EBOS GROUP LIMITED — Investor Presentation 2017

Aug 23, 2017

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Investor Presentation

FY17 Annual Results

24 August 2017

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Disclaimer

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

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

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

The information contained in this presentation should be considered in conjunction with the consolidated financial statements for the period ended 30 June 2017.

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

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1 Group Financial Results

Symbion Keysborough facility, Melbourne, Australia 3

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FY17 Summary Results

Revenue Underlying EBITDA[1] Underlying NPAT[1] $7.6b $241.4m $138.6m 7.4% (+9.5% Constant FX) 7.1% (+9.6% Constant FX) 9.1% (+11.6% Constant FX)

ROCE 16.0% 0.3%

Underlying EPS[1] 91.3c 8.7% (+11.1% Constant FX)

Total Dividends per share 63.0c

7.7%

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Note 1: Excludes transaction costs of $7.0m before tax ($5.3m after tax and non-controlling interests) incurred on acquisitions undertaken in FY17.

Group Financial Results

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Investment Highlights

Acquisitions

Capacity Expansion

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TWC Investment: 31 October 2016

• Merger of Chemmart and Terry White has created of one of the largest retail pharmacy store networks in Australia.

Significant progress made in FY17 on two key capex projects in Australia

• New Wholesale Distribution site

• Brisbane, Queensland

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HPS Acquired: 7 June 2017

• Australia’s largest provider of outsourced pharmacy services to Hospitals.

• Acquisition expands EBOS’ existing leading position in the Hospital channel.

Nature’s Synergy Acquired: 31 March 2017

• Australian distributor of Floradix products, which include liquid herbal, vitamin and mineral supplements.

• New Contract Logistics site

• Sydney, New South Wales

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Construction progress: new Brisbane wholesale distribution centre

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Group Financial Results

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Record FY17 financial performance

	Constant FX NZ$m FY17 FY16 Var Var Statutory Results Revenue 7,625.9 7,101.5 7.4% 9.5% Gross Operating Revenue 745.3 676.5 10.2% 12.4% EBITDA 234.4 225.5 4.0% 6.4% EBIT 208.6 200.8 3.9% 6.3% Net Finance Costs 19.0 20.1 5.2% 3.2% Profit Before Tax 189.6 180.7 4.9% 7.4% Net Profit After Tax1 133.3 127.0 4.9% 7.3% Statutory EPS - cps 87.8 84.0 4.5% 6.9%	Constant FX NZ$m FY17 FY16 Var Var Statutory Results Revenue 7,625.9 7,101.5 7.4% 9.5% Gross Operating Revenue 745.3 676.5 10.2% 12.4% EBITDA 234.4 225.5 4.0% 6.4% EBIT 208.6 200.8 3.9% 6.3% Net Finance Costs 19.0 20.1 5.2% 3.2% Profit Before Tax 189.6 180.7 4.9% 7.4% Net Profit After Tax1 133.3 127.0 4.9% 7.3% Statutory EPS - cps 87.8 84.0 4.5% 6.9%
	Net Profit After Tax1
	Statutory EPS - cps
	Underlying EBITDA2 Underlying NPAT2 Underlying EPS - cps2	241.4 225.5 7.1% 9.6% 138.6 127.0 9.1% 11.6% 91.3 84.0 8.7% 11.1%
	Net Debt Net Debt : EBITDA	434.7 247.6 1.79x 1.14x

• Full Year Group Revenue increase of $524.4m or 9.5% (constant FX):

• Healthcare up 9.8%.

• Animal Care up 4.2%.

• Revenue increase driven by a full 12 month contribution from hepatitis C medicine sales, which were $415m higher than FY16.

  • Revenue excluding hepatitis C medicine sales grew by $110m or 3.7% (constant FX).

• Underlying EBITDA increase of $16.0m or 9.6% (constant FX):

• Healthcare up 9.5%.

• Animal Care up 7.6%.

• Underlying NPAT increase of $11.6m or 11.6% (constant FX).

• Increased NZD:AUD cross rate negatively impacted NPAT by $2.8m in FY17.

• Underlying EPS growth of 11.1% (constant FX).

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Note 1: Net profit after tax and non-controlling interests.

Group Financial Results

Note 2: Excludes transaction costs of $7.0m before tax ($5.3m after tax and non-controlling interests) incurred on acquisitions undertaken in FY17.

