EBOS Group Limited Annual Report 2022 Page 1 Annual Report 2022 Celebrating 100 years EBOS Group Limited Annual Report 2022 Page 3 Table of contents Business Overview Page 4 Business Highlights Animal Care Page 32 Foreword Page 4 Summary of Results Page 6 Chair & CEO Report Page 8 Celebrating 100 Years Page 12 EBOS Group Overview Page 16 Our People Page 18 Our Customers Page 22 Environmental, Social and Governance Program Page 24 EBOS Becomes a Leader in Devices Page 26 Business Highlights Healthcare Page 28 Our Board Page 34 Financials Page 36 Financial Summary Page 36 Financial Report Page 38 Auditor’s Report Page 40 Financial Statements Page 44 Corporate Governance Page 102 Remuneration Page 105 Directors’ Interests & Disclosures Page 114 Directory Page 119 Our story has been enriched through an investment strategy to build a diverse portfolio of high-performing market-leading businesses backed by our shareholders and talented workforce. It is through our collective efforts that we lead the way in providing the high-quality healthcare and animal care products and services that customers across New Zealand, Australia, and now Southeast Asia deserve. When acquiring Symbion, EBOS inherited the rich history of the Faulding brand, which celebrated 177 years in business on 19 May 2022. Francis Hardy Faulding opened his first pharmacy at 5 Rundle Street, Adelaide in 1845 and while the business has evolved considerably since then, Faulding continues to live on as part of the EBOS Group, a respected brand that supports the health and wellbeing of Australians. Page 4 Page 4 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 5 Foreword One hundred years of dedication, innovation, vision, resilience and teamwork. These values have shaped EBOS Group’s transformation from a humble dental and surgical supply business into New Zealand and Australia’s largest healthcare and animal care company. What started as small steps have become giant strides for our Trans-Tasman company which has been guided by a commitment to delivering the best outcomes for everyone who relies on our business. In our milestone one-hundredth year we pay tribute to the partnership with our valued shareholders, customers, business partners, and especially our employees – past and present – who have believed in our vision for a positive impact on our communities. Our annual report highlights that EBOS’ strength has been the sum of its parts working in unison with a shared vision for success. Our story has been enriched through an investment strategy to build a diverse portfolio of high-performing market-leading businesses backed by our shareholders and talented workforce. It is through our collective efforts that we lead the way in providing the high-quality healthcare and animal care products and services that customers across New Zealand, Australia, and now Southeast Asia deserve. We are proud of our heritage, we thank all of our stakeholders who have been part of our journey, and we look forward to the next one hundred years. We are proud of our heritage, we thank all of our stakeholders who have been part of our journey, and we look forward to the next one hundred years. Highlights Our business $10.7 billion revenue $89.2 million net investment in capital works $1,299.1 million acquisition investment spend 12,765 shareholders 109 locations in Australia, New Zealand and Southeast Asia Southeast Asia 19% Australia 60% New Zealand 21% 96.0c total dividends per share (NZ) 5,000 employees B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 6 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 7 Summary of Results Financial Highlights $10.7 billion revenue + 16.6% increase 129.0c underlying earnings per share + 12.2% increase $228.2 NZ96.0c million underlying net profit after tax + 21.3% increase dividends per share + 8.5% increase Revenue 8.765 9.202 10.734 6.986 6.930 2018 2019 2020 2021 2022 Five year revenue trend for the year to 30 June ($ billions) Underlying Profit Results 355.0 294.5 263.1 218.2 229.6 228.2 188.2 162.9 137.3 144.4 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Five year EBIT trend for the year to 30 June ($millions) Five year NPAT trend for the year to 30 June ($millions) Segment and divisional earnings overview Data based on gross operating revenue, which comprises revenue less cost of sales Pharmacy 46% Institutional 31% Animal Care 13% Contract Logistics 10% Segment distribution Healthcare 87% 13% Animal Care Revenue EBIT Australia 80% New Zealand and other 20% Australia 84% New Zealand and other 16% B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 8 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 9 Chair & CEO Report From the commencement of operations in 1922, Early Brothers Trading Company, the founding corporation of today’s EBOS Group, provided a broad range of products and wholesale services that catered to the needs of communities across New Zealand. It is with a great deal of satisfaction that 100 years later, through our diversified range of healthcare and animal care businesses, EBOS continues to serve and provide for communities across New Zealand, Australia and now Southeast Asia. We are pleased to report on the 2022 financial year and, given it marks our centenary, it is especially fitting to be able to report on another record result including revenues exceeding $10 billion for the first time. Highlights Our FY22 performance underlines EBOS’ disciplined adherence to our value creation strategy, consisting of maximising the organic growth in our market leading businesses, disciplined cash flow management, investing for future growth through capital investments in our operational infrastructure and strategic acquisitions and delivering strong returns for our shareholders. Consistent with this strategy EBOS continued to expand and diversify its operations with a number of acquisitions completed during the financial year. The acquisition of Sentry Medical, an Australian distributor of medical consumable products to hospitals, general practitioners, aged care facilities and government agencies, further strengthened EBOS’ presence in the distribution of medical consumables. Our medical devices business continued its growth trajectory with the acquisition of Pioneer Medical, a New Zealand importer and distributor of spine and major joint implants primarily for orthopaedic and neurosurgery, and MD Solutions, an Australian distributor of medical devices and consumables principally for interventional oncology, urology and gynaecology, gastroenterology and ear, nose and throat procedures. In December 2021, EBOS announced its largest ever acquisition with the $1.167 billion purchase of LifeHealthcare Group, a leading independent distributor of third-party medical devices, consumables, capital equipment and in-house manufactured allograft material in Australia, New Zealand and Southeast Asia. The transaction, which includes LifeHealthcare, Australian Biotechnologies and a majority investment in Transmedic, further diversifies our healthcare portfolio and increases our exposure to the high value medical devices sector. The addition of Singapore headquartered medical technology provider Transmedic to our portfolio gives our Group its first material investment in Southeast Asia. Together with our other medical devices businesses they will form a business within EBOS of approximately 1,000 employees across the region. The acquisition provides EBOS’ medical devices division with an enlarged operating platform providing the business with greater depth to service original equipment manufacturer (OEM) relationships across our region as well as enhancing our ability to expand and develop new relationships and growth opportunities. The Group also continued to invest in its operational infrastructure with several capital projects being progressed across our Healthcare segment whilst in Animal Care we completed construction of our state- of-the-art $82 million pet care manufacturing facility in Parkes, New South Wales (NSW). The Healthcare projects commenced or completed in 2022 included expanding our pharmaceutical distribution centres in Brisbane and Melbourne, opening new medical consumables distribution centres in Sydney and Perth and within our Contract Logistics division we commenced construction of two new distribution centres in Auckland and Sydney. These investments not only increase our storage capacity, of particular importance with the ongoing disruptions to the global supply chains but will also provide for more modern and energy efficient facilities. The completion of our pet care manufacturing facility in Parkes, which commenced operations in the second half of FY22, places our Animal Care segment in a strong position to meet the increasing demand for premium pet food products. The Parkes facility allows Masterpet to self manufacture its premium Black Hawk dog and cat kibble for the first time, allowing for greater controls over nutritional excellence and product innovation. Importantly, aligned with our focus on sustainable practices, nearly half of the fresh ingredients used in production are sourced locally, thereby limiting our food miles and ensuring greater quality control along the supply chain of the vet-formulated product range. The COVID-19 lockdowns of recent years, and with those prolonged periods of working from home, drove an increase in pet ownership and together with the ongoing trends of humanisation of pets and premiumisation of pet care products combined to drive our growth. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i We are pleased to report on the 2022 financial year and, given it marks our centenary, it is especially fitting to be able to report on another record result including revenues exceeding $10 billion for the first time. In another milestone for EBOS, our Terry White Chemmart (TWC) community pharmacy business celebrated the opening of its 500th pharmacy in Matraville, NSW, in March. This achievement reflects the success across many facets of the TWC business, including industry-leading business support, world- class education programs, innovations in health and the deeper connections TWC community pharmacies are forging with their customers every day. Overall, 51 new pharmacies joined the network during the year. In March 2022, the TWC network surpassed the administration of one million COVID-19 vaccinations, setting the bar for vaccination in community pharmacy. In FY22, the network delivered more than 1.7 million vaccinations to support the COVID-19 and Influenza vaccine rollouts in Australia. In recognition of the efforts of the 1,500 vaccinating pharmacists, TWC received the 2022 Customer Experience of the Year Award from Inside Retail in the Medium to Large Business category. With the milestone 500th store opening, administering one million COVID-19 vaccinations and award-winning communication campaigns, TWC has cemented its reputation as one of Australia’s leading retail pharmacy networks. The importance of workplace health and safety at EBOS continues to be a major focus and was further strengthened by the establishment of the Group Safety Committee, chaired by the CEO, with representatives from across our business units. The Committee focusses on developing Group wide health and safety initiatives, identifying areas for further improvement and facilitating learning and experience in safety matters across the Group. In FY22, it was pleasing to see a continued reduction in recordable injuries. This positive result reinforces our focus on ensuring the ongoing safety and well-being for all employees. COVID-19 COVID-19 continues to have an impact across many areas of EBOS, and this has required us to be flexible in managing situations across our operations. Our businesses continue to follow COVID-19 protocols and the advice of the local authorities as applicable to the circumstances at the time. We continue to maintain prudent controls with the objective of keeping our people safe, and our primary distribution facilities open to ensure the uninterrupted supply of products across the community. C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 10 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 11 Chair & CEO Report Whilst the need for community-wide lockdowns has diminished, the continued prevalence of COVID-19 infections across the community and the subsequent requirement for self-quarantining is impacting our people and in turn placing pressure on our operations. This has been compounded by the return of widespread flu infections, affecting the health of our employees and their families. To encourage all our employees to get vaccinated against COVID-19, EBOS provided flexibility for all staff to receive the vaccine during work hours and in August 2021 we introduced an incentive program for all ‘double dose’ vaccinated employees. Linked to the incentive program, EBOS committed to donate to UNICEF’s VaccinAid appeal for every eligible vaccinated employee. The total amount committed to UNICEF was in excess of $217,000. We thank and congratulate all of our employees who made the commitment to protecting themselves and their families, their colleagues and the wider community by getting vaccinated. Sustainability and Community During FY22, EBOS developed strategies for several high priority topics within our ESG Program. This included setting targets1, milestones and KPI’s for areas including Environmental Stewardship, Consumer Packaging, Ethical Sourcing and Our People. EBOS is committed to reducing carbon emissions from its business operations. We are progressing plans to work towards carbon neutrality, aiming to be carbon neutral for Scope 1 emissions in FY23, Scopes 1 and 2 emissions in FY27 and Scopes 1, 2 and 3 building emissions in FY28. This year the EBOS Board also approved a proposal for the scoping of an 18.8MW solar array that will meet the current and estimated future electricity needs of our Australian operations. We are also pleased to celebrate our 15-year partnership with Greenfleet this year. Since 2007, EBOS has been offsetting the estimated greenhouse gas emissions from transport associated with customer deliveries of healthcare products in Australia, totaling more than 90,000 tonnes of CO2. We look forward to continuing this important and long-standing partnership. We strive to build an engaged, diverse and talented workforce at EBOS. During FY22, we launched our Integrity training which included training on our Code of Ethics and Discrimination and Harassment. 1 Excludes LifeHealthcare, Transmedic and Australian Biotechnologies. New leaders were also trained on Unconscious Bias. We also commenced Cultural Awareness training in New Zealand after a successful rollout in Australia in FY21. We celebrated International Women’s Day and our Be Well from Anywhere Program offered staff a range of activities to improve their wellbeing and keep them connected. In Australia, we continue to implement action items within our Reconciliation Action Plan, identifying areas where we can further develop appropriate and relevant initiatives for our business. We have continued to assist with charitable causes across our communities such as our Healthcare teams sourcing crucial medical supplies for Ukraine after an urgent plea for help on behalf of the Australian Federation of Ukrainian Organisations. Domestically, we once again supported Ovarian Cancer Australia, LandSAR, BackTrack, Fight MND (Motor Neuron Disease) and Cerebral Palsy Alliance. You can read about these initiatives in more detail in our 2022 Sustainability Report. Our Board In July 2021 Dr Tracey Batten was appointed to our Board and has been a valued addition with her extensive executive career in the healthcare sector. Succession planning for directors remains a focus of the Board given there are directors with long tenures who have indicated an intention to retire over the next few years. The Board has been undertaking an extensive search process to ensure that a range of potential candidates with the necessary skills, diverse backgrounds, cultural fit and experience in different geographic markets, are considered. Dividends The Directors declared a final dividend of NZ 49.0 cents per share. In combination with the interim dividend, this brings total dividends declared for FY22 to NZ 96.0 cents per share (up 8.5%), representing a 74.2% underlying pay-out ratio . The Dividend Reinvestment Plan (“DRP”) will be operational for the upcoming final dividend. Shareholders can elect to take shares in lieu of a cash dividend at a discount of 2.5% to the volume weighted average share price (“VWAP”). The record date for the dividend is 9 September 2022 and the dividend will be paid on 30 September 2022. The final dividend will be imputed to 25% for New Zealand tax resident shareholders and fully franked for Australian tax resident shareholders. Outlook EBOS is pleased with the strong earnings growth in FY22 and we expect another year of profitable growth in FY23. The Group’s portfolio of businesses has proven to be very resilient throughout the COVID-19 pandemic, however given the global economic and geopolitical environment there are material uncertainties that may impact upon the Group’s future trading performance. Capital expenditure for FY23 is expected to remain elevated as EBOS embarks upon facility expansions and upgrades to support the growth in the business. EBOS‘ balance sheet is within its target range and is well positioned to support the capital expenditure requirements and pursue growth opportunities. The success we have achieved as a business across the 2022 financial year is the result of the combined efforts of our almost 5,000 employees across New Zealand, Australia and now Southeast Asia. We acknowledge their commitment to each other, our businesses and to the communities they serve. We thank our shareholders for their ongoing support and the trust placed in the Board, Executive and employees of EBOS. Elizabeth Coutts Chair John Cullity CEO B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y The success we have achieved as a business across the 2022 financial year is the result of the combined efforts of our almost 5,000 employees across New Zealand, Australia and now Southeast Asia. We acknowledge their commitment to each other, our businesses and to the communities they serve. Page 12 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 13 Celebrating 100 Years A century ago, King Tutankhamun’s tomb is discovered in Egypt, the BBC takes to the airwaves, and a Canadian teenager is the first diabetic treated with insulin revolutionising treatment of the condition. In New Zealand, as the post-war economy strives to recover, a small company with big ambitions is born. Lively newspaper advertisements showcase the company’s diverse suite of goods – gas lamps, kitchen and camp stoves, radiators and even fire extinguishers for cars. “If your car is not insured, the Fire-Gun is a first-class insurance against loss by fire,” one advertisement proclaims. The firm is Early Bros Trading Company Limited, purveyors of domestic and commercial heating equipment and much more. But in the 1950s, the company eschews household appliances for healthcare and in 1954 rebrands as Early Bros Dental & Surgical Supplies, setting the scene for a long and fruitful corporate journey. Six years later, the firm lists on the New Zealand Stock Exchange and in 1964 it acquires an Auckland-based dealer of intravenous and transfusion equipment. By 1986, the company officially becomes EBOS Group Limited, a small player in the New Zealand health sector, with annual revenues of approximately NZ$8 million. Three years pass and in 1989, under renewed leadership, EBOS Group makes the leap across the Tasman and begins trading in Australia as an orthopaedic specialist sales and marketing company. It is the springboard for a new chapter of ambitious acquisitions as the Company pursues a growth strategy to drive revenue, diversify its earnings, and generate strong returns for shareholders. In 1999, EBOS Healthcare is formed to represent healthcare suppliers and manufacturers and in 2000, EBOS Group becomes New Zealand’s largest independent healthcare company. By 2006 it enters the Top 50 on the New Zealand Stock Exchange. The once humble company does not stand still, acquiring New Zealand-based Health Support Ltd (now Onelink) and New Zealand pharmaceutical wholesaler ProPharma, adding to its high-performing stable of companies. By 2008, EBOS’ revenues exceed NZ$1 billion for the first time. Recognising that human health is intertwined with that of their pets, EBOS Group makes a shrewd entry into the fast-growing animal care market, with the acquisition of market leading New Zealand based Masterpet. EBOS later bolsters its Animal Care segment with Australian premium pet food brand Black Hawk. During this time, healthcare remains a key focus and the Company accelerates its ambitions to become a leader in the field when in 2013, it undertakes the acquisition of Australian pharmaceutical wholesaler Symbion for NZ$1.1 billion. EBOS’ rich history is made stronger as it inherits the Faulding pharmaceutical brand as part of the Symbion transaction, a legacy that stretches back to 1845, when chemist Francis Hardy Faulding established a small shop in Adelaide, Australia. EBOS Group’s growth is supercharged when Chemmart merges with Terry White to create one of the largest community pharmacy brands in Australia. By now, EBOS’ revenue has exceeded NZ$7 billion. Since 2013, the Group has undertaken twenty acquisitions through a proven investment strategy. This approach has delivered more than 2,000% in shareholder returns since the year 2000. To date, our workforce has grown to nearly 5,000-strong across 109 locations in New Zealand, Australia and Southeast Asia and in FY22, EBOS exceeded revenues of A$10 billion for the first time. Following the recent acquisition of LifeHealthcare, EBOS Group’s footprint now extends beyond the Trans-Tasman with operations spread across Southeast Asia. In recent years, our employees – many of them long-serving members – have not only helped to grow our business but displayed adaptability, dependability and resourcefulness in responding to one of history’s greatest health emergencies. We emerge through this period stronger, more focused, and more energised to deliver returns to our shareholders; serve our customers and the community, and write the next 100 years in our story. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i 1. Faulding delivery vehicles. 2 2. Early Bros Dental & Surgical Supplies newspaper article, 1965. Stuff Limited. 1 In 1999, EBOS Healthcare is formed to represent healthcare suppliers and manufacturers and in 2000, EBOS Group becomes New Zealand’s largest independent healthcare company. C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 14 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 15 Celebrating 100 Years 1922 Early Brothers Trading Co. Ltd is founded in New Zealand. The company sells carriage lamps and lighting for rural properties. 1954 The company’s name is changed to Early Bros Dental & Surgical Supplies Ltd. 1960 Early Bros Dental & Surgical Supplies Ltd is listed on the NZ Stock Exchange. 1986 EBOS Dental & Surgical Supplies Ltd officially becomes EBOS Group Ltd. 1996 EBOS enters the Australian market as a medical supplier. 2000 EBOS becomes NZ’s largest independent healthcare supply company with the acquisition of Medic Corporation. 2002 EBOS acquires Health Support Ltd (now Onelink). The business provides specialised logistics of medical consumables and pharmaceuticals to several district health boards. 2006 EBOS Group attains a Top 50 listing on the NZ Stock Exchange and becomes a leading Australian medical wholesaler in the primary care market with the acquisition of medical wholesaler Tasmed Pty Ltd. 1999 EBOS Healthcare is formed. Representing healthcare suppliers and manufacturers, EBOS Healthcare markets and sells products in NZ. 2007 EBOS acquires NZ pharmaceutical wholesaler ProPharma, and third-party logistics provider Healthcare Logistics. 2008 EBOS Group revenues exceed NZ$1 billion for the first time. 2019 EBOS enters the medical device sector following the acquisition of LMT and National Surgical Businesses. 2020 EBOS acquires its second business in the medical device sector following the acquisition of Cryomed Aesthetics. 2016 Chemmart merges with Terry White Group forming TerryWhite Chemmart, one of Australia’s largest retail pharmacy networks. EBOS exceeds NZ$7 billion in revenue. 2014 EBOS acquires Australian premium pet food brand, Black Hawk. 2011 EBOS acquires animal care business Masterpet Corporation and 50% of the Animates pet store group. 2013 EBOS acquires Symbion, a leading pharmaceutical wholesaler in Australia, and whose brands include Chemmart and Faulding. EBOS also takes ownership of Lyppard, a leading veterinary wholesaler in Australia. 2017 EBOS Group acquires HPS and becomes a leader in outsourced pharmacy services to hospitals. 2018 EBOS acquires 100% ownership of TerryWhite Chemmart, Victoria-based veterinary distribution business Therapon, Australian retail pharmacy management company Ventura Health and medical and surgical supplies wholesaler Warner & Webster. 2021 EBOS acquires Sentry Medical, an Australian designer, marketer and distributor of medical consumable products. 2022 EBOS acquires one of the largest independent distributors of medical devices in Australia, New Zealand and Southeast Asia, LifeHealthcare, for $1.167 billion. EBOS revenues exceed $10 billion. 2015 EBOS Group revenues exceed NZ$6 billion. EBOS acquires ZEST, a leading healthcare communications business, and Red Seal, a major natural health products business. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 16 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 17 EBOS Group Overview EBOS’ success is built on a diverse range of industry leading brands spanning community pharmacy, institutional healthcare, contract logistics and animal care. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i Healthcare Animal Care Community Pharmacy Institutional Healthcare Contract Logistics Animal Care i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 18 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 19 Perina Kuljis Customer Service Representative, ProPharma New Zealand (recently retired) 52 years with EBOS Our People Perina Kuljis exemplifies the EBOS spirit of service with an extraordinary 52-year career with our pharmaceutical wholesaler business, ProPharma. Perina began working with ProPharma in 1970 as a customer representative in Auckland, when the business was known as the Stevens Drug Company. Perina was a colourful and valued member of the ProPharma team, whose commitment, work ethic and customer service acumen will remain a lasting legacy of her time with the company. In her half-century tenure, Perina rode the wave of technological advancement, including the transition to B2B transmissions in place of manual typed-out orders. It is estimated Perina, who retired in March 2022, answered the phone 750,000 times to pharmacists across New Zealand. Our valued people are the foundation of EBOS’ success. Each of our nearly 5,000 employees – individually and collectively – contributes to delivering for our customers and the community each and every day. Whether it is packing healthcare and animal care products, fielding customer queries, or coordinating time-sensitive deliveries, our employees’ contributions underpin our success, add to our corporate legacy, and ensure we remain a competitive and agile company. We are particularly proud of the tenacity and resilience of our employees in their determined response to the dynamic business and healthcare landscape posed by COVID-19 which continues to disrupt all sectors of the global economy. The endeavour, teamwork, skills, and leadership our employees have displayed in rising to every challenge reinforces our commitment to invest in them so they can build long, healthy and fulfilling careers with our company. It is our priority to continually support and develop all of our employees, from those beginning the EBOS journey to those who have been with us for many years such as the dedicated employees we are proud to profile here. From left, Product Managers Bridget Englebretsen and Martin O‘Sullivan, and CEO Animal Care Julie Dillon at Interzoo, the world’s largest Pet Care Trade Show event in Germany. