EBOS GROUP LIMITED — Interim / Quarterly Report 2018

Mar 26, 2018

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EBOS Group Interim Report

31 DECEMBER 2017

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EBOS Group has delivered record first half earnings, demonstrating the benefits of a diverse portfolio of Healthcare and Animal Care businesses in Australia and New Zealand.

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Anita Ray, Production Operator, DoseAid

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Aarefa Mohamed, Pharmacist, TerryWhite Chemmart

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Half year 2018 at a glance

FINANCIAL HIGHLIGHTS

+ $3.9 billion revenue

+ $138.5 million EBITDA +15.6% increase

+ $76.7 million net profit after tax +11.5% increase

+ 50.4 cents earnings per share +11.0% increase

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

FIVE YEAR EBITDA TREND

For the six months ended 31 December ($millions)

2017		138.5
2016	119.9
2015	113.7
2014	100.3
2013	94.8

FIVE YEAR REVENUE TREND

For the six months ended 31 December ($millions)

2017		3,943
2016		3,960
2015	3,380
2014	3,120
2013	3,000

FIVE YEAR NPAT TREND (attributable to shareholders)

For the six months ended 31 December ($millions)

2017			76.7
2016		68.8
2015		64.2
2014	53.9
2013	49.4

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Dear Shareholder

Segment & Divisional Earnings Overview

86% 14% Healthcare Animal Care

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14%

Animal Care

49%

Pharmacy (Wholesale and Retail)

5%

Consumer Products

7%

Contract Logistics

25%

Institutional Healthcare

It is with great pleasure that we provide you with the interim report on our financial results for the six months to 31 December 2017, which has once again demonstrated the benefits of a diverse portfolio of Healthcare and Animal Care businesses in Australia and New Zealand.

The highlights of the six months included:

• HPS fully transitioning into the Group, further expanding our leading position in the Institutional Healthcare market;

• a strong performance from our key Animal Care brand, Black Hawk, including the launch of this brand into the New Zealand market;

• acquiring a strategic 14.1% shareholding in MedAdvisor Ltd, Australia’s leading digital medication management company;

• strong domestic sales growth in our Red Seal consumer products business; and

• excellent progress on our major capital projects in Australia with these projects remaining on-track and budget.

The Group generated revenue for the half-year of $3.9 billion, in line with the same period last year.

Our reported earnings before net finance costs, tax, depreciation and amortisation (EBITDA) increased by 15.6% to $138.5 million with Healthcare up by 12.5% and Animal Care up by 15.3%.

Net Profit after Tax (NPAT) increased to $76.7 million, representing an increase of 11.5% on the prior half-year. Earnings per share increased by 11.0% to 50.4 cents.

The reported financial results were positively impacted by the weaker NZD/AUD exchange rate and, on a constant currency basis, EBITDA grew by 11.7% and NPAT grew by 7.8%.

INTERIM DIVIDEND INCREASE

Your Directors declared an interim dividend of 33 cents per share, an increase of 10% on the prior corresponding period. The interim dividend will be once again imputed to 25% for New Zealand resident shareholders and fully franked for Australian resident shareholders. The record date for the dividend is 16 March 2018 and the dividend will be paid on 6 April 2018.

HEALTHCARE

Our Healthcare businesses continued to deliver strong EBITDA growth of 12.5%, which was assisted by a full six month contribution from HPS which was acquired in June 2017.

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In the Australian pharmacy market, revenue growth (excluding hepatitis C medicines and acquisitions) of +1.9% was moderate due to the on-going impact of PBS reforms. Sales in the non-prescription over-the-counter (OTC) channel were flat compared to the prior corresponding period.

EBOS Group maintained its market leading positions in both the Australian and New Zealand Institutional Healthcare markets delivering further earnings growth. Total revenue declined 8.1% (constant currency basis) driven by lower hepatitis C medicines sales. Excluding sales of hepatitis C medicines and acquisitions, underlying revenue growth was +2.2%.

