EBOS GROUP LIMITED — Interim / Quarterly Report 2016

Aug 24, 2016

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EBOS Group Ltd

Results presentation Financial Year ended 30 June 2016 Patrick Davies Chief Executive Officer John Cullity Chief Financial Officer

25 August 2016

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Disclaimer

The information in this presentation was prepared by EBOS Group Ltd with due care and attention. However, the information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliability of the information. In addition, neither the EBOS Group nor any of its subsidiaries, directors, employees, shareholders nor any other person shall have liability whatsoever to any person for any loss (including, without limitation, arising from any fault or negligence) arising from this presentation or any information supplied in connection with it.

This presentation may contain forward-looking statements and projections. These reflect EBOS’s current expectations, based on what it thinks are reasonable assumptions. EBOS gives no warranty or representation as to its future financial performance or any future matter. Except as required by law or NZX or ASX listing rules, EBOS is not obliged to update this presentation after its release, even if things change materially. This presentation does not constitute financial advice. Further, this presentation is not and should not be construed as an offer to sell or a solicitation of an offer to buy EBOS Group securities and may not be relied upon in connection with any purchase of EBOS Group securities.

This presentation contains a number of non-GAAP financial measures, including Gross Profit, Gross Operating Revenue, EBIT, EBITA, EBITDA, Free Cash Flow, Interest cover, Net Debt and Return on Capital Employed. Because they are not defined by GAAP or IFRS, EBOS’s calculation of these measures may differ from similarly titled measures presented by other companies and they should not be considered in isolation from, or construed as an alternative to, other financial measures determined in accordance with GAAP. Although EBOS believes they provide useful information in measuring the financial performance and condition of EBOS's business, readers are cautioned not to place undue reliance on these non-GAAP financial measures.

The information contained in this presentation should be considered in conjunction with the audited consolidated financial statements for the year ended 30 June 2016.

All currency amounts are in New Zealand dollars unless stated otherwise.

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2

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1 Group Financial Results

A-Frame automatic picking system, Symbion Keysborough facility, 3 Melbourne, Australia

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Record Revenue and Profit Performance for FY16

Total Revenue $  Up 17.0% (+16.5% Constant FX)

$  7.1b Up 17.0% (+16.5% Constant FX) Total EBITDA  $ 225.5m

Return on Capital Employed  16.3% Up 260bps

Earnings per share  84.0c

Up 14.6% (+14.0% Constant FX)

Up 18.7% (+18.2% Constant FX)

Total NPAT  $ 127.0m Up 19.9% (+19.3% Constant FX)

Final Dividend per share  32.5c

Up 30.0%

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Group Financial Results

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Strong growth continues

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Revenue
NZ $m
7,101
6,068 11.1%
5,757
CAGR
FY14 FY15 FY16
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NPAT
NZ $m
127
106 17.4%
92 CAGR
FY14 FY15 FY16
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Earnings Per Share
Cents per share
84.0
15.7%
70.8
CAGR
62.8
FY14 FY15 FY16
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Operating Cash Flow
NZ $m
224
134
114
FY14 FY15 FY16
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Return on Capital Employed
16.3%
13.7%
12.8%
FY14 FY15 FY16
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Group Financial Results

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EBOS Approach

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Our Healthcare and Animal Care strategic focus is centred on

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Investing for Growth

Leading Market Positions

Disciplined Capital Management

Two types of investments:

• External acquisitions – we have a strong history of deal execution.

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• Internal Capex – investment to lift productivity, manage cost and deliver better customer service.

We aim to have positions of scale in the markets we operate in and maximise opportunities across our wide range of business segments wherever possible.

• Cash generation to drive scope for further investment which allows for dividends paid in the range of 60-70% of Net Profit After Tax.

• Acquisitions focus on improving Group returns on capital employed.

We focus on delivering profitable growth and superior returns

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Group Financial Results

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FY16 Highlights

Investments

Capital Management

Investments of $108.4m made in FY16

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• Acquisition of Red Seal (November 2015)

• • Acquisition of Zest (October 2015)

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• Onelink’s NSW Health contract commenced

• • Initial investment made in a new distribution centre in Brisbane, Queensland

• • BlackHawk like-for-like annual sales growth of 55%

• • Post balance date announcement to merge Chemmart with Terry White Group Limited to create one of Australia’s largest retail pharmacy networks.