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Healthcare Results 2

Top left: TerryWhite Chemmart Pharmacy in Melbourne. Top right: Selection of Red Seal toothpaste and vitamin products. Bottom left: Greystanes staff, NSW 7 Bottom right: Vy Nguyen, HPS Pharmacy Manager (Moorabbin, Victoria)

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Healthcare segment

Strong trading performances across Australia and New Zealand

NZ$m	FY17	FY16	Var		Constant FX Var
Healthcare segment
Revenue	7,202.7	6,686.4	7.7%		9.8%
EBITDA	208.8	195.0	7.1%		9.5%
EBIT	187.1	174.1	7.5%		10.0%
EBITDA%	2.90%	2.92%	-2pts		-2pts
Australia
Revenue	5,756.8	5,273.8	9.2%		11.8%
EBITDA	164.7	155.3	6.1%		8.8%
EBIT	145.2	136.5	6.4%		9.1%
EBITDA%	2.86%	2.94%	-8pts		-8pts
New Zealand
Revenue EBITDA	1,445.9 44.1	1,412.6 39.8	2.4% 10.8%
EBIT	41.9	37.6	11.6%
EBITDA%	3.05%	2.82%	23pts

• Revenue increase of $516m or 9.8% (constant FX): – Australia up 11.8% (or 4.1% excluding hepatitis C medicine sales). Sales of hepatitis C medicines moderated in the second half of FY17 compared to the first half.

• New Zealand up 2.4%.

• EBITDA increase of $13.8m or 9.5% (constant FX): – Australia up 8.8%.

• New Zealand up 10.8%.

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EBITDA
NZ$m
209
195
170
153
FY14 FY15 FY16 FY17
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Healthcare Results

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Community Pharmacy

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• Pharmacy revenue in Australia grew by 11.3% (constant FX), attributable to new hepatitis C medicine sales (albeit at lower gross profit margins) and the inclusion of Terry White Group revenue from November 2016.

• Prescription medicine sales growth in Australia (excluding hepatitis C medicines) was flat due to the on-going impact of PBS reforms.

• Following industry trends across Australia and NZ, FY17 over-the-counter (OTC) sales declined on the unusually high (double digit) growth recorded in the prior year. OTC sales for the last three months have now returned to modest growth.

• Continued focus on our cost base resulted in cost savings and improved productivity across our operations.

	Reported	Reported	Constant FX
NZ$m	FY17	FY16	FY16 Var%
Revenue GOR	4,181.9 3,907.8 3,828.3 9.2% 372.2 332.6 325.0 14.5%
GOR%	8.9% 8.5% 8.5%

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Revenue and GOR
NZ$m (Reported FX)
372
333
311
293
4,182
3,908
3,393 3,516
FY14 FY15 FY16 FY17
Revenue GOR
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Healthcare Results

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• The merger of Chemmart with Terry White Group was completed in October 2016 to create one of Australia’s largest retail pharmacy store networks.

• The integration of the two groups across marketing and merchandise, operations, store development and corporate functions is on schedule.

• TWG is investing in an extensive rebrand and alignment program. This program is currently on schedule, with the majority of stores already rebranded with the new TerryWhite Chemmart signage.

• In August 2017, TWG launched a nationwide consumer campaign titled “Alive & Well”.

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Institutional Healthcare

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• With the acquisition of HPS in June 2017, EBOS continues to expand its position as a specialised and essential partner across a number of areas, primarily in hospitals, aged care and primary care.

• Symbion Hospital Services maintained its market leading position and recorded revenue growth driven by a full 12 month period of hepatitis C medicine sales of $496m, which is $162m higher than FY16.

• FY17 GOR was assisted by the full year of operations at Onelink Australia, our exclusive outsourced logistics operation with NSW Health.

• Onelink NZ growth was primarily from the District Health Board hospitals in the northern region.

NZ$m	Reported	Reported	Constant FX
	FY17	FY16	FY16 Var%
Revenue GOR	2,484.5 2,233.4 2,192.0 13.3% 154.3 138.2 135.4 14.0%
GOR%	6.2% 6.2% 6.2%

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Revenue and GOR
NZ$m (Reported FX)
154
138
112
109
2,484
2,233
1,679 1,779
FY14 FY15 FY16 FY17
Revenue GOR
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Healthcare Results

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HPS Acquisition

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• The acquisition of HPS was completed in June 2017 and expands EBOS’ existing leading position in the Hospital channel.

