One of the leading independent distributors
of healthcare products in New Zealand,
Australia and the Pacifi c Islands.
ebos@ebos.co.nz
Annual Report 2011
ProPharma
PO Box 62–027
Mt Wellington
Auckland
New Zealand
Phone: +64 9 570 1080
Fax: +64 9 915 9581
Email: info@propharma.co.nz
Pharmacy Wholesaler Russells
PO Box 71 149
Rosebank 1348
Avondale 1026
Auckland
New Zealand
Phone: +64 9 968 6750
Fax: +64 9 968 6754
Healthcare Logistics
58 Richard Pearse Drive
Mangere
Auckland
New Zealand
Phone: +64 9 918 5100
Fax: +64 9 918 5101
TRADING ENTITIES
EBOS Healthcare - New Zealand
243-249 Bush Road
Albany
PO Box 302-161
North Harbour Postal Center
Auckland
New Zealand
Phone: +64 9 415 3267
Fax: +64 9 415 4004
Email: ebos@ebos.co.nz
EBOS Healthcare - Australia
Unit 2, 109 Vanessa Street
PO Box 100
Kingsgrove, NSW 2208
Australia
Phone: +61 2 9502 8410
Fax: +61 2 9502 8411
Email: ebos@ebosgroup.com.au
Vital Medical
PO Box 100
Kingsgrove 1480
Australia
Phone: +61 1300 557 651
Fax: +61 1300 557 631
Health Support
56 Carrington Road
PO Box 44027
Pt Chevalier
Auckland
New Zealand
Phone: +64 9 815 2600
Fax: +64 9 815 1911
sales@healthsupport.co.nz
EBOS Group Annual Report 2011
02 - 28
Report from the Directors
03
06
08
11
15
18
20
22
24
Introduction
Our Networks: Our Strength
Our Supply Chain Explained
Chairman’s Report
Managing Director’s Review
Operational Round-Up
Board of Directors
Corporate Governance Statement
Directors’ Report and Disclosures
29 - 72
Financial Statements
30
31
32
32
33
34
35
36
73
74
Directors’ Responsibility Statement
Auditor’s 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
Directory
2
Mr Julian Hayes
Colorectal and General Surgeon
Introduction
3
Powerful trends are at work –
all around the world – forcing changes
in how healthcare will be conceived and
delivered in the decades ahead.
According to global commentators, the
future will bring massive change. On one
hand, technology and innovation will deliver
breathtaking new opportunities. The decoding
of an individual’s genome, for instance, will
lead to a greater understanding of disease and
the development of new therapies.
Healthcare will also reach more people than
ever before. Innovation and demand will soar
in emerging economies, such as China and
India, creating signifi cant new markets for
healthcare companies.
There are also challenges ahead. The ageing
of populations worldwide will see burgeoning
numbers suff ering from chronic, expensive-
to-treat diseases and disabilities. This will
place a strain on healthcare systems -
and healthcare costs will continue to spiral
upwards. This will have a widespread impact
on healthcare spending, design of national
systems, and delivery.
4
Introduction
Continued
“In healthcare, unlike other areas
of commerce, you’re actually dealing
with lives every single day.
The products and services EBOS provide
directly impact on peoples’ lives. In the
wider sense, we have a role to play in
improving the health of New Zealanders,
and those in other key markets. We can
help the Government achieve greater
effi ciencies – which in turn, will allow for
greater access to healthcare. And access
is what ultimately helps people.”
- Mark Waller, Chief Executive Offi cer, EBOS Group
In New Zealand, we face similar challenges
and opportunities. A landmark ministerial
review, the Horn Report, tells us we cannot
sustain the current levels of spending growth
in public healthcare. We need to act now to
ensure our public health system operates
more effi ciently.
The Horn Report recommends a set of
initiatives to gain effi ciencies – such as fewer,
regionalised District Health Boards; a system
of national product procurement; and new
patient-centric models of care.
“Bureaucracy, waste, and ineffi ciencies
must be reduced and resources moved to
the front-line as spending growth slows.
We must focus on quality, which will deliver
better patient outcomes, and on ensuring
better access to health services through
smarter planning and resource utilisation,
at regional and national levels.”
- Horn Report, 31 July 2009
5
MercyAscot
Mercy Hospital
Operating Theatres
6
Our Networks: Our Strength
Whatever changes the future may bring, EBOS will position
itself to meet them. As the largest supplier to the New Zealand
healthcare industry, we have a unique perspective on the entire
healthcare market.
7
7
EBOS Healthcare Albany
8
Our Supply Chain Explained
Market
needs
Over the life cycle of products or technologies, alternatives
soon emerge, increasing choices and competition. This requires
alternative models to serve the needs of the market.
Business
function
Business
entity
Sales &
Marketing
Wholesale/
Specialised
Logistics
Third-party
Logistics/
Pre-wholsesale
EBOS
Healthcare
Health Support
& ProPharma
Healthcare
Logistics
End user
A broad range of healthcare providers and distributors; from public
and private hospitals, general practitioners, pharmacy, aged care and
community to allied professionals, consumers and manufacturers.
The EBOS answer was to implement a business model that can meet all the market needs -
be that the customer, manufacturer or provider.
This has driven EBOS to create the unique platform that we have today.
A specialist sales and marketing capability to manage the brands and categories of a wide
range of products and technologies utilised in the health sector, accessed through dedicated
channels to market.
The wholesale and specialised logistics businesses of Pro Pharma and Health Support.
Third-Party Logistics, pre wholesale business of Healthcare Logistics provides a ‘virtual
company’ off er for overseas manufacturers.
This unique market coverage gives EBOS Group a remarkably strong position in the
New Zealand healthcare market. It also sets an exciting platform for our future growth
in key markets.
9
10
Rick Christie
Chairman
Chairman’s Report
11
On behalf of the EBOS Board of Directors,
I’m pleased to report another very strong
performance by EBOS Group Ltd for the
year ending June 30 2011.
This continues the impressive record of the past 10 years.
The Group has continually achieved year-on-year growth,
as well as paying shareholder dividends each year.
In the past two to three years, we have been consolidating
our existing businesses, and achieving further effi ciencies.
Much of the profi t improvement has been driven by increasing
stock turn, integrating our systems, and reducing debt.
At the same time, we’ve also been busy prospecting.
EBOS has made a total of 17 acquisitions over the past 10 years.
Although we have not made an acquisition since our largest
purchase of Pharmacy Retailing (NZ) (PRNZ) in 2008, this has
continued to be a key strategic focus.
12
Chairman’s Report
Continued
Importantly, EBOS Board and
management recognise that sound
strategy is absolutely critical to a good
acquisition. It is an often-quoted statistic
that 80% of mergers and acquisitions fail.
For EBOS, the reverse is true. We employ
a very robust process of ‘prospect and
fi lter’ when looking to acquire a business.
We also recognise that making the deal
work is much more important than simply
getting the deal done.
In our mergers and acquisitions strategy,
we look for businesses that have a
strong fi t with our core competencies,
and geographies that off er the most
potential. There are a number of leading
opportunities in our portfolio right now.
RESULTS
In the year ended 30 June 2011, revenue from
continuing operations was $1,344m ($1,317m in
2010). Earnings before interest tax, depreciation and
amortisation (EBITDA) from continuing operations
was $41.125m (2010 $40.350m) up 2%. Profi t for
the year after tax from continuing operations was
$23.4m (2010 $19.69m) an increase of 18.8%.
The net profi t for the year including discontinued
operations after interest and tax was $31.58m
(2010 $23.44m) up 34.7%. As reported in the 2010
Annual Report the scientifi c business operations
were divested in August/September 2010. Earnings
per share including the earnings from discontinued
operations increased to 61.2 cents from 47 cents.
BALANCE SHEET
EBOS is in a strong fi nancial position.
Cash fl ow for the year has been sound, with net cash
infl ow from operations of $21.7m, while the proceeds
from the scientifi c divestment were a net $45.2m.
The net cash infl ow from operating and investing
activities for the year was $63.1m (2010 $39.2m).
Net assets increased to $198.80m ($182.79m
last year) refl ecting an increase in total assets to
$538.32m. Current assets stand at $378.00m
($336.39m) and non current assets at $160.32m
($181.95m) with current liabilities at $268.36m
($261.70m).
DIVIDEND
The Directors are pleased to be able to approve a
fi nal dividend of 18 cents per share to be paid on
7 October 2011, making a total of 51.5 cents per
share (31 cents per share) for the year, which
included a special dividend of 20 cents per share
following the sale of the Scientifi c business segment.
The record date for the purpose of determining
entitlements for the fi nal dividend is close of
business 16 September 2011.
The dividend reinvestment plan will not be operative
for the fi nal dividend.
BOARD
Once again, I am grateful for the support and
commitment shown by the Board this year.
There have been no changes to our membership.
We have a very stable, well-balanced team that
offers both sound fi nancial skills, a depth of industry
knowledge, cornerstone shareholder representation
and constructive input. We have plenty of robust
discussion around the table – because everyone
has a view – but at the end of the day that delivers
greater value.
Another notable feature of our Board is the time we
spend focussed on strategy. Unlike many companies
that might have one strategic meeting a year, we talk
strategy at every board meeting. Typically, we’ll be
looking at up to 10 potential deals that are aligned
with our strategic direction, needless to say, not
many make the grade.
MANAGEMENT AND EMPLOYEES
Mark Waller was awarded Deloitte/Management
Magazine’s 2010 Executive of the Year, which was a
totally deserved accolade. He is an outstanding chief
executive and leads a strong team, which underpins
our strategic thinking, and the way we run our
businesses.
13
OUTLOOK
It goes without saying that we’re currently operating
in an economic environment of considerable
uncertainty. That is a concern for every New
Zealand company. However EBOS is better
positioned than most to adapt – or in fact thrive –
in a volatile market.
In just over 10 years, EBOS Group has graduated
from being an agency-dominated business into what
is now a very sophisticated and integrated sales,
marketing and distribution business operating in
New Zealand, Australia and the Pacifi c. This model
has consistently delivered profi table returns for us.
Not only have we paid dividends every year; we’ve
also been more profi table each year than the year
before. The EBOS growth story is a remarkable one.
Our shareholders have an expectation that we will
continue to grow by acquisition. The company is in
the enviable position of having no net debt, and the
opportunity to leverage what we have built thus far
is very real.
The sale of our scientifi c business refl ected
our philosophy of aiming to be one of the two
major players in our core businesses. Given the
consolidation of the scientifi c supply business
globally – we elected to exit, and shareholders have
already benefi ted from the capital gain on sale.
As a Christchurch based company, we have lived
through the disastrous series of earthquakes to
strike the city over the past 12 months. It was
not, and still is not, an easy time for our staff and
families, and I salute their commitment to maintain
services to our clients and indeed other suppliers
clients through the aftermath of the quakes.
Rick Christie
Chairman of Directors
1,345
1,317
1,344
40.4
41.1
38.7
33.6
31.6
1,092
1B mark
18.8
23.4
19.7
16.7
307
10.3
2007 2008 2009
2010
2011
2007 2008 2009 2010 2011
2007 2008 2009 2010 2011
**Revenue ($ millions)
EBITDA ($ millions)
**EBITDA ($ millions)
EBITDA ($ millions)
NPAT($ millions)
2011
2010
2009
2008
2007
Net cash inflow from operating activities ($’000)
21,703
41,813
33,310
28,546
7,254
Shareholders’ interest ($’000)
Distributions cents per share
Earnings per share
Net interest bearing debt to net interest
bearing debt plus equity
198,796
182,790
162,039
147,304
92,195
51.5c
61.2c
31.0c
47.0c
25.0c
41.1c
23.0c
37.6c
22.5c
31.7c
Nil In Funds
1.5%
19.6%
32.0%
8.1%
**Note 1: 2010 and 2011 numbers represent continuing operations. Prior years numbers include discontinued operations.
14
Mark Waller
Chief Executive Offi cer
& Managing Director
Managing Director’s Review
15
Every successful organisation has a
strong central philosophy and sense
of direction. For EBOS, we’ve essentially
employed two key strategies that have
seen us perform well over the years.
Firstly, our business model allows us to follow the patient
through their life cycle. We provide literally a lifetime of
products and services - from the needs of a new baby,
through to aged care.
Secondly, we’ve been fl exible and nimble enough to change our
off ering as the market landscape has changed. In fact looking
back, you could say we’ve reinvented the company about every
fi ve years.
