EBOS GROUP LIMITED — Interim / Quarterly Report 2015

Mar 15, 2015

INTERIM REPORT EBOS GROUP 2015

EBOS

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FOR

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HOSPITAL

CONSUMER

EBOS IS THE LINK BETWEEN HEALTH PRODUCT MANUFACTURERS AND THE FRONT LINE. OUR SPECIFIC CAPABILITIES IN PHARMACEUTICAL WHOLESALING, MEDICAL CONSUMABLES DISTRIBUTION, THIRD PARTY LOGISTICS, AND ANIMAL CARE, ARE SIGNIFICANT.

EBOS | Interim Report 2015

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HALF YEAR 2015 AT A GLANCE
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FIVE YEAR REVENUE TREND
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For the six months to 31 December
2014 3,120
2013 3,000
2012 755
2011 689
2010 693
0 500 1000 1500 2000 2500 3000 3500
$MILLIONS
FIVE YEAR EBITDA TREND
For the six months to 31 December
2014 100.3
2013 94.8
2012 26.8
2011 18.8
2010 19.6
0 20 40 60 80 100 120
$MILLIONS
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FIVE YEAR CONTINUING OPERATIONS NPAT TREND

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For the six months to 31 December
2014 53.9
2013 49.4
2012 15.0
2011 11.6
2010 11.5
0 10 20 30 40 50 60
$MILLIONS
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EBOS HIGHLIGHTS

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ANIMAL
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• Total revenues of NZ$3.1 billion up 4% on the prior year Net profi t of NZ$53.9 million up 9.2% on the prior year EBITDA of NZ$100.3 million up 5.9% on the prior year

• 6.5% increase in Earnings per Share Acquisition of Blackhawk Premium Pet Care Pty Limited Strategic 25% investment in Good Price Pharmacy Warehouse Major new distribution centre opened in Melbourne

• Awarded the New South Wales Health Warehousing and Distribution Contract

/ 1

Dear SHAREHOLDER,

It is with great pleasure that we enclose our interim fi nancial statements for the six month period ending 31 December 2014. We have started the fi nancial year very strongly with sound performances across both our Healthcare and Animal care businesses which resulted in Net Profi t after Tax growing by 9.2% to $53.9 million.

The Group now generates approximately 82% of its earnings in Australia and the continued appreciation of the New Zealand dollar during the period negatively impacted our EBITDA for the period by approximately $2.2 million.

The last six months has been a period of major activity for the Company with some highlights including:

• The acquisition of Blackhawk Premium Pet Care Pty Limited for $57.4 million

• A strategic 25% investment in Good Price Pharmacy Warehouse

Interim Dividend Increases

The Board has declared an interim dividend of 22 cents per share payable on the 2nd of April 2015 and imputed to 30%. This represents an increase of 7.3% and the dividend reinvestment plan is available to shareholders who wish to participate. The record date for the interim dividend is 13 March 2015.

• The opening of a major new distribution centre in Melbourne, Australia

• The awarding of the New South Wales Health Warehousing and Distribution contract

The Company’s diverse operations spanning both Healthcare and Animal care generated revenue in the six month period of $3.1 billion representing growth of 4% on the same period last year.

Healthcare

Our Healthcare business EBITDA increased by 8.1% on the back of a 3.7% increase in revenue. The Company’s wide range of businesses all demonstrated sound growth with the Institutional Healthcare, Consumer Products, Contract Logistics

Our earnings before net fi nance costs, tax, depreciation and amortisation ( EBITDA ) grew to $100.3 million representing an increase of 5.9% or 8.1% in constant currency terms.

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EBOS | Interim Report 2015

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and Pharmacy businesses all providing strong contributions to the results.

During the period we made a strategic investment in an Australian pharmacy retailer, Good Price Pharmacy Warehouse (GPPW). GPPW is an expanding business with approximately 46 stores and we are now their preferred wholesaler.

In November 2014, we opened our newest major pharmacy distribution facility in Keysborough, Melbourne, representing a capital investment of A$31million. This facility can move more than 10,000 units of medicine every hour and features the latest global warehousing and distribution technology. We are very proud of our investment in this facility as it refl ects our ongoing commitment to providing our customers with an industry leading service as well as providing future cost effi ciencies for our Company.

In January 2015 we announced that our Onelink division was awarded a contract by the New South Wales Government for the warehousing and distribution of medical consumables to all public hospitals in that State. The awarding of this contract to EBOS is particularly encouraging as it recognises our capability and experience in undertaking an expanded range of premium healthcare logistics services to our customers.

