EBOS GROUP LIMITED — Annual Report 2011

Dec 4, 2013

One of the leading independent distributors of healthcare products in New Zealand, Australia and the Pacifi c Islands. ebos@ebos.co.nz

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Annual Report 2011

TRADING ENTITIES

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EBOS Group Annual Report 2011

02 - 28 Report from the Directors

• 03 Introduction

• 06 Our Networks: Our Strength

• 08 Our Supply Chain Explained 11 Chairman’s Report

• 15 Managing Director’s Review 18 Operational Round-Up

• 20 Board of Directors

• 22 Corporate Governance Statement 24 Directors’ Report and Disclosures

• 29 - 72 Financial Statements

• 30 Directors’ Responsibility Statement 31 Auditor’s Report

• 32 Income Statement

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• 32 Statement of Comprehensive Income 33 Balance Sheet

• 34 Statement of Changes in Equity 35 Cash Flow Statement

• 36 Notes to the Financial Statements

• 73 Additional Stock Exchange Information 74 Directory

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Mr Julian Hayes
Colorectal and General Surgeon
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Introduction

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Powerful trends are at work – all around the world – forcing changes in how healthcare will be conceived and delivered in the decades ahead.

According to global commentators, the future will bring massive change. On one hand, technology and innovation will deliver breathtaking new opportunities. The decoding of an individual’s genome, for instance, will lead to a greater understanding of disease and the development of new therapies.

Healthcare will also reach more people than ever before. Innovation and demand will soar in emerging economies, such as China and India, creating signifi cant new markets for healthcare companies.

There are also challenges ahead. The ageing of populations worldwide will see burgeoning numbers suff ering from chronic, expensiveto-treat diseases and disabilities. This will place a strain on healthcare systems - and healthcare costs will continue to spiral upwards. This will have a widespread impact on healthcare spending, design of national systems, and delivery.

Introduction Continued

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“In healthcare, unlike other areas of commerce, you’re actually dealing with lives every single day. The products and services EBOS provide directly impact on peoples’ lives. In the wider sense, we have a role to play in improving the health of New Zealanders, and those in other key markets. We can help the Government achieve greater effi ciencies – which in turn, will allow for greater access to healthcare. And access is what ultimately helps people.”

• Mark Waller, Chief Executive Offi cer, EBOS Group

“Bureaucracy, waste, and ineffi ciencies must be reduced and resources moved to the front-line as spending growth slows. We must focus on quality, which will deliver better patient outcomes, and on ensuring better access to health services through smarter planning and resource utilisation, at regional and national levels.”

In New Zealand, we face similar challenges and opportunities. A landmark ministerial review, the Horn Report, tells us we cannot sustain the current levels of spending growth in public healthcare. We need to act now to ensure our public health system operates more effi ciently.

The Horn Report recommends a set of initiatives to gain effi ciencies – such as fewer, regionalised District Health Boards; a system of national product procurement; and new patient-centric models of care.

• Horn Report, 31 July 2009

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MercyAscot
Mercy Hospital
Operating Theatres
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Our Networks: Our Strength

Whatever changes the future may bring, EBOS will position itself to meet them. As the largest supplier to the New Zealand healthcare industry, we have a unique perspective on the entire healthcare market.

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Our Supply Chain Explained

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Market Over the life cycle of products or technologies, alternatives needs soon emerge, increasing choices and competition. This requires alternative models to serve the needs of the market.

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Wholesale/ Third-party
Business Sales & Specialised Logistics/
function Marketing Logistics Pre-wholsesale
Business EBOS Health Support Healthcare
entity Healthcare & ProPharma Logistics
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End user A broad range of healthcare providers and distributors; from public and private hospitals, general practitioners, pharmacy, aged care and community to allied professionals, consumers and manufacturers.

The EBOS answer was to implement a business model that can meet all the market needs - be that the customer, manufacturer or provider.

This has driven EBOS to create the unique platform that we have today.

A specialist sales and marketing capability to manage the brands and categories of a wide range of products and technologies utilised in the health sector, accessed through dedicated channels to market.

The wholesale and specialised logistics businesses of Pro Pharma and Health Support.

Third-Party Logistics, pre wholesale business of Healthcare Logistics provides a ‘virtual company’ off er for overseas manufacturers.

This unique market coverage gives EBOS Group a remarkably strong position in the New Zealand healthcare market. It also sets an exciting platform for our future growth in key markets.

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Rick Christie
Chairman
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Chairman’s Report

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On behalf of the EBOS Board of Directors, I’m pleased to report another very strong performance by EBOS Group Ltd for the year ending June 30 2011.

This continues the impressive record of the past 10 years. The Group has continually achieved year-on-year growth, as well as paying shareholder dividends each year.

In the past two to three years, we have been consolidating our existing businesses, and achieving further effi ciencies. Much of the profi t improvement has been driven by increasing stock turn, integrating our systems, and reducing debt. At the same time, we’ve also been busy prospecting.

EBOS has made a total of 17 acquisitions over the past 10 years. Although we have not made an acquisition since our largest purchase of Pharmacy Retailing (NZ) (PRNZ) in 2008, this has continued to be a key strategic focus.

Chairman’s Report Continued

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Importantly, EBOS Board and management recognise that sound strategy is absolutely critical to a good acquisition. It is an often-quoted statistic that 80% of mergers and acquisitions fail. For EBOS, the reverse is true. We employ a very robust process of ‘prospect and fi lter’ when looking to acquire a business. We also recognise that making the deal work is much more important than simply getting the deal done.

In our mergers and acquisitions strategy, we look for businesses that have a strong fi t with our core competencies, and geographies that off er the most potential. There are a number of leading opportunities in our portfolio right now.

RESULTS

In the year ended 30 June 2011, revenue from continuing operations was $1,344m ($1,317m in 2010). Earnings before interest tax, depreciation and amortisation (EBITDA) from continuing operations was $41.125m (2010 $40.350m) up 2%. Profi t for the year after tax from continuing operations was $23.4m (2010 $19.69m) an increase of 18.8%.

The net profi t for the year including discontinued operations after interest and tax was $31.58m (2010 $23.44m) up 34.7%. As reported in the 2010 Annual Report the scientifi c business operations were divested in August/September 2010. Earnings per share including the earnings from discontinued operations increased to 61.2 cents from 47 cents.

Net assets increased to $198.80m ($182.79m last year) refl ecting an increase in total assets to $538.32m. Current assets stand at $378.00m ($336.39m) and non current assets at $160.32m ($181.95m) with current liabilities at $268.36m ($261.70m).

DIVIDEND

The Directors are pleased to be able to approve a fi nal dividend of 18 cents per share to be paid on 7 October 2011, making a total of 51.5 cents per share (31 cents per share) for the year, which included a special dividend of 20 cents per share following the sale of the Scientifi c business segment.

The record date for the purpose of determining entitlements for the fi nal dividend is close of business 16 September 2011.

The dividend reinvestment plan will not be operative

BOARD

Once again, I am grateful for the support and commitment shown by the Board this year. There have been no changes to our membership. We have a very stable, well-balanced team that offers both sound fi nancial skills, a depth of industry knowledge, cornerstone shareholder representation and constructive input. We have plenty of robust discussion around the table – because everyone has a view – but at the end of the day that delivers greater value.

Another notable feature of our Board is the time we spend focussed on strategy. Unlike many companies that might have one strategic meeting a year, we talk strategy at every board meeting. Typically, we’ll be looking at up to 10 potential deals that are aligned with our strategic direction, needless to say, not many make the grade.

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BALANCE SHEET

MANAGEMENT AND EMPLOYEES

EBOS is in a strong fi nancial position.

Cash fl ow for the year has been sound, with net cash infl ow from operations of $21.7m, while the proceeds from the scientifi c divestment were a net $45.2m. The net cash infl ow from operating and investing activities for the year was $63.1m (2010 $39.2m).

Mark Waller was awarded Deloitte/Management Magazine’s 2010 Executive of the Year, which was a totally deserved accolade. He is an outstanding chief executive and leads a strong team, which underpins our strategic thinking, and the way we run our businesses.

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The sale of our scientif c business ref ected our philosophy of aiming to be one of the two major players in our core businesses. Given the consolidation of the scientif c supply business globally – we elected to exit, and shareholders have already benef ted from the capital gain on sale. As a Christchurch based company, we have lived through the disastrous series of earthquakes to strike the city over the past 12 months. It was not, and still is not, an easy time for our staff and families, and I salute their commitment to maintain services to our clients and indeed other suppliers clients through the aftermath of the quakes. Rick Christie Chairman of Directors OUTLOOK It goes without saying that we’re currently operating in an economic environment of considerable uncertainty. That is a concern for every New Zealand company. However EBOS is better positioned than most to adapt – or in fact thrive – in a volatile market. In just over 10 years, EBOS Group has graduated from being an agency-dominated business into what is now a very sophisticated and integrated sales, marketing and distribution business operating in New Zealand, Australia and the Pacif c. This model has consistently delivered prof table returns for us. Not only have we paid dividends every year; we’ve also been more prof table each year than the year before. The EBOS growth story is a remarkable one. Our shareholders have an expectation that we will continue to grow by acquisition. The company is in the enviable position of having no net debt, and the opportunity to leverage what we have built thus far is very real. 2011 2010 2009 2008 2007 Net cash infow from operating activities ($’000) 21,703 41,813 33,310 7,254 Shareholders’ interest ($’000) 198,796 182,790 162,039 92,195 Distributions cents per share 51.5c 31.0c 25.0c 22.5c Earnings per share 61.2c 47.0c 28,546 147,304 23.0c 37.6c 41.1c 31.7c Net interest bearing debt to net interest bearing debt plus equity Nil In Funds 1.5% 19.6% 32.0% 8.1% Revenue ($ millions) Note 1:2010 and 2011 numbers represent continuing operations. Prior years numbers include discontinued operations. 1B mark EBITDA ($ millions) 2007 2008 2009 307 1,092 1,345 2010 1,317 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 1,344 18.8 33.6 38.7 40.4 41.1 **EBITDA ($ millions) EBITDA ($ millions) 10.3 16.7 19.7 23.4 31.6 NPAT($ millions)

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Mark Waller
Chief Executive Offi cer
& Managing Director
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Managing Director’s Review

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Every successful organisation has a strong central philosophy and sense of direction. For EBOS, we’ve essentially employed two key strategies that have seen us perform well over the years.

Firstly, our business model allows us to follow the patient through their life cycle. We provide literally a lifetime of products and services - from the needs of a new baby, through to aged care.

Secondly, we’ve been fl exible and nimble enough to change our off ering as the market landscape has changed. In fact looking back, you could say we’ve reinvented the company about every fi ve years.

When we cast our minds back to the 1980s, the big focus was on new technologies. The multinationals were in acquisition mode, all clamouring to own the next great new technology. Then, over the space of a decade, almost the opposite trend came into play. A huge proportion of medical products started to be treated as commodities. Without the margins off ered by unique products, the multinationals started to reduce their presence in the New Zealand market.

At EBOS, we recognised this was an important turning point. We asked ourselves the critical question, ‘how can we be more valuable to the market we want to serve?’

Managing Director’s Review Continued

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The answer was to implement a business model that could meet all the market’s needs.

For unique products, we’d have a business dedicated to providing sales and marketing support. Then as products become commoditised - and move through their life-cycle into wholesale and pre-wholesale categories - EBOS would be there too. We saw that the key was to offer market access right across the continuum.

In a nutshell, that was the strategy that drove us to create the unique platform we have today. EBOS Healthcare is our sales and marketing arm that services all different segments of the market. Our wholesale businesses are Health Support and ProPharma; and our pre-wholesale and third-party logistics business, Healthcare Logistics, provides manufacturers with a ‘virtual company’ option.

With this model, we aim to ensure all customers have the right product, at the right time, at a very competitive price, and with superb levels of service.

Having put this framework in place - and running it successfully for many years - we believe that EBOS is well-poised to assist the New Zealand government with their plans to improve healthcare delivery.

We’re currently responsible for a signifi cant percentage of the volumes provided into the local healthcare industry, which gives us a very unique view on the whole market in New Zealand. Our logistics and wholesale businesses are already making signifi cant contributions to public health

Given our technology and proven experience, EBOS can be a key supply chain partner under a more centralised environment. We are capable of assisting the Government with many of the initiatives they’re looking at – whether it’s national product procurement, a national network of distribution centres, or even consolidating their IT platforms.

EBOS has ready-established networks, technologies and infrastructure in these key areas. This gives us considerable scope to contribute to the Government’s vision for more cost effective healthcare delivered earlier with greater access.

So while our New Zealand-based business is certainly looking positive, it’s actually only part of the story. What I fi nd most exciting, personally, is our plans for international growth.

The past year has seen us undertake an unprecedented amount of activity, all aimed at making our business as effi cient as possible. We have amalgamated parts of our business, lowered the cost base, and achieved effi ciencies in back offi ce and IT. We have reduced our net debt from $110m three years ago, to nil.

EBOS is ready to embark on an important new phase. From now, our focus will be 100 percent on growing the business, through acquisition and other strategic alliances.

Geographically, we’ll be looking at opportunities in New Zealand, Australia, and beyond. We’re quite open-minded as to what form this might take – whether it’s owning brands, or being an agency for brands; whether it’s in wholesale, or manufacturing. The growth opportunities are as diverse as they are exciting.

There’s also another fi eld of opportunity which overlays our plans for geographical expansion. Having developed a suite of core competencies in pharmaceutical, medical devices and supply chain management; we’re also looking at complementary industries where our skills could be profi tably applied.

To sum up, our story so far has seen EBOS wellpositioned in the New Zealand market, and with a strong and developing market in Australia and the Pacifi c. We’re a credible and valuable part of the whole supply chain into health. The time has come for us to leverage off that expertise - to take it further afi eld internationally, and into different markets.

EBOS management and staff look forward to embarking on this journey with you.

M ar k W a ll er

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Sales and marketing and customer services staff 210 Staff across New Zealand, Group Revenue Australia and Pacific Islands $1.34B 770

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0perational Round-Up

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The following major projects have been completed in the past 12 months. These have been key drivers to achieve effi ciency gains to make us more competitive for the benefi t of our customers.