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Record operating cashflow of $224m

• Tight control over management of working capital

• • Net debt reduction of $69m to $248m

• • Return on capital employed (ROCE) of 16.3%, up 260bps on FY15

• • Extended tenor of our core debt facilities

• • Total dividends of 58.5cps, an increase of 24.5% on prior year

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Group Financial Results

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Strong Full Year financial performance

					Constant FX	• Full Year Group Revenue increase of $1,033.4m
NZ$m	FY16	FY15	Var		Var	or 16.5% (constant FX):
Revenue	7,101.5	6,068.1	17.0%		16.5%	– Healthcare up 16.9%.
Gross Operating Revenue	676.5	600.2	12.7%		12.2%	– Animal Care up 10.0%.
EBITDA	225.5	196.7	14.6%		14.0%	• EBITDA increase of $28.8m or 14.0% (constant
EBIT	200.8	172.6	16.3%		15.7%	FX):
Net Finance Costs	20.1	21.9	8.4%		8.9%	– Healthcare up 14.2%.
Profit Before Tax	180.7	150.7	19.9%		19.3%	– Animal Care up 13.0%.
Net Profit After Tax	127.0	105.9	19.9%		19.3%	• Net Finance Costs reduced by $1.8m or 8.9%
EBITDA%	3.18%	3.24%	-6pts			(constant FX).
Operating Cash Flow	224.1	133.8	67.5%			• NPAT increase of $21.1m or 19.3% (constant
EPS - cps	84.0	70.8	18.7%		18.2%	FX).
Total Dividends - cps	58.5	47.0	24.5%
Net Debt	247.6	316.9	21.9%			• EPS growth of 18.2% (constant FX).
Net Debt : EBITDA	1.1x	1.6x	0.5x			• Operating cash flow increased by 67.5% to
ROCE	16.3%	13.7%	2.6%			$224.1m.

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Group Financial Results

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Segment earnings and GOR mix

EBITDA by segment

					Constant FX
NZ$m	FY16	FY15	Var		Var
Healthcare	195.0	170.2	14.6%		14.2%
Animal Care	42.3	37.1	14.0%		13.0%
Corporate	(11.9)	(10.6)	(12.0%)		(13.3%)
Group	225.5	**196.7 **	14.6%		14.0%

Gross Operating Revenue (GOR) FY16

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FY16 GOR mix

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Group Financial Results

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Healthcare Results 2

Top left: Chemmart pharmacist and Minfos Business Development Manager. Top right: Symbion, Keysborough, Melbourne. Bottom left: EBOS Healthcare, Auckland. 10 Bottom right: ProPharma, Auckland

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Healthcare segment

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Strong trading performances across Australia and New Zealand

					Constant FX
NZ$m	FY16	FY15	Var		Var
Healthcare segment
Revenue	6,686.4	5,692.9	17.5%		16.9%
EBITDA	195.0	170.2	14.6%		14.2%
EBIT	174.1	149.7	16.3%		15.9%
EBITDA%	2.92%	2.99%	-7pts		-7pts
Australia
Revenue	5,273.8	4,408.4	19.6%		18.9%
EBITDA	155.3	137.5	12.9%		12.3%
EBIT	136.5	119.3	14.4%		13.8%
EBITDA%	2.94%	3.12%	-18pts		-18pts
New Zealand
Revenue	1,412.6	1,284.5	10.0%
EBITDA	39.8	32.7	21.8%
EBIT	37.6	30.4	23.6%
EBITDA%	2.82%	2.54%	27pts

• Revenue increase of $993.5m or 16.9% (constant FX): – Australia up 18.9%.

• – New Zealand up 10.0%.

• EBITDA increase of $24.8m or 14.2% (constant FX): – Australia up 12.3%.

• – New Zealand up 21.8%.

	EBITDA
	NZ$m
		195
	170	12.9%
153		CAGR
FY14	FY15	FY16

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Healthcare Results

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Healthcare segment

Pharmacy

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Pharmacy Services
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• Pharmacy revenue in Australia grew by 12.2% (constant FX), attributable to:

• new wholesale business;

• OTC product category sales; and

• new Hepatitis C drug sales of $129m, albeit at lower gross profit margins.

	Pharmacy		Constant FX
	NZ$m	FY16	FY15 Var%
	Revenue	3,907.8	3,531.9 10.6%
	GOR GOR%	332.6 8.5%	312.7 6.4% 8.9%

Note: Revenue includes Net Sales and Other Income. Gross Operating Revenue (GOR) includes Gross Profit and Other Income and excludes operating expenses.