Animal care

The Animal care business generated a 7.1% increase in EBITDA on the back of an 8% increase in revenue.

The revenue growth refl ects our continued focus on developing our own brands, with the Vitapet brand now representing approximately 35% of this segment’s retail revenues. Substantial investments in operations, advertising and marketing were made during the period to reinforce the focus on growth of this segment for the long term.

On the 31st of October 2014, we announced the acquisition of Blackhawk Premium Pet Care Pty Limited for a net cash outlay of $57.4 million as part of our expansion into the fast-growing premium pet food sector. BlackHawk is a rapidly growing pet food brand sold exclusively through Australian pet stores and veterinary clinics. The acquisition, which is immediately earnings per share accretive, has performed in line with our expectations.

Debt Refi nancing

In August 2014, the Company took advantage of favourable credit markets and successfully refi nanced its banking facilities incorporating both an extension of term and reduced margins. The benefi ts of this refi nancing are already being realised with net fi nance costs decreasing by 18.6% on the prior corresponding period.

Outlook

We hold market leading positions in many segments of the Healthcare and Animal Care industries in New Zealand and Australia. Your Board and Management are always looking to invest in new activities that will continue the long history of growth of the EBOS Group.

We have made a strong start to the fi nancial year with solid growth across both our Healthcare and Animal care businesses and management expects the second half constant currency profi t growth to be at approximately the same rate as recorded

We look forward to writing to you again at the end of the fi nancial year on the performance of the Company and we appreciate your continued support.

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PATRICK DAVIES Chief Executive Offi cer

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RICK CHRISTIE Chairman of Directors

/ 3

FINANCIAL STATEMENTS

Six months ended 31 December 2014

Summary of Consolidated		Condensed Consolidated Statement		Condensed Consolidated
Financial Highlights	5	of Comprehensive Income	8	Cash Flow Statement	13
Shareholder Calendar	5	Condensed Consolidated Statement		Notes to the Condensed
		of Changes in Equity	9	Consolidated Interim
Auditor’s Review Report	6			Financial Statements	14
		Condensed Consolidated
Condensed Consolidated		Balance Sheet	11	Directory	25
Income Statement	7

EBOS | Interim Report 2015

SUMMARY OF CONSOLIDATED FINANCIAL HIGHLIGHTS

Revenue EBITDA EBIT Prof t before income tax expense Net prof t for the period Shareholders’ equity Earnings per share Net interest cover Net interest bearing debt to net interest bearing debt plus equity Net asset backing per share	Six months 31 Dec 14 $’000 (Unaudited) 3,119,873 100,345 88,479 77,014 53,949 1,002,286 36.2c 8.8x 26.9% 669c	Six months 31 Dec 13 $’000 (Unaudited) 3,000,051 94,786 83,437 69,347 49,409 961,131 34.0c 6.7x 26.7% 651c	Year ended 30 Jun 14 $’000 (Audited) 5,757,234 175,422 152,839 125,781 92,069 979,039 62.8c 6.5x 24.4% 658c

SHAREHOLDER CALENDAR

Release of half year result		25 February 2015
Interim dividend record date		13 March 2015
Interim dividend payable		2 April 2015
Release of full year result		Late August 2015
Final dividend payable		Late October 2015
Annual General Meeting		27 October 2015

/ 5

REVIEW REPORT TO THE SHAREHOLDERS OF EBOS GROUP LIMITED

We have reviewed the condensed consolidated interim fi nancial statements of EBOS Group Limited and its subsidiaries (“the Group”) which comprise the condensed consolidated balance sheet as at 31 December 2014, and the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated cash fl ow statement for the six months ended on that date, and a summary of signifi cant accounting policies and other explanatory information on pages 7 to 24.

This report is made solely to the Group’s shareholders, as a body. Our review has been undertaken so that we might state to the Group’s shareholders those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group’s shareholders as a body, for our engagement, for this report, or for the opinions we have formed.

A review of the condensed consolidated interim fi nancial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion

Other than in our capacity as auditors, and the provision of due diligence, fi nancial modelling and information technology advisory assistance, we have no relationship with or interests in EBOS Group Limited or its subsidiaries. These services have not impaired our independence as auditor of the Company and Group.