RATIONALIZING THE BUSINESS MODEL

• 1 The deployment of Multipick 3.2 warehouse management systems into Health Support

• 2 Health Support went live onto the latest version of SAP software – which is also used by ProPharma and Healthcare Logistics - Pharmacy Retailing (NZ) Limited (PRNZ)

• 3 The Health Support retail Pharmacy business was transferred to ProPharma

• 4 All of the Health Support third-party logistics businesses were consolidated into Healthcare Logistics

• 5 There has been a complete integration of the back offi ce accounting functions of Health Support into PRNZ

• 6 The Scientifi c business was sold to VWR International – the second biggest deal in the history of EBOS. It sold for approximately $45 million. The deal also included a transition service agreement through until December 2011

• 7 The consolidation of all the back offi ce IT, administration and supply chain services of Vital Medical into EBOS Healthcare Australia

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Board of Directors

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RICK CHRISTIE

MSC (HONS), FNZID, FNZIM (Chairman)

Joined the EBOS Group Ltd Board in June 2000, and appointed chairman in April 2003. Member of the Audit and Risk Committee, the Remuneration Committee and the Nomination Committee. Rick Christie is a professional director with a breadth of governance and management experience in the oil and petrol-chemical industries. Former chief executive of the diversifi ed investment company Rangatira Ltd, a former managing director of Cable Price Downer and former chief executive of Trade New Zealand. He is the chairman of National e-Science Infrastructure – NeSI, Director of South Port New Zealand Ltd, NZ Pork Industry Board, Solnet Solutions Ltd, Tourism Holdings Ltd, and Wakefi eld Health Ltd. Previously chairman of AgResearch Ltd, deputy chairman of the Foundation for Research, Science & Technology and chairman of the Victoria University Foundation Board of Trustees. He is also a Fellow of the Royal Society of Arts, Manufacturers and Commerce in London. He is a former director of Television New Zealand and the New Zealand Symphony Orchestra and a past president of Chamber Music New Zealand.

MARK WALLER

BCOM, ACA, FNZIM (Chief Executive and Managing Director)

Mark Waller has been chief executive offi cer and managing director of EBOS Group Ltd since 1987. He is a member of the Remuneration Committee. He is a director of all the EBOS Group Ltd subsidiaries, as well as being a director of Scott Technology Ltd, and HTS-110 Ltd.

PETER KRAUS

MA (HONS), DIP ENG

Peter Kraus is an Auckland businessman who has been a director of EBOS Group Ltd since 1990. A member of the Nomination Committee, he is a director of Whyte Adder No.3 Ltd, Strand Holdings Ltd, Strand Management Ltd, Herpa Properties Ltd, Ecostore Company Ltd, Oceania Attractions Ltd, ISL International Ltd, Hapimana Properties Ltd and Huckleberry Farms Ltd and Trustee of the Perpanida Trust and The Annalise Trust.

ELIZABETH COUTTS

BMS, CA

Appointed to the EBOS Group Ltd Board July 2003, Elizabeth is a member of the Audit and Risk Committee and Nomination Committee and is a professional director. She is also a former, chair of Meritec Group, Industrial Research, and Life Pharmacy Ltd, director of Air New Zealand Ltd, the Health Funding Authority and Trust Bank New Zealand, former deputy chairman of Public Trust, board member of Sport and Recreation NZ, member of the Pharmaceutical Management Agency (Pharmac), commissioner for both the Commerce and Earthquake Commissions and former external monetary policy adviser to the Governor of the Reserve Bank of New Zealand and chief executive of the Caxton Group of Companies and Carter building supply group. Her current directorships include chair of Urwin & Co Ltd, and Director of NZ Directories Holdings Ltd (and subsidiaries), Ports of Auckland Ltd, Ravensdown Fertiliser Co-operative Ltd, Sanford Ltd and Skellerup Holdings Ltd and Member, Marsh New Zealand Advisory Board. She is chair designate of Inland Revenue.

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PETER MERTON

BPharm

Appointed to the EBOS Group Ltd Board 12 September 2007. Peter has worked in the retail, manufacturing, distribution and wholesale areas of the pharmacy industry in New Zealand, Asia and Africa since the early eighties. In 1987 he joined Zuellig Pharma in New Zealand where he worked for the Zuellig group and then API until 2005. From 1997 through 2008 he was chief executive offi cer of PRNZ Ltd. He is Chairman of Pharmacy Brands Ltd and a director of, Cape Healthcare Ltd, and Trustee of Pentz Trust.

SARAH OTTREY

BCOM

Appointed to the EBOS Group Ltd Board 18 September 2006. Sarah is a Director of Blue Sky Meats (NZ) Ltd, Smiths City Group Ltd and Sarah Ottrey Marketing Ltd. She is a past board member of the Public Trust. Sarah has held senior marketing management positions with Unilever and DB Breweries.

MARK STEWART

BCOM

Appointed to the EBOS Group Ltd Board 8 September 2008. Mark commenced working for the PDL Group of Companies in 1983. From 1987 to 2001 he held senior executive roles and had directorship responsibilities for a number of companies in the PDL Group and was managing director of MasterTrade Group Ltd from July 1991 until October 1994. He gained experience in manufacturing, sales and marketing in the Asian and Australasian markets.

Since October 2001 he has been Managing Director of Masthead Ltd, the private investment vehicle of the Stewart Family. He is a director of Masthead Holdings Ltd, Masthead Ltd, Masthead Services Ltd, Masthead Investments Ltd, Masthead Portfolios Ltd, Masthead Management Ltd, Windwhistle Holdings Ltd, Forwood Forestry Ltd, Southern Excursions Ltd, Stravon Safaries Ltd, Twinmark Investments Ltd (in liq.), Python Portfolios Ltd, Woodbent Hill Ltd, Laindon Ltd, Andos Holdings Ltd, Anaconda Ltd, Proteus Group Holdings Ltd, Medusa Ltd, Lesley Hills Holdings Ltd, Newco No1 Ltd and Ziwipeak Ltd. He is also an alternate director of Wakefi eld Health Ltd.

BARRY WALLACE

MCOM (HONS), CA

Appointed to the EBOS Group Ltd Board October 2001. Barry is chairman of the Audit and Risk Committee and member of the Remuneration Committee. He is a chartered accountant with a background in fi nancial management with companies such as Rank Xerox New Zealand Ltd and David Reid Electronics. Barry is a former chief executive of Health Support Ltd and is the fi nancial manager for a private group of companies. He is a director of Allum Management Services Ltd, PRNZ Ltd and its associated companies, Whyte Adder No.3 Ltd, Strand Holdings Ltd, Strand Management Ltd, Herpa Properties Ltd, Ecostore Company Ltd, Eco Tech Solutions Ltd, Oceania Attractions Ltd, ISL International Ltd, Hapimana Properties Ltd, Huckleberry Farms Ltd and a Trustee of The Perpanida Trust and The Annalise Trust.

The above named directors held offi ce throughout the year.

Corporate Governance Statement

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The Board and management of EBOS Group Ltd are committed to ensuring that the Company adheres to best practice and governance principles and maintains high ethical standards. The Board has agreed to regularly review and assess the Company’s governance structures to ensure they are consistent, both in form and in substance, with best practice. These are set out in the Company’s Corporate Governance Code, the full content of which can be found on the Company’s website (www.ebos.co.nz). The Board considers that the Company’s Corporate Governance policies, practices and procedures substantially comply with the New Zealand Exchange Corporate Governance Best Practice Code.

CODE OF ETHICS

The EBOS Code of Ethics is the framework of standards by which the directors and employees of EBOS and its related companies are expected to conduct their professional lives, and covers confl icts of interest, receipt of gifts, confi dentiality, expected behaviour, delegated authority and compliance with laws and policies.

ROLE OF THE BOARD AND MANAGEMENT

The Board is responsible for the direction and supervision of the business and affairs of the Company and the monitoring of the performance of the Company on behalf of shareholders. The Board also places emphasis on regulatory compliance.

Responsibility for the day to day management of the Company has been delegated to the Chief Executive Offi cer/Managing Director and his management team.

BOARD COMPOSITION

The Board is elected by the shareholders of EBOS Group Ltd. At each annual meeting at least one third of the directors retire by rotation. The Board currently comprises the following non-executive directors: Chairman, Rick Christie; Peter Kraus; Elizabeth Coutts; Peter Merton; Sarah Ottrey; Mark Stewart and Barry Wallace. It has one executive director Mark Waller, Chief Executive Offi cer and Managing Director. Rick Christie, Elizabeth Coutts and Sarah Ottrey have been determined as Independent Directors, (as defi ned under the NZSX Listing Rules and the EBOS Group Ltd Corporate Governance Code).

BOARD COMMITTEES

Specifi c responsibilities are delegated to the Audit and Risk Committee, the Remuneration Committee and the Nomination Committee. Each of these committees has a charter setting out the committee’s objectives, procedures, composition and responsibilities. Copies of these charters are available on the Company’s website.

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AUDIT AND RISK COMMITTEE

The Audit and Risk Committee provides the Board with assistance in fulfi lling their responsibility to shareholders, the investment community and others for overseeing the Company’s fi nancial statements, fi nancial reporting processes, internal accounting systems, fi nancial controls, and annual external fi nancial audit and EBOS’s relationship with its external auditor. In addition, the Audit and Risk Committee is responsible for the establishment of policies and procedures relating to risk oversight, identifi cation, management and control. Members of the Audit and Risk Committee are Barry Wallace (Chairman), Rick Christie and Elizabeth Coutts

REMUNERATION COMMITTEE

The Remuneration Committee provides the Board with assistance in establishing relevant remuneration policies and practices for directors, executives and employees. Members of the Remuneration Committee are Rick Christie (Chairman), Barry Wallace and Mark Waller

NOMINATION COMMITTEE

The procedure for the appointment and removal of directors is ultimately governed by the Company’s Constitution. A director is appointed by ordinary resolution of the shareholders although the Board may fi ll a casual vacancy. The Board has delegated to the Nomination Committee the responsibility for recommending candidates to be nominated as a director on the Board and candidates for the committees. When recommending candidates to act as director, the Nomination Committee takes into account such factors as it deems appropriate, including the experience and qualifi cations of the candidate. The current members of the Nomination Committee are Rick Christie (Chairman), Elizabeth Coutts and Peter Kraus. The majority of the members of the Nomination Committee are independent.

BOARD PROCESSES

The table within the Directors Report shows attendances at the board and committee meetings during the year ended 30 June 2011.

SHARE TRADING BY DIRECTORS AND OFFICERS

The Company has formal procedures that directors and offi cers must follow when trading EBOS shares. They must notify and obtain the consent of the Board prior to any trading. All trading must be conducted within two prescribed trading windows. These periods commence from the date on which the annual result and half-yearly results are announced and conclude on the following 30 November and 30 April respectively.

SHAREHOLDER PARTICIPATION

The Board aims to ensure that shareholders are informed of all major developments affecting the Group’s state of affairs. Information is communicated to shareholders in the Annual Report and the Interim Report. The Board has adopted a policy of Continuous Disclosures that complies with the NZSX Listing Rules. The Board encourages full participation of shareholders at the Annual Meeting to ensure a high level of accountability and identifi cation with the Group’s strategies and goals. Investors can obtain information on the company from its website (www.ebos.co.nz). The site contains recent NZSX announcements and reports.

Directors’ Report and Disclosures

24

Your Directors are pleased to submit to shareholders their report and fi nancial statements for the year ended 30 June 2011.

GROUP RESULTS

PRINCIPAL ACTIVITIES

EBOS Group Limited (the Company) is listed on the NZSX board of the New Zealand Exchange (NZX) under the securities code EBO. The Company operated in two business segments up until 1 September 2010, being Healthcare and Scientifi c. Healthcare incorporates the sale of healthcare products in a range of sectors, own brands, retail healthcare and wholesale activities, and logistics and Scientifi c incorporating the sale of laboratory consumables, life sciences equipment and technical support to industry and research laboratories. The Scientifi c segment was sold on 1 September 2010. Since that date the Company has operated in one business segment, being Healthcare.

Group operating revenue from continuing operations was $1,344m in the year ended 30 June 2011 (2010 $1,317m). Operating profi t before fi nance costs and tax of $37.7m (2010 $36.7m) was earned for the year ended 30 June 2011. The net profi t for the year including discontinued operations after interest and tax was $31.6m (2010 $23.4m). Earnings per share were 61.2 cents (2010 47.0 cents). Cash fl ow of $63.1m (2010 $39.2m) was generated from operations and investing activities.

DIVIDENDS

The Directors approved a fi nal dividend of 18 cents per share making a total of 51.5 cents per share for the year (2010 31 cents per share), which included a special dividend of 20 cents following the sale of the Scientifi c segment.

ISSUED CAPITAL

As at 30 June 2011 the Company had on issue 52,107,487 ordinary fully paid shares, with 1,311,736 shares issued during the year.

DIRECTORS

Mark Stewart, Peter Kraus and Sarah Ottrey retire by rotation in accordance with the Company’s constitution and being eligible offer themselves for re-election.

Issued capital

52 107 487 , ,

Shares issued

1 311 736 , ,

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Dividend 51.5c

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DIRECTORS’ INTERESTS

Share dealings by Directors

The Directors have disclosed to the Board under section 148(2) of the Companies Act 1993 particulars of acquisitions of dispositions of relevant interests in ordinary shares during the year – refer table on following pages.

Disclosure of interests by Directors

In accordance with section 140(2) of the Companies Act 1993, the directors named below have made general disclosure of interest, by a general notice disclosed to the Board and entered in the Company’s interest register, as follows:

R.G.M. Christie: Chairman of National e-Science Infrastructure – NeSI, Director of South Port New Zealand Ltd, NZ Pork Industry Board, Solnet Solutions Ltd, Tourism Holdings Ltd, and Wakefi eld Health Ltd.

E.M. Coutts: Chair of Urwin & Co Ltd, and Director of NZ Directories Holdings Ltd (and subsidiaries), Ports of Auckland Ltd, Ravensdown Fertiliser Co-operative Ltd, Sanford Ltd and Skellerup Holdings Ltd and Member, Marsh New Zealand Advisory Board and chair designate of Inland Revenue.

P.F. Kraus: Director of Whyte Adder No.3 Ltd, Strand Holdings Ltd, Strand Management Ltd, Herpa Properties Ltd, Ecostore Company Ltd, Oceania Attractions Ltd, ISL International Ltd, Hapimana Properties Ltd and Huckleberry Farms Ltd and Trustee of the Perpanida Trust and the Annalise Trust.

P.M. Merton: Chairman of Pharmacy Brands Ltd, and Director of Cape Healthcare Ltd, and Trustee of Pentz Trust.

S.C. Ottrey: Director of Blue Sky Meats (NZ) Ltd, Smiths City Group Ltd and Sarah Ottrey Marketing Ltd.

M.J. Stewart: Director of Masthead Holdings Ltd, Masthead Ltd, Masthead Services Ltd, Masthead Investments Ltd, Masthead Portfolios Ltd, Masthead Management Ltd, Windwhistle Holdings Ltd, Forwood Forestry Ltd, Southern Excursions Ltd, Stravon Safaries Ltd, Twinmark Investments Ltd (in Liq.), Python Portfolios Ltd, Woodbent Hill Ltd, Laindon Ltd, Andos Holdings Ltd, Anaconda Ltd, Proteus Group Holdings Ltd, Medusa Ltd, Lesley Hills Holdings Ltd, and Newco No1 Ltd and Ziwipeak Ltd.

