OPERATING + FINANCIAL REVIEW BLACKMORES ANNUAL REPORT 2016 BLACKMORES ANNUAL REPORT 2016 18 18 %% 60 60 50 50 40 40 30 30 20 20 10 10 0 0 12 12 13 13 14 14 15 15 16 16 %% 120 120 100 100 RETURN ONON SHAREHOLDERS’ EQUITY RETURN SHAREHOLDERS’ EQUITY 80 80 RETURN ONON ASSETS RETURN ASSETS 60 60 CASH CONVERSION CASH CONVERSION 40 40 GEARING GEARING 20 20 0 0 12 12 13 13 14 14 15 15 16 16 13 13 14 14 15 15 16 16 %% 60 60 50 50 40 40 30 30 20 20 10 10 0 0 12 12 SALES Significant growth across all divisions and brands in the Group delivering Group sales of $717 million, up 52% on the prior year 717 800 600 700 500 $MILLION 400 300 > 200 100 12 EBIT Earnings before interest and taxes of $145 million, up 101% on the prior year. 13 14 15 16 52% 145 150 120 $MILLION 90 60 12 13 14 15 > 30 16 101% DIVIDENDS PER SHARE Dividends of 410 cents per share more than doubled in the 12 months. 03 FINANCIAL 410 500 400 REVIEW CENTS 300 100 12 80 102% $MILLION 60 40 12 13 14 15 16 115% 400 300 .6 200 100 12 13 14 15 16 114.5% BLACKMORES ANNUAL REPORT 2016 580 CENTS 600 500 Earnings per share of 580.6 cents, up 114.5% on prior year. 16 100 100 20 EPS 15 > Net profit after tax (NPAT) to grow to $100 million, up 115% on the prior year. 14 > NPAT 13 > 200 GROUP FINANCIAL POSITION Total current assets increased by $107 million to $295 million, 57% up on the prior year. This reflects an increase in working capital commensurate with growth in the business with inventory increasing by $78 million to $116 million largely due to higher inventory levels to meet consumer demand. Current liabilities have increased from $115 million to $192 million reflecting both the increased inventory purchases, higher employee incentives and increased income tax obligations. Non-current liabilities have increased from $45 million to $61 million largely due to an increase in interest-bearing liabilities. Net debt remains low at $18 million but has increased marginally from the $7 million reported in the prior year. This increase includes $23 million of debt funding required to acquire Global Therapeutics. The business has continued to generate strong net operating cash flows at $83.7 million, 18% growth over the prior period. This was due to a strong trading performance, improved treasury capability offset by direct purchasing of raw materials to secure quality ingredients. The cash conversion ratio of 81% reflected a continued focus on operational effectiveness initiatives whilst the company built inventory levels, invested in packaging robotics and acquired Global Therapeutics. The Group gearing ratio at 9.1% remained low (2015: 5.1%) and net interest cover at 80.2 times (2015: 21.1 times) provides significant cover within our existing banking covenants even after the acquisition of Global Therapeutics. Equity increased from $133 million to $181 million, a $48 million increase due to growth in Group NPAT, reserves, retained earnings and our interest in PT Kalbe Blackmores Nutrition, our Indonesian joint venture. Group NPAT was $100.0 million (2015: $46.6 million) a 115% increase on the prior year and similarly Basic earnings per share (EPS) increased from 270.7 cents per share to 580.6 cents per share, an increase of 114.5%. Our focus on delivery of shareholder returns has resulted in industry leading return on assets at 39.9% and return on equity of 56.1% and highlights a continued trajectory of year on year improvement. 19