EBOS Group Limited Annual Report 2010
EBOS Group Limited Annual Report 2010
EBOS key revenue streams
• Healthcare sales and marketing, where we
drive demand for specific brands.
• Pharmaceutical and medical wholesaling.
• As a key service provider of pharmaceuticals
and medical consumables to public and
private hospitals.
• As a key service provider to multi-national
healthcare manufacturers.
v EBOS Group Limited Annual Report 2010
Highlights
Financial Performance and Trends
Chairman’s Report
Managing Director’s Review
Board of Directors
Corporate Governance Statement
Directors’ Report
EBOS Group Limited Financial Report
Directors’ Responsibility Statement
Audit Report
Income Statement
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Additional Stock Exchange Information
EBOS Group Limited Directory
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v EBOS Group Limited Annual Report 2010
Highlights of the year
ended 30 June 2010
• The entire EBOS group performed strongly
with our resilience, reliability and flexibility to
the fore in difficult economic conditions.
• Efficiency gains have led to improved
earnings, with net profit before abnormal
items ahead by 28.9%
• Continued investment in information
technologies, improved customer service
and operating efficiencies.
• Effective capital management with
positive cash flow of $41.8 million and
net debt reduced to $2.7 million.
• The proactive sale of the Scientific
portfolio post balance date
further strengthens our financial
position for future growth.
2
Financial performance and trends
1,344.9
1,373.3
1,092.0
45.7
38.7
33.6
25.4
19.7
16.7
21.7
18.8
11.5
10.3
307.3
300.5
2006 2007 2008 2009 2010
2006 2007 2008 2009 2010
2006 2007 2008 2009 2010
Revenue ($ millions)
EBITDA ($ millions)
NPAT ($ millions)
2010
2009
2008
2007
2006
Net cash inflow from operating activities ($’000)
Shareholders’ interest ($’000)
Distributions cents per share
Earnings per share
Interest cover
Net interest bearing debt to net interest
bearing debt plus equity
41,813
182,790
31.0c
51.0c
7.3
33,310
162,039
25.0c
41.1c
4.4
28,546
147,304
23.0c
37.6c
3.7
7,254
92,195
22.5c
31.7c
7.8
8,349
55,763
22.5c
41.8c
6.9
1.5%
19.6%
32.0%
8.1%
42.3%
2010 Normalised to add back deferred tax expense arising out of tax legislation made by New Zealand Government in May 2010.
3
EBOS Group Limited Annual Report 2010
Chairman’s
report
Your Board of Directors is very happy to
report to shareholders another very successful
year for EBOS Group Limited. Despite a
very challenging economic environment we
achieved a significant increase in earnings
for the year ending 30 June 2010 and indeed
EBOS and its subsidiary companies are in the
best operating shape in their corporate history.
Not only has the group locked in the benefits
of the growth steps taken in recent years
in New Zealand and Australia but we have
complemented this with efficiency gains across
the board.
We have a strong platform in our pharmacy
wholesaling, logistics and hospital procurement
businesses, where integration of information
technology to provide excellence in service
delivery is key to achieving further efficiencies.
The Group continued to expand contractually
with further District Health Boards becoming
customers.
Likewise our Healthcare businesses in New
Zealand and Australia have had another
excellent year, with both operations producing
another strong year of earnings growth.
The group continues to closely monitor
changes being made in the NZ state health
sector. The EBOS NZ portfolio of businesses
collectively represent the largest contribution
to NZ Healthcare supply. A policy of continuous
improvement driving efficiency gains year
on year should enable us to maintain our
competitive edge.
The company has strengthened its balance
sheet with major reductions in working capital,
strong shareholder returns, and improved
market capitalisation.
4
Results
In the year ended 30 June 2010, revenue was a new
record at $1,373m ($1,344m in 2009). Earnings before
interest, tax, amortisation and depreciation (EBITDA)
was a record $45.74m ($38.71m) an 18.2% increase.
Normalised net profit was $25.4m and net profit
after tax of $23.44m was 18.8% higher than the 2009
result of $19.73m. This included abnormal deferred
tax charges of $1.97m on the group’s buildings
resulting from the reduction of tax depreciation
rates to zero for periods from and including 2012, as
brought down in the New Zealand Government’s 2010
Budget. Importantly, the tax adjustment is a one-off
and non-cash charge. It would be fair to say that we
are not alone in expressing our concerns over how
these changes in the tax and reporting environment
have made it even more difficult for shareholders to
gauge the true financial performance of New Zealand
corporates.
Earnings per share increased to 47.0 cents from 41.1
cents on the increased capital base of 50.80 million
shares on issue as at 30 June 2010, which continues
our very positive trend in earnings growth.
The trading results came from three key revenue
streams:
• Healthcare Sales
and Marketing
• Scientific Sales
and Marketing
Australia, NZ and
the Pacific Islands
• Wholesale-Logistics Services business
located solely in New Zealand.
The announcement post balance date of the sale
of our Scientific portfolio of business marks an
important phase in EBOS’s strategy to take value for
shareholders when the market timing is right. The
business operations divested were those of Global
Science & Technology Limited, Quantum Scientific
Pty Limited and Crown Scientific Pty Limited.
This divestment for a cash amount was achieved
at a very satisfactory multiple. The sale will have
a significant positive impact on our balance sheet
going forward and effectively eliminates debt and
places EBOS in a strong position to undertake further
expansion and look to enhance shareholder value.
EBOS has earned an enviable reputation for making
and successfully implementing acquisitions over the
last decade. This deal shows that management is
also able to complete a major sale transaction for the
benefit of shareholders.
Balance Sheet
EBOS already had a strong financial position as at
30 June 2010 having further reduced debt during the
period as is reflected in the continued fall in interest
costs.
Repayments during the year reduced the level of net
borrowings at balance date to $2.7m compared with
$39.38m in 2009.
Strong positive cash flow from all operating business
has significantly reduced the debt incurred since
the acquisition of PRNZ 3 years ago (comprising
Healthcare Logistics and pharmacy wholesaler
ProPharma). The group’s popular bonus distribution
plan, has also contributed to the lower debt levels.
Net assets increased to $182.79m ($162.04m last year)
reflecting an increase in total assets to $518.34m
($499.83m) and reduced non-current liabilities of
$73.85m ($83.54m). Current assets stand at $336.39m
($314.58m) and non-current assets at $181.95m
($185.25m), with current liabilities at $261.70m
($254.25m).
Operational cash flow generation in 2010 was a new
record at $41.81m and continues the positive trend of
2009 ($33.3m) and 2008 ($28.54m).
Dividend and Bonus Share
Distribution
The Directors are pleased to be able to approve a
share distribution of 17.5 cents per share to be made
on 8 October 2010, making a total of 31 cents per
share for the year. This represents an overall increase
of 6 cents per share.
The record date for the bonus share distribution was
10 September 2010. Shareholders have the option to
have these shares purchased back by the company
for cash. The Board thanks those shareholders who
are supporting the bonus share distribution scheme.
It enables the company to retain cash in the business
where it can be used to fund future growth.
my sincere thanks for the efforts and continued
commitment of the board over the past year.
Management and Employees
The year’s events have been extremely demanding
on our management team and the Board greatly
appreciates and values the loyalty, determination, and
skills required to succeed shown by our managing
director Mark Waller and his team.
The Board also recognises the commitment of
employees in all EBOS owned businesses during a
trying year for individuals and families in terms of the
economic cycle. Our people reside in some of the
finest environments on Earth but they can undergo
unpredictable change as we have seen from the
disruption and losses inflicted by natural disasters
such as bushfires in Australia, storm damage in the
Pacific Islands and, most recently, the earthquake in
Christchurch where the EBOS Group is headquartered.
The Directors extend their best wishes to those
employees affected.
Outlook
The Board is optimistic about the prospects for 2010-11
in each of our markets.
As I noted above we are in the best operating form
ever and this, coupled with the stability and expertise
that comes from having a stable and highly skilled
executive team, excellent partnerships with suppliers
and customers and an ungeared balance sheet,
provide the impetus for significant future growth.
Our future investment will concentrate on
opportunities in our core Healthcare activities.
Our conservative balance sheet provides real flexibility
to examine expansion opportunities. However, all such
opportunities will be subject to the usual EBOS tests
of being a good strategic fit and being capable of
enhancing shareholder value.
In closing it is worth reminding shareholders present
and future of what a fantastic growth story EBOS has
been for its shareholders over the past ten years.
In 2000, our turnover was just $80m pa with SHF
of $35m and total assets of $62m.
In 2010 turnover is almost $1.4bn, SHF $183m, and
total assets of $518m.
The EBOS Board thanks all of our 4,400 shareholders
for their continued support of the company and looks
forward to meeting shareholders attending the Annual
Shareholders’ Meeting to be held at Christchurch on
Thursday 21 October 2010.
Board
As the group grows in size, and faces more complex
decision-making, it has benefited from the tremendous
business experience of its directors. I express
Rick Christie
Chairman of Directors
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EBOS Group Limited Annual Report 2010
Managing
Director’s
review
The excellent financial performance of EBOS
Group Limited in the year ending 30 June 2010
is a great credit to our staff and management.
EBOS has reported a further rise in reported
profit during a sustained period of generally
poor economic growth in the broader
marketplace. We have again delivered solid
outcomes across each of our group trading
divisions, all of which have come through the
recession of 2009-10 in excellent shape.
We are exposed to the same macro-economic
shifts as any other large business. We are
however fortunate to be somewhat insulated
from sliding consumer confidence. Our core
revenue streams in healthcare sales and
marketing, logistics and wholesale supply are
more defensive than in other industry sectors.
We do however have to deliver continuing
customer benefits and efficiency gains to win in
an ultra competitive environment.
Our group Earnings before Interest, Taxation,
Depreciation and Amortisation (‘EBITDA’)
reached another record at $45.7m, which is an
18.2% gain on 2009.
Our NPAT of $23.4m is after a deferred tax
adjustment of $1.974m. This is a one-off, non
cash, charge resulting from the New Zealand
Government’s move in the 2010 Budget to
reduce tax depreciation rates on buildings
to zero for periods from and including 2012.
In comparison to many other New Zealand
corporates, the quantum of the charge may be
modest; it nevertheless has a material effect on
reported profit, and should be added back to
reflect the true trading position.
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The trend for many years underscores the ongoing
growth trajectory of the group.
REvEnuE
EBITDA
MARKET
CAP
2005
2010
$281.0m
$1,373.3m
$19.2m
$45.7m
$117m
$315m
The trend confirms that EBOS has more than doubled
its EBITDA over this period. Earnings per share have
increased from 32.5 cents in 2005 to 47.0 cents in
2010. Total returns to shareholders including dividends,
bonus shares and market value gains in the EBOS
share price place EBOS returns amongst a handful of
NZ’s best performing listed companies. This leading
performance in total shareholder returns is confirmed
over 1, 2, 5, 7 and 10 year comparisons.
The Profit ‘Drivers’
How have we achieved the recent improvement
against the backdrop of a difficult business
environment?
Put simply, our profit result reflects efficiency gains
and ongoing investment in automation and technology
across all businesses and strong profit growth from
Australian operations.
We continue to reap the benefit of our investments
made in Australia during the last decade. The major
strides by EBOS Australia flow from the strategy to
grow our Primary Care business to be one of the
leading national players. This, along with our move into
the aged care sector and selected areas of the hospital
market, specialising in infection prevention, along with
the skill and great attitude of our employees underpin
the success story.
Right Attitude + Right Actions
= Success
The EBOS culture which we strive to embed across all
group activities is a winning formula for continuous
improvement. We seek to implant a ‘can do’ attitude in
each of our businesses across New Zealand, Australia
and the Pacific Islands.
With almost 1000 staff we encourage them to seek the
most effective solution to every thing we do to help
our customers, and suppliers. Their personal initiatives,
strongly support our drive to create excellence in our
group-wide technology improvement programme.
To support our staff and customers we continue to
invest in Information Technology with on-line ordering,
web based options, business to business solutions, and
warehouse automation.
Our Wholesale Logistics and Distribution businesses
supplying public and private hospitals in New Zealand
are volume-driven, low-margin, businesses. Our
internal pursuit of improved performance arises from
operational as distinct from pricing gains by investing
in and using technology as the key driver for growth in
profitability.
The successful implementation of a ‘digital dashboard’
of Key Performance Indicators across all business
units allows managers to track inventory levels, sales
and stock turn, costs of sale, return on capital, gross
profit trends and debtor positions. This assists group
productivity levels and management of working
capital.
This internal drive for operational efficiency has
continued to be rewarded with operating cashflow
rising from last year’s record $33.3m to a new record
of $41.8m.
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EBOS Group Limited Annual Report 2010
The Importance of our Results
Our financial performance, minimal debt levels and
long standing track record are obvious positives for
shareholders of EBOS.
They are equally important to suppliers, customers
and staff.
It is about confidence, and the ability to grow and
invest to support our customers and suppliers. EBOS
Group and its subsidiary companies represent the
most important single organisation in the supply
of product – both pharmaceutical and medical
consumables to the NZ Health sector. Our presence
and continued success is vital for the country.
In Australia we are still a small player overall and yet
we are one of the few companies with a national vision
to replicate the market reach we have in NZ, across the
many sectors of Healthcare.
Sale of Scientific Portfolio
Our decision to exit the Scientific market was the
result of a detailed review of the growth prospects and
the changed landscape internationally on this sector.
It is important for EBOS to be number one or two in a
market, to be both influential and to ensure ongoing
profitability.
We felt that this could no longer be achieved by our
Scientific businesses, given the international strength
of VWR and their closest competitor in this sector.
The fact that EBOS has created a worthwhile trans-
Tasman business, and recognised the right time to
sell it has enabled us to extract considerable value for
EBOS shareholders. Importantly, all staff in Quantum
Scientific; Crown Scientific and Global Science have
been offered roles with new owners VWR International
(USA). As a major global player, VWR offers staff the
best possible career prospects, along with a greatly
expanded product portfolio for customers.
The preliminary settlement conditions were met and
funds received in early September. Final accounts and
adjustments will be completed late September.
We thank our wonderful and loyal staff for their
dedication and our scientific customers and suppliers
for their support over many years.
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Group Operations
What EBOS Group businesses actually do and where
they fit in the Healthcare sector is often not clear to
new comers to the Health sector; mostly because of
the breadth of market segments we cover and the
business models appropriate to service those markets.
The New Zealand model as applied to pharmaceuticals
has been highly beneficial from a cost containment
perspective. It has however, dramatically reduced the
direct marketing presence in New Zealand of many
multinational companies.
This has translated into the existing market structure
in New Zealand for the marketing and supply of
pharmaceuticals. A similar approach to the medical
devices and consumables sector is starting to unfold.
The success in New Zealand and the planned changes
to the medical device sector are of great interest
to the Australian government, which like most
governments, seeks to contain Healthcare costs.
We have already commented about our EBOS
Australia business and the fact that it had another
successful year of growth. Equally our NZ businesses,
including EBOS Healthcare, ProPharma, Health
Support and Healthcare Logistics all produced
improved results for the year to 30 June. Our
International business in the Pacific had a record year,
culminating with the opening of a new office in Fiji.