B.J. Wallace: Director of Allum Management Services Ltd, PRNZ Ltd and its associated companies, Whyte Adder No.3 Ltd, Strand Holdings Ltd, Strand Management Ltd, Herpa Properties Ltd, Ecostore Company Ltd, Eco Tech Solutions Ltd, Oceania Attractions Ltd, ISL International Ltd, Hapimana Properties Ltd and Huckleberry Farms Ltd and Trustee of the Perpanida Trust and The Annalise Trust.

M.B. Waller: Director of EBOS Group Ltd subsidiaries and associated companies and a director of Scott Technology Ltd, and HTS-110 Ltd.

Directors’ Report and Disclosures

26

During the year the Board received no notices from directors of the company requesting to use company information received in their capacity as directors, which would not otherwise have been available to them.

SHARE DEALINGS BY DIRECTORS

	Ordinary Shares	Consideration Paid	Date of Transaction
Director	Purchased (Sold)	(Received)
R G M Christie – All non benef cially held	1,399	$9,324	October 2010
Issue of restricted staff shares	49,850	$174,475	To June 2011
Maturing staff shares	(63,970)	Nil	To June 2011
E M Coutts – Held by associated persons	500	$3,332	October 2010
P F Kraus	28	$187	October 2010
P F Kraus – Held by associated persons	114,246	$761,383	October 2010
S C Ottrey – Held by associated persons	127	$846	October 2010
	88	$639	April 2011
P M Merton – Held by associated persons	31,249	$208,256	October 2010
	(700,000)	($4,902,915)	April 2011
M J Stewart – Non benef cially held	135,805	$905,061	October 2010
Director of Python Portfolios Ltd
M B Waller – Held by associated persons	11,379	$75,934	October 2010
	(6,400)	($40,960)	November 2010
Non benef cially held	1,399	$9,324	October 2010
Issue of restricted staff shares	49,850	$174,475	To June 2011
Maturing staff shares	(63,970)	Nil	To June 2011
B.J. Wallace
Non benef cially held – Director of Whyte	114,246	$761,383	October 2010
Adder No.3 Ltd and of Herpa Properties Ltd

	Number of fully paid shares held as at 30 June 2011 30 June 2010 E M Coutts 19,510 19,010 R G M Christie - Non benef cially held – - Staff share purchase scheme 176,899 189,620 P F Kraus 1,076 1,048 - Held by associated persons 4,464,974 4,350,728 P M Merton - Held by associated persons 521,277 1,190,028 S C Ottrey - Held by associated persons 4,935 4,808 DIRECTORS’ SHAREHOLDINGS

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27

DIRECTORS’ SHAREHOLDINGSCONTINUED	DIRECTORS’ SHAREHOLDINGSCONTINUED
Number of fully paid shares held as at		30 June 2011		30 June 2010
M J Stewart	- Non benef cially held – Director of		5,307,571		5,171,766
	Python Portfolios Ltd
B J Wallace	- Non benef cially held – Director of
	Whyte Adder No.3 Ltd/Herpa Properties Ltd		4,464,974		4,350,728
M B Waller	- Held by associated persons		439,005		434,026
	- Non benef cially held – Staff share purchase scheme		176,899		189,620

ATTENDANCE

ATTENDANCE
		Board
	Eligible to		Attended	Audit & Risk	Committee	Remuneration	Committee
	Attend			Eligible to	Attended	Eligible to	Attended
				Attend		Attend
R Christie	9		9	4	4	1	1
P Kraus	9		6	-	-	-	-
E Coutts	9		9	4	4	-	-
P Merton	7		5	-	-	-	-
S Ottrey	9		9	-	-	-	-
M Stewart	9		8	-	-	-	-
B Wallace	9		9	4	4	1	1
M Waller	9		9	4	4	1	1

INDEMNITY AND INSURANCE

In accordance with section 162 of the Companies Act 1993 and the constitution of the company, the Company has given indemnities to, and has effected insurance for, the directors and executives of the Company and its related companies which, except for some specifi c matters which are expressly excluded, indemnify and insure directors and executives against monetary losses as a result of actions undertaken by them in the course of their duties. Specifi cally excluded are certain matters, such as the incurring of penalties and fi nes which may be imposed for breaches of law.

DIRECTORS’ REMUNERATION AND OTHER BENEFITS

Directors’ remuneration and other benefi ts required to be disclosed pursuant to section 211(1) of the Companies Act 1993 for the year ended 30 June 2011 were as follows:

	30 June 2011 30 June 2010 R.G.M. Christie $127,500 $106,000 E.M. Coutts $65,000 $53,000 P.F. Kraus $60,000 $75,000 P. Merton $60,000 $50,000 M.J. Stewart $60,000 $50,000 S.C. Ottrey $60,000 $50,000 B.J. Wallace $67,500 $56,000 M.B. Waller Salary $470,420 $470,420 (Chief Executive Off cer and Managing Director) Other benef ts $1,430,798 $1,299,000 Includes performance bonus and other emoluments

Directors’ Report and Disclosures

28

EMPLOYEE REMUNERATION

Grouped below, in accordance with Section 211 of the Companies Act 1993, are the number of employees or former employees of the company and its subsidiaries, including those based in Australia, who received remuneration and other benefi ts in their capacity as employees totalling NZ$100,000 or more during the year.

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||||
|---|---|---|
|Employee Remuneration|30 June 2011|30 June 2010|
|Remuneration (NZ$)|Number of employees|
|100,000 – 110,000|16|27|
|110,000 – 120,000|9|19|
|120,000 – 130,000|11|10|
|130,000 – 140,000|6|11|
|140,000 – 150,000|2|-|
|150,000 – 160,000|5|8|
|160,000 – 170,000|6|7|
|170,000 – 180,000|1|3|
|180,000 – 190,000|3|-|
|190,000 – 200,000|1|2|
|200,000 – 210,000|1|-|
|210,000 – 220,000|2|-|
|230,000 – 240,000|1|1|
|240,000 – 250,000|-|1|
|250,000 – 260,000|1|1|
|270,000 – 280,000|1|-|
|290,000 – 300,000|-|1|
|330,000 – 340,000|1|1|
|340,000 – 350,000|1|1|
|350,000 – 360,000|2|-|
|360,000 – 370,000|1|-|
|380,000 – 390,000|-|1|
|390,000 – 400,000|1|-|
|520,000 – 530,000|-|1|
|530,000 – 540,000|1|-|
|550,000 – 560,000|-|1|
|630,000 – 640,000|1|-|

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AUDITORS

The Company’s Auditors, Deloitte, will continue in offi ce in accordance with the Companies Act 1993.

The Directors are satisfi ed that the provision of non-audit services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Companies Act 1993. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditors are outlined in note

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Rick Christie Chairman

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Mark Waller Chief Executive Offi cer and Managing Director

26 August 2011

Financial Statements Year Ended 30 June, 2011

29

• 30 Directors’ Responsibility Statement 31 Auditor’s Report 32 Income Statement 32 Statement of Comprehensive Income 33 Balance Sheet 34 Statement of Changes in Equity 35 Cash Flow Statement 36 Notes to the Financial Statements

Directors’ Responsibility Statement

30

The Directors of EBOS Group Limited are pleased to present to shareholders the fi nancial statements for EBOS Group and its controlled entities (together the “Group”) for the year to 30 June 2011.

The Directors are responsible for presenting fi nancial statements in accordance with New Zealand law and generally accepted accounting practice, which give a true and fair view of the fi nancial position of the Company and the Group as at 30 June 2011 and the results of their operations and cash fl ows for the year ended on that date.

The Directors consider the fi nancial statements of the Company and the Group have been prepared using accounting policies which have been consistently applied and supported by reasonable judgements and estimates and that all relevant fi nancial reporting and accounting standards have been followed.

The Directors believe that proper accounting records have been kept which enable with reasonable accuracy, the determination of the fi nancial position of the Company and Group and facilitate compliance of the fi nancial statements with the Financial Reporting Act 1993.

The Directors consider that they have taken adequate steps to safeguard the assets of the Company and the Group, and to prevent and detect fraud and other irregularities. Internal control procedures are also considered to be suffi cient to provide a reasonable assurance as to the integrity and reliability of the fi nancial statements.

The Financial Statements are signed on behalf of the Board on 26 August 2011 by:

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Rick Christie Chairman

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Mark Waller Chief Executive Offi cer and Managing Director

Independent Auditor’s Report to the Shareholders of EBOS Group Limited

31

Report on the Financial Statements

We have audited the fi nancial statements of EBOS Group Limited and group on pages 32 to 72, which comprise the consolidated and separate balance sheets of EBOS Group Limited, as at 30 June 2011, the consolidated and separate income statements, statements of comprehensive income, statements of changes in equity and cash fl ow statements for the year then ended, and a summary of signifi cant accounting policies and other explanatory information.

Board of Directors’ Responsibility for the Financial Statements

The Board of Directors is responsible for the preparation of fi nancial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal control as the Board of Directors determine is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibilities

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates, as well as the overall presentation of the

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Other than in our capacity as auditor and the provision of information technology services, due diligence, internal control assurance services, assurance assistance and the assistance with the review of the group fi nance function we have no relationship with or interests in EBOS Group Limited or any of its subsidiaries.

Opinion

In our opinion, the fi nancial statements on pages 32 to 72:

• comply with generally accepted accounting practice in New Zealand;

• comply with International Financial Reporting Standards; and

• give a true and fair view of the fi nancial position of EBOS Group Limited and group as at 30 June 2011, and their fi nancial performance and cash fl ows for the year then ended.

Report on Other Legal and Regulatory Requirements

We also report in accordance with section 16 of the Financial Reporting Act 1993. In relation to our audit of the fi nancial statements for the year ended 30 June 2011:

• we have obtained all the information and explanations we have required; and

• in our opinion proper accounting records have been kept by EBOS Group Limited as far as appears from our examination of those records.

Chartered Accounta nts 26 August 2011 Christchurch, New Zealand

This audit report relates to the fi nancial statements of EBOS Group Limited and group for the year ended 30 June 2011 included on EBOS Group Limited’s website. The board of directors is responsible for the maintenance and integrity of EBOS Group Limited’s website. We have not been engaged to report on the integrity of EBOS Group Limited’s website. We accept no responsibility for any changes that may have occurred to the fi nancial statements since they were initially presented on the website. The audit report refers only to the fi nancial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these fi nancial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited fi nancial statements and related audit report dated 26 August 2011 to confi rm the information included in the audited fi nancial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of fi nancial statements may diff er from legislation in other jurisdictions.

32

INCOME STATEMENT

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|||||||
|---|---|---|---|---|---|
|Group|Parent|
|Notes|2011|2010|2011|2010|
|For the Financial Year Ended 30 June, 2011|$’000|$’000|$’000|$’000|
|Continuing operations|
|Revenue|2 (a) 1,343,756 1,317,481|99,271|81,848|
|Profi t before depreciation, amortisation,|
|fi nance costs and income tax expense|41,125|40,350|13,682|16,188|
|Depreciation|2 (b)|(3,231)|(3,151)|(425)|(445)|
|Amortisation of fi nite life intangibles|2 (b)|(173)|(504)|-|-|
|Profi t before fi nance costs and tax|37,721|36,695|13,257|15,743|
|Finance costs|2 (b)|(5,148)|(5,682)|(3,010)|(3,429)|
|Profi t before income tax|2 (b)|32,573|31,013|10,247|12,314|
|Income tax|3|(9,173)|(11,324)|(1,118)|(1,679)|
|Profi t for the year from continuing operations|23,400|19,689|9,129|10,635|
|Discontinued operations|
|Profi t for the year from discontinued operations|31|8,179|3,748|-|-|
|Profi t for the year|31,579|23,437|9,129|10,635|
|Earnings per share:|
|From continuing and discontinued operations|
|Basic (cents per share)|25|61.2|47.0|
|Diluted (cents per share)|25|61.2|47.0|
|From continuing operations|
|Basic (cents per share)|25|45.4|39.5|
|Diluted (cents per share)|25|45.4|39.5|

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STATEMENT OF COMPREHENSIVE INCOME

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|||||||
|---|---|---|---|---|---|
|Group|Parent|
|Notes|2011|2010|2011|2010|
|For the Financial Year Ended 30 June, 2011|$’000|$’000|$’000|$’000|
|Profi t for the year|31,579|23,437|9,129|10,635|
|Other comprehensive income|
|Cash fl ow hedges gains|21|855|1,285|615|866|
|Related income tax to cashfl ow hedges|21|(262)|(386)|(195)|(260)|
|Gains/(losses) on translation of foreign operations|21|1,357|(470)|-|-|
|Total comprehensive income net of tax|33,529|23,866|9,549|11,241|

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Notes to the fi nancial statements are included on pages 36 — 72.