Conclusion

Board of Directors’ Responsibilities

The Board of Directors are responsible for the preparation and fair presentation of the condensed consolidated interim fi nancial statements, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting and for such internal control as the Board of Directors determine is necessary to enable the preparation and fair presentation of the condensed consolidated interim fi nancial statements that are free from material misstatement, whether due to fraud or error.

Our Responsibilities

Our responsibility is to express a conclusion on the condensed consolidated interim fi nancial statements based on our review. We conducted our review in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the condensed consolidated interim fi nancial statements, taken as a whole, are not prepared, in all material respects, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting. As the auditor of EBOS Group Limited, NZ SRE 2410 requires that we comply with the ethical requirements

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim fi nancial statements of the Group do not present fairly, in all material respects, the fi nancial position of the Group as at 31 December 2014 its fi nancial performance and cash fl ows for the six months ended on that date in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting.

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24 February 2015

Chartered Accountants, Christchurch, New Zealand

EBOS | Interim Report 2015

CONDENSED CONSOLIDATED INCOME STATEMENT

For the Six Months ended 31 December 2014

NOTES Revenue 2(a) Income from associates 2(b) Prof t before depreciation, amortisation, net f nance costs and income tax expense Depreciation 2(b) Amortisation of f nite life intangibles 2(b) Prof t before net f nance costs and income tax expense Finance income 2(b) Finance expense 2(b) Net f nance costs 2(b) Prof t before income tax expense 2(b) Income tax expense Prof t for the period	Six months 31 Dec 14 $’000 (Unaudited) 3,119,873 933 100,345 (5,649) (6,217) 88,479 1,192 (12,657) (11,465) 77,014 (23,065) 53,949	Six months 31 Dec 13 $’000 (Unaudited) 3,000,051 619 94,786 (5,187) (6,162) 83,437 1,461 (15,551) (14,090) 69,347 (19,938) 49,409	Year ended 30 Jun 14 $’000 (Audited)
			5,757,234
			1,567
			175,422
			(10,173)
			(12,410)
			152,839
			2,819
			(29,877)
			(27,058)
			125,781
			(33,712)
			92,069
Earnings per share Basic (cents per share) Diluted (cents per share)	36.2 36.2	34.0 34.0
			62.8
			62.8

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months ended 31 December 2014

Prof t for the period Other comprehensive income Items that may be reclassif ed subsequently to prof t or loss: Cash f ow hedge (losses)/gains Related income tax Translation of foreign operations Total comprehensive income net of tax	Six months 31 Dec 14 $’000 (Unaudited) 53,949 (811) 223 (8,528) 44,833	Six months 31 Dec 13 $’000 (Unaudited) 49,409 404 (137) (20,695) 28,981	Year ended 30 Jun 14 $’000 (Audited)
			92,069
			(2,423)
			701
			(24,194)
			66,153

EBOS | Interim Report 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Six Months ended 31 December 2014

NOTES Six months ended 31 December 2013 (unaudited): Opening balance Prof t for the period Other comprehensive income for the period, net of tax Payment of dividends 4 Dividends re-invested 3 Shares issued – rights issue 3 Share issue costs Issue of consideration shares 3 Share issue costs Balance at 31 December 2013 Year ended 30 June 2014 (audited): Opening balance Prof t for the year Other comprehensive income for the year, net of tax Payment of dividends 4 Dividends re-invested 3 Shares issued – rights issue 3 Share issue costs Issue of consideration shares 3 Share issue costs Balance at 30 June 2014	Share capital $’000 201,288 – – – 9,500 149,119 (7,356) 498,147 (145) 850,553 201,288 – – – 20,496 149,119 (7,356) 498,147 (145) 861,549	Foreign currency translation reserve $’000 (5,675) – (20,695) – – – – – – (26,370) (5,675) – (24,194) – – – – – – (29,869)	Retained earnings $’000 107,268 49,409 – (21,992) – – – – – 134,685 107,268 92,069 – (52,252) – – – – – 147,085	Hedge reserve $’000 1,996 – 267 – – – – – – 2,263 1,996 – (1,722) – – – – – – 274	Total $’000
					304,877
					49,409
					(20,428)
					(21,992)
					9,500
					149,119
					(7,356)
					498,147
					(145)
					961,131
					304,877
					92,069
					(25,916)
					(52,252)
					20,496
					149,119
					(7,356)
					498,147
					(145)
					979,039