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EBOS Group Limited Annual Report 2010
What We Do in New Zealand
Our goal this year is to explain the fundamental
purpose of our New Zealand businesses, by business
model and customer group.
Fundamental Components
• All of our businesses have a distribution and logistics component. The better
this works in terms of service to customers, order processing efficiency and
inventory optimisation, the better off we and our customers are.
We call this expertise a CENTRE OF EXCELLENCE.
• The ability to analyse customer needs, forecast their requirements to the
product manufacturers and to accept product enquiry and process orders in
the most efficient manner is another shared need across all of our businesses.
To this we need to add “customer intelligence” in terms of knowing and
managing their needs and to be able to link this to our marketing activities.
The linkage to customers through web portals, B2B, smart telephone and
dedicated on line ordering systems is another shared need.
These collectively form part of our Information Technology CENTRE
OF EXCELLENCE.
• Finance, treasury, accounting and statutory compliance are also common to
all businesses. We are in the midst of a business streamlining and simplification
process for this CENTRE OF EXCELLENCE
The definition of CENTRE OF EXCELLENCE is to be world class and one of the
best anywhere in systems and processes with a known and high quality outcome –
each and every time.
In the past we had an expectation that each manager should be able to do
“a bit of everything”.
We have moved on from this to allow each business unit manager to focus on the
needs of their customers, safe in the knowledge that these support services will be
so good that they have a competitive advantage.
The creation by EBOS of these CENTRES OF EXCELLENCE now forms part of the
Groups’ intellectual property.
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BUSINESS
ACTIVITY
Pharmacy Wholesale
BUSINESS
MODEL
UTILISED
GROUP
BUSINESSES
INVOLVED
Business to business
marketing company
with just in time
logistics capability
ProPharma
Health Support
• District Health Board
• Business partnership
Health Support
ProPharma
Supply Contracts
• Private Hospital
Supply Contracts
Community
Supply Contracts
(Pharmaceutical,
Medical devices,
other consumables)
model where
services are out
sourced to our
group business.
• Large customers
can negotiate
pricing directly
with manufacturers,
thereby creating
tripartite contracts.
Brand Marketing to
Hospitals, Aged Care,
Primary Care and
Consumer market
segments
Sales and Marketing of
exclusive brands aimed
at customers choosing
our brand of product
over a competitor.
EBOS Healthcare
ProPharma Consumer
division
Pre Wholesale
(includes 3PL)
International Business
“Virtual company”
services including all
Centre of Excellence
components and
contract sales/
marketing where
required.
Customers are all
manufacturers.
Business partnership
built around specific
competencies such as
Radiology with service
contracts included.
Healthcare Logistics
Health Support
EBOS Healthcare
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EBOS Group Limited Annual Report 2010
Going Forward
It makes sense that our trading businesses specialise
and focus on their core markets. It also makes
sense that these businesses share CENTRES OF
EXCELLENCE, where practical. Information technology
is a key enabler of these changes.
We are in the midst of projects to place all “back
office” services of Health Support onto the group’s
latest SAP information technology platform. This will
conclude in late 2010 with Health Support, ProPharma
and Healthcare Logistics sharing one I.T. platform, and
one Finance/Accounting team.
Similarly we will clarify our market offering with
the Health Support pharmacy wholesale business
transferring to ProPharma and the Pre Wholesale/3PL
contracts transferring to Healthcare Logistics.
Most significantly all major DHB contracts have been
renewed or rolled over during the year to 30 June.
The majority of District Health Boards now have
contracts with Health Support or ProPharma hospital
division.
The senior executive team, whilst having a primary
business unit responsibility now form part of a group
wide project team. This allows all businesses to benefit
from their vast range of skills and focus on new ideas
that will enhance growth.
Growth Initiatives
• Our EBOS NZ Healthcare team have
a renewed focus on medical specialty
areas where we see the opportunity to
either become the number one or two
player or provide a unique technical/price
advantage. Our focus is on the surgical
market. This initiative once successful
will be launched in Australia as well and
is likely to influence some of our future
acquisition plans.
• AUSTRALIA
We have mentioned earlier in this report
that we are a small player in the Australian
Healthcare market. Having said that, our
success in the two key areas we compete
in has been impressive.
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We are currently in the midst of a project
to combine all support services and
logistics for our Vital Medical subsidiary.
This is to ensure consistency with our
CENTRE OF EXCELLENCE concept and to
allow management to focus exclusively on
customer needs and sales growth.
We will retain the Vital Medical brand.
Our dedicated infection prevention
business unit started last year which
markets products to the aged care and
hospital sectors has grown well.
The key for Australia now, will be to
expand both geographically and in market
share, particularly into States where we
are not either number one or two in the
market. Generic growth based on the
existing portfolio will not satisfy our
needs, nor do justice to the size of the
market opportunity.
We have the talent in-house to handle a
much larger business.
Health Sector Review
Much has been written in New Zealand about the
formation of new government entities which aim to
reduce costs in the supply side of public hospital
spend.
Our group companies are absolutely best placed in
terms of market knowledge, information technology
platforms and vast experience based on existing
contractual arrangements. Most importantly we can
offer neutrality away from specific product bias.
Group executives are working closely with key
government policy and decision makers. Put simply,
we have the knowledge, experience and resources
to assist the government in a way that no other NZ
organisation can do.
The Future
Despite a great track record we cannot look back
because tomorrow will be different. What we do know
is that at an operational level we are performing to
world class levels and continue to drive improvements.
The sale of our scientific businesses has in itself been
a major project for our small executive team and the
outcome leaves the group with no debt and cash in
hand.
We are now turning our attention to growth via
acquisition and will apply our usual rigorous criteria
around expected returns.
We have the talent pool and resources at our disposal
to continue to chase our goal of becoming the leading,
non multinational company in Healthcare in our region.
Mark Waller
Managing Director
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EBOS Group Limited Annual Report 2010
Board of
Directors
RICK CHRISTIE MSC (HONS), FNZID, FNZIM (68)
(Chairman)
Joined the EBOS Group Ltd Board in June 2000,
and appointed chairman in April 2003. Member of
the Audit and Risk Committee, the Remuneration
Committee and the Nomination Committee. Mr Rick
Christie is a professional director with a breadth of
governance and management experience in the oil and
petrol-chemical industries. Former chief executive of
the diversified investment company Rangatira Ltd, a
former managing director of Cable Price Downer and
former chief executive of Trade New Zealand. He is
the chairman of Health Support Ltd and a director of
Tourism Holdings Ltd, Wakefield Health Ltd and the
NZ Pork Industry Board and Board Advisor to Solnet
Solutions Ltd. Previously chairman of AgResearch
Ltd, deputy chairman of the Foundation for Research,
Science & Technology and chairman of the Victoria
University Foundation Board of Trustees. He is also
a Fellow of the Royal Society of Arts, Manufacturers
and Commerce in London. He is a former director
of Television New Zealand and the New Zealand
Symphony Orchestra and a past president of Chamber
Music New Zealand.
MARK WALLER BCOM, ACA, FNZIM (56)
(Chief Executive and Managing Director)
Mark Waller has been chief executive officer and
managing director of EBOS Group Ltd since 1987.
He is a member of the Remuneration Committee. He is
a director of Global Science & Technology Ltd, Health
Support Ltd, EBOS Group Pty Ltd, EBOS Health &
Science Pty Ltd, Healthcare Distributors Pty Ltd, PRNZ
Ltd and its associated companies, Quantum Scientific
Pty Ltd, Vital Medical Supplies (Australia) Pty Ltd and
Scott Technology Ltd.
14
PETER KRAuS MA (HONS), DIP ENG (59)
(Deputy Chairman)
Peter Kraus is an Auckland businessman who has been
a director of EBOS Group Ltd since 1990.
He is a member of the Nomination Committee.
He is a director of Whyte Adder No.3 Ltd, Strand
Holdings Ltd, Strand Management Ltd, Herpa
Properties Ltd, Health Support Ltd, Ecostore Company
Ltd, Oceania Attractions Ltd, ISL International Ltd,
Hapimana Properties Ltd and Huckleberry Farms Ltd
and Trustee of the Perpanida Trust and The Annalise
Trust.
ELIZABETH COuTTS BMS, CA (51)
Appointed to the EBOS Group Ltd Board July 2003.
She is a member of the Audit and Risk Committee
and the Nomination Committee. Elizabeth Coutts
is a professional director. She is a former, Chairman
of Meritec Group, Chairman of Industrial Research,
and Life Pharmacy Ltd, director of Air New Zealand
Ltd, the Health Funding Authority and Trust Bank
New Zealand, former deputy chairman of Public
Trust, board member of Sport and Recreation NZ,
member of the Pharmaceutical Management Agency
(Pharmac), commissioner for both the Commerce
and Earthquake Commissions and former external
monetary policy adviser to the Governor of the
Reserve Bank of New Zealand and chief executive of
the Caxton Group of Companies and Carter building
supply group. Her current directorships include chair
of Urwin & Co Ltd, chair of the Audit, Finance and
He is the financial manager for a private group of
companies. He is a director of Whyte Adder No.3 Ltd,
Strand Holdings Ltd, Strand Management Ltd, Herpa
Properties Ltd, Health Support Ltd, Global Science
& Technology Ltd, PRNZ Ltd and its associated
companies, Ecostore Company Ltd, Eco Tech Solutions
Ltd, Oceania Attractions Ltd, ISL International Ltd,
Hapimana Properties Ltd, Huckleberry Farms Ltd and
Allum Management Services Ltd and a Trustee of The
Perpanida Trust and The Annalise Trust.
The above named Directors held office during
the year and since the end of the financial year.
Risk Committee of the Ministry of Health, director of
Ravensdown Fertiliser Co-operative Ltd and Skellerup
Holdings Ltd.
PETER MERTOn BPharm (48)
Appointed to the EBOS Group Ltd Board 12
September 2007. Peter has worked in the retail,
manufacturing, distribution and wholesale areas of
the pharmacy industry in New Zealand, Asia and
Africa since the early eighties. In 1987 he joined Zuellig
Pharma in New Zealand where he worked for the
Zuellig group and then API until 2005. From 1997
through 2008 he was chief executive officer of PRNZ
Ltd. He is Chairman of Pharmacy Brands Ltd and a
director of, Cape Healthcare Ltd, and Trustee of Pentz
Trust.
SARAH OTTREY BCOM (45)
Appointed to the EBOS Group Ltd Board
18 September 2006. Sarah is a marketing specialist
advising various high profile clients and is a Strategic
Marketing Consultant to DB Dominion Breweries Ltd.
She is a past board member of the Public Trust. Sarah
has held senior marketing management positions with
Unilever and DB Breweries.
MARK STEWART BCOM (47)
Appointed to the EBOS Group Ltd Board
8 September 2008. Mark commenced working for the
PDL Group of Companies in 1983 from 1987 to 2001
he held senior executive roles and had directorship
responsibilities, for a number of companies in the PDL
Group and was Managing Director of MasterTrade
Group Ltd from July 1991 until October 1994. Gaining
experience in manufacturing, sales and marketing in
the Asian and Australasian markets.
Since October 2001 he has been Managing Director
of Masthead Ltd, the private investment vehicle of the
Stewart Family. He is a director of Masthead Holdings
Ltd, Masthead Ltd, Masthead Services Ltd, Masthead
Investments Ltd, Masthead Portfolios Ltd, Masthead
Management Ltd, Windwhistle Holdings Ltd, Forwood
Forestry Ltd, Southern Excursions Ltd, Stravon Safaries
Ltd, Twinmark Investments Ltd (in liq.), Python
Portfolios Ltd, Woodbent Hill Ltd, Laindon Ltd, Andos
Holdings Ltd, Anaconda Ltd, Proteus Group Holdings
Ltd, Medusa Ltd, Lesley Hills Holdings Ltd, Newco No1
Ltd and Ziwipeak Ltd. Alternate director of Wakefield
Health Ltd.
BARRY WALLACE MCOM (HONS), CA (57)
Appointed to the EBOS Group Ltd Board October
2001. He is chairman of the Audit and Risk Committee
and member of the Remuneration Committee. Barry
Wallace is a chartered accountant with a background
in financial management with companies such as Rank
Xerox New Zealand Ltd and David Reid Electronics.
He is a former chief executive of Health Support Ltd.
15
EBOS Group Limited Annual Report 2010
Corporate
Governance
Statement
The Board and management of EBOS Group Ltd are
committed to ensuring that the Company adheres to
best practice and governance principles and maintains
high ethical standards. The Board has agreed to
regularly review and assess the Company’s governance
structures to ensure they are consistent, both in form
and in substance, with best practice. These are set out
in the Company’s Corporate Governance Code, the
full content of which can be found on the Company’s
website (www.ebos.co.nz). The Board considers
that the Company’s Corporate Governance policies,
practices and procedures substantially comply with
the New Zealand Exchange Corporate Governance
Best Practice Code.
Code of Ethics
The EBOS Code of Ethics is the framework of
standards by which the directors and employees
of EBOS and its related companies are expected to
conduct their professional lives, and covers conflicts
of interest, receipt of gifts, confidentiality, expected
behaviour, delegated authority and compliance with
laws and policies.
Role of the Board and Management
The Board is responsible for the direction and
supervision of the business and affairs of the Company
and the monitoring of the performance of the
Company on behalf of shareholders. The Board also
places emphasis on regulatory compliance.
Responsibility for the day to day management of the
Company has been delegated to the Chief Executive
Officer/Managing Director and his management team.
16
Board composition
The Board is elected by the shareholders of EBOS
Group Ltd. At each annual meeting at least one third
of the directors retire by rotation. The Board currently
comprises the following non-executive directors:
Chairman, Rick Christie; Peter Kraus; Elizabeth Coutts;
Peter Merton; Sarah Ottrey; Mark Stewart and Barry
Wallace. It has one executive director Mark Waller,
Chief Executive Officer/Managing Director. Rick
Christie, Elizabeth Coutts and Sarah Ottrey have been
determined as Independent Directors, (as defined
under the NZSX Listing Rules and the EBOS Group Ltd
Corporate Governance Code).
Board Committees
Specific responsibilities are delegated to the Audit and
Risk Committee, the Remuneration Committee and
the Nomination Committee. Each of these committees
has a charter setting out the committee’s objectives,
procedures, composition and responsibilities. Copies
of these charters are available on the Company’s
website.
Audit and Risk Committee
The Audit and Risk Committee provides the Board
with assistance in fulfilling their responsibility to
shareholders, the investment community and others
for overseeing the Company’s financial statements,
financial reporting processes, internal accounting
systems, financial controls, and annual external
financial audit and EBOS’s relationship with its external
auditor. In addition, the Audit and Risk Committee
is responsible for the establishment of policies and
procedures relating to risk oversight, identification,
management and control. Members of the Audit and
Risk Committee are Barry Wallace (Chairman),
Rick Christie and Elizabeth Coutts.
Remuneration Committee
The Remuneration Committee provides the Board
with assistance in establishing relevant remuneration
policies and practices for directors, executives and
employees. Members of the Remuneration Committee
are Rick Christie (Chairman), Barry Wallace and
Mark Waller.