When we cast our minds back to the 1980s, the big focus was
on new technologies. The multinationals were in acquisition
mode, all clamouring to own the next great new technology.
Then, over the space of a decade, almost the opposite trend
came into play. A huge proportion of medical products started
to be treated as commodities. Without the margins off ered
by unique products, the multinationals started to reduce their
presence in the New Zealand market.
At EBOS, we recognised this was an important turning point.
We asked ourselves the critical question, ‘how can we be more
valuable to the market we want to serve?’
16
Managing Director’s Review
Continued
The answer was to implement a
business model that could meet all
the market’s needs.
For unique products, we’d have a business
dedicated to providing sales and marketing support.
Then as products become commoditised - and
move through their life-cycle into wholesale and
pre-wholesale categories - EBOS would be there
too. We saw that the key was to offer market access
right across the continuum.
In a nutshell, that was the strategy that drove
us to create the unique platform we have today.
EBOS Healthcare is our sales and marketing arm
that services all different segments of the market.
Our wholesale businesses are Health Support and
ProPharma; and our pre-wholesale and third-party
logistics business, Healthcare Logistics, provides
manufacturers with a ‘virtual company’ option.
With this model, we aim to ensure all customers
have the right product, at the right time, at a very
competitive price, and with superb levels of service.
Having put this framework in place - and running it
successfully for many years - we believe that EBOS
is well-poised to assist the New Zealand government
with their plans to improve healthcare delivery.
We’re currently responsible for a signifi cant
percentage of the volumes provided into the local
healthcare industry, which gives us a very unique
view on the whole market in New Zealand. Our
logistics and wholesale businesses are already
making signifi cant contributions to public health
sector effi ciencies.
Given our technology and proven experience, EBOS
can be a key supply chain partner under a more
centralised environment. We are capable of assisting
the Government with many of the initiatives
they’re looking at – whether it’s national product
procurement, a national network of distribution
centres, or even consolidating their IT platforms.
EBOS has ready-established networks, technologies
and infrastructure in these key areas. This
gives us considerable scope to contribute to
the Government’s vision for more cost effective
healthcare delivered earlier with greater access.
So while our New Zealand-based business is
certainly looking positive, it’s actually only part of
the story. What I fi nd most exciting, personally, is our
plans for international growth.
The past year has seen us undertake an
unprecedented amount of activity, all aimed at
making our business as effi cient as possible. We have
amalgamated parts of our business, lowered the cost
base, and achieved effi ciencies in back offi ce and
IT. We have reduced our net debt from $110m three
years ago, to nil.
EBOS is ready to embark on an important new
phase. From now, our focus will be 100 percent on
growing the business, through acquisition and other
strategic alliances.
Geographically, we’ll be looking at opportunities in
New Zealand, Australia, and beyond. We’re quite
open-minded as to what form this might take –
whether it’s owning brands, or being an agency
for brands; whether it’s in wholesale, or
manufacturing. The growth opportunities are as
diverse as they are exciting.
There’s also another fi eld of opportunity which
overlays our plans for geographical expansion.
Having developed a suite of core competencies in
pharmaceutical, medical devices and supply chain
management; we’re also looking at complementary
industries where our skills could be profi tably applied.
To sum up, our story so far has seen EBOS well-
positioned in the New Zealand market, and with a
strong and developing market in Australia and the
Pacifi c. We’re a credible and valuable part of the
whole supply chain into health. The time has come
for us to leverage off that expertise - to take it further
afi eld internationally, and into different markets.
EBOS management and staff look forward
to embarking on this journey with you.
M k W ll
Mark Waller
Chief Executive Offi cer
17
Sales and marketing and customer services staff
210
$1.34B
Group Revenue
Staff across New Zealand,
Australia and Pacific Islands
770
18
0perational Round-Up
The following major projects have been completed in the past
12 months. These have been key drivers to achieve effi ciency
gains to make us more competitive for the benefi t of our
customers.
RATIONALIZING THE BUSINESS MODEL
1 The deployment of Multipick 3.2 warehouse management systems into
Health Support
2 Health Support went live onto the latest version of SAP software – which is
also used by ProPharma and Healthcare Logistics - Pharmacy Retailing (NZ)
Limited (PRNZ)
3 The Health Support retail Pharmacy business was transferred to ProPharma
4 All of the Health Support third-party logistics businesses were consolidated
into Healthcare Logistics
5 There has been a complete integration of the back offi ce accounting functions
of Health Support into PRNZ
6 The Scientifi c business was sold to VWR International – the second biggest deal
in the history of EBOS. It sold for approximately $45 million. The deal also included
a transition service agreement through until December 2011
7 The consolidation of all the back offi ce IT, administration and supply chain
services of Vital Medical into EBOS Healthcare Australia
19
19
20
Board of Directors
RICK CHRISTIE
MSC (HONS), FNZID, FNZIM
(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.
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 diversifi ed 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
National e-Science Infrastructure – NeSI, Director
of South Port New Zealand Ltd, NZ Pork Industry
Board, Solnet Solutions Ltd, Tourism Holdings Ltd,
and Wakefi eld Health 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
(Chief Executive and Managing Director)
Mark Waller has been chief executive offi cer and
managing director of EBOS Group Ltd since 1987.
He is a member of the Remuneration Committee.
He is a director of all the EBOS Group Ltd
subsidiaries, as well as being a director of Scott
Technology Ltd, and HTS-110 Ltd.
PETER KRAUS
MA (HONS), DIP ENG
Peter Kraus is an Auckland businessman who has
been a director of EBOS Group Ltd since 1990.
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,
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
Appointed to the EBOS Group Ltd Board July
2003, Elizabeth is a member of the Audit and
Risk Committee and Nomination Committee and
is a professional director. She is also a former,
chair of Meritec Group, 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, and Director of NZ
Directories Holdings Ltd (and subsidiaries), Ports of
Auckland Ltd, Ravensdown Fertiliser Co-operative
Ltd, Sanford Ltd and Skellerup Holdings Ltd and
Member, Marsh New Zealand Advisory Board.
She is chair designate of Inland Revenue.
21
PETER MERTON
BPharm
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 offi cer 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
Appointed to the EBOS Group Ltd Board 18
September 2006. Sarah is a Director of Blue Sky
Meats (NZ) Ltd, Smiths City Group Ltd and Sarah
Ottrey Marketing 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
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. He gained 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. He is also an alternate director of Wakefi eld
Health Ltd.
BARRY WALLACE
MCOM (HONS), CA
Appointed to the EBOS Group Ltd Board October
2001. Barry is chairman of the Audit and Risk
Committee and member of the Remuneration
Committee. He is a chartered accountant with
a background in fi nancial management with
companies such as Rank Xerox New Zealand Ltd
and David Reid Electronics. Barry is a former chief
executive of Health Support Ltd and is the fi nancial
manager for a private group of companies. He is a
director of Allum Management Services 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, Huckleberry Farms Ltd and a Trustee of The
Perpanida Trust and The Annalise Trust.
The above named directors held offi ce
throughout the year.
22
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
BOARD COMPOSITION
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 confl icts
of interest, receipt of gifts, confi dentiality, 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
Offi cer/Managing Director and his management
team.
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 Offi cer
and Managing Director. Rick Christie, Elizabeth
Coutts and Sarah Ottrey have been determined as
Independent Directors, (as defi ned under the NZSX
Listing Rules and the EBOS Group Ltd Corporate
Governance Code).
BOARD COMMITTEES
Specifi c 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.
23
AUDIT AND RISK COMMITTEE
BOARD PROCESSES
The table within the Directors Report shows
attendances at the board and committee meetings
during the year ended 30 June 2011.
SHARE TRADING BY DIRECTORS
AND OFFICERS
The Company has formal procedures that directors
and offi cers 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.
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
identifi cation 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.
The Audit and Risk Committee provides the Board
with assistance in fulfi lling their responsibility to
shareholders, the investment community and others
for overseeing the Company’s fi nancial statements,
fi nancial reporting processes, internal accounting
systems, fi nancial controls, and annual external
fi nancial 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,
identifi cation, 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 fi ll 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
into account such factors as it deems appropriate,
including the experience and qualifi cations 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.
24
Directors’ Report and Disclosures
Your Directors are pleased to submit to shareholders their report
and fi nancial statements for the year ended 30 June 2011.
PRINCIPAL ACTIVITIES
GROUP RESULTS
EBOS Group Limited (the Company) is listed on
the NZSX board of the New Zealand Exchange
(NZX) under the securities code EBO. The
Company operated in two business segments
up until 1 September 2010, being Healthcare and
Scientifi c. Healthcare incorporates the sale of
healthcare products in a range of sectors, own
brands, retail healthcare and wholesale activities,
and logistics and Scientifi c incorporating the sale
of laboratory consumables, life sciences equipment
and technical support to industry and research
laboratories. The Scientifi c segment was sold on 1
September 2010. Since that date the Company has
operated in one business segment, being Healthcare.
ISSUED CAPITAL
As at 30 June 2011 the Company had on issue
52,107,487 ordinary fully paid shares, with 1,311,736
shares issued during the year.
Group operating revenue from continuing operations
was $1,344m in the year ended 30 June 2011 (2010
$1,317m). Operating profi t before fi nance costs
and tax of $37.7m (2010 $36.7m) was earned for
the year ended 30 June 2011. The net profi t for the
year including discontinued operations after interest
and tax was $31.6m (2010 $23.4m). Earnings per
share were 61.2 cents (2010 47.0 cents). Cash
fl ow of $63.1m (2010 $39.2m) was generated from
operations and investing activities.
DIVIDENDS
The Directors approved a fi nal dividend of 18 cents
per share making a total of 51.5 cents per share for
the year (2010 31 cents per share), which included a
special dividend of 20 cents following the sale of the
Scientifi c segment.
DIRECTORS
Mark Stewart, Peter Kraus and Sarah Ottrey retire
by rotation in accordance with the Company’s
constitution and being eligible offer themselves
for re-election.
Issued capital
52,107,487
Shares issued
1,311,736
Dividend
51.5c
25
DIRECTORS’ INTERESTS
Share dealings by Directors
The Directors 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 following pages.
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 National e-Science
Infrastructure – NeSI, Director of South Port New
Zealand Ltd, NZ Pork Industry Board, Solnet
Solutions Ltd, Tourism Holdings Ltd, and Wakefi eld
Health Ltd.
E.M. Coutts: Chair of Urwin & Co Ltd, and
Director of NZ Directories Holdings Ltd (and
subsidiaries), Ports of Auckland Ltd, Ravensdown
Fertiliser Co-operative Ltd, Sanford Ltd and
Skellerup Holdings Ltd and Member, Marsh New
Zealand Advisory Board and chair designate of
Inland Revenue.
P.F. Kraus: Director of Whyte Adder No.3 Ltd,
Strand Holdings Ltd, Strand Management Ltd,
Herpa Properties 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.
P.M. Merton: Chairman of Pharmacy Brands Ltd,
and Director of Cape Healthcare Ltd, and Trustee
of Pentz Trust.
S.C. Ottrey: Director of Blue Sky Meats (NZ) Ltd,
Smiths City Group Ltd and Sarah Ottrey
Marketing 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 Wakefi eld Health Limited.
B.J. Wallace: Director of Allum Management
Services 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 EBOS Group Ltd
subsidiaries and associated companies and a
director of Scott Technology Ltd, and HTS-110 Ltd.
