EBOS GROUP LIMITED — Interim / Quarterly Report 2020

Feb 19, 2020

EBOS GROUP LIMITED

INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

EBOS GROUP LIMITED INTERIM REPORT 2020

CONTENTS	Page
Summary of Consolidated Financial Highlights	1
Shareholder Calendar	1
Auditor’s Independent Review Report	2
Condensed Consolidated Income Statement	3
Condensed Consolidated Statement of Comprehensive Income	4
Condensed Consolidated Statement of Changes in Equity	5
Condensed Consolidated Balance Sheet	8
Condensed Consolidated Cash Flow Statement	9
Notes to the Condensed Consolidated Interim Financial Statements	10
Directory	22

EBOS GROUP LIMITED

INTERIM REPORT 2020

SUMMARY OF CONSOLIDATED FINANCIAL HIGHLIGHTS

Six months 31 Dec 19 A$’000 (unaudited) Six months 31 Dec 18 A$’000 (unaudited)

Year ended 30 Jun 19 A$’000 (audited)

Revenue 4,376,127 3,496,498 Profit before net finance costs, tax expense, depreciation and amortisation (EBITDA) 167,205 122,566 Earnings before interest and income tax expense (EBIT) 131,355 107,318 Profit before income tax expense 115,928 94,962 Profit for the period 81,922 67,238 Profit for the period attributable to owners of the Company 81,680 67,045 Equity attributable to owners of the Company 1,284,757 1,053,285 Earnings per share 50.6c 44.1c Interim dividend per share (New Zealand dollars) 37.5c 34.5c

6,930,360 250,410 218,349 193,015 136,727 137,700 1,242,331 89.8c 34.5c

SHAREHOLDER CALENDAR

Interim dividend record date Interim dividend payable Release of 2020 full year results Annual General Meeting

13 March 2020 3 April 2020 20 August 2020 13 October 2020

1

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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 2019, 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 3 to 21.

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.

Our firm carries out other assignments for the Group in the area of taxation advice. These services have not impaired our independence as auditor of the Group. In addition to this, partners and employees of our firm deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. The firm has no other relationship with, or interest in, 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 2019 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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19 February 2020 Christchurch, New Zealand

2

EBOS GROUP LIMITED CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 December 2019

Notes Revenue 2(a) Income from associates Profit before depreciation, amortisation, net finance costs and income tax expense Depreciation 2(b) Amortisation of finite life intangibles 2(b) Profit before net finance costs and income tax expense Finance income Finance costs – borrowings Finance costs – leases 9 Profit before income tax expense Income tax expense Profit for theperiod Profit for the period attributable to: Owners of the Company Non-controllinginterests Earnings per share Basic (cents per share) Diluted (cents per share)	Six months 31 Dec 19 A$’000 (unaudited) 4,376,127 1,632 167,205 (27,619) (8,231) 131,355 761 (12,291) (3,897) 115,928 (34,006) 81,922 81,680 242 81,922 50.6 50.6	Six months 31 Dec 18 A$’000 (unaudited) 3,496,498 1,814 122,566 (7,490) (7,758) 107,318 942 (13,298) - 94,962 (27,724) 67,238 67,045 193 67,238 44.1 44.1	Year ended 30 Jun 19 A$’000 (audited)
			6,930,360 4,203 250,410 (16,438) (15,623)
			218,349 1,927 (27,261) -
			193,015 (56,288)
			136,727
			137,700 (973)
			136,727
			89.8 89.8

3

EBOS GROUP LIMITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2019

Profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss: Cash flow hedge (losses) Related income tax Movement in foreign currencytranslation reserve Items that will not be reclassified subsequently to profit or loss: Movement on equity instruments fair valued through other comprehensive income Total comprehensive income net of tax Total comprehensive income for the period is attributable to: Owners of the Company Non-controllinginterests	Six months 31 Dec 19 A$’000 (unaudited) 81,922 (218) 64 3,031 2,877 (2,778) 82,021 81,779 242 82,021	Six months 31 Dec 18 A$’000 (unaudited) 67,238 (2,158) 714 10,517 9,073 (2,593) 73,718 73,525 193 73,718	Year ended 30 Jun 19 A$’000 (audited)
			136,727 (9,432) 2,784 12,013
			5,365 370
			142,462
			143,435 (973)
			142,462