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTINUED

For the Six Months ended 31 December 2014

NOTES Six months ended 31 December 2014 (unaudited): Opening balance Prof t for the period Other comprehensive income for the period, net of tax Payment of dividends 4 Dividends re-invested 3 Balance at 31 December 2014	Share capital $’000 861,549 – – – 8,904 870,453	Foreign currency translation reserve $’000 (29,869) – (8,528) – – (38,397)	Retained earnings $’000 147,085 53,949 – (30,490) – 170,544	Hedge reserve $’000 274 – (588) – – (314)	Total $’000
					979,039
					53,949
					(9,116)
					(30,490)
					8,904
					1,002,286

EBOS | Interim Report 2015

CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 December 2014

NOTES Current assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Current tax refundable Other f nancial assets – derivatives 8 Total current assets Non-current assets Property, plant and equipment Capital work in progress Prepayments Deferred tax assets Goodwill Indef nite life intangibles Finite life intangibles Investment in associates Total non-current assets Total assets Current liabilities Trade and other payables Finance leases Bank loans 7 Current tax payable Employee benef ts Other f nancial liabilities – derivatives 8 Total current liabilities	31 Dec 14 $’000 (Unaudited) 68,836 785,018 5,533 515,397 82 1,761 1,376,627 108,250 731 34 35,421 763,461 75,708 69,694 32,344 1,085,643 2,462,270 914,690 163 176,021 12,238 26,099 4,540 1,133,751	31 Dec 13 $’000 (Unaudited) 92,580 755,396 7,269 505,835 1,401 2,630 1,365,111 98,437 693 – 28,936 721,046 56,941 82,067 22,620 1,010,740 2,375,851 874,358 968 176,560 19,615 22,460 1,668 1,095,629	30 Jun 14 $’000 (Audited)
			88,698
			699,276
			6,748
			491,624
			83
			1,442
			1,287,871
			84,854
			20,872
			54
			36,589
			720,875
			56,576
			77,502
			24,100
			1,021,422
			2,309,293
			821,391
			155
			153,334
			14,219
			28,830
			3,404
			1,021,333

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CONDENSED CONSOLIDATED BALANCE SHEET CONTINUED

As at 31 December 2014

		NOTES 7 3	31 Dec 14 $’000 (Unaudited) 260,492 14,630 46,545 250 4,316 326,233 1,459,984 1,002,286 870,453 (38,397) 170,544 (314) 1,002,286	31 Dec 13 $’000 (Unaudited) 262,641 9,605 40,073 2,566 4,206 319,091 1,414,720 961,131 850,553 (26,370) 134,685 2,263 961,131	30 Jun 14 $’000 (Audited)
Non-current liabilities Bank loans Trade and other payables Deferred tax liabilities Finance leases Employee benef ts
					250,826
					9,778
					43,407
					680
					4,230
Total non-current liabilities					308,921
Total liabilities					1,330,254
Net assets					979,039
Equity Share capital Foreign currency translation reserve Retained earnings Cash f ow hedge reserve
					861,549
					(29,869)
					147,085
					274
Total equity					979,039

EBOS | Interim Report 2015

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the Six Months ended 31 December 2014

NOTES Cash f ows from operating activities Receipts from customers Interest received Payments to suppliers and employees Taxes paid Interest paid Net cash inf ow from operating activities 5 Cash f ows from investing activities Sale of property, plant & equipment Purchase of property, plant & equipment Payments for capital work in progress Payments for intangible assets Acquisition of associates Acquisition of subsidiaries 11 Net cash (outf ow) from investing activities Cash f ows from f nancing activities Proceeds from issue of shares 3 Proceeds from borrowings Repayment of borrowings Dividends paid to equity holders of parent 4 Net cash inf ow from f nancing activities Net (decrease) in cash held Effect of exchange rate f uctuations on cash held during the period Net cash and cash equivalents at beginning of period Net cash and cash equivalents at end of period	Six months 31 Dec 14 $’000 (Unaudited) 3,021,876 1,192 (2,952,414) (27,494) (12,657) 30,503 637 (9,920) – (102) (5,581) (57,414) (72,380) 8,904 53,433 (8,667) (30,490) 23,180 (18,697) (1,165) 88,698 68,836	Six months 31 Dec 13 $’000 (Unaudited) 2,927,400 1,461 (2,855,278) (8,460) (15,551) 49,572 476 (15,485) – (631) (2,988) (366,853) (385,481) 151,118 317,717 (211,011) (21,992) 235,832 (100,077) (5,357) 198,014 92,580	Year ended 30 Jun 14 $’000 (Audited)
			5,732,731
			2,819
			(5,561,884)
			(29,637)
			(29,877)
			114,152
			1,351
			(11,725)
			(20,115)
			(3,467)
			(3,520)
			(366,853)
			(404,329)
			162,114
			310,327
			(233,136)
			(52,252)
			187,053
			(103,124)
			(6,192)
			198,014
			88,698

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the Six Months ended 31 December 2014

1. FINANCIAL STATEMENTS

These unaudited condensed consolidated interim fi nancial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (“NZ GAAP”). They comply with the New Zealand Equivalent to International Accounting Standard 34 (NZ IAS 34) “Interim Financial Reporting” and International Accounting Standard IAS 34, as applicable for profi t orientated entities.