The New Zealand Healthcare operations again delivered a solid performance over the period with revenue increasing 5.1% and EBITDA increasing 7.5% with growth across all NZ business units.

The Group’s Consumer Products division recorded solid revenue growth (+7.7% year on year), principally driven by Red Seal’s strong domestic performance in toothpastes, teas and supplements.

ANIMAL CARE

The Animal Care segment recorded 15.3% EBITDA growth (+11.7% constant currency basis) for the period as the business continues to benefit from excellent growth in our branded products, with first-half sales of Black Hawk in Australia up 26% from last year.

Black Hawk today is Australia’s fastest growing premium pet food brand with a leading market position in the pet specialty retail channel.

In another exciting development for the business, Black Hawk was launched into the New Zealand market in July 2017 and has gained strong acceptance from both specialty retailers and veterinary clinics.

INVESTMENT IN OPERATIONS

We are committed to investing in our warehousing and distribution facilities to better service our customers. Capital expenditure for the period was $31.5 million, with $17.0 million spent on the new highly automated distribution facility in Brisbane, Queensland and $4.5 million on the new contract logistics facility in Sydney, New South Wales. Additional capital expenditure will be incurred in the second half on these major projects, with total spend on these two projects alone in FY18 estimated at $43 million.

OPERATING CASH FLOW, NET DEBT AND RETURN ON CAPITAL EMPLOYED

Record first half operating cash flow of $101.7 million was achieved and is a significant increase on the prior corresponding period (+$53.8 million). The Group’s Net Debt/EBITDA ratio at 31 December 2017 of 1.76x is in line with the level recorded at June 2017.

Return on Capital Employed of 16.1% was in line with the prior year.

OUTLOOK

EBOS Group has recorded a strong start to the first half of the financial year across both our Healthcare and Animal Care segments.

We expect constant currency, underlying EBITDA for the 2018 financial year to grow by approximately 10% on the prior year.

LEADERSHIP TRANSITION

As announced on 13 December 2017, Patrick Davies has advised he is stepping down as Group Chief Executive Officer and will be succeeded by John Cullity, currently the Chief Financial Officer of the Group, effective 31 March 2018. Patrick has made an outstanding contribution to EBOS, and hands over the leadership to John with the business occupying enviable market positions, and well placed to continue to grow and deliver on our strategy.

We look forward to delivering you the full financial year performance of the Group under the leadership of incoming CEO John Cullity and we appreciate your ongoing support.

Patrick Davies Chief Executive Officer

Mark Waller Chairman of Directors

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Financial Statements

Summary of consolidated fnancial highlights	9
Shareholder calendar	9
Condensed consolidated income statement	10
Condensed consolidated statement of comprehensive income	11
Condensed consolidated statement of changes in equity	12
Condensed consolidated balance sheet	14
Condensed consolidated cash fow statement	16
Notes to the condensed consolidated interim fnancial statements	17
Auditor’s review report	26
Directory	27

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	Six months	Six months	Year ended
	31 Dec 17	31 Dec 16	30 Jun 17
	$’000	$’000	$’000
	(Unaudited)	(Unaudited)	(Audited)
Revenue	3,942,661	3,960,204	7,625,854
Earnings before net fnance costs, tax expense, depreciation
and amortisation (EBITDA)	138,517	119,868	234,427
Earnings before interest and tax expense (EBIT)	121,241	107,534	208,593
Proft before income tax expense	110,506	98,602	189,568
Proft for the period	77,450	69,269	132,846
Proft for the period attributable to owners of the Company	76,670	68,785	133,279
Equity attributable to owners of the Company	1,171,354	1,108,190	1,132,070
Earnings per share	50.4c	45.4c	87.8c
Interim dividend per share	33.0c	30.0c	30.0c

