EBOS GROUP LIMITED — Interim / Quarterly Report 2016

Mar 28, 2016

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EBOS Group Limited Interim Report 2016

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Strategic investment and a robust performance by our Healthcare and Animal Care businesses are building a platform for continued growth and improved returns for shareholders.

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EBOS Group Limited Interim Report 2016

Financial highlights

Half year 2016 at a glance

• $3.4 billion revenue +8.3% increase

• $113.7 million EBITDA +13.3% increase

• $64.2 million net profit after tax +18.9% increase

• $46.6 million operating cashflow +52.6% increase

• 42.5 cents earnings per share +17.5% increase

• 26.0 cents interim dividend per share +18.2% increase

All figures are in New Zealand Dollars, unless otherwise stated.

FIVE YEAR REVENUE TREND

For the six months to 31 December ($millions)

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2015 3,380
2014 3,120
2013 3,000
2012 755
2011 689
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FIVE YEAR EBITDA TREND

For the six months to 31 December ($millions)

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2015 113.7
2014 100.3
2013 94.8
2012 26.8
2011 18.8
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FIVE YEAR CONTINUING OPERATIONS NPAT TREND

For the six months to 31 December ($millions)

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2015 64.2
2014 53.9
2013 49.4
2012 15.0
2011 11.6
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EBOS Group Limited Interim Report 2016

Dear Shareholder

It is with great pleasure that we provide you with the interim report for the six months to 31 December 2015, a period which reflected the benefits of continued organic growth and nearly $100 million in strategic investments across the Group.

The interim results demonstrated the robust performance of our Healthcare and Animal Care business units. Importantly, the results provide confidence for the Group to continue investing in key markets to drive future growth and improved returns for shareholders.

The highlights of the six months included:

• The acquisition of Red Seal, a natural vitamins, supplements and products business to accelerate the growth of our Endeavour Consumer Health business in Australia, New Zealand and Asia.

• The Onelink Australia business commencing operations under the NSW Health medical consumables warehousing and distribution contract.

• The acquisition of Zest as part of the Company’s growing focus on areas including the delivery and administration of specialty pharmaceutical products, further strengthening our relationships with the manufacturer community.

The Group generated revenue for the half year of $3.4 billion, up 8.3% on the same period last year with Healthcare up by 8.2% and Animal Care up by 10.1%.

Our earnings before net finance costs, tax, depreciation and amortisation (EBITDA)

increased by 13.3% to $113.7 million with Healthcare up by 12.7% and Animal Care up by 16.3%.

Net Profit After Tax increased to $64.2 million, representing an increase of 18.9% on the prior half-year, and earnings per share increased by 17.5%.

Interim dividend increase

Your Directors declared an interim dividend of 26.0 cents per share, an increase of 18.2% on the prior corresponding period. The interim dividend will be imputed to 25% for New Zealand resident shareholders and will be fully franked for Australian resident shareholders. The record date for the dividend is 11 March 2016 and the dividend will be paid on 1 April 2016.

As communicated in August 2015, the Board has reviewed the Group’s dividend reinvestment plan (DRP). The Board has decided to suspend the DRP. Accordingly, it will not apply in respect of the interim dividend.

Healthcare

EBITDA for the Healthcare business increased 12.7%. Strong EBITDA growth was recorded by both the Australian and New Zealand businesses.

The profit performance of the Australian business reflected sound performances across Pharmacy, Institutional Healthcare and Contract Logistics.

In the Australian pharmacy market, solid wholesale revenue growth was assisted by increased levels of activity, particularly in

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.

the non-prescription channel. Our Onelink Australia business is demonstrating to customers and key stakeholders alike the operational capacity and expertise of its people and infrastructure.

The New Zealand operations (including our international Healthcare business) delivered a strong performance with EBITDA increasing by 24.1%, reflecting higher levels of activity within our Contract Logistics business and a strong contribution from our International division.

Animal Care

Animal Care recorded a 16.3% increase in EBITDA assisted by a full six month earnings contribution from BlackHawk which continues to receive strong support from pet specialty retailers in Australia. EBOS Group’s 50% owned Animates business (NZ), the pre-eminent pet retailer in New Zealand, also performed well for the half-year.