		Group Parent Notes 2011 2010 2011 2010 As at 30 June, 2011 $’000 $’000 $’000 $’000 Current assets Cash and cash equivalents 99,678 56,484 73,130 18,175 Trade and other receivables 6 152,797 148,178 10,183 8,718 Prepayments 7 2,673 2,581 944 1,116 Inventories 8 121,807 128,484 8,347 7,955 Current tax refundable 3 1,045 458 - 53 Other f nancial assets - derivatives 9 - 105 - 105 Advances to subsidiaries - - 1,538 4,648 Finance leases - 102 - 102 Total current assets 378,000 336,392 94,142 40,872 Non-current assets Property, plant and equipment 10 16,974 17,570 4,037 4,267 Capital work in progress 11 - 245 - - Prepayments 7 847 1,179 - - Deferred tax assets 3 4,538 5,297 693 1,190 Goodwill 12 114,132 133,741 1,728 1,728 Indef nite life intangibles 13 23,796 23,714 4,960 4,960 Finite life intangibles 14 32 205 - - Shares in subsidiaries 15 - - 110,686 128,630 Total non-current assets 160,319 181,951 122,104 140,775 Total assets 538,319 518,343 216,246 181,647 Current liabilities Trade and other payables 17 259,130 248,855 8,826 7,779 Finance leases 16, 18 5 176 - 20 Current tax payable 3 3,422 5,577 643 - Employee benef ts 4,983 5,578 2,218 2,339 Other f nancial liabilities - derivatives 19 815 1,512 598 1,083 Advances from subsidiaries 16 - - 54,464 12,842 Total current liabilities 268,355 261,698 66,749 24,063 Non-current liabilities Bank loans 16 57,177 59,017 28,000 28,000 Trade and other payables 17 4,591 4,770 - - Deferred tax liabilities 3 8,706 9,148 2,038 2,151 Finance leases 16, 18 6 18 - - Employee benef ts 688 902 - - Total non-current liabilities 71,168 73,855 30,038 30,151 Total liabilities 339,523 335,553 96,787 54,214 Net assets 198,796 182,790 119,459 127,433 Equity Share capital 20 107,970 106,000 107,970 106,000 Foreign currency translation reserve 21 2,473 1,116 - - Retained earnings 21 88,824 76,738 11,827 22,191 Cash f ow hedge reserve 21 (471) (1,064) (338) (758) Total equity 198,796 182,790 119,459 127,433 Notes to the f nancial statements are included on pages 36 — 72. BALANCE SHEET

34		Group Parent Notes 2011 2010 2011 2010 For the Financial Year Ended 30 June, 2011 $’000 $’000 $’000 $’000 Equity at start of year 182,790 162,039 127,433 119,307 Prof t for the year 31,579 23,437 9,129 10,635 Other comprehensive income: Movements in cashf ow hedge reserve 593 899 420 606 Movement in foreign currency translation reserve 1,357 (470) - - Dividends paid to company shareholders 22 (19,493) (3,254) (19,493) (3,254) Shares issued 20 1,970 139 1,970 139 Equity at end of year 198,796 182,790 119,459 127,433 Notes to the f nancial statements are included on pages 36 — 72. STATEMENT OF CHANGES IN EQUITY

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35

CASH FLOW STATEMENT

	Group Parent Notes 2011 2010 2011 2010 For the Financial Year Ended 30 June, 2011 $’000 $’000 $’000 $’000
	Cash f ows from operating activities Receipts from customers 1,342,560 1,373,841 72,669 70,065 Interest received 2,367 942 1,934 538 Dividends received from subsidiaries - - 23,305 12,935 Payments to suppliers and employees (1,306,387) (1,319,253) (66,706) (64,242) Taxes paid (11,689) (8,015) (234) (62) Interest paid (5,148) (5,702) (3,010) (3,429)
	Net cash inf ow from operating activities 24(c) 21,703 41,813 27,958 15,805 Cash f ows from investing activities Sale of property, plant & equipment 37 257 - - Advances from subsidiaries - - 41,622 7,770 Purchase of property, plant & equipment (3,887) (2,656) (212) (357) Payments for capital work in progress - (245) - - Advances to subsidiaries - - 3,110 7,230 Proceeds from disposal of businesses 24(a) 45,203 - - -
	Net cash inf ow/(outf ow) from investing activities 41,353 (2,644) 44,520 14,643 Cash f ows from f nancing activities Proceeds from issue of shares 1,970 139 1,970 139 Repayment of borrowings (3,000) (13,000) - (11,000) Dividends paid to equity holders of parent 22 (19,493) (3,254) (19,493) (3,254)
	Net cash (outf ow) from f nancing activities (20,523) (16,115) (17,523) (14,115) Net increase in cash held 42,533 23,054 54,955 16,333 Effect of exchange rate f uctuations on cash held 661 (176) - - Net cash and cash equivalents at beginning of the year 56,484 33,606 18,175 1,842
	Net cash and cash equivalents at the end of the year 99,678 56,484 73,130 18,175
	Cash and cash equivalents 99,678 56,484 73,130 18,175

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Notes to the fi nancial statements are included on pages 36 — 72.

36 NOTES TO THE FINANCIAL STATEMENTS

For the Financial Year Ended 30 June, 2011

1. SUMMARY OF ACCOUNTING POLICIES

1.1 Statement of Compliance

EBOS Group Ltd (“the Company”) is a profi t-oriented company incorporated in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Exchange.

The Company operated in two business segments up until 1 September 2010, being Healthcare and Scientifi c – Healthcare incorporates the sale of healthcare products in a range of sectors, own brands, retail healthcare and wholesale activities, and logistics and Scientifi c incorporated the sale of laboratory consumables, life sciences equipment and technical support to industry and research laboratories. The Scientifi c segment was sold on 1 September 2010. Since that date the Company operates in one business segment, being Healthcare.

The Company is a reporting entity and issuer for the purposes of the Financial Reporting Act 1993 and its fi nancial statements comply with that Act.

The fi nancial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (‘NZ GAAP’). They comply with New Zealand Equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable reporting standards as appropriate for profi t oriented entities.

The Financial Statements comply with International Financial Reporting Standards (“IFRS”).

1.2 Basis of Preparation

The fi nancial statements have been prepared on the basis of historical cost, except for the revaluation of certain

Cost is based on the fair value of the consideration given in exchange for assets.

Accounting policies are selected and applied in a manner which ensures that the resulting fi nancial information satisfi es the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The accounting policies set out below have been applied in preparing the fi nancial statements for the year ended 30 June, 2011 and the comparative information presented in these fi nancial statements for the year ended 30 June, 2010.

The information is presented in thousands of New Zealand dollars.

1.3 Critical Judgements in Applying Accounting Policies

In the application of NZ IFRS management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed

to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of NZ IFRS that have signifi cant effects on the fi nancial statements and estimates with a signifi cant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the fi nancial statements.

Critical judgements made by management principally relate to the identifi cation of intangible assets such as brands separately from goodwill, arising on acquisition of a business or subsidiaries and the recognition of revenue on signifi cant contracts subject to renewal where the receipt of cashfl ows does not match the services provided.

1.4 Key Sources of Estimation Uncertainty

Key sources of estimation uncertainty relate to assessment of impairment of goodwill and indefi nite life intangibles.

The Group determines whether goodwill and indefi nite life intangibles are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and indefi nite life intangibles are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and indefi nite life intangibles are discussed in notes 12 and 13. It is assumed that signifi cant contracts will be rolled over for each period of renewal.

Determining the recoverable amounts of goodwill and intangible assets requires the estimation of the effects of uncertain future events at balance date. These estimates involve assumptions about risk assessment to cash fl ows or discount rates used, future changes in salaries and future changes in price affecting other costs.

1.5 Specifi c Accounting Policies

The following specifi c accounting policies have been adopted in the preparation and presentation of the fi nancial statements.

a) Basis of consolidation

The consolidated fi nancial statements are prepared by combining the fi nancial statements of all the entities that comprise the Group, being the Company (the Parent entity) and its subsidiaries as defi ned in NZ IAS-27 ‘Consolidated and Separate Financial Statements’. A list of subsidiaries appears in note 15 to the fi nancial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated fi nancial statements.

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method.

37

The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profi t or loss as incurred.

Where applicable, the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classifi ed as an asset or liability are accounted for in accordance with relevant NZ IFRSs. Changes in the fair value of contingent consideration classifi ed as equity are not recognised.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts, to refl ect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group receives complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum period of one year.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All signifi cant inter-company transactions and balances are eliminated on consolidation.

In the Company’s fi nancial statements, investments in subsidiaries are recognised at their cost, less any adjustment for impairment.

b) Goodwill

Goodwill arising on the acquisition of the subsidiary is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously-held equity interest (if any) in the acquiree over the fair value of the identifi able net assets recognised.

If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifi able net assets exceeds the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer’s previously-held equity interests (if any) in the acquiree, the excess is recognised immediately in profi t or loss as a bargain purchase gain.

Goodwill is not amortised, but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cashgenerating units expected to benefi t from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. The recoverable amount is the higher of fair value less cost to sell and value in use. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss is recognised immediately in profi t or loss and is not subsequently reversed.

c) Indefi nite life intangible assets

Indefi nite life intangible assets represent purchased brand names and are initially recognised at cost. Such intangible assets are regarded as having indefi nite useful lives and they are tested annually for impairment on the same basis as for goodwill.

d) Finite life intangible assets

Finite life intangible assets are recorded at cost less accumulated amortisation. Amortisation is charged on a straight line basis over their estimated useful life. The estimated useful life of fi nite life intangible assets is 1 to 8 years. The estimated useful life and amortisation period is reviewed at the end of each annual reporting period.

e) Intangible assets acquired in a business combination

All potential intangible assets acquired in a business combination are identifi ed and recognised separately from goodwill where they satisfy the defi nition of an intangible asset and their fair value can be measured reliably.

f) Property, plant, and equipment

The group has fi ve classes of property, plant and equipment:

• Freehold land

• Buildings

• Leasehold improvements

• Plant

• Offi ce equipment, furniture and fi ttings.

Property, Plant and Equipment is initially recorded at cost.

Cost includes the original purchase consideration and those costs directly attributable to bring the item of Property, Plant and Equipment to the location and condition for its intended use.

38 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

For the Financial Year Ended 30 June, 2011

f) Property, plant and equipment continued

After recognition as an asset Property, Plant and Equipment is carried at cost less accumulated depreciation and impairment losses.

When an item of Property, Plant and Equipment is disposed of, any gain or loss is recognised in the Income Statement and is calculated as the difference between the sale price and the carrying value of the item.

Depreciation is provided for on a straight line basis on all Property, Plant and Equipment other than freehold land, at depreciation rates calculated to allocate the assets’ cost less estimated residual value, over their estimated useful lives.

Leased assets are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets.

The following useful lives are used in the calculation of depreciation:

Buildings	20 to 100years
Leasehold improvements	2 to 15years
Plant	2 to 20years
Off ce equipment, furniture and f ttings	2 to 10years

g) Impairment of assets

At each balance sheet date, the Group reviews the carrying amounts of its non current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash fl ows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.

If the recoverable amount of an asset (cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, other than for Goodwill and indefi nite life intangible assets, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised

as income immediately. Impairment losses can not be reversed for Goodwill and indefi nite life intangible assets.

h) Taxation

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interest in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

39

Current and deferred tax are recognised as an expense or income in profi t or loss, except when they relate to items recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other comprehensive income or directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities over the cost of the business combination.

i) Inventories

Inventories are recognised at the lower of cost, determined on a weighted average basis, and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

j) Leases

The Group leases certain plant and equipment and land and buildings.

Finance leases, which effectively transfer to the Group substantially all of the risks and benefi ts incident to ownership of the leased item, are capitalised at the present value of the minimum lease payments. The leased assets and corresponding liabilities are recognised and the leased assets are depreciated over the period the Group is expected to benefi t from their use. Lease payments are apportioned between fi nance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the Income Statement.

Operating lease payments, where the lessors effectively retain substantially all the risks and benefi ts of ownership of the lease items, are included in the determination of the net surplus in equal instalments over the period of the lease. Lease incentives received are recognised as an integral part of the total lease payments made and also spread on a basis representative of the pattern of benefi ts expected to be derived from the leased asset.

k) Foreign Currency Translation

Functional and Presentation Currency

The fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”).

The consolidated fi nancial statements are presented in New Zealand dollars, which is the Company’s functional and presentation currency.

Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing

on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Income Statement for the period.

Foreign Operations

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average rates for the period. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profi t or loss on disposal of the foreign operation.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date.

l) Goods & Services Tax

Revenues, expenses, liabilities and assets are recognised net of the amount of goods and services tax (GST), except for receivables and payables which are recognised inclusive of GST.

Cash fl ows are included in the cash fl ow statement on a net basis. The GST component of cash fl ows arising from investing and fi nancing activities which is recoverable from, or payable to, the taxation authority is classifi ed as operating cash fl ows.

m) Financial Instruments

Financial assets and fi nancial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial Assets

Financial assets are classifi ed into the following specifi c categories: “fi nancial assets at fair value through profi t or loss” (FVTPL), “held to maturity” investments, “available for sale” (AFS) fi nancial assets and “loans and receivables”. The category depends on the nature and purpose of the fi nancial assets and is determined at initial recognition. The categories used are set out below:

Cash & Cash Equivalents:

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignifi cant risk of changes in value.

Financial Assets at Fair Value through Profi t and Loss (FVTPL):

Financial assets are classifi ed as FVTPL where the fi nancial asset is either held for trading or it is designated at FVTPL, such as derivative fi nancial asset instruments where hedge accounting is not applied.

40 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

For the Financial Year Ended 30 June, 2011

m) Financial Instruments continued

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profi t or loss. The net gain or loss recognised in profi t or loss incorporates any

Loans and Receivables:

Trade and other receivables, including advances to subsidiaries, that have fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables.

Loans and receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the Income Statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the effective interest rate computed at initial recognition.

Equity Instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial Liabilities

Financial liabilities are classifi ed as either fi nancial liabilities at “fair value through profi t or loss” (FVTPL) or “other fi nancial liabilities” measured at amortised cost.

Financial Liabilities at Fair Value through Profi t and Loss: Financial liabilities are classifi ed as FVTPL where the fi nancial liability is either held for trading or it is designated at FVTPL, such as derivative fi nancial liability instruments where hedge accounting is not applied.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profi t or loss. The net gain or loss recognised in profi t or loss incorporates any dividend or interest paid on the fi nancial liability.

Other Financial Liabilities:

Trade and other payables, including advances from subsidiaries and bank loans, are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest rate method.

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received plus issue costs associated with the borrowing. After initial recognition, these loans and borrowings are subsequently measured at amortised cost using the effective interest rate method which allocates the cost through the expected life of the loan or borrowing. Amortised cost is calculated taking into account any issue costs, and any discount or premium on drawdown.

Bank loans are classifi ed as current liabilities (either advances or current portion of term debt) unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Derivative Financial Instruments

The Group enters into foreign currency forward exchange contracts to hedge trading transactions, including anticipated transactions, denominated in foreign currencies and from time to time uses interest rate swaps to manage

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The resulting gain or loss is recognised in profi t or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profi t or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as cashfl ow hedges of highly probable forecast transactions.

Cashfl ow Hedges

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in cashfl ows of the hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cashfl ow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profi t or loss.

Amounts deferred in equity are recycled in profi t or loss in the periods when the hedged item is recognised in profi t or loss. However, when the forecast transaction that is hedged results in the recognition of a non-fi nancial asset or a non-fi nancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset and liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires, is terminated, exercised or no longer qualifi es for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profi t or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profi t or loss.

n) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable

41

for goods and services provided in the normal course of business, net of returns, discounts, allowances and GST. The following specifi c recognition criteria must be met before revenue is recognised:

Sale of Goods

Sales of goods are recognised when signifi cant risks and rewards of owning the goods are transferred to the buyer, when the revenue can be measured reliably and when management effectively ceases involvement or control.

Rendering of Services

Revenue from services rendered is recognised when it is probable that the economic benefi ts associated with the transaction will fl ow to the entity. The stage of completion at balance date is assessed based on the value of services performed to date as a percentage of the total services to be performed.

Interest Income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount.

Effective Interest Method

The effective interest rate method is a method of calculating the amortised cost of a fi nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the fi nancial asset, or, where appropriate, a shorter period to the carrying

Royalties

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement. Royalties determined on a time basis are recognised on a straight line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognised by reference to the underlying agreement.

Investing activities are those activities relating to the acquisition and disposal of current and non-current investments and any other non-current assets.