• HPS is Australia’s largest provider of outsourced pharmacy services to hospitals – servicing approximately 43% of the outsourced private market.

• HPS has long term relationships and contracts with key private and public hospitals, correctional facilities, oncology clinics and IVF clinics.

• HPS provides EBOS with future revenue growth opportunities as new greenfield and brownfield hospitals open. These opportunities are expected to come on stream over the FY18 to FY20 period.

• HPS also provides customised and robust information technology solutions that enable better patient and pharmacy management.

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Healthcare Results

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Consumer Products

• High growth for the year, driven by a full 12 months contribution from Red Seal (7 months in FY16).

• Red Seal is performing in-line with expectations with revenue growth recorded in teas, toothpaste and supplements.

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NZ$m Revenue GOR	Reported	Reported	Constant FX
	FY17	FY16	FY16 Var%
	105.4 86.4 85.3 23.5% 42.5 37.2 36.7 15.7%
GOR%	40.3% 43.1% 43.1%

• Domestic NZ sales grew an impressive 11.6%.

• Performance in export markets was mixed with high sales growth achieved in South Korea but lower growth from China.

• Acquisition of Nature's Synergy in March 2017, the Australian distributor of Floradix products (liquid herbal, vitamin and mineral supplements).

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Revenue and GOR 43
NZ$m (Reported FX) 37
25 26
105
86
59 62
FY14 FY15 FY16 FY17
Revenue GOR
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Healthcare Results

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Contract Logistics

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• Healthcare Logistics (NZ) maintained its leading market position and combined with cost management, delivered another period of increased earnings.

• GOR was steady in FY17 following high growth from FY14 to FY16.

NZ$m Revenue GOR	Reported	Reported	Constant FX
	FY17	FY16	FY16 Var%
	484.9 495.0 491.7 (1.4%) 60.5 60.5 59.8 1.1%

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

• The Group is expanding its Contract Logistics business in Australia with the development of a new facility in Sydney (NSW). Capacity constraints has restricted recent growth in Australia.

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Revenue and GOR
NZ$m (Reported FX)
61 61
54
51
495 485
373
313
FY14 FY15 FY16 FY17
Revenue GOR
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Construction progress: new Sydney Contract Logistics facility

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Healthcare Results

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Animal Care Results 3

Selection of Animal Care products from the Black Hawk and Vitapet brands. 15

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Animal Care segment

Black Hawk and Vitapet revenue growth key to earnings performance

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					Constant FX	EBITDA
NZ$m	FY17	FY16	Var		Var	NZ$m
Animal Care segment
Revenue	423.2	415.0	2.0%		4.2%
EBITDA	44.7	42.3	5.7%		7.6%
EBIT	41.2	38.6	6.7%		8.6%
EBITDA%	10.57%	10.19%	38pts		38pts

• EBITDA increase of $2.4m or 7.6% (constant FX) attributable to:

• Revenue growth from our key branded products;

  • Black Hawk sales growth of 48%

  • Vitapet sales growth of 8.5%

• Significant additional investment in marketing and advertising undertaken in FY17.

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Animal Care Results

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Animal Care Segment

Performance Overview

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PRODUCTS & BRANDS

RETAIL

VET WHOLESALE

• Black Hawk, our premium pet food brand, continues to receive very strong support and is outperforming the market. Revenue grew by 48% in FY17, driven by an investment in marketing, additional ranging in pet specialty stores and new product launches.

• Increased Animates profit due to revenue growth of 15.9%. During the year, Animates opened seven new retail stores and eight veterinary clinics. The business now operates 39 retail stores and 16 veterinary clinics in New Zealand.

• Lyppard recorded steady revenue growth from its major customers.

• The wholesale market remains competitive and together with the consolidation of vet clinic ownership is placing pressure on margins. Notwithstanding this, earnings growth in the business continued.

• Vitapet recorded revenue growth of 8.5% (constant FX) driven by new product development, range expansion and marketing investment.

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Animal Care Results 17

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Black Hawk Update

Black Hawk is focused on the natural premium pet food segment. The premium pet food category is estimated to be growing at 4 - 5% per annum.