Shareholder calendar

Interim dividend record date	16 March 2018
Interim dividend payable	6 April 2018
Release of 2018 full year results	23 August 2018
Annual Meeting	16 October 2018

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Financial Statements

Condensed consolidated income statement

Condensed consolidated income statement
For the six months ended 31 December 2017		Six months	Six months	Year ended
		31 Dec 17	31 Dec 16	30 Jun 17
		$’000	$’000	$’000
	Notes	(Unaudited)	(Unaudited)	(Audited)
Revenue	2(a)	3,942,661	3,960,204	7,625,854
Income from associates		2,088	1,948	4,062
Proft before depreciation, amortisation, net fnance costs
and income tax expense		138,517	119,868	234,427
Depreciation	2(b)	(8,906)	(6,519)	(13,616)
Amortisation of fnite life intangibles	2(b)	(8,370)	(5,815)	(12,218)
Proft before net fnance costs and income tax expense		121,241	107,534	208,593
Finance income		986	1,219	2,079
Finance costs		(11,721)	(10,151)	(21,104)
Proft before income tax expense		110,506	98,602	189,568
Income tax expense		(33,056)	(29,333)	(56,722)
Proft for the period		77,450	69,269	132,846
Proft for the period attributable to:
Owners of the Company		76,670	68,785	133,279
Non-controlling interests		780	484	(433)
		77,450	69,269	132,846
Earnings per share
Basic (cents per share)		50.4	45.4	87.8
Diluted (cents per share)		50.4	45.4	87.8

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Condensed consolidated statement of comprehensive income

For the six months ended 31 December 2017	Six months Six months	Year ended
	31 Dec 17 31 Dec 16	30 Jun 17
	$’000 $’000	$’000
	(Unaudited) (Unaudited)	(Audited)
Proft for the period	77,450 69,269	132,846
Other comprehensive income
Items that may be reclassifed subsequently to proft or loss:
Cash fow hedge gains	968 5,074	5,675
Related income tax	(276) (1,470)	(1,653)
Net fair value movement on available-for-sale fnancial assets	(1,769) -	-
Translation of foreign operations	13,669 (2,270)	1,947
Total comprehensive income net of tax	90,042 70,603	138,815
Total comprehensive income for the period is attributable to:
Owners of the Company	89,262 70,119	139,248
Non-controlling interests	780 484	(433)
	90,042 70,603	138,815

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Condensed consolidated statement of changes in equity

For the six months ended 31 December	2017		Share	Foreign		Cash	Available-
			based	currency		fow	for-sale	Non-
		Share	payments	translation	Retained	hedge	revaluation	controlling
		capital	reserve	reserve	earnings	reserve	reserve	interests	Total
	Notes	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Six months ended
31 December 2016 (unaudited):
Opening balance		888,513	-	(36,761)	239,578	(4,053)	-	-	1,087,277
Proft for the period		-	-	-	68,785	-	-	484	69,269
Other comprehensive income
for the period, net of tax		-	-	(2,270)	-	3,604	-	-	1,334
Payment of dividends	4	-	-	-	(49,371)	-	-	-	(49,371)
Arising on acquisition of subsidiaries		-	-	-	-	-	-	20,303	20,303
Share based payments		-	165	-	-	-	-	-	165
Efect of exchange rate fuctuations		-	-	-	-	-	-	(412)	(412)
Balance at 31 December 2016		888,513	165	(39,031)	258,992	(449)	-	20,375	1,128,565
Year ended 30 June 2017 (audited): Opening balance Proft for the year Other comprehensive income for the year, net of tax Payment of dividends Arising on acquisition of subsidiaries Share based payments Efect of exchange rate fuctuations	4	888,513 - - - - - -	- - - - - 490 -	(36,761) - 1,947 - - - -	239,578 133,279 - (94,945) - - -	(4,053) - 4,022 - - - -	- - - - - - -	- (433) - - 20,936 - (175)	1,087,277 132,846 5,969 (94,945) 20,936 490 (175)
Balance at 30 June 2017		888,513	490	(34,814)	277,912	(31)	-	20,328	1,152,398

