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EBOS Group Annual Meeting Address

EBOS Group Annual Meeting Address




While we are meeting today with the financial world still in great uncertainty, it is important that we do not lose sight of the tremendous steps taken by this company in the past year to create a durable and strong platform for ongoing profitability and growth.

Much has been achieved that will maintain the robustness of EBOS through what will be challenging times for the economy and markets in 2009.

The significance to EBOS of the last financial period was foreshadowed at last year’s shareholder meeting, when we commented on the acquisition of PRNZ as a truly company changing event.

Up until then EBOS’ growth had been achieved by a combination of organic growth and relatively small strategic acquisitions of healthcare and scientific businesses both in New Zealand and more often recently, in Australia.

A year on we can reflect on the decision to acquire PRNZ. The Board is very pleased with the outcome of taking this very big step upwards in the group’s size.

EBOS has delivered on the targets as set out in the Explanatory Memorandum related to the acquisition. It must surely be one of the most successful transactions on the NZX in the past two years.

These are still early days in terms of fully understanding the businesses we have now blended into the group. However, we have had no great surprises, we like what we see, and we have already de-risked most of the post-acquisition issues.

In particular in respect to PRNZ itself, we have signed off the successful implementation of the new SAP management technology system, which is a key tool going forward.

Combined with the early results from other acquisitions in Australia and excellent performances from our trans-Tasman sales and marketing, distribution and logistics activities in the healthcare, and scientific sectors; the overall outcome is an annual result we are very proud to have reported to you.

[Slides on (1) Revenue and (2) EBITDA and NPAT]

• Revenue rose 255% to $1.09bn

• Profit after tax is up 61.5% to $16.6m.

• Total assets are up to $486.2m and net assets to $147.3m.

• Earnings per share are up from 31.7 cents to 37.6 cents per share.

The Economic Situation [Slide]

Returning to the risk that is so widely evident on financial markets, the contagion has been likened as being of historic proportions.

We can expect to face more uncertainty in the current year than at any time for many decades. Whilst there have been some positive developments in the process of restoring confidence, it will be some time before there can be a return to what we have regarded as normal trading conditions.

It would be illogical to think that New Zealand and its corporate sector could somehow escape from all of this, even if some politicians would like to think so.

Any impact on demand from the healthcare and scientific markets in which EBOS operates will be cushioned by the group’s diversification and geographical spread.

We are already operating efficiently and, for now, are taking a cautious approach to the business. We successfully completed a significant capital-raising last year and fortunately avoided going to the market during the much more difficult financial conditions that now prevail.

We also successfully renegotiated our 3-year term debt with ANZ National Bank in August this year, putting us in good shape in terms of our financial strength.

Of course, adverse times can also throw up opportunities and we will be awake to these if they occur within our areas of business interest.

[Slide: ‘Our Focus’]

Our focus for the balance of this financial year will be on extracting value from the existing business.

- There is ongoing work in fully integrating PRNZ into the broader EBOS group.
- We are examining our IT needs for the future of our much larger and more complex group.
- We will look at rationalisation of the now considerable number of properties (freehold/leasehold) we have accumulated through acquisitions in New Zealand and Australia, in the interests of both operational efficiency and releasing capital.
- We continually review the way in which the group is managed, especially now in the context of our larger geographical footprint, and expanded business model.
We also seek to achieve continuity of our culture of corporate leadership, against the background of general disappointment with the flawed behaviour that underlies the root causes of global financial crisis.

[Slide: Time for a Rethink]

We look too for strong leadership on key economic, regulatory and social issues by the incoming Government that New Zealanders will elect in two week’s time.

In many areas of our economy it is time for a reappraisal of those restraints that impede our economic development, and a re-assessment of those areas where there is excessive liberalism to the detriment of such core values as tolerance, honesty and a work ethic.

Businesses now face a degree of regulatory compliance that borders on the unmanageable.

Increased time is diverted from business-building, to completing our books to the new international accounting standards, a legacy of the greater disclosures required after an even earlier American crisis of confidence (I refer to the Enron and Worldcom scandals) with new rules aimed at protecting shareholders.

We have been well assisted through the accounting labyrinth by our auditors, Deloitte, yet the accounting profession is itself indirectly responsible for much of the complication contained within our accounts; it is ironic that shareholders now often need help in interpreting what the restated results actually mean.

Market Rating [Slide]

The Board has always preferred that our share price, as proxy for value, be driven by results, but I know the media, in particular, are fascinated by other things and this is of concern to some of our shareholders.

In reality, the media are driven by other signals, such as the notoriously adverse news that has surrounded the meltdown in the finance sector, the difficulties facing retailing and finance companies etc… all rather more newsworthy.

Fortunately the media are not the key arbiter of market value. More importantly, EBOS is benefiting from equity analysts showing greater interest in the company now that it is a Top 50 stock by market capitalisation, and considerably more by turnover. We should attract increased media attention as a consequence.

We also believe that in the new prevailing climate there will be increased focus on quality companies particularly those that have proven resilient and defensive to economic impact through several economic cycles. Few companies qualify for those criteria better than EBOS Group.


Lastly, I would like to make some acknowledgements for the year past, starting by thanking my Board for their work during a very busy year. I should also like to note the appointment by the Board in September of Mark Stewart of Masthead, our largest cornerstone investor. Masthead has been a strong supporter of EBOS in recent times and has fully supported our capital raisings. Mark is a Christchurch resident and has a extensive background in management and governance.

He is up for reappointment at this meeting and the Board unanimously support a positive vote for that resolution.

We are also aware that we are very fortunate with the calibre of our management and we have again been well served by Mark Waller and his team, who have rewarded the faith held in them by the Board by stepping up and running a much larger company.

The Board also sincerely appreciates the commitment shown by the staff of EBOS Group companies throughout Australia and New Zealand.

I now have pleasure in handing over to Mark for his commentary to the meeting.

Thank You.


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