Black Hawk Sales (pre and post acquisition) +48%

EBOS has been able to rapidly grow Black Hawk in Australia through:

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+55%
+23%
FY14 FY15 FY16 FY17
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• Our relationships with the pet specialty retailers who are fully ranging and supporting the product;

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• Significant investment in advertising driving brand awareness and increasing customer demand;

• The launch of a number of new SKU’s including a grain-free range in FY17; and

• Delivering a quality product at attractive prices to customers.

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In July 2017, EBOS launched Black Hawk into New Zealand and consequently ceased the sales, marketing and distribution of Mars NZ brands (IAMS and Eukanuba). The NZ premium pet food market (including vet) is estimated to be NZ$100 million.

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Animal Care Results
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4 Group Financial Information

EBOS Healthcare warehouse, 19 Auckland, New Zealand

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Cash Flow

Another strong Operating Cash Flow performance

NZ$m	FY17	FY16	Var$
EBITDA	234.4	225.5	9.0
Net interest paid	(19.0)	(20.1)	1.0
Tax paid	(65.4)	(54.5)	(10.8)
Net workingcapital and other movements Cash from Operating activities	(6.1) 143.9	73.2 224.1	(79.3) (80.2)
Proceeds from disposal of assets	0.1	5.2	(5.2)
Capital expenditure	(37.6)	(17.6)	(20.0)
Free Cash Flow	106.5	211.7	(105.2)
Acquisitions and investments	(184.1)	(92.1)	(92.1)
Dividendspaid(net of DRP)	(94.9)	(69.1)	(25.8)
Net Cash Flow	(172.6)	50.5	(223.1)
Borrowings acquired on acquistion	(14.7)	-	(14.7)
FX impact on net debt	0.2	18.8	(18.6)
(Increase)/Reduction in Net Debt	(187.1)	69.3	(256.5)

• Another year of strong cash flow ($143.9m) demonstrating the Group’s disciplined focus on cash flow management.

• Capex spend in FY17 includes payments for the new distribution centre in Brisbane ($23.0m).

• Significant additional Capex will be incurred in FY18 on the new warehouses in Brisbane and Sydney, with spend on these projects in FY18 of approximately $40m.

• Acquisition and investments in FY17 represents the Group’s acquisitions of HPS, Terry White Group and Nature’s Synergy.

Operating Cash Flow (NZ$m)

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Group Financial Information

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Working Capital and Cash Conversion

NZ$m	June 2017 June 2016
Net Working Capital Trade receivables Inventory Trade payables Other	1,015.1 1,302.8 572.0 578.5 (1,230.0) (1,539.9) (123.7) (98.9)
Total Cash conversion days1 Debtor days Inventory days Creditor days	233.4 242.6 41 42 30 29 57 58
Cash conversion days	14 13

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

• Cash conversion cycle of 14 days.

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Note 1: Cash conversion days are adjusted for the Group’s 3PL debtors and creditors arising from its hepatitis C business.

Group Financial Information

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Net Debt, Gearing and ROCE

Net Debt and Gearing

Return on Capital Employed

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500 40%
450
35%
400
27.4% 30%
350 24.4% 23.2%
25%
300
18.5%
250 20% 16.3%
16.0%
435
200
15%
150 316 317 13.7%
100 248 10% 12.8%
5%
50
0 0%
Jun-14 Jun-15 Jun-16 Jun-17 FY14 FY15 FY16 FY17
Net Debt Gearing ratio (Net debt)
Gearing ratio
Net debt (NZ$m)
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• Net Debt of $435m at June 2017 includes all of the debt required to purchase HPS in June 2017.

• Net Debt : EBITDA of 1.79x at June 2017 (1.14x at June 2016).

• Return on Capital Employed of 16.0% at June 2017, marginally lower than June 2016 (-0.3%) primarily due to capital expenditure on the Brisbane distribution facility (under construction).

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Group Financial Information

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Earnings and Dividends per share

Underlying Earnings per share Dividends per share

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91.3
84.0
62.8 70.8
FY14 FY15 FY16 FY17
Cents per share
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• EPS growth of 11.1% on an underlying and constant FX basis in FY17 following a 18.2% increase in FY16.

• Final dividend of 33.0 cents (imputed to 25% and franked to 100% for Australian resident shareholders).

• Total dividends in FY17 of 63.0 cents represents an increase of 7.7% on last year.

• Dividend payout ratio of 71.8%.

• DRP remains suspended and will not operate for this dividend.