26
Directors’ Report and Disclosures
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 benefi cially held
Issue of restricted staff shares
Maturing staff shares
E M Coutts – Held by associated persons
P F Kraus
Ordinary Shares
Purchased (Sold)
Consideration Paid
(Received)
Date of Transaction
1,399
49,850
(63,970)
500
28
$9,324
$174,475
Nil
October 2010
To June 2011
To June 2011
$3,332
October 2010
$187
October 2010
P F Kraus – Held by associated persons
114,246
$761,383
October 2010
S C Ottrey – Held by associated persons
P M Merton – Held by associated persons
M J Stewart – Non benefi cially held
Director of Python Portfolios Ltd
M B Waller – Held by associated persons
Non benefi cially held
Issue of restricted staff shares
Maturing staff shares
B.J. Wallace
Non benefi cially held – Director of Whyte
Adder No.3 Ltd and of Herpa Properties Ltd
127
88
$846
$639
October 2010
April 2011
31,249
(700,000)
$208,256
($4,902,915)
October 2010
April 2011
135,805
$905,061
October 2010
11,379
(6,400)
1,399
49,850
(63,970)
$75,934
($40,960)
$9,324
$174,475
Nil
October 2010
November 2010
October 2010
To June 2011
To June 2011
114,246
$761,383
October 2010
DIRECTORS’ SHAREHOLDINGS
Number of fully paid shares held as at
30 June 2011
30 June 2010
E M Coutts
R G M Christie
P F Kraus
- Non benefi cially held –
- Staff share purchase scheme
- Held by associated persons
19,510
19,010
176,899
189,620
1,076
4,464,974
1,048
4,350,728
P M Merton
- Held by associated persons
521,277
1,190,028
S C Ottrey
- Held by associated persons
4,935
4,808
27
DIRECTORS’ SHAREHOLDINGS CONTINUED
Number of fully paid shares held as at
30 June 2011
30 June 2010
M J Stewart
- Non benefi cially held – Director of
Python Portfolios Ltd
5,307,571
5,171,766
B J Wallace
- Non benefi cially held – Director of
Whyte Adder No.3 Ltd/Herpa Properties Ltd
4,464,974
4,350,728
M B Waller
- Held by associated persons
- Non benefi cially held – Staff share purchase scheme
439,005
176,899
434,026
189,620
ATTENDANCE
R Christie
P Kraus
E Coutts
P Merton
S Ottrey
M Stewart
B Wallace
M Waller
Board
Attended
Eligible to
Attend
Audit & Risk
Eligible to
Attend
Committee
Attended
Remuneration
Eligible to
Attend
Committee
Attended
9
9
9
7
9
9
9
9
9
6
9
5
9
8
9
9
4
-
4
-
-
-
4
4
4
-
4
-
-
-
4
4
1
-
-
-
-
-
1
1
1
-
-
-
-
-
1
1
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 specifi c 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. Specifi cally excluded are certain matters, such as the incurring of penalties and fi nes which may be
imposed for breaches of law.
DIRECTORS’ REMUNERATION AND OTHER BENEFITS
Directors’ remuneration and other benefi ts required to be disclosed pursuant to section 211(1) of the Companies
Act 1993 for the year ended 30 June 2011 were as follows:
R.G.M. Christie
E.M. Coutts
P.F. Kraus
P. Merton
M.J. Stewart
S.C. Ottrey
B.J. Wallace
M.B. Waller
(Chief Executive Offi cer and Managing Director)
*Includes performance bonus and other emoluments
30 June 2011
30 June 2010
$127,500
$65,000
$60,000
$60,000
$60,000
$60,000
$67,500
$470,420
* Other benefi ts $1,430,798
Salary
$106,000
$53,000
$75,000
$50,000
$50,000
$50,000
$56,000
$470,420
$1,299,000
28
Directors’ Report and Disclosures
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 benefi ts in their capacity as employees totalling NZ$100,000 or more during the year.
Employee Remuneration
Remuneration (NZ$)
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
180,000 – 190,000
190,000 – 200,000
200,000 – 210,000
210,000 – 220,000
230,000 – 240,000
240,000 – 250,000
250,000 – 260,000
270,000 – 280,000
290,000 – 300,000
330,000 – 340,000
340,000 – 350,000
350,000 – 360,000
360,000 – 370,000
380,000 – 390,000
390,000 – 400,000
520,000 – 530,000
530,000 – 540,000
550,000 – 560,000
630,000 – 640,000
AUDITORS
30 June 2011
Number of employees
30 June 2010
16
9
11
6
2
5
6
1
3
1
1
2
1
-
1
1
-
1
1
2
1
-
1
-
1
-
1
27
19
10
11
-
8
7
3
-
2
-
-
1
1
1
-
1
1
1
-
-
1
-
1
-
1
-
The Company’s Auditors, Deloitte, will continue in offi ce in accordance with the Companies Act 1993.
The Directors are satisfi ed 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 fi nancial statements.
Rick Christie
Chairman
26 August 2011
Mark Waller
Chief Executive Offi cer and
Managing Director
Financial Statements
Year Ended 30 June, 2011
29
30
31
32
32
33
34
35
36
Directors’ Responsibility Statement
Auditor’s Report
Income Statement
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
30
Directors’ Responsibility Statement
The Directors of EBOS Group Limited are pleased to present to shareholders the
fi nancial statements for EBOS Group and its controlled entities (together the “Group”)
for the year to 30 June 2011.
The Directors are responsible for presenting fi nancial statements in accordance with
New Zealand law and generally accepted accounting practice, which give a true and
fair view of the fi nancial position of the Company and the Group as at 30 June 2011
and the results of their operations and cash fl ows for the year ended on that date.
The Directors consider the fi nancial 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 fi nancial
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 fi nancial position of the Company
and Group and facilitate compliance of the fi nancial 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 suffi cient to provide a
reasonable assurance as to the integrity and reliability of the fi nancial statements.
The Financial Statements are signed on behalf of the Board on 26 August 2011 by:
Rick Christie
Chairman
Mark Waller
Chief Executive Offi cer and
Managing Director
Independent Auditor’s Report to the
Shareholders of EBOS Group Limited
31
Report on the Financial Statements
We have audited the fi nancial statements of EBOS
Group Limited and group on pages 32 to 72, which
comprise the consolidated and separate balance
sheets of EBOS Group Limited, as at 30 June 2011,
the consolidated and separate income statements,
statements of comprehensive income, statements
of changes in equity and cash fl ow statements for
the year then ended, and a summary of signifi cant
accounting policies and other explanatory
information.
Board of Directors’ Responsibility for the
Financial Statements
The Board of Directors is responsible for the
preparation of fi nancial statements in accordance
with generally accepted accounting practice in
New Zealand and that give a true and fair view
of the matters to which they relate, and for such
internal control as the Board of Directors determine
is necessary to enable the preparation of fi nancial
statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibilities
Our responsibility is to express an opinion on
these fi nancial statements based on our audit. We
conducted our audit in accordance with International
Standards on Auditing and International Standards
on Auditing (New Zealand). Those standards
require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable
assurance about whether the fi nancial statements
are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the fi nancial statements. The procedures selected
depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of
the fi nancial statements, whether due to fraud or
error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s
preparation of fi nancial statements that give a true
and fair view of the matters to which they relate in
order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes
evaluating the appropriateness of the accounting
policies used and the reasonableness of accounting
estimates, as well as the overall presentation of the
fi nancial statements.
We believe that the audit evidence we have obtained
is suffi cient and appropriate to provide a basis for
our audit opinion.
Other than in our capacity as auditor and the
provision of information technology services,
due diligence, internal control assurance services,
assurance assistance and the assistance with the
review of the group fi nance function we have no
relationship with or interests in EBOS Group Limited
or any of its subsidiaries.
Opinion
In our opinion, the fi nancial statements
on pages 32 to 72:
• comply with generally accepted accounting
practice in New Zealand;
• comply with International Financial Reporting
Standards; and
• give a true and fair view of the fi nancial
position of EBOS Group Limited and group
as at 30 June 2011, and their fi nancial
performance and cash fl ows for the year
then ended.
Report on Other Legal and Regulatory
Requirements
We also report in accordance with section 16 of the
Financial Reporting Act 1993. In relation to our audit
of the fi nancial statements for the year ended
30 June 2011:
• we have obtained all the information and
explanations we have required; and
• in our opinion proper accounting records have
been kept by EBOS Group Limited as far as
appears from our examination of those records.
Chartered Accounta
a
Chartered Accountants
26 August 2011
Christchurch, New Zealand
This audit report relates to the fi nancial statements of EBOS Group Limited and group for the year ended 30 June 2011 included on EBOS Group Limited’s
website. The board of directors 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 fi nancial statements since
they were initially presented on the website. The audit report refers only to the fi nancial statements named above. It does not provide an opinion on any
other information which may have been hyperlinked to/from these fi nancial 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 fi nancial statements and related audit report
dated 26 August 2011 to confi rm the information included in the audited fi nancial statements presented on this website. Legislation in New Zealand
governing the preparation and dissemination of fi nancial statements may diff er from legislation in other jurisdictions.
32
INCOME STATEMENT
For the Financial Year Ended 30 June, 2011
Continuing operations
Revenue
Profi t before depreciation, amortisation,
fi nance costs and income tax expense
Depreciation
Amortisation of fi nite life intangibles
Profi t before fi nance costs and tax
Finance costs
Profi t before income tax
Income tax
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
2 (a) 1,343,756 1,317,481
99,271
81,848
2 (b)
2 (b)
2 (b)
2 (b)
3
41,125
(3,231)
(173)
40,350
(3,151)
(504)
13,682
(425)
-
16,188
(445)
-
37,721
(5,148)
36,695
(5,682)
13,257
(3,010)
15,743
(3,429)
32,573
(9,173)
31,013
(11,324)
10,247
(1,118)
12,314
(1,679)
Profi t for the year from continuing operations
23,400
19,689
9,129
10,635
Discontinued operations
Profi t for the year from discontinued operations
31
8,179
3,748
-
-
Profi t for the year
31,579
23,437
9,129
10,635
Earnings per share:
From continuing and discontinued operations
Basic (cents per share)
Diluted (cents per share)
From continuing operations
Basic (cents per share)
Diluted (cents per share)
STATEMENT OF COMPREHENSIVE INCOME
25
25
25
25
61.2
61.2
45.4
45.4
47.0
47.0
39.5
39.5
For the Financial Year Ended 30 June, 2011
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
Profi t for the year
31,579
23,437
9,129
10,635
Other comprehensive income
Cash fl ow hedges gains
Related income tax to cashfl ow hedges
Gains/(losses) on translation of foreign operations
21
21
21
855
(262)
1,357
1,285
(386)
(470)
615
(195)
-
866
(260)
-
Total comprehensive income net of tax
33,529
23,866
9,549
11,241
Notes to the fi nancial statements are included on pages 36 — 72.
BALANCE SHEET
33
As at 30 June, 2011
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Current tax refundable
Other fi nancial assets - derivatives
Advances to subsidiaries
Finance leases
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
6
7
8
3
9
99,678
152,797
2,673
56,484
148,178
2,581
121,807 128,484
458
105
-
102
1,045
-
-
-
73,130
10,183
944
8,347
-
-
1,538
-
18,175
8,718
1,116
7,955
53
105
4,648
102
Total current assets
378,000 336,392
94,142
40,872
Non-current assets
Property, plant and equipment
Capital work in progress
Prepayments
Deferred tax assets
Goodwill
Indefi nite life intangibles
Finite life intangibles
Shares in subsidiaries
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Finance leases
Current tax payable
Employee benefi ts
Other fi nancial liabilities - derivatives
Advances from subsidiaries
Total current liabilities
Non-current liabilities
Bank loans
Trade and other payables
Deferred tax liabilities
Finance leases
Employee benefi ts
10
11
7
3
12
13
14
15
16,974
-
847
4,538
114,132
23,796
32
-
17,570
245
1,179
5,297
133,741
23,714
205
-
4,037
-
-
693
1,728
4,960
-
4,267
-
-
1,190
1,728
4,960
-
110,686 128,630
160,319
181,951
122,104
140,775
538,319
518,343
216,246
181,647
17
16, 18
3
19
16
259,130 248,855
176
5,577
5,578
1,512
-
5
3,422
4,983
815
-
8,826
-
643
2,218
598
54,464
7,779
20
-
2,339
1,083
12,842
268,355
261,698
66,749
24,063
16
17
3
16, 18
57,177
4,591
8,706
6
688
59,017
4,770
9,148
18
902
28,000
-
2,038
-
-
28,000
-
2,151
-
-
Total non-current liabilities
71,168
73,855
30,038
30,151
Total liabilities
Net assets
Equity
Share capital
Foreign currency translation reserve
Retained earnings
Cash fl ow hedge reserve
339,523 335,553
96,787
54,214
198,796
182,790
119,459
127,433
20
21
21
21
107,970 106,000
1,116
76,738
(1,064)
2,473
88,824
(471)
107,970 106,000
-
22,191
(758)
-
11,827
(338)
Total equity
198,796
182,790
119,459
127,433
Notes to the fi nancial statements are included on pages 36 — 72.
34
STATEMENT OF CHANGES IN EQUITY
For the Financial Year Ended 30 June, 2011
Equity at start of year
Profi t for the year
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
182,790 162,039
127,433
119,307
31,579
23,437
9,129
10,635
Other comprehensive income:
Movements in cashfl ow hedge reserve
Movement in foreign currency translation reserve
593
1,357
899
(470)
420
-
606
-
Dividends paid to company shareholders
Shares issued
22
20
(19,493)
1,970
(3,254)
139
(19,493)
1,970
(3,254)
139
Equity at end of year
198,796
182,790
119,459
127,433
Notes to the fi nancial statements are included on pages 36 — 72.