Financing activities are those activities relating to changes in the equity and debt capital structure of the Company and Group and those activities relating to the cost of servicing the Company’s and the Group’s equity capital.

p) Employee Entitlements

A liability for annual leave and long service leave is accrued and recognised in the statement of fi nancial position. The liability is equal to the present value of the estimated future cash outfl ows as a result of employee services provided at balance date.

Provisions made in respect of employee benefi ts expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefi ts which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outfl ows to be made by the Group in respect of services provided up to reporting date.

q) Segment Reporting

The Group’s operating segments are identifi ed on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (Chief Executive Offi cer) in order to allocate resources to the segment and to assess its performance.

r) Research and Developmen t

Expenditure on research activities, such as software development, is recognised as an expense in the period it is incurred.

s) Adoption of New Revised Standards and Interpretations

No standards have been adopted during the year which have had a material impact on these fi nancial statements. We are not aware of any standards in issue but not yet effective which would materially impact the amounts recognised or disclosed in the fi nancial statements.

Dividend Income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

o) Cash Flow Statement

The cash fl ow statement is prepared exclusive of GST, which is consistent with the method used in the income statement.

Defi nition of terms used in the cash fl ow statement: Operating activities include all transactions and other events that are not investing or fi nancing activities.

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

42

2. PROFIT FROM CONTINUING OPERATIONS

		Group Parent Notes 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (a) Revenue Revenue consisted of the following items: Revenue from the sale of goods - external 1,337,454 1,312,247 58,639 57,154 Revenue from the sale of goods - inter group - - 10,964 10,283 Revenue from the rendering of services 3,523 2,804 - - Management fees - external 415 1,495 - - Management fees - inter group - - 456 483 Rental revenue - inter group - - 12 85 Interest revenue - inter group - - 233 203 Interest revenue - other 2,364 935 1,702 335 Royalty income - inter group - - 3,960 370 Dividends - inter group - - 23,305 12,935 1,343,756 1,317,481 99,271 81,848 (b) Prof t before income tax Prof t before income tax has been arrived at after crediting/(charging) the following gains and losses from operations: (Loss)/gain on disposal of property, plant and equipment (34) 3 - (4) Disposal of Scientif c businesses - - (17,941) - Change in fair value of derivative f nancial instruments (236) 848 (236) 848 Prof t before income tax has been arrived at after charging the following expenses by nature: Cost of sales - external (1,205,620) (1,185,179) (45,525) (44,940) Purchases inter group - - (1,426) (1,991) Write-down of inventory (1,137) (1,129) (248) (391) Finance costs: Bank interest (4,511) (5,057) (2,399) (2,978) Other interest expense (637) (625) (611) (451) Total f nance costs (5,148) (5,682) (3,010) (3,429) Net bad and doubtful debts arising from: Impairment loss on trade & other receivables (330) (443) (1) (30) Depreciation of property, plant and equipment 10 (3,231) (3,151) (425) (445) Amortisation of f nite life intangibles 14 (173) (504) - - Operating lease rental expenses: Minimum lease payments (5,741) (5,554) (862) (875) Donations (69) (40) (47) (16) Employee benef t expense (50,587) (48,189) (10,805) (10,552) Other expenses (38,877) (37,448) (8,498) (7,709) Total expenses (1,310,913) (1,287,319) (70,847) (70,378) Prof t before income tax 32,573 31,013 10,247 12,314 2. PROFIT FROM CONTINUING OPERATIONS

43

		Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (a) Income tax recognised in income statement Tax expense/(credit) comprises: Current tax expense: Current year 9,348 11,573 929 - Adjustments for prior years (559) (1,583) - - Other adjustments 41 32 - 33 8,830 10,022 929 33 Deferred tax expense/(credit): Origination and reversal of temporary differences (650) 915 (158) 219 Adjustments for prior years 563 1,844 406 1,475 Adjustments related to changes in tax rates or imposition of new taxes 186 (368) (59) (48) Other (44) - - - 55 2,391 189 1,646 Total income tax expense/(credit) 8,885 12,413 1,118 1,679 Attributable to: Continuing operations 9,173 11,324 1,118 1,679 Discontinued operations (288) 1,089 - - 8,885 12,413 1,118 1,679 The prima facie income tax expense on pre-tax accounting prof t from operations reconciles to the income tax expense in the f nancial statements as follows: Prof t from continuing operations 32,573 31,013 10,247 12,314 Prof t from discontinued operations 7,891 4,837 - - Prof t from operations 40,464 35,850 10,247 12,314 Income tax expense calculated at 30% 12,139 10,755 3,074 3,694 Non-deductible expenses/(non-assessable income) (2,361) 67 (1,549) (3,841) Effect of differences arising from investment interests in other jurisdictions (756) (346) (754) (346) Effect of reduction of tax base of buildings - 1,974 - 712 (Over)/under provision of income tax in previous year 4 261 406 1,475 Adjustments related to changes in tax rates 186 (368) (59) (48) Other adjustments (327) 70 - 33 Total income tax expense/(credit) 8,885 12,413 1,118 1,679 The tax rates used are principally the corporate tax rates of 30% (2010: 30%) payable by New Zealand and Australian corporate entities on taxable prof ts under tax law in each jurisdiction. The tax legislation announcement made by the New Zealand Government in May 2010 has impacted on the deferred tax expense/(credit) as follows: 1. The tax rate for depreciation on buildings, which have a life of 50 years or greater was reduced to zero for years from and including 2012. The effect of this is an additional deferred tax expense in the prior year of $1,974,000 (Group), $712,000 (Parent). 2. The Company income tax rate is to reduce to 28% (currently 30%) for the year from and including the 2012 year. The impact of this change in tax rates has resulted in a deferred tax debit/(credit) in the current year of $186,000 (Group) (2010: ($368,000)). ($59,000) (Parent) (2010: ($48,000)). 3. INCOME TAXES

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

44

3. INCOME TAXES CONTINUED

		Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (b) Current tax assets and liabilities Current tax assets: Current tax refundable 1,045 458 - 53 Current tax liabilities: Current tax payable 3,422 5,577 643 - (c) Deferred tax balance Deferred tax assets comprise: Temporary differences 4,538 5,297 693 1,190 Deferred tax liabilities comprise: Temporary differences (8,706) (9,148) (2,038) (2,151) (4,168) (3,851) (1,345) (961) Taxable and deductible temporary differences arise from the following: Group Group Group Group Opening Charged Charged Closing balance to income to equity balance $’000 $’000 $’000 $’000 2011 Gross deferred tax liabilities: Property, plant & equipment (1,893) 284 - (1,609) Intangible assets (7,255) 158 - (7,097) (9,148) 442 - (8,706) Gross deferred tax assets: Property, plant & equipment 333 (333) - - Provisions 3,680 (461) - 3,219 Doubtful debts & impairment losses 573 171 - 744 Other f nancial liabilities – derivatives 454 (1) (262) 191 Other 257 127 - 384 5,297 (497) (262) 4,538 (55) (262) 2010 Gross deferred tax liabilities: Property, plant & equipment (63) (1,830) - (1,893) Provisions (18) 18 - - Intangible assets (7,531) 276 - (7,255) (7,612) (1,536) - (9,148) Gross deferred tax assets: Property, plant & equipment 256 77 - 333 Provisions 3,454 226 - 3,680 Doubtful debts & impairment losses 517 56 - 573 Other f nancial liabilities – derivatives 846 (4) (388) 454 Other 1,467 (1,210) - 257 6,540 (855) (388) 5,297 (2,391) (388) 3. INCOME TAXESCONTINUED

45

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----- Start of picture text -----

||||||
|---|---|---|---|---|
|3. INCOME TAXES|CONTINUED|
|Parent|Parent|Parent|Parent|
|Opening|Charged|Charged|Closing|
|balance|to income|to equity|balance|
|$’000|$’000|$’000|$’000|
|2011|
|Gross deferred tax liabilities:|
|Property, plant & equipment|(663)|13|-|(650)|
|Intangible assets|(1,488)|100|-|(1,388)|
|(2,151)|113|-|(2,038)|
|Gross deferred tax assets:|
|Provisions|567|(43)|-|524|
|Doubtful debts & impairment losses|41|(2)|-|39|
|Other fi nancial liabilities – derivatives|325|-|(195)|130|
|Tax losses carried forward|257|(257)|-|-|
|1,190|(302)|(195)|693|
|(189)|(195)|
|2010|
|Gross deferred tax liabilities:|
|Property, plant & equipment|-|(663)|-|(663)|
|Intangible assets|(1,488)|-|-|(1,488)|
|(1,488)|(663)|-|(2,151)|
|Gross deferred tax assets:|
|Property, plant & equipment|11|(11)|-|-|
|Provisions|337|230|-|567|
|Doubtful debts & impairment losses|41|-|-|41|
|Other fi nancial liabilities – derivatives|585|-|(260)|325|
|Tax losses carried forward|1,459|(1,202)|-|257|
|2,433|(983)|(260)|1,190|
|(1,646)|(260)|

----- End of picture text -----

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

46

		No liability has been recognised in respect of the amount of temporary differences including foreign currency translation reserves associated with undistributed earnings of off-shore subsidiaries because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. 3. INCOME TAXESCONTINUED Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (d) Imputation credit account balances Balance at beginning of the year 6,845 4,624 250 (1,604) Attached to dividends received - - 3,000 3,857 Taxation paid 6,991 4,301 234 62 Attached to dividends paid (8,137) (1,365) (8,137) (1,365) Other credits 242 8 - - Other debits (179) (723) (234) (700) Balance at end of the year 5,762 6,845 (4,887) 250 Imputation credits available directly and indirectly to shareholders of the Parent company, through Parent company (4,887) 250 Subsidiaries 10,649 6,595 5,762 6,845

47

4. KEY MANAGEMENT PERSONNEL COMPENSATION

==> picture [381 x 297] intentionally omitted <==

----- Start of picture text -----

||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|Short-term employee benefi ts|6,838|6,539|5,076|4,451|
|Post-employment benefi ts|297|266|297|266|
|7,135|6,805|5,373|4,717|
|5. REMUNERATION OF AUDITORS|
|Auditor of the parent entity (Deloitte)|
|Audit of the fi nancial statements|379|404|76|61|
|Audit related services for review of fi nancial statements|
|not included above|18|-|18|-|
|Review of group fi nance function|42|-|42|-|
|Assurance assistance|83|-|-|-|
|Due diligence|37|36|37|36|
|Information technology services|40|64|40|64|
|Internal control assurance services|139 - -|-|
|738|504|213|161|
|6. TRADE & OTHER RECEIVABLES|
|Trade receivables (i)|153,365|148,819|9,863|8,717|
|Other receivables|1,057|707|458|139|
|Allowance for impairment (ii)|(1,625)|(1,348)|(138)|(138)|
|152,797|148,178|10,183|8,718|

----- End of picture text -----

(i) Trade receivables are non-interest bearing and generally on monthly terms. No interest is charged on the trade receivables for the fi rst 60 days from the date of the invoice. Thereafter, interest may be charged at 3% per annum on the outstanding balance. The Group’s ProPharma Pharmacy business unit generally holds collateral over its trade receivables balances.

(ii) Allowance for Impairment

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----- Start of picture text -----

||||||
|---|---|---|---|---|
|Balance at the beginning of the year|(1,348)|(1,134)|(138)|(138)|
|Impairment loss recognised on trade receivables|(594)|(593)|(1)|(30)|
|Amounts written off as uncollectible|235|231|1|30|
|Impairment losses reversed|82|148|-|-|
|(1,625)|(1,348)|(138)|(138)|

----- End of picture text -----

In determining the recoverability of trade and other receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

48

Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (iii) Aging of impaired trade and other receivables 90 days+ (1,625) (1,348) (138) (138) (1,625) (1,348) (138) (138) (iv) Aging of past due but not impaired trade and other receivables Included in the trade and other receivables balance are debtors with a carrying amount of Group $13,008,000 (2010: $14,792,000) and Parent $2,177,000 (2010: $2,522,000) which are past due at the reporting date for which the Group and/or Parent has not provided any impairment as the amounts are still considered recoverable. 30 - 60 days 9,672 10,454 1,144 1,443 60 - 90 days 1,716 2,458 264 149 90 days+ 1,620 1,880 769 930 13,008 14,792 2,177 2,522 7. PREPAYMENTS Current portion 2,673 2,581 944 1,116 Term portion 847 1,179 - - 3,520 3,760 944 1,116 8. INVENTORIES Finished Goods At cost 121,807 128,484 8,347 7,955 121,807 128,484 8,347 7,955 9. OTHER FINANCIAL ASSETS - DERIVATIVES At fair value: Foreign currency forward contracts (i) - 105 - 105 - 105 - 105 (i) Financial asset carried at fair value through prof t or loss (“FVTPL”). 6. TRADE & OTHER RECEIVABLESCONTINUED

49

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||||||||
|---|---|---|---|---|---|---|
|10. PROPERTY, PLANT AND EQUIPMENT|
|Group|
|Offi ce|
|Leasehold|equipment|
|improve-|Plant and|furniture &|
|Freehold|Buildings|ments at|vehicles|fi ttings at|
|land at cost|at cost|cost|at cost|cost|Total|
|$’000|$’000|$’000|$’000|$’000|$’000|
|Gross carrying amount|
|Balance at 1 July, 2009|1,895|8,953|2,059|8,439|12,397|33,743|
|Additions|-|80|16|888|1,136|2,120|
|Disposals|-|-|(26)|(1,536)|(1,172)|(2,734)|
|Net foreign currency exchange differences|-|-|(7)|(39)|(35)|(81)|
|Balance at 30 June, 2010|1,895|9,033|2,042|7,752|12,326|33,048|
|Additions|-|10|276|1,039|2,407|3,732|
|Disposals|-|-|(296)|(1,428)|(2,385)|(4,109)|
|Net foreign currency exchange differences|-|-|36|103|90|229|
|Balance at 30 June, 2011|1,895|9,043|2,058|7,466|12,438|32,900|
|Accumulated depreciation|
|Balance at 1 July, 2009|-|(1,490)|(558)|(3,970)|(8,281)|(14,299)|
|Disposals|-|-|20|1,248|1,191|2,459|
|Depreciation expense|-|(284)|(415)|(1,231)|(1,758)|(3,688)|
|Net foreign currency exchange differences|-|-|5|21|24|50|
|Balance at 30 June, 2010|-|(1,774)|(948)|(3,932)|(8,824)|(15,478)|
|Disposals|-|-|162|831|2,000|2,993|
|Depreciation expense|-|(277)|(369)|(1,056)|(1,598)|(3,300)|
|Net foreign currency exchange differences|-|-|(27)|(62)|(52)|(141)|
|Balance at 30 June, 2011|-|(2,051)|(1,182)|(4,219)|(8,474)|(15,926)|
|Net book value|
|As at 30 June, 2010|1,895|7,259|1,094|3,820|3,502|17,570|
|As at 30 June, 2011|1,895|6,992|876|3,247|3,964|16,974|

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50 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

10. PROPERTY, PLANT AND EQUIPMENT CONTINUED

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||||||||
|---|---|---|---|---|---|---|
|Parent|
|Offi ce|
|equipment|
|Leashold|furniture &|
|Freehold|Buildings|improve-|Plant at|fi ttings at|
|land at cost|at cost|ment at cost|cost|cost|Total|
|$’000|$’000|$’000|$’000|$’000|$’000|
|Gross carrying amount|
|Balance at 1 July, 2009|694|2,835|202|836|1,307|5,874|
|Additions|-|78|2|162|89|331|
|Disposals|-|-|(7)|(307)|(39)|(353)|
|Balance at 30 June, 2010|694|2,913|197|691|1,357|5,852|
|Additions|-|7|1|134|55|197|
|Disposals|-|-|-|(2)|-|(2)|
|Balance at 30 June, 2011|694|2,920|198|823|1,412|6,047|
|Accumulated depreciation|
|Balance at 1 July, 2009|-|(110)|(118)|(606)|(654)|(1,488)|
|Disposals|-|-|7|302|39|348|
|Depreciation expense|-|(97)|(19)|(123)|(206)|(445)|
|Balance at 30 June, 2010|-|(207)|(130)|(427)|(821)|(1,585)|
|Disposals|-|-|-|-|-|-|
|Depreciation expense|-|(91)|(18)|(132)|(184)|(425)|
|Balance at 30 June, 2011|-|(298)|(148)|(559)|(1,005)|(2,010)|
|Net book value|
|As at 30 June, 2010|694|2,706|67|264|536|4,267|
|As at 30 June, 2011|694|2,622|50|264|407|4,037|

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Group plant includes fi nance leases capitalised with a cost of $162,000 (2010: $1,394,000) and book value of $19,000 (2010: $217,000). Parent plant includes fi nance leases capitalised with a cost of $134,000 (2010: $134,000) and book value of $Nil (2010: $Nil).