Performance metrics

Operating cash flow of $46.6 million for the period was up 52.6% on the prior

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EBOS Group Limited Interim Report 2016

corresponding period and the Group’s Net Debt/ EBITDA ratio at 31 December 2015 was 1.8x. Return on capital employed increased by 1.4% to 14.3% reflecting the increased operating profit and cash performance of the Group, including the benefits of strategic investments undertaken in both the current and prior years.

Outlook

EBOS has recorded positive financial results for the first half of the financial year across both its Healthcare and Animal Care divisions.

The financial performance and growth in the first half has benefited from acquisitions and investments undertaken in previous periods which have now cycled through a full 12 months of ownership.

We remain confident of delivering another year of double digit, constant currency, profit growth for our shareholders in 2016. We look forward to writing to you again following the end of the financial year on the performance of the Company and we appreciate your continued support.

Segment & Divisional Overview

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16% Animal Care

Consumer Products

4%

6% Pharmacy Retail

44%

Pharmacy

9% Contract Logistics

21% Institutional Healthcare

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Patrick Davies Chief Executive Officer

Mark Waller Chairman of Directors

Data based on gross operating revenue, which comprises revenue less cost of sales and write down of inventory.

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EBOS Group Limited Interim Report 2016

Financial Statements

Six months ended 31 December 2015

Summary of consolidated fnancial highlights	5
Shareholder calendar	5
Auditor’s review report	6
Condensed consolidated income statement	7
Condensed consolidated statement of comprehensive income	8
Condensed consolidated statement of changes in equity	9
Condensed consolidated balance sheet	10
Condensed consolidated cash fow statement	12
Notes to the condensed consolidated interim fnancial statements	13
Directory

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EBOS Group Limited Interim Report 2016

Summary of consolidated financial highlights

		Six months	Six months	Year ended
		31 Dec 15	31 Dec 14	30 Jun 15
		$’000	$’000	$’000
		(Unaudited)	(Unaudited)	(Audited)
Revenue		3,379,749	3,119,873	6,068,080
Earnings before interest, tax expense, depreciation
and amortisation (EBITDA)		113,725	100,345	196,695
Earnings before interest and tax expense (EBIT)		101,419	88,479	172,577
Proft before income tax expense		91,744	77,014	150,668
Net proft for the period		64,170	53,949	105,941
Shareholder’s equity		1,070,247	1,002,286	1,051,028
Earnings per share		42.5c	36.2c	70.8c
Interim dividend per share		26.0c	22.0c	47.0c
Net interest cover		11.8x	8.8x	9.0x
Net interest bearing debt to net interest bearing debt plus equity		26.2%	26.9%	23.2%
Shareholder calendar
Release of half year result	24 February 2016
Interim dividend record date		11 March 2016
Interim dividend payable		1 April 2016
Release of full year result	25 August 2016
Annual Meeting	19	October 2016

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EBOS Group Limited Interim Report 2016

Independent review report to the shareholders of EBOS Group Limited

We have reviewed the condensed consolidated interim financial statements of EBOS Group Limited and its subsidiaries (“the Group”) which comprise the condensed consolidated balance sheet as at 31 December 2015, and the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated cash flow statement for the six months ended on that date, and a summary of significant accounting policies and other explanatory information on pages 7 to 25.

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.

Board of Directors’ Responsibilities

The Board of Directors are responsible for the preparation and fair presentation of the condensed consolidated interim financial 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 financial 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 financial 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 financial 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 relevant to the audit of the annual financial statements.

A review of the condensed consolidated interim financial 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 financial 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 on those financial statements.

Other than in our capacity as auditors, and the provision of due diligence 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 Group.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements of the Group do not present fairly, in all material respects, the financial position of the Group as at 31 December 2015 and its financial performance and cash flows 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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23 February 2016

Chartered Accountants, Christchurch, New Zealand

This review report relates to the unaudited condensed consolidated interim financial statements of EBOS Group Limited for the six months ended 31 December 2015 included on EBOS Group Limited’s website. The Board of Directors are 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 unaudited condensed consolidated interim financial statements since they were initially presented on the website. The review report refers only to the unaudited condensed consolidated interim financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these unaudited condensed consolidated interim financial 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 unaudited condensed consolidated interim financial statements and related review report dated 23 February 2016 to confirm the information included in the unaudited condensed consolidated interim financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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EBOS Group Limited Interim Report 2016