CASH FLOW STATEMENT
35
For the Financial Year Ended 30 June, 2011
Cash fl ows from operating activities
Receipts from customers
Interest received
Dividends received from subsidiaries
Payments to suppliers and employees
Taxes paid
Interest paid
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
1,342,560
2,367
-
(1,306,387)
(11,689)
(5,148)
1,373,841
942
-
(1,319,253)
(8,015)
(5,702)
72,669
1,934
23,305
(66,706)
(234)
(3,010)
70,065
538
12,935
(64,242)
(62)
(3,429)
Net cash infl ow from operating activities
24(c)
21,703
41,813
27,958
15,805
Cash fl ows 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
Proceeds from disposal of businesses
37
-
(3,887)
-
-
45,203
257
-
(2,656)
(245)
-
-
-
41,622
(212)
-
3,110
-
-
7,770
(357)
-
7,230
-
24(a)
Net cash infl ow/(outfl ow) from investing activities
41,353
(2,644)
44,520
14,643
Cash fl ows from fi nancing activities
Proceeds from issue of shares
Repayment of borrowings
Dividends paid to equity holders of parent
1,970
(3,000)
(19,493)
139
(13,000)
(3,254)
1,970
-
(19,493)
139
(11,000)
(3,254)
22
Net cash (outfl ow) from fi nancing activities
(20,523)
(16,115)
(17,523)
(14,115)
Net increase in cash held
Effect of exchange rate fl uctuations on cash held
Net cash and cash equivalents at beginning
of the year
42,533
661
23,054
(176)
54,955
-
16,333
-
56,484
33,606
18,175
1,842
Net cash and cash equivalents at the end of the year
99,678
56,484
73,130
18,175
Cash and cash equivalents
99,678
56,484
73,130
18,175
Notes to the fi nancial statements are included on pages 36 — 72.
36
NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 30 June, 2011
1. SUMMARY OF ACCOUNTING POLICIES
1.1 Statement of Compliance
EBOS Group Ltd (“the Company”) is a profi t-oriented
company incorporated in New Zealand, registered under
the Companies Act 1993 and listed on the New Zealand
Exchange.
The Company operated in two business segments up
until 1 September 2010, being Healthcare and Scientifi c
– Healthcare incorporates the sale of healthcare products
in a range of sectors, own brands, retail healthcare
and wholesale activities, and logistics and Scientifi c
incorporated the sale of laboratory consumables, life
sciences equipment and technical support to industry and
research laboratories. The Scientifi c segment was sold on
1 September 2010. Since that date the Company operates
in one business segment, being Healthcare.
The Company is a reporting entity and issuer for the
purposes of the Financial Reporting Act 1993 and its
fi nancial statements comply with that Act.
The fi nancial 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 profi t oriented entities.
The Financial Statements comply with International
Financial Reporting Standards (“IFRS”).
1.2 Basis of Preparation
The fi nancial statements have been prepared on the basis
of historical cost, except for the revaluation of certain
fi nancial 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 fi nancial information
satisfi es 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 fi nancial statements for the
year ended 30 June, 2011 and the comparative information
presented in these fi nancial statements for the year ended
30 June, 2010.
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 signifi cant effects on the fi nancial
statements and estimates with a signifi cant risk of
material adjustments in the next year are disclosed, where
applicable, in the relevant notes to the fi nancial statements.
Critical judgements made by management principally relate
to the identifi cation of intangible assets such as brands
separately from goodwill, arising on acquisition of
a business or subsidiaries and the recognition of revenue
on signifi cant contracts subject to renewal where the
receipt of cashfl ows does not match the services provided.
1.4 Key Sources of Estimation Uncertainty
Key sources of estimation uncertainty relate to assessment
of impairment of goodwill and indefi nite life intangibles.
The Group determines whether goodwill and indefi nite 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 indefi nite
life intangibles are allocated. The assumptions used in this
estimation of recoverable amount and the carrying amount
of goodwill and indefi nite life intangibles are discussed in
notes 12 and 13. It is assumed that signifi cant 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 fl ows
or discount rates used, future changes in salaries and
future changes in price affecting other costs.
1.5 Specifi c Accounting Policies
The following specifi c accounting policies have been
adopted in the preparation and presentation of the fi nancial
statements.
a) Basis of consolidation
The consolidated fi nancial statements are prepared by
combining the fi nancial statements of all the entities that
comprise the Group, being the Company (the Parent entity)
and its subsidiaries as defi ned in NZ IAS-27 ‘Consolidated
and Separate Financial Statements’. A list of subsidiaries
appears in note 15 to the fi nancial statements. Consistent
accounting policies are employed in the preparation and
presentation of the consolidated fi nancial statements.
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method.
37
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 profi t
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
classifi ed as an asset or liability are accounted for in
accordance with relevant NZ IFRSs. Changes in the fair
value of contingent consideration classifi ed 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 refl ect 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 signifi cant inter-company transactions and balances
are eliminated on consolidation.
In the Company’s fi nancial statements, investments
in subsidiaries are recognised at their cost, less any
adjustment for impairment.
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 identifi able
net assets recognised.
If, after reassessment, the Group’s interest in the fair value
of the acquiree’s identifi able 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
profi t or loss as a bargain purchase gain.
Goodwill is 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 benefi t 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 fi rst 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 profi t or loss and is not subsequently
reversed.
c) Indefi nite life intangible assets
Indefi nite life intangible assets represent purchased brand
names and are initially recognised at cost. Such intangible
assets are regarded as having indefi nite 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 fi nite 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 identifi ed and recognised separately from
goodwill where they satisfy the defi nition of an intangible
asset and their fair value can be measured reliably.
f) Property, plant, and equipment
The group has fi ve classes of property, plant and
equipment:
• Freehold land
• Buildings
• Leasehold improvements
• Plant
• Offi ce equipment, furniture and fi ttings.
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.
38
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the Financial Year Ended 30 June, 2011
f) Property, plant and equipment continued
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.
The following useful lives are used in the calculation
of depreciation:
Buildings
Leasehold improvements
Plant
20 to 100 years
2 to 15 years
2 to 20 years
Offi ce equipment, furniture and fi ttings
2 to 10 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 fl ows 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 fl ows are discounted to their present
value using a pre-tax discount rate that refl ects current
market assessments of the time value of money and the
risks specifi c to the asset for which the estimates of future
cash fl ows 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 indefi nite 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 indefi nite life intangible assets.
h) Taxation
The tax currently payable is based on taxable profi t for the
year. Taxable profi t differs from profi t 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 fi nancial
statements and the corresponding tax bases used in
the computation of taxable profi t, 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 profi ts 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 profi t nor the
accounting profi t.
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 suffi cient taxable profi ts against
which to utilise the benefi ts 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 suffi cient taxable profi ts 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 refl ects 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.
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.
39
Current and deferred tax are recognised as an expense or
income in profi t or loss, except when they relate to items
recognised in other comprehensive income or directly in
equity, in which case the tax is also recognised in other
comprehensive income or directly in equity, or where
they arise from the initial accounting for a business
combination. In the case of a business combination, the
tax effect is taken into account in calculating goodwill or
in determining the excess of the acquirer’s interest in the
net fair value of the acquiree’s identifi able assets, liabilities
and contingent liabilities over the cost of the business
combination.
i) Inventories
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.
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 profi t 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.
j) Leases
l) Goods & Services Tax
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 benefi ts 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 benefi t from their use. Lease payments are
apportioned between fi nance 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 benefi ts 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 benefi ts
expected to be derived from the leased asset.
k) Foreign Currency Translation
Functional and Presentation Currency
The fi nancial 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 fi nancial 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
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 fl ows are included in the cash fl ow statement on a
net basis. The GST component of cash fl ows arising from
investing and fi nancing activities which is recoverable
from, or payable to, the taxation authority is classifi ed as
operating cash fl ows.
m) Financial Instruments
Financial assets and fi nancial liabilities are recognised
on the Group’s balance sheet when the Group becomes
a party to the contractual provisions of the instrument.
Financial Assets
Financial assets are classifi ed into the following specifi c
categories: “fi nancial assets at fair value through profi t or
loss” (FVTPL), “held to maturity” investments, “available
for sale” (AFS) fi nancial assets and “loans and receivables”.
The category depends on the nature and purpose of the
fi nancial 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 insignifi cant risk
of changes in value.
Financial Assets at Fair Value through Profi t and Loss
(FVTPL):
Financial assets are classifi ed as FVTPL where the
fi nancial asset is either held for trading or it is designated
at FVTPL, such as derivative fi nancial asset instruments
where hedge accounting is not applied.
40
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the Financial Year Ended 30 June, 2011
m) Financial Instruments continued
Financial assets at FVTPL are stated at fair value, with any
resultant gain or loss recognised in profi t or loss. The net
gain or loss recognised in profi t or loss incorporates any
dividend or interest earned on the fi nancial asset.
Loans and Receivables:
Trade and other receivables, including advances to
subsidiaries, that have fi xed or determinable payments
that are not quoted in an active market are classifi ed 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 fl ows 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 classifi ed as either fi nancial
liabilities at “fair value through profi t or loss” (FVTPL) or
“other fi nancial liabilities” measured at amortised cost.
The classifi cations used are set out below:
Bank loans are classifi ed 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 fl ow 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 profi t or loss immediately unless
the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition
in profi t or loss depends on the nature of the hedge
relationship. The Group designates certain derivatives as
cashfl ow hedges of highly probable forecast transactions.
Cashfl ow 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 cashfl ows of the hedged items.
Financial Liabilities at Fair Value through Profi t and Loss:
Financial liabilities are classifi ed as FVTPL where
the fi nancial liability is either held for trading or it is
designated at FVTPL, such as derivative fi nancial liability
instruments where hedge accounting is not applied.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cashfl ow
hedges are deferred in equity. The gain or loss relating to
the ineffective portion is recognised immediately in profi t
or loss.
Financial liabilities at FVTPL are stated at fair value, with
any resultant gain or loss recognised in profi t or loss. The
net gain or loss recognised in profi t or loss incorporates
any dividend or interest paid on the fi nancial liability.
Other Financial Liabilities:
Trade and other payables, including advances from
subsidiaries and bank loans, 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.
Amounts deferred in equity are recycled in profi t or loss
in the periods when the hedged item is recognised in profi t
or loss. However, when the forecast transaction that is
hedged results in the recognition of a non-fi nancial asset
or a non-fi nancial 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 qualifi es 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 profi t 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 profi t or loss.
n) Revenue Recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable
41
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 fi nancial
position. The liability is equal to the present value of the
estimated future cash outfl ows as a result of employee
services provided at balance date.
Provisions made in respect of employee benefi ts 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 benefi ts which are
not expected to be settled within 12 months are measured
at the present value of the estimated future cash outfl ows
to be made by the Group in respect of services provided
up to reporting date.
q) Segment Reporting
The Group’s operating segments are identifi ed on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker
(Chief Executive Offi cer) in order to allocate resources to
the segment and to assess its performance.
r) Research and Development
Expenditure on research activities, such as software
development, is recognised as an expense in the period it
is incurred.
s) Adoption of New Revised Standards and Interpretations
No standards have been adopted during the year which
have had a material impact on these fi nancial statements.
We are not aware of any standards in issue but not yet
effective which would materially impact the amounts
recognised or disclosed in the fi nancial statements.
for goods and services provided in the normal course of
business, net of returns, discounts, allowances and GST.
The following specifi c recognition criteria must be met
before revenue is recognised:
Sale of Goods
Sales of goods are recognised when signifi cant 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 benefi ts associated with the
transaction will fl ow 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 fi nancial 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 fi nancial 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 fi nancial asset,
or, where appropriate, a shorter period to the carrying
amount of the fi nancial 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.
o) Cash Flow Statement
The cash fl ow statement is prepared exclusive of GST,
which is consistent with the method used in the income
statement.
Defi nition of terms used in the cash fl ow statement:
Operating activities include all transactions and other
events that are not investing or fi nancing activities.