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Notes Share capital $’000 Share based payments reserve $’000 Foreign currency translation reserve $’000 Retained earnings $’000 Cash fow hedge reserve $’000 Available- for-sale revaluation reserve $’000 Non- controlling interests $’000 Total $’000 Six months ended 31 December 2017 (unaudited): Opening balance 888,513 490 (34,814) 277,912 (31) - 20,328 1,152,398 Proft for the period - - - 76,670 - - 780 77,450 Other comprehensive income for the period, net of tax - - 13,669 - 692 (1,769) - 12,592 Payment of dividends 4 - - - (50,338) - - - (50,338) Share based payments - 360 - - - - - 360 Efect of exchange rate fuctuations - - - - - - 931 931 Balance at 31 December 2017 888,513 850 (21,145) 304,244 661 (1,769) 22,039 1,193,393

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Condensed consolidated balance sheet

As at 31 December 2017		31 Dec 17	31 Dec 16	30 Jun 17
		$’000	$’000	$’000
	Notes	(Unaudited)	(Unaudited)	(Audited)
Current assets
Cash and cash equivalents		142,847	175,679	162,181
Trade and other receivables		1,053,601	1,134,832	1,041,849
Prepayments		9,435	9,093	7,834
Inventories		621,314	596,174	572,001
Current tax refundable		3,965	83	168
Other fnancial assets – derivatives	8	253	576	19
Total current assets		1,831,415	1,916,437	1,784,052
Non-current assets
Property, plant and equipment		120,324	106,914	115,876
Capital work in progress		45,225	8,303	22,923
Prepayments		4	209	9
Deferred tax assets		48,097	43,730	49,263
Goodwill		1,008,595	859,858	1,000,050
Indefnite life intangibles		129,245	107,316	115,940
Finite life intangibles		71,555	56,263	80,084
Investment in associates		38,209	34,480	36,455
Other fnancial assets		10,643	-	922
Total non-current assets		1,471,897	1,217,073	1,421,522
Total assets		3,303,312	3,133,510	3,205,574

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Notes 31 Dec 17 $’000 (Unaudited) 31 Dec 16 $’000 (Unaudited) 30 Jun 17 $’000 (Audited) Current liabilities Trade and other payables 1,384,159 1,424,184 1,327,757 Finance leases 25 118 72 Bank loans 7 229,321 188,866 155,857 Current tax payable 21,260 12,862 14,209 Employee benefts 40,001 34,134 40,971 Other fnancial liabilities – derivatives 8 2,262 4,154 2,995 Total current liabilities 1,677,028 1,664,318 1,541,861 Non-current liabilities Bank loans 7 360,883 274,778 440,847 Trade and other payables 13,035 14,297 13,837 Deferred tax liabilities 52,588 46,622 50,783 Finance leases 96 - 103 Employee benefts 6,289 4,930 5,745 Total non-current liabilities 432,891 340,627 511,315 Total liabilities 2,109,919 2,004,945 2,053,176 Net assets 1,193,393 1,128,565 1,152,398 Equity Share capital 3 888,513 888,513 888,513 Share based payments reserve 850 165 490 Foreign currency translation reserve (21,145) (39,031) (34,814) Retained earnings 304,244 258,992 277,912 Cash fow hedge reserve 661 (449) (31) Available-for-sale revaluation reserve (1,769) - - Equity attributable to owners of the company 1,171,354 1,108,190 1,132,070 Non-controlling interests 22,039 20,375 20,328 Total equity 1,193,393 1,128,565 1,152,398