Nomination Committee
The procedure for the appointment and removal of
directors is ultimately governed by the Company’s
Constitution. A director is appointed by ordinary
resolution of the shareholders although the Board
may fill a casual vacancy. The Board has delegated
to the Nomination Committee the responsibility
for recommending candidates to be nominated
as a director on the Board and candidates for the
committees. When recommending candidates to
act as director, the Nomination Committee takes
Shareholder participation
The Board aims to ensure that shareholders are
informed of all major developments affecting the
Group’s state of affairs. Information is communicated
to shareholders in the Annual Report and the Interim
Report. The Board has adopted a policy of Continuous
Disclosures that complies with the NZSX Listing
Rules. The Board encourages full participation of
shareholders at the Annual Meeting to ensure a
high level of accountability and identification with
the Group’s strategies and goals. Investors can
obtain information on the company from its website
(www.ebos.co.nz). The site contains recent NZSX
announcements and reports.
into account such factors as it deems appropriate,
including the experience and qualifications of the
candidate. The current members of the Nomination
Committee are Rick Christie (Chairman), Elizabeth
Coutts and Peter Kraus. The majority of the members
of the Nomination Committee are independent.
Board processes
The table on page 20 shows attendances at the board
and committee meetings during the year ended 30
June 2010.
Share trading by Directors
and Officers
The Company has formal procedures that directors
and officers must follow when trading EBOS shares.
They must notify and obtain the consent of the Board
prior to any trading. All trading must be conducted
within two prescribed trading windows. These periods
commence from the date on which the annual result
and half-yearly results are announced and conclude on
the following 30 November and 30 April respectively.
17
EBOS Group Limited Annual Report 2010
Director’s
Report
Your Directors are pleased to submit to shareholders
their report and financial statements for the year
ended 30 June 2010.
Principal activities
EBOS Group Limited (the Company) is listed on the
NZSX board of the New Zealand Exchange (NZX)
under the securities code EBO. EBOS Group is the
largest New Zealand owned independent national
distributor and marketer of medical, and scientific
supplies in New Zealand. Significant business
operations are also conducted in Australia, Papua New
Guinea and the Pacific. The company markets world
class healthcare and scientific brands sourced from
leading international manufacturers.
EBOS operates in two key business segments being
Healthcare and Scientific
Healthcare incorporates the sales and marketing of
healthcare products to a wide range of sectors and the
provision of wholesale distribution services of health
sector consumables, pharmaceuticals and ‘over-the-
counter’ products.
Scientific incorporates the sale and marketing of
laboratory consumables, life sciences equipment and
the provision of technical support to industry and
research laboratories.
On 5 August 2010 the Company entered into an
agreement to sell the Scientific operating business
segment. The transaction is subject to the satisfaction
of certain conditions, with the completion date being
1 September 2010. On settlement the cash proceeds of
the sale will exceed the carrying value of the Scientific
operating business segment.
Issued capital
As at 30 June 2010 the Company had on issue
50,795,751 ordinary fully paid shares, with 1,814,952
shares issued during the year.
18
Group results
Annual group operating revenue was NZ$1,373m in the
year ended 30 June 2010 (2009 $1,343m). Operating
profit before finance costs and tax of NZ$41.5m (2009
$34.7m) was earned for the year ended 30 June 2010.
The net profit for the period after interest and tax was
$25.4m before the additional deferred tax expense
of $1.9m resulting from the impact of New Zealand
Government tax legislation announced May 2010 on
depreciation of buildings (2009 $19.7m). Earnings per
share were 47.0 cents (2009 41.1 cents).
Operating cash flow of $41.8m (2009 $33.3m) was
generated in the year.
Distribution
The Directors approved a final distribution of 17.5 cents
per share making a total of 31 cents per share for the
year (2009 25 cents per share). Bonus shares under
the Distribution Plan will be issued on 8 October 2010.
Directors
Rick Christie; Peter Merton and Elizabeth Coutts
retire by rotation in accordance with the Company’s
constitution and being eligible offer themselves for
re-election.
Directors’ interests
Share dealings by Directors
The Directors tabled on page 19 have disclosed to the
Board under section 148(2) of the Companies Act 1993
particulars of acquisitions of dispositions of relevant
interests in ordinary shares during the year – refer
table on page 19.
Disclosure of interests by Directors
In accordance with section 140(2) of the Companies
Act 1993, the directors named below have made
general disclosure of interest, by a general notice
disclosed to the Board and entered in the Company’s
interest register, as follows:
R.G.M. Christie: Chairman of, Health Support Ltd,
and South Port New Zealand Ltd, and Director of
Tourism Holdings Ltd, Wakefield Health Ltd and
NZ Pork Industry Board and Board Advisor to Solnet
Solutions Ltd.
P.F. Kraus: Director of Whyte Adder No.3 Ltd, Strand
Holdings Ltd, Strand Management Ltd, Herpa
Properties Ltd, Health Support Ltd, Ecostore Company
Ltd, Oceania Attractions Ltd, ISL International Ltd,
Hapimana Properties Ltd and Huckleberry Farms Ltd
and Trustee of the Perpanida Trust and the Annalise
Trust.
E.M. Coutts: Chair of Urwin & Co Ltd, Chair Audit,
Finance and Risk Committee of the Ministry of Health,
and Director of Ravensdown Fertiliser Co-operative
Ltd, and Skellerup Holdings Ltd.
P.M. Merton: Chairman of Pharmacy Brands Ltd,
and Director of Cape Healthcare Ltd, and Trustee
of Pentz Trust.
S.C. Ottrey: Strategic Marketing Consultant to
DB Dominion Breweries Ltd.
M.J. Stewart: Director of Masthead Holdings Ltd,
Masthead Ltd, Masthead Services Ltd, Masthead
Investments Ltd, Masthead Portfolios Ltd, Masthead
Management Ltd, Windwhistle Holdings Ltd, Forwood
Forestry Ltd, Southern Excursions Ltd, Stravon Safaries
Ltd, Twinmark Investments Ltd (in Liq.), Python
Portfolios Ltd, Woodbent Hill Ltd, Laindon Ltd, Andos
Holdings Ltd, Anaconda Ltd, Proteus Group Holdings
Ltd, Medusa Ltd, Lesley Hills Holdings Ltd, and Newco
No1 Ltd and Ziwipeak Ltd. Alternate Director of
Wakefield Health Limited.
B.J. Wallace: Director of Allum Management Services
Ltd, Global Science and Technology Ltd, Health
Support Ltd, PRNZ Ltd and its associated companies,
Whyte Adder No.3 Ltd, Strand Holdings Ltd, Strand
Management Ltd, Herpa Properties Ltd, Ecostore
Company Ltd, Eco Tech Solutions Ltd, Oceania
Attractions Ltd, ISL International Ltd, Hapimana
Properties Ltd and Huckleberry Farms Ltd and Trustee
of the Perpanida Trust and The Annalise Trust.
M.B. Waller: Director of Global Science and Technology
Ltd, Health Support Ltd, EBOS Health & Science Pty
Ltd, EBOS Group Pty Ltd, Healthcare Distributors Pty
Ltd, PRNZ Ltd and its associated companies, Quantum
Scientific Pty Ltd, Scott Technology Ltd, and Vital
Medical Supplies (Australia) Pty Ltd.
Directors’ Report & Disclosures
Use of Company information
During the year the Board received no notices from directors of the company requesting to use company
information received in their capacity as directors, which would not otherwise have been available to them.
Share dealings by Directors
Director
R G M Christie – All non beneficially held
Issue of restricted staff shares
Maturing staff shares
E M Coutts
– Held by associated persons
P F Kraus
P F Kraus
– Held by associated persons
S C Ottrey
– Held by associated persons
P M Merton
– Held by associated persons
M J Stewart
Director of Python Portfolios Ltd
– Non beneficially held
M B Waller
– Held by associated persons
Non beneficially held
Issue of restricted staff shares
Maturing staff shares
B.J. Wallace
Non beneficially held – Director of Whyte
Adder No.3 Ltd
Director of Herpa
Properties Ltd
Ordinary Shares
Purchased (Sold)
Consideration Paid
(Received)
1,910
1,779
46,300
(31,345)
450
408
25
23
86,694
16,395
78,496
14,845
114
104
$11,160
$10,954
$138,905
Nil
$2,628
$2,512
$146
$142
$506,577
$95,800
$483,338
$91,408
$665
$640
40,045
36,258
(500,000)
$233,994
$232,258
($3,125,000)
122,543
110,955
480
9,314
1,910
1,779
46,300
(31,345)
86,694
16,395
78,496
14,845
$716,052
$683,203
$2,803
$57,351
$11,160
$10,954
$138,900
Nil
$506,577
$95,800
$483,338
$91,408
Date of
Transaction
October 2009
April 2010
June 2010
To June 2010
October 2009
April 2010
October 2009
April 2010
October 2009
October 2009
April 2010
April 2010
October 2009
April 2010
October 2009
April 2010
April 2010
October 2009
April 2010
October 2009
April 2010
October 2009
April 2010
June 2010
To June 2010
October 2009
October 2009
April 2010
April 2009
19
30 June 2010
30 June 2009
19,010
189,620
1,048
4,350,728
1,190,028
4,808
5,171,766
4,350,728
434,006
189,620
18,152
170,976
1,000
4,154,297
1,613,725
4,590
4,938,268
4,154,297
424,212
170,976
EBOS Group Limited Annual Report 2010
Director’s Report continued
Directors’ Report & Disclosures
Use of Company information continued
Directors’ shareholdings
Number of fully paid shares held as at
E M Coutts
R G M Christie – Non beneficially held – Staff share purchase scheme
P F Kraus
– Held by associated persons
– Held by associated persons
– Held by associated persons
– Non beneficially held – Director of Python Portfolios Ltd
– Non beneficially held – Director of Whyte Adder No.3 Ltd/
Herpa Properties Ltd
– Held by associated persons
– Non beneficially held – Staff share purchase scheme
P M Merton
S C Ottrey
M J Stewart
B J Wallace
M B Waller
Attendance
R Christie
P Kraus
E Coutts
P Merton
S Ottrey
M Stewart
B Wallace
M Waller
Board*
Eligible to
Attend
Attended
9
9
9
9
9
9
9
9
9
6
9
9
9
8
9
9
Audit & Risk Committee Remuneration Committee
Eligible to
Attend
Eligible to
Attend
Attended
Attended
3
–
3
–
–
–
3
3
3
–
3
–
–
–
3
3
1
–
–
–
–
–
1
1
1
–
–
–
–
–
1
1
*includes attendance by directors at subsidiary company board meetings.
Indemnity and insurance
In accordance with section 162 of the Companies Act 1993 and the constitution of the company, the Company has
given indemnities to, and has effected insurance for, the directors and executives of the Company and its related
companies which, except for some specific matters which are expressly excluded, indemnify and insure directors
and executives against monetary losses as a result of actions undertaken by them in the course of their duties.
Specifically excluded are certain matters, such as the incurring of penalties and fines which may be imposed for
breaches of law.
20
Directors’ Remuneration and other benefits
Directors’ remuneration and other benefits required to be disclosed pursuant to section 211(1) of the Companies Act
1993 for the year ended 30 June 2010 were as follows:
EBOS GROUP LIMITED
30 June 2010
30 June 2009
R.G.M. Christie
P.F. Kraus
E.M. Coutts
P. Merton
M.J. Stewart
S.C. Ottrey
B.J. Wallace
M.B. Waller
(Chief Executive Officer and Managing Director)
*Includes performance bonus and other emoluments
$106,000
$75,000
$53,000
$50,000
$50,000
$50,000
$56,000
Salary
* Other benefits
$470,420
$1,229,000
$106,000
$75,000
$53,000
$25,000
$40,625
$50,000
$56,000
$455,000
$875,000
Employee Remuneration
Grouped below, in accordance with Section 211 of the Companies Act 1993, are the number of employees or former
employees of the company and its subsidiaries, including those based in Australia, who received remuneration and
other benefits in their capacity as employees totalling NZ$100,000 or more during the year.
Employee Remuneration
Remuneration (NZ$)Number of Employees
2010
2009
100,000 – 110,000
110,000 – 120,000
120,000 – 130,000
130,000 – 140,000
140,000 – 150,000
150,000 – 160,000
160,000 – 170,000
170,000 – 180,000
190,000 – 200,000
200,000 – 210,000
220,000 – 230,000
230,000 – 240,000
240,000 – 250,000
250,000 – 260,000
260,000 – 270,000
290,000 – 300,000
330,000 – 340,000
340,000 – 350,000
380,000 – 390,000
440,000 – 450,000
500,000 – 510,000
520,000 – 530,000
550,000 – 560,000
27
19
10
11
–
8
7
3
2
–
–
1
1
1
–
1
1
1
1
–
–
1
1
18
11
14
6
12
5
1
1
2
1
1
2
1
1
2
–
–
–
–
1
1
–
–
Auditors
The Company’s Auditors, Deloitte, will continue in office in accordance with the Companies Act 1993.
The Directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible
with the general standard of independence for auditors imposed by the Companies Act 1993. Details of amounts
paid or payable to the auditor for non-audit services provided during the year by the auditors are outlined in note 5
to the financial statements.
R.G.M. Christie
Chairman
26 August 2010
M.B. Waller
Managing Director
21
EBOS Group Limited
Financial Report
For the Financial Year ended 30 June, 2010
Directors’ Responsibility
Statement
The Directors of EBOS Group Limited are pleased to present to shareholders the financial statements for
EBOS Group and its controlled entities (together the “group”) for the year to 30 June 2010.
The Directors are responsible for presenting financial statements in accordance with New Zealand law
and generally accepted accounting practice, which give a true and fair view of the financial position of the
company and the group as at 30 June 2010 and the results of their operations and cash flows for the year ended
on that date.
The Directors consider the financial statements of the company and the group have been prepared using
accounting policies which have been consistently applied and supported by reasonable judgements and
estimates and that all relevant financial reporting and accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable with reasonable accuracy,
the determination of the financial position of the company and group and facilitate compliance of the financial
statements with the Financial Reporting Act 1993.
The Directors consider that they have taken adequate steps to safeguard the assets of the company and the
group, and to prevent and detect fraud and other irregularities. Internal control procedures are also considered
to be sufficient to provide a reasonable assurance as to the integrity and reliability of the financial statements.
The Financial Statements are signed on behalf of the Board by:
Rick Christie
Chairman
26 August 2010
Mark Waller
Chief Executive Officer and Managing Director
22
AUDIT REPORT
TO THE SHAREHOLDERS OF EBOS GROUP LIMITED
We have audited the financial statements on pages 24 to 66. The financial statements provide information about the past
financial performance and financial position of EBOS Group Limited and group as at 30 June 2010. This information is stated
in accordance with the accounting policies set out on pages 28 to 35.
Board of Directors’ Responsibilities
The Board of Directors is responsible for the preparation, in accordance with New Zealand law and generally accepted
accounting practice, of financial statements which give a true and fair view of the financial position of EBOS Group Limited
and group as at 30 June 2010 and of the results of operations and cash flows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express to you an independent opinion on the financial statements presented by the Board of
Directors.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements.