Land and buildings in Auckland with a carrying value of $5,570,000 (2010: $5,751,000) were last valued on 30 June 2011 and determined by Telfer Young (Auckland) Limited, in accordance with NZ IAS16, to have a fair value of $9,600,000.

Land and buildings in Christchurch with a carrying value of $3,316,000 (2010: $3,400,000) were acquired during the last four years and are stated at cost less accumulated depreciation and impairment.

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||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|Aggregate depreciation recognised as an expense|
|during the year:|
|Buildings|277|284|91|97|
|Leasehold improvements|369|415|18|19|
|Plant and vehicles|1,056|1,231|132|123|
|Offi ce equipment, furniture & fi ttings|1,598|1,758|184|206|
|3,300|3,688|425|445|

----- End of picture text -----

51

		Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 Capital work in progress - 245 - - The capital work in progress relates to software development. The total cost to complete the project is $Nil (2010: $975,000). Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 Gross carrying amount Balance at beginning of f nancial year 133,741 133,915 1,728 1,728 De-recognised on disposal of businesses (20,410) - - - Effects of foreign currency exchange differences 801 (174) - - Net book value 114,132 133,741 1,728 1,728 Allocation of goodwill to cash-generating units Goodwill has been allocated for impairment testing purposes to the following cash-generating units representing the lowest level at which management monitor goodwill: • Australian Hospital and Primary Healthcare sector (EBOS Group Pty Limited) – Healthcare Australia. • New Zealand Consumer, Hospital, Primary Healthcare, Aged Care and International Product Supplies (EBOS Group Limited) – Healthcare NZ. • New Zealand Hospital Procurement and logistic services (Health Support) – Logistics NZ – amalgamated with PRNZ Limited 1 November 2010. • Australasia Scientif c Supplies (Global Science & Technology Limited) – Scientif c – disposed 1 September 2010. • New Zealand Pharmacy Wholesaler and Logistic Services (PRNZ Limited) – Pharmacy/Logistics NZ The carrying amount of goodwill allocated to cash-generating units is as follows: Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 Healthcare Australia 17,361 16,629 - - Healthcare NZ (Parent) 1,728 1,728 1,728 1,728 Healthcare - Logistics NZ Wholesale - 1,468 - - Scientif c - 20,341 - - Healthcare – Pharmacy/Logistics NZ 95,043 93,575 - - 114,132 133,741 1,728 1,728 During the year ended 30 June 2011, management have determined that there is no impairment of any of the cash generating units containing goodwill (2010: Nil). The recoverable amounts (i.e. higher of value in use and fair value less costs to sell) of those units are determined on the basis of value in use calculations. Management has determined that the recoverable amount calculations are most sensitive to changes in the following assumptions: 12. GOODWILL 11. CAPITAL WORK IN PROGRESS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

52

		Healthcare Australia and Healthcare NZ – Maintaining market share and gross margin being maintained during a period of high volatility in foreign currency during the assessment period. Logistics NZ and Pharmacy/Logistics NZ – Maintaining market share and controlling operational costs during the assessment period. Gross margins during the period for Healthcare Australia, Healthcare NZ, Logistics NZ and Pharmacy/Logistics NZ are estimated by management based on average gross margins achieved before the start of the assessment period. Market shares during the assessment period are assessed by management based on average market shares achieved in the period immediately before the start of the assessment period, adjusted each year for any anticipated growth. The value in use calculation uses cash f ow projections based on f nancial forecasts approved by management covering a f ve year period and management’s past experience. Annual growth rates of 0% to 5.1% (2010: 2% to 5%), which is below current historical growth rates; an allowance of 2% to 3% (2010: 2%) for inf ation to expenses, and pre-tax discount rates of 12.5% to 14% (2010: 14.2% to 14.3%) have been applied to these projections. Cash f ows beyond the f ve year period have been extrapolated using a steady 2% (2010: 2%) growth rate. Management also believes that any reasonably possible change in the key assumptions would not cause the carrying amount of any of the cash generating units to exceed their recoverable amount. 13. INDEFINITE LIFE INTANGIBLES Group Group Group Group Group Natures Kiss Allersearch Liceblaster Trademarks Total $’000 $’000 $’000 $’000 $’000 Gross carrying amount Balance at 1 July, 2009 2,390 2,570 1,530 17,240 23,730 Net foreign currency exchange differences - - (16) - (16) Balance at 30 June, 2010 2,390 2,570 1,514 17,240 23,714 Net foreign currency exchange differences - - 82 - 82 Balance at 30 June, 2011 2,390 2,570 1,596 17,240 23,796 Net book value As at 30 June, 2010 2,390 2,570 1,514 17,240 23,714 As at 30 June, 2011 2,390 2,570 1,596 17,240 23,796 Parent Parent Parent Natures Kiss Allersearch Total $’000 $’000 $’000 Gross carrying amount Balance at 1 July, 2009 2,390 2,570 4,960 Balance at 30 June, 2010 2,390 2,570 4,960 Balance at 30 June, 2011 2,390 2,570 4,960 Net book value As at 30 June, 2010 2,390 2,570 4,960 As at 30 June, 2011 2,390 2,570 4,960 12. GOODWILLCONTINUED

53

		The carrying amount of brands (indef nite life intangibles) has been allocated to the cash generating units as follows: Group 2011 2010 $’000 $’000 Healthcare Australia 4,166 4,084 Healthcare NZ (Parent) 2,390 2,390 Pharmacy/Logistics NZ 17,240 17,240 23,796 23,714 Group 2011 2010 $’000 $’000 Gross carrying amount of Supply Contracts Balance at beginning of f nancial year 1,490 1,490 Accumulated amortisation & impairment Balance at beginning of f nancial year (1,285) (781) Amortisation expense (173) (504) Balance at end of f nancial year (1,458) (1,285) Net book value at end of f nancial year 32 205 Allocated to cash generating units as follows: Pharmacy/Logistics NZ 32 205 Management have assessed these as having an indef nite useful life. In coming to this conclusion management considered expected expansion of the usage of the brands across other products and markets, the typical product life cycle of these assets, the stability of the industry in which the brands are operating, the level of maintenance expenditure required and the period of legal control over the brands. During the year ended 30 June 2011, management have determined that there is no impairment of any of the brands. The value in use calculation uses cash f ow projections based on f nancial forecasts approved by management covering a f ve year period and management’s past experience. The calculation of the recoverable amounts for Natures Kiss; Allersearch and Liceblaster brands and Pharmacy/ Logistics NZ Trademarks have been determined based on a value in use calculation that uses cash f ow projections based on f nancial forecast approved by management covering a f ve-year period. Management has determined that the recoverable amount calculations are most sensitive to change in the following assumptions. Annual growth rates of 0% to 5.8% (2010: 4% to 5%), and an allowance of 2% to 3% (2010: 2%) for inf ation to expenses, and pre-tax discount rates of 12.4% to 14.1% (2010: 14.3% to 14.6%) have been applied to these projections. Cash f ows beyond the f ve-year period have been extrapolated using a steady 2% (2010: 2%) growth rate. Management also believes that any reasonably possible change in the key assumptions would not cause the carrying amount of the brands to exceed their recoverable amount. 14. FINITE LIFE INTANGIBLES 13. INDEFINITE LIFE INTANGIBLESCONTINUED

54 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 Current Finance lease liabilities (ii) 5 176 - 20 Advances from Subsidiaries (at call) (iii) - - 54,464 12,842 5 176 54,464 12,862 Non-current Bank loans (i) 57,177 59,017 28,000 28,000 Finance lease liabilities (ii) 6 18 - - 57,183 59,035 28,000 28,000 Total borrowings 57,188 59,211 82,464 40,862 (i) Bank term loans and revolving cash advance facilities operate under a negative pledge deed provided to ANZ National Bank Limited by the parent company and its subsidiaries. There have been no breaches of the banking covenants provided under the negative pledge deed. (ii) Secured by the assets leased. (iii) Unsecured. The fair value of non current borrowings is approximately equal to their carrying amount. 17. TRADE & OTHER PAYABLES Current Trade payables 244,621 235,159 5,609 4,672 Other payables 14,509 13,696 3,217 3,107 259,130 248,855 8,826 7,779 Non-current Other payables 4,591 4,770 - - Total trade & otherpayables 263,721 253,625 8,826 7,779 Parent and Head Entity EBOS Group Limited Subsidiaries (all balance dates 30 June) Country of Ownership Interests Incorporation and Voting Rights 2011 and 2010 EBOS Healthcare (Australia) Pty Limited (formerly EBOS Group Pty Limited) Australia 100% EBOS Group Pty Limited (formerly Vital Medical Supplies (Australia) Pty Limited) Australia 100% EBOS Health & Science Pty Limited Australia 100% EBOS Shelf Company New Zealand Limited (formerly Global Science & Technology Limited) New Zealand 100% EBOS Shelf Company Australia Pty Limited (formerly Quantum Scientif c Pty Limited) Australia 100% PRNZ Limited New Zealand 100% EBOS Limited Partnership Australia 100% Healthcare Distributors Pty Limited Australia 100% 16. BORROWINGS 15. SUBSIDIARIES

55

18. LEASES

Finance leases

Minimum future lease payments

Finance leases relate to offi ce equipment, plant and motor vehicles. The Group has options to purchase the equipment for a nominal amount at the conclusion of the lease agreements.

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||||||||||
|---|---|---|---|---|---|---|---|---|
|Present Value of Minimum|
|Finance lease liabilities|
|Minimum Future Lease Payments|Future Lease Payments|
|Group|Parent|Group|Parent|
|2011|2010|2011|2010|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|$’000|$’000|$’000|$’000|
|Not later than 1 year|7|184|-|25|5|176|-|20|
|Later than 1 year and not later than 5 years|6|21|-|-|6|18|-|-|
|Minimum lease payments*|13|205|-|25|11|194|-|20|
|Less future fi nance charges|(2)|(11)|-|(5)|-|-|-|-|
|Present value of minimum lease payments|11|194|-|20|11|194|-|20|
|Included in the fi nancial statements as:|
|Finance leases - current portion|5|176|-|20|
|Finance leases - non current portion|6|18|-|-|
|11|194|-|20|

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• Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.

Operating leases

Leasing arrangements

Operating leases relate to certain property and equipment, with lease terms of between one to ten years with options to extend for a further one to ten years. All operating lease contracts contain market review clauses in the event that the Company/Group exercises its option to renew. The Company/Group does not have an option to purchase the leased asset at the expiry of the lease period.

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||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|Operating leases|
|Non-cancellable operating lease payments|
|Not longer than 1 year|5,266|6,788|691|844|
|Longer than 1 year and not longer than 5 years|13,661|13,371|3,143|376|
|Longer than 5 years|5,451|2,744|3,665|-|
|24,378|22,903|7,499|1,220|

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19. OTHER FINANCIAL LIABILITIES - DERIVATIVES

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||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|At fair value:|
|Foreign currency forward contracts (i)|130|-|130|-|
|Interest rate swaps (ii)|685|1,512|468|1,083|
|815|1,512|598|1,083|

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(i) Financial liability carried at fair value through profi t or loss (“FVTPL”).

(ii) Designated and effective as cashfl ow hedging instrument carried at fair value.

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

56

20. SHARE CAPITAL

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----- Start of picture text -----

||||||
|---|---|---|---|---|
|2011|2011|2010|2010|
|No.’000|$’000|No.’000|$’000|
|Fully paid ordinary shares|
|Balance at beginning of fi nancial period|50,796|106,000|48,981|105,861|
|Issue of shares to executives and staff|
|under employee share ownership scheme|50|174|46|139|
|Bonus shares issued under Profi t Distribution Plan|
|- October 2009|-|-|901|-|
|- April 2010|-|-|868|-|
|- October 2010|1,015|-|-|-|
|Dividend reinvested|
|- April 2011|246|1,796|-|-|
|52,107|107,970|50,796|106,000|

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Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Changes to the Companies Act in 1993 abolished the authorised capital and par value concept in relation to share capital from 1 July, 1994. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Given the immateriality of the amounts involved, the issue of shares to executives and staff under the employee ownership scheme have not been accounted for pursuant to NZ IFRS-2: Share Based Payment. Since the inception of the employee ownership scheme in December 1994 389,500 (2010: 339,650) shares have been issued raising $721,505 (2010: $547,030).

21. RESERVES

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||||
|---|---|---|
|Group|
|2011|2010|
|$’000|$’000|
|Foreign currency translation reserve|
|Balance at beginning of the year|1,116|1,586|
|Translation of foreign operations|1,357|(470)|
|Balance at end of the year|2,473|1,116|

----- End of picture text -----

Exchange differences, principally relating to the translation from Australian dollars, being the functional currency of the Group’s foreign controlled entities in Australia, into New Zealand dollars, are brought to account by entries made directly to the foreign currency translation reserve.