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For the six months ended 31 December 2017		Six months	Six months	Year ended
		31 Dec 17	31 Dec 16	30 Jun 17
		$’000	$’000	$’000
	Notes	(Unaudited)	(Unaudited)	(Audited)
Cash fows from operating activities
Receipts from customers		4,006,609	4,146,399	7,922,392
Interest received		986	1,219	2,079
Dividends received from associates		703	682	913
Payments to suppliers and employees		(3,864,286)	(4,053,068)	(7,694,957)
Taxes paid		(30,595)	(37,218)	(65,380)
Interest paid		(11,721)	(10,151)	(21,104)
Net cash infow from operating activities	5	101,696	47,863	143,943
Cash fows from investing activities
Sale of property, plant & equipment		87	45	150
Purchase of property, plant & equipment		(9,505)	(13,471)	(13,507)
Payments for capital work in progress		(21,505)	(1,852)	(22,923)
Payments for intangible assets		(620)	(670)	(1,164)
Acquisition of subsidiaries		(1,449)	(11,961)	(183,228)
Investment in other fnancial assets		(11,797)	-	(879)
Net cash (outfow) from investing activities		(44,789)	(27,909)	(221,551)
Cash fows from fnancing activities
Proceeds from borrowings		-	85,848	224,456
Repayment of borrowings		(32,493)	-	(10,357)
Dividends paid to equity holders of parent	4	(50,338)	(49,371)	(94,945)
Net cash (outfow)/infow from fnancing activities		(82,831)	36,477	119,154
Net (decrease)/increase in cash held		(25,924)	56,431	41,546
Efect of exchange rate fuctuations on cash held during the period		6,590	(1,003)	384
Net cash and cash equivalents at beginning of period		162,181	120,251	120,251
Net cash and cash equivalents at end of period		142,847	175,679	162,181

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For the six months ended 31 December 2017

1. Financial Statements

These unaudited condensed consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Practice (“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 2017. 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 2017. The information is presented in thousands of New Zealand dollars unless otherwise stated.

2. Profit from Operations

	Six months	Six months	Year ended
	31 Dec 17	31 Dec 16	30 Jun 17
	$’000	$’000	$’000
	(Unaudited)	(Unaudited)	(Audited)
(a) Revenue
Revenue from the sale of goods	3,826,677	3,890,309	7,471,918
Revenue from the rendering of services	115,984	69,895	153,936
	3,942,661	3,960,204	7,625,854
(b) Proft before income tax expense

(b) Proft before income tax expense
Proft before income tax has been arrived at after charging the following
expenses by nature:
Cost of sales	(3,507,129)	(3,593,238)	(6,872,190)
Write-down of inventory	(712)	(2,842)	(8,387)
Impairment on trade & other receivables	(572)	(465)	(2,758)
Depreciation of property, plant & equipment	(8,906)	(6,519)	(13,616)
Amortisation of fnite life intangibles	(8,370)	(5,815)	(12,218)
Operating lease rental expenses	(20,896)	(16,038)	(35,125)
Donations	(25)	(17)	(49)
Employee beneft expense	(149,934)	(119,025)	(245,813)
Defned contribution plan expense	(8,152)	(6,448)	(14,653)
Other expenses	(118,827)	(104,213)	(216,017)
Total expenses	(3,823,523)	(3,854,620)	(7,420,826)

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(continued)

For the six months ended 31 December 2017

1. Share Capital

3. Share Capital
		Six months		Six months		Year ended
		31 Dec 17		31 Dec 16		30 Jun 17
	No.	$’000	No.	$’000	No.	$’000
	‘000	(Unaudited)	‘000	(Unaudited)	‘000	(Audited)
Fully paid ordinary shares
Balance at beginning of period	151,914	888,513	151,314	888,513	151,314	888,513
Shares issued – September 2016	-	-	600	-	600	-
– September 2017	625	-	-	-	-	-
	152,539	888,513	151,914	888,513	151,914	888,513