It also includes assessing:
•
the significant estimates and judgements made by the Board of Directors in the preparation of the financial statements, and
• whether the accounting policies are appropriate to the company and group circumstances, consistently applied and
adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to
obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence
to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud
or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial
statements.
Other than in our capacity as auditor and the provision of information technology and due diligence advisory services we have
no relationship with or interests in EBOS Group Limited or any of its subsidiaries.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion:
• proper accounting records have been kept by EBOS Group Limited as far as appears from our examination of those
records; and
•
the financial statements on pages 24 to 66:
– comply with generally accepted accounting practice in New Zealand;
– comply with International Financial Reporting Standards; and
– give a true and fair view of the financial position of EBOS Group Limited and group as at 30 June 2010 and the
results of their operations and cash flows for the year ended on that date.
Our audit was completed on 26 August 2010 and our unqualified opinion is expressed as at that date.
Chartered Accountants
ChRISTChuRCh, NEW ZEALAND.
This audit report relates to the financial statements of EBOS Group Limited for the year ended 30 June 2010 included on EBOS Group Limited’s website. The Board
of Director’s is responsible for the maintenance and integrity of EBOS Group Limited’s website. We have not been engaged to report on the integrity of EBOS Group
Limited’s website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/
from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the
published hard copy of the audited financial statements and related audit report dated 26 August 2010 to confirm the information included in the audited financial
statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
23
23
EBOS Group Limited
Income Statement
For the Financial Year ended 30 June, 2010
Revenue
Profit before depreciation, amortisation,
finance costs and income tax expense
Depreciation
Amortisation of finite life intangibles
Profit before finance costs and tax
Finance costs
Profit before income tax (expense)/credit
Income tax (expense)/credit
Profit for the period
Earnings per share:
Basic (cents per share)
Diluted (cents per share)
EBOS Group Limited
Statement of Comprehensive Income
For the Financial Year ended 30 June, 2010
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
2 (a)
1,373,367
1,344,946
81,848
78,519
2 (b)
2 (b)
2 (b)
2 (b)
3
45,744
(3,688)
(504)
41,552
(5,702)
35,850
(12,413)
38,711
(3,364)
(644)
34,703
(7,926)
26,777
(7,050)
16,188
(445)
-
15,743
(3,429)
12,314
(1,679)
13,811
(446)
-
13,365
(4,687)
8,678
1,395
23,437
19,727
10,635
10,073
25
25
47.0
47.0
41.1
41.1
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
Profit for the period
23,437
19,727
10,635
10,073
Other comprehensive income
Cash flow hedges gains/(losses)
Related income tax to cashflow hedges
(Losses) on translation of foreign operations
21
21
21
1,285
(386)
(470)
(2,555)
729
(458)
866
(260)
-
(1,570)
471
-
Total comprehensive income net of tax
23,866
17,443
11,241
8,974
24
Notes to the financial statements are included on pages 28 to 66.
EBOS Group Limited
Balance Sheet
As at 30 June, 2010
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Current tax refundable
Other financial assets - derivatives
Advances to subsidiaries
Finance leases
Total current assets
Non-current assets
Property, plant and equipment
Capital work in progress
Finance leases
Prepayments
Deferred tax assets
Goodwill
Indefinite life intangibles
Finite life intangibles
Shares in subsidiaries
Total non-current assets
Total assets
Current liabilities
Bank overdraft
Trade and other payables
Finance leases
Bank loans
Current tax payable
Employee benefits
Other financial liabilities - derivatives
Advances from subsidiaries
Total current liabilities
Non-current liabilities
Bank loans
Trade and other payables
Deferred tax liabilities
Finance leases
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Foreign currency translation reserve
Retained earnings
Cash flow hedge reserve
Total equity
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
6
7
8
3
9
10
11
7
3
12
13
14
15
16
17
16, 18
16
3
19
16
16
17
3
16, 18
56,484
148,178
2,581
128,484
458
105
-
102
33,609
150,720
2,203
127,380
562
-
-
108
18,175
8,718
1,116
7,955
53
105
4,648
102
336,392
314,582
40,872
17,570
245
-
1,179
5,297
133,741
23,714
205
-
19,444
-
57
856
6,540
133,915
23,730
709
-
4,267
-
-
-
1,190
1,728
4,960
-
128,630
Parent
2009
$’000
1,845
10,430
1,018
9,100
23
-
11,878
108
34,402
4,386
-
57
-
2,433
1,728
4,960
-
128,630
181,951
185,251
140,775
142,194
518,343
499,833
181,647
176,596
-
248,855
176
-
5,577
5,578
1,512
-
3
239,457
551
2,250
3,678
4,767
3,550
-
-
7,779
20
-
-
2,339
1,083
12,842
3
7,376
27
1,000
-
1,612
2,691
5,072
261,698
254,256
24,063
17,781
59,017
4,770
9,148
18
902
70,000
4,936
7,612
186
804
28,000
-
2,151
-
-
73,855
83,538
30,151
335,553
337,794
54,214
38,000
-
1,488
20
-
39,508
57,289
182,790
162,039
127,433
119,307
20
21
21
21
106,000
1,116
76,738
(1,064)
105,861
1,586
56,555
(1,963)
106,000
-
22,191
(758)
105,861
-
14,810
(1,364)
182,790
162,039
127,433
119,307
Notes to the financial statements are included on pages 28 to 66.
25
EBOS Group Limited
Statement of Changes in Equity
For the Financial Year ended 30 June, 2010
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
Equity at start of period
162,039
147,304
119,307
113,041
Total comprehensive income net of tax
23,866
17,443
11,241
8,974
Dividends paid to company shareholders
Shares issued
22
20
(3,254)
139
(2,817)
109
(3,254)
139
(2,817)
109
Equity at end of period
182,790
162,039
127,433
119,307
26 Notes to the financial statements are included on pages 28 to 66.
EBOS Group Limited
Cash Flow Statement
For the Financial Year ended 30 June, 2010
Cash flows from operating activities
Receipts from customers
Interest received
Dividends received from subsidiaries
Payments to suppliers and employees
Taxes (paid)/refunded
Interest paid
Notes
Group
2010
$’000
Group
2009
$’000
1,373,841
942
-
(1,319,253)
(8,015)
(5,702)
1,343,550
878
-
(1,298,807)
(4,385)
(7,926)
Parent
2010
$’000
70,065
538
12,935
(64,242)
(62)
(3,429)
Parent
2009
$’000
64,679
688
11,350
(59,272)
1,254
(4,687)
Net cash inflow from operating activities
24c
41,813
33,310
15,805
14,012
Cash flows from investing activities
Sale of property, plant & equipment
Advances from subsidiaries
Purchase of property, plant & equipment
Payments for capital work in progress
Advances to subsidiaries
Businesses acquired
257
-
(2,656)
(245)
-
-
2,969
-
(1,867)
(916)
-
(1,452)
-
7,770
(357)
-
7,230
-
24a
Net cash (outflow)/inflow from investing activities
(2,644)
(1,266)
14,643
156
-
(602)
-
(21)
-
(467)
Cash flows from financing activities
Proceeds from issue of shares
Repayment of borrowings
Dividends paid to equity holders of parent
139
(13,000)
(3,254)
109
(11,600)
(2,817)
139
(11,000)
(3,254)
109
(9,100)
(2,817)
22
Net cash (outflow) from financing activities
(16,115)
(14,308)
(14,115)
(11,808)
Net increase in cash held
Effect of exchange rate fluctuations on cash held
Net cash and cash equivalents at beginning
of the year
23,054
(176)
17,736
11
16,333
-
33,606
15,859
1,842
Net cash and cash equivalents at the end of the year
56,484
33,606
18,175
Cash and cash equivalents
Bank overdrafts
56,484
-
33,609
(3)
18,175
-
56,484
33,606
18,175
1,737
-
105
1,842
1,845
(3)
1,842
Notes to the financial statements are included on pages 28 to 66.
27
EBOS Group Limited
Notes to the Financial Statements
For the Financial Year ended 30 June, 2010
1.
SUMMARY OF ACCOUNTING POLICIES
1.1 Statement of Compliance
EBOS Group Ltd (“the Company”) is a profit-oriented company incorporated in New Zealand, registered under the Companies Act 1993
and listed on the New Zealand Exchange.
The company operates in two business segments, being healthcare and Scientific – healthcare incorporates the sale of healthcare
products in a range of sectors, own brands, retail healthcare and wholesale activities, and Scientific incorporates the sale of laboratory
consumables, life sciences equipment and technical support to industry and research laboratories.
The Company is a reporting entity and issuer for the purposes of the Financial Reporting Act 1993 and its financial statements comply
with that Act.
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (‘NZ GAAP’).
They comply with New Zealand Equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable reporting
standards as appropriate for profit oriented entities.
The Financial Statements comply with International Financial Reporting Standards (“IFRS”).
1.2 Basis of Preparation
The financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial instruments.
Cost is based on the fair value of the consideration given in exchange for assets.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of
relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June, 2010 and the
comparative information presented in these financial statements for the year ended 30 June, 2009.
The information is presented in thousands of New Zealand dollars.
1.3 Critical Judgements in applying accounting policies
In the application of NZ IFRS management is required to make judgements, estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of NZ IFRS that have significant effects on the financial statements and estimates
with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial
statements.
Critical judgements made by management principally relate to the identification of intangible assets such as brands separately from
goodwill, arising on acquisition of a business or subsidiaries and the recognition of revenue on significant contracts subject to renewal
where the receipt of cashflows does not match the services provided.
28
1.
SUMMARY OF ACCOUNTING POLICIES cont.
1.4 Key Sources of Estimation Uncertainty
Key sources of estimation uncertainty relate to assessment of impairment of goodwill and indefinite life intangibles.
The group determines whether goodwill and indefinite life intangibles are impaired at least on an annual basis. This requires an
estimation of the recoverable amount of the cash generating units to which the goodwill and indefinite life intangibles are allocated.
The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and indefinite life intangibles are
discussed in notes 12 and 13. It is assumed that significant contracts will be rolled over for each period of renewal.
Determining the recoverable amounts of goodwill and intangible assets requires the estimation of the effects of uncertain future events at
balance date. These estimates involve assumptions about risk assessment to cash flows or discount rates used, future changes in salaries
and future changes in price affecting other costs.
1.5 Specific accounting policies
The following specific accounting policies have been adopted in the preparation and presentation of the financial statements.
a) Basis of consolidation
The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the group,
being the company (the parent entity) and its subsidiaries as defined in NZ IAS-27 ‘Consolidated and Separate Financial Statements’.
A list of subsidiaries appears in note 15 to the financial statements. Consistent accounting policies are employed in the preparation and
presentation of the consolidated financial statements.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method.
The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in
profit or loss as incurred.
Where applicable, the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured
at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify
as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or
liability are accounted for in accordance with relevant NZ IFRSs. Changes in the fair value of contingent consideration classified as
equity are not recognised.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts, to reflect
new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group receives complete information about facts and
circumstances that existed as of the acquisition date – and is subject to a maximum period of one year.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated Income Statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
All significant inter-company transactions and balances are eliminated on consolidation.
In the Company’s financial statements, investments in subsidiaries are recognised at their cost, less any adjustment for impairment.
29
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
1.
SUMMARY OF ACCOUNTING POLICIES cont.
b) Goodwill
Goodwill arising on the acquisition of the subsidiary is recognised as an asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer’s previously-held equity interest (if any) in the acquiree over the fair value of the identifiable
net assets recognised.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously-held equity
interests (if any) in the acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill in not amortised, but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be
impaired. The recoverable amount is the higher of fair value less cost to sell and value in use. If the recoverable amount of the cash
generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Any impairment loss is recognised immediately in profit or loss and is not subsequently reversed.
c) Indefinite life intangible assets
Indefinite life intangible assets represent purchased brand names and are initially recognised at cost. Such intangible assets are regarded
as having indefinite useful lives and they are tested annually for impairment on the same basis as for goodwill.
d) Finite life intangible assets
Finite life intangible assets are recorded at cost less accumulated amortisation. Amortisation is charged on a straight line basis over their
estimated useful life. The estimated useful life of finite life intangible assets is 1 to 8 years. The estimated useful life and amortisation
period is reviewed at the end of each annual reporting period.
e) Intangible assets acquired in a business combination
All potential intangible assets acquired in a business combination are identified and recognised separately from goodwill where they
satisfy the definition of an intangible asset and their fair value can be measured reliably.
f) Property, plant, and equipment
The group has five classes of property, plant and equipment:
• Freehold land;
• Buildings;
• Leasehold improvements;
• Plant and Vehicles, and
• Office equipment, furniture and fittings.
Property, Plant and Equipment is initially recorded at cost.
Cost includes the original purchase consideration and those costs directly attributable to bring the item of Property, Plant and Equipment
to the location and condition for its intended use.
After recognition as an asset Property, Plant and Equipment is carried at cost less accumulated depreciation and impairment losses.
When an item of Property, Plant and Equipment is disposed of, any gain or loss is recognised in the Income Statement and is calculated
as the difference between the sale price and the carrying value of the item.
Depreciation is provided for on a straight line basis on all Property, Plant and Equipment other than freehold land, at depreciation rates
calculated to allocate the assets’ cost less estimated residual value, over their estimated useful lives.
Leased assets are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets.
30
1.
SUMMARY OF ACCOUNTING POLICIES cont.
f) Property, plant, and equipment (cont.)
The following useful lives are used in the calculation of depreciation:
• Buildings
• Leasehold improvements
• Plant
• Office equipment, furniture and fittings
• Motor vehicles
20 to 100 years
2 to 15 years
2 to 20 years
2 to 10 years
4 to 5 years
g) Impairment of Assets
At each balance sheet date, the group reviews the carrying amounts of its non current assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, other than for Goodwill and indefinite life intangible assets, the carrying amount of
the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Impairment losses can
not be reversed for Goodwill and indefinite life intangible assets.
h) Taxation
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement
because it excludes items of income and expense that are taxable or deductible in other years and further excludes items that are never
taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all
deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates,
and interest in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences
associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable
profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled
or the asset realised, based on tax (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The
measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner which the Group
expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
31
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
1.
SUMMARY OF ACCOUNTING POLICIES cont.
h) Taxation (cont.)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets
and liabilities on a net basis.
Inventories
i)
Inventories are recognised at the lower of cost, determined on a weighted average basis, and net realisable value. Cost comprises direct
materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business, less all
estimated costs of completion and costs to be incurred in marketing, selling and distribution.
j) Leases
The group leases certain plant and equipment and land and buildings.
Finance leases, which effectively transfer to the group substantially all of the risks and benefits incident to ownership of the leased item,
are capitalised at the present value of the minimum lease payments. The leased assets and corresponding liabilities are recognised and
the leased assets are depreciated over the period the group is expected to benefit from their use. Lease payments are apportioned between
finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly to the Income Statement.
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the lease items,
are included in the determination of the net surplus in equal instalments over the period of the lease. Lease incentives received are
recognised as an integral part of the total lease payments made and also spread on a basis representative of the pattern of benefits
expected to be derived from the leased asset.
k) Foreign Currency Translation
Functional and Presentation Currency
The financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”).