42
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. PROFIT FROM CONTINUING OPERATIONS
(a) Revenue
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
(b) Profi t before income tax
Profi t before income tax has been arrived
at after crediting/(charging) the following gains
and losses from operations:
(Loss)/gain on disposal of property, plant and
equipment
Disposal of Scientifi c businesses
Change in fair value of derivative fi nancial instruments
Profi t 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 fi nance costs
Net bad and doubtful debts arising from:
Impairment loss on trade & other receivables
Depreciation of property, plant and equipment
Amortisation of fi nite life intangibles
Operating lease rental expenses:
Minimum lease payments
Donations
Employee benefi t expense
Other expenses
Total expenses
Profi t before income tax
Notes
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
1,337,454 1,312,247
-
-
2,804
3,523
1,495
415
-
-
-
-
-
-
935
2,364
-
-
-
-
58,639
10,964
-
-
456
12
233
1,702
3,960
23,305
57,154
10,283
-
-
483
85
203
335
370
12,935
1,343,756 1,317,481
99,271
81,848
(34)
-
(236)
3
-
848
-
(17,941)
(236)
(4)
-
848
(1,205,620) (1,185,179)
-
-
(1,129)
(1,137)
(45,525)
(1,426)
(248)
(44,940)
(1,991)
(391)
(4,511)
(637)
(5,057)
(625)
(2,399)
(611)
(2,978)
(451)
(5,148)
(5,682)
(3,010)
(3,429)
10
14
(330)
(3,231)
(173)
(443)
(3,151)
(504)
(1)
(425)
-
(30)
(445)
-
(5,741)
(69)
(50,587)
(38,877)
(5,554)
(40)
(48,189)
(37,448)
(862)
(47)
(10,805)
(8,498)
(875)
(16)
(10,552)
(7,709)
(1,310,913) (1,287,319)
(70,847)
(70,378)
32,573
31,013
10,247
12,314
3. INCOME TAXES
(a) Income tax recognised in income statement
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
Other
43
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
9,348
(559)
41
11,573
(1,583)
32
8,830
10,022
(650)
563
186
(44)
915
1,844
(368)
-
929
-
-
929
(158)
406
(59)
-
-
-
33
33
219
1,475
(48)
-
55
2,391
189
1,646
Total income tax expense/(credit)
8,885
12,413
1,118
1,679
Attributable to:
Continuing operations
Discontinued operations
The prima facie income tax expense on pre-tax
accounting profi t from operations reconciles to
the income tax expense in the fi nancial
statements as follows:
Profi t from continuing operations
Profi t from discontinued operations
9,173
(288)
11,324
1,089
1,118
-
1,679
-
8,885
12,413
1,118
1,679
32,573
7,891
31,013
4,837
10,247
-
12,314
-
Profi t from operations
40,464
35,850
10,247
12,314
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
(Over)/under provision of income tax
in previous year
Adjustments related to changes in tax rates
Other adjustments
12,139
(2,361)
10,755
67
3,074
(1,549)
3,694
(3,841)
(756)
-
4
186
(327)
(346)
1,974
261
(368)
70
(754)
-
406
(59)
-
(346)
712
1,475
(48)
33
Total income tax expense/(credit)
8,885
12,413
1,118
1,679
The tax rates used are principally the corporate tax rates of 30% (2010: 30%) payable by New Zealand and
Australian corporate entities on taxable profi ts 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) as follows:
1. The tax rate for depreciation on buildings, which have a life of 50 years or greater was reduced to zero for years
from and including 2012. The effect of this is an additional deferred tax expense in the prior year of $1,974,000
(Group), $712,000 (Parent).
2. The Company income tax rate is to reduce to 28% (currently 30%) for the year from and including the 2012
year. The impact of this change in tax rates has resulted in a deferred tax debit/(credit) in the current year of
$186,000 (Group) (2010: ($368,000)). ($59,000) (Parent) (2010: ($48,000)).
44
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. INCOME TAXES CONTINUED
(b) Current tax assets and liabilities
Current tax assets:
Current tax refundable
Current tax liabilities:
Current tax payable
(c) Deferred tax balance
Deferred tax assets comprise:
Temporary differences
Deferred tax liabilities comprise:
Temporary differences
Taxable and deductible temporary
differences arise from the following:
2011
Gross deferred tax liabilities:
Property, plant & equipment
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other fi nancial liabilities – derivatives
Other
2010
Gross deferred tax liabilities:
Property, plant & equipment
Provisions
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other fi nancial liabilities – derivatives
Other
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
1,045
458
-
53
3,422
5,577
643
-
4,538
5,297
693
1,190
(8,706)
(9,148)
(2,038)
(2,151)
(4,168)
(3,851)
(1,345)
(961)
Group
Opening
balance
$’000
Group
Charged
to income
$’000
Group
Charged
to equity
$’000
Group
Closing
balance
$’000
(1,893)
(7,255)
(9,148)
333
3,680
573
454
257
284
158
442
(333)
(461)
171
(1)
127
-
-
-
(1,609)
(7,097)
(8,706)
-
-
-
(262)
-
-
3,219
744
191
384
5,297
(497)
(262)
4,538
(55)
(262)
(63)
(18)
(7,531)
(1,830)
18
276
(7,612)
(1,536)
-
-
-
-
(1,893)
-
(7,255)
(9,148)
256
3,454
517
846
1,467
77
226
56
(4)
(1,210)
-
-
-
(388)
-
333
3,680
573
454
257
6,540
(855)
(388)
5,297
(2,391)
(388)
3. INCOME TAXES CONTINUED
2011
Gross deferred tax liabilities:
Property, plant & equipment
Intangible assets
Gross deferred tax assets:
Provisions
Doubtful debts & impairment losses
Other fi nancial liabilities – derivatives
Tax losses carried forward
2010
Gross deferred tax liabilities:
Property, plant & equipment
Intangible assets
Gross deferred tax assets:
Property, plant & equipment
Provisions
Doubtful debts & impairment losses
Other fi nancial liabilities – derivatives
Tax losses carried forward
45
Parent
Opening
balance
$’000
Parent
Charged
to income
$’000
Parent
Charged
to equity
$’000
Parent
Closing
balance
$’000
(663)
(1,488)
(2,151)
13
100
113
-
-
-
(650)
(1,388)
(2,038)
567
41
325
257
(43)
(2)
-
(257)
-
-
(195)
-
1,190
(302)
(195)
524
39
130
-
693
(189)
(195)
-
(1,488)
(663)
-
(1,488)
(663)
-
-
-
(663)
(1,488)
(2,151)
11
337
41
585
1,459
(11)
230
-
-
(1,202)
-
-
-
(260)
-
-
567
41
325
257
2,433
(983)
(260)
1,190
(1,646)
(260)
46
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. INCOME TAXES CONTINUED
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.
(d) Imputation credit account balances
Balance at beginning of the year
Attached to dividends received
Taxation paid
Attached to dividends paid
Other credits
Other debits
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
6,845
-
6,991
(8,137)
242
(179)
4,624
-
4,301
(1,365)
8
(723)
250
3,000
234
(8,137)
-
(234)
(1,604)
3,857
62
(1,365)
-
(700)
Balance at end of the year
5,762
6,845
(4,887)
250
Imputation credits available directly and
indirectly to shareholders of the Parent
company, through
Parent company
Subsidiaries
(4,887)
10,649
250
6,595
5,762
6,845
4. KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefi ts
Post-employment benefi ts
5. REMUNERATION OF AUDITORS
Auditor of the parent entity (Deloitte)
Audit of the fi nancial statements
Audit related services for review of fi nancial statements
not included above
Review of group fi nance function
Assurance assistance
Due diligence
Information technology services
Internal control assurance services
6. TRADE & OTHER RECEIVABLES
Trade receivables (i)
Other receivables
Allowance for impairment (ii)
47
Group
2011
$’000
6,838
297
2010
$’000
6,539
266
Parent
2011
$’000
5,076
297
2010
$’000
4,451
266
7,135
6,805
5,373
4,717
379
404
76
-
-
-
36
64
139 - -
18
42
83
37
40
18
42
-
37
40
61
-
-
-
36
64
-
738
504
213
161
153,365
1,057
(1,625)
148,819
707
(1,348)
9,863
458
(138)
8,717
139
(138)
152,797
148,178
10,183
8,718
(i) Trade receivables are non-interest bearing and generally on monthly terms. No interest is charged on the trade
receivables for the fi rst 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
Impairment losses reversed
(1,348)
(594)
235
82
(1,134)
(593)
231
148
(138)
(1)
1
-
(138)
(30)
30
-
(1,625)
(1,348)
(138)
(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.
48
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6. TRADE & OTHER RECEIVABLES CONTINUED
(iii) Aging of impaired trade and other receivables
90 days+
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
(1,625)
(1,348)
(138)
(138)
(1,625)
(1,348)
(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 $13,008,000
(2010: $14,792,000) and Parent $2,177,000 (2010: $2,522,000) 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.
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 profi t or loss (“FVTPL”).
9,672
1,716
1,620
10,454
2,458
1,880
1,144
264
769
1,443
149
930
13,008
14,792
2,177
2,522
2,673
847
2,581
1,179
944
-
1,116
-
3,520
3,760
944
1,116
121,807 128,484
8,347
7,955
121,807 128,484
8,347
7,955
-
-
105
105
-
-
105
105
49
10. PROPERTY, PLANT AND EQUIPMENT
Group
Freehold
land at cost
$’000
Buildings
at cost
$’000
Leasehold
improve-
ments at
cost
$’000
Gross carrying amount
Balance at 1 July, 2009
Additions
Disposals
Net foreign currency exchange differences
1,895
-
-
-
8,953
80
-
-
2,059
16
(26)
(7)
Offi ce
equipment
furniture &
fi ttings at
cost
$’000
Total
$’000
12,397
1,136
(1,172)
(35)
33,743
2,120
(2,734)
(81)
Plant and
vehicles
at cost
$’000
8,439
888
(1,536)
(39)
Balance at 30 June, 2010
1,895
9,033
2,042
7,752
12,326
33,048
Additions
Disposals
Net foreign currency exchange differences
-
-
-
10
-
-
276
(296)
36
1,039
(1,428)
103
2,407
(2,385)
90
3,732
(4,109)
229
Balance at 30 June, 2011
1,895
9,043
2,058
7,466
12,438
32,900
Accumulated depreciation
Balance at 1 July, 2009
Disposals
Depreciation expense
Net foreign currency exchange differences
Balance at 30 June, 2010
Disposals
Depreciation expense
Net foreign currency exchange differences
-
-
-
-
-
-
-
-
(1,490)
-
(284)
-
(558)
20
(415)
5
(3,970)
1,248
(1,231)
21
(8,281)
1,191
(1,758)
24
(14,299)
2,459
(3,688)
50
(1,774)
(948)
(3,932)
(8,824)
(15,478)
-
(277)
-
162
(369)
(27)
831
(1,056)
(62)
2,000
(1,598)
(52)
2,993
(3,300)
(141)
Balance at 30 June, 2011
-
(2,051)
(1,182)
(4,219)
(8,474)
(15,926)
Net book value
As at 30 June, 2010
As at 30 June, 2011
1,895
1,895
7,259
6,992
1,094
876
3,820
3,247
3,502
17,570
3,964
16,974
50
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Parent
Freehold
land at cost
$’000
Buildings
at cost
$’000
Leashold
improve-
ment at cost
$’000
694
-
-
694
-
-
2,835
78
-
2,913
7
-
202
2
(7)
197
1
-
Offi ce
equipment
furniture &
fi ttings at
cost
$’000
1,307
89
(39)
Plant at
cost
$’000
836
162
(307)
691
134
(2)
1,357
55
-
Total
$’000
5,874
331
(353)
5,852
197
(2)
Gross carrying amount
Balance at 1 July, 2009
Additions
Disposals
Balance at 30 June, 2010
Additions
Disposals
Balance at 30 June, 2011
694
2,920
198
823
1,412
6,047
Accumulated depreciation
Balance at 1 July, 2009
Disposals
Depreciation expense
Balance at 30 June, 2010
Disposals
Depreciation expense
Balance at 30 June, 2011
Net book value
As at 30 June, 2010
As at 30 June, 2011
-
-
-
-
-
-
-
(110)
-
(97)
(207)
-
(91)
(118)
7
(19)
(130)
-
(18)
(606)
302
(123)
(427)
-
(132)
(654)
39
(206)
(1,488)
348
(445)
(821)
-
(184)
(1,585)
-
(425)
(298)
(148)
(559)
(1,005)
(2,010)
694
694
2,706
2,622
67
50
264
264
536
407
4,267
4,037
Group plant includes fi nance leases capitalised with a cost of $162,000 (2010: $1,394,000) and book value of
$19,000 (2010: $217,000). Parent plant includes fi nance leases capitalised with a cost of $134,000 (2010: $134,000)
and book value of $Nil (2010: $Nil).