Condensed consolidated income statement

For the six months ended 31 December 2015

		Six months	Six months	Year ended
		31 Dec 15	31 Dec 14	30 Jun 15
		$’000	$’000	$’000
	Notes	(Unaudited)	(Unaudited)	(Audited)
Revenue	2(a)	3,379,749	3,119,873	6,068,080
Income from associates	2(b)	1,852	933	2,861
Proft before depreciation, amortisation,
net fnance costs and income tax expense		113,725	100,345	196,695
Depreciation	2(b)	(6,416)	(5,649)	(12,108)
Amortisation of fnite life intangibles	2(b)	(5,890)	(6,217)	(12,010)
Proft before net fnance costs and income tax expense		101,419	88,479	172,577
Finance income	2(b)	1,404	1,192	2,299
Finance costs	2(b)	(11,079)	(12,657)	(24,208)
Net fnance costs	2(b)	(9,675)	(11,465)	(21,909)
Proft before income tax expense	2(b)	91,744	77,014	150,668
Income tax expense		(27,574)	(23,065)	(44,727)
Proft for the period		64,170	53,949	105,941
Earnings per share
Basic (cents per share)		42.5	36.2	70.8
Diluted (cents per share)		42.5	36.2	70.8

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EBOS Group Limited Interim Report 2016

Condensed consolidated statement of comprehensive income

For the six months ended 31 December 2015

	Six months	Six months	Year ended
	31 Dec 15	31 Dec 14	30 Jun 15
	$’000	$’000	$’000
	(Unaudited)	(Unaudited)	(Audited)
Proft for the period	64,170	53,949	105,941
Other comprehensive income
Items that may be reclassifed subsequently to proft or loss:
Cash fow hedge (losses)	(1,615)	(811)	(2,224)
Related income tax	452	223	631
Translation of foreign operations	(14,000)	(8,528)	11,993
Total comprehensive income net of tax	49,007	44,833	116,341

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EBOS Group Limited Interim Report 2016

Condensed consolidated statement of changes in equity

For the six months ended 31 December 2015

~~Six months ended 31 December 2014 (unaudited):~~ Opening balance 861,549 (29,869) 147,085 274 979,039 Proft for the period - - 53,949 - 53,949 Other comprehensive income for the period, net of tax - (8,528) - (588) (9,116) Payment of dividends 4 - - (30,490) - (30,490) Dividends reinvested 3 8,904 - - - 8,904 Balance at 31 December 2014 870,453 (38,397) 170,544 (314) 1,002,286 ~~Year ended 30 June 2015 (audited):~~ Opening balance 861,549 (29,869) 147,085 274 979,039 Proft for the year - - 105,941 - 105,941 Other comprehensive income for the year, net of tax - 11,993 - (1,593) 10,400 Payment of dividends 4 - - (63,431) - (63,431) Dividends reinvested 3 19,079 - - - 19,079 Balance at 30 June 2015 880,628 (17,876) 189,595 (1,319) 1,051,028 ~~Six months ended 31 December 2015 (unaudited):~~ Opening balance 880,628 (17,876) 189,595 (1,319) 1,051,028 Proft for the period - - 64,170 - 64,170 Other comprehensive income for the period, net of tax - (14,000) - (1,163) (15,163) Payment of dividends 4 - - (37,673) - (37,673) Dividends reinvested 3 7,885 - - - 7,885 Balance at 31 December 2015 888,513 (31,876) 216,092 (2,482) 1,070,247 Share capital $’000 Notes Foreign currency translation reserve $’000 Retained earnings $’000 Cash fow hedge reserve $’000 Total $’000

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EBOS Group Limited Interim Report 2016

Condensed consolidated balance sheet

As at 31 December 2015

~~Current assets~~ Cash and cash equivalents 115,810 68,836 109,521 Trade and other receivables 869,559 785,018 803,839 Prepayments 6,671 5,533 7,935 Inventories 548,776 515,397 518,272 Current tax refundable 88 82 88 Other fnancial assets – derivatives 8 468 1,761 2,184 Total current assets 1,541,372 1,376,627 1,441,839 ~~Non-current assets~~ Property, plant and equipment 102,884 108,250 111,599 Capital work in progress - 731 - Prepayments 330 34 439 Deferred tax assets 44,547 35,421 48,284 Goodwill 828,922 763,461 764,618 Indefnite life intangibles 92,058 75,708 79,043 Finite life intangibles 61,779 69,694 69,325 Investment in associates 35,576 32,344 34,911 Total non-current assets 1,166,096 1,085,643 1,108,219 Total assets 2,707,468 2,462,270 2,550,058 31 Dec 15 $’000 (Unaudited) Notes 31 Dec 14 $’000 (Unaudited) 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