The consolidated financial statements are presented in New Zealand dollars, which is the Company’s functional and presentation
currency.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign
currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Income
Statement for the period.
Foreign Operations
On consolidation, the assets and liabilities of the group’s overseas operations are translated at exchange rates prevailing at the reporting
date. Income and expense items are translated at the average rates for the period. Exchange differences arising, if any, are recognised in
the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at exchange rates prevailing at the reporting date.
l) Goods & Services Tax
Revenues, expenses, liabilities and assets are recognised net of the amount of goods and services tax (GST), except for receivables and
payables which are recognised inclusive of GST.
Cash flows are included in the cash flow statement on a net basis. The GST component of cash flows arising from investing and
financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
32
1.
SUMMARY OF ACCOUNTING POLICIES cont.
m) Financial Instruments
Financial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes a party to the contractual
provisions of the instrument.
Financial assets are classified into the following specific categories: “financial assets at fair value through profit or loss” (FVTPL), “held
to maturity” investments, “available for sale” (AFS) financial assets and “loans and receivables”. The category depends on the nature
and purpose of the financial assets and is determined at initial recognition. The categories used are set out below:
Cash & Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Loans and Receivables
Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and
receivables.
Loans and receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the Income Statement
when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial
recognition.
Equity Instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial Liabilities
Financial liabilities are classified as either financial liabilities at “fair value through profit or loss” (FVTPL) or “other financial
liabilities” measured at amortised cost. The classifications used are set out below:
Other Financial Liabilities
Trade and other payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest
rate method.
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received plus issue costs associated
with the borrowing. After initial recognition, these loans and borrowings are subsequently measured at amortised cost using the effective
interest rate method which allocates the cost through the expected life of the loan or borrowing. Amortised cost is calculated taking into
account any issue costs, and any discount or premium on drawdown.
Bank loans are classified as current liabilities (either advances or current portion of term debt) unless the group has an unconditional
right to defer settlement of the liability for at least 12 months after the balance sheet date.
Derivative Financial Instruments
The group enters into foreign currency forward exchange contracts to hedge trading transactions, including anticipated transactions,
denominated in foreign currencies and from time to time 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.
33
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
1.
SUMMARY OF ACCOUNTING POLICIES cont.
m) Financial Instruments (cont.)
Cashflow hedges
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item,
along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of
the hedge and on an ongoing basis, the group documents whether the hedging instrument that is used in a hedging relationship is highly
effective in offsetting changes in cashflows of the hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cashflow hedges are deferred in equity.
The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. however,
when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and
losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset and
liability.
hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires, is terminated,
exercised or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and
is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.
n) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and
services provided in the normal course of business, net of returns, discounts, allowances and GST. The following specific recognition
criteria must be met before revenue is recognised:
Sale of Goods
Sales of goods are recognised when significant risks and rewards of owning the goods are transferred to the buyer, when the revenue can
be measured reliably and when management effectively ceases involvement or control.
Rendering of Services
Revenue from services rendered is recognised when it is probable that the economic benefits associated with the transaction will flow
to the entity. The stage of completion at balance date is assessed based on the value of services performed to date as a percentage of the
total services to be performed.
Interest Income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which
is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying
amount.
Effective Interest Method
The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial asset, or, where appropriate, a shorter period to the carrying amount of the financial asset.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement. Royalties determined on
a time basis are recognised on a straight line basis over the period of the agreement. Royalty arrangements that are based on production,
sales and other measures are recognised by reference to the underlying agreement.
Dividend Income
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
34
1.
SUMMARY OF ACCOUNTING POLICIES cont.
o) Cash Flow Statement
The cash flow statement is prepared exclusive of GST, which is consistent with the method used in the income statement.
Definition of terms used in the cash flow statement:
Operating activities include all transactions and other events that are not investing or financing activities.
Investing activities are those activities relating to the acquisition and disposal of current and non-current investments and any other non-
current assets.
Financing activities are those activities relating to changes in the equity and debt capital structure of the company and group and those
activities relating to the cost of servicing the company’s and the group’s equity capital.
p) Employee entitlements
A liability for annual leave and long service leave is accrued and recognised in the statement of financial position. The liability is equal
to the present value of the estimated future cash outflows as a result of employee services provided at balance date.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured at the present value
of the estimated future cash outflows to be made by the Group in respect of services provided up to reporting date.
q) Segment Reporting
The Group has adopted NZ IFRS 8 Operating Segments, with effect from 1 July 2009. NZ IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision
maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor standard (NZ IAS
14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards
approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the
identification of such segments.
r) New standards and Interpretations
The following new accounting standards have impacted current year disclosures and accounting policies in the financial statements.
NZ IAS 1- Presentation of Financial Statements (revised 2007)
This has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of
the financial statements. In particular there is a new Statement of Comprehensive Income.
NZ IFRS 8 - Operating Segments
This is a disclosure Standard that has resulted in minor changes to the Group’s disclosures.
Amendments to NZ IFRS 7 – Financial Instruments –Disclosures
The amendments to NZ IFRS 7 expand the disclosures required in respect of liquidity risk.
We are not aware of any standards in issue but not yet effective which would materially impact the amounts recognised or disclosed in
the financial statements.
There were no changes to accounting policies during the year.
35
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
2.
PROFIT
Revenue
(a)
Revenue consisted of the following items:
Revenue from the sale of goods - external
Revenue from the sale of goods - inter group
Revenue from the rendering of services
Management fees - external
Management fees - inter group
Rental revenue - inter group
Interest revenue - inter group
Interest revenue - other
Royalty income - inter group
Dividends - inter group
Other revenue
Profit before income tax (expense)/credit
(b)
Profit before income tax has been arrived
at after crediting/(charging) the following gains
and losses from operations:
Gain/(loss) on disposal of property, plant and
equipment
Change in fair value of derivative financial instruments
Profit before income tax has been arrived
at after charging the following expenses by nature:
Cost of sales - external
Purchases inter group
Write-down of inventory
Finance costs:
Bank interest
Other interest expense
Total finance costs
Net bad and doubtful debts arising from:
Impairment loss on trade & other receivables
Depreciation of property, plant and equipment
Amortisation of finite life intangibles
Operating lease rental expenses:
Minimum lease payments
Donations
Employee benefit expense
Other expenses
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
1,365,417
-
5,482
1,495
-
-
-
942
-
-
31
1,334,458
-
6,469
2,638
-
-
-
878
-
-
503
57,154
10,283
-
-
483
85
203
335
370
12,935
-
56,192
9,441
-
-
483
-
513
175
365
11,350
-
1,373,367
1,344,946
81,848
78,519
(16)
848
301
(736)
(4)
848
61
(736)
(1,217,913)
-
(1,511)
(1,192,969)
-
(2,097)
(5,059)
(643)
(7,371)
(555)
(44,940)
(1,991)
(391)
(2,978)
(451)
(42,120)
(2,346)
(940)
(4,571)
(116)
(5,702)
(7,926)
(3,429)
(4,687)
10
14
(445)
(3,688)
(504)
(7,165)
(46)
(58,531)
(42,844)
(549)
(3,364)
(644)
(7,029)
(42)
(59,762)
(43,352)
(30)
(445)
-
(875)
(16)
(10,552)
(7,709)
(6)
(446)
-
(835)
(7)
(9,704)
(8,075)
Total expenses
(1,338,349)
(1,317,734)
(70,378)
(69,166)
Profit before income tax expense
35,850
26,777
12,314
8,678
36
3.
INCOME TAXES
Income tax recognised in income statement
(a)
Tax expense/(credit) comprises:
Current tax expense:
Current year
Adjustments for prior years
Other adjustments
Deferred tax expense/(credit):
Origination and reversal of temporary differences
Adjustments for prior years
Adjustments related to changes in tax rates or
imposition of new taxes
Total income tax expense/(credit)
The prima facie income tax expense on pre-tax
accounting profit from operations reconciles to
the income tax expense in the financial
statements as follows:
Profit before income tax expense
Income tax expense calculated at 30%
Non-deductible expenses/(non-assessable income)
Effect of differences arising from investment
interests in other jurisdictions
Effect of reduction of tax base of buildings
under/(over) provision of income tax
in previous year
Adjustments related to changes in tax rates
Other adjustments
Notes
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
11,573
(1,583)
32
10,022
915
1,844
(368)
8,998
(10)
65
9,053
-
-
33
33
-
3
36
39
(2,024)
21
219
1,475
(1,408)
(26)
-
(48)
-
2,391
(2,003)
12,413
7,050
1,646
1,679
(1,434)
(1,395)
35,850
26,777
12,314
8,678
10,755
67
(346)
1,974
261
(368)
70
8,033
(524)
(353)
-
11
-
(117)
3,694
(3,841)
2,603
(3,658)
(346)
712
1,475
(48)
33
(353)
-
(23)
-
36
Total income tax expense/(credit)
12,413
7,050
1,679
(1,395)
The tax rates used are principally the corporate tax rates of 30% (2009: 30%) payable by New Zealand and Australian corporate entities
on taxable profits under tax law in each jurisdiction.
The tax legislation announcement made by the New Zealand Government in May 2010 has impacted on the deferred tax expense/
(credit) for the current period as follows:
1. The tax rate for depreciation on buildings, which have a life of 50 years or greater was reduced to zero for periods from
and including 2012. The effect of this is an additional deferred tax expense in the current period of $1,974,000 (group),
$712,000 (parent).
2. The Company income tax rate is to reduce to 28% (currently 30%) for the period from and including the 2012 year.
The impact of this change in tax rates has resulted in a deferred tax credit in the current period of $368,000 (group),
$48,000 (parent).
37
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
3.
INCOME TAXES cont.
Current tax assets and liabilities
(b)
Current tax assets:
Current tax refundable
Current tax liabilities:
Current tax payable
Deferred tax balance
(c)
Deferred tax assets comprise:
Temporary differences
Deferred tax liabilities comprise:
Temporary differences
Taxable and deductible temporary differences arise from the following:
2010
Gross deferred tax liabilities:
Property, plant & equipment
Provisions
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other financial liabilities – derivatives
Other
38
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
458
562
53
5,577
3,678
-
23
-
5,297
6,540
1,190
2,433
(9,148)
(7,612)
(2,151)
(1,488)
(3,851)
(1,072)
(961)
945
Group
Opening Charged to Charged to
equity
income
balance
$’000
$’000
$’000
(63)
(18)
(7,531)
(1,830)
18
276
(7,612)
(1,536)
256
3,454
517
846
1,467
6,540
77
226
56
(4)
(1,210)
(855)
(2,391)
-
-
-
-
-
-
-
(388)
-
(388)
(388)
Closing
balance
$’000
(1,893)
-
(7,255)
(9,148)
333
3,680
573
454
257
5,297
3.
INCOME TAXES cont.
2009
Gross deferred tax liabilities:
Property, plant & equipment
Provisions
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other financial liabilities – derivatives
Other
2010
Gross deferred tax liabilities:
Property, plant & equipment
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other financial liabilities – derivatives
Tax losses carried forward
Group
Opening Charged to Charged to
equity
income
balance
$’000
$’000
$’000
(244)
(18)
(7,534)
(7,796)
45
2,953
635
113
246
3,992
181
-
3
184
211
501
(118)
4
1,221
1,819
2,003
-
-
-
-
-
-
-
729
-
729
729
Parent
Opening Charged to Charged to
equity
income
balance
$’000
$’000
$’000
-
(1,488)
(1,488)
11
337
41
585
1,459
2,433
(663)
-
(663)
(11)
230
-
-
(1,202)
(983)
(1,646)
-
-
-
-
-
-
(260)
-
(260)
(260)
Closing
balance
$’000
(63)
(18)
(7,531)
(7,612)
256
3,454
517
846
1,467
6,540
Closing
balance
$’000
(663)
(1,488
(2,151)
-
567
41
325
257
1,190
39
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
3.
INCOME TAXES cont.
2009
Gross deferred tax liabilities:
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other financial liabilities – derivatives
Tax losses carried forward
Parent
Opening Charged to Charged to
equity
income
balance
$’000
$’000
$’000
Closing
balance
$’000
(1,488)
-
-
(1,488)
21
218
175
113
-
527
(10)
119
(134)
-
1,459
1,434
1,434
-
-
-
472
-
472
472
11
337
41
585
1,459
2,433
No liability has been recognised in respect of the amount of temporary differences including foreign currency translation reserves
associated with undistributed earnings of off-shore subsidiaries because the group is in a position to control the timing of the reversal of
the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Parent
2010
$’000
Parent
2009
$’000
(1,604)
3,857
62
(1,365)
-
(700)
(2,628)
3,064
(1,254)
(727)
118
(177)
(1,604)
Imputation credit account balances
(d)
Balance at beginning of the period
Attached to dividends received
Taxation paid
Attached to dividends paid
Other credits
Other debits
Group
2010
$’000
4,624
3,857
4,301
(5,222)
8
(723)
Group
2009
$’000
4,808
3,064
2,710
(3,792)
244
(2,410)
Balance at end of the period
6,845
4,624
250
Imputation credits available directly and
indirectly to shareholders of the parent
company, through
Parent company
Subsidiaries
250
6,595
6,845
(1,604)
6,228
4,624
40
4.
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
5.
REMUNERATION OF AUDITORS
Auditor of the parent entity (Deloitte)
Audit of the financial statements
Due diligence
Information technology services
6.
TRADE & OTHER RECEIVABLES
Trade receivables (i)
Other receivables
Allowance for impairment (ii)
Group
2010
$’000
6,539
266
6,805
Group
2009
$’000
4,340
227
4,567
Parent
2010
$’000
4,451
266
4,717
Parent
2009
$’000
2,686
227
2,913
404
36
64
504
403
-
75
478
61
36
64
161
115
-
75
190
148,819
707
(1,348)
151,104
750
(1,134)
8,717
139
(138)
10,475
93
(138)
148,178
150,720
8,718
10,430
(i) Trade receivables are non-interest bearing and generally on monthly terms. No interest is charged on the trade receivables for the
first 60 days from the date of the invoice. Thereafter, interest may be charged at 3% per annum on the outstanding balance. The
Group’s ProPharma Pharmacy business unit generally holds collateral over its trade receivables balances.
(ii) Allowance for Impairment
Balance at the beginning of the year
Impairment loss recognised on trade receivables
Amounts written off as uncollectible
Amounts recovered during year
Impairment losses reversed
(1,134)
(593)
231
-
148
(718)
(549)
138
(5)
-
(1,348)
(1,134)
(138)
(30)
30
-
-
(138)
(138)
(7)
7
-
-
(138)
In determining the recoverability of trade and other receivables, the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to reporting date. The concentration of credit risk is limited due to the customer
base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the
allowance for doubtful debts.
41
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
6.
TRADE & OTHER RECEIVABLES cont.
(iii) Aging of impaired trade and other receivables
90 days+
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
(1,348)
(1,134)
(1,348)
(1,134)
(138)
(138)
(138)
(138)
(iv) Aging of past due but not impaired trade and other receivables
Included in the trade and other receivables balance are debtors with a carrying amount of group $15,672,000 (2009: $21,855,000)
and parent $2,522,000 (2009: $3,330,000) which are past due at the reporting date for which the Group and/or parent has not
provided any impairment as the amounts are still considered recoverable.