57

Retained Earnings Balance at beginning of the year 76,738 56,555 22,191 14,810 Prof t for the year 31,579 23,437 9,129 10,635 Dividends provided for or paid (note 22) (19,493) (3,254) (19,493) (3,254) Balance at end of the year 88,824 76,738 11,827 22,191 Cash Flow Hedge Reserve Balance at beginning of the year (1,064) (1,963) (758) (1,364) Gain recognised on cash f ow hedges 855 1,285 615 866 Related income tax (262) (386) (195) (260) Balance at end of the year (471) (1,064) (338) (758) The hedging reserve represents gains and losses recognised on the effective portion of cash f ow hedges. The cumulative deferred gain or loss on the hedge is recognised in prof t or loss when the hedged transaction impacts prof t or loss. Recognised amounts Fully paid ordinary shares - Final - prior year 17.5 2,136 14.5 1,853 - Special - current year 20.0 10,362 - - - Interim - current year 13.5 6,995 13.5 1,401 51.0 19,493 28.0 3,254 Unrecognised amounts Final dividend 18.0 9,379 17.5 2,136 A dividend of 18.0 cents per share was declared on 26 August 2011 with the dividend being paid on 7 October 2011. The cash impact of the dividend will be $9,379,000 (2010: $2,136,000) 22. DIVIDENDS Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 2011 2011 2010 2010 Cents per Total Cents per Total share $’000 share $’000 21. RESERVESCONTINUED

58 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

		Book value of net assets sold Current assets Trade and other receivables 6,493 - - - Prepayments 114 - - - Inventories 10,017 - - - Non-current assets Property, plant and equipment 1,255 - - - Goodwill 20,410 - - - Current liabilities Trade and other payables (1,186) - - - Employee benef ts (753) - - - Net assets disposed of 36,350 - - - Gain on disposal 8,853 - - - 45,203 - - - Consideration Consideration paid in cash and cash equivalents 45,203 - - - Net cash inf ow on disposal Consideration paid in cash and cash equivalents 45,203 - - - Less cash and cash equivalent balances - - - - 45,203 - - - Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 23. DISPOSAL OF BUSINESSES On 1 September 2010, the Group disposed of its scientif c operations. Details of the disposal are as follows:

59

		(a) Businesses disposed Note 23 sets out details of the businesses disposed. Details of the disposals are as follows. Consideration Cash and cash equivalents 45,203 - - - 45,203 - - - Represented by: Book value of net assets sold (Note 23) 36,350 - - - Gain on disposal 8,853 - - - Consideration 45,203 - - - Net cash inf ow on disposal Cash and cash equivalents consideration 45,203 - - - 45,203 - - - (b) Financing facilities Financing facilities Bank overdraft facility, reviewed annually and payable at call: Amount used - - - - Amount unused 2,857 3,561 1,250 1,250 2,857 3,561 1,250 1,250 Bank loan facilities with various maturity dates through to August 2014 Amount used 57,177 59,017 28,000 28,000 Amount unused 42,000 40,000 22,000 20,000 99,177 99,017 50,000 48,000 Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 24. NOTES TO THE CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

60

		(c) Reconciliation of prof t for the year with cash f ows from operating activities Prof t for the year 31,579 23,437 9,129 10,635 Add/(less) non-cash items: Depreciation 3,300 3,688 425 445 Loss on sale of property, plant and equipment 34 16 - 4 (Gain) on disposal of businesses (8,853) - - - Write-off of investment in businesses disposed - - 17,941 - Amortisation of f nite life intangible assets 173 504 - - Loss/(gain) on derivatives/f nancial instruments 236 (848) 236 (848) Deferred tax 55 2,391 188 1,646 Provision for doubtful debts 277 214 - - (4,778) 5,965 18,790 1,247 Movement in working capital: Trade and other receivables (4,896) 2,328 (1,465) 1,712 Finance lease receivables 102 63 102 63 Prepayments 240 (701) 172 (98) Inventories 6,677 (1,104) (392) 1,145 Current tax refundable/payable (2,742) 2,003 696 (30) Trade and other payables 10,096 9,232 1,047 403 Employee benef ts (809) 909 (121) 728 Foreign currency loss/(gain) on translation of working capital balances 919 (319) - - 9,587 12,411 39 3,923 Working capital items disposed of (Note 23) (14,685) - - - Net cash inf ow from operatingactivities 21,703 41,813 27,958 15,805 Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 24. NOTES TO THE CASH FLOW STATEMENTCONTINUED

61

		Basic earnings per share From continuing operations 45.4 39.5 From discontinued operations 15.8 7.5 Total basic earnings cents per share 61.2 47.0 $’000 $’000 Earnings used in the calculation of total basic earnings per share 31,579 23,437 Prof t for the year from discontinued activities used in the calculation of basic earnings per share from discontinued operations (8,179) (3,748) Earnings used in the calculation of basic earnings per share from continuing operations 23,400 19,689 Weighted average number of ordinary shares for the purposes of basic earnings per share 51,585 49,841 Diluted earnings per share (refer Income Statement and Note 20) cents cents From continuing operations 45.4 39.5 From discontinued operations 15.8 7.5 Total diluted earnings cents per share 61.2 47.0 $’000 $’000 Earnings used in the calculation of total diluted earnings per share 31,579 23,437 Prof t for the year from discontinued activities used in the calculation of diluted earnings per share from discontinued operations (8,179) (3,748) Earnings used in the calculation of diluted earnings per share from continuing operations 23,400 19,689 Weighted average number of ordinary shares for the purposes of diluted earnings per share 51,585 49,841 Group Parent 2011 2010 2011 2010 $’000 $’000 $’000 $’000 (a) Capital expenditure commitments Property, Plant and Equipment - 975 - - (b) Lease commitments Finance lease liabilities and non-cancellable operating lease commitments are disclosed in note 18 to the f nancial statements. 26. COMMITMENTS FOR EXPENDITURE Group 2011 2010 cents cents 25. EARNINGS PER SHARE CALCULATION Basic earnings per share (refer Income Statement and note 20)

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

62

27. CONTINGENT LIABILITIES & CONTINGENT ASSETS

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----- Start of picture text -----

||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|Contingent liabilities|
|Guarantees given to third parties|6,872|6,338|599|154|
|Guarantees arising from the deed of cross|
|guarantee with other entities in the wholly-owned|
|group|-|-|29,177|31,017|

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In June 2011 the Company renegotiated its bank facilities. Bank term loans and revolving cash advance facilities operate under a negative pledge deed provided to ANZ National Bank Limited by the Company and its subsidiaries. Previously the Company has entered into a deed of guarantee for certain wholly-owned subsidiaries. The amount disclosed as a contingent liability represents total liabilities of the Group of companies party to that, less the liabilities recognised by the Group. This amount disclosed also represents the maximum credit risk exposure to the Group and Parent.

A subsidiary company (PRNZ Limited) is guarantor for certain loans made to pharmacies by the ANZ National Bank Limited amounting to $5,273,000 (2010: $5,184,000). The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifi ce of economic benefi ts will be required or the amount is not capable of reliable measurement.

A performance bond of up to $1,000,000 (2010: $1,000,000) is also held by the bank on behalf of a supplier.

28. SEGMENT INFORMATION

a) Products and services from which reportable segments derive their revenues

The Group’s reportable segments under NZ IFRS 8 are as follows:

Healthcare: Incorporates the sale of healthcare products in a range of sectors, own brands, retail healthcare and wholesale activities.

==> picture [57 x 30] intentionally omitted <==

Scientifi c: Incorporates the sale of laboratory consumables, life sciences equipment and technical support to industry and research laboratories.

The Scientifi c operations were discontinued on 1 September 2010.

Information regarding the Group’s reportable segments is presented below.

• (b) Segment revenues and results

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||||
|---|---|---|
|Group|
|2011|2010|
|$’000|$’000|
|Continuing operations|
|Revenue from external customers|
|Healthcare|1,343,756 1,317,481|
|Segment result|
|Healthcare|41,125|40,350|

----- End of picture text -----

63

Group 2011 2010 $’000 $’000 Depreciation (3,231) (3,151) Amortisation of f nite life intangibles (173) (504) Finance costs (5,148) (5,682) Income tax expense (9,173) (11,324) Prof t for the year 23,400 19,689 Discontinued operations Revenue from external customers Scientif c 8,386 55,886 Segment result Scientif c (893) 5,394 Depreciation (69) (537) Finance costs - (20) Income tax expense 288 (1,089) (Loss)/prof t for the year (674) 3,748 Gain on sale of operations 8,853 - 8,179 3,748 The accounting policies of the reportable segments are consistent with the Group’s accounting policies. Segment result represents prof t before depreciation, amortisation, f nance costs and tax. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. Group 2011 2010 $’000 $’000 (c) Segment assets Healthcare 538,319 478,953 Scientif c - 39,390 538,319 518,343 For the purposes of monitoring segment performance and allocating resources between segments, the chief operating decision maker monitors the tangible, intangible and f nancial assets attributable to each segment. Prior to the disposal of the scientif c division assets were allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of revenues earned by individual reportable segments. (d) Revenues from major products and services The Group’s major products and services are the same as the reportable segments i.e. healthcare and scientif c. Revenues are reported above under (b) Segment revenues and results. 28. SEGMENT INFORMATIONCONTINUED

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

64

Group 2011 2010 $’000 $’000 Continuing and discontinued operations Revenue from external customers New Zealand 1,215,417 1,200,974 Australia 136,725 172,393 1,352,142 1,373,367 Non-current assets New Zealand 135,625 148,702 Australia 20,156 27,952 155,781 176,654 (f) Information about major customers No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues (June 2010: Nil). 28. SEGMENT INFORMATIONCONTINUED (e) Geographical information The Group operates in two principal geographical areas; New Zealand (country of domicile) and Australia. The Group’s revenue from external customers by geographical location (of the reportable segment) and information about its segment assets (non-current assets) excluding f nancial instruments and deferred tax assets are detailed below:

65

29. RELATED PARTY DISCLOSURES

(a) Parent Entities

The parent entity in the group is EBOS Group Limited.

(b) Equity interests in Related Parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 15 to the fi nancial statements.

(c) Transactions with Related Parties

Transactions involving the parent entity

Amounts receivable from and payable to related parties at balance date are:

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||||
|---|---|---|
|2011|2010|
|$’000|$’000|
|PRNZ Limited|(12,315)|3,039|
|EBOS Group Pty Limited|(12,846)|(7,870)|
|EBOS Shelf Company New Zealand Limited|(29,303)|(4,972)|
|Healthcare Distributors Limited|348|348|
|EBOS Health and Science Pty Limited|1,190|1,261|

----- End of picture text -----

During the fi nancial year, EBOS Group Limited received dividends of $23,305,000 (2010: $12,935,000) from its subsidiaries.

During the fi nancial year, EBOS Group Limited provided accounting and administration services to its subsidiaries for a consideration of $456,000 (2010: $483,000) and charged royalties for the use of intellectual property, brand names and patents totalling $3,960,000 (2010: $370,000).

During the fi nancial year, EBOS Group Limited rented warehouse space and contracted labour from its subsidiaries for a total cost of $94,000 (2010: $154,000).

Terms/price under which related party transactions were entered into

All loans advanced to and payable by subsidiaries are unsecured, subordinate to other liabilities and are at call. Interest rates determined by the directors were 0% - 6.45% (2010: 5.0% - 6.2%). During the fi nancial year, EBOS Group Limited received interest of $233,000 (2010: $203,000) from loans to subsidiaries, and paid interest of $606,000 (2010: $444,000) to subsidiaries.

No amounts were provided for doubtful debts relating to debts due from related parties at reporting date (2010: Nil).

Guarantees provided or received

As detailed in note 27, EBOS Group Limited has entered into a deed of cross guarantee with certain whollyowned subsidiaries.

(d) Key Management Personnel Remuneration

Details of key management personnel remuneration are disclosed in note 4 to the fi nancial statements.

66 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

30. FINANCIAL INSTRUMENTS

(a) Financial risk management objectives

The Group’s corporate treasury function provides services to the Groups entities, co-ordinates access to domestic and international fi nancial markets, and manages the fi nancial risks relating to the operation of the Group.

The Group does not enter into or trade fi nancial instruments, including derivative fi nancial instruments, for speculative purposes. The use of fi nancial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of fi nancial derivatives. Compliance with policies and exposure limits is reviewed on a regular basis.

(b) Market Risk

The Group’s activities expose it primarily to the fi nancial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a variety of derivative fi nancial instruments to manage its exposure to interest rate and foreign currency risk, including:

• forward foreign exchange contracts to hedge the exchange rate risk arising on imports of product;

(c) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fl uctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

Forward foreign exchange contracts

It is the policy of the Group to enter into forward foreign exchange contracts to cover specifi c foreign currency payments and receipts within 60% to 100% of the exposure generated. The Group also enters into forward foreign exchange contracts to manage the risk associated with anticipated sales and purchase transactions out to 12 months within 20% to 75% of the exposure generated.

The fair value of forward exchange contracts is derived using inputs supplied by third parties that are observable either directly (i.e. prices) or indirectly (i.e. derived from prices). Therefore the Group has categorised these derivatives as Level 2 under the fair value hierarchy contained within the amendment to NZ IFRS 7.

• interest rate swaps to mitigate the risk of rising interest rates.

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||||||||||
|---|---|---|---|---|---|---|---|---|
|Average exchange rate|Foreign currency|Contract value|Fair vlaue|
|2011|2010|2011|2010|2011|2010|2011|2010|
|Outstanding Contracts|FC’000|FC’000|$’000|$’000|$’000|$’000|
|Buy Australian Dollars|
|Less than 3 months|0.765|-|800|-|1,045|-|(14)|-|
|Buy Euro|
|Less than 3 months|0.544|0.551|200|725|367|1,315|(8)|(15)|
|Buy Pounds|
|Less than 3 months|0.490|0.476|535|510|1,091|1,070|(46)|46|
|Buy US Dollars|
|Less than 3 months|0.794|0.699|1,400|1,400|1,763|2,002|(62)|49|
|Buy Japanese Yen|
|Less than 3 months|65.481|- 20,000|-|305|-|25|
|4,266|4,692|(130)|105|

----- End of picture text -----

The above fi nancial instruments relate to the Group and Parent entity. The fair value of forward foreign exchange contracts outstanding are recognised as other fi nancial assets/liabilities. Hedge accounting has not been adopted for the forward foreign exchange contracts.

(d) Interest rate risk management

The Group is exposed to interest rate risk as it borrows funds at both fi xed and fl oating interest rates. The risk is managed by maintaining an appropriate mix between fi xed and fl oating rate borrowings, and by the use of interest rate swap contracts and forward interest rate contracts.