Land and buildings in Auckland with a carrying value of $5,570,000 (2010: $5,751,000) were last valued on
30 June 2011 and determined by Telfer Young (Auckland) Limited, in accordance with NZ IAS16, to have a fair
value of $9,600,000.
Land and buildings in Christchurch with a carrying value of $3,316,000 (2010: $3,400,000) were acquired during
the last four years and are stated at cost less accumulated depreciation and impairment.
Aggregate depreciation recognised as an expense
during the year:
Buildings
Leasehold improvements
Plant and vehicles
Offi ce equipment, furniture & fi ttings
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
277
369
1,056
1,598
284
415
1,231
1,758
3,300
3,688
91
18
132
184
425
97
19
123
206
445
51
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
-
245
-
-
11. CAPITAL WORK IN PROGRESS
Capital work in progress
The capital work in progress relates to software development.
The total cost to complete the project is $Nil (2010: $975,000).
12. GOODWILL
Gross carrying amount
Balance at beginning of fi nancial year
De-recognised on disposal of businesses
Effects of foreign currency exchange differences
Group
2011
$’000
2010
$’000
133,741
(20,410)
801
133,915
-
(174)
Parent
2011
$’000
1,728
-
-
2010
$’000
1,728
-
-
Net book value
114,132
133,741
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) – Logistics NZ – amalgamated with
PRNZ Limited 1 November 2010.
• Australasia Scientifi c Supplies (Global Science & Technology Limited) – Scientifi c – disposed 1 September 2010.
• New Zealand Pharmacy Wholesaler and Logistic Services (PRNZ Limited) – Pharmacy/Logistics NZ
The carrying amount of goodwill allocated to cash-generating units is as follows:
Healthcare Australia
Healthcare NZ (Parent)
Healthcare - Logistics NZ Wholesale
Scientifi c
Healthcare – Pharmacy/Logistics NZ
Group
2011
$’000
17,361
1,728
-
-
95,043
2010
$’000
16,629
1,728
1,468
20,341
93,575
Parent
2011
$’000
-
1,728
-
-
-
2010
$’000
-
1,728
-
-
-
114,132
133,741
1,728
1,728
During the year ended 30 June 2011, management have determined that there is no impairment of any of the cash
generating units containing goodwill (2010: Nil).
The recoverable amounts (i.e. higher of value in use and fair value less costs to sell) of those units 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:
52
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. GOODWILL CONTINUED
Healthcare Australia and Healthcare NZ – Maintaining market share and gross margin being maintained
during a period of high volatility in foreign currency during the assessment period.
Logistics NZ and Pharmacy/Logistics NZ – Maintaining market share and controlling operational costs during
the assessment 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 assessment
period. Market shares during the assessment period are assessed by management based on average market
shares achieved in the period immediately before the start of the assessment period, adjusted each year for any
anticipated growth.
The value in use calculation uses cash fl ow projections based on fi nancial forecasts approved by management
covering a fi ve year period and management’s past experience.
Annual growth rates of 0% to 5.1% (2010: 2% to 5%), which is below current historical growth rates; an
allowance of 2% to 3% (2010: 2%) for infl ation to expenses, and pre-tax discount rates of 12.5% to 14%
(2010: 14.2% to 14.3%) have been applied to these projections. Cash fl ows beyond the fi ve year period have
been extrapolated using a steady 2% (2010: 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.
13. INDEFINITE LIFE INTANGIBLES
Group
Group
Natures Kiss Allersearch
$’000
$’000
Group
Group
Liceblaster Trademarks
$’000
$’000
Group
Total
$’000
Gross carrying amount
Balance at 1 July, 2009
Net foreign currency exchange differences
Balance at 30 June, 2010
Net foreign currency exchange differences
2,390
-
2,390
-
2,570
-
2,570
-
1,530
(16)
1,514
82
17,240
-
23,730
(16)
17,240
-
23,714
82
Balance at 30 June, 2011
2,390
2,570
1,596
17,240
23,796
Net book value
As at 30 June, 2010
As at 30 June, 2011
2,390
2,570
1,514
17,240
23,714
2,390
2,570
1,596
17,240
23,796
Parent
Parent
Natures Kiss Allersearch
$’000
$’000
Gross carrying amount
Balance at 1 July, 2009
Balance at 30 June, 2010
2,390
2,570
2,390
2,570
Balance at 30 June, 2011
2,390
2,570
Net book value
As at 30 June, 2010
As at 30 June, 2011
2,390
2,570
2,390
2,570
Parent
Total
$’000
4,960
4,960
4,960
4,960
4,960
13. INDEFINITE LIFE INTANGIBLES CONTINUED
The carrying amount of brands (indefi nite life intangibles) has been allocated to the cash generating units as follows:
53
Healthcare Australia
Healthcare NZ (Parent)
Pharmacy/Logistics NZ
Group
2011
$’000
4,166
2,390
17,240
2010
$’000
4,084
2,390
17,240
23,796
23,714
Management have assessed these as having an indefi nite 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 2011, management have determined that there is no impairment of any
of the brands.
The value in use calculation uses cash fl ow projections based on fi nancial forecasts approved by management
covering a fi ve year period and management’s past experience.
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 fl ow
projections based on fi nancial forecast approved by management covering a fi ve-year period. Management has
determined that the recoverable amount calculations are most sensitive to change in the following assumptions.
Annual growth rates of 0% to 5.8% (2010: 4% to 5%), and an allowance of 2% to 3% (2010: 2%) for infl ation
to expenses, and pre-tax discount rates of 12.4% to 14.1% (2010: 14.3% to 14.6%) have been applied to these
projections. Cash fl ows beyond the fi ve-year period have been extrapolated using a steady 2% (2010: 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.
14. FINITE LIFE INTANGIBLES
Gross carrying amount of Supply Contracts
Balance at beginning of fi nancial year
Accumulated amortisation & impairment
Balance at beginning of fi nancial year
Amortisation expense
Balance at end of fi nancial year
Net book value at end of fi nancial year
Allocated to cash generating units as follows:
Group
2011
$’000
2010
$’000
1,490
1,490
(1,285)
(173)
(781)
(504)
(1,458)
(1,285)
32
205
Pharmacy/Logistics NZ
32
205
54
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. SUBSIDIARIES
Parent and Head Entity
EBOS Group Limited
Subsidiaries (all balance dates 30 June)
EBOS Healthcare (Australia) Pty Limited
(formerly EBOS Group Pty Limited)
EBOS Group Pty Limited (formerly Vital Medical Supplies
(Australia) Pty Limited)
EBOS Health & Science Pty Limited
EBOS Shelf Company New Zealand Limited
(formerly Global Science & Technology Limited)
EBOS Shelf Company Australia Pty Limited
(formerly Quantum Scientifi c Pty Limited)
PRNZ Limited
EBOS Limited Partnership
Healthcare Distributors Pty Limited
Country of
Incorporation
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Ownership Interests
and Voting Rights
2011 and 2010
100%
100%
100%
100%
100%
100%
100%
100%
16. BORROWINGS
Current
Finance lease liabilities (ii)
Advances from Subsidiaries (at call) (iii)
Non-current
Bank loans (i)
Finance lease liabilities (ii)
Total borrowings
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
5
-
5
176
-
-
54,464
20
12,842
176
54,464
12,862
57,177
6
59,017
18
28,000
-
28,000
-
57,183
59,035
28,000
28,000
57,188
59,211
82,464
40,862
(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. There have been
no breaches of the banking covenants provided under the negative pledge deed.
(ii) Secured by the assets leased.
(iii) Unsecured.
The fair value of non current borrowings is approximately equal to their carrying amount.
17. TRADE & OTHER PAYABLES
Current
Trade payables
Other payables
244,621 235,159
13,696
14,509
5,609
3,217
4,672
3,107
Non-current
Other payables
259,130 248,855
8,826
7,779
4,591
4,770
-
-
Total trade & other payables
263,721 253,625
8,826
7,779
55
18. LEASES
Finance leases
Minimum future lease payments
Finance leases relate to offi ce 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
Present Value of Minimum
Future Lease Payments
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
Not later than 1 year
Later than 1 year and not later than 5 years
7
6
184
21
Minimum lease payments*
Less future fi nance charges
13
(2)
205
(11)
Present value of minimum lease payments
11
194
-
-
-
-
-
25
-
25
(5)
20
Included in the fi nancial statements as:
Finance leases - current portion
Finance leases - non current portion
5
6
11
-
11
176
18
194
-
194
5
6
176
18
11
194
-
-
-
-
-
-
-
-
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, with lease terms of between one to ten years with
options to extend for a further one to ten years. 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
19. OTHER FINANCIAL LIABILITIES - DERIVATIVES
At fair value:
Foreign currency forward contracts (i)
Interest rate swaps (ii)
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
5,266
13,661
5,451
6,788
13,371
2,744
691
3,143
3,665
844
376
-
24,378
22,903
7,499
1,220
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
130
685
-
1,512
130
468
-
1,083
815
1,512
598
1,083
(i) Financial liability carried at fair value through profi t or loss (“FVTPL”).
(ii) Designated and effective as cashfl ow hedging instrument carried at fair value.
56
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. SHARE CAPITAL
Fully paid ordinary shares
Balance at beginning of fi nancial period
Issue of shares to executives and staff
under employee share ownership scheme
Bonus shares issued under Profi t Distribution Plan
- October 2009
- April 2010
- October 2010
Dividend reinvested
- April 2011
2011
No.’000
2011
$’000
2010
No.’000
2010
$’000
50,796 106,000
48,981
105,861
50
174
46
139
-
-
1,015
-
-
-
901
868
-
246
1,796
-
-
-
-
-
52,107
107,970
50,796 106,000
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 389,500 (2010: 339,650) shares have been issued raising
$721,505 (2010: $547,030).
21. RESERVES
Foreign currency translation reserve
Balance at beginning of the year
Translation of foreign operations
Balance at end of the year
Group
2011
$’000
2010
$’000
1,116
1,357
1,586
(470)
2,473
1,116
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.
57
21. RESERVES CONTINUED
Retained Earnings
Balance at beginning of the year
Profi t for the year
Dividends provided for or paid (note 22)
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
76,738
31,579
(19,493)
56,555
23,437
(3,254)
22,191
9,129
(19,493)
14,810
10,635
(3,254)
Balance at end of the year
88,824
76,738
11,827
22,191
Cash Flow Hedge Reserve
Balance at beginning of the year
Gain recognised on cash fl ow hedges
Related income tax
(1,064)
855
(262)
(1,963)
1,285
(386)
(758)
615
(195)
(1,364)
866
(260)
Balance at end of the year
(471)
(1,064)
(338)
(758)
The hedging reserve represents gains and losses recognised on the effective portion of cash fl ow hedges.
The cumulative deferred gain or loss on the hedge is recognised in profi t or loss when the hedged transaction
impacts profi t or loss.
22. DIVIDENDS
Recognised amounts
Fully paid ordinary shares
- Final - prior year
- Special - current year
- Interim - current year
Unrecognised amounts
Final dividend
2011
Cents per
share
2011
Total
$’000
2010
Cents per
share
2010
Total
$’000
17.5
20.0
13.5
2,136
10,362
6,995
14.5
-
13.5
1,853
-
1,401
51.0
19,493
28.0
3,254
18.0
9,379
17.5
2,136
A dividend of 18.0 cents per share was declared on 26 August 2011 with the dividend being paid on 7 October
2011. The cash impact of the dividend will be $9,379,000 (2010: $2,136,000)
58
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23. DISPOSAL OF BUSINESSES
On 1 September 2010, the Group disposed of its scientifi c operations. Details of the disposal are as follows:
Book value of net assets sold
Current assets
Trade and other receivables
Prepayments
Inventories
Non-current assets
Property, plant and equipment
Goodwill
Current liabilities
Trade and other payables
Employee benefi ts
Net assets disposed of
Gain on disposal
Consideration
Consideration paid in cash and cash equivalents
Net cash infl ow on disposal
Consideration paid in cash and cash equivalents
Less cash and cash equivalent balances
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
6,493
114
10,017
1,255
20,410
(1,186)
(753)
36,350
8,853
45,203
45,203
45,203
-
45,203
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24. NOTES TO THE CASH FLOW STATEMENT
(a) Businesses disposed
Note 23 sets out details of the businesses disposed.