10,454
2,458
2,760
14,682
3,386
3,787
15,672
21,855
2,581
1,179
3,760
2,203
856
3,059
1,443
149
930
2,522
1,116
-
1,116
1,554
574
1,202
3,330
1,018
-
1,018
128,484
127,380
128,484
127,380
7,955
7,955
9,100
9,100
105
105
-
-
105
105
-
-
30 - 60 days
60 - 90 days
90 days+
7.
PREPAYMENTS
Current portion
Term portion
8.
INVENTORIES
Finished Goods
At cost
9.
OTHER FINANCIAL ASSETS - DERIVATIVES
At fair value:
Foreign currency forward contracts (i)
(i) Financial asset carried at fair value through profit or loss (“FVTPL”).
42
10.
PROPERTY, PLANT AND EQUIPMENT
Freehold
land
at
cost
$’000
Buildings
at
cost
$’000
Group
Leasehold
improv.
at
cost
$’000
Plant and Office equip.
furniture &
fittings at
cost
$’000
vehicles
at
cost
$’000
Gross carrying amount
Balance at 1 July, 2008
Additions
Disposals
Acquisitions through business
combinations
Net foreign currency exchange
differences
3,251
-
(1,356)
10,026
124
(1,197)
-
-
-
-
2,640
26
(599)
3
(11)
8,016
1,077
(672)
57
(39)
11,039
2,078
(705)
22
(37)
Total
$’000
34,972
3,305
(4,529)
82
(87)
Balance at 30 June, 2009
1,895
8,953
2,059
8,439
12,397
33,743
Additions
Disposals
Net foreign currency exchange
differences
-
-
-
80
-
-
16
(26)
(7)
888
(1,536)
1,136
(1,172)
2,120
(2,734)
(39)
(35)
(81)
Balance at 30 June, 2010
1,895
9,033
2,042
7,752
12,326
33,048
Accumulated depreciation
Balance at 1 July, 2008
Disposals
Depreciation expense
Net foreign currency exchange
differences
Balance at 30 June, 2009
Disposals
Depreciation expense
Net foreign currency exchange
differences
Balance at 30 June, 2010
Net book value
As at 30 June, 2009
As at 30 June, 2010
-
-
-
-
-
-
-
-
-
(1,333)
141
(298)
(696)
522
(393)
(3,368)
527
(1,143)
(7,472)
697
(1,530)
(12,869)
1,887
(3,364)
-
9
14
24
47
(1,490)
(558)
(3,970)
(8,281)
(14,299)
-
(284)
-
20
(415)
1,248
(1,231)
1,191
(1,758)
2,459
(3,688)
5
21
24
50
(1,774)
(948)
(3,932)
(8,824)
(15,478)
1,895
1,895
7,463
7,259
1,501
1,094
4,469
3,820
4,116
3,502
19,444
17,570
43
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
10.
PROPERTY, PLANT & EQUIPMENT cont.
Freehold
land
at
cost
$’000
698
-
(4)
694
-
-
Buildings
at
cost
$’000
2,711
124
-
2,835
78
-
Parent
Leasehold
improv.
at
cost
$’000
Plant and Office equip.
furniture &
fittings at
cost
$’000
vehicles
at
cost
$’000
209
9
(16)
202
2
(7)
1,115
167
(446)
836
162
(307)
1,701
275
(669)
1,307
89
(39)
Total
$’000
6,434
575
(1,135)
5,874
331
(353)
Gross carrying amount
Balance at 1 July, 2008
Additions
Disposals
Balance at 30 June, 2009
Additions
Disposals
Balance at 30 June, 2010
694
2,913
197
691
1,357
5,852
Accumulated depreciation
Balance at 1 July, 2008
Disposals
Depreciation expense
Balance at 30 June, 2009
Disposals
Depreciation expense
Balance at 30 June, 2010
Net book value
As at 30 June, 2009
As at 30 June, 2010
-
-
-
-
-
-
-
(15)
-
(95)
(110)
-
(97)
(115)
16
(19)
(118)
7
(19)
(797)
355
(164)
(606)
302
(123)
(1,155)
669
(168)
(654)
39
(206)
(2,082)
1,040
(446)
(1,488)
348
(445)
(207)
(130)
(427)
(821)
(1,585)
694
694
2,725
2,706
84
67
230
264
653
536
4,386
4,267
Group plant includes finance leases capitalised with a cost of $1,394,000 (2009: $1,398,000) and book value of $217,000 (2009:
$728,000). Parent plant includes finance leases capitalised with a cost of $134,000 (2009: $134,000) and book value of $Nil (2009
$25,000).
Land and buildings in Auckland with a carrying value of $5,751,000 (2009: $5,939,000) were last valued on 30 June 2010 and
determined by Telfer Young (Auckland) Limited, in accordance with NZ IAS16, to have a fair value of $9,600,000 (2009: $9,600,000).
Land and buildings in Christchurch with a carrying value of $3,400,000 (2009: $3,419,000) were acquired during the last three years
and are stated at cost less depreciation.
Land and buildings in Wellington with a 2008 carrying value of $2,427,000 were sold in December 2008 for $2,785,000.
44
10.
PROPERTY, PLANT & EQUIPMENT cont.
Aggregate depreciation recognised as an expense
during the year:
Buildings
Leasehold improvements
Plant and vehicles
Office equipment, furniture & fittings
11.
CAPITAL WORK IN PROGRESS
Capital work in progress
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
284
415
1,231
1,758
3,688
298
393
1,143
1,530
3,364
97
19
123
206
445
95
19
164
168
446
Group
2010
$’000
245
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
-
-
-
The capital work in progress relates to software development. The total cost to complete the project is $975,000 (2009: Nil).
12.
GOODWILL
Gross carrying amount
Balance at beginning of financial year
Additional amounts recognised from business
combinations occurring during the period
Effects of foreign currency exchange differences
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
133,915
133,062
1,728
1,728
-
(174)
1,131
(278)
-
-
-
-
Net book value
133,741
133,915
1,728
1,728
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to the following cash-generating units representing the lowest level at
which management monitor goodwill:
• Australian hospital and Primary healthcare sector (EBOS Group Pty Limited) – healthcare Australia.
• New Zealand Consumer, hospital, Primary healthcare, Aged Care and International Product Supplies (EBOS Group Limited) –
healthcare NZ.
• New Zealand hospital Procurement and logistic services (health Support Limited) – Logistics NZ.
• Australasia Scientific Supplies (Global Science & Technology Limited) – Scientific.
• New Zealand Pharmacy Wholesaler and Logistic Services (PRNZ Limited) – Pharmacy/Logistics NZ
45
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
12.
GOODWILL cont.
The carrying amount of goodwill allocated to cash-generating units is as follows:
healthcare Australia
healthcare NZ (Parent)
healthcare - Logistics NZ Wholesale
Scientific
healthcare – Pharmacy NZ Wholesale
Group
2010
$’000
16,629
1,728
1,468
20,341
93,575
Group
2009
$’000
16,775
1,728
1,468
20,369
93,575
133,741
133,915
Parent
2010
$’000
Parent
2009
$’000
-
1,728
-
-
-
1,728
-
1,728
-
-
-
1,728
During the year ended 30 June 2010, management have determined that there is no impairment of any of the cash generating units
containing goodwill (2009: Nil).
The recoverable amounts (i.e. higher of value in use and fair value less costs to sell) of those units with the exception of Scientific which
has been determined at fair value less cost to sell, are determined on the basis of value in use calculations. Management has determined
that the recoverable amount calculations are most sensitive to changes in the following assumptions:
healthcare Australia and healthcare NZ – Maintaining market share and gross margin being maintained during a period of high
volatility in foreign currency during the budget period.
Logistics NZ and Pharmacy/Logistics NZ – Maintaining market share and controlling operational costs during the budget period.
Gross margins during the period for healthcare Australia, healthcare NZ, Logistics NZ and Pharmacy/Logistics NZ are estimated by
management based on average gross margins achieved before the start of the budget period. Market shares during the budget period
are assessed by management based on average market shares achieved in the period immediately before the start of the budget
period, adjusted each year for any anticipated growth.
The value in use calculation uses cash flow projections based on financial budgets approved by management covering a five year period.
Annual growth rates of 2% to 5% (2009: 2% to 5%), which is below current historical growth rates; an allowance of 2% (2009: 2%) for
inflation to expenses, and pre tax discount rates of 14.2% to 14.3% (2009: 14.2% to 14.8%) have been applied to these projections. Cash
flows beyond the five year period have been extrapolated using a steady 2% (2009: 2%) growth rate. Management also believes that any
reasonably possible change in the key assumptions would not cause the carrying amount of any of the cash generating units to exceed
their recoverable amount.
46
13.
INDEFINITE LIFE INTANGIBLES
Group
Natures Kiss Allersearch Liceblaster Trademarks
$’000
$’000
$’000
$’000
Total
$’000
Gross carrying amount
Balance at 1 July, 2008
Net foreign currency exchange differences
Balance at 30 June, 2009
Net foreign currency exchange differences
2,390
-
2,390
-
2,570
-
2,570
-
1,556
(26)
17,240
-
23,756
(26)
1,530
(16)
17,240
-
23,730
(16)
Balance at 30 June, 2010
2,390
2,570
1,514
17,240
23,714
Net book value
As at 30 June, 2009
As at 30 June, 2010
Gross carrying amount
Balance at 1 July, 2008
Balance at 30 June, 2009
Balance at 30 June, 2010
Net book value
As at 30 June, 2009
As at 30 June, 2010
2,390
2,390
2,570
2,570
1,530
1,514
17,240
17,240
23,730
23,714
Natures Kiss
$’000
Parent
Allersearch
$’000
2,390
2,390
2,390
2,390
2,390
2,570
2,570
2,570
2,570
2,570
Total
$’000
4,960
4,960
4,960
4,960
4,960
The carrying amount of brands (indefinite life intangibles) has been allocated to the cash generating units as follows:
healthcare Australia
healthcare NZ (Parent)
Pharmacy/Logistics NZ
Group
2009
$’000
4,100
2,390
17,240
23,730
2010
$’000
4,084
2,390
17,240
23,714
47
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
13.
INDEFINITE LIFE INTANGIBLES cont.
Management have assessed these as having an indefinite useful life. In coming to this conclusion management considered expected
expansion of the usage of the brands across other products and markets, the typical product life cycle of these assets, the stability of the
industry in which the brands are operating, the level of maintenance expenditure required and the period of legal control over the brands.
During the year ended 30 June 2010, management have determined that there is no impairment of any of the brands.
The calculation of the recoverable amounts for Natures Kiss; Allersearch and Liceblaster brands and Pharmacy/Logistics NZ
Trademarks have been determined based on a value in use calculation that uses cash flow projections based on financial budgets
approved by management covering a five-year period. Management has determined that the recoverable amount calculations are
most sensitive to change in the following assumptions. Annual growth rates of 4% to 5% (2009: 2% to 5%), and an allowance of 2%
(2009: 2%) for inflation to expenses, and pre-tax discount rates of 14.3% to 14.6% (2009:14.3% to 14.6%) have been applied to these
projections. Cash flows beyond the five-year period have been extrapolated using a steady 2% (2009:2%) growth rate. Management also
believes that any reasonably possible change in the key assumptions would not cause the carrying amount of the brands to exceed their
recoverable amount.
Group
2010
$’000
2009
$’000
1,490
1,490
(781)
(504)
(1,285)
(137)
(644)
(781)
205
709
Group
2010
$’000
205
2009
$’000
709
14.
FINITE LIFE INTANGIBLES
Gross carrying amount of Supply Contracts
Balance at beginning of financial period
Accumulated amortisation & impairment
Balance at beginning of financial period
Amortisation expense
Balance at end of financial period
Net book value at end of financial period
Allocated to cash generating units as follows:
Pharmacy/Logistics NZ
48
15.
SUBSIDIARIES
Parent and Head Entity
Ebos Group Limited
Subsidiaries (all balance dates 30 June)
Ebos Group Pty Limited
Vital Medical Supplies (Australia) Pty Limited
Ebos health & Science Pty Limited
health Support Limited
Global Science & Technology Limited
- Quantum Scientific Pty Limited
PRNZ Limited
EBOS Limited Partnership
- healthcare Distributors Pty Limited
16.
BORROWINGS
Current
Bank overdrafts (i)
Bank loans (i)
Finance lease liabilities (ii)
Advances from Subsidiaries (at call) (iii)
Non-current
Bank loans (i)
Finance lease liabilities (ii)
Total borrowings
Country of
Incorporation
Australia
Australia
Australia
New Zealand
New Zealand
Australia
New Zealand
Australia
Australia
Ownership Interests
and Voting Rights
2010 and 2009
100%
100%
100%
100%
100%
100%
100%
100%
100%
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
-
-
176
-
176
3
2,250
551
-
2,804
59,017
18
70,000
186
-
-
20
12,842
12,862
28,000
-
59,035
70,186
28,000
59,211
72,990
40,862
3
1,000
27
5,072
6,102
38,000
20
38,020
44,122
(i)
Bank term loans and revolving cash advance facilities operate under a negative pledge deed provided to ANZ National Bank
Limited by the parent company and its subsidiaries.
Secured by the assets leased.
(ii)
(iii) unsecured.
17.
TRADE & OTHER PAYABLES
Current
Trade payables
Other payables
Non-current
Other payables
235,159
13,696
228,171
11,286
248,855
239,457
4,770
4,936
4,672
3,107
7,779
-
5,404
1,972
7,376
-
Total trade & other payables
253,625
244,393
7,779
7,376
49
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
18.
LEASES
Finance leases
Minimum future lease payments
Finance leases relate to office equipment, plant and motor vehicles. The group has options to purchase the equipment for a nominal
amount at the conclusion of the lease agreements.
Finance lease liabilities
Minimum Future Lease Payments
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
Present Value of Minimum
Future Lease Payments
Parent
2010
$’000
Group
2009
$’000
Group
2010
$’000
Not later than 1 year
Later than 1 year and not later than
5 years
184
21
684
215
25
-
25
(5)
34
26
60
(13)
176
18
194
-
551
186
737
-
205
(11)
899
(162)
Minimum lease payments*
Less future finance charges
Present value of minimum
lease payments
Included in the financial statements as:
Finance leases - current portion
Finance leases - non current portion
194
737
20
47
194
737
176
18
194
551
186
737
Parent
2009
$’000
27
20
47
-
47
27
20
47
20
-
20
-
20
20
-
20
*Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.
Operating leases
Leasing arrangements
Operating leases relate to certain property and equipment. All operating lease contracts contain market review clauses in the event that
the company/group exercises its option to renew. The company/group does not have an option to purchase the leased asset at the expiry
of the lease period.
Operating leases
Non-cancellable operating lease payments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
6,788
13,371
2,744
6,692
15,288
11,725
844
376
-
759
719
-
22,903
33,705
1,220
1,478
50
19.