4

EBOS GROUP LIMITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 December 2019

Notes Six months ended 31 December 2018 (unaudited): Opening balance Profit for the period Other comprehensive income for the period, net of tax Payment of dividends 4 Share based payments Arising on acquisition of remaining non-controlling interest Transfer of non-controlling interest Balance at 31 December 2018	Share capital A$’000 763,636 - - - - - - 763,636	Share based payments reserve A$’000 2,144 - - - 882 - - 3,026	Foreign currency translation reserve A$’000 (22,805) - 10,517 - - - - (12,288)	Retained earnings A$’000 308,499 67,045 - (49,386) - - (23,228) 302,930	Cash flow hedge reserve A$’000 1,442 - (1,444) - - - - (2)	Equity instruments fair valued through other comprehensive income reserve A$’000 (1,424) - (2,593) - - - - (4,017)	Non- controlling interests A$’000 21,352 193 - - - (46,678) 23,228 (1,905)	Total A$’000
								1,072,844 67,238 6,480 (49,386) 882 (46,678) -
								1,051,380

5

EBOS GROUP LIMITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

For the six months ended 31 December 2019

Notes Year ended 30 June 2019 (audited): Opening balance Profit for the period Other comprehensive income for the period, net of tax Payment of dividends 4 Share based payments Dividends reinvested 3 Institutional placement 3 Share issue costs 3 Arising on acquisition of remaining non-controlling interest Transfer of non-controlling interest Balance at 30 June 2019	Share capital A$’000 763,636 - - - - 5,719 165,493 (3,037) - - 931,811	Share based payments reserve A$’000 2,144 - - - 1,793 - - - - - 3,937	Foreign currency translation reserve A$’000 (22,805) - 12,013 - - - - - - - (10,792)	Retained earnings A$’000 308,499 137,700 - (99,336) - - - - - (23,228) 323,635	Cash flow hedge reserve A$’000 1,442 - (6,648) - - - - - - - (5,206)	Equity instruments fair valued through other comprehensive income reserve A$’000 (1,424) - 370 - - - - - - - (1,054)	Non- controlling interests A$’000 21,352 (973) - - - - - - (46,678) 23,228 (3,071)	Total A$’000
								1,072,844 136,727 5,735 (99,336) 1,793 5,719 165,493 (3,037) (46,678) -
								1,239,260

6

EBOS GROUP LIMITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

For the six months ended 31 December 2019

Notes Six months ended 31 December 2019 (unaudited): Opening balance Profit for the period Other comprehensive income for the period, net of tax Payment of dividends 4 Share based payments Dividends reinvested 3 Employee shares exercised 3 Balance at 31 December 2019	Share capital A$’000 931,811 - - - - 9,301 6,353 947,465	Share based payments reserve A$’000 3,937 - - - 1,371 - - 5,308	Foreign currency translation reserve A$’000 (10,792) - 3,031 - - - - (7,761)	Retained earnings A$’000 323,635 81,680 - (56,378) - - - 348,937	Cash flow hedge reserve A$’000 (5,206) - (154) - - - - (5,360)	Equity instruments fair valued through other comprehensive income reserve A$’000 (1,054) - (2,778) - - - - (3,832)	Non- controlling interests A$’000 (3,071) 242 - - - - - (2,829)	Total A$’000
								1,239,260 81,922 99 (56,378) 1,371 9,301 6,353
								1,281,928

7

EBOS GROUP LIMITED CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 December 2019