1. Dividends

		Six months	Six months		Year ended
		31 Dec 17	31 Dec 16		30 Jun 17
	Cents	$’000 Cents	$’000	Cents	$’000
	per share	(Unaudited) per share	(Unaudited)	per share	(Audited)
Recognised amounts
Fully paid ordinary shares
Final – prior year	33.0	50,338 32.5	49,371	32.5	49,371
Interim – current year	-	- -	-	30.0	45,574
	33.0	50,338 32.5	49,371	62.5	94,945
Unrecognised amounts
Final dividend	-	- -	-	33.0	50,132
Interim dividend	33.0	50,338 30.0	45,574	-	-
	33.0	50,338 30.0	45,574	33.0	50,132

The Board approved an interim dividend of 33.0 cents per share on 20 February 2018. The record date for the dividend is 16 March 2018 and the dividend will be paid on 6 April 2018.

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1. Notes to the Cash Flow Statement

5. Notes to the Cash Flow Statement
Six months	Six months	Year ended
31 Dec 17	31 Dec 16	30 Jun 17
$’000	$’000	$’000
(Unaudited)	(Unaudited)	(Audited)
Reconciliation of proft for the period with cash fows from operating activities Proft for the period 77,450	69,269	132,846
Add/(less) non-cash items: Depreciation of property, plant and equipment 8,906	6,519	13,616
Amortisation of fnite life intangibles 8,370	5,815	12,218
(Gain)/loss on sale of property, plant & equipment (15)	(2)	497
Income from associates (2,088)	(1,948)	(4,062)
Expense recognised in respect of share based payments 360	165	490
Deferred tax (175)	(1,816)	(2,462)
15,358	8,733	20,297
Movements in working capital: Trade and other receivables (11,752)	185,555	278,538
Prepayments (1,596)	(834)	626
Inventories (49,313)	(17,661)	6,512
Current tax refundable/(payable) 3,254	(5,341)	(4,079)
Trade and other payables 55,600	(186,056)	(282,943)
Provision for employee benefts (426)	(1,215)	6,436
Foreign currency translation of opening working capital balances 13,866	(3,316)	608
9,633	(28,868)	5,698
Working capital items relating to investing activities (745)	682	(2,466)
Working capital items acquired on acquisition -	(1,953)	(12,432)
Net cash infow from operating activities 101,696	47,863	143,943

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(continued)

For the six months ended 31 December 2017

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 either 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:

Six months	Six months	Year ended
31 Dec 17	31 Dec 16	30 Jun 17
$’000	$’000	$’000
(Unaudited)	(Unaudited)	(Audited)
Revenue from external customers Healthcare 3,734,719	3,744,059	7,202,688
Animal Care 207,942	216,145	423,166
3,942,661	3,960,204	7,625,854
Segment result (EBITDA) Healthcare 120,004	106,659	208,782
Animal Care 24,342	21,115	44,712
Corporate (5,829)	(7,906)	(19,067)
138,517	119,868	234,427

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Segment expenses Healthcare: Depreciation of property, plant and equipment (8,176) (5,970) (12,562) Amortisation of fnite life intangibles (7,047) (4,591) (9,719) Income tax expense (31,686) (28,909) (53,762) (46,909) (39,470) (76,043) Animal Care: Depreciation of property, plant and equipment (517) (549) (1,054) Amortisation of fnite life intangibles (1,323) (1,224) (2,499) Income tax expense (6,296) (5,317) (11,206) (8,136) (7,090) (14,759) Corporate: Depreciation of property, plant and equipment (213) - - Net fnance costs (10,735) (8,932) (19,025) Income tax credit 4,926 4,893 8,246 (6,022) (4,039) (10,779) Proft for the period Healthcare 73,095 67,189 132,739 Animal Care 16,206 14,025 29,953 Corporate (11,851) (11,945) (29,846) 77,450 69,269 132,846 Six months 31 Dec 17 $’000 (Unaudited) Six months 31 Dec 16 $’000 (Unaudited) Year ended 30 Jun 17 $’000 (Audited)