In a presentation change in the current period, interest revenue is now included within net fi nance costs rather than revenue. Comparative information has also been presented on a similar basis for consistency. Aside from this change in presentation the same accounting policies and methods of computation are applied in the interim fi nancial statements as were applied in the fi nancial statements for the year ended 30 June 2014. These fi nancial statements should be read in conjunction with the fi nancial statements and related notes included in the Company’s Annual Report for the year ended 30 June 2014. The information is presented in thousands of New Zealand dollars unless otherwise stated.

2. PROFIT FROM OPERATIONS

	Revenue Revenue from the sale of goods Revenue from the rendering of services	Six months 31 Dec 14 $’000 (Unaudited) 3,074,892 44,981 3,119,873	Six months 31 Dec 13 $’000 (Unaudited) 2,955,281 44,770 3,000,051	Year ended 30 Jun 14 $’000 (Audited)
(a)
				5,671,996
				85,238
				5,757,234

EBOS | Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

2. PROFIT FROM OPERATIONS (CONTINUED)

	Prof t before income tax expense Prof t before income tax has been arrived at after crediting/(charging) the following gains and losses from operations: Gain on sale of property, plant and equipment Change in fair value of derivative f nancial instruments Share of prof ts of associates Prof t before income tax has been arrived at after (charging) the following expenses by nature: Cost of sales Write-down of inventory Net f nance costs: Interest revenue Interest expense Total net f nance costs Impairment on trade & other receivables Depreciation of property, plant & equipment Amortisation of f nite life intangibles Operating lease rental expenses Donations Employee benef t expense Def ned contribution plan expense Other expenses Total expenses, net of interest revenue Prof t before income tax expense	Six months 31 Dec 14 $’000 (Unaudited) 6 (6) 933 (2,813,355) (1,134) 1,192 (12,657) (11,465) (765) (5,649) (6,217) (12,800) (82) (100,404) (5,892) (86,029) (3,043,792) 77,014	Six months 31 Dec 13 $’000 (Unaudited) 286 (115) 619 (2,701,778) (1,550) 1,461 (15,551) (14,090) (1,249) (5,187) (6,162) (12,993) (41) (97,585) (5,576) (85,283) (2,931,494) 69,347	Year ended 30 Jun 14 $’000 (Audited)
(b)
				(4)
				(213)
				1,567
				(5,187,151)
				(3,771)
				2,819
				(29,877)
				(27,058)
				(1,684)
				(10,173)
				(12,410)
				(25,563)
				(107)
				(195,232)
				(11,141)
				(158,513)
				(5,632,803)
				125,781

/ 15

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

3. SHARE CAPITAL

Fully paid ordinary shares Balance at beginning of period Dividend reinvested – October 2013 April 2014 October 2014 Rights issue – July 2013 Share issue costs Issue of consideration shares – July 2013 Share issue costs	No. ’000 148,720 – – 1,019 – – – – 149,739	Six months 31 Dec 14 Total $’000 (Unaudited) 861,549 – – 8,904 – – – – 870,453	No. ’000 65,546 996 – – 22,941 – 58,127 – 147,610	Six months 31 Dec 13 Total $’000 (Unaudited) 201,288 9,500 – – 149,119 (7,356) 498,147 (145) 850,553	No. ’000 65,546 996 1,110 – 22,941 – 58,127 – 148,720	Year ended 30 Jun 14
						Total $’000 (Audited)
						201,288
						9,500
						10,996
						–
						149,119
						(7,356)
						498,147
						(145)
						861,549

EBOS | Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

4. DIVIDENDS

Recognised amounts Fully paid ordinary shares Final – prior year Interim – current year Unrecognised amounts Final dividend Interim dividend	Six months 31 Dec 14 Cents per share Total $’000 (Unaudited) 20.5 30,490 – – 20.5 30,490 – – 22.0 32,943 22.0 32,943	Six months 31 Dec 13 Cents per share Total $’000 (Unaudited) 15.0 21,992 – – 15.0 21,992 – – 20.5 30,260 20.5 30,260	Year ended 30 Jun 14
			Cents per share Total $’000 (Audited)
			15.0 21,992
			20.5 30,260
			35.5 52,252
			20.5 30,490
			– –
			20.5 30,490

The Board approved an interim dividend of 22.0 cents per share on 24 February 2015. The record date for the dividend is 13 March 2015 and the dividend will be paid on 2 April 2015. The Group’s dividend reinvestment plan will be operable for this interim dividend.