Notes Current assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Current tax refundable Other financial assets – derivatives 8 Total current assets Non-current assets Property, plant and equipment Capital work in progress Prepayments Deferred tax assets Goodwill Indefinite life intangibles Finite life intangibles Right of use assets 9 Investment in associates Other financial assets Total non-current assets Total assets Current liabilities Trade and other payables Bank loans 7 Lease liabilities 9 Current tax payable Employee benefits Other financial liabilities – derivatives 8 Total current liabilities Non-current liabilities Bank loans 7 Lease liabilities 9 Trade and other payables Deferred tax liabilities Employee benefits Total non-current liabilities Total liabilities Net assets Equity Share capital 3 Share based payments reserve Foreign currency translation reserve Retained earnings Cash flow hedge reserve Equityinstruments fair valued through OCI Equityattributable to owners of the company Non-controllinginterests Total equity	31 Dec 19 A$’000 (unaudited) 274,420 1,107,458 12,496 728,726 13,774 - 2,136,874 172,992 12,343 517 125,712 966,763 123,856 41,870 228,408 42,607 7,008 1,722,076 3,858,950 1,458,159 202,189 34,737 20,375 35,071 10,324 1,760,855 464,209 205,999 3,355 135,715 6,889 816,167 2,577,022 1,281,928 947,465 5,308 (7,761) 348,937 (5,360) (3,832) 1,284,757 (2,829) 1,281,928	31 Dec 18 A$’000 (unaudited) 152,144 910,318 9,532 564,602 1,229 807 1,638,632 120,934 54,452 68 46,398 945,698 123,382 51,923 - 38,979 6,747 1,388,581 3,027,213 1,145,003 213,762 - 14,995 35,890 3,639 1,413,289 490,370 - 14,406 51,276 6,492 562,544 1,975,833 1,051,380 763,636 3,026 (12,288) 302,930 (2) (4,017) 1,053,285 (1,905) 1,051,380	30 Jun 19 A$’000 (audited)
			166,620 897,796 9,603 723,517 83 611
			1,798,230
			174,463 6,508 650 54,348 947,055 123,582 46,569 - 41,074 9,733
			1,403,982
			3,202,212
			1,288,319 168,307 - 12,883 40,805 10,717
			1,521,031
			364,038 - 13,941 57,330 6,612
			441,921
			1,962,952
			1,239,260
			931,811 3,937 (10,792) 323,635 (5,206) (1,054)
			1,242,331
			(3,071)
			1,239,260

8

EBOS GROUP LIMITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 December 2019

Notes Cash flows from operating activities Receipts from customers Interest received Dividends received from associates Payments to suppliers and employees Taxes paid Interestpaid Net cash inflow from operating activities 5 Cash flows from investing activities Sale of property, plant & equipment Purchase of property, plant & equipment Payments for capital work in progress Payments for intangible assets Acquisition of subsidiaries Investment in other financial assets Net cash (outflow) from investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities 9 Dividendspaid to equityholders ofparent 4 Net cash inflow from financing activities Net increase/(decrease) in cash held Effect of exchange rate fluctuations on cash held during the period Net cash and cash equivalents at beginningofperiod Net cash and cash equivalents at end ofperiod	Six months 31 Dec 19 A$’000 (unaudited) 4,204,450 761 315 (4,082,531) (32,579) (16,188) 74,228 346 (5,429) (6,018) (2,583) (30,261) - (43,945) 15,654 132,972 - (15,451) (55,508) 77,667 107,950 (150) 166,620 274,420	Six months 31 Dec 18 A$’000 (unaudited) 3,556,358 942 959 (3,479,059) (25,647) (13,298) 40,255 98 (11,189) (5,013) (795) (92,389) (110) (109,398) - 128,361 (9,169) - (50,138) 69,054 (89) 2,364 149,869 152,144	Year ended 30 Jun 19 A$’000 (audited)
			7,032,507 1,927 1,394 (6,834,753) (55,271) (27,261)
			118,543 7,703 (27,239) (5,735) (1,227) (93,445) (110)
			(120,053) 168,175 23,077 (74,955) - (99,932)
			16,365 14,855 1,896 149,869
			166,620

9

EBOS GROUP LIMITED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 31 December 2019

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. 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 2019.

Apart from the changes noted below in relation to the adoption of NZ IFRS 16 ‘Leases’ the accounting policies and methods of computation adopted are consistent with those of the previous year.

During the current period, effective from 1 July 2019, the Group has adopted NZ IFRS 16 which has had a material impact on these financial statements (refer to Note 9).

NZ IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. The distinction between operating leases (off balance sheet) and finance leases (on balance sheet) is removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet), except for short-term leases and leases of low-value assets.

The right-of-use asset is initially measured at cost, and subsequently measured at cost less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, among others.