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i Martin O’Sullivan Senior Group Product Manager Australasia, Masterpet 41 years with EBOS Skipping school is not something to be encouraged but helping his twin brother set Martin O’Sullivan on course with a long relationship with Masterpet. “My brother Michael left school and our uncle David Molloy, who was a sales rep, organised a temporary job for him at Masterpet,” Martin said. “When it was busy, I would wag school and come and help Michael unload containers and work at the Wellington warehouse. “Within two years I was part of the sales team and had a company car by the time I was 19, which my family and friends thought was cool.” By 23, Martin was managing the company’s Auckland operations. He has been in his present role for more than a decade working with Masterpet distribution centres on supply, pricing, new product development capacity, and sourcing new business opportunities. “Masterpet has always been a dynamic business with pet passionate people, I’ve been fortunate to start at a young age and grow with the business,” he said. “The single biggest thrill I get working for Masterpet is seeing fantastic people given opportunities and seeing them grow with the business.” Terry Hayes General Manager Supply Chain, Symbion Australia 43 years with EBOS Terry Hayes began his healthcare journey in warehouse operations at Faulding in 1978 when he was aged 18 and there was an employee to serve staff refreshments. Forty-three years later and the refreshments service is a distant memory but Terry has carried with him the importance of making customers central to delivering strong results for the company and shareholders. Terry has worked across Symbion’s pharmacy and retail divisions, and for more than 20 years has held senior management positions with the company. Since 2016 he has been Symbion’s General Manager, Supply Chain, managing 45 staff across Demand & Supply Planning, Master Data and Pricing & Analytics. He oversees billions of dollars of purchases annually. Terry is committed to the delivery of superior service to Symbion’s highly valued customers while at the same time efficiently managing the inventory component of working capital. “Our business really does encourage innovation and ideas … it’s an environment that is really important to bringing to market innovation which benefits the business,” Terry said. C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 20 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 21 Our People Terry White AO and Rhonda White AO TerryWhite Chemmart, 63 years in Pharmacy A picturesque seaside village linked to one of history’s great explorers was also the starting point for what is now one of Australia’s greatest pharmacy success stories. In 1799, Englishman Matthew Flinders and his crew landed at what is now known as Woody Point, in Queensland’s Moreton Bay, as part of his historic circumnavigation of Australia. It was also here that Terence Anthony “Terry” White AO opened his first pharmacy in 1958, lighting the fire for what would become part of the TerryWhite Chemmart brand – an integral business of the EBOS community. In 1961, Terry married Rhonda White AO (nee Conn) and formed an amazingly successful partnership in business and in life. Early on after purchasing his pharmacy at Woody Point, Terry soon realised that the pharmacy was isolated, surrounded on three sides by Moreton Bay. In response to this challenge, Terry and Rhonda converted a Fiat 500 and later a Holden panel van to deliver medicine and assisted living equipment to customers. In another sign of their entrepreneurship and teamwork, Terry and Rhonda used a two-way radio to relay scripts from a patient’s house to the dispensary to ensure the medication would be ready by the time Rhonda returned to collect it. Over the next ten years, five pharmacies and five children later, Terry and Rhonda both decided to undertake further studies. Terry pursued a political career with the Australian Liberal Party and Rhonda became engrossed in Organisational Development (Psychology), working with a number of national and international companies. In the early 80s, Rhonda returned to pharmacy and with her passion for Systems Management set about working with the teams from each of the three pharmacies they had retained, to document best practice operating systems for Community Pharmacy. Their eldest son Anthony, then a young aspiring graduate working with PricewaterhouseCoopers, joined Rhonda as in-house accountant. Terry returned to the business in 1989 and they worked together to grow the pharmacies. The building blocks were in place to build a brand. The Terry White Chemists flagship Gold Coast store opened in 1990 and would redefine Community Pharmacy, incorporating cosmetics, fragrance, an extensive range of health, wellness and preventative healthcare products, supported by systems and processes that assured a consistent standard of service and care that is still the focus and culture today. The Whites were overwhelmed with interest in this cutting-edge concept. “A pharmacist owner is required to be responsible for what goes on in all parts of the pharmacy at all times. It was clear to me that the only way to meet that standard in all our pharmacies was to develop documented systems and protocols by which all must operate,” Rhonda said. “With the numbers growing, we invited another family member, our son and Project Manager, William, who subsequently rolled out the first 100 stores.” “Some time in 1993 one of our managers called to say, ‘I don’t want to be a manager anymore. I want to buy my own pharmacy, but I want to call it Terry White Chemists’. That’s when the franchise began, and the brand took off.” The first franchise opened in 1994 and within four years, there were 80 stores. In 2016 Terry White Group merged with the EBOS owned Chemmart pharmacy franchise to create TerryWhite Chemmart, one of Australia’s leading pharmacy franchise networks, with EBOS moving to 100% ownership in 2018. When asked about their relationship with EBOS Group, the Whites said there is mutual admiration and respect built on years of a very positive business association. “Having the backing of EBOS has ensured the TerryWhite Chemmart network can keep up with the demands of an ever-evolving pharmacy landscape. Never did we think that the marriage with EBOS would take the Brand to 500 stores and more to come.” There are now over 500 TerryWhite Chemmart network stores, serving 2 million customers every month. Terry and Rhonda were made Officers of the Order of Australia in 2006 and 2014 for their service to the pharmacy profession, and in 2022, were awarded a Lifetime Achievement Award by the Pharmaceutical Society of Australia. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i 1 3 4 2 1. Terry and Rhonda celebrate the opening of TWC’s iconic Australia Fair store on the Gold Coast. 2. Terry White - President of the Pharmacy Guild in 1974. 3. Terry White (TWC Margate 1967) serving a customer. 4. A delivery vehicle used by Terry and Rhonda to bring health and wellness to their community. 1958 Terry White opens his first pharmacy at Woody Point, Queensland. They delivered products to customers, relaying scripts using two-way radios 1963 Rhonda opens her own White’s pharmacy at Clontarf, Queensland 1990 Their flagship Gold Coast store, designed by Rhonda, opens and becomes a model for the modern-day Community Pharmacy 1994 1999 Terry White Chemists franchise established Terry White Chemists Brand is sold to Faulding. F H Faulding taken over by Mayne Pharma 2009 2016 2018 2022 Terry, Rhonda, and other pharmacy owners, reacquire the Terry White Chemists Brand. Anthony White is brought on board as CEO to steer the business in the right direction Terry White Group merges with Chemmart to create TerryWhite Chemmart EBOS Group moves to 100% ownership of Terry White brand TerryWhite Chemmart reaches 500 community pharmacies in Australia C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 22 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 23 Our Customers The EBOS story and our success is shaped not just by our dedicated employees, but also our valued customers. We recognise the importance of a customer-first focus and pride ourselves on building long-standing relationships with them through the ups and downs of business. Many customers have been part of the journey for many decades and we thank them for entrusting our products, services and people to drive their business success. Bernie McKone Unichem Waikiki Pharmacy Customer, 40 years Bernie McKone credits the “inspirational” and “high calibre” ProPharma team with having a hand in his business success. Bernie, who has worked with the pharmaceutical wholesaler in New Zealand for more than 40 years, cites the company’s ‘can do’ attitude to business, strategic planning and mentoring as critical to his professional journey. “I had the benefit of working with an inspirational team of people who encouraged innovation and participation in events such as the New Zealand Marketing awards,” he said. “I finished runner-up before winning the title in the 1990s. “This was a major influence on how I was able to shape and build the pharmacy business from a small pharmacy in Gore to eventually running services across Eastern Southland. “I have been privileged to work with a high calibre, positive group of people and would encourage anyone in business to consider the true value of maximising their relationship with ProPharma as their wholesaler.” Rod Garozzo TerryWhite Chemmart Pharmacist, Symbion Customer, 40 years Pharmacist Rod Garozzo’s relationship with Symbion is nudging 40 years and it is a partnership that has endured significant challenges. Tragedy struck in 2000 when fire gutted Rod’s Terry White Chemist store at Arana Hills, in Brisbane, which he now co-owns. Rod said Symbion’s response in helping him rebuild the business was something he would “never forget”. “Symbion were just fantastic in what they did after the pharmacy burned down in helping to refill us across the road in a temporary store,” he said. “They went far above and beyond what you would expect.” In 1956 Rod’s father opened a pharmacy in the Brisbane suburb of Mitchelton, and Rod is now a co-owner of that branch which is also a TerryWhite Chemmart. “If you can get continuity in business, things run a lot smoother. Life isn’t always clear sailing, but Symbion have always been fantastic for us through the ups and downs,” Rod said. John Counihan Owner Mount Barker Pet Care Centre, Masterpet customer 30 years John Counihan has a strong allegiance to the Masterpet brand honed over more than 30 years in pet care retailing and product development. A former South Australian sales manager with Pets International, which Masterpet acquired in 2001, John has a connection with Masterpet through his former sales role and, later, operating several pet care businesses in South Australia. John, who has for the past 15 years run the highly successful Mount Barker Pet Care Centre in South Australia’s fastest growing township said Masterpet’s strengths were its people and products. “I think, for me, it’s the range of product they keep from food through to general accessories, and they’re particularly strong in the dog area and that’s 80% of my business,” he said. “I’d also say the representation is a strength of the company. Our rep Robert Downie is wonderful. I’ve known him since he began. He’s well respected, the company are well respected. “He’s just very good at following up with us, keeping us updated with changes in price rises, new products and even tracking where my business stands in terms of growth in certain product areas.” John said Masterpet did some “great marketing” when it acquired the Black Hawk pet food brand in 2014. “The marketing helped grow the brand and helped to grow our business,“ he said. From left: Mary-Anne Pitman - TWCM Business Development Manager; Colleen Rodgers - Retail Manager at TWCM Blackwood; Mr John Spick - Pharmacy Owner - TWCM Blackwood; Irene Sardelis - Symbion Key Account Manager SA/NT; and Gary Flynn - TWCM State Operations Manager SA/NT. John Spick TerryWhite Chemmart Pharmacist and Symbion Customer, 50 years For 50 years John Spick has served customers from his Adelaide Hills pharmacy – and Australia’s leading pharmacy wholesaler Symbion has been by his side from the beginning. John has been with Symbion since the 1970s when he opened a small pharmacy in Blackwood under the Faulding banner, as Symbion was known at the time. The pharmacy expanded over the years and has transitioned through the Symbion brand portfolio, from Pharmacy Choice to Chemmart, then becoming a TerryWhite Chemmart in 2016. Today John works in a locum capacity serving fourth-generation customers. Symbion Senior Key Account Manager Michael McNeil, who worked with John for 30 years as his account manager, says John is a humble and quiet achiever. “As a loyal business operator, and in his very unassuming way, he has always sought to be treated with the same care in which he looks after his customers – and that’s certainly the foundation on which we built a relationship with him,” he says. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 24 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 25 Environmental, Social and Governance Program The EBOS Board has approved the scoping of an 18.8MW solar array to demonstrate the Group’s commitment to cutting carbon emissions. This major piece of infrastructure is planned to meet the total annual electricity demand of our Australian operations Our second Sustainability Report highlights in more detail achievements and targets1 under our Environmental, Social and Governance (ESG) Program which is centred on five pillars: Health and Animal Care Partners, Consumers and Patients, Community and Environment, Our People, and Responsible Business. With our reach across New Zealand, Australia, and Southeast Asia, and our diverse portfolio of products and services, EBOS, together with our shareholders, has the ability to effect positive change. Each day we strive to improve lives through our Healthcare and Animal Care segments, and we are passionate about using our influence and resources to make the world a better place socially and environmentally. Our Company has been on a journey towards greater corporate social responsibility and while we have only recently started formal reporting on our Environmental, Social and Governance activity, we have a long history of implementing sustainability initiatives. In FY22, we continued our charitable endeavours through efforts such as: supporting not-for-profit organisations fighting to find cures for cancers, offsetting our carbon emissions through financing revegetation projects, and feeding search and rescue dogs. We joined the medical relief efforts in the Ukraine, our employees helped to raise funds for UNICEF’S COVID-19 response, and they walked that extra mile to raise money for cerebral palsy research. 96,261,533 steps for Cerebral Palsy Alliance $217k donated to UNICEF VaccinAid fund $160k stock donation to Ukraine 1 Excludes LifeHealthcare, Transmedic and Australian Biotechnologies. EBOS celebrates its 15 Year partnership with Greenfleet. EBOS CEO John Cullity (left) and EBOS Transport Manager Bruce Blair supporting Greenfleet’s tree planting day. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Health & Animal Care Partners Consumers & Patients Community & Environment Delivering essential infrastructure for human and animal health • Community service role • Nurturing customer and government relationships Implementing robust systems • Business continuity management • Data and technology security/ privacy Managing the impacts of our products • Packaging and Waste • Ethical Sourcing Upholding our Quality Promise • Quality Management • Compliance Environmental Stewardship • Minimising our impact • Carbon offsetting Reaching out to help out • Supporting causes close to us • Advancing equity, fairness and opportunity in society Our People Responsible Business • Employee safety, health and wellbeing • Culture and engagement • Talent and capability • Performance and reward • Legal compliance • Reporting with integrity • Ethical behaviour • Corporate governance Page 26 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 27 1 EBOS Becomes a Leader in Devices EBOS substantially accelerated its medical devices strategy with the $1.167 billion acquisition of leading distributor LifeHealthcare Group in a significant milestone for our company. LifeHealthcare is an independent distributor of third party medical devices, consumables, capital equipment and in-house manufactured allograft material in Australia, New Zealand and Southeast Asia. The transaction, which includes LifeHealthcare, Australian Biotechnologies and a majority investment in Transmedic, aligns with our vision of investing for growth, diversifies our medical devices portfolio and increases exposure to a high value healthcare sector. The addition of Singapore headquartered medical technology provider Transmedic to our portfolio gives our company its first significant investment in Southeast Asia. EBOS announced it completed the acquisition of LifeHealthcare to the New Zealand and Australian stock exchanges on 31 May 2022. LifeHealthcare, Transmedic and Australian Biotechnologies will join our existing medical device businesses LMT, Cryomed, Pioneer Med and MD Solutions. Together they will form a business unit within EBOS with approximately 1,000 employees across Australia, New Zealand and Southeast Asia. The acquisition provides EBOS’ medical devices business with sufficient breadth and depth to service original equipment manufacturer (OEM) relationships and develop new relationships. It will allow us to accelerate our medical devices strategy, gives us scale, expands and diversifies EBOS’ earnings by segment and creates a platform to capitalise on future growth. LifeHealthcare’s CEO, Matt Muscio, is the new CEO of the expanded medical devices business. “The continued success of EBOS is underpinned by our adherence to a disciplined strategy that includes investing for growth and expanding and diversifying our earnings,” EBOS Chair Elizabeth Coutts said. “The acquisition of LifeHealthcare is consistent with this strategy and part of our overall objective to deliver value to our shareholders.” 2 1. LifeHealthcare team conference. 2. Matt Muscio who, together with his management team, will lead the day to day operations of our devices division. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 28 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 29 EBOS integral to COVID-19 response As federal governments in New Zealand and Australia seek to control community transmission of the virus, RATs became an important tool in slowing the spread, particularly with the arrival of the Omicron variant. Our Healthcare team was a crucial ally in supplying RATs to communities across New Zealand and Australia, often procuring and delivering the stock at short notice and from overseas, amid supply constraints back home. In New Zealand, our Healthcare Logistics (HCL) business continues to be an integral distribution partner for the New Zealand Ministry of Health’s national COVID-19 response. During the Omicron surge in early 2022, HCL’s daily warehouse activities increased significantly amid demand for products including Personal Protective Equipment (PPE). Healthcare segment delivers despite challenging circumstances The depth of our wholesale network, our deep supplier and customer contacts, and our dedicated employees have all demonstrated their value in the face of significant business and community adversity. The past 12 months saw disruptions to the global medical supply chain, resulting in higher rates of supplier out-of-stock products, reduced overall availability and longer lead times for wholesalers to secure stock. In response, Symbion adapted to deliver medicines to pharmacies and hospitals wherever possible by increasing inventory holdings, training extra staff members and deploying additional delivery vans to meet the challenges posed by supply chain disruptions. Healthcare Logistics Australia’s focus on safety, quality, service and continuity planning mitigated disruption to the supply of critical medicines despite the challenges posed by the pandemic. The extra resources and adaptability helped HCL’s partners overcome these challenges and respond to and recover from stock shortages faster to continue to connect communities to care. EBOS Healthcare continued to support Australia’s National Immunisation Program, providing storage and distribution for close to four million government- funded vaccine doses in Victoria. This support has now been extended to Western Australia. In New Zealand HCL is expecting to deliver approximately 1.5 million doses of the flu vaccine in 2022. We commend the determination of our operations team members and logistic partners in providing medicines to flood-affected customers in Queensland and New South Wales. In many cases our colleagues were working despite not knowing whether their own properties had been damaged in the flood disaster. The actions of all our teams in continuing the supply of medicines under trying conditions is a testament to our team’s valuable contribution to the Australian and New Zealand healthcare industry. Delivering expanded distribution network We continue to invest in the expansion of our distribution centres in a strategy that aligns with our growth and will enable us to better serve the needs of our growing customer base in New Zealand and Australia. The investment not only increases our storage capacity but also provides for more modern and energy-efficient facilities. Featured developments strengthening our ‘essential infrastructure’ Symbion Keysborough, VIC Beginning construction in FY22, we are adding 3,000 sqm of storage space and investing in automation and supporting infrastructure at this existing site. Symbion Acacia Ridge, QLD Our new 3,000 sqm expansion at this existing site increased much needed capacity for storage of 4,500 additional pallets. Healthcare Logistics, Auckland Due for completion in FY23, our new 12,500 sqm facility will be the biggest in New Zealand standing at an impressive 16.7m in height with capacity to store 13,400 pallets. The frontline team at Symbion, Keysborough. Business Highlights Healthcare Connecting communities to care EBOS Group’s Healthcare segment has again delivered strong results for the Company and provided crucial community care while responding to the dynamic environment posed by the pandemic. It was a case of business as usual for our company as the healthcare demands of COVID-19 again tested the resilience and adaptability of our employees and systems. In another busy year, governments in New Zealand and Australia – and their communities – again counted on the industry- leading expertise and professionalism of our healthcare team to meet the COVID-19 response efforts. And rise to the challenge they did. Whether it was delivering millions of vaccines or providing advice to pharmacy customers – our employees were integral to communities getting the right care where and when they needed it. Our leadership, expertise and sophisticated systems have helped us manage supply chain constraints due to the pandemic. We have continued our strategy to acquire quality healthcare assets and are expanding our distribution centres across our healthcare portfolio to position the Company for future growth, better serve our communities and deliver returns for our shareholders. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 30 EBOS Group Limited Annual Report 2022 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 Page 31 Page 31 Business Highlights Healthcare Continued Sentry Medical acquisition Support for Ukraine and UNICEF Our investment strategy for growth was reflected in the exciting acquisition of Australian medical consumable marketer and distributor, Sentry Medical, in August 2021. Sentry supplies customers including wholesalers, hospitals, general practitioners, dental surgeries, aged care facilities, pharmacies and government agencies with their own brands and other agency brands. The investment further strengthens EBOS’ presence in the distribution of medical consumables. Inspiring our next leaders Professional development of our employees is essential for EBOS to retain and attract the best and brightest people. To cultivate and support our future leaders, we launched an internal eight-month sponsorship and development program, Catalyst. Catalyst is designed to support emerging talent within EBOS and develop career progression and networking by connecting our leaders of today with our leaders of tomorrow. The program was introduced into our Healthcare segment giving participants one-on-one coaching, an executive sponsor from within the business, networking opportunities and learning and development via workshops. The program is another critical part of our overarching people strategy and gives employees the opportunity to advance their careers with us. As part of our important charitable commitments our Australian operations responded to the global humanitarian response following Russia’s invasion of Ukraine. In March 2022 EBOS received an urgent request to provide medical aid to Ukraine whose people’s lives have been turned upside down by what is now a prolonged and devastating war. Our team jumped to action providing $160,000 worth of stock which was palletised, wrapped, and delivered to holding centres in Melbourne and Sydney for transport to Ukraine. We also raised $217,000 for UNICEF’s VaccinAid appeal by encouraging our employees to have their COVID-19 vaccinations in exchange for EBOS making a $75 donation per vaccination to the humanitarian aid organisation. Almost 3,000 employees rolled up their sleeves with the money helping to pay for COVID-19 vaccinations for health workers, teachers, social workers and vulnerable people around the world. UNICEF Australia’s CEO Tony Stuart wrote to EBOS in February 2022 expressing UNICEF’s gratitude for the donation which will support its work in addressing the global vaccine equity crisis. Almost 3,000 employees rolled up their sleeves with the money helping to pay for COVID-19 vaccinations for health workers, teachers, social workers and vulnerable people around the world. TerryWhite Chemmart opens its 500th pharmacy with the unveiling of the outlet in Matraville, Sydney. TerryWhite Chemmart success With a milestone 500th store opening, administering one million COVID-19 vaccinations and award- winning communication campaigns, TerryWhite Chemmart (TWC) has cemented its reputation as one of Australia’s leading retail pharmacy networks. In March 2022 TWC achieved a significant milestone with the opening of the network’s 500th pharmacy in Matraville NSW. This achievement reflects the success across many facets of the TWC business, including industry-leading business support, world- class education programs, innovations in health and the deeper connections TWC community pharmacies are forging with their customers every day. In the same month, the TWC network surpassed one million COVID-19 vaccinations, setting the bar for vaccination administration in community pharmacy. Over FY22, the network delivered over 1.7 million vaccinations in total to support both the COVID-19 and influenza vaccine roll outs in Australia. It was therefore worthy acknowledgement of the incredible effort of the 1,500 vaccinating pharmacists when TWC received the 2022 Customer Experience of the Year Award from Inside Retail in the Medium to Large Business category. The award was in recognition of the efforts displayed by all TWC pharmacies in delivering vaccination services to the community. The network has worked incredibly hard to deliver a professional, safe and convenient vaccination experience for customers. TWC’s investment in and focus on education over the past 5 years has supported the development of industry leading programs for pharmacists like the ‘TerryWhite Chemmart Masterclass’. The educational event is the pinnacle professional development experience for pharmacists on the pharmacy industry calendar attracting over 400 pharmacists and pharmacy professionals demonstrating a desire for continued education and learning. Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryBusiness Overview Page 32 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 33 Business Highlights Animal Care $82m Pet Care Manufacturing Facility Puppy power COVID-19 has raised awareness of maintaining our health and for many New Zealanders and Australians that healthy lifestyle extends to their precious pets. Lockdowns and working-from-home continued to fuel strong spending across animal ownership and for our Animal Care segment. The segment is well-positioned to meet the demand by raising the bar in the pet-food industry with production ramping up at our $82 million state-of- the-art Pet Care Manufacturing Facility at Parkes, NSW, which commenced operations in the second half of FY22. We recognise the extraordinary efforts of our team to deliver this game-changing manufacturing facility which allows Masterpet to manufacture its premium Black Hawk brand dog and cat kibble in house for the first time. Nearly half of the fresh ingredients are sourced within 200 kilometres of the 12,800m2 facility – reducing our food miles – and ensuring greater quality control along the supply chain for the vet-formulated product range. Nutritional excellence and innovation are a centrepiece of the facility as we strive towards a goal of human-grade pet food. To meet our stringent standards and ensure we deliver products pet owners trust, we have partnered with local farmers to ensure crops used in food production are grown to our precise specifications. The facility has created more than 50 direct jobs in Parkes and there is scope to expand the plant to meet future demand. Our pets, much like our children, need the best start in life and that means eating well. In FY22, Black Hawk launched a new pet food range specifically developed for puppies based on their breed size and age, to ensure they receive the right body and brain nutrition so they can achieve optimal growth. The Black Hawk Original Puppy range is specifically formulated by our pet nutritionists and is produced at our Parkes Pet Care Manufacturing Facility. The product packaging is designed to enhance consumer recognition of the products specific to their puppy and aid in self-selection. The launch has proven a success with Black Hawk reaching approximately 20% share in the premium puppy food category in both Australia and New Zealand. Nutritional excellence and innovation are a centrepiece of the facility as we strive towards a goal of human-grade pet food. B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i Pet Care Manufacturing Facility in Parkes, NSW. Black Hawk and VitaPet go from strength to strength Lyppard supports vets in Australia Our Black Hawk brand is a leading premium dog food brand sold in pet specialty stores across both Australia and New Zealand. Black Hawk grew sales by 18% in FY22 and increased its market share in New Zealand. Our pet treats brand VitaPet has also performed strongly and remains the number 1 brand in the grocery dog treats category by revenue in both Australia and New Zealand. The increasing sales of premium pet food reflects the underlying trend of the humanisation of pets with pet parents willing to spend more on their pet’s needs. In Australia, pet ownership has increased in the last two years with 69% of households now owning a pet, in contrast to 61% two years ago. Initially the growth was from owners servicing the needs of their puppies and kittens, but as these animals mature, the growth continues into the adult premium pet food category. The dog treat category has followed similar trends to premium pet food with strong double-digit growth over the last three years. In Australia, 47% of households now have at least one dog with 34% of New Zealand households now also counting a dog as part of the family. The increase in dog population across both countries combined with pet parents spending more on their dogs has been a key driver of this category over the past three years. Lyppard has again delivered strong growth through targeting new business with independent veterinary clinics as well as focusing on bolstering relationships with large veterinary groups. The veterinary sector has continued to grow with demand increasing for the care of domestic pets. The increase in pet ownership during the COVID-19 pandemic, with the extra time that pet parents spent caring for their pets, resulted in stronger demand for high quality animal care services and products. Despite the COVID-19-driven wave in the market having peaked, and begun to slow since the start of 2022, pet numbers are still high and the demand for high-quality animal care services and products continues to remain at a level higher than before the pandemic began. In November 2021, Lyppard moved its Brisbane operations to a new 3,800sqm distribution facility. This has allowed the business to better serve its customers in the region and also provides capacity to support future business growth. C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 34 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 35 Our Board B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i Elizabeth Coutts, Independent Chair ONZM, BMS, FCA Dr Tracey Batten, Independent Director MBBS, MHA, FRACMA, MBA, FAICD Elizabeth Coutts was appointed to the EBOS Group Limited Board in July 2003. She is Chair of the Remuneration Committee and a member of the Audit and Risk Committee. She is Chair of Oceania Healthcare Limited, Skellerup Holdings Limited and Voyage Digital (NZ) Limited, Director of EBOS Group subsidiaries in New Zealand and Member, Marsh New Zealand Advisory Board. Elizabeth is a former Chair of Ports of Auckland Limited, Meritec Group, Industrial Research, Life Pharmacy Limited, former director of Air New Zealand Limited, the Health Funding Authority, Sanford Limited, the Yellow Group of Companies and Tennis Auckland Region Incorporated, former Deputy Chairman of Public Trust, former board member of Sport NZ, former member of the Pharmaceutical Management Agency (Pharmac), former Commissioner for both the Commerce and Earthquake Commissions, former external monetary policy adviser to the Governor of the Reserve Bank of New Zealand, a former president of the Institute of Directors Inc. and former Chief Executive of the Caxton Group of Companies. Dr Tracey Batten was appointed to the EBOS Group Limited Board in July 2021. She is a member of the Remuneration Committee. Tracey is currently a non-executive director of Medibank Private Limited, the Accident Compensation Corporation, and the National Institute of Water and Atmospheric Research. She was previously a non-executive director of Abano Healthcare Group Limited and various other healthcare-related research institutes, charities and industry and government bodies. During her executive career she was Group CEO of Imperial College Healthcare NHS Trust in the United Kingdom, Group CEO of St Vincent’s Health Australia, CEO of Eastern Health and CEO of Dental Health Services Victoria. Stuart McGregor, Independent Director BCOM, LLB, MBA Sarah Ottrey, Independent Director BCOM, CF. Inst.D Sarah Ottrey was appointed to the EBOS Group Limited Board in September 2006. She is a member of the Audit and Risk Committee. Sarah is Chair of Whitestone Cheese Limited and a director of Skyline Enterprises Limited and subsidiaries, Mount Cook Alpine Salmon Limited, Christchurch International Airport Ltd, Sarah Ottrey Marketing Limited, and a committee member of the NZ Institute of Directors Otago/Southland Branch. She is a past board member of the Public Trust and the Smiths City Group Ltd. Sarah has held senior marketing management positions with Unilever and Heineken. Stuart McGregor was appointed to the EBOS Group Limited Board in July 2013. Stuart was educated at the University of Melbourne and the London School of Business Administration, gaining degrees in Commerce and Law. He was previously admitted as an Associate of the Australian Society of Accountants (now CPA Australia) and also completed a Master of Business Administration at the University of Melbourne. Currently, Stuart is a director of Symbion Pty Ltd and other EBOS Group subsidiaries. Stuart has been Company Secretary of Carlton United Breweries, Managing Director of Cascade Brewery Company Limited in Tasmania and Managing Director of San Miguel Brewery Hong Kong Limited. In the public sector, he served as Chief of Staff to a Minister for Industry and Commerce in the Federal Government and as Chief Executive of the Tasmanian Government’s Economic Development Agency. He was formerly a director of PrimeLife Limited and Chairman of Two Way TV Limited and Donaco International Limited. Peter Williams, Independent Director Peter Williams was appointed to the EBOS Group Limited Board in July 2013. He was formerly a director of Green Cross Health Limited and an executive of Zuellig Group. Stuart McLauchlan, Independent Director BCOM, FCA, CF. Inst.D Stuart was appointed to the EBOS Group Limited Board in July 2019. He is Chairman of the Audit and Risk Committee and a member of the Remuneration Committee. Stuart is a Chartered Fellow of the Institute of Directors and a Past President. He is a chartered accountant, partner of G S McLauchlan & Co, and a Fellow of the New Zealand Institute of Chartered Accountants. He is currently Chairman of Scott Technology Ltd and ADInstruments Ltd. He is a director of Argosy Properties Ltd as well as a number of private companies. He is also a governor of the New Zealand Sports Hall of Fame, a member of the Marsh New Zealand Advisory Board and a member of the Advisory Board to the Partridge Jewellers group. He was formerly a director of Ngāi Tahu Tourism Ltd. i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Page 36 Page 36 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 Page 37 Page 37 Financial Summary EBOS delivered another record financial result and double-digit NPAT growth. Group revenue exceeded $10 billion for the first time, up 16.6% on the prior year, driven by growth in both our Healthcare and Animal Care segments, including strong performances from our Community Pharmacy, Institutional Healthcare, Contract Logistics and Animal Care businesses. EBOS recorded Underlying Earnings Before Net Finance Costs and Tax (EBIT) of $355.0 million, representing 20.5% growth and Underlying Net Profit After Tax (NPAT) attributable to shareholders of $228.2 million, representing 21.3% growth. Healthcare The Healthcare segment reported revenue of $10.2 billion and Underlying EBIT of $316.2 million, representing 17.1% and 24.0% growth respectively. In Australia, Healthcare revenue increased to $8.2 billion and Underlying EBIT increased to $267.1 million, representing 18.0% and 23.6% growth respectively. In New Zealand, Healthcare revenue increased to $2.0 billion and Underlying EBIT increased to $49.1 million, representing 13.4% and 26.2% growth respectively. This was driven by strong performances from our Community Pharmacy, Institutional Healthcare and Contract Logistics businesses. Net capital expenditure for the year was $89.2 million which included business-as-usual capital expenditure of $59.2 million and $30.0 million of capital expenditure associated with EBOS’ new pet food manufacturing facility in New South Wales. Return on Capital Employed for June 2022 was 18.6%, up 0.6% on the prior year. The net debt to EBITDA ratio was 1.94x, excluding the impact of IFRS 16 Leases and reflecting a higher net debt balance following the completion of the LifeHealthcare acquisition. Acquisitions Consistent with our strategy of investing for growth, during the last 12 months, EBOS announced a number of acquisitions to expand and further diversify our earnings. These acquisitions consist of LifeHealthcare, a leading distributor of a range of medical devices within Australia, New Zealand and Southeast Asia; Sentry Medical, an Australian distributor of medical consumable products to wholesalers, hospitals and primary care facilities; Pioneer Medical, a New Zealand importer and distributor of spine and major joint implants primarily for orthopaedic and neurosurgery; and MD Solutions, an Australian distributor of a range of medical devices and consumables primarily for interventional oncology, urology and gynaecology, gastroenterology and ear, nose and throat procedures. Animal Care Dividends The Animal Care segment had a strong performance with revenue of $541.3 million and EBIT of $72.6 million, representing 8.8% and 15.3% growth respectively. Our Animal Care businesses continued to capitalise on strong pet market conditions as a result of their leading market positions. This growth was driven by strong performances from our leading brands and businesses, including Black Hawk, Vitapet and Lyppard. Cash flow and balance sheet EBOS has reported underlying operating cash flows before capital expenditure of $291.0 million. This cash performance reflects a higher investment for the year into net working capital to cater for sales growth and higher tax payments. The Directors are pleased to declare a final FY22 dividend of NZ 49.0 cents per share, which equates to a full-year dividend of NZ 96.0 cents per share. For the full year, this represents an increase of 8.5% on the prior year and a dividend payout ratio of 74.2% on an underlying basis. The record date for the final dividend is 9 September 2022 and the dividend will be paid on 30 September 2022. The final dividend will again be imputed to 25% for New Zealand tax resident shareholders and will be fully franked for Australian tax resident shareholders. The Dividend Reinvestment Plan (DRP) will be operational for the final dividend. Shareholders can elect to take shares in lieu of a cash dividend at a discount of 2.5% to the volume weighted average share price (“VWAP”). B B u u s s i i n n e e s s s s O O v v e e r r v v e e w w i i i F n a n c a l s i C o r p o r a t e G o v e r n a n c e R e m u n e r a t i o n l & D i s c o s u r e s D i r e c t o r s ’ I n t e r e s t s D i r e c t o r y Consistent with our strategy of investing for growth, during the last 12 months, EBOS announced a number of acquisitions to expand and further diversify our earnings. Page 38 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 39 Financial Report Contents Directors’ Responsibility Statement Independent Auditor’s Report Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the consolidated Financial Statements Introducing this report 50 Section E: How we fund the business Section A: EBOS performance A1. Revenue and expenses A2. Segment information A3. Taxation A4. Earnings per share Section B: Key judgements made B1. Goodwill and intangibles B2. Acquisition information Section C: Operating assets and liabilities used by EBOS C1. Trade and other receivables C2. Inventories C3. Trade and other payables 52 55 58 60 61 66 71 72 73 Section D: Capital assets used by EBOS to operate our business D1. Property, plant and equipment D2. Capital work in progress 74 75 E1. Share capital E2. Dividends E3. Borrowings E4. Borrowing facilities maturity profile E5. Operating cash flows Section F: EBOS Group structure F1. Subsidiaries F2. Investment in associates F3. Non-controlling interests Section G: How we manage risk G1. Financial risk management G2. Financial instruments Section H: Other disclosures H1. Contingent liabilities H2. Commitments for expenditure H3. Subsequent events H4. Related party disclosures H5. Remuneration of auditors H6. Leases H7. New accounting standards Additional stock exchange information Key Key judgements and other judgements made Accounting policy Subsequent event Explanatory note Risks 39 40 44 44 45 46 48 49 50 76 77 78 79 80 82 85 87 88 90 93 93 93 93 94 95 97 98 The Directors consider that they have taken adequate steps to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities. Internal control procedures are also considered to be sufficient to provide reasonable assurance as to the integrity and reliability of the financial statements. The financial statements are signed on behalf of the Board by: Elizabeth Coutts Chair Stuart McLauchlan Director 23 August 2022 Directors’ Responsibility Statement The Directors of EBOS Group Limited are pleased to present to shareholders the financial statements for EBOS Group Limited and its controlled entities (together the “Group”) for the year to 30 June 2022. The Directors are responsible for presenting financial statements in accordance with New Zealand law and generally accepted accounting practice, which give a true and fair view of the financial position of the Group as at 30 June 2022 and the results of their operations and cash flows for the year ended on that date. The Directors consider the financial statements of the Group have been prepared using accounting policies which have been consistently applied and supported by reasonable judgements and estimates and that all relevant financial reporting and accounting standards have been followed. The Directors believe that proper accounting records have been kept which enable with reasonable accuracy, the determination of the financial position of the Group and facilitate compliance of the financial statements with the Financial Markets Conduct Act 2013. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 40 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 41 Independent Auditor’s Report to the Shareholders Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of EBOS Group Limited and its subsidiaries (the ‘Group’), which comprise the consolidated balance sheet as at 30 June 2022, and the consolidated income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements, on pages 44 to 97, present fairly, in all material respects, the consolidated financial position of the Group as at 30 June 2022, and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Company in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm carries out other assignments for the Group in the area of taxation compliance services. These services have not impaired our independence as auditor of the Group. In addition to this, partners and employees of our firm deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. The firm has no other relationship with, or interest in, the Group. We consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the Group that in our judgement would make it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’ materiality). In addition, we also assess whether other matters that come to our attention during the audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the Group financial statements as a whole to be AUD $14.75m. Audit Materiality Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Goodwill and Indefinite Life Intangible Asset Impairment Assessment Goodwill and Indefinite Life Intangible Asset Impairment Assessment The Group has $2,140m of goodwill and $117m of indefinite life intangible assets, including brands of $91m, on the balance sheet at 30 June 2022 as detailed in note B1 to the financial statements. The carrying values of goodwill and indefinite life intangible assets are dependent on the future cash flows expected to be generated by the underlying businesses, and there is a risk if these cash flows do not meet the Group’s expectations that the assets may be impaired. The Group tests goodwill and indefinite life intangible assets at least annually by determining the recoverable amount (the higher of value-in-use or fair value less costs to sell) of the individual assets where possible, or otherwise the cash generating units to which the assets belong and comparing the recoverable amounts of the assets to their carrying values. The impairment assessment models prepared by the Group contain a number of significant assumptions. Changes in these assumptions might lead to a change in the carrying value of indefinite life intangible assets and goodwill. The Group has assessed the recoverable amount of brands based on fair value using the relief from royalty method. The key assumptions applied in the above models are: • Annual revenue and expense growth rates for the 5 year forecast period; • pre-tax discount rates; • royalty rates; and • terminal growth rates. We considered whether the Group’s methodology for assessing impairment is compliant with NZ IAS 36: Impairment of Assets. We focused on testing and challenging the suitability of the models and reasonableness of the assumptions used by the Group in conducting their impairment reviews. Our procedures included: • Agreeing a sample of future cash flows to Board approved forecasts; • Challenging the reliability of the Group’s revenue and expense growth rates by comparing the forecasts underlying the growth rates to historical forecasts and actual results of the underlying businesses (where applicable). This also included consideration of the impact of COVID-19 on both forecast revenue and profitability of the CGU’s; and • Assessing the reasonableness of key assumptions and changes to them from previous years. We used our internal valuation specialists to assist with evaluating the models and challenging the Group’s key assumptions. The procedures of the specialists included: • Evaluating the appropriateness of the valuation methodology; • Testing the mathematical integrity of the models; • Evaluating the Group’s determination of the pre-tax discount rates and royalty rates used in the models through consideration of the relevant risk factors for each CGU, the cost of capital for the Group, and market data on comparable businesses; and • Comparing the terminal growth rates to market data for the industry sectors. The Group has assessed the recoverable amount of each cash generating unit (“CGU”) or group of CGU’s to which goodwill has been allocated based on value-in-use models. The key assumptions applied in the value-in-use models are: • Annual revenue and expense growth rates for the 5 year We evaluated the sensitivity analysis performed by management to consider the extent to which a change in one or more of the key assumptions could give rise to impairment in the goodwill and indefinite life intangible assets. forecast period; • pre-tax discount rates; and • terminal growth rates. We have included the impairment assessments of goodwill and indefinite life intangible assets as a key audit matter due to the significance of the balances to the financial statements and the level of judgement applied by the Group in determining the key assumptions used to determine the recoverable amounts. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 42 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 43 Key audit matter How our audit addressed the key audit matter Acquisition Accounting – Life Healthcare Group New Zealand equivilents to International Financial Reporting Standards (NZ IFRS) require the purchaser to identify the assets and liabilities acquired in a business combination, including the identifiable intangible assets, and to measure them at fair value at the date of acquisition. Goodwill arising (excess of consideration paid over the fair value of the assets and liabilities acquired) is required to be allocated to a Cash Generating Unit (CGU) or groups of CGU’s benefitting from the acquisition. As detailed in note B2 EBOS Group acquired the Life Healthcare Group (LHC) for $1,194m at 31 May 2022. Due to the timing of the acquisition detailed valuations to determine the fair value of the underlying assets and liabilities acquired have not been able to be completed. As a result, the acquisition balance sheet was determined on a provisional basis at 30 June 2022. The provisional acquisition balance sheet, including the provisional goodwill of $991m, will be revised to determine the fair value of the assets and liabilities acquired within the measurement period of one year from the date of acquisition. We have included the acquisition of LHC as a key audit matter due to its significance to the financial statements. We obtained the sale and purchase agreement and related documents to corroborate the assets and liabilities acquired. We confirmed the fair value of the consideration paid, including deferred consideration, to the sale and purchase agreement. We ensured call and put options related to the subsequent purchase of non controlling interests were appropriately recognised. We considered the appropriateness of the provisional accounting for the acquisition balance sheet of LHC. We considered the judgements applied by the Group in determining whether there was any impairment of goodwill arising from the LHC acquisition under NZ IAS-36 Impairment of Assets. Other information The directors are responsible on behalf of the Group for the other information. The other information comprises the information in the Annual Report that accompanies the consolidated financial statements and the audit report. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and consider whether it is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If so, we are required to report that fact. We have nothing to report in this regard. Directors’ responsibilities for the consolidated financial statements The directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibilities for the audit of the consolidated financial statements In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located on the External Reporting Board’s website at: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit- report-1 This description forms part of our auditor’s report. Restriction on use This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Mike Hawken, Partner For Deloitte Limited Christchurch, New Zealand 23 August 2022 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 44 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 45 Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income The Consolidated Income Statement presents income earned and expenditure incurred by the Group during the financial year in determining profit. The Consolidated Statement of Comprehensive Income presents profit for the year, plus gains and losses that are not recognised in the Consolidated Income Statement and instead are required to be taken directly to reserves within equity. For the financial year ended 30 June 2022 Revenue Income from associates Profit before depreciation, amortisation, net finance costs and tax expense (EBITDA) Depreciation Amortisation Profit before net finance costs and tax expense (EBIT) Finance income Finance costs – borrowings Finance costs – leases Profit before tax expense Tax expense Profit for the year Profit for the year attributable to: Owners of the Company Non-controlling interests Earnings per share: Basic (cents per share) Diluted (cents per share) Notes A1(a) F2 A1(b) A1(b) H6 A3 A4 A4 2022 A$’000 2021 A$’000 For the financial year ended 30 June 2022 10,734,119 9,202,886 Profit for the year 9,749 7,071 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Cash flow hedge gains Related income tax Movement in foreign currency translation reserve Items that will not be reclassified subsequently to profit or loss: Movement on equity instruments fair valued through other comprehensive income Total comprehensive income net of tax Total comprehensive income for the year is attributable to: Owners of the Company Non-controlling interests 405,810 (67,534) (14,338) 323,938 2,762 (22,943) (8,504) 295,253 (93,215) 202,038 202,605 (567) 202,038 114.5 114.5 363,297 (60,544) (12,101) 290,652 713 (20,641) (7,705) 263,019 (78,970) 184,049 185,297 (1,248) 184,049 113.2 113.2 2022 A$’000 2021 A$’000 202,038 184,049 10,341 (3,212) (15,937) (8,808) (3,441) 189,789 190,356 (567) 189,789 5,933 (1,750) (2,993) 1,190 (2,433) 182,806 184,054 (1,248) 182,806 Notes to the financial statements are included on pages 50 to 97. Notes to the financial statements are included on pages 50 to 97. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 46 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 47 Consolidated Balance Sheet Consolidated Balance Sheet continued The Consolidated Balance Sheet presents a summary of the Group’s assets, liabilities and equity at the end of the financial year. As at 30 June 2022 Current assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Current tax refundable Other financial assets – derivatives Total current assets Non-current assets Property, plant and equipment Capital work in progress Prepayments Deferred tax assets Goodwill Indefinite life intangibles Finite life intangibles Right of use assets Investment in associates Other financial assets Total non-current assets Total assets Current liabilities Trade and other payables Bank loans Lease liabilities Current tax payable Employee benefits Other financial liabilities – derivatives Total current liabilities Notes 2022 A$’000 2021 A$’000 517,316 1,374,731 32,706 1,120,053 127 19,722 168,953 1,156,499 14,111 784,761 278 44 As at 30 June 2022 Non-current liabilities Bank loans Lease liabilities Trade and other payables Deferred tax liabilities Employee benefits Other financial liabilities – derivatives 3,064,655 2,124,646 Total non-current liabilities Total liabilities Net assets Equity Share capital Share-based payments reserve Foreign currency translation reserve Retained earnings Equity instruments fair valued through other comprehensive income Cash flow hedge reserve Equity attributable to owners of the Company Non-controlling interests Total equity 302,389 24,992 1,360 180,805 2,140,036 117,432 123,883 249,596 45,912 13,485 3,199,890 6,264,545 172,209 70,362 30 141,806 999,339 122,354 40,089 222,367 47,896 8,660 1,825,112 3,949,758 2,021,211 1,623,904 331,517 42,627 40,395 75,880 - 116,640 36,498 35,600 58,706 6,631 2,511,630 1,877,979 C1 C2 G2 D1 D2 A3 (b) B1 (a) B1 (b) B1 (d) H6 F2 C3 E3 H6 G2 Notes E3 H6 C3 A3 (b) G2 E1 F3 2022 A$’000 2021 A$’000 1,046,259 227,203 21,283 160,585 9,029 137,000 1,601,359 4,112,989 2,151,556 1,810,562 11,228 (37,100) 481,666 (6,002) 4,458 2,264,812 (113,256) 2,151,556 323,565 203,621 3,617 127,428 7,845 - 666,076 2,544,055 1,405,703 993,616 10,350 (21,163) 433,453 (2,561) (2,671) 1,411,024 (5,321) 1,405,703 Notes to the financial statements are included on pages 50 to 97. Notes to the financial statements are included on pages 50 to 97. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 48 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 49 Consolidated Statement of Changes in Equity The Consolidated Statement of Changes in Equity presents the components of capital and reserves of the Group and explains the movements in each component during the financial year. Consolidated Cash Flow Statement The Consolidated Cash Flow Statement presents the cash generated and used by the Group during the financial year. For the financial year ended June 2022 Share capital A$’000 Notes Share- based payments reserve A$’000 Foreign currency translation reserve A$’000 Retained earnings A$’000 Equity instruments fair valued through other com- prehensive income reserve A$’000 Cash flow hedge reserve A$’000 Non- controlling interests A$’000 Total A$’000 Balance at 1 July 2020 961,486 6,601 (18,170) 372,012 (128) (6,854) (4,073) 1,310,874 Profit for the year Other comprehensive income for the year, net of tax Payment of dividends Share-based payments Dividends reinvested Employee LTI shares exercised Employee share plan shares issued Employee share issue costs E2 E1 E1 E1 E1 - - - - 27,553 3,056 1,665 (144) - - - 3,749 - - - - - 185,297 - - (1,248) 184,049 (2,993) - (2,433) 4,183 - - - - - - (123,856) - - - - - - - - - - - - - - - - - - - - - - - - (1,243) (123,856) 3,749 27,553 3,056 1,665 (144) Balance at 30 June 2021 993,616 10,350 (21,163) 433,453 (2,561) (2,671) (5,321) 1,405,703 Balance at 1 July 2021 993,616 10,350 (21,163) 433,453 (2,561) (2,671) (5,321) 1,405,703 - 202,605 - - (567) 202,038 For the financial year ended 30 June 2022 Notes Cash flows from operating activities Receipts from sale of goods and services Interest received Dividends received from associates Payments for purchase of goods and services Taxes paid Interest paid Net cash inflow from operating activities Cash flows from investing activities Sale of property, plant and equipment Purchase of property, plant and equipment Payments for capital work in progress Payments for intangible assets Acquisition of subsidiaries Investment in other financial assets Net cash (outflow) from investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Dividends paid to equity holders of parent F2 E5 B2 E1 E5 E5 H6 Profit for the year Other comprehensive income for the year, net of tax Payment of dividends Arising on acquisition of subsidiaries Option over non-controlling interests Share-based payments Share placement Retail offer Script consideration - - - - - - 638,155 159,981 22,638 E2 B2 F3 E1 E1 E1 Share placement and retail offer issue costs E1 (10,769) Tax on deductible issue costs Employee LTI shares exercised Employee share plan shares issued Employee share issue costs E1 E1 E1 E1 3,097 2,343 1,617 (116) - - - - - 878 - - - - - - - - (15,937) - (3,441) 7,129 - (154,392) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (12,249) - (154,392) 29,632 29,632 Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash held Effect of exchange rate fluctuations on cash held Net cash and cash equivalents at the beginning of the year Net cash and cash equivalents at the end of the year (137,000) (137,000) - - - - - - - - - 878 638,155 159,981 22,638 (10,769) 3,097 2,343 1,617 (116) Balance at 30 June 2022 1,810,562 11,228 (37,100) 481,666 (6,002) 4,458 (113,256) 2,151,556 Notes to the financial statements are included on pages 50 to 97. Notes to the financial statements are included on pages 50 to 97. 2022 A$’000 2021 A$’000 10,599,165 9,080,007 2,762 10,607 713 5,761 (10,217,016) (8,687,637) (115,335) (31,447) 248,736 453 (27,567) (54,205) (7,862) (1,299,120) (7,896) (1,396,197) 791,211 1,160,888 (255,427) (40,941) (154,110) 1,501,621 354,160 (5,797) 168,953 517,316 (72,184) (28,346) 298,314 217 (20,354) (56,800) (5,106) (31,223) (497) (113,763) 32,130 49,600 (181,459) (35,261) (124,986) (259,976) (75,425) (400) 244,778 168,953 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 50 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 51 Notes to the consolidated financial statements For the financial year ended 30 June 2022. Introducing this report The notes to the financial statements include information that is considered relevant and material to assist the reader in the understanding of the financial performance and financial position of EBOS Group Limited and its controlled entities (together “the Group” or “EBOS”). Information is considered relevant and material if: • the amount is significant because of its size and nature; • it is important to assist the readers understanding of the results of EBOS; • it helps to explain to the reader the changes in the business and/or operations of EBOS; or • it relates to an aspect of operations that is important to the future performance of EBOS. EBOS Group Limited (‘the Company’) is a profit-oriented company incorporated in New Zealand, registered under the Companies Act 1993 and dual listed on both the New Zealand Stock Exchange and the Australian Securities Exchange. Basis of preparation Critical accounting estimates and judgements The financial statements have been prepared in accordance with Generally Accepted Accounting Practice (‘GAAP’). They comply with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable reporting standards as appropriate for-profit oriented entities. The financial statements comply with International Financial Reporting Standards (‘IFRS’). EBOS is a Tier 1 for-profit entity in terms of the New Zealand External Reporting Board Standard A1. The Company is a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013, and its financial statements comply with this Act. The financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial instruments. Cost is based on the fair value of the consideration given in exchange for assets. The information is presented in thousands of Australian dollars, unless otherwise stated. In the process of applying the Group’s accounting policies and the application of accounting standards, EBOS has made a number of judgements and estimates. The estimates and underlying assumptions are based on historic experience and various other factors that are considered to be appropriate under the circumstances. Therefore, there is an inherent risk that actual results may subsequently differ from the estimates made. These estimates and underlying assumptions are reviewed on an on-going 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 and estimates that are considered material to understanding the performance of EBOS are found in the relevant notes to the financial statements. Key judgements have been made in regard to assumptions that support the impairment assessment for goodwill and indefinite life intangibles (note B1) and business combination accounting (note B2 and note F3). Introducing this report continued Basis of consolidation The Group’s financial statements comprise the financial statements of EBOS Group Limited, the parent company, combined with all the entities that comprise the Group, being its subsidiaries (listed in note F1) and its share of associate investments (listed in note F2). The financial statements of the members of the Group, including associates, are prepared for the same reporting period as the parent company, using consistent accounting policies. Subsidiaries are consolidated on the date on which control is obtained to the date on which control is lost. 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. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in the Consolidated Income Statement for the period. Foreign operations On consolidation, the assets and liabilities of EBOS’ overseas operations are translated at the exchange rate at the reporting date. Income and expense items are translated at the average rates for the period. Exchange differences arising are recognised in the foreign currency translation reserve (in equity) and recognised in profit or loss on disposal of the foreign operation. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate at the reporting date. All significant inter-company transactions and balances are eliminated on consolidation. Other Accounting Policies Other accounting policies that are relevant to the readers understanding of the financial statements are included throughout the following notes to the financial statements. Adopting of new and revised standards and interpretations In the current year, the Group adopted all mandatory new and amended standards and interpretations. None had a material impact on these financial statements. The Group is not aware of any NZ IFRS Standards or Interpretations that have been recently issued or amended that have not yet been adopted by the Group that would materially impact the Group for the reporting period ended 30 June 2022. Foreign currency Functional currency The financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which that entity operates (“the functional currency”). Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are translated 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. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 52 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 53 Animal Care Revenue is derived from the supply of animal care products to pet retail, supermarkets and vet clinics across Australia and New Zealand. Upon delivery of the goods, the customer assumes full control as it has complete discretion over the manner of distribution and pricing of goods, has the primary responsibility when on-selling the goods and bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it passes control of the goods, which is when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is made. Under the Group’s standard terms with customers product returns, refunds and provision for warranties are in accordance with local requirements. Accumulated experience has been used to determine that such returns are not significant. Section A: EBOS performance Section Overview A1. Revenue and expenses continued (a) Revenue continued This section explains the financial performance of EBOS by: a) displaying additional information about individual items in the Consolidated Income Statement; b) presenting further analysis of EBOS’ operating segments by revenue and expenses; and c) providing an analysis of the components of EBOS’ tax balances for the year and the current imputation credit account balance. A1. Revenue and expenses (a) Revenue Revenue consisted of the following items: Community Pharmacy Institutional Healthcare Contract Logistics Services Contract Logistics Sales Interdivisional eliminations Healthcare Animal Care 2022 A$’000 6,441,693 3,069,546 123,240 762,222 (203,923) 10,192,778 541,341 10,734,119 2021 A$’000 5,389,989 2,686,014 88,615 718,911 (178,167) 8,705,362 497,524 9,202,886 Recognition and measurement Community Pharmacy and Institutional Healthcare Revenue is derived from the supply of human healthcare products to pharmacies, hospitals, aged care facilities, supermarkets and other healthcare providers in Australia, New Zealand and Southeast Asia markets. This includes the supply of agency products and EBOS’ own branded human healthcare products such as Red Seal, Grans Remedy, Faulding, Natures Kiss and Quitnits. Following delivery of the goods, the customer obtains control as it has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility when on selling the goods and bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it passes control of the goods, which is when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is made. The transaction price may be adjusted for customers who pay their account in full, earlier than what standard credit terms would require, or for incremental costs incurred in obtaining a sales contract which are recognised over the contractual period. Under the Group’s standard terms with customers, product returns, refunds and provision for warranties are in accordance with local requirements. Accumulated experience has been used to determine that such returns are not significant. Recognition and measurement Contract Logistics Sales: Sales consist of the sale of human healthcare products to a wide range of healthcare customers (wholesalers, pharmacies and medical centres), in accordance with agreed terms with the customer. A receivable is recognised by the Group when it passes control of the goods which is when the goods are confirmed to be on sold by the customer, as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is made. Under our standard terms with customers product returns, refunds and provision for warranties provided are in accordance with local requirements. Accumulated experience has been used to determine that such returns are not significant. Service fees: Revenue is derived from the provision of logistics services for a fee to healthcare manufacturers for their operating activities in Australia and New Zealand. Service fees are typically charged for storage of manufacturer’s inventory holdings and pick, pack and delivery services provided over a period of time, typically on a monthly basis, as specified within contractual rates agreed with the manufacturer. The performance obligation is satisfied either at a point in time or over time, as applicable, at which point the right to consideration becomes unconditional, as only the passage of time is required before payment is made. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 54 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 55 A1. Revenue and expenses continued (b) Expenses Profit before tax expense has been arrived at after charging the following expenses by nature: One-off items (1) Cost of sales Writedown of inventory Impairment loss on trade and other receivables Depreciation of property, plant and equipment Depreciation on right of use assets Amortisation of finite life intangibles Short-term and low value asset leases Donations Employee benefit expense Defined contribution plan expense Other expenses Total expenses (1) One-off items comprise merger and acquisition costs incurred. Recognition and measurement 2022 A$’000 (31,038) 2021 A$’000 (3,813) (9,488,854) (8,210,446) (11,438) (1,683) (22,557) (44,977) (14,338) (7,423) (514) (392,479) (21,335) (383,294) (8,127) (988) (20,813) (39,731) (12,101) (5,080) (228) (332,566) (18,285) (267,127) (10,419,930) (8,919,305) Impairment EBOS reviews the recoverable amount of its tangible and intangible assets, including goodwill, at each balance date. If the carrying value of an asset exceeds the recoverable amount, an impairment expense is recognised in the income statement. Tangible assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of future cash flows expected to be generated by the asset (value in use). Depreciation and amortisation 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. Refer to note D1 for the useful lives used in the calculation of depreciation. Amortisation is charged on a straight line basis over the estimated useful life of finite life intangibles. Refer to note B1(d) for the useful lives used in the calculation of amortisation. Short term and low value asset leases EBOS leases certain land, buildings, plant and equipment. The Group has elected not to recognise right of use assets and lease liabilities for short-term leases and low value asset leases. The Group recognises the lease payments associated with the leases as an expense (recognised within other expenses in the Income Statement on a straight-line basis over the lease term). A1. Revenue and expenses continued (b) Expenses continued Employee expenses Provision is made for benefits owing to employees in respect of wages and salaries, annual leave, long service leave and employee incentives for services rendered. Provisions are recognised when it is probable they will be settled and can be measured reliably. They are carried at the remuneration rate expected to apply at the time of settlement and discounted to the present value of the expected payment to the employee at balance date. Net finance costs Finance costs include bank interest and amortisation of costs incurred in connection with borrowing facilities. Finance costs are expensed immediately as incurred, using the effective interest method, unless they relate to acquisition and development of qualifying assets, in which case they are capitalised. Interest income is recognised on a time-proportionate basis using the effective interest method. A2. Segment information (a) Reportable segments Healthcare Segment Animal Care Segment Corporate Sales of healthcare products in a range of sectors, own brands, retail healthcare, pharmacy and logistic services and wholesale activities. Sales of animal care products in a range of sectors, own brands, retail and wholesale activities. Includes net funding costs and central administration expenses that have not been allocated to the Healthcare or Animal Care segments. EBOS’ major products and services are the same as the reportable segments, i.e. Healthcare and Animal Care, with no major products and services allocated to Corporate. (b) Segment revenues and results The following is an analysis of EBOS’ revenue and results by reportable segment: Revenue from external customers (A$’000) 2022 2021 Healthcare 95% $10,192,778 Animal Care 5% $541,341 Healthcare 95% $8,705,362 Animal Care 5% $497,524 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 56 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 57 300 250 200 150 100 50 0 200 150 100 50 0 A2. Segment information continued (b) Segment revenues and results continued EBIT (A$’000) $285,124 $251,107 Healthcare $72,582 $62,942 Animal Care 2022 2021 ($33,768) ($23,397) Corporate Net profit/(loss) after tax for the year attributable to owners of the Company (A$’000) $196,368 $178,004 Healthcare Associate information: $53,190 $45,743 Animal Care 2022 2021 ($46,953) ($38,450) Corporate Included in the segment results above is income from associates: Animal Care Healthcare Total income from associates 2022 A$’000 7,442 2,307 9,749 2021 A$’000 5,687 1,384 7,071 A2. Segment information continued (b) Segment revenues and results continued The following is an analysis of other financial information by reportable segment: Healthcare Animal Care Corporate 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 Revenue from external customers 10,192,778 8,705,362 541,341 497,524 - - EBITDA 358,517 316,223 79,961 69,350 (32,668) (22,276) Depreciation of property, plant and equipment (21,029) (19,933) (1,528) (880) - - Depreciation on right of use assets (38,275) (33,281) (5,602) (5,329) (1,100) (1,121) Amortisation of finite life intangibles (14,089) (11,902) (249) (199) - - EBIT Net finance costs 285,124 251,107 72,582 62,942 (33,768) (23,397) - - - - (28,685) (27,633) Tax (expense)/benefit (89,323) (74,351) (19,392) (17,199) 15,500 12,580 Profit for the year 195,801 176,756 53,190 45,743 (46,953) (38,450) Non-controlling interests 567 1,248 - - - - Profit for the year attributable to owners of the Company 196,368 178,004 53,190 45,743 (46,953) (38,450) (c) Geographical information EBOS operates in two principal geographical areas: Australia and New Zealand and Other (country of domicile). EBOS’ revenue from external customers by geographical location and information about its segment assets (non-current assets), excluding investment in associates and deferred tax assets, are detailed below: Australia New Zealand and Other Group 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 Continuing operations Revenue from external customers 8,636,607 7,355,220 2,097,512 1,847,666 10,734,119 9,202,886 Non-current assets 2,530,530 1,287,114 442,643 348,296 2,973,173 1,635,410 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 58 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 59 (d) Information about major customers A3. Taxation continued No revenues from transactions that are with a single customer amount to 10% or more of EBOS’ revenues (2021: Nil). (b) Deferred tax assets and liabilities Recognition and measurement Taxable and deductible temporary differences arise from the following: The reportable segments of EBOS have been identified in accordance with NZ IFRS 8 ‘Operating Segments’. The Group’s operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision-maker in order to allocate resources to the segment and to assess its performance. The accounting policies of EBOS have been consistently applied to the operating segments. Profit before net finance costs and tax expense (EBIT) is the measure reported to the chief operating decision-maker for the purpose of resource allocation and assessment of segment performance. Assets are not allocated to operating segments as they are not reported to the chief operating decision-maker at a segment level. A3. Taxation (a) Tax expense recognised in Consolidated Income Statement Tax expense comprises: Current tax expense: Current year Adjustments for prior years Deferred tax (credit)/expense: Current year Adjustments for prior years Total tax expense 2022 A$’000 2021 A$’000 111,481 (1,840) 109,641 (17,892) 1,466 (16,426) 93,215 94,335 (1,833) 92,502 (14,942) 1,410 (13,532) 78,970 The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: Profit before tax expense 295,253 263,019 Tax expense calculated at 28% (2021: 28%) Non-deductible expenses Effect of different tax rates of subsidiaries operating in overseas jurisdictions (Over) provision of tax expense in prior years Other adjustments Total tax expense 82,671 8,277 5,005 (374) (2,364) 93,215 73,645 4,109 4,363 (422) (2,725) 78,970 The tax rates used are principally the corporate tax rates of 28% (2021: 28%) payable by New Zealand and 30% (2021: 30%) payable by Australian corporate entities on taxable profits under tax law in each jurisdiction. Gross deferred tax liabilities: Property, plant and equipment Other payables Other financial assets – derivatives Right of use assets Intangible assets Total gross deferred tax liabilities Gross deferred tax assets: Property, plant and equipment Other payables Other financial assets – derivatives Lease liabilities Intangible assets Tax losses carried forward Total gross deferred tax assets (c) Imputation credit account balances 2022 A$’000 6,962 4,018 752 72,107 76,746 160,585 12,270 72,962 - 76,092 16,490 2,991 180,805 2021 A$’000 6,130 631 161 68,269 52,237 127,428 12,928 43,386 1,938 71,086 12,204 264 141,806 Imputation credit account balances Imputation credits available directly and indirectly to shareholders of the parent company: 2022 A$’000 2021 A$’000 13,354 7,481 Imputation credits allow EBOS to pass on to its shareholders the benefit of the New Zealand income tax it has paid by attaching imputation credits to the dividends it distributes, reducing shareholders’ net tax obligations. Recognition and measurement Taxable profit differs from profit before tax reported in the Consolidated Income Statement as it excludes items of income and expense that are taxable or deductible in other years (temporary differences) and also excludes items that will never be taxable or deductible (permanent differences). Income tax expense components are current income tax and deferred tax. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 60 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 61 A3. Taxation continued Deferred tax is income tax that is expected to be payable or recoverable in the future as a result of the unwinding of temporary differences. These arise from differences in the recognition of assets and liabilities for financial reporting and for the filing of income tax returns. Deferred tax is recognised on all temporary differences, other than those arising: • from goodwill; • from the initial recognition of assets and liabilities in a transaction (other than in a business combination) that affects neither the accounting nor taxable profit or loss; and Section B: Key judgements made Section Overview This section identifies the balances and transactions to which key judgements have been made by EBOS in the preparation of these financial statements. Key judgements have been made in regards to the estimates for future cash flows for goodwill and indefinite life intangibles impairment assessment purposes, and the identification of intangible assets and recognition of goodwill for business acquisitions. • investments in associates and subsidiaries where EBOS is able to control the reversal of the temporary differences and B1. Goodwill and intangibles such differences are not expected to reverse in the foreseeable future. (a) Goodwill Deferred tax is calculated at the tax rates that are expected to apply to the year when a liability is settled or an asset realised, based on tax rates and tax laws that have been enacted or substantively enacted at balance date. A deferred tax asset is recognised to the extent it is probable that future taxable profits will be available to use the asset. This is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available in the future to utilise the deferred tax asset. A4. Earnings per share Basic earnings per share Diluted earnings per share 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 Earnings used in the calculation of total earnings per share A$’000 202,605 185,297 202,605 185,297 Weighted average number of ordinary shares for the purposes of calculating earnings per share No. (000’s) 176,916 163,711 176,916 163,711 Earnings per share Cents 114.5 113.2 114.5 113.2 Basic earnings per share is calculated by dividing the profit attributable to the shareholders of the company by the weighted average number of ordinary shares on issue during the year excluding shares held as treasury stock. Diluted earnings per share assumes conversion of all dilutive potential ordinary shares in determining the denominator. Notes Gross carrying amount Balance at beginning of financial year Recognised from business acquisition during the year B2 Effects of foreign currency exchange differences Net book value 2022 A$’000 999,339 1,149,259 (8,562) 2,140,036 2021 A$’000 969,623 30,435 (719) 999,339 Recognition and measurement Goodwill arising on the acquisition of a subsidiary is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the fair value of the acquirer’s previously-held equity interest (if any) in the acquiree over the fair value of the identifiable net assets recognised. Goodwill is not amortised, but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of EBOS’ CGUs or groups of CGUs expected to benefit from the synergies of the combination. CGUs 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 costs to sell and value in use. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is first allocated to reduce the carrying amount of any goodwill and then to the other assets of the unit on a pro-rata basis. Any impairment loss on goodwill is recognised immediately in profit or loss and is not subsequently reversed. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 62 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 63 B1. Goodwill and intangibles continued (b) Indefinite life intangibles TerryWhite Chemmart Brands A$’000 Other Healthcare Brands A$’000 Franchise Network A$’000 Animal Care Brands A$’000 Healthcare Trademarks A$’000 Total A$’000 Gross carrying amount Balance at 1 July 2020 Effects of foreign currency exchange and other differences 36,550 33,823 10,954 25,071 16,102 122,500 (12) (62) - (20) (52) (146) Balance at 30 June 2021 36,538 33,761 10,954 25,051 16,050 122,354 Reclassification to finite life intangibles Effects of foreign currency exchange and other differences - - (3,624) (635) - - - - (3,624) (182) (481) (1,298) Balance at 30 June 2022 36,538 29,502 10,954 24,869 15,569 117,432 Recognition and measurement Indefinite life intangible assets represent purchased brands, trademarks and a franchise network asset that are initially recognised at fair value. These intangible assets are tested annually for impairment on the same basis as for goodwill. Judgement: useful lives of indefinite life intangible assets The Directors have assessed these brands, trademarks and a franchise network asset as having an indefinite useful life. In coming to this conclusion the expected expansion of these assets across other products and markets, the typical product life cycle of these assets, the stability of the industry in which the assets are operating, the level of maintenance expenditure required and the period of legal control over these assets has been considered. B1. Goodwill and intangibles continued (c) Cash-generating units The carrying amount of goodwill and indefinite life intangibles allocated to CGUs or groups of CGUs is as follows: Goodwill Indefinite life intangibles 2022 A$’000 2021 A$’000 2022 A$’000 2021 A$’000 Healthcare Australia 1, 5 Healthcare New Zealand 2 709,369 623,009 9,059 12,682 66,034 68,081 20,444 21,079 Healthcare: Pharmacy/Logistics NZ 3 85,823 88,484 15,568 16,050 Healthcare: TerryWhite Group 4 Healthcare: Medical Devices 5 Animal Care 6 39,726 27,229 47,492 47,492 1,086,248 37,909 - - 152,836 154,627 24,869 25,051 2,140,036 999,339 117,432 122,354 1 Australian Consumer, Hospital, Pharmacy, Primary Healthcare sectors. 2 New Zealand Consumer, Hospital, Primary Healthcare, Aged Care and International Product Supplies. 3 New Zealand Pharmacy Wholesaler and Logistic Services. 4 Australia – Terry White Group. 5 Healthcare: Medical Devices identified as a new CGU in the current year and separated from Healthcare Australia, due to the acquisitions made during the year. 6 Australia and New Zealand Animal Care. For the year ended 30 June 2022, the Directors have determined that there is no impairment of any of the CGUs containing goodwill, brands, trademarks or the franchise network asset (2021: Nil). Key judgement: impairment assessment assumption The recoverable amounts of cash generating units are determined on the basis of value in use calculations. The recoverable amount calculations are most sensitive to changes in the following assumptions: Revenue Estimated by management based on revenue achieved in the period immediately before the start of the assessment period and adjusted each year for any anticipated growth. Operating costs Estimated by management based on current trends at the start of the assessment period and adjusted for expected changes in the business or sector in which the business operates. Discount rates Estimated by management based on a current market assessment of the time value of money, cost of capital and risks specific to the asset or CGU to which the cash flows generated by that asset or CGU are being assessed. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 64 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 65 B1. Goodwill and intangibles continued (c) Cash-generating units continued Key estimate: value in use calculation The value in use calculation uses cash flow projections based on financial forecasts approved by the Board and management covering a five year period, including terminal value, and management’s past experience. The following estimates were used in the value in use calculation: B1. Goodwill and intangibles continued (d) Finite life intangibles Customer relationships/ contracts A$’000 Supplier contracts A$’000 Other A$’000 Total A$’000 Goodwill Annual revenue growth rates Allowance for increases in expenses Pre-tax discount rates Terminal growth rate 2022 2021 3.5% - 6.2% 2.5% - 7.0% 3.0% - 6.0% 2.5% - 4.9% 10.4% - 12.2% 11.6% - 13.7% 2.5% 2.5% Gross carrying amount 106,874 1,387 39,099 147,360 Accumulated amortisation and impairment (86,882) (1,387) (19,002) (107,271) Balance at 30 June 2021 19,992 - 20,097 40,089 Gross carrying amount Accumulated amortisation and impairment Balance at 30 June 2022 100,877 (88,806) 12,071 89,640 (2,796) 86,844 47,150 237,667 (22,182) (113,784) 24,968 123,883 Key estimate: value in use calculation The fair value of indefinite life intangibles has been calculated using the relief from royalty method. The following estimates were used: Aggregate amortisation recognised as an expense during the year: Indefinite life intangibles Annual revenue growth rates Allowance for increases in expenses Royalty rate Pre-tax discount rates Terminal growth rate 5.0% - 8.5% 3.0% - 7.2% 3.0% - 6.0% 2.5% - 4.9% 3.0% - 11.8% 3.0% - 11.8% 12.1% - 18.0% 12.3% - 20.3% 2.5% 2.5% Management has carried out a sensitivity analysis and believe that any reasonable possible change in the key assumptions would not cause the book value of any CGUs or groups of CGUs to exceed their recoverable amount. Customer relationships and contracts (1) Supplier contracts (1) Other (1) Non-cash amortisation recognised on acquisitions. Recognition and measurement 2022 A$’000 2021 A$’000 9,270 1,451 3,617 14,338 8,263 - 3,838 12,101 Finite life intangible assets are recorded at cost less accumulated amortisation. Amortisation is charged on a straight line basis over their estimated useful life. Other finite life intangible assets comprise primarily software. Judgement: Software as a Service (SaaS) and useful lives of finite life intangible assets The Group completed its assessment of the implementation and ongoing costs of SaaS arrangements, in response to the agenda decisions issued by IFRIC on how accounting standards apply to these types of arrangements. The implication of these agenda decisions did not have a material effect on the Group’s financial statements. In determining the estimated useful life of finite life intangible assets (of a period of between one to 12 years) the following characteristics have been assessed: (i) expected expansion of the usage of the assets, (ii) the typical product life cycle of these assets, (iii) the stability of the industry in which the assets are operating, and (iv) the level of maintenance expenditure required. The estimated useful life and amortisation period is reviewed at the end of each annual reporting period. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 66 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 67 B1. Goodwill and intangibles continued (e) Goodwill and intangibles accounting policies Accounting policies At each balance sheet date, EBOS reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, EBOS estimates the recoverable amount of the CGU to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) 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, the carrying amount of the asset (CGU) 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 (CGU) in prior years. A reversal of an impairment loss is recognised as income immediately. Impairment losses cannot be reversed for goodwill. B2. Acquisition information The following material acquisitions of subsidiaries took place during the year: Name of business acquired Principal activities Date of acquisition Cost of acquisition A$’000 2022: 100% of the business assets and liabilities of Pioneer Medical Limited (Pioneer) 100% of the business assets and liabilities of Sentry Medical Pty Limited (Sentry) Healthcare August 2021 38,512 Healthcare August 2021 80,521 100% of the business assets and liabilities of MD Solutions Australasia Pty Limited and MD Solutions NZ Limited (MD Solutions Group) Healthcare September 2021 32,258 B2. Acquisition information continued Combined details of acquisitions undertaken during the current year are as follows: LifeHealthcare Other acquisitions Total Fair value on acquisition (i) A$’000 Carrying value A$’000 Fair value adjustment A$’000 Fair value on acquisition A$’000 Fair value on acquisition A$’000 Current assets Cash and cash equivalents 19,042 19,704 - 19,704 38,746 Trade and other receivables 68,0621 15,939 (1,468) 1 14,471 82,533 Prepayments Inventories 6,086 556 (90) 2 466 6,552 131,038 24,137 (3,010) 3 21,127 152,165 Other financial assets – derivatives 968 - - - 968 Non-current assets Property, plant and equipment 33,776 3,554 (1,051)4 2,503 36,279 Finite life intangibles Deferred tax assets Right of use assets Other financial assets Current liabilities 91,466 2,461 5 16,072 506 - - - - - - 91,466 3,144 5 6,677 6 3,144 6,677 5,605 22,749 - - 506 Trade and other payables (58,288) (6,620) (514)7 (7,134) (65,422) Bank loans Lease liabilities Current tax payables Employee benefits (5,768) (2,721) - - - - (5,768) (3,327) 8 (3,327) (6,048) (1,482) (9,000) (628) 9 (9,628) (11,110) (11,445) (882) (83) 10 (965) (12,410) 100% of the assets of Aaxis Pacific (Aaxis) Healthcare May 2022 34,692 Non-current liabilities 100% of the business assets and liabilities of Pacific Health Supplies TopCo1 Pty Limited and Pacific Health Supplies TopCo2 LLC (LifeHealthcare Group) Healthcare May 2022 1,194,266 Trade and other payables (676) (132) Bank loans Lease liabilities Deferred tax liabilities Employee benefits Net assets acquired (26,417) (13,351) (16,285) - - - - - (132) (808) - (26,417) (3,350) 8 (3,350) (16,701) (1,226) 11 (1,226) (17,511) (401) (313) (445) 10 (758) (1,159) 232,643 46,943 (5,371) 41,572 274,215 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 68 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 69 B2. Acquisition information continued LifeHealthcare Other acquisitions Total Fair value on acquisition (i) A$’000 Carrying value A$’000 Fair value adjustment A$’000 Fair value on acquisition A$’000 Fair value on acquisition A$’000 Goodwill on acquisition Non-controlling interest arising on acquisition Total consideration Less cash and cash equivalents acquired Less Script consideration Less Deferred purchase consideration Net cash outflow from acquisition 991,255 (29,632) 1,194,266 (19,042) (22,638) - 1,152,586 158,004 1,149,259 - (29,632) 199,576 1,393,842 (19,704) (38,746) - (22,638) (41,222) (41,222) 138,650 1,291,236 (i) Due to the proximity of the acquisition date to balance date and the material nature of the entity being acquired no fair value adjustments have yet been made to the initial carrying value except for a provisional provision for doubtful debts of $13.1m and associated deferred tax assets of $2.5m. Consequentially, accounting for the business combination is considered provisional at balance date, as allowable under IFRS 3. The Group also entered into arrangements providing a pathway to 100% ownership of Transmedic (a subsidiary of LifeHealthcare Group), resulting in a financial liability – derivative of $137.0m being recognised on the balance sheet (refer to Note G2) and a corresponding adjustment to non-controlling interests (refer to Note F3). Subsequent changes to the carrying value of the financial liability – derivative will be recognised in equity. The acquisition accounting for Aaxis is also considered provisional as at 30 June 2022. Judgements made: 1. To recognise the fair value of trade and other receivables on acquisition. 2. To recognise the fair value of prepayments on acquisition. 3. To recognise the fair value of inventories on acquisition. 4. To recognise the fair value of property, plant and equipment on acquisition. 5. To recognise deferred tax assets on acquisition. 6. To recognise right of use assets on acquisition. 7. To recognise the fair value of trade and other payables on acquisition. 8. To recognise lease liabilities on acquisition. 9. To recognise the fair value of current tax payable on acquisition. 10. To recognise the fair value of employee benefits on acquisition. 11. To recognise deferred tax liabilities on acquisition. Recognition and measurement Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of 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 EBOS in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant NZ IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised. Deferred consideration of $41.2m was recognised as future financial performance earn out targets of the businesses acquired, on which the consideration is payable, has been, or are expected to be achieved. Had the acquisitions made during the year been effective at 1 July 2021, the revenue of the Group would have been $11.096b and the net profit for the period would have been $233.0m. The impact to net profit for the period includes amortisation on previous acquisitions made by the acquired entities, but does not include amortisation that may arise once the provisional acquisition accounting for the LifeHealthcare acquisition is completed. Goodwill arising on acquisition Goodwill arose on the acquisitions of the business operations of Pioneer, Sentry, MD Solutions Group, LifeHealthcare Group and Aaxis because the cost of acquisition included a control premium paid. In addition, goodwill resulted from the consideration paid for the benefit of future expected cash flows above the current fair value of the assets acquired and the expected synergies and future market benefits expected to be obtained. These benefits are not recognised separately from goodwill as the expected future economic benefits arising cannot be reliably measured and they do not meet the definition of identifiable intangible assets. The accounting for the LifeHealthcare Group business combination including goodwill arose is considered provisional at balance date and will be finalised within 12 months of the acquisition date. Pioneer is a New Zealand based supplier of orthopaedic supplies and MD Solutions Group is an Australian based supplier of healthcare products. Both businesses were acquired as they are profitable businesses which the Group believes fit strategically within its healthcare business assets. Sentry and Aaxis are Australian based distributors of surgical and medical consumables. Both businesses were acquired as they are profitable Australian healthcare businesses which the Group believes fits strategically with its Australian healthcare business assets. LifeHealthcare Group is an independent distributor of third party medical devices, consumables, capital equipment and inhouse manufactured allograft material in Australia, New Zealand and Southeast Asia. LifeHealthcare Group was acquired as it is a profitable ANZ and Southeast Asia healthcare business which the Group believes fits strategically with its healthcare business assets and establishes a measured strategic entry into Southeast Asia for EBOS. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 70 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 71 B2. Acquisition information continued Section C: Operating assets and liabilities used by EBOS Impact on the Consolidated Cash Flow Statement of all acquisitions during the year: 2022 A$’000 2021 A$’000 This section provides further analysis on the significant operating assets and liabilities of EBOS. These balances comprise the material net working capital balances used by EBOS to run its day to day operating activities. Section Overview Subsidiaries acquired Consideration Cash and cash equivalents Script consideration Deferred purchase consideration Total consideration Represented by Net assets acquired Non-controlling interest Goodwill on acquisition Total consideration Net cash outflow on acquisitions Cash and cash equivalents consideration 1,329,982 30,398 22,638 41,222 1,393,842 274,215 (29,632) 1,149,259 1,393,842 - 8,500 38,898 8,463 - 30,435 38,898 C1. Trade and other receivables Trade receivables (i) Other receivables Provision for expected credit losses (ii) Recognition and measurement 2022 A$’000 1,310,185 96,636 (32,090) 1,374,731 2021 A$’000 1,112,747 57,625 (13,873) 1,156,499 Trade receivables are measured on initial recognition at fair value and are subsequently carried at amortised cost. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. The Directors believe that the carrying amount of trade and other receivables approximates their fair value 1,329,982 30,398 (i) Trade receivables are non-interest bearing. Interest may be charged on outstanding overdue balances in accordance with the Deferred purchase consideration paid in relation to prior year acquisition Less cash and cash equivalents acquired Net cash consideration paid 7,884 (38,746) 836 (11) 1,299,120 31,223 terms and conditions under which goods are supplied. Trade debtors generally have terms of 30 days. (ii) Provision for expected credit losses Not due A$’000 30–60 days A$’000 60–90 days A$’000 90+ days A$’000 Total 2022 A$’000 Trade receivables – total 1,213,997 59,434 11,688 25,066 1,310,185 Provision for expected credit losses – total (537) (7,073) (1,755) (22,725) (32,090) Not due A$’000 30–60 days A$’000 60–90 days A$’000 90+ days A$’000 Total 2021 A$’000 Trade receivables – total 1,084,519 21,842 2,992 3,394 1,112,747 Provision for expected credit losses – total (1,017) (8,306) (1,686) (2,864) (13,873) The increase in provision for expected credit losses is attributable to the provisional take on balances of the LifeHealthcare Group acquisition (refer to Note B2). Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 72 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 73 C1. Trade and other receivables continued Recognition and measurement The Group recognises a loss allowance for expected credit losses (“ECL”) on trade receivables. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group measures the provision for ECL using the simplified approach to measuring ECL, which uses a lifetime expected loss allowance for all trade receivables. The Group determines lifetime ECL for groups of trade receivables with shared credit risk characteristics. Groupings are based on customer, trading terms and ageing. An ECL rate is determined based on the historic credit loss rates for the Group, adjusted for other current observable data that may materially impact the Group’s future credit risk. This other observable data includes specific factors in relation to each debtor or general economic conditions of the industry in which the debtors operate. Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable basis that a more lagging default criterion is more appropriate. C2. Inventories Raw materials – at cost Finished goods – at cost 2022 A$’000 22,267 1,097,786 1,120,053 2021 A$’000 6,503 778,258 784,761 Recognition and measurement Inventories consist of raw materials (for the manufacturing operations of EBOS) and finished goods. Inventories are recognised at the lower of cost, determined on a weighted average basis, and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. C3. Trade and other payables Current Trade payables Other payables Deferred purchase consideration Non-current Other payables Deferred purchase consideration 2022 A$’000 1,767,572 218,324 35,315 2,021,211 11,036 10,247 21,283 2021 A$’000 1,469,202 142,710 11,992 1,623,904 3,617 - 3,617 Recognition and measurement Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. Trade and other payables, are initially measured at fair value and subsequently measured at amortised cost, using the effective interest method. The Directors consider that the carrying amount of trade payables approximates to their fair value. Trade payables are unsecured and are generally settled within the month following the invoice date. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 74 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 75 Section D: Capital assets used by EBOS to operate our business Section Overview This section explains what capital assets, such as property, plant and equipment, that EBOS uses to operate its business activities. This section also describes the material movements in capital assets during the year. D1. Property, plant and equipment Freehold land A$’000 Buildings A$’000 Leasehold improvements A$’000 Plant and equipment A$’000 Office equipment, furniture and fittings A$’000 Total A$’000 Cost 28,643 43,115 38,857 116,448 34,816 261,879 Accumulated depreciation - (9,217) (15,167) (45,389) (19,897) (89,670) D1. Property, plant and equipment continued Recognition and measurement Property, plant and equipment is initially recorded at cost. Cost includes the original purchase consideration and those costs directly attributable to bringing the item of property, plant and equipment to the location and condition for its intended use. After recognition as an asset, property, plant and equipment is carried at cost less accumulated depreciation and impairment losses. Depreciation of property, plant and equipment assets, other than freehold land, is calculated on a straight-line basis. This allocates the cost or fair value amount of an asset, less any residual value, over its estimated useful life. Judgements and estimates – useful lives EBOS estimates the remaining useful life of assets as follows: • Buildings: 20 to 50 years • Leasehold improvements: two to 15 years • Plant and equipment: two to 20 years • Office equipment, furniture and fittings: two to 10 years Balance at 30 June 2021 28,643 33,898 23,690 71,059 14,919 172,209 The residual value and useful lives are reviewed and if appropriate adjusted at each reporting date. Cost 28,590 76,015 47,311 219,730 38,090 409,736 Accumulated depreciation - (10,567) (18,432) (54,620) (23,728) (107,347) Balance at 30 June 2022 28,590 65,448 28,879 165,110 14,362 302,389 Reconciliation of the net carrying amount from the beginning to the end of the year (A$’000) D2. Capital work in progress Capital work in progress 2022 A$’000 24,992 24,992 2021 A$’000 70,362 70,362 $36,279 ($370) ($22,557) ($393) $302,389 $89,654 $27,567 $172,209 350,000 300,000 250,000 200,000 150,000 100,000 50,000 - Opening balance Additions Transfer from WIP Acquisitions Disposals Depreciation Forex Closing Balance Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 76 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 77 Section E: How we fund the business Section Overview This section explains how EBOS funds its operations and shows the sources of other available facilities that it may call upon if required to fund its operational or future investing activities. Capital management EBOS manages its capital, meaning total shareholders’ funds, to provide appropriate returns to shareholders whilst maintaining a capital structure that safeguards its ability to remain a going concern and optimises the cost of capital. E1. Share capital Fully paid ordinary shares 2022 No. 000’s 2022 Total A$’000 2021 No. 000’s 2021 Total A$’000 Balance at beginning of financial year 164,164 993,616 162,864 961,486 Dividend reinvested Share placement – December 2021 Retail offer – January 2022 Script consideration Share placement and retail offer issue costs Tax on deductible issue costs Issue of shares to staff under employee share plan Employee share issue costs Shares vested under the long term executive incentive scheme - 19,526 4,955 691 - - 47 - - - 1,233 27,553 638,155 159,981 22,638 (10,769) 3,097 1,617 (116) 2,343 - - - - - 67 - - - - - - - 1,665 (144) 3,056 189,383 1,810,562 164,164 993,616 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of shares held. Every ordinary shareholder present at a meeting of the Company in person or by proxy, is entitled to one vote, and upon a poll each ordinary share is entitled to one vote. Treasury stock Opening stock Share scheme – shares fully vested Recognition and measurement 2022 No. 000’s - - - 2021 No. 000’s 585 (585) - An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. E2. Dividends Recognition and measurement Dividends are approved by the Board in New Zealand dollars. Dividends recognised in the Statement of Changes in Equity are converted from New Zealand dollars to Australian Dollars at the exchange rate applicable on the date the dividend was approved. Unrecognised dividends are converted at the exchange rate applicable on the reporting date 2022 2021 A$ Cents per share Total A$’000 A$ Cents per share Total A$’000 44.1 43.7 87.8 72,228 82,164 154,392 36.5 39.5 76.0 59,225 64,631 123,856 44.3 83,806 42.8 70,305 Recognised amounts Fully paid ordinary shares: Final – prior year Interim – current year Dividends per share Unrecognised amounts Final dividend Subsequent event A dividend of NZ 49.0 cents per share was declared on 23 August 2022 with the dividend being payable on 30 September 2022. The anticipated cash impact of the dividend is approximately $67.0m. The following table shows dividends approved in New Zealand dollars: Recognised amounts Fully paid ordinary shares: Final – prior year Interim – current year Dividends per share Unrecognised amounts Final dividend 2022 NZ$ Cents per share 2021 NZ$ Cents per share 46.0 47.0 93.0 40.0 42.5 82.5 49.0 46.0 New Zealand dollar dividends paid to equity holders of the parent are translated into Australian dollars and disclosed in the cash flow statement at the foreign currency exchange rate applicable on the date they are paid. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 78 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 79 E3. Borrowings E4. Borrowings facilities maturity profile Current Bank loans – securitisation facility (i) Bank loans (ii) Non-current Bank loans (ii) 2022 A$’000 2021 A$’000 221,517 110,000 331,517 1,046,259 1,046,259 116,640 - 116,640 323,565 323,565 (i) EBOS, through a subsidiary company, has a trade debtor securitisation facility of $400.0m (2021: $400.0m) of which $178.5m was unutilised at 30 June 2022 (2021: $283.4m). The securitisation facility involves providing security over the future cash flows of specific trade receivables, which meet certain criteria, in return for cash finance on a contracted percentage of the security provided. As recourse, in the event of default by a trade debtor, remains with EBOS, the trade receivables provided as security and the funding provided are recognised on the EBOS Consolidated Balance Sheet. In April 2022, the Group entered into an agreement to extend the maturity date of this securitisation facility to April 2025. At 30 June 2022, the value of trade receivables provided as security under this securitisation facility was $271.6m (2021: $158.5m). The net cash flows associated with the securitisation programme are disclosed in the Consolidated Cash Flow Statement as cash flows from financing activities. (ii) EBOS has gross bank term loan facilities of $1,380.3m (2021: $789.5m), of which $224.0m was unutilised at 30 June 2022 (2021: $465.9m). In May 2022, in conjunction with the acquisition of LifeHealthcare Group, the Group entered into additional bank debt funding facilities of $540.0m in total, split evenly between a 3 and 4 year maturity tenor. EBOS is in full compliance with its debt facility financial covenants. All bank loans, excluding the securitisation facility, are secured by a charge over the assets of EBOS. Recognition and measurement All loans and borrowings are initially recognised at cost, being the fair value of the consideration received plus issue costs associated with the borrowing. After initial recognition, these loans and borrowings are subsequently measured at amortised cost using the effective interest method, which allocates the cost through the expected life of the loan or borrowing. The fair value of non-current borrowings is approximately equal to their carrying amount. As at 30 June 2022, EBOS had unrestricted access to the following lines of available credit: Facility Term debt facilities ($AUD) Term debt facilities ($SGD) Term debt facilities ($NZD) Term debt facilities ($AUD) Term debt facilities ($AUD) Term debt facilities ($AUD) Securitisation facility ($AUD) A$millions 250.0 52.2 45.2 125.0 563.0 345.0 400.0 Maturity < 1 year 1-2 years 1-2 years 1-2 years 2-3 years 3-4 years 2-3 years The following table shows the remaining contractual maturity for EBOS’ borrowings at balance date. The table includes both interest and principal (undiscounted) cash flows, with total bank loans of $1,377.8m (2021: $440.2m): Less than 1 year A$’000 1–2 years A$’000 2–3 years A$’000 3–4 years A$’000 4–5 years A$’000 5+ years A$’000 Total A$’000 151,297 188,324 802,383 354,736 - 7,178 7,178 170,859 228,738 50,251 - - 1,496,740 464,204 Bank loans 2022 2021 Financing activities Bank overdraft facility, reviewed annually and payable at call: Amount unused 2022 A$’000 2021 A$’000 7,329 7,329 1,364 1,364 1,377,776 402,496 1,780,272 440,205 749,295 1,189,500 Bank loans are classified as current liabilities unless EBOS has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Bank loan facilities with various maturity dates through to June 2026 (2021: June 2026) Amount used Amount unused Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 80 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 81 E5. Operating cash flows Reconciliation of profit for the year with cash from operating activities: E5. Operating cash flows continued Reconciliation of debt: For the financial year ended 30 June 2022 2022 A$’000 2021 A$’000 202,038 184,049 Bank loans 1 July 2021 A$’000 440,205 1 July 2020 A$’000 571,838 Net borrowings A$’000 Borrowings acquired A$’000 Foreign currency movement A$’000 905,461 32,185 (75) Net repayments A$’000 (131,859) Borrowings acquired A$’000 Foreign currency movement A$’000 - 226 30 June 2022 A$’000 1,377,776 30 June 2021 A$’000 440,205 Bank loans Accounting policies Cash and cash equivalents comprise cash on hand and deposits readily convertible to cash and which are not subject to a significant risk of change in value. The Consolidated Cash Flow Statement is prepared exclusive of Goods and Services Tax (GST), which is consistent with the method used in the Consolidated Income Statement. • Operating activities include all transactions and other events that are not investing or financing activities. • Investing activities are those activities relating to the acquisition and disposal of current and non-current investments and any other non-current assets. Financing activities are those activities relating to changes in the equity and debt capital structure of the Group and those activities relating to the cost of servicing EBOS’ equity capital. Profit for the year Add/(less) non-cash items: Depreciation of property, plant and equipment Depreciation on right of use assets Loss/(gain) on sale of property, plant and equipment Amortisation of finite life intangible assets Share of profit from associates Expense recognised in respect of share-based payments Deferred tax Movement in working capital: Trade and other receivables Prepayments Inventories Current tax refundable/payable Trade and other payables Employee benefits Foreign currency translation of working capital balances Balances classified as investing activities Working capital items acquired Net cash inflow from operating activities 22,557 44,977 434 14,338 (9,749) 6,266 (16,426) 62,397 (218,232) (19,925) (335,292) 4,946 414,973 18,358 15 (135,157) (30,883) 150,341 248,736 20,813 39,731 (103) 12,101 (7,071) 3,749 (13,532) 55,688 (133,912) (1,330) (47,062) 19,994 209,619 16,479 87 63,875 (12,914) 7,616 298,314 Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 82 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 83 Section F: EBOS Group structure Section Overview This section provides information to assist in understanding the EBOS Group legal structure and how it affects the financial position and performance of the Group. Details of businesses acquired are presented in Section B. F1. Subsidiaries The following entities comprise the significant trading and holding companies of the Group: Parent and head entity: EBOS Group Limited Subsidiaries (all balance dates 30 June unless otherwise noted) Pet Care Holdings Australia Pty Ltd EBOS Group Australia Pty Ltd EBOS Health & Science Pty Ltd PRNZ Ltd Pharmacy Retailing NZ Ltd Pet Care Distributors Pty Ltd Masterpet Corporation Ltd Masterpet Australia Pty Ltd Botany Bay Imports and Exports Pty Ltd QPharma Pty Ltd (formerly Aristopet Pty Ltd) EAHPL Pty Limited ZHHA Pty Ltd ZAP Services Pty Ltd Symbion Pty Ltd Intellipharm Pty Ltd Lyppard Australia Pty Ltd DoseAid Pty Ltd Symbion Trade Receivables Trust 1 Endeavour Consumer Health Limited Nexus Australasia Pty Ltd EBOS PH Pty Ltd TerryWhite Group Pty Ltd Chemmart Holdings Pty Ltd TW&CM Pty Ltd TWC IP Pty Ltd PBA Wholesale Pty Ltd Ownership Interests and Voting Rights Country of Incorporation Australia 2022 100% 2021 100% Australia 100% 100% Australia 100% 100% New Zealand 100% 100% New Zealand 100% 100% Australia 100% 100% New Zealand 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% New Zealand 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Subsidiaries (all balance dates 30 June unless otherwise noted) VIM Health Pty Ltd PBA Finance No. 1 Pty Ltd PBA Finance No. 2 Pty Ltd Chem Plus Pty Ltd Pharmacy Brands Australia Pty Ltd VIM Health IP Pty Ltd Tony Ferguson Weight Management Pty Ltd Lite Living Pty Ltd Alchemy Holdings Pty Ltd Alchemy Sub-Holdings Pty Ltd HPS Holdings Group (Aust) Pty Ltd HPS Hospitals Pty Ltd HPS Corrections Pty Ltd HPS Services Pty Ltd Hospharm Pty Ltd HPS IVF Pty Ltd HPS Finance Pty Ltd HPS Brands Pty Ltd Endeavour CH Pty Ltd Ventura Health Pty Ltd You Save Management Pty Ltd Mega Save Management Pty Ltd Cincotta Holding Company Pty Ltd Ownership Interests and Voting Rights Country of Incorporation 2022 2021 Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% CC Pharmacy Investments Pty Ltd Australia 100% 100% CC Pharmacy Promotions Pty Ltd CC Pharmacy Management Pty Ltd Shanghai EBOS Trading Co Ltd (formerly Shanghai EBOS Business Management Co Ltd) Australia 100% 100% ACN 618 208 969 Pty Ltd Warner and Webster Pty Ltd W & W Management Services PL EBOS Medical Devices NZ Limited EBOS Medical Devices Australia Pty Ltd LMT Surgical Pty Ltd National Surgical Pty Ltd Healthcare Supply Partners Pty Ltd EBOS Aesthetics Pty Limited Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Australia 100% 100% Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 84 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 85 F1. Subsidiaries continued Subsidiaries (all balance dates 30 June unless otherwise noted) Pioneer Medical Ltd Sentry Medical Pty Ltd MD Solutions Australasia Pty Ltd MD Scopes Pty Ltd Fibertech Medical Australia Pty Ltd Klinic Solutions Australasia Pty Ltd Surgical and Medical Supplies Pty Ltd MD Solutions NZ Ltd Pacific Health Supplies TopCo1 Pty Ltd Pacific Health Supplies TopCo2 Pty Ltd Pacific Health Supplies TopCo Pty Ltd Pacific Health Supplies Mezzco Pty Ltd Pacific Health Supplies Holdco Pty Ltd Pacific Health Supplies Bidco Pty Ltd LifeHealthcare Group Pty Ltd LifeHealthcare Finance Pty Ltd LifeHealthcare Pty Ltd LifeHealthcare Distribution Pty Ltd LifeHealthcare Services Pty Ltd LifeHealthcare Ltd LifeHealthcare Distribution (NZ) Ltd Culpan Distributors Ltd Culpan Medical Pty Ltd Spiran Pty Ltd Australian BioTechnologies Pty Ltd ABT Medical Pty Ltd Tissuelife Pty Ltd Tissue Technologies Pty Ltd Transmedic Pte Ltd PT. Transmedic Indonesia Transmedic Healthcare Sdn Bhd Transmedic Company Ltd Transmedic Healthcare Co Ltd Transmedic Philippines, Inc Ownership Interests and Voting Rights 2021 Subsidiaries (all balance dates 30 June unless otherwise noted) Transmedic Holdings Philippines Inc T-Medic Co Ltd Transmedic (Thailand) Co Ltd Transmedic China Ltd Swissmed Pte Ltd Ophthaswissmed Philippines Inc Swissmed Sdn Bhd Ownership Interests and Voting Rights Country of Incorporation 2022 2021 Philippines Thailand Thailand Hong Kong Singapore 51% 51% 51% 51% 51% Philippines 50.49% Malaysia 51% - - - - - - - (1) The balance date of all subsidiaries is 30 June aside from the Symbion Trade Receivables Trust which has a balance date of 31 December. The results of the Symbion Trade Receivables Trust (“the Trust”) have been included in the Group results for the year to 30 June 2022. The Trust is consolidated as EBOS has the exposure, or rights, to variable returns from its involvement with the Trust and the Group considers that it has existing rights that give it the current ability to direct the relevant activities of the Trust. F2. Investment in associates Name of associate company Principal activities Proportion of shares and voting rights acquired Cost of acquisition A$’000 Date of acquisition Animates NZ Holdings Limited Animal Care December 2011 50% 17,353 Good Price Pharmacy Franchising Pty Limited Healthcare October 2014 44.18% Good Price Pharmacy Management Pty Limited Healthcare October 2014 44.18% 7,286 7,286 The reporting date for Animates NZ Holdings Limited is 30 June. Animates NZ Holdings Limited is incorporated in New Zealand. Although the company holds 50% of the shares and voting power in Animates NZ Holdings Limited, this entity is not deemed to be a subsidiary as the other 50% is held by a single shareholder, therefore EBOS is unable to exercise control over this entity. The reporting date for Good Price Pharmacy Franchising Pty Limited and Good Price Pharmacy Management Pty Limited is 30 June. They are incorporated in Australia. The summarised financial information in respect of the Group’s associates is set out below: Country of Incorporation New Zealand Australia Australia Australia Australia Australia Australia New Zealand Australia USA Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand New Zealand Australia Australia Australia Australia Australia 2022 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Australia 50.01% Singapore Indonesia Malaysia Vietnam Vietnam Philippines 51% 51% 51% 51% 51% 51% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 86 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 87 F2. Investment in associates continued F3. Non-controlling interests The summary financial information in respect of the Group’s associates is set out below: The following non-wholly owned subsidiaries of the Group have material non-controlling interests. The other non-controlling interests are not considered material and are therefore not disclosed in the financial statements. Statement of Financial Position Total assets Total liabilities Net assets Group’s share of net assets Income Statement Total revenue Total profit for the year Group’s share of profits of associates Movement in the carrying amount of the Group’s investment in associates: Balance at the beginning of the financial year Share of profits of associates Share of dividends Net foreign currency exchange differences Balance at the end of the financial year Goodwill included in the carrying amount of the Group’s investment in associates The Group’s share of the contingent liabilities of associates The Group’s share of capital commitments of associates 2022 A$’000 120,439 (80,429) 40,010 19,706 184,035 20,050 9,749 47,896 9,749 (10,607) (1,126) 45,912 23,277 - - 2021 A$’000 108,875 (66,020) 42,855 21,250 157,325 14,478 7,071 46,679 7,071 (5,761) (93) 47,896 23,724 - - Recognition and measurement An associate is an entity over which EBOS has significant influence and that is neither a subsidiary nor an interest in a joint venture or joint operation. EBOS has significant influence when it has the power to participate in the financial and operating policy decisions of the investee, but is not in control or joint control over those policies. Investments in associates are incorporated in the Group’s financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the Consolidated Balance Sheet at cost and adjusted for post-acquisition changes in EBOS’ share of the net assets of the associate, less any impairment in the value of individual investments and less any dividends. Losses of an associate in excess of EBOS’ interest in that associate are recognised only to the extent that EBOS has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over EBOS’ share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Name of subsidiary Proportion of ownership interests held by non-controlling interests Profit allocated to non-controlling interests for the year 2022 A$’000 Non-controlling interests1 Principal place of business Transmedic Pte Limited (Transmedic) Southeast Asia 49% 613 (106,755) (1) The Group entered into arrangement providing a pathway to 100% ownership of Transmedic, resulting in a financial liability – derivative of $137.0m has been recognised on the balance sheet (refer to Note G2). The non-controlling interests consist both the share of net assets and the recognition of the financial liability – derivative. The summarised financial information in respect of the Group’s subsidiaries that have material non-controlling interests as at 30 June 2022, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below: Statement of Financial Position Total assets Total liabilities Net assets Equity attributable to owners of the company Non-controlling interests Non-controlling interests in % Income Statement Total revenue Total profit for the year Profit attributable to owners of the Company Profit attributable to non-controlling interests Cash Flow Statement Net cash inflow from operating activities Net cash (outflow) from investing activities Net cash (outflow) from financing activities Total net cash (outflow) Recognition and measurement 2022 A$’000 121,284 (59,560) 61,724 31,479 30,245 49% 9,807 1,254 641 613 1,938 (2,416) (232) (710) Non-controlling interests in subsidiaries are identified separately from the Group’s equity. The non-controlling interests on the date of acquisition are initially measured at the non-controlling interests’ proportionate share of the fair value of the identifiable net assets assumed. Subsequent to the acquisition, the carrying amount of non-controlling interests is the valuation on initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Transactions with non-controlling interests are recorded directly in equity. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 88 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 89 Section G: How we manage risk Section Overview This section describes the financial risks that EBOS has identified and how it manages these risks, to protect its financial position and financial performance. Management of these risks includes the use of financial instruments to hedge against unfavourable interest rate and foreign currency movements. G1. Financial risk management The EBOS corporate treasury function provides services to the Group’s entities, co-ordinates access to financial markets, and manages the financial risks relating to the operation of the Group. EBOS does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by Group policies approved by the Board of Directors, which provide written principles on the use of financial derivatives. Compliance with policies and exposure limits is reviewed by the Board of Directors on a regular basis. Foreign currency risk Interest rate risk EBOS is exposed to foreign currency risk arising primarily from the procurement of goods denominated in foreign currencies (US dollar, Australian dollars, Thai baht, Euro and British pound). It is the policy of the Group to enter into foreign exchange forward contracts to manage the foreign currency risk associated with anticipated sales and purchase transactions typically out to 12 months of the exposure generated. It is the policy of the Group to enter into foreign exchange forward contracts for up to 100% of forecasted foreign currency transactions for the next six months and up to 80% of six to 12 months of forecasted foreign currency transactions. All forward foreign currency contracts entered into fixed the exchange rate of highly probable forecast transactions, denominated in foreign currencies, and are designated as cash flow hedges to reduce the Group’s cash flow exposure resulting from variable movements in exchange rates. The Group performs a qualitative assessment of effectiveness of hedges using the critical terms of the underlying transaction and hedging instrument. It is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange rates. EBOS enters into forward foreign exchange contracts only in accordance with the Board approved treasury policy. No sources of ineffectiveness emerged from these hedging relationships. EBOS is exposed to interest rate risk as it borrows funds in both New Zealand dollars and Australian dollars at floating interest rates. The risk is assessed and managed by the use of interest rate swap and interest rate collar contracts. In interest rate swap contracts, EBOS agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. In interest rate collar contracts, EBOS pays upfront premiums to cap the interest at strike rates on agreed notional principal amounts. Such contracts enable EBOS to mitigate the risk of changing interest rates on debt held. It is the policy of the Group to enter into interest rate swap and interest rate collar contracts to manage base interest rate risk associated with floating rate Group borrowings of up to 100% of the exposure generated for 1-3 years, up to 80% for 3-5 years and up to 50% for 5-10 years. All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts and interest rate collar contracts capping the floating rates at strike rates are designated as cash flow hedges to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously, and the amount accumulated in equity is reclassified to profit or loss over the period that the floating rate interest payments on debt affect profit or loss. G1. Financial risk management continued In 2022, the Group entered a number of interest rate collar contracts. Under the interest rate collar contracts, for each period where floating rates are above strike rates, the interest payments are limited to the strike rates. Changes in fair value of the collar due to intrinsic value changes are deferred in the cash flow hedge reserve. Changes in fair value of the collar due to changes in time value are deferred in a separate component of equity. The premium paid for the collars are recorded as an expense over the life of the instruments on a straight-line basis. The Group performs a qualitative assessment of the effectiveness of hedges using the critical terms of the underlying transaction and hedging instrument. It is expected that the value of the interest rate swaps or interest rate collars, and the value of the corresponding hedged items (floating rate borrowings) will systematically change in opposite direction in response to movements in the underlying interest rates. Interest rate swap and interest rate collar contracts are only entered into in accordance with the Group’s Board approved treasury policy. No sources of ineffectiveness emerged from these hedging relationships. Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A one per cent increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates for the year ended 30 June 2022 had been one per cent higher/lower with all other variables held constant, the Group’s: • Profit before tax would decrease/increase by $1.1m. This is attributable to the Group’s unhedged exposure to interest rates on its variable rate borrowings. • Other comprehensive income would decrease/ increase by $0.9m as a result of the changes in the fair value of interest rate swaps. Liquidity risk EBOS is exposed to liquidity risk as it must invest in significant levels of working capital such as inventory and accounts receivable which can impact liquidity unless they are converted to cash. EBOS manages liquidity risk by maintaining adequate reserves, banking facilities and reserve banking facilities by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities. Refer to note E4 for information on EBOS’ borrowings facility maturity profile. Credit risk EBOS is exposed to the risk of default in relation to receivables owing from its healthcare and animal care customers, hedging instruments and guarantees and deposits held with banks and other financial institutions. EBOS has adopted a policy of only dealing with credit worthy counter parties as a means of mitigating the risk of financial loss from defaults. All bank balances are assessed to have low credit risk at each reporting date as they are held with reputable international banking institutions. Trade receivables consist of a large number of customers, spread across diverse sectors and geographical areas. On-going credit evaluation is performed on the financial condition of the trade receivables. Credit assessments are undertaken to determine the credit quality of the customer, taking into account their financial position, past experience and other relevant factors. Individual risk limits are granted in accordance with the internal credit policy and authorised via appropriate personnel as defined by the Group’s delegation of authority manual. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the maximum exposure to EBOS of any credit risk. EBOS does not have any significant credit risk exposure to any single counter party. The credit risk on liquid funds and derivative financial instruments is limited because the counter parties are banks with high credit ratings assigned by international credit rating agencies. EBOS has not changed its overall strategy regarding the management of risk from 2021. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 90 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 91 Judgement: measurement of financial liability – derivative (put option over non-controlling interests) Valuation of the financial liability – derivative is based upon management’s most recent assessment of the consideration to be payable, in the event that the option is exercised by the minority shareholders. Consideration payable is subject to future financial performance of the subsidiary and the current market assessment of the time value of money. In the event that the option is not exercised during the option period, and therefore expires, then the financial liability – derivative is derecognised with no impact to Profit or Loss. G2. Financial instruments continued Cash flow hedges At the inception of a hedge relationship, the Group 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 cash flows of the hedged item attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated as a separate component of equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Financial liability – derivative (put option over non-controlling interests) Where the Group writes a put option with the non- controlling shareholders on their equity interest in a non-wholly owned subsidiary for settlement in cash a financial liability – derivative, at the present value of the exercise price of the option, is recognised. When the non-controlling interests still have present access to the returns associated with the underlying ownership interest, non-controlling interests continue to be recognised and accordingly the liability is considered a transaction with owners and recognised within non-controlling interests. Subsequent to the initial recognition, any changes in the carrying amount of the financial liability – derivative, including the accretion of interest, are recognised directly in equity within non-controlling interests. G2. Financial instruments Derivatives Other financial assets – derivatives (at fair value) Forward foreign exchange contracts (i) Interest rate swaps (i) Interest rate collars (i) Other financial liabilities – derivatives (at fair value) Forward foreign exchange contracts (i) Interest rate swaps (i) Other financial liabilities - consideration for remaining non-controlling interest (ii) 2022 A$’000 2021 A$’000 4,330 392 15,000 19,722 - - 137,000 137,000 44 - - 44 577 6,054 - 6,631 (i) Designated and effective as a cash flow hedging instrument carried at fair value. (ii) Represents the present value of management’s estimate of the financial obligation (put option) if the Group were to acquire the remaining 49% of Transmedic, a subsidiary of LifeHealthcare Group (refer to note B2). As at 30 June 2022, there have been no material changes in fair value of the option over non-controlling interests. Recognition and measurement EBOS has categorised these derivatives, both financial assets and financial liabilities, as Level 2 under the fair value hierarchy contained within NZ IFRS 13. There were no transfers between fair value hierarchy levels during the current or prior periods. The fair value of forward foreign exchange contracts is determined using a discounted cash flow valuation. Key inputs are based upon observable forward exchange rates, at the measurement date, with the resulting value discounted back to present values. Interest rate swaps and interest rate collars are valued using a discounted cash flow valuation. Key inputs for the valuation of interest rate swaps and interest rate collars are the estimated future cash flows based on observable yield curves at the end of the reporting period, discounted at a rate that reflects the credit risk of the various counter parties. 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 fair values of financial assets and financial liabilities are determined as follows: • The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. • The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. • The fair value of derivative instruments are calculated using quoted prices. Where such prices are not available use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments. The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values. As hedge accounting has been applied for all derivatives except the option over non-controlling interests, and no hedge ineffectiveness has occurred during the period, the movement in these instruments has been recognised in other comprehensive income. The premium paid for the interest rate collars are recorded as an expense over the life of the instruments on a straight-line basis. The recognition in profit or loss depends on the nature of the hedge relationship. EBOS designates these derivatives as cash flow hedges of highly probable forecast transactions. Hedging gains or losses are recognised in the profit or loss when the hedged items affect the profit or loss except where they are hedging non-financial items in which case they are recognised as an adjustment to the initial carrying value of the non-financial items (basis adjustment). When a forward contract is used in a cash flow hedge relationship the Group has designated the change in fair value of the entire forward contract, i.e. including the forward element, as the hedging instrument. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 92 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 93 Outstanding forward foreign currency contracts: nominal value Buy Australian dollars Buy Euro Buy British pounds Buy Thai baht Buy US dollars Buy CH francs Outstanding interest rate swap contracts: nominal value Less than 1 year 1 to 3 years 3 to 5 years Greater than 5 years 2022 A$’000 6,111 6,374 4,289 10,624 46,736 926 75,060 2022 A$’000 170,000 25,000 - - 2021 A$’000 6,853 3,735 2,454 10,941 25,886 - 49,869 2021 A$’000 94,655 195,000 - - Section H: Other disclosures Section Overview This section includes the remaining information relating to EBOS that is required to be presented so as to comply with its financial reporting requirements. H1. Contingent liabilities Contingent liabilities Guarantees given to third parties H2. Commitments for expenditure Capital expenditure commitments: Plant 2022 A$’000 2,988 2,988 2022 A$’000 10,872 10,872 2021 A$’000 320 320 2021 A$’000 22,232 22,232 G2. Financial instruments continued Outstanding interest rate collar contracts: nominal value Subsequent to year end the Board has approved a final dividend to shareholders. For further details please refer to note E2. 195,000 289,655 H3. Subsequent events Subsequent event Less than 1 year 1 to 3 years 3 to 5 years Greater than 5 years 2022 A$’000 - 180,000 420,000 200,000 800,000 2021 A$’000 - - - - - H4. Related party disclosures Key management personnel compensation Employee benefits 2022 A$’000 23,993 23,993 2021 A$’000 14,106 14,106 EBOS operates a long term incentive scheme whereby eligible staff receive performance rights entitling each holder of the performance right to 1 new share per right issued (or payment of cash in lieu, at the Board’s discretion). Performance rights do not vest until performance conditions are met over a three year period. In the current year 320,068 performance rights were issued with a 3 year performance period of 1 July 2021 to 30 June 2024 (2021: 313,890 with a 3 year performance period of 1 July 2020 to 30 June 2023). Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 94 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 95 H5. Remuneration of auditors All non-audit services provided by EBOS Group’s Auditor require pre-approval by the Audit and Risk Committee. Before any non-audit services are approved, the Audit and Risk Committee must be satisfied that the provision of such services will not have any influence on the independence of the auditors. Auditor of the Group (Deloitte) Audit of the financial statements Audit related services for review of interim financial statements Taxation compliance 2022 A$’000 2021 A$’000 1,122 244 4 1,370 600 202 4 806 H6. Leases The Group as a lessee The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right of use (ROU) asset and a corresponding liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of twelve months or less) and leases of low value assets. For these leases, the Group applies the practical expedient and recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the lease assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate (IBR). Lease payments included in the measurement of the lease liability comprise: • fixed lease payments, less incentives receivable; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease term is the non-cancellable period of a lease, together with periods covered by an option (available to the lessee only) to extend or terminate the lease if the lessee is reasonably certain to exercise/not to exercise that option. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise/not exercise an option. The lease liability is presented as a separate line in the Consolidated Balance Sheet. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related ROU asset) whenever: • the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate. • a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The ROU assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets. ROU assets are depreciated over the shorter period of either the lease term or the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the ROU asset reflects that the Group expects to exercise a purchase option, the related ROU asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The ROU assets are presented as a separate line in the Consolidated Balance Sheet. The Group applies NZ IAS 36 Impairment of Assets to determine whether a ROU asset is impaired and accounts for any identified impairment loss under this standard. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the ROU asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line “operating lease rental expenses” in the Consolidated Income Statement. As a practical expedient, NZ IFRS 16 Leases permits a lessee not to separate non-lease components, and instead account for any lease and associated non- lease components as a single arrangement. The Group has adopted this practical expedient. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 96 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 97 H6. Leases continued Right of use assets Cost Balance as at 1 July 2021 Additions (including business combination) Disposals Forex Balance as at 30 June 2022 Accumulated depreciation Balance as at 1 July 2021 Disposals Depreciation expense Forex Land and buildings A$’000 Office, plant and equipment A$’000 Motor vehicles A$’000 277,742 74,006 (8,102) (2,175) 341,471 (64,977) 5,223 (40,499) 875 11,917 2,082 (2,686) (148) 11,165 (4,837) 1,980 (2,871) 51 4,792 1,123 (1,082) (51) 4,782 (2,270) 1,083 (1,607) 27 Total A$’000 294,451 77,211 (11,870) (2,374) 357,418 (72,084) 8,286 (44,977) 953 Balance as at 30 June 2022 (99,378) (5,677) (2,767) (107,822) Net book value As at 30 June 2021 As at 30 June 2022 212,765 242,093 7,080 5,488 2,522 2,015 222,367 249,596 Amounts recognised in profit and loss Depreciation on right of use assets Finance costs – leases Expense relating to short term leases and low value assets Lease liabilities Current Non-current Maturity analysis (undiscounted future cash flows) Year 1 Year 2 Year 3 Year 4 Year 5 Onwards Cash outflows for leases Interest on lease liabilities Repayments of lease liabilities Short term leases and low value asset leases H7. New accounting standards 2022 A$’000 44,977 8,504 7,423 42,627 227,203 52,145 48,869 45,430 38,233 30,596 103,545 318,818 (8,504) (40,941) (7,423) (56,868) 2021 A$’000 39,731 7,705 5,080 36,498 203,621 43,388 38,899 36,871 33,660 26,268 92,736 271,822 (7,705) (35,261) (5,080) (48,046) The Group has adopted all new accounting standards that have become effective during the current year. The adoption of these new standards has had no impact upon these financial statements. The Group is not aware of any NZ IFRS Standards or Interpretations that have been recently issued or amended that have not yet been adopted by the Group that would materially impact the Group for the reporting period ended 30 June 2022. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 98 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 99 Additional stock exchange information Additional stock exchange information continued Distribution of shareholders and shareholdings Holders Fully paid ordinary shares Percentage of paid capital Size of Holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total 7,358 3,966 787 623 62 2,689,054 9,027,344 5,551,298 13,383,184 158,736,957 12,796 189,387,837 1.42 4.77 2.93 7.07 83.81 100.00 Distribution of performance rights (not quoted on NZX and ASX) As at 25 July 2022 Number of performance rights participants Number of performance rights Percentage of performance rights 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total 23 33 10 14 2 82 17,1722 83,580 71,417 467,834 434,567 1,074,519 2.0 9.8 8.4 43.1 36.6 100.00 As at 25 July 2022 Twenty largest shareholders Sybos Holdings Pte Limited Custodial Services Limited Citibank Nominees (New Zealand) Limited - NZCSD HSBC Nominees (New Zealand) Limited - NZCSD JP Morgan Nominees Australia Limited JPMorgan Chase Bank Na NZ Branch-Segregated Clients Acct - NZCSD Forsyth Barr Custodians Limited FNZ Custodians Limited HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees (NZ) Limited - NZCSD HSBC Nominees (New Zealand) Limited A/C State Street - NZCSD Accident Compensation Corporation - NZCSD National Nominees Limited - NZCSD HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD Tea Custodians Limited Client Property Trust Account - NZCSD JBWere (NZ) Nominees Limited ANZ Wholesale Australasian Share Fund - NZCSD National Nominees Limited Citicorp Nominees Pty Limited New Zealand Depository Nominee Limited Fully paid shares Percentage of paid capital 35,285,353 18.63 15,755,060 10,454,801 9,215,016 7,590,783 7,281,283 6,484,058 5,266,356 5,215,323 5,132,553 5,095,802 4,718,820 3,445,326 3,349,425 3,105,996 2,833,514 2,164,148 2,026,426 2,016,648 1,988,730 8.32 5.52 4.87 4.01 3.84 3.42 2.78 2.75 2.71 2.69 2.49 1.82 1.77 1.64 1.50 1.14 1.07 1.07 1.05 138,425,421 73.09 Substantial product holders and number of securities The following information is provided in compliance with section 293 of the Financial Markets Conduct Act and the ASX Listing Rules. Number of ordinary shares As at balance date As at 25 July 2022 189,383,176 189,387,837 Number of unquoted performance rights As at balance date As at 25 July 2022 756,040 1,074,519 Substantial holder name* Ordinary shares as at balance date Percentage of share capital as at balance date Ordinary shares as at 25 July 2022 Percentage of share capital as at 25 July 2022 Sybos Holdings Pte Limited 35,285,353 18.63% 35,285,383 18.63% * based on substantial holding notices received by the Company. Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 100 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 101 Unmarketable parcels As at 25 July 2022, there were 268 shareholders (with a total of 1,782 shares) holding less than a marketable parcel of shares based on the closing price of the Company’s shares on the ASX of A$35.19. The ASX Listing Rules define a marketable parcel of shares as a parcel of shares of not less than A$500. Restricted securities A total of 691,015 fully paid ordinary shares are subject to voluntary escrow. The escrow will cease to apply at the end of the relevant escrow period, or earlier in limited circumstances. Of the escrowed shares, 195,604 fully paid ordinary shares are subject to escrow until the later of (subject in each case to ASX Listing Rule 3.10A) 4.14 pm on: (a) the first trading day 12 months after completion of the LifeHealthcare acquisition (with completion occurring on 31 May 2022); and (b) the trading day following the day on which EBOS’ results for the financial year ending 30 June 2023 are released to ASX and NZX. Of the escrowed shares, 495,411 fully paid ordinary shares are subject to escrow until 4.14pm on 29 February 2024. References to time are to Melbourne, Australia time. (a) In general, securities in the Company are freely transferable and the only significant restrictions or limitations in relation to the acquisition of securities are those imposed by New Zealand laws relating to takeovers, overseas investment and competition. (b) The New Zealand Takeovers Code creates a general rule under which the acquisition of 20% or more of the voting rights in the Company or the increase of an existing holding of 20% or more of the voting rights of the Company can only occur in certain permitted ways. These include a full takeover offer in accordance with the Takeovers Code, a partial takeover in accordance with the Takeovers Code, an acquisition approved by an ordinary resolution, an allotment approved by an ordinary resolution, a creeping acquisition (in certain circumstances), or compulsory acquisition of a shareholder holding 90% or more of the shares. (c) The New Zealand Overseas Investment Act 2005 and Overseas Investment Regulations 2005 (New Zealand) regulate certain investments in New Zealand by overseas interests. In general terms, the consent of the New Zealand Overseas Investment Office is likely to be required where an ‘overseas person’ acquires shares in the Company that amount to 25% or more of the shares issued by the Company, or if the overseas person already holds 25% or more, the acquisition increases that holding. Waivers granted from the NZX Listing Rules/ASX Admission There were no waivers granted by NZX during the year or waivers of NZX Listing Rules relied upon by the Company during the year. (d) The New Zealand Commerce Act 1986 is likely to prevent a person from acquiring shares in the Company if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in the market. The terms of the Company’s admission to the ASX and on-going listing requires the following disclosures: 1. The Company is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act dealing with the acquisition of shares (including substantial holdings and takeovers). 2. Limitations on the acquisition of securities imposed under New Zealand law are as follows: Voting Rights Shareholders may vote at a meeting of shareholders either in person or by proxy, attorney, or representative. In a poll every shareholder present in person or by proxy, attorney or representative has one vote for each share. THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK Business OverviewCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectoryFinancials Page 102 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 103 Objective Progress during 2021/2022 Educate our leaders through training to ensure they are equipped and can role model the principles outlined in our Diversity and Inclusion policy and bring the policy to life in our workplace. In 2021/22, we implemented our online Integrity Training. This included a number of topics such as our Code of Ethics, anti-bullying and harassment and workplace health and safety. These policies support the principles in our Diversity and Inclusion Policy. EBOS also continues to provide unconscious bias training. Gender representation The Group’s gender representation as at 30 June 2022 was as follows: Board 2021/22 2020/21 Officer 2021/22 2020/21 Female % Female (no.) Male % Male (no.) Gender Diverse % Gender Diverse (no.) 50% 33.3% 3 2 50% 66.6% 3 4 0% 0% 0 0 Female % Female (no.) Male % Male (no.) Gender Diverse % Gender Diverse (no.) 40% 33.3% 4 3 60% 66.6% 6 6 0% 0% 0 0 Officer has the meaning given in the NZX Listing Rules. Group 2021/22 2020/21 Female % Male % 57 59 43 41 The Group data does not include LifeHealthcare employees. Corporate Governance The Board and management of EBOS Group Limited are committed to ensuring that the Company adheres to best practice and governance principles and maintains high ethical standards. For the purposes of compliance with the NZ Companies Act, NZX Listing Rules and NZX Corporate Governance Code dated 17 June 2022 (NZX Code), the following disclosures are included in the Annual Report. The 2022 Corporate Governance Statement relating to the Company and its subsidiaries (the Group) can be found at: https://ebosgroup.gcs-web.com/corporate-governance. The Corporate Governance Statement refers to a number of codes, policies and charters of the Group. These documents (or a summary of them) can be found at https://ebosgroup.gcs-web.com/corporate-governance. Diversity The Group has a Diversity & Inclusion Policy which is set out as Appendix F of the Corporate Governance Code. Under the policy, the Board is responsible for setting measurable objectives for achieving diversity. The Board set the current objectives in February 2021. Set out below is the Board’s assessment of those objectives for the 2021/22 year:1 Objective Progress during 2021/2022 Aim to increase the proportion of women on the Board as vacancies arise, having regard to the circumstances (including skill requirements) relating to the vacancies. Aim to increase the proportion of women in executive and senior leadership roles by identifying internal talent through robust succession planning, developing female leaders and acquiring external talent through fair and objective recruitment practices. There has been an increase in the number of women on the Board from two to three. As at 30 June 2022, 50% of directors were female. Succession planning for directors remains a focus of the Board given there are directors with long tenures at the Company who have indicated an intention to retire over the next few years. The Board has been mindful to ensure a diverse range of potential candidates are considered as part of this process. There has been an increase in the number of women on the Executive Leadership Team from three to four. As at 30 June 2022, 40% of Executive Leadership Team members were female. The Recruitment and Selection Policy was launched in 2021/22 and continues to be further embedded in the Group, including ensuring recruitment and selection processes have diverse representation for both decision makers and candidates. EBOS has a sponsorship and development program called ‘Catalyst’ and is committed to 40:40:20 representation on that program. Under the current intake of the program, 53% of participants are female. Ensure a remuneration framework is in place that will allow the organisation to complete an objective analysis of EBOS pay equity annually to monitor pay rates and identify if there are any gender based pay issues that need to be addressed. A new remuneration framework was developed and implemented during 2021/22. This enabled greater objectivity in relation to assessing pay outcomes. This also formed the basis of a pay equity report which was reviewed by the Board. Continue to promote family friendly and flexible work place practices including but not limited to a commitment to supporting those on parental leave, supporting flexible return to work arrangements and on-going flexible work arrangements that suit both the organisation and the individual. There has been ongoing support for flexible working during 2021/22, particularly having regard to the impact of the COVID-19 pandemic on our people. In 2021/22 parental leave returns were monitored and tracked. 81% of those who took parental leave returned to the business after their leave. Continue to commit to the EBOS Reconciliation Action Plan in Australia and improving cultural awareness across both Australia and NZ. EBOS commenced development of a First Peoples Engagement Strategy in partnership with a first nations consulting firm. The strategy is a part of delivering on actions as part of our Reconciliation Action Plan. Māori inclusion training delivered by a third party was offered to a number of leaders in New Zealand. 1 The assessment of the Group’s diversity and inclusion objectives does not include initiatives or data related to LifeHealthcare, noting that the acquisition completed on 31 May 2022. This will be included in future reports. Business OverviewDirectors’ Interests & DisclosuresRemunerationDirectoryFinancialsCorporate Governance Page 104 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 105 Director independence The Board’s assessment of the independence of each person that was a director as at 30 June 2022 is set out below. Name Status Appointment date Elizabeth Coutts Independent1 July 2003 Tracey Batten Independent July 2021 Stuart McGregor Independent July 2013 Stuart McLauchlan Independent July 2019 Sarah Ottrey Independent September 2006 Peter Williams Independent July 2013 which the Board considers affects its assessment of their independence. On 6 July 2021, it was announced that the Board determined that Peter Williams and Stuart McGregor were Independent Directors (as defined in the NZX Listing Rules). Peter Williams and Stuart McGregor were first appointed to the EBOS Board in 2013 in connection with the investment in EBOS by Sybos (an entity that is part of the Zuellig Group). Peter Williams and Stuart McGregor’s associations with the Zuellig Group changed since 2013 and neither have executive or non-executive roles representing Zuellig Group interests. In relation to Elizabeth Coutts and Sarah Ottrey, the Board is unanimously of the view that each director brings, amongst other things, an independent view to decisions in relation to EBOS and that their tenure is not, of itself, an indication that they are no longer Independent. The Board has determined that all directors are Independent. Dr Tracey Batten was appointed to the Board on 1 July 2021 and Stuart McLauchlan was appointed to the Board on 1 July 2019, neither Tracey Batten or Stuart McLauchlan have relationships NZX Code Under NZX Listing Rule 3.8.1(b), EBOS is required to state in the annual report which recommendations in the NZX Code were not followed in the financial year ended 30 June 2022. Recommendation Comment 3.4 – Nomination Committee The Board does not have a nomination committee. The Board has determined, having regard to the current composition of the Board, that a nomination committee is not currently required. The Board undertakes the functions that were previously delegated to a nominations committee. 5.2 – Remuneration policy EBOS has a remuneration policy. The policy does not include the relative weightings of remuneration and performance criteria. This information is included in the Company’s Corporate Governance Statement (as required under the policy) to ensure it accurately reflects the remuneration structures. 8.4 – equity raising The acquisition of LifeHealthcare, announced on 9 December 2021, was partly funded by a placement of shares conducted in December 2021 and a retail offer (share purchase plan) which closed in January 2022. The placement and retail offer structure was considered to be in the best interests of the Company and preferred because: (i) it was regarded as challenging to undertake a traditional rights issue over the Christmas and New Year period and (ii) it allowed pricing with a smaller discount to the market price than would be typical for a traditional rights issue, meaning less dilution for those shareholders who were unable to (or chose not to) participate. As part of the placement allocation process, EBOS and the lead manager applied an allocation policy to ensure fairness across existing shareholders – i.e. ensuring that existing shareholders had the opportunity to receive a minimum of their pro rata, should they apply for it. The retail offer price was structured to provide participating shareholders with downside pricing protection for the period between the announcement of the placement and retail offer and closing of the retail offer. The price was structured to be the lower of the placement price or a price based on a 5 day volume weighted average price up to the closing of the retail offer. Further, in recognition of the strong support from shareholders, EBOS elected to increase the size of the retail offer, setting it at an amount that provided participating eligible shareholders with their pro rata allocation2 (up to the maximum application amount3). 1 Independent means that the director is considered to be an Independent Director as defined under the NZX Listing Rules and independent having regard to the factors set out in the ASX Corporate Governance Council’s Corporate Governance Principles & Recommendations. 2 Pro rata allocation based on the announced offer size on 9 December 2021 comprising a NZ$674 million (A$642 million) placement and NZ$105 million (A$100 million) Retail Offer, representing the same offer size that was used to calculate pro rata for shareholders who participated in the placement. 3 Or the amount applied for if an eligible shareholder applied for a lower amount. Remuneration Remuneration Overview The Remuneration Committee is responsible for: EBOS Group Limited presents this remuneration overview for the Company and its controlled entities for the year ended 30 June 2022. This overview provides details beyond those required under New Zealand laws and the NZX Corporate Governance Code. The Board considers that it is important to provide an appropriate level of transparency around EBOS’ approach to remuneration in order to encourage confidence in EBOS’ executive and director remuneration processes. This overview provides details of EBOS’ approach to remuneration including incentive plans for senior executives that were in place for the reporting year and remuneration received by the CEO and the directors. Remuneration Philosophy and Principles During the year ended 30 June 2022 (FY2022), a review was undertaken of EBOS’ Remuneration Policy. A copy of the revised policy is available on the Group’s website (https://ebosgroup.gcs-web.com/corporate-governance). The revised policy formalises EBOS’ existing remuneration philosophy and guiding principles. As described in that policy, EBOS believes that it is in the best interests of both EBOS and its employees to pay everyone fairly for the value of the work performed, in a financially responsible manner. EBOS adopts an objective, market-competitive system to determine the remuneration levels of roles at EBOS based on the job requirements, skills, and knowledge required of a fully competent job incumbent without bias. This approach is also flexible enough to ensure that EBOS is able to recruit, develop and retain a highly qualified workforce. Attracting, developing and retaining people of a high calibre is critical to support the business and its strategy and the remuneration of directors and executives is set having regard to this. Specifically in relation to executives, EBOS aligns components of executive remuneration with the performance of EBOS. Accordingly, executive remuneration comprises fixed and ‘at risk’ (or performance-based) elements which are both short and long-term in nature. The purpose of this structure is to ensure that the interests of the executives, EBOS and its shareholders are aligned during the period over which the business results are realised. As a result, the remuneration framework is structured to promote the long-term sustainable growth of the Group with a significant portion of performance-based executive remuneration awarded as rights to equity to reinforce alignment with the interests of EBOS and its shareholders over this period. Remuneration Governance As set out in the Charter for the Remuneration Committee, the Committee is responsible for reviewing, recommending and, if delegated by the Board, setting, in accordance with EBOS’ Remuneration Policy and practices, all components of the remuneration of the directors and executives. The charter for the Remuneration Committee can be found at https://ebosgroup.gcs-web.com/corporate-governance. • approving the remuneration of executives; and • recommending non-executive director remuneration to the Board. The Board is responsible for: • approving non-executive director remuneration; and • approval of remuneration policies. The members of the Remuneration Committee during the year were Elizabeth Coutts (Chair), Stuart McLauchlan, Sarah Ottrey and Tracey Batten. Dr Batten replaced Ms Ottrey as a member of the Remuneration Committee at which time Ms Ottrey was appointed to the Audit & Risk Committee. Executive Remuneration Framework The Group’s remuneration structure for executives, including the CEO, comprises three elements: • Total Fixed Remuneration (TFR); • Short-Term Incentive (STI); and • Long-Term Incentive (LTI). The following summarises each component of executive remuneration. A summary of the remuneration of the CEO, Mr John Cullity, is set out in section 5. a. Total Fixed Remuneration (TFR) Fixed remuneration may include a component of compulsory superannuation contributions for Australian- based executives and KiwiSaver contributions for New Zealand-based executives. Executives fixed remuneration is set having regard to the person’s position accountabilities, their qualifications, performance experience and record of achievement at EBOS, market data for similar positions at broadly comparable companies (typically by size, industry classification and complexity) and any other relevant talent market considerations. b. Short Term Incentive (STI) The STI is currently an annual cash payment which is dependent on the achievement of a combination of Group and individual performance measures. The performance measures for the STI are set by reference to the executive’s responsibilities and particular projects relevant to that executive and the business or function for which they are responsible. The purpose of the STI is to reward executives for meeting measurable objectives linked to a financial year. For example, for executives that are responsible for businesses in the Group, their performance measures may be set by reference to the performance of that business and the Group as a whole. For executives that have functional responsibilities, their performance objectives may be set by reference to the financial performance of EBOS. Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 106 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 107 For FY2022, the Board introduced a stretch component to STIs for executives whereby 150% of an executive’s target STI entitlement would be paid for financial outperformance by the Group. Further details regarding the stretch component for the CEO are set out in section 5d. The performance measures for the STI for executives are considered by the Board at the same time as the audited accounts for the relevant financial year. Accordingly, the STI outcomes in respect of the year ended 30 June 2022 (2022 STI) will be paid in FY2023. Table 2: FY2022 LTI plan continued Feature Approach Performance Criteria The performance criteria (vesting conditions) for executives are: The Board also has the flexibility to award short term incentive payments for special or strategically important projects. Table 1: FY2022 STI plan Feature Purpose Eligibility Approach Align individual performance with Group objectives. Provide individuals with a competitive market position for total reward (i.e. variable and fixed pay components). Those considered for participation in the program must be able to impact the performance of their own work area, their business or function and also contribute to the Group’s overall performance. Instrument Cash. Performance Criteria The following criteria must be met before any payments are made: • Group Profit Before Tax (PBT) target for the financial year; and • for those with business unit responsibilities either Segment EBITDA or EBIT targets for the financial year (Healthcare or Animal Care). The Board determined that the 2022 STI for executives, including the CEO, and other managers on short term incentives would include a stretch incentive that explicitly incentivises and rewards outperformance. The maximum STI entitlement for achieving this outperformance is 150% of the applicable executive’s target STI entitlement. The details of Mr Cullity’s 2022 STI opportunity are set out in section 5d below. Dividends and voting rights Clawback Table 2: FY2022 LTI plan c. Long-Term Incentive (LTI) • continuous employment with the Group; • growth in EBOS’ earnings per share over the performance period must equal or exceed a specific compound annual growth percentage target. The Board determined that the vesting conditions for the 2022 LTI would include a ‘stretch’ target for certain senior executives to incentivise and reward outperformance by EBOS. The details of performance rights issued to Mr Cullity as his 2022 LTI are set out in section 5d and includes this stretch target. The performance criteria is assessed at the end of the 3 year performance period. Settlement If the Board determines that performance rights have vested it may determine with respect to each vested right whether to: • allot and issue, or transfer, shares to a participant (equity settle); or • pay a cash amount to a participant equivalent to the ‘market value’ of a share as at the date of vesting of the performance rights (cash settle). The market value of an EBOS share is calculated by reference to the volume weighted average price of EBOS shares on NZX for the 5 trading days immediately prior to the date that the Board determines the rights have vested. Performance rights do not have voting rights or accrue dividends. The Board has broad discretion to adjust downwards (including to zero) unvested or vested LTI awards where, in the opinion of the Board; the CEO or an executive has: • acted fraudulently, dishonestly or engaged in gross misconduct or is in breach of their obligations to EBOS; • acted in a way that has contributed to material reputational damage to EBOS; or • received performance rights that have vested as a result of fraud, dishonesty or breach of obligations of any person or as a result of a material misstatement of the financial statements of EBOS. EBOS has a long-term incentive plan which currently takes the form of a performance rights plan. The table below sets out the key terms for the LTIs granted during FY2022 (2022 LTI). Restriction on hedging Hedging of performance rights by executives is prohibited under the plan rules and EBOS’ Securities Trading Policy. Approach Change of control Vesting of performance rights is subject to Board discretion. Feature Purpose Eligibility Align a portion of executives’ total remuneration with the medium to long term performance of the Group. Cessation of employment The Remuneration Committee determines whether an LTI plan will operate and the extent (if any) to which each executive is invited to participate in an LTI plan. Resignation: subject to the Board determining otherwise, unvested performance rights are forfeited. Termination for cause: if an executive’s employment is terminated for cause, subject to the Board determining otherwise, unvested and vested performance rights are forfeited. Termination without cause (including circumstances such as redundancy and retirement): the Board shall determine the treatment of unvested performance rights. All vested performance rights remain on foot unless otherwise determined by the Board. Instrument Performance rights which are rights to acquire ordinary shares in EBOS for nil consideration. Performance period Three years from 1 July 2021 to 30 June 2024. Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 108 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 109 d. Executive Remuneration Mix c. Relative weightings of CEO remuneration EBOS’ Remuneration Policy does not include the relative weightings of remuneration and performance criteria. The table below sets out the relative weightings of Mr Cullity’s remuneration: As required under the Remuneration Policy, the relative weightings of realised executive remuneration components in FY2022 is set out in the Group’s Corporate Governance Statement. The relative weightings of the CEO’s remuneration are included in section 5c below for completeness. CEO Remuneration a. Past Financial Performance Chief Executive Officer 21% fixed remuneration 39% short term incentive 40% long term incentive The table below presents the financial performance for EBOS Group Limited for the previous five financial years. d. CEO Remuneration Outcomes for FY2022 The table below sets out the realised remuneration outcomes for Mr. Cullity for FY2022 and FY2021 Table 3: Past Financial Performance 2022 2021 2020 2019 2018 Table 5: Summary of total realised remuneration NPAT 1 A$202.6m A$185.3m A$162.5m A$137.7m A$137.3m Basic EPS (Annual) A$114.5cps A$113.2cps A$100.6cps A$89.8cps A$90.4cps Compound growth in Basic EPS (3 year) 8.4% per annum (2020-2022) 7.8% per annum (2019-2021) 6.6% per annum (2018-2020) Financial year Fixed remuneration (including compulsory superannuation) STI LTI Total 2022 2021 A$1,417,500 A$1,820,000 A$2,614,036 A$5,851,536 A$1,350,000 A$1,350,000 A$1,000,000 A$3,700,000 Share price at end of financial year NZ$39.01 NZ$32.30 NZ$21.61 NZ$23.15 NZ$17.95 The table below sets out the expected STI that will be paid shortly after the release of the annual report in respect of the Group’s FY2022 results (2022 STI). Market capitalisation at end of financial year NZ$7,388m NZ$5,302m NZ$3,519m NZ$3,743m NZ$2,738m Total dividends in period (NZ$ cps) 96.0 88.5 77.5 71.5 Total shareholder return (annual)2 23.7% 53.56% (3.30%) 32.95% 68.5 6.5% Total shareholder return (3 year) 79.8% (2020-2022) 93.2% (2019-2021) 35.9% (2018-2020) 53.9% (2017-2019) 93.7% (2016-2018) Total shareholder return (4 year) 135.9% (2019-2022) Note 1: Net profit after tax attributable to owners of the company. Note 2: Total shareholder return is calculated as the share price at the end of the year plus dividends declared in relation to that year divided by the opening share price for the year. b. Key terms of CEO employment contract The table below sets out the key terms of Mr Cullity’s employment contract. Table 4: CEO Contract Contract duration Notice period – company Notice period – CEO Termination provision (where notice provided) Post-employment restraint Ongoing until terminated by either party 12 months unless for cause 12 months 12 months 18 months Table 6: Expected STI Financial year 2023 Expected STI $2,550,000 The amounts set out in this section may differ from the amounts included in Note H4 to the Financial Report and the table of employee remuneration included on pages 112 and 113 which are reported according to accounting standards. The accounting values of remuneration reported may not reflect what a person was actually paid during the financial year, particularly due to the valuation of share based payments and accrual of short term incentives. Fixed remuneration In FY2022, Mr Cullity received fixed remuneration of $1,417,500. This included compulsory superannuation contributions. Short Term Incentive (STI) payment – Realised 2021 STI and Expected 2022 STI • the 2021 Target, 75% of the STI was payable; • 102% of the 2021 Target, 90% of the STI was payable; and • 103.5% of the 2021 Target, Mr Cullity’s maximum STI entitlement was payable. At the time the 2021 Target was set Mr Cullity’s maximum STI entitlement was $1,400,000. The Board exercised its discretion and determined that the STI paid in respect of that financial year to executives, including Mr. Cullity, and other senior managers on short term incentives would be increased to 130% of this originally set maximum entitlement in recognition of EBOS’ and the executives’ outstanding overall performance. Accordingly, Mr Cullity received $1,820,000 (130% of $1,400,000) for his 2021 STI and this amount was paid in FY2022. Realised 2021 STI Expected 2022 STI In FY2022, Mr Cullity received an STI payment of $1,820,000. This was based on the financial performance of EBOS for the prior year (that is, the year ended 30 June 2021) (2021 STI) and was paid following the finalisation of EBOS’ audited accounts for that year. With regard to the 2021 STI, a target was originally set by reference to EBOS’ FY2021 underlying Profit Before Tax results (2021 Target). If EBOS’ FY2021 underlying Profit Before Tax (PBT) results were equal to: In relation to the STI target for senior executives for FY2022, the Board implemented a structure that included a stretch target that explicitly rewards outperformance. For FY2022, if EBOS’ underlying PBT results (2022 Target) were equal to: • the 2022 Target, 75% of the STI is payable; • 102% of the 2022 Target, 90% of the STI is payable; • 103.5% of the 2022 Target, 100% of the STI is payable (‘target STI entitlement’); Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 110 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 111 • from 104.4% to 108% of the 2022 Target, between 110% to 150% (‘maximum STI entitlement’) of the target STI entitlement is payable on a straight line basis. Mr Cullity’s target STI entitlement under the 2022 STI is $1,700,000 and his maximum STI entitlement is $2,550,000 (150% of his target STI entitlement). It is expected that Mr Cullity will receive $2,550,000 for his 2022 STI, with this amount to be paid in FY2023. Mr Cullity will also be eligible for a special short term incentive for the additional effort and successful execution of the LifeHealthcare acquisition. Granted 2022 LTI The performance conditions for the performance rights granted during FY2022 (2022 LTI) are described in section 4.c above. The maximum LTI opportunity in the form of equity instruments for Mr Cullity, which is inclusive of a stretch component as described in section 4c, for the financial year ended 30 June 2022 was $2,850,000. These rights will be tested after 30 June 2024 following the conclusion of the relevant performance period with any vesting occurring during FY2025. Long Term Incentives Granted 2023 LTI During the year ended 30 June 2022, Mr Cullity received long term incentives totalling $2,614,036 in cash. This comprised: • An award of $1,000,000 in cash for full achievement of EPS performance hurdles over the three year performance period from 1 July 2018 to 30 June 2021; and • Full vesting and cash settlement of 47,500 performance rights (with a value of $1,614,036 on vesting) as a result of the achievement of the EPS performance hurdles for the three year performance period from 1 July 2018 to 30 June 2021. $731,500 of this cash payment that was made on vesting was attributable to strong share price performance over the relevant three year performance period above, reinforcing alignment with shareholder value creation over this period. Mr Cullity will not share in any share price accretion from this point into the future in respect of these performance rights as they have been cash settled. Expected 2020 LTI Vesting In relation to the 45,455 performance rights issued in respect of the performance period 1 July 2019 to 30 June 2022, it is expected that these performance rights will vest shortly after the release of the annual report. Table 7: LTIs – Chief Executive Officer In July 2022, Mr Cullity, together with other senior executives, was issued with performance rights in relation to the performance period 1 July 2022 to 30 June 2025. Although this grant of performance rights occurred after FY2022, the details are included in Table 7 for completeness. Vested LTI Shares In previous financial years, EBOS operated a long term incentive share plan whereby EBOS provided an interest free, non-recourse loan to participating senior executives, including Mr Cullity, in order for those executives to purchase shares in the Company. Those shares have vested. The loan balances in respect of those vested shares as at 30 June 2022 are as follows: • LTI 2016/2019 – 95,000 shares – NZ$1,403,851; • LTI 2017/2020 – 110,000 shares – NZ$1,584,202. Summary of LTIs Long term incentives in the form of equity instruments received by Mr Cullity since the commencement of his employment with the Group in 2009 are: Performance Period Instrument Vested/Unvested LTI – 2022/2025 1 July 2022 to 30 June 2025 80,195 performance rights Unvested LTI – 2021/2024 1 July 2021 to 30 June 2024 94,124 performance rights Unvested LTI – 2020/2023 1 July 2020 to 30 June 2023 75,000 performance rights Unvested LTI – 2019/2022 1 July 2019 to 30 June 2022 45,455 performance rights Unvested LTI – 2018/2021 1 July 2018 to 30 June 2021 47,500 performance rights Vested (cash settled) LTI – 2017/2020 1 July 2017 to 30 June 2020 110,000 loan-backed shares Vested LTI – 2016/2019 1 July 2016 to 30 June 2019 95,000 loan backed shares Vested Non-Executive Director Remuneration To support the attraction and retention of directors of the highest calibre and requisite expertise from New Zealand, Australia and internationally, the Group aims to set remuneration of non-executive directors having regard to: • the time commitment and responsibilities of the non- executive directors (including any commitment as a member of a standing or ad hoc Board committee and special exertion for significant project work outside of the normal workload for the Board and Committees); and • market rates for non-executive director remuneration for comparable companies (by size, industry classification and complexity). Table 8: Non-executive director fees by position Position Chair Director (other than Chair) Chair of Audit & Risk Committee Chair of Remuneration Committee Member of Audit & Risk Committee Member of Remuneration Committee Special exertion fee pool *No special exertion fees were paid to directors during FY2022. Non-executive director remuneration is in the form of fees. Non-executive directors do not receive performance-based or equity-based remuneration. Total remuneration for non-executive directors is subject to an aggregate fee pool limit of NZ$1,565,000 (including payments made in respect of KiwiSaver and compulsory superannuation contributions) in any financial year. The fee pool was approved by shareholders at the Annual Meeting held on 19 October 2021. The table below sets out the current fee allocations for director fees by position. Fees (NZ$) $336,000 $168,000 $40,000 $33,000 $20,000 $16,500 $75,000* Directors’ remuneration and other benefits required to be disclosed pursuant to section 211(1) of the Companies Act 1993 for the year ended 30 June 2022 were as follows: Table 9: Non-executive director fees paid during the year ended 30 June 2022 Director E Coutts T Batten S McGregor S McLauchlan S Ottrey P Williams N Dowling* Base Fee NZ$ $336,000 $168,000 $168,000 $168,000 $168,000 $168,000 $102,200 Audit and Risk Committee NZ$ Remuneration Committee NZ$ Total NZ$ $20,000 $33,000 $389,000 - - $40,000 $3,407 - $12,167 $2,810 - $16,500 $13,690 - - $170,810 $168,000 $224,500 $185,097 $168,000 $114,367 *Mr Dowling ceased to be a director on 8 February 2022 Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 112 Page 112 Page 112 EBOS Group Limited EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 Annual Report 2022 EBOS Group Limited EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 Annual Report 2022 Page 113 Page 113 Page 113 Employee Payment Bands 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 outside of New Zealand, who received remuneration and other benefits in their capacity as employees totalling NZ$100,000 or more during the year. Employee remuneration (NZ$) $100,000 to $110,000 $110,000 to $120,000 $120,000 to $130,000 $130,000 to $140,000 $140,000 to $150,000 $150,000 to $160,000 $160,000 to $170,000 $170,000 to $180,000 $180,000 to $190,000 $190,000 to $200,000 $200,000 to $210,000 $210,000 to $220,000 $220,000 to $230,000 $230,000 to $240,000 $240,000 to $250,000 $250,000 to $260,000 $260,000 to $270,000 $270,000 to $280,000 $280,000 to $290,000 $290,000 to $300,000 $300,000 to $310,000 $310,000 to $320,000 $320,000 to $330,000 $330,000 to $340,000 $340,000 to $350,000 $350,000 to $360,000 $360,000 to $370,000 $370,000 to $380,000 $380,000 to $390,000 $390,000 to $400,000 30 June 2022 Number of Employees 221 156 127 111 84 72 48 45 32 23 20 27 20 17 12 14 8 11 4 9 5 4 2 4 3 5 2 1 2 3 Employee remuneration (NZ$) $400,000 to $410,000 $410,000 to $420,000 $420,000 to $430,000 $430,000 to $440,000 $450,000 to $460,000 $460,000 to $470,000 $470,000 to $480,000 $480,000 to $490,000 $490,000 to $500,000 $510,000 to $520,000 $520,000 to $530,000 $550,000 to $560,000 $560,000 to $570,000 $610,000 to $620,000 $700,000 to $710,000 $710,000 to $720,000 $810,000 to $820,000 $830,000 to $840,000 $910,000 to $920,000 $1,080,000 to $1,090,000 $1,240,000 to 1,250,000 $1,280,000 to $1,290,000 $1,640,000 to $1,650,000 $1,660,000 to $1,670,000 $1,750,000 to $1,760,000 $1,890,000 to $1,900,000 $1,930,000 to $1,940,000 $2,750,000 to $2,760,000 $6,270,000 to $6,280,000 30 June 2022 Number of Employees 3 1 2 1 1 3 2 4 2 1 2 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 114 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 115 Directors’ Interests and Disclosures Disclosure of interests Former director N.W Dowling: Director of ABI Dowling Pty Ltd, Balmoral Australia Pty Ltd, Balmoral Financial Investments Pty Ltd, Balmoral Operations Pty Ltd, BPI Property Investments Pty Ltd and BPI Property Developments Pty Ltd. Indemnity and Insurance In accordance with section 162 of the Companies Act 1993 and the constitution of the Company, the Company has given indemnities to, and has effected insurance for, the directors and executives of the Company and its related companies which, except for some specific matters that are expressly excluded, indemnify and insure directors and executives against monetary losses as a result of actions undertaken by them in the course of their duties. Specifically excluded are certain matters, such as the incurring of penalties and fines, which may be imposed for breaches of law. Use of information There were 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. In accordance with section 140(2) of the Companies Act 1993, the directors named below have made a general disclosure of interest, by a general notice disclosed to the Board and entered in the Company’s interests register during the year ended 30 June 2022, as follows: E.M. Coutts: Chair of Oceania Healthcare Limited and Skellerup Holdings Limited, Director of EBOS Group subsidiaries in New Zealand and Member, Marsh New Zealand Advisory Board. T.L. Batten: Director of Medibank Private Limited, NIWA Australia Pty Ltd, National Institute of Water and Atmospheric Research Limited and Accident Compensation Corporation. S.J. McGregor: Director of Symbion Pty Ltd and other EBOS Group subsidiaries. S.J. McLauchlan: Chairman of Scott Technology Limited, Analog Digital Instruments Limited, Cargill Hotel 2002 Ltd, G S McLauchlan & Co, Otago Community Hospice and Wood Solutions. Director of Southlink Health Education Trust, Argosy Property Ltd, Dunedin Casinos Ltd, NZ Whisky and Scenic Hotels Group. Governor, NZ Sports Hall of Fame. Member, Advisory Board to Partridge Jewellers group. Member, Marsh NZ Advisory Board. S.C. Ottrey: Chair of Whitestone Cheese Ltd and director of Sarah Ottrey Marketing Ltd, Skyline Enterprises Limited and subsidiaries, Mount Cook Alpine Salmon Limited and Christchurch International Airport Ltd. Member of the Institute of Directors – Otago Southland Branch committee, Trustee for the SGE and AA Berry Family Trust. P.J. Williams: Director of Green Cross Health Limited. Share dealings by Directors The directors have disclosed to the Board under section 148(2) of the Companies Act 1993 particulars of acquisitions or disposals of a relevant interest in the Company’s shares during the year ended 30 June 2022. Director Elizabeth Coutts Tracey Batten Stuart McLauchlan Sarah Ottrey Former director Nicholas Dowling* Ordinary Shares Purchased/(Sold) Consideration Paid/(Received) Date of Transaction 1,449 1,500 284 1,166 419 (1,198) 206 NZ$49,990.50 24 January 2022 A$54,746.40 13 December 2021 NZ$9,798.00 24 January 2022 NZ$40,227 NZ$14,455 24 January 2022 24 January 2022 A$(45,478.47) 11 January 2022 A$6,707.36 24 January 2022 *Mr Dowling resigned from the Board with effect from 8 February 2022. The information is as at the date of his resignation. Directors’ shareholdings Director Elizabeth Coutts – Indirect/beneficial interest – Direct, non-beneficial interest – trustee of EBOS Staff Share Plan Tracey Batten – Direct interest Stuart McLauchlan – Indirect/beneficial interest Sarah Ottrey – Indirect/beneficial interest – Held with associated person Former Director 30 June 2022 30 June 2021 35,323 71,592 1,500 2,355 3,469 9,650 33,874 71,592 N/A 2,071 3,050 8,484 Nicholas Dowling* – Indirect/beneficial interest 508* 1,500 *Mr Dowling resigned from the Board with effect from 8 February 2022. The information is as at the date of his resignation. Attendance at Board and committee meetings Director Board Audit & Risk Remuneration Elizabeth Coutts Tracey Batten Stuart McGregor Stuart McLauchlan Sarah Ottrey Peter Williams Former director Nicholas Dowling Eligible to Attend Attended Eligible to Attend Attended Eligible to Attend Attended 17 17 17 17 17 17 11 17 17 15 17 15 17 11 3 - - 3 1 - 1 3 - - 3 1 - 1 4 1 - 4 3 - - 4 1 - 4 3 - - Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 116 EBOS Group Limited Annual Report 2022 EBOS Group Limited Annual Report 2022 Page 117 Disclosures relating to subsidiaries Subsidiary Current Directors Current Directors Current Directors Subsidiary Current Directors Subsidiary Current Directors HPS Holdings Group (Aust) Pty Ltd ABT Medical Pty Ltd J Cullity ABT Nevada LLC ACN 618 208 969 Pty Ltd Alchemy Holdings Pty Ltd Alchemy Sub-Holdings Pty Ltd Australian Biotechnologies Pty. Limited Beaphar Pty Ltd BFCMC Pty Ltd Blackhawk Premium Pet Care Pty Ltd J Cullity L Hansen M Muscio S Berry J Goldberg J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity J Cullity J Cullity S McGregor# J Cullity S McGregor# Botany Bay Imports Exports Pty Ltd J Cullity CC Pharmacy Investments Pty Ltd CC Pharmacy Management Pty Ltd CC Pharmacy Promotions Pty Ltd Chem Plus Pty Ltd Chemmart Holdings Pty Ltd Cincotta Holding Company Pty Ltd Clinect Pty Ltd Clinect NZ Pty Limited Collaboration Medical Clinics Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor E Coutts J Cullity L Hansen J Cullity S McGregor# Collaboration Medical Clinics Investments Pty Ltd Culpan Distributors Ltd Culpan Medical Pty Ltd Developing People Pty Ltd DoseAid Pty Ltd EAHPL Pty Ltd J Cullity J Cullity L Hansen J Cullity J Cullity S McGregor# J Cullity S McGregor J Cullity S McGregor# EBOS Aesthetics Pty Ltd J Cullity EBOS Group Australia Pty Ltd EBOS Health & Science Pty Ltd EBOS Medical Devices Australia Pty Ltd EBOS Medical Devices NZ Limited EBOS PH Pty Ltd Endeavour CH Pty Ltd Endeavour Consumer Health Limited J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# E Coutts J Cullity L Hansen J Cullity S McGregor# J Cullity S McGregor# E Coutts J Cullity L Hansen Hospharm Pty Ltd HPS Brands Pty Ltd HPS Corrections Pty Ltd HPS Finance Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# HPS Hospitals Pty Ltd HPS IVF Pty Ltd HPS Services Pty Ltd Intellipharm Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor Klinic Solutions Australasia Pty Ltd J Cullity LifeHealthcare Limited LifeHealthcare Distribution (NZ) Limited LifeHealthcare Pty Limited J Cullity L Hansen J Cullity L Hansen J Cullity LifeHealthcare Distribution Pty Limited J Cullity LifeHealthcare Finance Pty Limited J Cullity Mega Save Management Pty Ltd National Surgical Pty Ltd Nexus Australasia Pty Limited Pacific Health Supplies Topco1 Pty Limited Pacific Health Supplies TopCo2 LLC Pacific Health Supplies BidCo Pty Limited Pacific Health Supplies HoldCo Pty Limited Pacific Health Supplies MezzCo Pty Limited Pacific Health Supplies TopCo Pty Limited PBA Finance No. 1 Pty Ltd LifeHealthcare Group Pty Limited J Cullity PBA Finance No. 2 Pty Ltd LifeHealthcare Services Pty Ltd J Cullity PBA Wholesale Pty Ltd Lite Living Pty Ltd LMT Surgical Pty Ltd Lyppard Australia Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# Pet Care Distributors Pty Ltd Pet Care Holdings Australia Pty Ltd Pet Care Wholesalers Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity J Cullity J Cullity J Cullity J Cullity J Cullity J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# Masterpet Logistics Pty Ltd J Cullity Pharmacy Retailing (NZ) Limited MD Scopes Pty Ltd J Cullity MD Solutions Australasia Pty Ltd J Cullity MD Solutions NZ Limited J Cullity L Hansen Pioneer Medical Limited E Coutts J Cullity L Hansen E Coutts J Cullity L Hansen Fibertech Medical Australia Pty Ltd J Cullity Masterpet Australia Pty Limited J Cullity Healthcare Supply Partners Pty Ltd J Cullity Masterpet Corporation Limited E Coutts J Cullity L Hansen Pets International Pty Ltd J Cullity Pharmacy Brands Australia Pty Ltd J Cullity S McGregor# Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresDirectoryRemuneration Page 118 Page 118 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 EBOS Group Limited EBOS Group Limited Annual Report 2022 Annual Report 2022 Page 119 Page 119 Subsidiary PRNZ Limited QPharma Pty Ltd Richard Thomson Pty Limited Current Directors Subsidiary Current Directors E Coutts J Cullity L Hansen J Cullity J Cullity S McGregor# You Save Management Pty Ltd ZAP Services Pty Ltd ZHHA Pty Ltd J Cullity S McGregor# J Cullity S McGregor J Cullity S McGregor Sentry Medical Pty Limited J Cullity # Alternate director. No employee of the Group appointed as a director of the Company or its subsidiaries receives remuneration or other benefits in their role as a director. The remuneration and other benefits of such employees, received as employees, are included in the relevant bandings for remuneration disclosed under employee remuneration range on page 112. Auditor The Company’s Auditor, Deloitte, will continue in office in accordance with the Companies Act 1993. The directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Companies Act 1993. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note H5 of the financial statements. Elizabeth Coutts Chair of Directors Stuart McLauchlan Director Shanghai EBOS Business Management Co Ltd Spiran Pty. Ltd. J Cullity J Cullity Surgical and Medical Supplies Pty. Ltd. J Cullity Symbion Pty Ltd Terry White Group Pty Ltd J Cullity S McGregor J Cullity S McGregor# Tissue Technologies Pty Ltd J Cullity Tissuelife Pty Limited J Cullity Tony Ferguson Weight Management Pty Ltd J Cullity S McGregor# Transmedic Pte Ltd J Cullity TW&CM Pty Ltd TWC IP Pty Ltd Ventura Health Pty Ltd VIM Health Pty Ltd VIM Health IP Pty Ltd J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# J Cullity S McGregor# Vitapet Corporation Pty Limited J Cullity Warner & Webster Pty Ltd W & W Management Services Pty Ltd J Cullity S McGregor# J Cullity S McGregor# Directory Registered offices 108 Wrights Road PO Box 411 Christchurch 8024 New Zealand Telephone: +64 3 338 0999 Email: ebos@ebos.co.nz Level 7, 737 Bourke Street Docklands 3008 PO Box 7300 Melbourne 8004 Australia Telephone: +61 3 9918 5555 Email: ebos@ebosgroup.com Website address www.ebosgroup.com Directors Elizabeth Coutts Independent Chair Tracey Batten Independent Director Stuart McGregor Independent Director Stuart McLauchlan Independent Director Sarah Ottrey Independent Director Peter Williams Independent Director Managing your shareholding online To change your address, update your payment instructions and to view your Investment portfolio, including transactions, please visit: www.computershare.com/ investorcentre General enquiries can be directed to: • enquiry@computershare.co.nz • Private Bag 92119, Auckland 1142, New Zealand or GPO Box 3329, Melbourne, Victoria 3001, Australia • Telephone (NZ) +64 9 488 8777 or (Aust) 1800 501 366 • Facsimile (NZ) +64 9 488 8787 or (Aust) +61 3 9473 2500 Please assist our registrar by quoting your CSN or shareholder number. Annual Meeting The Annual Meeting of EBOS Group Limited will be held on Thursday, 27 October 2022 at 2pm, at the Park Hyatt Hotel, 99 Halsey Street, Auckland, New Zealand. Senior executives John Cullity Chief Executive Officer Brett Barons CEO Symbion Andrea Bell Chief Information Officer Simon Bunde EGM Strategic Operations, ESG and Innovation Janelle Cain General Counsel Julie Dillon CEO Animal Care Leonard Hansen Chief Financial Officer David Lewis EGM Strategy Jacinta McCarthy Group GM – Human Resources Matt Muscio CEO Medical Technology Auditor Deloitte Limited Christchurch Securities exchange EBOS Group Limited shares are quoted on the New Zealand Securities Exchange and the Australian Securities Exchange (NZX/ASX code: EBO). Share register Computershare Investor Services Ltd Private Bag 92119 Auckland 1142 New Zealand Telephone: +64 9 488 8777 Computershare Investor Services Pty Ltd GPO Box 3329 Melbourne, Victoria 3001 Australia Telephone: 1800 501 366 This Annual Report is printed on environmentally responsible paper, produced using FCS® certified 100% Post Consumer Recycled, Process Chlorine Free (PCF) pulp. Business OverviewFinancialsCorporate GovernanceDirectors’ Interests & DisclosuresRemunerationDirectory ebosgroup.com