/ 17

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

5. NOTES TO THE CASH FLOW STATEMENT

Reconciliation of prof t for the period with cash f ows from operating activities Prof t for the period Add/(less) non-cash items: Depreciation of property, plant and equipment Amortisation of f nite life intangibles Gain on sale of property, plant & equipment Share of prof ts of associates Loss on derivative f nancial instruments Deferred tax Movements in working capital: Trade and other receivables Prepayments Inventories Current tax refundable/(payable) Trade and other payables Provision for employee benef ts Foreign currency translation of opening working capital balances Working capital items relating to investing activities Working capital items acquired on acquisition Net cash inf ow from operating activities	Six months 31 Dec 14 $’000 (Unaudited) 53,949 5,649 6,217 (6) (933) 6 (1,821) 9,112 (85,742) 1,235 (23,773) (1,980) 98,151 (2,645) (9,496) (24,250) (9,709) 1,401 30,503	Six months 31 Dec 13 $’000 (Unaudited) 49,409 5,187 6,162 (286) (619) 115 (2,901) 7,658 (18,967) 584 52,515 13,464 (17,171) (4,930) (32,990) (7,495) – – 49,572	Year ended 30 Jun 14 $’000 (Audited)
			92,069
			10,173
			12,410
			4
			(1,567)
			213
			(6,366)
			14,867
			37,153
			1,051
			66,726
			9,386
			(69,965)
			1,464
			(38,599)
			7,216
			–
			–
			114,152

EBOS | Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

6. 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 human healthcare products in a range of sectors, own brands, retail healthcare and wholesale activities. Animal care: Incorporates the sale of animal care products in a range of sectors, own brands, retail and wholesale activities.

Corporate: Includes net fi nancing costs and central administration expenses that have not been allocated to the healthcare or animal care segments.

(b) Segment revenues and results

The following is an analysis of the Group’s revenue and results by reportable segment:

Revenue from external customers Healthcare Animal care Segment result (EBITDA) Healthcare Animal care Corporate Segment expenses Healthcare: Depreciation of property, plant and equipment Amortisation of f nite life intangibles Income tax expense Animal care: Depreciation of property, plant and equipment Amortisation of f nite life intangibles Income tax expense Corporate: Net f nance costs Income tax credit Prof t for the period Healthcare Animal care Corporate	Six months 31 Dec 14 $’000 (Unaudited) 2,928,736 191,137 3,119,873 88,541 16,843 (5,039) 100,345 (4,973) (5,039) (23,880) (33,892) (676) (1,178) (3,782) (5,636) (11,465) 4,597 (6,868) 54,649 11,207 (11,907) 53,949	Six months 31 Dec 13 $’000 (Unaudited) 2,823,018 177,033 3,000,051 81,922 15,720 (2,856) 94,786 (4,439) (5,139) (20,133) (29,711) (748) (1,023) (4,402) (6,173) (14,090) 4,597 (9,493) 52,211 9,547 (12,349) 49,409	Year ended 30 Jun 14 $’000 (Audited)
			5,418,356
			338,878
			5,757,234
			153,055
			29,431
			(7,064)
			175,422
			(8,693)
			(10,401)
			(34,644)
			(53,738)
			(1,480)
			(2,009)
			(7,701)
			(11,190)
			(27,058)
			8,633
			(18,425)
			99,317
			18,241
			(25,489)
			92,069

/ 19

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

6. SEGMENT INFORMATION (CONTINUED)

The accounting policies of the reportable segments are consistent with the Group’s accounting policies. Segment result represents profi t before depreciation, amortisation, net fi 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.

(c) Segment assets

The following balance sheet and cash fl ow items are not allocated to operating segments as they are not reported to the chief operating decision maker at a segment level:

• Assets

• Liabilities

• Capital expenditure

(d) Revenues from major products and services

The Group’s major products and services are transacted the same as its reportable segments i.e. healthcare, animal care and corporate.