OTHER FINANCIAL LIABILITIES - DERIVATIVES
At fair value:
Foreign currency forward contracts (i)
Interest rate swaps (ii)
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
-
1,512
1,512
742
2,808
3,550
-
1,083
1,083
742
1,949
2,691
(i) Financial liability carried at fair value through profit or loss (“FVTPL”).
(ii) Designated and effective as cashflow hedging instrument carried at fair value.
20.
SHARE CAPITAL
Fully paid ordinary shares
Balance at beginning of financial period
Issue of shares to executives and staff
under employee share ownership scheme
Bonus shares issued under Profit Distribution Plan
- October 2008
- April 2009
- October 2009
- April 2010
2010
No.
’000
2010
$’000
2009
No.
’000
2009
$’000
48,981
105,861
47,022
105,752
46
139
44
109
-
-
901
868
-
-
-
-
1,115
800
-
-
-
-
-
-
50,796
106,000
48,981
105,861
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Changes to the Companies Act in 1993 abolished the authorised capital and par value concept in relation to share capital from 1 July,
1994. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.
Given the immateriality of the amounts involved, the issue of shares to executives and staff under the employee ownership scheme
have not been accounted for pursuant to NZ IFRS-2: Share Based Payment. Since the inception of the employee ownership scheme in
December 1994 339,650 (2009: 293,350) shares have been issued raising $547,030 (2009: $408,130).
51
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
21.
RESERVES
Foreign currency translation reserve
Balance at beginning of the period
Translation of foreign operations
Balance at end of the period
Group
2010
$’000
2009
$’000
1,586
(470)
1,116
2,044
(458)
1,586
Exchange differences, principally relating to the translation from Australian dollars, being the functional currency of the group’s foreign
controlled entities in Australia, into New Zealand dollars, are brought to account by entries made directly to the foreign currency
translation reserve.
Retained Earnings
Balance at beginning of the period
Profit for the period
Dividends provided for or paid (note 22)
Group
2010
$’000
56,555
23,437
(3,254)
Group
2009
$’000
39,645
19,727
(2,817)
Parent
2010
$’000
14,810
10,635
(3,254)
Parent
2009
$’000
7,554
10,073
(2,817)
Balance at end of the period
76,738
56,555
22,191
14,810
Cash Flow Hedge Reserve
Balance at beginning of the period
Gain/(loss) recognised on cash flow hedges
Related income tax
(1,963)
1,285
(386)
(137)
(2,555)
729
(1,364)
866
(260)
(265)
(1,570)
471
Balance at end of the period
(1,064)
(1,963)
(758)
(1,364)
The hedging reserve represents gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain
or loss on the hedge is recognised in profit or loss when the hedged transaction impacts profit or loss.
22.
DIVIDENDS
Recognised amounts
Fully paid ordinary shares
- Final - prior year
- Interim - current year
Unrecognised amounts
Final dividend
2010
Cents per
share
2010
Total
$’000
2009
Cents per
share
14.5
13.5
28.0
1,853
1,401
3,254
13.5
10.5
24.0
2009
Total
$’000
1,504
1,313
2,817
17.5
2,222
14.5
1,853
A bonus share distribution of 17.5 cents per share was declared on 26 August 2010 with the shares to be issued on 8 October 2010.
Shareholders may elect to sell these shares back to the Company. It is anticipated the cash impact of the sell back will be approximately
$2,222,000 (2009: $1,853,000).
52
23.
ACQUISITION OF BUSINESSES
Name of Business Acquired
2009:
100% of business assets of MedBio Limited
Description of Acquisition Activity
2009
Net Assets Acquired
Current assets:
Trade and other receivables
Prepayments
Inventories
Non-current assets:
Property, plant and equipment
Current liabilities:
Trade and other payables
Net assets acquired
Goodwill on acquisition
Consideration
Principal
activity
Date of
acquisition
Scientific Supplies
1 July 2008
Cost of
acquisition
$’000
1,452
1,452
Book Value
MedBio
Fair value
adjustments
$’000
$’000
Fair value
on
acquisition
$’000
233
7
99
82
(100)
321
1,131
1,452
-
-
-
-
-
-
-
-
233
7
99
82
(100)
321
1,131
1,452
The contribution to net surplus for the 2009 year attributable to the purchase of MedBio Limited was $215,000.
53
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
24.
NOTES TO THE CASH FLOW STATEMENT
(a)
Businesses acquired
Note 23 sets out details of the businesses acquired.
Details of the acquisitions are as follows.
Consideration
Cash and cash equivalents
Represented by:
Net assets acquired (Note 23)
Goodwill on acquisition
Consideration
Net cash outflow on acquisition
Cash and cash equivalents consideration
Less cash and cash equivalents acquired
(b)
Financing facilities
Financing facilities
Bank overdraft facility, reviewed annually and
payable at call:
Amount used
Amount unused
Bank loan facilities with various maturity
dates through to August 2011
Amount used
Amount unused
54
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
-
-
-
-
-
-
-
-
1,452
1,452
321
1,131
1,452
1,452
-
1,452
-
-
-
-
-
-
-
-
-
3,561
3,561
3
3,567
3,570
-
1,250
1,250
59,017
40,000
72,250
39,000
28,000
20,000
99,017
111,250
48,000
-
-
-
-
-
-
-
-
3
1,247
1,250
39,000
19,000
58,000
24.
NOTES TO THE CASH FLOW STATEMENT cont.
(c)
Reconciliation of profit for the period
with cash flows from operating activities
Profit for the period
23,437
19,727
10,635
10,073
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
Add/(less) non-cash items:
Depreciation
Loss/(gain) on sale of property, plant and equipment
Amortisation of finite life intangible assets
(Gain)/loss on derivatives/financial instruments
Deferred tax
Provision for doubtful debts
Movement in working capital:
Trade and other receivables
Finance lease receivables
Prepayments
Inventories
Current tax refundable/payable
Trade and other payables
Employee benefits
Foreign currency (gain)/loss on translation of working
capital balances
3,688
16
504
(848)
2,391
214
5,965
2,328
63
(701)
(1,104)
2,003
9,232
909
3,364
(301)
644
736
(2,003)
416
2,856
(710)
58
906
(676)
4,658
6,036
720
445
4
-
(848)
1,646
-
1,247
1,712
63
(98)
1,145
(30)
403
728
446
(61)
-
736
(1,433)
-
(312)
(1,858)
58
(971)
5,031
1,293
469
229
(319)
(504)
-
-
12,411
10,488
3,923
4,251
Movements in items treated as investing/financing activities
-
239
-
-
Net cash inflow from operating activities
41,813
33,310
15,805
14,012
55
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
25.
EARNINGS PER SHARE CALCULATION
Basic earnings per share (refer Income Statement and note 20)
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings
Weighted average number of ordinary shares
for the purposes of basic earnings per share
Basic earnings per share
Group
2010
$’000
Group
2009
$’000
23,437
19,727
49,841
47,996
47.0
41.1
Diluted earnings per share (refer Income Statement and note 20)
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
Earnings
Weighted average number of ordinary shares for the
purpose of diluted earnings per share
Diluted earnings per share
26.
COMMITMENTS FOR EXPENDITURE
Group
2010
$’000
Group
2009
$’000
23,437
19,727
49,841
47,996
47.0
41.1
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
(a)
Capital expenditure commitments
Property, Plant and Equipment
975
-
-
-
(b)
Lease commitments
Finance lease liabilities and non-cancellable operating lease commitments are disclosed in note 18 to the financial statements
56
27.
CONTINGENT LIABILITIES & CONTINGENT ASSETS
Contingent liabilities
Guarantees given to third parties
Guarantees arising from the deed of cross
guarantee with other entities in the wholly-owned group
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
Parent
2009
$’000
6,338
6,751
154
158
-
-
31,017
33,250
In August 2008 the company renegotiated its bank facilities. Bank term loans and revolving cash advance facilities operate under a
negative pledge deed provided to ANZ National Bank Limited by the company and its subsidiaries. Previously the company has entered
into a deed of guarantee for certain wholly-owned subsidiaries. The amount disclosed as a contingent liability represents total liabilities
of the group of companies party to that, less the liabilities recognised by the group.
A subsidiary company (PRNZ Limited) is guarantor for certain loans made to pharmacies by the ANZ National Bank Limited amounting
to $5,184,000 (2009: $5,593,000). The directors are of the opinion that provisions are not required in respect of these matters, as it is not
probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
A performance bond of up to $1,000,000 (2009: $1,000,000) is also held by the bank on behalf of a supplier.
28.
SEGMENT INFORMATION
(a)
Adoption of NZ IFRS 8 Operating Segments
The group has adopted NZ IFRS 8 Operating Segments, with effect from 1 July 2009. NZ IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision
maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (NZ IAS
14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards
approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the
identification of such segments.
Following the adoption of the NZ IFRS 8, the identification of the Group’s reportable segments has not changed.
(b)
Products and services from which reportable segments derive their revenues
The Group’s reportable segments under IFRS 8 are as follows:
healthcare: Incorporates the sale of healthcare products in a range of sectors, own brands, retail healthcare and wholesale activities.
Scientific: Incorporates the sale of laboratory consumables, life sciences equipment and technical support to industry and research
laboratories.
Information regarding the Group’s reportable segments is presented below. Amounts reported for the prior year have been restated to
conform to the requirements of NZ IFRS 8.
57
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
28.
SEGMENT INFORMATION cont.
(c)
Segment revenues and results
The following is an analysis of the Group’s revenue and results by reportable segment:
Revenue from external customers
healthcare
Scientific
Segment result
healthcare
Scientific
Depreciation
Amortisation of finite life intangibles
Finance costs
Income tax expense
Profit for the period
Group
2010
$’000
Group
2009
$’000
1,317,481
55,886
1,278,201
66,745
1,373,367
1,344,946
40,392
5,352
45,744
(3,688)
(504)
(5,702)
(12,413)
34,278
4,433
38,711
(3,364)
(644)
(7,926)
(7,050)
23,437
19,727
The accounting policies of the reportable segments are consistent with the Group’s accounting policies. Segment result represents profit
before depreciation, amortisation, 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.
Group
2010
$’000
Group
2009
$’000
478,953
39,390
455,055
44,778
518,343
499,833
Segment assets
(d)
healthcare
Scientific
58
28.
SEGMENT INFORMATION cont.
For the purposes of monitoring segment performance and allocating resources between segments, the chief operating decision maker
monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. Assets
used jointly by reportable segments are allocated on the basis of revenues earned by individual reportable segments.
(e)
Revenues from major products and services
The Group’s major products and services are the same as the reportable segments i.e. healthcare and scientific. Revenues are reported
above under (c) Segment revenues and results.
(f)
Geographical information
The Group operates in two principal geographical areas; New Zealand (country of domicile) and Australia.
The Group’s revenue from external customers by geographical location (of the reportable segment) and information about its segment
assets (non-current assets) excluding financial instruments and deferred tax assets are detailed below:
Revenue from external customers
New Zealand
Australia
Non-current assets
New Zealand
Australia
Group
2010
$’000
Group
2009
$’000
1,200,974
172,393
1,173,852
171,094
1,373,367
1,344,946
148,702
27,952
149,772
28,882
176,654
178,654
(g)
Information about major customers
No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues (June 2009: Nil).
59
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
29.
RELATED PARTY DISCLOSURES
(a)
Parent Entities
The parent entity in the group is EBOS Group Limited.
(b)
Equity interests in Related Parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 15 to the financial statements.
(c)
Transactions with Related Parties
Transactions involving the parent entity
Amounts receivable from and payable to related parties at balance date are disclosed on the parent company balance sheet, and Note 16
of these financial statements.
During the financial year, EBOS Group Limited received dividends of $12,935,000 (2009: $11,350,000) from its subsidiaries.
During the financial year, EBOS Group Limited provided accounting and administration services to its subsidiaries for a consideration
of $483,000 (2009: $483,000) and charged royalties for the use of brand names and patents totalling $370,000 (2009: $365,000).
During the financial year, EBOS Group Limited rented warehouse space and contracted labour from its subsidiaries for a total cost of
$154,000 (2009: $342,000).
Terms/price under which related party transactions were entered into
All loans advanced to and payable by subsidiaries are unsecured, subordinate to other liabilities and are at call. Interest rates determined
by the directors were 5.0% - 6.2% (2009: 6.0% - 9.7%). During the financial year, EBOS Group Limited received interest of $203,000
(2009: $513,000) from loans to subsidiaries, and paid interest of $444,000 (2009: $109,000) to subsidiaries.
No amounts were provided for doubtful debts relating to debts due from related parties at reporting date (2009: Nil).
Guarantees provided or received
As detailed in note 27, EBOS Group Limited has entered into a deed of cross guarantee with certain wholly-owned subsidiaries.
(d)
Key Management Personnel Remuneration
Details of key management personnel remuneration are disclosed in note 4 to the financial statements.
(e)
Other Transactions Involving Related Parties
During the financial year Quantum Scientific Pty Ltd leased premises from interests associated with key management personnel,
D Brown. Rents of $403,000 (2009: $406,000) were paid.
During the financial year Quantum Scientific Pty Ltd paid amounts totalling $443,000 (2009: $373,000) to interests associated with the
same key management personnel for the provision of management services.
Peter Merton a Director of the parent company, received remuneration of Nil (2009:$177,000) for services provided as Chief Executive
of PRNZ Ltd. Mr Peter Merton retired as Chief Executive of PRNZ Limited in December 2008.
60
30.
FINANCIAL INSTRUMENTS
(a)
Financial risk management objectives
The group’s corporate treasury function provides services to the two segments, co-ordinates access to domestic and international
financial markets, and manages the financial risks relating to the operation of the group.
The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
The use of financial derivatives is governed by the group’s policies approved by the Board of Directors, which provide written principles
on the use of financial derivatives. Compliance with policies and exposure limits is reviewed on a regular basis.
(b) Market Risk
The group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
The group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk,
including:
•
•
forward foreign exchange contracts to hedge the exchange rate risk arising on imports of product;
interest rate swaps to mitigate the risk of rising interest rates.
(c)
Foreign currency risk management
The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
Forward foreign exchange contracts
It is the policy of the group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts
within 60% to 100% of the exposure generated. The group also enters into forward foreign exchange contracts to manage the risk
associated with anticipated sales and purchase transactions out to 12 months within 20% to 75% of the exposure generated.
The fair value of forward exchange contracts is derived using inputs supplied by third parties that are observable either directly
(i.e. prices) or indirectly (i.e. derived from prices). Therefore the Group has categorised these derivatives as Level 2 under the fair
value hierarchy contained within the amendment to NZ IFRS 7.
Outstanding Contracts
2010
2009
Average
exchange rate
Foreign currency
2010
FC’000
2009
FC’000
Contract value
2010
$’000
2009
$’000
Fair value
2010
$’000
2009
$’000
Buy Australian Dollars
Less than 3 months
Buy Euro
Less than 3 months
Buy Pounds
Less than 3 months
Buy US Dollars
Less than 3 months
Buy Japanese Yen
Less than 3 months
-
0.801
-
700
-
874
-
(1)
0.551
0.426
0.476
0.372
725
510
455
1,070
1,224
1,100
1,315
2,584
(15)
(187)
0.699
0.544
1,400
1,650
2,002
3,035
65.481
53.583
20,000
26,000
305
485
46
49
25
(49)
(450)
(55)
The above financial instruments relate to the group and parent entity. The fair value of forward exchange contracts outstanding are
recognised as other financial assets/liabilities. hedge accounting has not been adopted for the forward foreign exchange contracts.