• To cater for our growth in the Queensland market and to further improve operational efficiencies, the EBOS Board has approved a new distribution facility in Brisbane which is expected to be completed by FY18. The total project is expected to cost A$55m (including land and buildings) with A$49m to be spent over FY17 and FY18.

• EBOS maintained its leading position in New Zealand with FY16 revenue growth of 4.8%.

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Healthcare Results

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Healthcare segment

Pharmacy Proposed Investment in Terry White Group (including Chemmart)

• EBOS has entered into an agreement to merge Chemmart with Terry White Group Limited (TWG) to create one of Australia’s largest retail pharmacy networks.

• EBOS Group will sell the Chemmart business assets and subscribe for shares in TWG, which will result in EBOS Group consolidating TWG in its financial statements from completion.

• The combination of Terry White and Chemmart franchise operations will result in a compelling industry offer focused on the delivery of front line health services and value for money.

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• Store retail turnover is estimated to be approximately A$2 billion.

• The transaction is expected to complete in October 2016.

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Healthcare Results

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Healthcare segment

Consumer Products

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• Red Seal acquisition for $80 million was completed on 30 November 2015.

• Red Seal is a leader in key NZ segments of the natural health products market including vitamins, minerals and supplements; herbal teas; non-fluoride toothpastes and functional foods including molasses and manuka honey.

	Consumer Products		Constant FX
	NZ$m	FY16	FY15 Var%
	Revenue	86.4	61.8 39.8%
	GOR	37.2	25.9 43.3%
	GOR%	43.1%	42.0%

Note: Revenue includes Net Sales and Other Income. Gross Operating Revenue (GOR) includes Gross Profit and Other Income and excludes operating expenses.

• Red Seal is performing in line with expectations with strong like-for-like sales growth recorded in both domestic and international markets.

• Faulding sales growth of 9.1% to last year due to new product development and customer growth.

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Healthcare Results

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Healthcare segment

Institutional Healthcare

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• EBOS continues to expand its position as a specialised, unique and essential partner across a number of areas of Institutional Healthcare in Australia and New Zealand, primarily in hospitals, aged care and primary care.

• Symbion Hospital Services business maintained its market leading position and recorded strong sales growth driven by Hepatitis C drug sales of $336m.

	Institutional	Healthcare	Constant FX
	NZ$m	FY16	FY15 Var%
	Revenue	2,233.4	1,787.8 24.9%
	GOR	138.2	112.5 22.8%
	GOR%	6.2%	6.3%

Note: Revenue includes Net Sales and Other Income. Gross Operating Revenue (GOR) includes Gross Profit and Other Income and excludes operating expenses.

• The EBOS Healthcare business across Australia and New Zealand delivered strong sales growth on the prior year, assisted by an improved performance from our International business.

• Onelink Australia commenced operations in November 2015 and all NSW Government Health warehouses have now transitioned to our special purpose logistics facility (effective March 2016). This contract operates on a cost-plus recovery model and the GOR recorded in FY16 was $13.1m (FY15: $0.3m).

• Acquisition of Zest was completed on 30 October 2015, to expand our presence in the delivery and administration of specialty pharmaceutical products and services.

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Healthcare Results

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Healthcare segment

Contract Logistics

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• Healthcare Logistics (NZ) maintained its leading market position and combined with cost management, delivered strong earnings growth.

• Symbion Contract Logistics (Australia) continues to grow its customer base which includes a number of leading pharmaceutical and OTC suppliers.

Contract Logistics NZ$m FY16 FY15 Var% Constant FX	Contract Logistics NZ$m FY16 FY15 Var% Constant FX
Revenue GOR	495.0 373.7 32.5% 60.5 54.4 11.3%

Note: GOR % not relevant as sales activity is predominantly done on consignment.

• The Group will invest in a new Sydney facility with construction scheduled to commence later this year.

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Healthcare Results

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Animal Care Results 3

Selection of our Animal Care brands of BlackHawk and Vitapet and an 17 Animates store in Auckland.

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Animal Care segment

BlackHawk drives the significant increase in Revenue and Earnings

NZ$m	Constant FX FY16 FY15 Var Var 415.0 375.2 10.6% 10.0% 42.3 37.1 14.0% 13.0% 38.6 33.5 15.3% 14.3% 10.19% 9.89% 30pts 28pts
Animal Care segment Revenue EBITDA EBIT EBITDA%

• Revenue increase of $39.8m or 10.0% primarily from growth of branded products (including BlackHawk, Vitapet) and wholesale operations (Lyppard).