(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 fi nancial instruments and deferred tax assets) are detailed below:

Revenue from external customers New Zealand Australia Non-current assets New Zealand Australia	Six months 31 Dec 14 $’000 (Unaudited) 672,285 2,447,588 3,119,873 208,455 809,423 1,017,878	Six months 31 Dec 13 $’000 (Unaudited) 649,619 2,350,432 3,000,051 207,002 752,182 959,184	Year ended 30 Jun 14 $’000 (Audited)
			1,278,650
			4,478,584
			5,757,234
			207,395
			753,338
			960,733

(f) Information about major customers

No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues (December 2013: Nil, June 2014: Nil).

EBOS | Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

7. BANK FACILITY AND BORROWINGS

The Group fully complies with and operates within the fi nancial covenants under the arrangements with its bankers. At 31 December 2014 the Group had unutilised term and revolving cash advance facilities of $89.6m (December 2013: $79.8m, June 2014: $87.6m).

The Group also has a trade debtor securitisation facility of which $226.3m was unutilised at 31 December 2014 (December 2013: $310m, June 2014: $319.7m).

During the current period the Group renegotiated some of the terms and conditions of its securitisation and term debt facilities.

This renegotiation included an extension of the expiry date of the securitisation facility to August 2017, previously September 2015, and a voluntary reduction in the available facility limit from NZ$438.6m (A$420m) to $NZ402.0m (A$385m).

The term of the Group’s existing bank debt facilities have also been extended as part of these renegotiations. As a result the maturity profi le of the Group’s term debt, working capital and securitisation facilities are now:

Facility	Amount	Maturity
Term debt facilities	$76.9m	August 2016
Term debt facilities	$92.0m	August 2018
Term debt facilities	$91.6m	August 2019
Working capital facilities	$89.9m	July 2015
Securitisation facility	$402.0m	August 2017

8. FINANCIAL INSTRUMENTS

The Group enters into foreign currency forward exchange contracts to hedge trading transactions, including anticipated transactions, denominated in foreign currencies and uses interest rate swaps to manage cash fl ow interest rate risk.

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.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

8. FINANCIAL INSTRUMENTS (CONTINUED)

Fair value of derivative f nancial instruments Other f nancial assets – derivatives: Foreign currency forward exchange contracts Interest rate swaps Other f nancial liabilities – derivatives: Foreign currency forward exchange contracts Interest rate swaps	Six months 31 Dec 14 $’000 (Unaudited) 1,761 – 1,761 (30) (4,510) (4,540)	Six months 31 Dec 13 $’000 (Unaudited) 1,077 1,553 2,630 – (1,668) (1,668)	Year ended 30 Jun 14 $’000 (Audited)
			103
			1,339
			1,442
			(953)
			(2,451)
			(3,404)

The Group has categorised these derivatives, both fi nancial assets and fi nancial liabilities, as Level 2 under the fair value hierarchy contained within NZ IFRS 13.

The fair value of foreign currency forward exchange contracts is determined using a discounted cashfl ow valuation. Key inputs include observable forward exchange rates, at the measurement date, with the resulting value discounted back to present values.

Interest rate swaps are valued using a discounted cashfl ow valuation. Key inputs for the valuation of interest rate swaps are the estimated future cash fl ows based on observable yield curves at the end of the reporting period, discounted at a rate that refl ects the credit risk of the various counterparties.

There have been no changes in valuation techniques used for either foreign currency forward exchange contracts or interest rate swaps during the current reporting period.

There were no transfers between fair value hierarchy levels during either the current or prior periods.

9. RELATED PARTY DISCLOSURES

EBOS Group Limited is the immediate parent, ultimate parent and controlling party.

As at 31 December 2014 no balances were owing to or from related parties of EBOS Group Limited (December 2013: Nil, June 2014: Nil). No amounts owed to related parties have been written off or forgiven during the period.

10. EVENTS AFTER BALANCE DATE

Subsequent to 31 December 2014, the Board approved an interim dividend to shareholders. For further details please refer to Note 4.