Condensed consolidated balance sheet (continued)

As at 31 December 2015

~~Current liabilities~~ Trade and other payables 1,028,647 914,690 952,257 Finance leases 540 163 153 Bank loans 7 307,970 176,021 153,245 Current tax payable 13,577 12,238 16,990 Employee benefts 29,368 26,099 33,573 Other fnancial liabilities – derivatives 8 6,638 4,540 6,047 Total current liabilities 1,386,740 1,133,751 1,162,265 ~~Non-current liabilities~~ Bank loans 7 186,458 260,492 272,852 Trade and other payables 10,324 14,630 10,042 Deferred tax liabilities 48,936 46,545 48,853 Finance leases 109 250 191 Employee benefts 4,654 4,316 4,827 Total non-current liabilities 250,481 326,233 336,765 Total liabilities 1,637,221 1,459,984 1,499,030 Net assets 1,070,247 1,002,286 1,051,028 ~~Equity~~ Share capital 3 888,513 870,453 880,628 Foreign currency translation reserve (31,876) (38,397) (17,876) Retained earnings 216,092 170,544 189,595 Cash fow hedge reserve (2,482) (314) (1,319) Total equity 1,070,247 1,002,286 1,051,028 31 Dec 15 $’000 (Unaudited) Notes 31 Dec 14 $’000 (Unaudited) 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

Condensed consolidated cash flow statement

For the six months ended 31 December 2015

Six months 31 Dec 15 $’000 (Unaudited) ~~Cash fows from operating activities~~ Receipts from customers 3,280,499 3,021,876 5,994,123 Interest received 1,404 1,192 2,299 Dividends received from associates 590 - 301 Payments to suppliers and employees (3,195,047) (2,952,414) (5,785,720) Taxes paid (29,812) (27,494) (53,006) Interest paid (11,079) (12,657) (24,208) Net cash infow from operating activities 5 46,555 30,503 133,789 ~~Cash fows from investing activities~~ Sale of property, plant & equipment 5,046 637 458 Purchase of property, plant & equipment (5,853) (9,920) (14,977) Payments for intangible assets (958) (102) (464) Acquisition of associates (1,107) (5,581) (6,710) Acquisition of subsidiaries (89,457) (57,414) (57,414) Net cash (outfow) from investing activities (92,329) (72,380) (79,107) ~~Cash fows from fnancing activities~~ Proceeds from issue of shares 3 7,885 8,904 19,079 Proceeds from borrowings 84,430 53,433 23,584 Repayment of borrowings - (8,667) (15,161) Dividends paid to equity holders of parent 4 (37,673) (30,490) (63,431) Net cash infow/(outfow) from fnancing activities 54,642 23,180 (35,929) Net increase/(decrease) in cash held 8,868 (18,697) 18,753 Efect of exchange rate fuctuations on cash held during the period (2,579) (1,165) 2,070 Net cash and cash equivalents at beginning of period 109,521 88,698 88,698 Net cash and cash equivalents at end of period 115,810 68,836 109,521 Notes Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

1. Financial statements

These unaudited condensed consolidated interim financial 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 profit orientated entities.

The same accounting policies and methods of computation are applied in the interim financial statements as were applied in the financial statements for the year ended 30 June 2015. These financial statements should be read in conjunction with the financial statements and related notes included in the Group’s Annual Report for the year ended 30 June 2015. The information is presented in thousands of New Zealand dollars unless otherwise stated.