Furthermore, the classification of cash flows will also be affected as operating lease payments under NZ IAS 17 ‘Leases’ are presented as operating cash flows; whereas under the NZ IFRS 16 model, the lease payments will be split into a principal and an interest portion, which will be presented as financing and operating cash flows respectively.

The Group has applied NZ IFRS 16 from 1 July 2019 using the modified retrospective full simplified transition method and the practical expedient that the right-to-use asset will match the lease liability. Comparative periods presented have not been restated in accordance with the transition method adopted.

Leases of less than 12 months duration and low value asset leases will continue to be recognised on a straight line basis.

The information is presented in thousands of Australian dollars unless otherwise stated.

10

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

2. PROFIT FROM OPERATIONS

(a)	Revenue Community Pharmacy Institutional Healthcare Contract Logistics Services Contract Logistics Sales Consumer Products Interdivisional eliminations Healthcare Animal Care	Six months 31 Dec 19 A$’000 (unaudited) 2,561,903 1,252,258 36,225 310,148 57,905 (52,935) 4,165,504 210,623 4,376,127	Six months 31 Dec 18 A$’000 (unaudited) 1,892,192 1,147,762 30,156 211,711 59,618 (37,247) 3,304,192 192,306 3,496,498	Year ended 30 Jun 19 A$’000 (audited)
				3,704,123 2,292,697 63,012 454,987 113,931 (80,434)
				6,548,316 382,044
				6,930,360

11

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

2. PROFIT FROM OPERATIONS (Continued)

(b)			Six months 31 Dec 19 A$’000 (unaudited) (1,240) (3,924,743) (1,976) (617) (9,480) (18,139) (8,231) (2,515) (45) (145,443) (8,578) (125,397) (4,246,404)	Six months 31 Dec 18 A$’000 (unaudited) (8,820) (3,090,157) (1,512) 671 (7,490) - (7,758) (21,513) (15) (139,397) (8,026) (106,977) (3,390,994)		Year ended 30 Jun 19 A$’000 (audited) (11,212) (6,121,500) (2,570) 341 (16,438) - (15,623) (42,796) (210) (283,024) (15,985) (207,197)
	Profit before income tax expense Profit before income tax has been arrived at after charging the following expenses by nature: One-off items (1) Cost of sales Write-down of inventory Impairment (loss)/gain on trade & other receivables Depreciation of property, plant & equipment Depreciation on right of use assets Amortisation of finite life intangibles Lease rental expenses Donations Employee benefit expense Defined contribution plan expense Other expenses Total expenses
						(6,716,214)

(1) One-off items comprise merger and acquisition costs (31 December 2019). One-off items comprise merger and acquisition costs, warehouse transition and restructuring costs incurred net of a $2.9m gain on the sale of excess land held (31 December 2018 and 30 June 2019).

3. SHARE CAPITAL

	No. ’000 161,708 - 415 - - - 162,123	Six months 31 Dec 19 A$’000 (unaudited) 931,811 - 9,301 - - 6,353 947,465	No. ’000 152,539 - - - - - 152,539	Six months 31 Dec 18 A$’000 (unaudited) 763,636 - - - - - 763,636	No. ’000 152,539 286 - 8,883 - - 161,708	Year ended 30 Jun 19 A$’000 (audited)
Fully paid ordinary shares Balance at beginning of period Dividend reinvested – April 2019 October 2019 Institutional placement – May 2019 Placement costs Shares vested under the long-term executive incentive scheme						763,636 5,719 - 165,493 (3,037) -
						931,811

12

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

4.	DIVIDENDS Recognised amounts Fully paid ordinary shares Final – prior year Interim dividend Unrecognised amounts Final dividend Interim dividend	AUD Six months 31 Dec 19 Cents per share A$’000 (unaudited) 35.0 56,378 - - 35.0 56,378 - - 36.1 58,468 36.1 58,468	AUD Six months 31 Dec 18 Cents per share A$’000 (unaudited) 32.4 49,057 - - 32.4 49,057 - - 32.8 50,100 32.8 50,100	AUD Year ended 30 Jun 19 Cents per share A$’000 (audited)
				32.4 49,057 33.2 50,279
				65.6 99,336
				35.4 57,205 - -
				35.4 57,205

Dividends are approved by the Board in New Zealand dollars. Dividends recognised in the Statement of Changes in Equity are converted from New Zealand dollars to Australian Dollars at the exchange rate applicable on the date the dividend was approved. Unrecognised dividends are converted at the exchange rate applicable on the reporting date. The Board approved an interim dividend of 37.5 New Zealand cents per share on 19 February 2020. The record date for the dividend is 13 March 2020 and the dividend will be paid on 3 April 2020.