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(continued)

For the six months ended 31 December 2017

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, investments in associates and deferred tax assets) are detailed below:

	Six months	Six months	Year ended
	31 Dec 17	31 Dec 16	30 Jun 17
	$’000	$’000	$’000
	(Unaudited)	(Unaudited)	(Audited)
Revenue from external customers
New Zealand	791,880	761,251	1,509,094
Australia	3,150,781	3,198,953	6,116,760
	3,942,661	3,960,204	7,625,854
Non-current assets
New Zealand	290,560	286,278	286,837
Australia	1,095,031	852,585	1,048,967
	1,385,591	1,138,863	1,335,804

(f) Information about major customers

No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues (December 2016: Nil, June 2017: Nil).

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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 2017 the Group had unutilised term facilities of $13.3m (December 2016: $86.3m, June 2017: $8.7m).

The Group also has a trade debtor securitisation facility of which $323.3m was unutilised at 31 December 2017 (December 2016: $255.1m, June 2017: $292.0m).

As at 31 December 2017, the maturity profile of the Group’s term debt and securitisation facilities was:

Facility Amount Maturity Term debt facilities $95.4m Within the next 12 months Term debt facilities $273.4m 1-2 years Term debt facilities $35.9m 2-3 years Term debt facilities $55.0m 3-4 years Securitisation facility $467.2m Within the next 12 months

24

(continued)

For the six months ended 31 December 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 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.

Six months	Six months	Year ended
31 Dec 17	31 Dec 16	30 Jun 17
$’000	$’000	$’000
Fair value of derivative fnancial instruments (Unaudited)	(Unaudited)	(Audited)
Other fnancial assets – derivatives: Foreign currency forward exchange contracts 219	576	19
Interest rate swaps 34	-	-
253	576	19
Other fnancial liabilities – derivatives: Foreign currency forward exchange contracts (192)	(132)	(428)
Interest rate swaps (2,070)	(4,022)	(2,567)
(2,262)	(4,154)	(2,995)

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.

During the period, on 24 October 2017, the group acquired a 14.1% equity interest in Medadvisor Ltd (ASX:MDR) for $11.8m. This investment has been classified as an available for sale financial instrument and has been valued using level 1 under the fair value hierarchy, therefore using the listed share price to determine fair value at the reporting date.

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

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9. Acquisition Information

The Group acquired a 100% equity interest in Alchemy Holdings Pty Ltd in June 2017. Due to the timing of the acquisition the acquisition accounting fair value adjustments were identified as being on a provisional basis in the Group’s 30 June 2017 financial statements.

During the current period, the acquisition accounting adjustments have been updated to reflect independent valuations performed on the net assets recognised as part of the acquisition. As a result, the following adjustments have been recognised in the current period: an increase in indefinite life intangible assets ($9.5m), a decrease in finite life intangible assets ($4.8m) and an increase in deferred tax liabilities ($2.7m). Consequently the goodwill recognised on the acquisition has decreased by $2.0m to $128.3m.

10. Events after Balance Date

Subsequent to 31 December 2017, the Board approved an interim dividend to shareholders. For further details please refer to Note 4.

In January 2018, the Group entered into a new three year securitisation facility (A$400m) which expires in January 2021.

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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 2017, and the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six months ended on that date, and a summary of significant accounting policies and other explanatory information on pages 10 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 auditor and the provision of advisory services we have no relationship with or interests in EBOS Group Limited or its subsidiaries.

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 2017 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.

Chartered Accountants,

20 February 2018 Christchurch, New Zealand

27

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 7, 737 Bourke Street Docklands Melbourne 3008 Australia Telephone +61 3 9918 5555

DIRECTORS

Mark Waller (Chairman) Elizabeth Coutts (Independent Director) Stuart McGregor Sarah Ottrey (Independent Director) Peter Williams

SHARE REGISTER

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

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