4,692
8,202
105
(742)
61
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
30.
FINANCIAL INSTRUMENTS cont.
(d)
Interest rate risk management
The group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by maintaining
an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts and forward interest rate
contracts.
Interest rate swap contracts
under interest rate swap contracts, the group agrees to exchange the difference between fixed and floating rate interest amounts
calculated on agreed notional principal amounts. Such contracts enable the group to mitigate the risk of changing interest rates on debt
held. The fair value of interest rate swaps are based on market values of equivalent instruments at the reporting date.
Outstanding Contracts
Outstanding variable rate for fixed contracts
Less than 1 year
1 to 3 years
3 to 5 years
Outstanding Contracts
Less than 1 year
1 to 3 years
Group
Average
contracted fixed
interest rate
2010
%
2009
%
Notional principal
amount
2010
$’000
2009
$’000
Fair value
2010
$’000
2009
$’000
7.97
7.11
-
-
7.78
5.13
29,222
25,885
-
-
58,612
4,000
(634)
(878)
-
-
(2,721)
(87)
55,107
62,612
(1,512)
(2,808)
Average
contracted fixed
interest rate
2010
%
8.22
7.39
2009
%
-
7.91
Parent
Notional principal
amount
2010
$’000
2009
$’000
Fair value
2010
$’000
2009
$’000
20,000
15,000
-
40,000
(452)
(631)
-
(1,949)
35,000
40,000
(1,083)
(1,949)
The fair value of interest rate swaps outstanding are recognised as other financial assets/liabilities. hedge accounting has been adopted.
The fair value of interest rate swaps is derived using inputs supplied by third parties that are observable either directly (i.e. prices) or
indirectly (i.e. derived from prices). Therefore the Group has categorised these derivatives as Level 2 under the fair value hierarchy
contained within the amendment to NZ IFRS 7.
Liquidity
(e)
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve banking facilities by continuously
monitoring forecast and actual cashflows and matching maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its financial assets and financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of the financial assets and liabilities. The table includes both interest and principal
cash flows.
62
30.
FINANCIAL INSTRUMENTS cont.
Group - 2010
Financial assets:
Cash and cash equivalents
Trade and other receivables
Other financial assets
Finance leases
Financial liabilities:
Trade and other payables
Finance leases
Bank loans
Other financial liabilities
Group - 2009
Financial assets:
Cash and cash equivalents
Trade and other receivables
Other financial assets
Finance leases
Financial liabilities:
Bank overdraft
Trade and other payables
Finance leases
Bank loans
Other financial liabilities
Maturity Dates
Total
1-2
Years
2-3
Years
3-4
Years
4-5
Years
5+
Years
$’000
$’000
$’000
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
-
536
-
-
-
536
-
-
-
-
-
536
-
-
-
536
-
-
-
-
-
-
56,484
- 148,178
105
-
112
-
- 204,879
536
-
-
-
5,892 257,260
205
61,909
1,512
-
-
-
536
5,892 320,886
Maturity Dates
Total
1-2
Years
2-3
Years
3-4
Years
4-5
Years
5+
Years
$’000
$’000
$’000
$’000
$’000
$’000
Weighted
average
effective
On
interest Demand
rate
%
$’000
2.1 56,484
- 148,178
-
-
-
9.0
204,662
Less
than 1
year
$’000
-
-
105
112
217
- 248,693
-
-
-
9.1
4.2
-
531
184
2,479
1,512
536
21
59,430
-
248,693
4,706
59,987
Weighted
average
effective
On
interest Demand
rate
%
$’000
2.3 33,609
- 150,720
-
-
-
9.0
184,329
Less
than 1
year
$’000
-
-
-
118
118
-
-
-
67
67
-
-
-
-
-
10.8
3
- 239,457
-
-
-
9.1
5.1
-
-
536
683
5,935
3,550
-
536
216
3,570
-
-
536
-
70,595
-
239,460
10,704
4,322
71,131
-
-
-
-
-
-
536
-
-
-
536
-
-
-
-
-
-
536
-
-
-
-
33,609
- 150,720
-
-
185
-
- 184,514
-
3
6,427 248,564
899
80,100
3,550
-
-
-
536
6,427 333,116
63
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
30.
FINANCIAL INSTRUMENTS cont.
Parent - 2010
Financial assets:
Cash and cash equivalents
Trade and other receivables
Other financial assets
Advances to subsidiaries
Finance leases
Financial liabilities:
Trade and other payables
Finance leases
Bank loans
Other financial liabilities
Advances from subsidiaries
Parent - 2009
Financial assets:
Cash and cash equivalents
Trade and other receivables
Advances to subsidiaries
Finance leases
Financial liabilities:
Bank overdraft
Trade and other payables
Finance leases
Bank loans
Other financial liabilities
Advances from subsidiaries
Maturity Dates
Total
1-2
Years
2-3
Years
3-4
Years
4-5
Years
5+
Years
$’000
$’000
$’000
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Maturity Dates
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,175
8,718
105
4,924
112
32,034
7,779
25
29,176
1,083
13,548
51,611
Total
1-2
Years
2-3
Years
3-4
Years
4-5
Years
5+
Years
$’000
$’000
$’000
$’000
$’000
$’000
Weighted
average
effective
On
interest Demand
rate
%
$’000
2.1 18,175
8,718
-
-
-
-
-
5.9
9.0
Less
than 1
year
$’000
-
-
105
4,924
112
26,893
5,141
-
9.1
3.6
-
5.5
7,779
-
-
-
-
-
25
1,008
1,083
13,548
-
-
28,168
-
-
7,779
15,664
28,168
Weighted
average
On
effective
interest Demand
rate
%
$’000
2.3
1,845
- 10,430
-
-
7.3
9.0
Less
than 1
year
$’000
-
-
12,745
118
12,275
12,863
-
-
-
67
67
-
-
-
-
-
10.8
-
9.1
3.5
-
7.3
3
7,376
-
-
-
-
-
-
34
1,035
2,691
5,442
-
-
26
1,330
-
-
-
-
-
38,222
-
-
7,379
9,202
1,356
38,222
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,845
10,430
12,745
185
25,205
3
7,376
60
40,587
2,691
5,442
56,159
In 2008 the group secured banking facilities for the three years to August 2011.
The group maintains the following lines of credit:
$3.5 million (2009: $3.5 million) overdraft facility. Interest is payable at the base rate plus specified margin. A loan facility
of $99 million (2009: $111 million) of which $99 million (2009: $109 million) is over 1 year.
64
30.
FINANCIAL INSTRUMENTS cont.
(f)
Sensitivity Analysis
(i) Interest Rate Sensitivity Analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for financial instruments at the
balance date. The analysis is prepared assuming the amount of the financial instrument outstanding at the balance sheet date
was outstanding for the whole year.
The impact to Profit for the Period and Total Equity as a result of a 100 basis point movement in interest rates is as follows:
+ 100 basis point shift up in yield curve
Impact on Profit for the Period
Impact on Total Equity
- 100 basis point shift down in yield curve
Impact on Profit for the Period
Impact on total Equity
(ii) Foreign Currency Sensitivity Analysis
Group
2010
$’000
Group
2009
$’000
Parent
2010
$’000
-
421
-
(429)
-
779
-
(801)
-
262
-
(267)
Parent
2009
$’000
-
480
-
(494)
The following table details the Group’s sensitivity to a 10% increase or decrease in foreign currencies against the Group’s
functional currency (New Zealand dollars). The sensitivity analysis includes any outstanding foreign currency contracts and
adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates
an increase in profit and equity where the functional currency weakens 10% against the relevant currency. For a 10%
strengthening against the relevant currency there would be an equal and opposite impact on the profit and equity.
+ 10% shift in NZD rate
Impact on Profit for the Period
Impact on Total Equity
- 10% shift in NZD rate
Impact on Profit for the Period
Impact on Total Equity
Group
2010
$’000
(436)
(436)
Group
2009
$’000
(673)
(673)
Parent
2010
$’000
(436)
(436)
533
533
823
823
533
533
Parent
2009
$’000
(673)
(673)
823
823
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end
exposure does not reflect the exposure during the year.
(g)
Credit Risk Management
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the group. The
group has adopted a policy of only dealing with credit worthy counter parties and obtaining sufficient collateral where appropriate, as a
means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the financial condition of the trade receivables.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the group’s
maximum exposure to credit risk without taking account of the value of any collateral obtained.
The group does not have any significant credit risk exposure to any single counter party or any group of counter parties having similar
characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counter parties are banks with
high credit ratings assigned by international credit rating agencies.
65
EBOS Group Limited
Notes to the Financial Statements (continued)
For the Financial Year ended 30 June, 2010
30.
FINANCIAL INSTRUMENTS cont.
(h)
Fair value of financial instruments
The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements
approximates their fair values.
The fair values and net fair values of financial assets and financial liabilities are determined as follows:
•
•
•
the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models
based on discounted cash flow analysis.
the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available use is made of
discounted cash flow analysis using the applicable yield curve for the duration of the instruments.
Transaction costs are included in the determination of net fair value.
(i)
Liquidity risk management
The group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
(j)
Capital Risk Management
The Group manages its capital to ensure that each entity within the Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity. The Group’s overall strategy remains unchanged from 2009.
31.
SUBSEQUENT EVENTS.
On 5 August 2010 the Company entered into an agreement to sell the Scientific operating business segment. The transaction is subject to
the satisfaction of certain conditions, with the completion date being 1 September 2010. On settlement the cash proceeds of the sale will
exceed the carrying value of the Scientific operating business segment.
66
EBOS Group Limited
Additional Stock Exchange Information
As at 30 July 2010
Twenty Largest Shareholders
Python Portfolios Ltd
Accident Compensation Corporation
Whyte Adder No.3 Ltd
Elite Investment holdings Ltd
Forsyth Barr Custodians Ltd
P M Merton & CWM Trustee Company Ltd
Custodial Services Ltd
Forsyth Barr Custodians Ltd
herpa Properties Ltd
New Zealand Superannuation Fund Nominees Ltd
Superlife Trustee Ltd
NZ Guardian Trust Investment Nominees Ltd
hubbard Churcher Trust Management Ltd
Citibank Nominees (New Zealand) Ltd
M.B. & A.L. Waller
Forsyth Barr Custodians Ltd
P Gardiner-Garden
Tea Custodians Ltd
FNZ Custodians Ltd
Custodial Services Ltd
Fully paid Percentage of
paid capital
shares
5,171,766
4,043,290
3,658,792
1,690,028
1,334,851
1,190,028
1,005,262
706,987
691,936
610,066
590,758
487,989
467,492
439,212
413,836
392,058
385,389
334,709
325,485
287,307
24,227,241
10.18%
7.96%
7.20%
3.33%
2.63%
2.34%
1.98%
1.39%
1.36%
1.20%
1.16%
0.96%
0.92%
0.87%
0.82%
0.77%
0.76%
0.66%
0.64%
0.57%
47.70%
Substantial Security Holders
As at 30 July 2010 the following persons are deemed to be substantial security holders in accordance with Section 26 of the Securities
Amendment Act 1988.
Python Portfolios Ltd
Whyte Adder No.3 Ltd and herpa Properties Ltd
Accident Compensation Corporation
Fully paid Percentage of
paid capital
shares
5,171,766
4,350,728
4,043,290
13,565,784
10.18%
8.56%
7.96%
26.70%
Distribution of Shareholders and Shareholdings
Holders
Fully paid Percentage of
paid capital
shares
Size of holding
1 to 999
1,000 to 4,999
5,000 to 9,999
10,000 to 49,999
50,000 to 99,999
100,000 to 499,999
500,000 to 999,999
1,000,000 and over
Total
Registered Address of Shareholders
New Zealand
Overseas
Total
919
2,135
737
570
32
32
4
7
309,449
5,471,678
5,060,558
10,218,876
2,072,548
6,968,878
2,599,747
18,094,017
0.62%
10.77%
9.96%
20.12%
4.08%
13.72%
5.11%
35.62%
4,436
50,795,751
100.00%
4,235
201
47,912,897
2,882,854
94.33%
5.67%
4,436
50,795,751
100.00%
67
Chairman
Chief Executive and Managing Director
Deputy Chairman
Directors
Rick Christie
Mark Waller
Peter Kraus
Elizabeth Coutts
Peter Merton
Sarah Ottrey
Mark Stewart
Barry Wallace
Chief Executive
Managing Director – Scientific
Executives
Mark Waller
Michael Broome General Manager – Healthcare Logistics
Derek Brown
Angus Cooper General Manager – Business Development
Dennis Doherty Chief Financial Officer
Kelvin Hyland General Manager – Sales & Marketing Healthcare
General Manager – ProPharma
David Lewis
Greg Managh General Manager – Health Support Ltd
Anthony Norris General Manager – EBOS Group Pty Ltd
Auditor
Deloitte
Christchurch
Bankers
ANZ National Bank Limited
Auckland
Solicitor
Chapman Tripp
Christchurch
Share Register
Computershare Investor Services Ltd
Private Bag 92119
Auckland 1142
159 Hurstmere Road
Takapuna, North Shore City 0622
NEW ZEALAND
EBOS Group Limited
Directory
Corporate Office
108 Wrights Road
P O Box 411
CHRISTCHURCH
Telephone (03) 338-0999
Fax (03) 339-5111
E-mail: ebos@ebos.co.nz
Internet: www.ebos.co.nz
Other Locations
Auckland Office
243-249 Bush Road
P O Box 302-161
Albany, Auckland
NEW ZEALAND
Subsidiaries
PRNZ Limited
54 Carbine Road
Mt Wellington
Auckland
NEW ZEALAND
Health Support Limited
56 Carrington Road, Pt Chevalier
Auckland
NEW ZEALAND
EBOS Group Pty Limited &
EBOS Health & Science Pty Limited
Unit 2, 109 Vanessa Street
Kingsgrove, NSW 2208
AUSTRALIA
Vital Medical Supplies (Australia) Pty Ltd
Unit 29-31, 276-278 Newline Road
Dural, NSW 2158
AUSTRALIA
EBOS Health & Science (PNG) Limited
GB House, Kunai Street
Hohola, Waigani NCD
PAPUA NEW GUINEA
Global Science & Technology Limited
241 Bush Road, Albany
Auckland
NEW ZEALAND
Quantum Scientific Pty Limited
31 Archimedes Place
Murarrie, Queensland
AUSTRALIA
Managing Your Shareholding Online:
To change your address, update your payment instructions and to view your investment portfolio including
transactions, please visit: www.computershare.co.nz/investorcentre
General enquiries can be directed to:
• enquiry@computershare.co.nz
• Private Bag 92119, Auckland 1142, New Zealand
• Telephone +64 9 488 8777 Facsimile +64 9 488 8787
Please assist our registrar by quoting your CSN or shareholder number.
One of the leading independent distributors
of healthcare products in New Zealand,
Australia and the Pacific Islands.
ebos@ebos.co.nz