The following table shows dividends approved in New Zealand dollars:

Recognised amounts Fully paid ordinary shares Final – prior year Interim dividend Unrecognised amounts Final dividend Interim dividend	NZD Cents per share 37.0 - 37.0 - 37.5 37.5	NZD Cents per share 35.5 - 35.5 - 34.5 34.5	NZD Cents per share
			35.5 34.5
			70.0
			37.0 -
			37.0

New Zealand dollar dividends paid to equity holders of the parent are translated into Australian dollars and disclosed in the cash flow statement at the foreign currency exchange rate applicable on the date they are paid.

13

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

5. NOTES TO THE CASH FLOW STATEMENT

Reconciliation of profit for the period with cash flows from operating activities Profit for the period Add/(less) non-cash items: Depreciation of property, plant & equipment Depreciation on right of use assets Amortisation of finite life intangibles Loss/(gain) on sale of property, plant & equipment Income from associates Expense recognised in respect of share based payments Deferred tax Movements in working capital: Trade and other receivables Prepayments Inventories Current tax refundable/(payable) Trade and other payables Provision for employee benefits Foreign currency translation of opening working capital balances Balances classified as investing activities Working capital items acquired on acquisition Net cash inflow from operating activities	Six months 31 Dec 19 A$’000 (unaudited) 81,922 9,480 18,139 8,231 51 (1,632) 1,371 8,227 43,867 (209,662) (2,760) (5,209) (6,199) 159,254 (5,457) 158 (69,875) 9,610 8,704 74,228	Six months 31 Dec 18 A$’000 (unaudited) 67,238 7,490 - 7,758 (2,856) (1,814) 585 955 12,118 6,543 (559) (29,520) 2,394 (24,192) (4,286) 555 (49,065) 4,152 5,812 40,255	Year ended 30 Jun 19 A$’000 (audited)
			136,727 16,438 - 15,623 (2,267) (4,203) 1,793 3,061
			30,445
			19,065 (1,212) (188,435) 1,428 118,648 749 (1,201)
			(50,958)
			(2,951) 5,280
			118,543

14

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

6. SEGMENT INFORMATION

• (a) Products and services from which reportable segments derive their revenues The Group’s reportable segments under NZ IFRS 8 ‘Operating Segments’ are as follows:

Healthcare: Incorporates the sale of human healthcare products to Community Pharmacy, Institutional Healthcare, Contract Logistics and Consumer Products customers.

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:

Revenue from external customers Healthcare Animal care Segment result (EBITDA) Healthcare Animal care Corporate Segment expenses Healthcare: Depreciation Amortisation of finite life intangibles Income tax expense Animal care: Depreciation Amortisation of finite life intangibles Income tax expense Corporate: Depreciation Net finance costs Income tax credit Profit for the period Healthcare Animal care Corporate	Six months 31 Dec 19 A$’000 (unaudited) 4,165,504 210,623 4,376,127 145,833 28,490 (7,118) 167,205 (24,037) (7,224) (33,710) (64,971) (3,010) (1,007) (6,789) (10,806) (572) (15,427) 6,493 (9,506) 80,862 17,684 (16,624) 81,922	Six months 31 Dec 18 A$’000 (unaudited) 3,304,192 192,306 3,496,498 104,270 24,319 (6,023) 122,566 (7,111) (6,679) (26,541) (40,331) (379) (1,079) (6,408) (7,866) - (12,356) 5,225 (7,131) 63,939 16,453 (13,154) 67,238	Year ended 30 Jun 19 A$’000 (audited)
			6,548,316 382,044
			6,930,360 215,949 48,271 (13,810)
			250,410 (15,698) (13,464) (54,628)
			(83,790) (740) (2,159) (12,327)
			(15,226) - (25,334) 10,667
			(14,667) 132,159 33,045 (28,477)
			136,727

15

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

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

Revenue from external customers New Zealand Australia Non-current assets New Zealand Australia	Six months 31 Dec 19 A$’000 (unaudited) 861,857 3,514,270 4,376,127 362,616 1,191,141 1,553,757	Six months 31 Dec 18 A$’000 (unaudited) 784,418 2,712,080 3,496,498 290,966 1,012,238 1,303,204	Year ended 30 Jun 19 A$’000 (audited)
			1,585,227 5,345,133
			6,930,360
			294,029 1,014,531
			1,308,560

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 2019 the Group had unutilised term and working capital facilities of $171.9m (December 2018: $143.6m, June 2019: $270.9m).