Details of the disposals are as follows.
Consideration
Cash and cash equivalents
Represented by:
Book value of net assets sold (Note 23)
Gain on disposal
Consideration
Net cash infl ow on disposal
Cash and cash equivalents consideration
(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 2014
Amount used
Amount unused
59
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
45,203
45,203
36,350
8,853
45,203
45,203
45,203
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,857
-
3,561
-
1,250
-
1,250
2,857
3,561
1,250
1,250
57,177
42,000
59,017
40,000
28,000
22,000
28,000
20,000
99,177
99,017
50,000
48,000
60
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. NOTES TO THE CASH FLOW STATEMENT CONTINUED
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
(c) Reconciliation of profi t for the year
with cash fl ows from operating activities
Profi t for the year
31,579
23,437
9,129
10,635
Add/(less) non-cash items:
Depreciation
Loss on sale of property, plant and equipment
(Gain) on disposal of businesses
Write-off of investment in businesses disposed
Amortisation of fi nite life intangible assets
Loss/(gain) on derivatives/fi nancial 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 benefi ts
Foreign currency loss/(gain) on translation of working
capital balances
3,300
34
(8,853)
-
173
236
55
277
3,688
16
-
-
504
(848)
2,391
214
425
-
-
17,941
-
236
188
-
445
4
-
-
-
(848)
1,646
-
(4,778)
5,965
18,790
1,247
(4,896)
102
240
6,677
(2,742)
10,096
(809)
2,328
63
(701)
(1,104)
2,003
9,232
909
(1,465)
102
172
(392)
696
1,047
(121)
1,712
63
(98)
1,145
(30)
403
728
919
(319)
-
-
9,587
12,411
39
3,923
Working capital items disposed of (Note 23)
(14,685)
-
-
-
Net cash infl ow from operating activities
21,703
41,813
27,958
15,805
25. EARNINGS PER SHARE CALCULATION
Basic earnings per share (refer Income Statement and note 20)
Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings cents per share
Earnings used in the calculation of total basic earnings per share
Profi t for the year from discontinued activities used in the calculation
of basic earnings per share from discontinued operations
Earnings used in the calculation of basic earnings per share from
continuing operations
Weighted average number of ordinary shares
for the purposes of basic earnings per share
Diluted earnings per share (refer Income Statement and Note 20)
From continuing operations
From discontinued operations
Total diluted earnings cents per share
Earnings used in the calculation of total diluted earnings per share
Profi t for the year from discontinued activities used in the calculation
of diluted earnings per share from discontinued operations
Earnings used in the calculation of diluted earnings per share from
continuing operations
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
26. COMMITMENTS FOR EXPENDITURE
61
Group
2011
cents
45.4
15.8
61.2
2010
cents
39.5
7.5
47.0
$’000
31,579
$’000
23,437
(8,179)
(3,748)
23,400
19,689
51,585
49,841
cents
45.4
15.8
61.2
cents
39.5
7.5
47.0
$’000
31,579
$’000
23,437
(8,179)
(3,748)
23,400
19,689
51,585
49,841
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’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 fi nancial statements.
62
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
6,872
6,338
599
154
-
-
29,177
31,017
In June 2011 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. This amount disclosed also represents the maximum credit risk exposure to the
Group and Parent.
A subsidiary company (PRNZ Limited) is guarantor for certain loans made to pharmacies by the ANZ National
Bank Limited amounting to $5,273,000 (2010: $5,184,000). The directors are of the opinion that provisions are not
required in respect of these matters, as it is not probable that a future sacrifi ce of economic benefi ts will be required
or the amount is not capable of reliable measurement.
A performance bond of up to $1,000,000 (2010: $1,000,000) is also held by the bank on behalf of a supplier.
28. SEGMENT INFORMATION
a) Products and services from which reportable segments derive their revenues
The Group’s reportable segments under NZ IFRS 8 are as follows:
Healthcare: Incorporates the sale of healthcare products in a range of sectors, own brands, retail healthcare
and wholesale activities.
Scientifi c: Incorporates the sale of laboratory consumables, life sciences equipment and technical support to
industry and research laboratories.
The Scientifi c operations were discontinued on 1 September 2010.
Information regarding the Group’s reportable segments is presented below.
(b) Segment revenues and results
Continuing operations
Revenue from external customers
Healthcare
Segment result
Healthcare
Group
2011
$’000
2010
$’000
1,343,756 1,317,481
41,125
40,350
28. SEGMENT INFORMATION CONTINUED
63
Depreciation
Amortisation of fi nite life intangibles
Finance costs
Income tax expense
Profi t for the year
Discontinued operations
Revenue from external customers
Scientifi c
Segment result
Scientifi c
Depreciation
Finance costs
Income tax expense
(Loss)/profi t for the year
Gain on sale of operations
Group
2011
$’000
2010
$’000
(3,231)
(173)
(5,148)
(9,173)
(3,151)
(504)
(5,682)
(11,324)
23,400
19,689
8,386
55,886
(893)
5,394
(69)
-
288
(537)
(20)
(1,089)
(674)
3,748
8,853
-
8,179
3,748
The accounting policies of the reportable segments are consistent with the Group’s accounting policies. Segment
result represents profi t before depreciation, amortisation, fi nance costs and tax. This is the measure reported to the
chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
(c) Segment assets
Healthcare
Scientifi c
Group
2011
$’000
2010
$’000
538,319 478,953
39,390
-
538,319
518,343
For the purposes of monitoring segment performance and allocating resources between segments, the chief
operating decision maker monitors the tangible, intangible and fi nancial assets attributable to each segment.
Prior to the disposal of the scientifi c division assets were allocated to reportable segments. Assets used jointly
by reportable segments are allocated on the basis of revenues earned by individual reportable segments.
(d) Revenues from major products and services
The Group’s major products and services are the same as the reportable segments i.e. healthcare and scientifi c.
Revenues are reported above under (b) Segment revenues and results.
64
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. SEGMENT INFORMATION CONTINUED
(e) Geographical information
The Group operates in two principal geographical areas; New Zealand (country of domicile) and Australia.
The Group’s revenue from external customers by geographical location (of the reportable segment) and
information about its segment assets (non-current assets) excluding fi nancial instruments and deferred tax
assets are detailed below:
Continuing and discontinued operations
Revenue from external customers
New Zealand
Australia
Non-current assets
New Zealand
Australia
Group
2011
$’000
2010
$’000
1,215,417 1,200,974
172,393
136,725
1,352,142 1,373,367
135,625
20,156
148,702
27,952
155,781
176,654
(f) Information about major customers
No revenues from transactions with a single customer amount to 10% or more of the Group’s revenues
(June 2010: Nil).
65
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 fi nancial
statements.
(c) Transactions with Related Parties
Transactions involving the parent entity
Amounts receivable from and payable to related parties at balance date are:
PRNZ Limited
EBOS Group Pty Limited
EBOS Shelf Company New Zealand Limited
Healthcare Distributors Limited
EBOS Health and Science Pty Limited
2011
$’000
2010
$’000
(12,315)
(12,846)
(29,303)
348
1,190
3,039
(7,870)
(4,972)
348
1,261
During the fi nancial year, EBOS Group Limited received dividends of $23,305,000 (2010: $12,935,000) from
its subsidiaries.
During the fi nancial year, EBOS Group Limited provided accounting and administration services to its
subsidiaries for a consideration of $456,000 (2010: $483,000) and charged royalties for the use of intellectual
property, brand names and patents totalling $3,960,000 (2010: $370,000).
During the fi nancial year, EBOS Group Limited rented warehouse space and contracted labour from its
subsidiaries for a total cost of $94,000 (2010: $154,000).
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 0% - 6.45% (2010: 5.0% - 6.2%). During the fi nancial
year, EBOS Group Limited received interest of $233,000 (2010: $203,000) from loans to subsidiaries, and
paid interest of $606,000 (2010: $444,000) to subsidiaries.
No amounts were provided for doubtful debts relating to debts due from related parties at reporting date
(2010: 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 fi nancial statements.
66
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. FINANCIAL INSTRUMENTS
(a) Financial risk management objectives
(c) Foreign currency risk management
The Group’s corporate treasury function provides
services to the Groups entities, co-ordinates access
to domestic and international fi nancial markets, and
manages the fi nancial risks relating to the operation
of the Group.
The Group does not enter into or trade fi nancial
instruments, including derivative fi nancial
instruments, for speculative purposes. The use of
fi nancial derivatives is governed by the Group’s
policies approved by the Board of Directors, which
provide written principles on the use of fi nancial
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
fi nancial risks of changes in foreign currency
exchange rates and interest rates. The Group enters
into a variety of derivative fi nancial 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.
The Group undertakes certain transactions
denominated in foreign currencies, hence exposures
to exchange rate fl uctuations 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 specifi c 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
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
Average exchange rate
Foreign currency
Contract value
Fair vlaue
2011
2010
2011
FC’000
2010
FC’000
2011
$’000
2010
$’000
2011
$’000
2010
$’000
0.765
-
800
-
1,045
-
(14)
-
0.544
0.551
200
725
367
1,315
(8)
(15)
0.490
0.476
535
510
1,091
1,070
(46)
0.794
0.699
1,400 1,400
1,763
2,002
(62)
46
49
65.481
- 20,000
-
305
-
25
4,266
4,692
(130)
105
The above fi nancial instruments relate to the Group
and Parent entity. The fair value of forward foreign
exchange contracts outstanding are recognised as
other fi nancial assets/liabilities. Hedge accounting
has not been adopted for the forward foreign
exchange contracts.
(d) Interest rate risk management
The Group is exposed to interest rate risk as it
borrows funds at both fi xed and fl oating interest
rates. The risk is managed by maintaining an
appropriate mix between fi xed and fl oating 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 fi xed and
fl oating 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.
67
30. FINANCIAL INSTRUMENTS CONTINUED
Outstanding Contracts
Outstanding variable rate for fi xed contracts
Less than 1 year
1 to 3 years
Outstanding Contracts
Outstanding variable rate for fi xed contracts
Less than 1 year
1 to 3 years
The fair value of interest rate swaps outstanding
are recognised as other fi nancial 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.
Group
Average contracted
fi xed interest rate
Notional
principal amount
Fair Value
2011
%
2010
%
2011
$’000
2010
$’000
2011
$’000
2010
$’000
7.47
5.13
7.97 22,257 29,222
2,500 25,885
7.11
(616)
(69)
(634)
(878)
24,757 55,107
(685)
(1,512)
Parent
Average contracted
fi xed interest rate
Notional
principal amount
Fair value
2011
%
2010
%
2011
$’000
2010
$’000
2011
$’000
2010
$’000
7.39
-
8.22 15,000 20,000
- 15,000
7.39
(468)
-
(452)
(631)
15,000 35,000
(468)
(1,083)
(e) Liquidity
The Group manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve
banking facilities by continuously monitoring
forecast and actual cashfl ows and matching maturity
profi les of fi nancial assets and liabilities.
The following tables detail the Group’s remaining
contractual maturity for its fi nancial assets and
fi nancial liabilities. The tables have been drawn
up based on the undiscounted cash fl ows of the
fi nancial assets and liabilities. The tables include
both interest and principal cash fl ows.