EBOS | Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

11. ACQUISITION OF SUBSIDIARIES

On 31 October 2014 the Group acquired 100% control over the issued capital of Blackhawk Premium Pet Care Pty Limited. Details of the acquisition are as follows:

Assets and liabilities acquired: Current assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Non-current assets Property, plant and equipment Indef nite life intangibles Current liabilities Trade and other payables Employee benef ts Taxation payable Non-current liabilities Deferred tax liabilities Net assets acquired Goodwill on acquisition Total consideration Less cash and cash equivalents acquired Deferred purchase consideration Net cash (outf ow) on acquisition	Carrying Value $’000 (Unaudited) 1,119 4,298 6 305 412 – (1,309) (53) (1,485) – 3,293	Fair value adjustment $’000 (Unaudited) – – – – – 21,3871 (361)2 – – (6,416)3 14,610	Fair value on acquisition $’000 (Unaudited)
			1,119
			4,298
			6
			305
			412
			21,387
			(1,670)
			(53)
			(1,485)
			(6,416)
			17,903
			46,257
			64,160
			(1,119)
			(5,627)
			(57,414)

1. To recognise the ‘BlackHawk’ brand as a result of a valuation performed at acquisition.

2. To recognise additional liabilities identifi ed as part of the acquisition.

3. To recognise additional deferred tax liabilities incurred.

/ 23

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

For the Six Months ended 31 December 2014

11. ACQUISITION OF SUBSIDIARIES (CONTINUED)

Goodwill arising on acquisition

Goodwill arose on the acquisition of Blackhawk Premium Pet Care Pty Limited (‘Blackhawk’) because the cost of acquisition included a control premium paid. In addition, the consideration paid for the benefi t of future expected cash fl ows above the current fair value of the assets acquired and the expected synergies and future market benefi ts expected to be obtained. These benefi ts are not recognised separately from goodwill as the expected future economic benefi ts arising cannot be reliably measured and they do not meet the defi nition of identifi able intangible assets.

Blackhawk was acquired as it is a profi table premium animal food supply business which the Group believes fi ts strategically with its Animal care business assets.

Impact of the acquisition on the results of the Group

Blackhawk contributed $874,000 to the Group profi t for the period. Group revenue for the period includes $4,362,000 in respect of Blackhawk. Had the Blackhawk acquisition been effective at 1 July 2014, the revenue of the Group from continuing operations would have been $3,129,000,000 and the profi t for the period from continuing operations would have been $55,400,000.

EBOS | Interim Report 2015

DIRECTORY

CORPORATE HEAD OFFICE

108 Wrights Road, PO Box 411, Christchurch 8024, New Zealand Telephone: +64 3 338 0999 E-mail: ebos@ebosgroup.com Internet: www.ebosgroup.com

AUSTRALIA HEAD OFFICE

Level 3, 484 St Kilda Road, PO Box 7300, Melbourne 3004, Australia Telephone: +61 3 9918 5555

MANAGING YOUR SHAREHOLDING ONLINE

DIRECTORS

Rick Christie Independent Chairman Mark Waller Executive Director Elizabeth Coutts Independent Director Peter Kraus

To change your address, update your payment instructions and to view your investment portfolio including transactions, please visit: www.computershare.com/investorcentre

Stuart McGregor

Sarah Ottrey Independent Director Barry Wallace Peter Williams

SENIOR EXECUTIVES

Patrick Davies Chief Executive Offi cer Brett Barons General Manager, Pharmacy Michael Broome Group General Manager, Contract Logistics Simon Bunde General Manager, Group Operations & Strategy Angus Cooper General Manager, Group Projects, Mergers & Acquisitions John Cullity Chief Financial Offi cer Sean Duggan Chief Executive Offi cer, Animal Care Tim Goldenberg Group Human Resources Manager Kelvin Hyland General Manager, EBOS Healthcare David Lewis General Manager, Onelink Australia Greg Managh Group Chief Information Offi cer Stuart Spencer General Manager, Group Business Development Sarah Turner General Counsel Andrew Vidler General Manager, Retail Services

General enquiries can be directed to:

• enquiry@computershare.co.nz

• Private Bag 92119, Auckland 1142, New Zealand or GPO Box 3329, Melbourne, Victoria 3001, Australia

• Telephone: (NZ) +64 9 488 8777 or (Aust) 1800 501 366

• Facsimile: (NZ) +64 9 488 8787 or (Aust) +61 3 9473 2500

• Please assist our registrar by quoting your CSN or shareholder number.

SHARE REGISTER

Computershare Investor Services Ltd Private Bag 92119, Auckland 1142, New Zealand Telephone: +64 9 488 8777

Computershare Investor Services Pty Ltd GPO Box 3329, Melbourne, Victoria 3001, Australia Telephone: 1800 501 366

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www.ebosgroup.com