Interest rate swap contracts

Under interest rate swap contracts, the Group agrees to exchange the difference between fi xed and fl oating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on debt held. The fair value of interest rate swaps are based on market values of equivalent instruments at the reporting date.

67

2011 % 2010 % 2011 $’000 2010 $’000 2011 $’000 2010 $’000 2011 % 2010 % 2011 $’000 2010 $’000 2011 $’000 2010 $’000 Outstanding variable rate for f xed contracts Less than 1 year 7.47 7.97 22,257 29,222 (616) (634) 1 to 3 years 5.13 7.11 2,500 25,885 (69) (878) 24,757 55,107 (685) (1,512) Outstanding variable rate for f xed contracts Less than 1 year 7.39 8.22 15,000 20,000 (468) (452) 1 to 3 years - 7.39 - 15,000 - (631) 15,000 35,000 (468) (1,083) The fair value of interest rate swaps outstanding are recognised as other f nancial assets/liabilities. Hedge accounting has been adopted. The fair value of interest rate swaps is derived using inputs supplied by third parties that are observable either directly (i.e. prices) or indirectly (i.e. derived from prices). Therefore the Group has categorised these derivatives as Level 2 under the fair value hierarchy contained within the amendment to NZ IFRS 7. (e) Liquidity The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve banking facilities by continuously monitoring forecast and actual cashf ows and matching maturity prof les of f nancial assets and liabilities. The following tables detail the Group’s remaining contractual maturity for its f nancial assets and f nancial liabilities. The tables have been drawn up based on the undiscounted cash f ows of the f nancial assets and liabilities. The tables include both interest and principal cash f ows. Parent Outstanding Contracts Outstanding Contracts Average contracted f xed interest rate Average contracted f xed interest rate Notional principal amount Fair Value Notional principal amount Fair value 30. FINANCIAL INSTRUMENTSCONTINUED Group

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

68

		Weighted average effective interest rate % On Demand $’000 Less 1 year $’000 1-2 years $’000 2-3 years $’000 3-4 years $’000 4-5 years $’000 5+ years $’000 Total $’000 Group - 2011 Financial assets: Cash and cash equivalents 2.5 99,678 - - - - - - 99,678 Trade and other receivables - 152,797 - - - - - - 152,797 252,475 - - - - - - 252,475 Financial liabilities: Trade and other payables - 258,951 535 536 536 536 536 5,357 266,987 Finance leases 14.6 - 7 6 - - - - 13 Bank loans 4.2 - 2,401 2,401 2,401 57,177 - - 64,380 Other f nancial liabilities - - 815 - - - - - 815 258,951 3,758 2,943 2,937 57,713 536 5,357 332,195 Group - 2010 Financial assets: Cash and cash equivalents 2.1 56,484 - - - - - - 56,484 Trade and other receivables - 148,178 - - - - - - 148,178 Other f nancial assets - - 105 - - - - - 105 Finance leases 9.0 - 112 - - - - - 112 204,662 217 - - - - - 204,879 Financial liabilities: Trade and other payables - 248,693 531 536 536 536 536 5,892 257,260 Finance leases 9.1 - 184 21 - - - - 205 Bank loans 4.2 - 2,479 59,430 - - - - 61,909 Other f nancial liabilities - - 1,512 - - - - - 1,512 248,693 4,706 59,987 536 536 536 5,892 320,886 Maturity Dates 30. FINANCIAL INSTRUMENTSCONTINUED

69

		In June 2011 the Group secured banking facilities for the three years to August 2014. The Group maintains the following lines of credit: $2.9 million (2010: $3.5 million) overdraft facility. Interest is payable at the base rate plus specif ed margin. A loan facility of $99 million (2010: $99 million) of which $99 million (2010: $99 million) is over 3 years. (f) Sensitivity Analysis (i) Interest Rate Sensitivity Analysis The sensitivity analysis which follows has been determined based on the exposure to interest rates for f nancial instruments at the balance date. The analysis is prepared assuming the amount of the f nancial instrument outstanding at the balance sheet date was outstanding for the whole year. The impact on Prof t for the Period and Total Equity as a result of a 100 basis point movement in interest rates is as follows: Weighted average effective interest rate % On Demand $’000 Less 1 year $’000 1-2 years $’000 2-3 years $’000 3-4 years $’000 4-5 years $’000 5+ years $’000 Total $’000 Parent - 2011 Financial assets: Cash and cash equivalents 2.5 73,130 - - - - - - 73,130 Trade and other receivables - 10,183 - - - - - - 10,183 Advances to subsidiaries 5.0 - 1,615 - - - - - 1,615 83,313 1,615 - - - - - 84,928 Financial liabilities: Trade and other payables - 8,826 - - - - - - 8,826 Bank loans 3.3 - 921 921 921 28,154 - - 30,917 Other f nancial liabilities - - 598 - - - - - 598 Advances from subsidiaries 3.3 - 56,241 - - - - - 56,241 8,826 57,760 921 921 28,154 - - 96,582 Parent - 2010 Financial assets: Cash and cash equivalents 2.1 18,175 - - - - - - 18,175 Trade and other receivables - 8,718 - - - - - - 8,718 Other f nancial assets - - 105 - - - - - 105 Advances to subsidiaries 5.9 - 4,924 - - - - - 4,924 Finance leases 9.0 - 112 - - - - - 112 26,893 5,141 - - - - - 32,034 Financial liabilities: Trade and other payables - 7,779 - - - - - - 7,779 Finance leases 9.1 - 25 - - - - - 25 Bank loans 3.6 - 1,008 28,168 - - - - 29,176 Other f nancial liabilities - - 1,083 - - - - - 1,083 Advances from subsidiaries 5.5 - 13,548 - - - - - 13,548 7,779 15,664 28,168 - - - - 51,611 Maturity Dates 30. FINANCIAL INSTRUMENTSCONTINUED

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

70

30. FINANCIAL INSTRUMENTS CONTINUED

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----- Start of picture text -----

||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|+ 100 basis point shift up in yield curve|
|Impact on Profi t|-|-|-|-|
|Impact on Total Equity|150|421|89|262|
|- 100 basis point shift down in yield curve|
|Impact on Profi t|-|-|-|-|
|Impact on Total Equity|(151)|(429)|(90)|(267)|

----- End of picture text -----

(ii) Foreign Currency Sensitivity Analysis change in foreign currency rates. A positive number below indicates an increase in profi t and equity The following table details the Group’s sensitivity where the functional currency weakens 10% against to a 10% increase or decrease in foreign currencies the relevant currency. For a 10% strengthening against the Group’s functional currency (New against the relevant currency there would be an Zealand dollars). The sensitivity analysis includes equal and opposite impact on the profi t and equity. any outstanding foreign currency contracts and adjusts their translation at the year end for a 10%

==> picture [379 x 99] intentionally omitted <==

----- Start of picture text -----

||||||
|---|---|---|---|---|
|Group|Parent|
|2011|2010|2011|2010|
|$’000|$’000|$’000|$’000|
|+ 10% shift in NZD rate|
|Impact on Profi t for the Year|(373)|(436)|(373)|(436)|
|Impact on Total Equity|(373)|(436)|(373)|(436)|
|- 10% shift in NZD rate|
|Impact on Profi t for the Year|456|533|456|533|
|Impact on Total Equity|456|533|456|533|

----- End of picture text -----

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not refl ect the exposure during the year.

(g) Credit Risk Management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in fi nancial loss to the group. The group has adopted a policy of only dealing with credit worthy counter parties and obtaining suffi cient collateral where appropriate, as a means of mitigating the risk of

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the fi nancial condition of the trade receivables.

The carrying amount of fi nancial assets recorded in the fi nancial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

The maximum credit risk associated with guarantees provided by the Group and Parent are disclosed in note 27.

The Group does not have any signifi cant credit risk exposure to any single counter party or any group of counter parties having similar characteristics. The credit risk on liquid funds and derivative fi nancial instruments is limited because the counter parties are banks with high credit ratings assigned by international credit rating agencies.

71

30. FINANCIAL INSTRUMENTS CONTINUED

The Directors consider that the carrying amount of fi nancial assets and fi nancial liabilities recorded in the fi nancial statements approximates their fair values.

The fair values and net fair values of fi nancial assets

• the fair value of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

• fi nancial liabilities are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis; and

• the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available use is made of discounted cash fl ow analysis using the applicable yield curve for the duration of the instruments.

Transaction costs are included in the determination of net fair value.

(i) Liquidity risk management

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities.

(j) Capital Risk Management

The Group manages its capital to ensure that each entity within the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity. The Group’s overall strategy remains unchanged from 2010.

31. DISCONTINUED OPERATIONS

On 1 September 2010 the Group’s Scientifi c businesses were disposed of. The disposal of the Scientifi c businesses is consistent with the Group’s long-term policy to focus its activities in the healthcare market.

Details of the assets and liabilities disposed of are disclosed in note 23.

The results of the discontinued operations included in the income statement and statement of comprehensive income are set out below.

Comparative profi t and cash fl ows from discontinued operations have been re-presented.

==> picture [380 x 150] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Group|
|2011|2010|
|$’000|$’000|
|(2 months)|
|Revenue|
|Revenue from the sale of goods|7,814|53,170|
|Revenue from the rendering of services|569|2,678|
|Interest revenue|3|7|
|Other revenue|-|31|
|8,386|55,886|
|(Loss)/profi t before income tax expense|
|Profi t before income tax expense has been arrived at after (charging)|
|the following gains and losses from operations:|
|Gain on sale of property, plant and equipment|-|(19)|

----- End of picture text -----

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

72

		32. EVENTS AFTER BALANCE DATE Subsequent to year end the Board have approved a f nal dividend to shareholders. For further details please refer to Note 22. (Loss)/prof t before income tax has been arrived at after (charging) the following expenses by nature: Cost of sales (5,190) (32,734) Write-down of inventory (251) (382) Finance costs: Bank interest - (2) Other interest expense - (18) Total f nance costs - (20) Net bad and doubtful debts arising from: Impairment loss on trade & other receivables - (2) Depreciation of property, plant and equipment (69) (537) Operating lease rental expenses: Minimum lease payments (267) (1,611) Donations - (6) Employee benef t expense (2,476) (10,342) Other expenses (1,095) (5,396) Total expenses (9,348) (51,030) (Loss)/prof t before income tax expense (962) 4,837 Income tax credit/(expense) 3 288 (1,089) (674) 3,748 Gain on disposal of operations 8,853 - Prof t for the year from discontinued operations 8,179 3,748 Cash f ows from discontinued activities Net cash f ows from operating activities 3,017 6,611 Net cash f ows from investing activities 43,864 (44) Net cash f ows from f nancing activities - - Net cash f ows 46,881 6,567 Group 2011 2010 $’000 $’000 Notes (2 months) 31. DISCONTINUED OPERATIONSCONTINUED

73

		Fully paid Percentage shares of paid capital Twenty Largest Shareholders Python Portfolios Ltd 5,307,571 10.19% Accident Compensation Corporation 4,294,221 8.24% Whyte Adder No.3 Ltd 3,754,868 7.21% Forsyth Barr Custodians Limited <1-33> 1,372,904 2.64% Custodial Services Limited 1,137,858 2.18% Herpa Properties Limited 710,106 1.36% Forsyth Barr Custodians Limited <1-17.5> 639,671 1.23% Superlife Trustee Nominees Limited 630,168 1.21% Forsyth Barr Custodians Limited <1-30> 573,301 1.10% Citibank Nominees (New Zealand) Limited 567,829 1.09% New Zealand Superannuation Fund Nominees Limited 561,495 1.08% P M Merton & CWM Trustee Company Ltd 521,277 1.00% New Zealand Permanent Trustees Limited 505,741 0.97% Elite Investment Holdings Limited 500,000 0.96% Custodial Services Limited 484,466 0.93% M.B Waller & A.L Waller 424,703 0.81% Custodial Services Limited 414,490 0.79% P Gardiner-Garden 385,589 0.74% Hubbard Churcher Trust Management Limited 350,000 0.67% New Zealand Depository Nominee Limited 327,392 0.63% 23,463,650 45.03% Substantial Security Holders As at 29 July 2011 the following persons are deemed to be substantial security holders in accordance with Section 26 of the Securities Amendment Act 1988. Python Portfolios Ltd 5,307,571 10.19% Whyte Adder No.3 Ltd and Herpa Properties Ltd 4,464,974 8.57% Accident Compensation Corporation 4,294,221 8.24% 14,066,766 27.00% Distribution of Shareholders and Shareholdings Size of Holding Holders 1 to 999 1,071 412,796 0.78% 1,000 to 4,999 2,333 5,817,891 11.17% 5,000 to 9,999 777 5,326,574 10.22% 10,000 to 49,999 577 10,651,932 20.44% 50,000 to 99,999 34 2,184,405 4.19% 100,000 to 499,999 31 6,636,879 12.74% 500,000 to 999,999 9 5,209,588 10.00% 1,000,000 and over 5 15,867,422 30.46% Total 4,837 52,107,487 100.00% Registered Address of Shareholders New Zealand 4,614 50,261,239 96.47% Overseas 223 1,846,248 3.53% Total 4,837 52,107,487 100.00% ADDITIONAL STOCK EXCHANGE INFORMATION As at 29 July 2011

Directory

74

CORPORATE HEAD OFFICE

108 Wrights Road PO Box 411 Christchurch New Zealand Phone: +64 3 338 0999 Fax: +64 3 339 5111 www.ebos.co.nz

DIRECTORS

Rick Christie Chairman Mark Waller Chief Executive and Managing Director Elizabeth Coutts Peter Kraus Peter Merton Sarah Ottrey Mark Stewart Barry Wallace

EXECUTIVES

Mark Waller Chief Executive Michael Broome General Manager – Healthcare Logistics Angus Cooper General Manager – Special Projects Dennis Doherty Chief Financial Offi cer Kelvin Hyland General Manager – Healthcare NZ David Lewis General Manager – ProPharma Greg Managh General Manager – Health Support Tony Norris General Manager – EBOS Group Pty Ltd

Auditor Deloitte Christchurch

Bankers ANZ National Bank Limited Auckland

Solicitor Chapman Tripp Christchurch

Share Registrar Computershare Investor Services Ltd Private Bag 92119 Auckland 1142 159 Hurstmere Road Takapuna, North Shore City 0622 New Zealand

Managing Your Shareholding Online: To change your address, update your payment instructions and to view your investment portfolio including transactions, please visit:

www.computershare.co.nz/investorcentre

TRADING ENTITIES

==> picture [533 x 93] intentionally omitted <==

One of the leading independent distributors of healthcare products in New Zealand, Australia and the Pacifi c Islands. ebos@ebos.co.nz

==> picture [98 x 610] intentionally omitted <==

Annual Report 2011