• EBITDA increase of $5.2m or 13.0% attributable to:

• revenue growth;

• full financial year of BlackHawk contribution (acquired 31 October 2014); and

• higher contribution from our 50% share in Animates.

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EBITDA
NZ$m
42
37
19.9%
CAGR
29
FY14 FY15 FY16
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Animal Care Results

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Animal Care segment Full Year Performance Overview

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• Our premium pet food brand continues to receive very strong support and is performing above expectations. Sales grew 55% in FY16 on a like-for-like 12 month basis.

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• Vitapet recorded sales growth of 7.0% (constant FX) driven by new product development and investment in the brand.

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• Lyppard revenues increased by 5.4% primarily from growth in major vet groups.

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• EBOS’ 50% share of Animates net profit increased $0.5m (23.6%) on last year from annual sales growth above 20%, the opening of five new retail stores and five veterinary clinics.

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Animal Care Results

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4 Group Financial Information

EBOS Healthcare warehouse, 20 Auckland, New Zealand

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Cash Flow

Another year of strong Operating Cash Flow

NZ$m	FY16	FY15	Var$	Var%
EBITDA	225.5	196.7	28.8	14.6%
Net interest paid	(20.1)	(21.9)	1.8
Tax paid	(54.5)	(53.0)	(1.5)
Net workingcapital and other movements	73.2	12.0	61.2
Cash from Operating activities	224.1	133.8	90.3	67.5%
Proceeds from disposal of assets	5.2	0.5	4.7
Capital expenditure	(17.6)	(15.4)	(2.2)
Free Cash Flow	211.7	118.8	92.9	78.2%
Acquisition of subsidiaries and investments	(92.1)	(64.1)	(28.0)
Dividendspaid(net of DRP)	(69.1)	(44.4)	(24.8)
Net Cash Flow	50.5	10.3	40.2
FX impact on net debt	18.8	(10.9)	29.7
Reduction/(Increase) in Net Debt	69.3	(0.6)	70.0

• Operating cash flow of $224.1m assisted by effective working capital management.

• Reduction in net interest payments of $1.8m or 8.4%.

• Proceeds from asset disposals primarily relates to the sale of the previous Melbourne distribution centre ($4.9m).

• Capex in FY16 includes payments for the new distribution centre in Brisbane ($6.5m) and completion of Onelink Australia’s new facility ($3.9m).

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Group Financial Information

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Working Capital and Cash Conversion

NZ$m	June 2016	June 2015
Net Working Capital
Trade receivables	1,302.8	787.9
Inventory	578.5	518.3
Trade payables	(1,539.9)	(865.5)
Other	(98.9)	(110.9)
Total	242.6	329.8
Cash conversion days1,2
Debtor days	42	45
Inventory days	29	33
Creditor days	58	56
Cash conversion days	13	22

• Working capital management discipline is a key focus of the Group.

• Cash conversion cycle improved to 13 days.

• Lower investment in Net Working Capital is providing improved cash returns for the Group.

• Cash conversion days excludes the Group’s 3PL Hepatitis C business as stock is held on consignment.

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Group Financial Information

Note 1: June 2016 cash conversion days are adjusted for the Group’s 3PL debtors and creditors arising from its Hepatitis C business. Note 2: June 2015 cash conversion days are adjusted for constant currency.

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Net Debt, Gearing and Debt Maturity

Net Debt and Gearing

Debt Maturity Profile – facility limits and term

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350 40% 450
300 35% 400 444
316 317
350
30%
250
300
248 25%
200 250
24.4%
23.2% 20%
150 200
18.5% 15%
150
100 92
10%
100
50 5% 50 - - 85 92 52
25
0 0% -
Jun-14 Jun-15 Jun-16 FY17 FY18 FY19 FY20 FY21 FY22
Net Debt Gearing ratio (Net debt) Cash advance facility Term debt Securitisation
NZ$m
Gearing ratio
Net debt (NZ$m)
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• Net Debt of $248m at June 2016.

• Net Debt : EBITDA of 1.1x at June 2016 (1.6x at June 2015).

• Reduction in the Gearing ratio from 23.2% at June 2015 to 18.5% at June 2016 – reflecting the strong earnings and cash flow results.