The Group also has a trade debtor securitisation facility of which $198.0m was unutilised at 31 December 2019 (December 2018: $186.2m, June 2019: $231.7m).

16

EBOS GROUP LIMITED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

7. BANK FACILITY AND BORROWINGS (Continued)

As at 31 December 2019, the maturity profile of the Group’s term debt and securitisation facilities was:

Facility Term debt and working capital facilities Term debt facilities Term debt facilities Securitisation facility	Amount $192.3m $151.0m $293.0m $400.0m	Maturity Less than 1 year 1-2 years 3-4 years 1-2 years

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.

Fair value of derivative financial instruments Other financial assets – derivatives: Foreign currencyforward exchange contracts Other financial liabilities – derivatives: Foreign currency forward exchange contracts Interest rate swaps	Six months 31 Dec 19 A$’000 (unaudited) - - (454) (9,870) (10,324)	Six months 31 Dec 18 A$’000 (unaudited) 807 807 (182) (3,457) (3,639)	Year ended 30 Jun 19 A$’000 (audited)
			611
			611
			(40) (10,677)
			(10,717)

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 ‘Fair Value Measurement’ .

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 cash flow 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.

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EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

9. IMPACT OF NEW ACCOUNTING STANDARDS

NZ IFRS 16 ‘Leases’

The Group has adopted NZ IFRS 16 with a date of initial application of 1 July 2019. NZ IFRS 16 (replaces NZ IAS 17) sets out the principal for the recognition, measurement, presentation and disclosure of leases. It requires lessees to account for all leases under a single on balance sheet model, similar to accounting for finance leases under NZ IAS 17.

The adoption of NZ IFRS 16 results in the Group recognising a right-of-use (ROU) asset and corresponding liability for all leases with a term of more than 12 months, excluding low value assets. Operating lease expense is replaced by depreciation expense on the ROU assets and interest expense on the lease liability as they amortise.

The Group has applied the modified retrospective full simplified transition method. At 1 July 2019, lease liabilities were measured at present value of the remaining lease payments, discounted at the incremental borrowing rate (IBR) as at 1 July 2019. ROU assets are measured equal to lease liabilities, adjusted for initial direct costs incurred when entering into the leases, less any incentives received on commencement date. Comparative periods were not restated.

Lease payments included in the measurement of the lease liability comprise:

• fixed lease payment, less incentives receivable,

• variable lease payments that depend on an index or a rate, initially measured using the index or rate at the commencement date,

• the amount expected to be payable by the lessee under residual value guarantees,

• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options, and

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made.

• The Group remeasures the lease liability (and makes a corresponding adjustment to the related ROU asset) whenever: - the lease term has changed or if there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using the relevant revised discount rate,

• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate, and

• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The Group did not make any such adjustments during the periods presented.

The ROU assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date less any lease incentives receivable and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located and restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets and a corresponding amount added to the ROU asset.

ROU assets are depreciated over the shorter period of either the lease term or the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the ROU asset reflects that the Group expects to exercise a purchase option, the related ROU asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement of the date of lease.

The ROU assets are presented as a separate line in the consolidated statement of financial position.

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EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

9. IMPACT OF NEW ACCOUNTING STANDARDS (Continued)

NZ IFRS 16 ‘Leases’

The Group applies NZ IAS 36 Impairment of Assets to determine whether a ROU asset is impaired and accounts for any identified impairment loss under this standard.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the ROU asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line “other expenses” in the statement of comprehensive income.

As a practical expedient, NZ IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease associated non-lease components as a single arrangement.

The lease expense that would previously be recorded as an operating expense moved from being included in operating expenses, to depreciation and finance expense from 1 July 2019.