2. Profit from operations

	~~(a) Revenue~~ Revenue from the sale of goods 3,326,984 3,074,892 5,979,980 Revenue from the rendering of services 52,765 44,981 88,100 3,379,749 3,119,873 6,068,080 Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

2. Profit from operations (continued)

Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited) ~~(b) Proft before income tax expense~~ Proft before income tax has been arrived at after crediting/ (charging) the following gains and losses from operations: (Loss)/gain on sale of property, plant and equipment (191) 6 (88) Change in fair value of derivative fnancial instruments (770) (6) 323 Share of profts of associates 1,852 933 2,861 Proft before income tax has been arrived at after (charging) the following expenses by nature: Cost of sales (3,044,051) (2,813,355) (5,464,445) Write-down of inventory (2,012) (1,134) (3,483) Net fnance costs: Finance income 1,404 1,192 2,299 Finance costs (11,079) (12,657) (24,208) Total net fnance costs (9,675) (11,465) (21,909) Impairment on trade & other receivables (861) (765) (1,869) Depreciation of property, plant & equipment (6,416) (5,649) (12,108) Amortisation of fnite life intangibles (5,890) (6,217) (12,010) Operating lease rental expenses (14,766) (12,800) (27,009) Donations (81) (82) (124) Employee beneft expense (106,251) (100,404) (198,695) Defned contribution plan expense (6,299) (5,892) (11,560) Other expenses (92,594) (86,029) (167,296) Total expenses, net of interest revenue (3,288,896) (3,043,792) (5,920,508) Proft before income tax expense 91,744 77,014 150,668

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

3. Share capital

~~Fully paid ordinary shares~~ Balance at beginning of period 150,687 880,628 148,720 861,549 148,720 861,549 Dividend reinvested – October 2014 - - 1,019 8,904 1,019 8,904 April 2015 - - - - 948 10,175 October 2015 627 7,885 - - - - 151,314 888,513 149,739 870,453 150,687 880,628 Six months 31 Dec 15 $’000 (Unaudited) No. ’000 No. ’000 Six months 31 Dec 14 $’000 (Unaudited) No. ’000 Year ended 30 Jun 15 $’000 (Audited)

4. Dividends

~~Recognised amounts~~ Fully paid ordinary shares Final – prior year 25.0 37,673 20.5 30,490 20.5 30,490 Interim – current year - - - - 22.0 32,941 25.0 37,673 20.5 30,490 42.5 63,431 ~~Unrecognised amounts~~ Final dividend - - - - 25.0 37,673 Interim dividend 26.0 39,342 22.0 32,941 - - 26.0 39,342 22.0 32,941 25.0 37,673 Six months 31 Dec 15 $’000 (Unaudited) Cents per share Cents per share Six months 31 Dec 14 $’000 (Unaudited) Cents per share Year ended 30 Jun 15 $’000 (Audited)

The Board approved an interim dividend of 26.0 cents per share on 23 February 2016. The record date for the dividend is 11 March 2016 and the dividend will be paid on 1 April 2016.

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

5. Notes to the cash flow statement

~~Reconciliation of proft for the period with cash fows from operating activities~~ Proft for the period 64,170 53,949 105,941 Add/(less) non-cash items: Depreciation of property, plant and equipment 6,416 5,649 12,108 Amortisation of fnite life intangibles 5,890 6,217 12,010 Loss/(gain) on sale of property, plant & equipment 191 (6) 88 Share of profts of associates, net of dividends received (1,262) (933) (2,861) Loss/(gain) on derivative fnancial instruments 770 6 (323) Deferred tax 212 (1,821) (8,293) Provision for doubtful debts 132 349 355 12,349 9,461 13,084 Movements in working capital: Trade and other receivables (65,852) (86,091) (104,918) Prepayments 1,373 1,235 (1,572) Inventories (30,504) (23,773) (26,648) Current tax refundable/(payable) (3,413) (1,980) 2,766 Trade and other payables 76,672 98,151 131,130 Provision for employee benefts (4,378) (2,645) 5,340 Foreign currency translation of opening working capital balances (14,249) (9,496) 13,973 (40,351) (24,599) 20,071 Working capital items relating to investing activities 1,111 (9,707) (6,706) Working capital items acquired on acquisition 9,276 1,399 1,399 Net cash infow from operating activities 46,555 30,503 133,789 Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

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 financing 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 3,169,276 2,928,736 5,692,888 Animal care 210,473 191,137 375,192 3,379,749 3,119,873 6,068,080 ~~Segment result (EBITDA)~~ Healthcare 99,755 88,541 170,167 Animal care 19,587 16,843 37,118 Corporate (5,617) (5,039) (10,590) 113,725 100,345 196,695 Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