68
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. FINANCIAL INSTRUMENTS CONTINUED
Weighted average
effective interest rate
%
On
Demand
$’000
Less 1
year
$’000
1-2
years
$’000
2-3
years
$’000
3-4
years
$’000
4-5
years
$’000
5+
years
$’000
Total
$’000
Maturity Dates
Group - 2011
Financial assets:
Cash and cash equivalents
Trade and other receivables
2.5 99,678
- 152,797
252,475
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 99,678
- 152,797
- 252,475
Financial liabilities:
Trade and other payables
Finance leases
Bank loans
Other fi nancial liabilities
- 258,951
-
-
-
14.6
4.2
-
535
7
2,401
815
536
6
2,401
-
536
-
536
-
2,401 57,177
-
-
536 5,357 266,987
-
13
- 64,380
815
-
-
-
-
Group - 2010
Financial assets:
Cash and cash equivalents
Trade and other receivables
Other fi nancial assets
Finance leases
Financial liabilities:
Trade and other payables
Finance leases
Bank loans
Other fi nancial liabilities
258,951
3,758
2,943 2,937 57,713
536 5,357 332,195
2.1 56,484
- 148,178
-
-
-
9.0
-
-
105
112
204,662
217
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 56,484
- 148,178
105
-
112
-
- 204,879
- 248,693
-
-
-
9.1
4.2
-
531
184
536
21
2,479 59,430
-
1,512
536
-
-
-
536
-
-
-
536 5,892 257,260
-
205
- 61,909
1,512
-
-
-
-
248,693
4,706 59,987
536
536
536 5,892 320,886
30. FINANCIAL INSTRUMENTS CONTINUED
Weighted average
effective interest rate
%
On
Demand
$’000
Less 1
year
$’000
1-2
years
$’000
2-3
years
$’000
3-4
years
$’000
4-5
years
$’000
5+
years
$’000
Total
$’000
Maturity Dates
69
Parent - 2011
Financial assets:
Cash and cash equivalents
Trade and other receivables
Advances to subsidiaries
2.5 73,130
- 10,183
-
5.0
-
-
1,615
83,313
1,615
-
-
-
-
-
-
-
-
-
-
-
-
Financial liabilities:
Trade and other payables
Bank loans
Other fi nancial liabilities
Advances from subsidiaries
-
3.3
-
3.3
-
8,826
921
-
-
598
- 56,241
-
921
-
-
-
-
921 28,154
-
-
-
-
Parent - 2010
Financial assets:
Cash and cash equivalents
Trade and other receivables
Other fi nancial assets
Advances to subsidiaries
Finance leases
Financial liabilities:
Trade and other payables
Finance leases
Bank loans
Other fi nancial liabilities
Advances from subsidiaries
8,826 57,760
921
921 28,154
2.1 18,175
8,718
-
-
-
-
-
5.9
9.0
-
-
105
4,924
112
26,893
5,141
-
-
-
-
-
-
-
9.1
3.6
-
5.5
-
25
-
7,779
-
-
1,008 28,168
-
-
-
1,083
-
- 13,548
7,779 15,664 28,168
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 73,130
- 10,183
1,615
-
- 84,928
-
8,826
- 30,917
-
598
- 56,241
- 96,582
- 18,175
8,718
-
105
-
4,924
-
112
-
- 32,034
7,779
-
-
25
- 29,176
-
1,083
- 13,548
-
51,611
In June 2011 the Group secured banking facilities
for the three years to August 2014.
The Group maintains the following lines of credit:
$2.9 million (2010: $3.5 million) overdraft facility.
Interest is payable at the base rate plus specifi ed
margin. A loan facility of $99 million (2010: $99
million) of which $99 million (2010: $99 million)
is over 3 years.
(f) Sensitivity Analysis
(i) Interest Rate Sensitivity Analysis
The sensitivity analysis which follows has been
determined based on the exposure to interest rates
for fi nancial instruments at the balance date. The
analysis is prepared assuming the amount of the
fi nancial instrument outstanding at the balance sheet
date was outstanding for the whole year.
The impact on Profi t for the Period and Total Equity
as a result of a 100 basis point movement in interest
rates is as follows:
70
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. FINANCIAL INSTRUMENTS CONTINUED
+ 100 basis point shift up in yield curve
Impact on Profi t
Impact on Total Equity
- 100 basis point shift down in yield curve
Impact on Profi t
Impact on Total Equity
Group
2011
$’000
2010
$’000
Parent
2011
$’000
-
150
-
421
-
89
2010
$’000
-
262
-
(151)
-
(429)
-
(90)
-
(267)
(ii) Foreign Currency Sensitivity Analysis
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 year end for a 10%
change in foreign currency rates. A positive number
below indicates an increase in profi t 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 profi t and equity.
+ 10% shift in NZD rate
Impact on Profi t for the Year
Impact on Total Equity
- 10% shift in NZD rate
Impact on Profi t for the Year
Impact on Total Equity
Group
2011
$’000
2010
$’000
Parent
2011
$’000
2010
$’000
(373)
(373)
(436)
(436)
(373)
(373)
(436)
(436)
456
456
533
533
456
456
533
533
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange
risk as the year end exposure does not refl ect 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
fi nancial loss to the group. The group has adopted
a policy of only dealing with credit worthy counter
parties and obtaining suffi cient collateral where
appropriate, as a means of mitigating the risk of
fi nancial 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 fi nancial condition of the trade
receivables.
The carrying amount of fi nancial assets recorded in
the fi nancial 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 maximum credit risk associated with guarantees
provided by the Group and Parent are disclosed in
note 27.
The Group does not have any signifi cant 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 fi nancial
instruments is limited because the counter parties
are banks with high credit ratings assigned by
international credit rating agencies.
71
30. FINANCIAL INSTRUMENTS CONTINUED
(h) Fair value of fi nancial instruments
The Directors consider that the carrying amount
of fi nancial assets and fi nancial liabilities recorded
in the fi nancial statements approximates their fair
values.
The fair values and net fair values of fi nancial assets
and fi nancial liabilities are determined as follows:
• the fair value of fi nancial assets and fi nancial
liabilities with standard terms and conditions and
traded on active liquid markets are determined
with reference to quoted market prices;
• the fair value of other fi nancial assets and
fi nancial liabilities are determined in accordance
with generally accepted pricing models based on
discounted cash fl ow analysis; and
• the fair value of derivative instruments are
calculated using quoted prices. Where such
prices are not available use is made of discounted
cash fl ow 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 fl ows and matching the
maturity profi les of fi nancial 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 2010.
31. DISCONTINUED OPERATIONS
On 1 September 2010 the Group’s Scientifi c businesses were disposed of. The disposal of the Scientifi c
businesses is consistent with the Group’s long-term policy to focus its activities in the healthcare market.
Details of the assets and liabilities disposed of are disclosed in note 23.
The results of the discontinued operations included in the income statement and statement of comprehensive
income are set out below.
Comparative profi t and cash fl ows from discontinued operations have been re-presented.
Revenue
Revenue from the sale of goods
Revenue from the rendering of services
Interest revenue
Other revenue
(Loss)/profi t before income tax expense
Profi t before income tax expense has been arrived at after (charging)
the following gains and losses from operations:
Gain on sale of property, plant and equipment
Group
2011
$’000
(2 months)
2010
$’000
7,814
569
3
-
53,170
2,678
7
31
8,386
55,886
-
(19)
72
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
31. DISCONTINUED OPERATIONS CONTINUED
(Loss)/profi t before income tax has been arrived
at after (charging) the following expenses by nature:
Cost of sales
Write-down of inventory
Finance costs:
Bank interest
Other interest expense
Total fi nance costs
Net bad and doubtful debts arising from:
Impairment loss on trade & other receivables
Depreciation of property, plant and equipment
Operating lease rental expenses:
Minimum lease payments
Donations
Employee benefi t expense
Other expenses
Total expenses
(Loss)/profi t before income tax expense
Income tax credit/(expense)
3
Gain on disposal of operations
Profi t for the year from discontinued operations
Cash fl ows from discontinued activities
Net cash fl ows from operating activities
Net cash fl ows from investing activities
Net cash fl ows from fi nancing activities
Net cash fl ows
32. EVENTS AFTER BALANCE DATE
Subsequent to year end the Board have approved a fi nal dividend to shareholders.
For further details please refer to Note 22.
2011
$’000
(2 months)
Group
2010
$’000
Notes
(5,190)
(251)
(32,734)
(382)
-
-
-
-
(69)
(267)
-
(2,476)
(1,095)
(9,348)
(962)
288
(674)
8,853
8,179
3,017
43,864
-
46,881
(2)
(18)
(20)
(2)
(537)
(1,611)
(6)
(10,342)
(5,396)
(51,030)
4,837
(1,089)
3,748
-
3,748
6,611
(44)
-
6,567
ADDITIONAL STOCK EXCHANGE INFORMATION
As at 29 July 2011
Twenty Largest Shareholders
Python Portfolios Ltd
Accident Compensation Corporation
Whyte Adder No.3 Ltd
Forsyth Barr Custodians Limited <1-33>
Custodial Services Limited
Herpa Properties Limited
Forsyth Barr Custodians Limited <1-17.5>
Superlife Trustee Nominees Limited
Forsyth Barr Custodians Limited <1-30>
Citibank Nominees (New Zealand) Limited
New Zealand Superannuation Fund Nominees Limited
P M Merton & CWM Trustee Company Ltd
New Zealand Permanent Trustees Limited
Elite Investment Holdings Limited
Custodial Services Limited
M.B Waller & A.L Waller
Custodial Services Limited
P Gardiner-Garden
Hubbard Churcher Trust Management Limited
New Zealand Depository Nominee Limited
Substantial Security Holders
73
Fully paid
shares
Percentage
of paid capital
5,307,571
4,294,221
3,754,868
1,372,904
1,137,858
710,106
639,671
630,168
573,301
567,829
561,495
521,277
505,741
500,000
484,466
424,703
414,490
385,589
350,000
327,392
10.19%
8.24%
7.21%
2.64%
2.18%
1.36%
1.23%
1.21%
1.10%
1.09%
1.08%
1.00%
0.97%
0.96%
0.93%
0.81%
0.79%
0.74%
0.67%
0.63%
23,463,650
45.03%
As at 29 July 2011 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
Distribution of Shareholders and Shareholdings
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
Holders
1,071
2,333
777
577
34
31
9
5
5,307,571
4,464,974
4,294,221
14,066,766
412,796
5,817,891
5,326,574
10,651,932
2,184,405
6,636,879
5,209,588
15,867,422
10.19%
8.57%
8.24%
27.00%
0.78%
11.17%
10.22%
20.44%
4.19%
12.74%
10.00%
30.46%
Total
4,837
52,107,487
100.00%
Registered Address of Shareholders
New Zealand
Overseas
Total
4,614
223
4,837
50,261,239
1,846,248
96.47%
3.53%
52,107,487
100.00%
74
Directory
CORPORATE HEAD OFFICE
108 Wrights Road
PO Box 411
Christchurch
New Zealand
Phone: +64 3 338 0999
Fax: +64 3 339 5111
www.ebos.co.nz
Chairman
Chief Executive and Managing Director
DIRECTORS
Rick Christie
Mark Waller
Elizabeth Coutts
Peter Kraus
Peter Merton
Sarah Ottrey
Mark Stewart
Barry Wallace
EXECUTIVES
Chief Executive
Mark Waller
Michael Broome General Manager – Healthcare Logistics
Angus Cooper General Manager – Special Projects
Dennis Doherty Chief Financial Offi cer
Kelvin Hyland General Manager – Healthcare NZ
David Lewis
Greg Managh General Manager – Health Support
Tony Norris
General Manager – EBOS Group Pty Ltd
General Manager – ProPharma
Auditor
Deloitte
Christchurch
Bankers
ANZ National Bank Limited
Auckland
Solicitor
Chapman Tripp
Christchurch
Share Registrar
Computershare Investor Services Ltd
Private Bag 92119
Auckland 1142
159 Hurstmere Road
Takapuna, North Shore City 0622
New Zealand
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
ProPharma
PO Box 62–027
Mt Wellington
Auckland
New Zealand
Phone: +64 9 570 1080
Fax: +64 9 915 9581
Email: info@propharma.co.nz
Pharmacy Wholesaler Russells
PO Box 71 149
Rosebank 1348
Avondale 1026
Auckland
New Zealand
Phone: +64 9 968 6750
Fax: +64 9 968 6754
Healthcare Logistics
58 Richard Pearse Drive
Mangere
Auckland
New Zealand
Phone: +64 9 918 5100
Fax: +64 9 918 5101
TRADING ENTITIES
EBOS Healthcare - New Zealand
243-249 Bush Road
Albany
PO Box 302-161
North Harbour Postal Center
Auckland
New Zealand
Phone: +64 9 415 3267
Fax: +64 9 415 4004
Email: ebos@ebos.co.nz
EBOS Healthcare - Australia
Unit 2, 109 Vanessa Street
PO Box 100
Kingsgrove, NSW 2208
Australia
Phone: +61 2 9502 8410
Fax: +61 2 9502 8411
Email: ebos@ebosgroup.com.au
Vital Medical
PO Box 100
Kingsgrove 1480
Australia
Phone: +61 1300 557 651
Fax: +61 1300 557 631
Health Support
56 Carrington Road
PO Box 44027
Pt Chevalier
Auckland
New Zealand
Phone: +64 9 815 2600
Fax: +64 9 815 1911
sales@healthsupport.co.nz
One of the leading independent distributors
of healthcare products in New Zealand,
Australia and the Pacifi c Islands.
ebos@ebos.co.nz
Annual Report 2011