The impact on net earnings before income tax of an individual lease over its term remains the same, however, the new standard results in a higher expense in early years, and lower in later years of a lease, as compared to the straight line expense profile of an operating lease under NZ IAS 17.

The aggregate lease liability and ROU asset recognised in the statement of financial position as at 1 July 2019 and the Group’s operating lease commitment at 30 June 2019 can be reconciled as follows:

Lease liability recognised on transition Future minimum lease payments under non-cancellable operating leases as at 30 June 2019 Future lease payments on renewal options that are reasonably certain Effect of discounting Lease liability as at 1 July 2019 Right of Use Asset recognised on transition Land and buildings Office, Plant and equipment Motor Vehicles Right of Use Assets as at 1 July 2019		A$’000 (unaudited) 193,402 93,756 (41,537)
		245,621
		A$’000 (unaudited) 225,624 8,576 2,746
		236,946

In applying the modified retrospective approach, the Group has taken advantage of the following practical expedients:

• a single discount rate has been applied to portfolios of leases with reasonably similar characteristics,

• leases with a term of less than 12 months have been considered short-term leases,

• leases with a remaining term of twelve months or less from the date of application have been accounted for as short term leases even though the initial term of the leases from lease commencement date may have been more than twelve months, and

• a lessee may use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.

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EBOS GROUP LIMITED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

10. ACQUISITION INFORMATION

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

On 30 September 2019 EBOS Group Limited, through its subsidiary EBOS Medical Devices Australia Pty Ltd, acquired the 100% equity interest in LMT Surgical Pty Ltd and National Surgical Pty Ltd (LMT Group).

Details of the acquisition are as follows:

Assets and liabilities acquired:

Assets and liabilities acquired:
Current assets Trade and other receivables Prepayments Inventories Current tax refundable Non-current assets Property, plant and equipment Deferred tax assets Right of use assets Current liabilities Bank overdraft Trade and other payables Lease liabilities Current tax payable Employee benefits Non-current liabilities Bank loans Deferred tax liabilities Net assets acquired Goodwill on acquisition Total consideration Less deferred consideration Plus bank overdraft acquired Net cash outflow from acquisition	Carrying Value A$’000 (unaudited) Fair value adjustment A$’000 (unaudited)	Fair value on acquisition A$’000 (audited)
	4,265 (255)1 746 - 14,070 (1,371)2 138 - 2,684 (703)3 263 795_4_ 4,077 - (1,352) - (6,960) (323)5 (4,219) - (82) - (1,390) - (996) - (17) -	4,010 746 12,699 138 1,981 1,058 4,077 (1,352) (7,283) (4,219) (82) (1,390) (996) (17)
	11,227 (1,857)	9,370 19,710
		29,080
		(3,500) 1,352
		26,932

1. To recognise the fair value of trade and other receivables on acquisition.

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

3. To recognise the fair value of property, plant and equipment on acquisition.

4. To recognise deferred tax assets on acquisition.

5. To recognise the fair value of trade and other payables on acquisition.

Due to the timing of the acquisition the above figures have not yet been finalised and are currently considered provisional.

20

EBOS GROUP LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Continued)

For the six months ended 31 December 2019

10. ACQUISITION OF SUBSIDIARIES (Continued)

Goodwill arising on acquisition

Goodwill arose on the acquisition of LMT Group because the cost of acquisition included a control premium paid. In addition, goodwill resulted from 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.

LMT Group was acquired as it is a profitable Australasian medical device business which the Group believes fits strategically with its Australasian healthcare business assets.

Due to the timing of the acquisition, LMT Group’s revenue and profit for the period are considered immaterial to the Group.

The acquisition of subsidiaries balance ($30.3m) included in the Condensed Consolidated Cash Flow Statement includes deferred consideration payments of $3.4m in relation to prior period acquisitions.

11. EVENTS AFTER BALANCE DATE

Subsequent to 31 December 2019, the Board approved an interim dividend to shareholders. For further details please refer to Note 4.

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EBOS GROUP LIMITED 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

Elizabeth Coutts Independent Chair Nick Dowling Independent Director Stuart McGregor Stuart McLauchlan Independent Director Sarah Ottrey Independent Director Peter Williams

SHARE REGISTER

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