6. Segment information (continued)

~~Segment expenses~~ Healthcare: Depreciation of property, plant and equipment (5,766) (4,973) (10,762) Amortisation of fnite life intangibles (4,683) (5,039) (9,695) Income tax expense (26,855) (23,880) (41,655) (37,304) (33,892) (62,112) Animal care: Depreciation of property, plant and equipment (650) (676) (1,346) Amortisation of fnite life intangibles (1,207) (1,178) (2,315) Income tax expense (4,958) (3,782) (11,616) (6,815) (5,636) (15,277) Corporate: Net fnance costs (9,675) (11,465) (21,909) Income tax credit 4,239 4,597 8,544 (5,436) (6,868) (13,365) ~~Proft for the period~~ Healthcare 62,451 54,649 108,055 Animal care 12,772 11,207 21,841 Corporate (11,053) (11,907) (23,955) 64,170 53,949 105,941 Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

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EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

6. Segment information (continued)

The accounting policies of the reportable segments are consistent with the Group’s accounting policies. Segment result represents profit before depreciation, amortisation, net finance 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 flow 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 financial instruments and deferred tax assets) are detailed below:

	~~Revenue from external customers~~ New Zealand 737,225 672,285 1,343,884 Australia 2,642,524 2,447,588 4,724,196 3,379,749 3,119,873 6,068,080 ~~Non-current assets~~ New Zealand 286,558 208,455 206,410 Australia 799,415 809,423 818,614 1,085,973 1,017,878 1,025,024 Six months 31 Dec 15 $’000 (Unaudited) Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited)

(f) Information about major customers

No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues (December 2014: Nil, June 2015: Nil).

20

EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

7. Bank facility and borrowings

The Group fully complies with and operates within the financial covenants under the arrangements with its bankers. At 31 December 2015 the Group had unutilised term and revolving cash advance facilities of $87.7m (December 2014: $89.6m, June 2015: $91.7m).

The Group also has a trade debtor securitisation facility of which $182.7m was unutilised at 31 December 2015 (December 2014: $226.3m, June 2015: $277.7m).

As at 31 December 2015 the maturity profile of the Group’s term debt, working capital and securitisation facilities was:

Facility Amount Maturity Working capital facilities $90.4m July 2016 Term debt facilities $77.6m August 2016 Term debt facilities $93.0m August 2018 Term debt facilities $93.5m August 2019 Securitisation facility $410.4m July 2017

Subsequent to 31 December 2015 the Group entered into an agreement to extend the maturity date of the Securitisation facility to September 2018 and increase the facility limit by $42.6m to $453m.

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 flow 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 profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as cashflow hedges of highly probable forecast transactions.

21

EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

8. Financial instruments (continued)

Six months 31 Dec 14 $’000 (Unaudited) Year ended 30 Jun 15 $’000 (Audited) Six months 31 Dec 15 $’000 (Unaudited) ~~Fair value of derivative fnancial instruments~~ Other fnancial assets – derivatives: Foreign currency forward exchange contracts 468 1,761 2,184 468 1,761 2,184 Other fnancial liabilities – derivatives: Foreign currency forward exchange contracts (1,103) (30) - Interest rate swaps (5,535) (4,510) (6,047) (6,638) (4,540) (6,047)

The Group has categorised these derivatives, both financial assets and financial 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 cashflow 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 cashflow valuation. Key inputs for the valuation of interest rate swaps are the estimated future cash flows based on observable yield curves at the end of the reporting period, discounted at a rate that reflects 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 2015 no balances were owing to or from related parties of EBOS Group Limited (December 2014: Nil, June 2015: Nil).

No amounts owed to related parties have been written off or forgiven during the period.

22

EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

10. Events after balance date

Subsequent to 31 December 2015, the Board approved an interim dividend to shareholders. For further details please refer to Note 4.

Subsequent to 31 December 2015, the Group renegotiated the maturity date and facility limit of the Securitisation facility. For further details please refer to Note 7.

11. Acquisition of subsidiaries

The following material acquisitions of subsidiaries took place during the period.