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Group Financial Information

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5 Summary and Outlook

Top: EBOS, Auckland. Symbion, Melbourne Bottom: ProPharma, Auckland. Monash 24 veterinary clinic, a customer of Lyppard.

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EBOS Strategic Approach

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Our Healthcare and Animal Care strategic focus is centred on

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Investing for Growth

Leading Market Positions

Disciplined Capital Management

Two types of investments:

• Acquisitions – we have a successful track record of deal execution.

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

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

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

• Acquisitions focus on supporting the Group’s return on capital employed.

We focus on delivering profitable growth and superior returns

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Summary and Outlook

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It is now 4 years post the transformational Symbion deal

We continue to deliver results while reinvesting for growth

Investments made (NZ$m)

Results achieved

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Underlying EPS
Underlying EBITDA
cents per share
NZ$m
$470m+ over
FY17 241 FY17 91.3
last 4 years
FY16 225 FY16 84.0
4 Year 4 Year
CAGR CAGR
+11.2% +13.3%
FY15 197 FY15 70.8
FY14 175 FY14 62.8
203.6 20.00 EBOS Share Price (NZ$) – Last 4 Years performance
18.00
16.00 Share price
1 88.1 +82.3%
3.5 70.9
14.00
35.3 37.6
15.4 17.6 12.00 Annualised
FY14 FY15 FY16 FY17 return 21.1%
Capital expenditure Acquisitions and investments 10.00 (inc. dividends)
8.00
30-Jun-13 31-Dec-13 30-Jun-14 31-Dec-14 30-Jun-15 31-Dec-15 30-Jun-16 31-Dec-16 30-Jun-17
Summary and Outlook
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Outlook

EBOS Group has recorded a strong financial performance in FY17 and the Company is confident of further profit growth into FY18 on an underlying, constant currency basis.

A performance update will be provided to shareholders at the Annual Meeting on 17 October 2017.

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Summary and Outlook

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Supporting Information 6

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EBOS Group locations in 28 Australia and New Zealand

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Foreign exchange

Appreciation of the average NZD:AUD cross-rate by 2.4c to 0.945 negatively impacted EBITDA by $5.1m in FY17

Revenue and EBITDA by currency

	AUD	Average	AUD	NZ	Group
	Operations	**NZD: AUD **	Operations	Operations	Consolidated
$m	AUD	translation	NZD	NZD	NZD
FY17
Revenue	5,792.2	0.95	6,116.8	1,509.1	7,625.9
EBITDA	174.3	0.95	184.3	50.1	234.4
EBITDA%	3.01%		3.01%	3.32%	3.07%

• 79% of the Group’s earnings (EBITDA) are generated in AUD.

• The average NZD:AUD FX rate for FY17 increased by 2.4 cents from FY16, negatively impacting the Group’s FY17 EBITDA by approximately $5.1m.

NZD:AUD exchange rate – July 2015 to June 2017

FY16 average: 0.921c FY17 average: 0.945c

• EBITDA sensitivity to a 1 cent movement in NZD:AUD exchange rate is approximately $2.1m per annum.

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Segment earnings and GOR mix

EBITDA by segment

Gross Operating Revenue (GOR) FY17

					Constant FX
NZ$m	FY17	FY16	Var		Var
Healthcare	208.8	195.0	7.1%		9.5%
Animal Care	44.7	42.3	5.7%		7.6%
Corporate	(19.1)	(11.9)	(60.8%)		(61.3%)
Group	234.4	225.5	4.0%		6.4%
Transaction costs	7.0	-
Corporate - underlying	(12.0)	(11.9)	(1.6%)		(1.9%)
Group - underlying	241.4	225.5	7.1%		9.6%

FY17 GOR mix

• FY17 Corporate segment result includes $7.0m of transaction costs incurred on the TerryWhite Chemmart merger and the HPS acquisition.

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Reconciliation of statutory and underlying results

	FY17			FY16
NZ$m	EBITDA	NPAT		EBITDA	NPAT
Statutory result	234.4	133.3		225.5	127.0
Add back
Transaction costs incurred on acquisitions undertaken duringtheyear	7.0	5.3		-	-
Underlying result1	241.4	138.6		225.5	127.0

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Note 1: Underlying EBITDA and Underlying Net Profit After Tax (attributable to the owners of the company) are both Non-GAAP measures which adjust for the effects of non-recurring items.

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Glossary of terms and measures

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

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

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