OPERATINGFINANCIAL REVIEW OPERATING + FINANCIAL REVIEW + + FINANCIALREVIEW OPERATING $6.7 3% $6.7 3% $53.1 $53.1 20% $53.1 20% 20% 2012 2012 2012 55 5 $201 77% YEAR YEAR YEAR BLACKMORES ANNUAL REPORT 2016 BL C POR RES 6 B L A C K M O R E S A N N U A LAR EK M OT 2 0 1 A N N U A L R E P O R T 2 0 1 6 16 16 $69.2 $69.2 10% 10% $81.4 $48.0 11% $81.4 11% 7% $48.0 7% $48.0 7% 2015 $76.4 16% $7.6 2% $7.6 2% $23.2 $23.2 3% 3% 2015 2015 $316.7 67% $7.6 2% GROUP $316.7 67% SALES $471.6M 2016 $15.4 3% $55.5 12% $55.5 12% $76.4 16% $69.2 10% $15.4 3% $201 $201 77% $55.5 77% 12% SALES SALES$76.4 16% $260.8M $260.8M OF REVENUE BYBY OF REVENUE $23.2 SEGMENT ($M) SEGMENT ($M) 3% $81.4 11% $15.4 3% GROUP SALES GROUP $260.8M GROUP DIVERSIFICATION OF REVENUE BY DIVERSIFICATION SEGMENT ($M) DIVERSIFICATION 16 $6.7 3% $316.7 67% GROUP GROUP SALES SALES $471.6M $471.6M 2016 2016 $495.4 69% AUSTRALIA GROUP SALES $717.2M $495.4 CHINA 69% $495.4 OTHER ASIA 69% BIOCEUTICALS OTHER GROUP SALES GROUP SALES $717.2M $717.2M AUSTRALIA AUSTRALIA CHINA CHINA OTHER ASIA OTHER ASIA BIOCEUTICALS OTHER BIOCEUTICALS OTHER 02 GROUP AND DIVISIONAL RESULTS GROUP AND DIVISIONAL RESULTS Group Sales for the year were $717.2 million (2015: $471.6 million), an increase of 52% compared with the prior year and our 14th consecutive year of sales growth. Sales in Australia, our heartland market, were up 56% compared to the prior year and were stimulated by a growing consumer demand for high quality, natural wellness products. We have launched new products and improved our service of retail customers while investing in our brand through integrated marketing activity. The Australian business continued to benefit from increased sales through Chinese tourists and entrepreneurs shopping in Australia and Chinese Australian consumers purchasing for relatives and friends and shipping to China. Excluding the impact of these sales, the Australian consumer business remains very healthy with sales up approximately 10%. By combining the contribution from these consumers with our in-country revenues from Asia, the Asian consumer accounts for almost 50% of Group sales. This demonstrates the growing demand for our brand outside Australia and highlights the importance of our Asia growth strategy. Increased sales to China have been supported by the Wholly Foreign-Owned Enterprise (WFOE) established in recent years. The opening of free trade zones in 2014 and further expansion across the current year has created a substantial opportunity for the company, especially as Blackmores is one of only a few companies in this category to secure a licence to directly trade within the zones. We are encouraged by the Australian Government’s commitment to improved trade relations within the Asian region, which we believe will continue to support further growth. Asia is a key region for Blackmores, providing an important platform to secure long-term profitable growth. Blackmores Asia achieved record sales, with full year sales up 54% to $129.4 million and EBIT up 79% to $14.9 million. In-country sales from Asia now comprise 18% of Group revenue. Blackmores Korea experienced sales challenge. This, coupled with the investment in Blackmores’ upcoming launch into Indonesia, resulted in a reduction in earnings for the ‘Other Asia’ segment compared to the prior year. Our growing revenue from Asia has helped create a natural hedge whereby the impact of changes to off-shore revenues as a result of foreign exchange fluctuations are partially offset by the procurement benefits to the Group. Our growing businesses in Asia have afforded the Group many scale benefits which have improved our operating efficiencies. We have grown our workforce considerably to support the growth, creating new jobs in Australia and Asia. Overall this has bolstered the returns we have delivered to our shareholders. BioCeuticals sales grew 25%, with strong growth in the practitioner-only range. This performance, combined with successful new product launches and a close management of the cost base, delivered EBIT growth of 9% on the prior year. This EBIT result includes the payment of incentives and profit share to BioCeuticals employees following their adoption of the Blackmores Enterprise Agreement. Excluding this, underlying BioCeuticals EBIT is up 28%. BioCeuticals represents approximately 10% of Group revenue. Blackmores New Zealand, Global Therapeutics and Blackmores’ proportion of our Nutritional Foods partnership with Bega are reported as part of the ‘Other’ segment. These businesses have contributed $23 million in sales, up from $15 million the prior year. BLACKMORES ANNUAL REPORT 2016 17