On 30 November 2015 the Group acquired the business operations of Red Seal Natural Health Limited (‘Red Seal’). Details of the acquisition are as follows:

Assets and liabilities acquired:

Carrying Value $’000 (Unaudited) Fair value adjustment $’000 (Unaudited) Fair value on acquisition $’000 (Unaudited) ~~Current assets~~ Trade and other receivables 4,033 (136)1 3,897 Inventories 6,333 (400)2 5,933 ~~Non-current assets~~ Property, plant and equipment 1,492 2163 1,708 Indefnite life intangibles - 16,0004 16,000 ~~Current liabilities~~ Trade and other payables (3,929) (738)5 (4,667) Employee benefts (316) - (316) Finance lease - (394)6 (394) ~~Non-current liabilities~~ Deferred tax liabilities - (4,231)7 (4,231) Net assets acquired 7,613 10,317 17,930

23

EBOS Group Limited Interim Report 2016

(Continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

11. Acquisition of subsidiaries (continued)

		Fair value	Fair value on
	Carrying Value	adjustment	acquisition
	$’000	$’000	$’000
	(Unaudited)	(Unaudited)	(Unaudited)
Goodwill on acquisition			62,337
Total consideration			80,267
Deferred purchase consideration			(267)
Net cash (outfow) on acquisition			(80,000)

1. To recognise the fair value of trade and other receivables expected to be received on acquisition.

2. To recognise the fair value of inventory acquired on acquisition.

3. To recognise additional net property, plant and equipment assets identified on acquisition.

4. To recognise the ‘Red Seal’ brand as a result of a valuation performed at acquisition.

5. To recognise additional liabilities identified on acquisition.

6. To recognise a finance lease arrangement in place on acquisition.

7. To recognise additional deferred tax liability balances incurred on acquisition.

Goodwill arising on acquisition

Goodwill arose on the acquisition of the business operations of Red Seal because the cost of acquisition included a control premium paid. In addition, the consideration paid for the benefit of future expected cash flows above the current fair value of the assets acquired and the expected synergies and future market benefits expected to be obtained. These benefits are not recognised separately from goodwill as the expected future economic benefits arising cannot be reliably measured and they do not meet the definition of identifiable intangible assets.

Red Seal was acquired as it is a profitable healthcare business which the Group believes fits strategically with its Australasian Retail Services business assets.

Impact of the acquisition on the results of the Group

Red Seal contributed $248,000 to the Group profit for the period. Group revenue for the period includes $3,314,000 in respect of Red Seal. Had the Red Seal acquisition been effective at 1 July 2015, the revenue of the Group from continuing operations would have been $3,397,779,000 and the profit for the period from continuing operations would have been $65,704,000.

24

EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

11. Acquisition of subsidiaries (continued)

During the current period the Group also acquired 100% control over the issued capital of Nexus Australasia Pty Ltd for $5.4m. The financial impact of this acquisition is considered to be immaterial for financial reporting purposes.

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:

Carrying Value $’000 (Unaudited) Fair value adjustment $’000 (Unaudited) Fair value on acquisition $’000 (Unaudited) ~~Current assets~~ Cash and cash equivalents 1,119 - 1,119 Trade and other receivables 4,297 - 4,297 Prepayments 6 - 6 Inventories 305 - 305 ~~Non-current assets~~ Property, plant and equipment 412 - 412 Indefnite life intangibles - 21,3871 21,387 Deferred tax assets - 3,0712 3,071 ~~Current liabilities~~ Trade and other payables (1,310) (361)3 (1,671) Employee benefts (53) - (53) Taxation payable (1,485) - (1,485) ~~Non-current liabilities~~ Deferred tax liabilities - (6,380)2 (6,380) Net assets acquired 3,291 17,717 21,008 Goodwill on acquisition 43,152 Total consideration 64,160 Less cash and cash equivalents acquired (1,119) Deferred purchase consideration (5,627) Net cash (outfow) on acquisition (57,414)

25

EBOS Group Limited Interim Report 2016

(continued) Notes to the condensed consolidated interim financial statements

For the six months ended 31 December 2015

11. Acquisition of subsidiaries (continued)

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

2. To recognise additional deferred tax liabilities incurred.

3. To recognise additional liabilities identified as part of the acquisition.

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 benefit of future expected cash flows above the current fair value of the assets acquired and the expected synergies and future market benefits expected to be obtained. These benefits are not recognised separately from goodwill as the expected future economic benefits arising cannot be reliably measured and they do not meet the definition of identifiable intangible assets.

Blackhawk was acquired as it is a profitable premium animal food supply business which the Group believes fits strategically with its Animal care business assets.

Impact of the acquisition on the results of the Group for the period ended 31 December 2014

Blackhawk contributed $874,000 to the Group profit for the period. Group revenue for that period included $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 profit for the period from continuing operations would have been $55,400,000.

Directory

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