• In 2016, EBOS extended the tenor of its core securitisation and term debt facilities. As at 30 June 2016, the weighted average maturity of our debt facilities is 32 months.

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Group Financial Information

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Earnings and Dividends per share, ROCE

Earnings and Dividends per share

Return on Capital Employed

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84.0
DPS EPS
70.8
62.8
58.5
41.0
47.0
FY14 FY15 FY16
Cents per share
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16.3%
13.7%
12.8%
FY14 FY15 FY16
ROCE %
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• EPS growth of 18.7% (18.2% constant FX) in FY16 following a 12.7% increase in FY15.

• Final dividend of 32.5 cents (imputed to 25%), an increase of 7.5 cents or 30.0% from last year.

• Return on Capital Employed of 16.3% at June 2016, an increase of 260bps from June 2015 and 350bps from June 2014.

• Dividend payout ratio of 70%.

• Final dividend is 100% franked for Australian resident shareholders.

• DRP remains suspended for the final dividend.

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Group Financial Information

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5[Summary and Outlook ]

Masterpet warehouse, 25 Wellington, New Zealand

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Summary and Outlook

• In FY16, EBOS has further strengthened its position as the largest diversified Australasian marketer, wholesaler and distributor of healthcare, medical, pharmaceutical and animal care products.

• EBOS continues to derive the benefits of its diversified portfolio of businesses as well as the underlying demand supporting our Healthcare and Animal Care markets.

• Prudent capital and cash flow management has allowed us to significantly improve our returns on capital and reduce our debt levels.

• We see continued growth in our business across both Healthcare and Animal Care into FY17 on a constant currency basis. A performance update will be provided at the Annual Meeting on 19 October 2016.

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Summary and Outlook

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Supporting Information

EBOS Group locations in 27 Australia and New Zealand

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Foreign exchange

Movement in the NZD:AUD cross-rate positively impacted EBITDA by $1.1m in FY16

Revenue and EBITDA by currency

	AUD	Average	AUD	NZ	Group
	Operations	**NZD: AUD **	Operations	Operations	Consolidated
$m	AUD	translation	NZD	NZD	NZD
FY16
Net Revenue EBITDA EBITDA%	5,184.9 165.3 3.19%	0.92 0.92	5,628.7 179.4 3.19%	1,472.8 46.0 3.13%	7,101.5 225.5 3.18%

• 80% of the Group’s earnings (EBITDA) are generated in AUD.

• The average NZD:AUD FX rate for FY16 decreased by 0.6 cents from FY15, positively impacting the Group’s FY16 EBITDA by approximately $1.1m.

NZD:AUD exchange rate – July 2014 to June 2016

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1.00 FY15 average: 0.927c FY16 average: 0.921c
0.98
0.96
0.94
0.92
0.90
0.88
0.86
Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jun-16
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• EBITDA sensitivity to a 1 cent movement in NZD:AUD exchange rate is approximately $1.9m per annum.

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Glossary of terms and measures

Except where noted, common terms and measures used in this document are based upon the following definitions:

Term	Definition
Actual results	Results translated into NZ dollars at the applicable actual monthly exchange rates ruling in each period.
CAGR	Compound annual growth rate calculated from FY14 to FY16.
Debtor days	Trade debtors at the end of period divided by Revenue for the period, multiplied by number of days in the period.
Inventory days	Inventory at the end of period divided by Cost of Sales for the period, multiplied by number of days in the period.
Creditor days	Trade creditors at the end of period divided by Cost of Sales for the period, multiplied by number of days in the period.
Constant FX/currency	Calculated by translating the prior period results into NZ dollars at the actual monthly exchange rates applicable in the current period.
Revenue	Revenue from the sale of goods and the rendering of services.
Gross Operating Revenue (GOR)	Revenue less cost of sales and the write-down of inventory
EBIT	Earnings before interest and tax.
EBITDA	Earnings before interest, tax, depreciation and amortisation.
Free Cash Flow	Cash from operations less capital expenditure net ofproceeds from disposals.
Earnings per share (EPS)	Net Profit after tax divided by the weighted average number of shares on issue during the period.
Net Debt : EBITDA	Ratio of net debt atperiod end to the last 12 months EBITDA.
Return on Capital	Measured as earnings before interest, tax and amortisation of finite life intangibles for 12 months divided by closing capital employed (including a
Employed (ROCE)	pro-rata adjustment for entities acquired).

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www.ebosgroup.com