2.23 Cost of capital (40%)

• Calculate the company?s cost of equity using various methods (at least 2); showing your calculations and detailing the source of your data.
• Calculate the company?s cost of debt; showing your calculations and detailing your assumptions and the source of your data.
• Calculate the company cost of capital; showing your calculations.

healthy Blackmores Annual Report 2015 1 PIRLS contents Cover image Community commitment: Sarah Tait, Quality Compliance Officer - Distribution, and Scott Choi - Junior Legal Counsel, participate in Clean Up Day at Mona Vale Beach. The 53rd Annual General Meeting of the Company will be held at 11am on Thursday 29 October 2015 at the Blackmores Campus, 20 Jubilee Avenue, Warriewood NSW 2102. 01 Our Passion and our Values 03 About Blackmores 05 Chairman's Introduction 07 CEO's Year in Review 20\tCommunity 22 Healthy People, Healthy Planet 24 Executive Team 27 Five Year History 28 Directors' Profiles 31 Directors' Report 46 Auditor's Independence Declaration 47 Independent Auditor's Report 49 Directors' Declaration 50 Consolidated Financial Statements 89 Additional Information 90 Company Information Blackmores improves people's lives by delivering the world's best natural health solutions that become people's first choice in healthcare. We achieve this by translating our unrivalled heritage and knowledge into innovative, quality branded healthcare solutions that work. Passion for Natural Health Our enthusiasm and belief in a natural, holistic approach to health inspires us to excellence in everything we do. Integrity We are honest, trustworthy and committed to the highest standards of personal, professional and business behaviour. Respect We treat each other with fairness, dignity and compassion and we embrace diversity. Leadership As a company, in teams and as individuals, we use our wisdom, experience and knowledge to inspire and influence everyone to be their best. Social Responsibility Our actions demonstrate our care, respect and compassion for our people, the broader community and the environment. Blackmores Annual Report 2015 3 Blackmores Annual Report 2015 2 about ---- Blackmores is passionate about natural health and inspires people to take control of, and invest in, their health and wellbeing. We are leaders in developing and marketing products and services that deliver a more natural approach to health, based on our expertise in vitamins, minerals, herbs and nutrients. The Company operates in Australia, New Zealand and Asia and currently employs more than 900 people, with a head office and Campus based in Warriewood on Sydney's Northern Beaches. Blackmores became a publicly listed company in May 1985. Blackmores has been an industry leader in Australia for more than 80 years. The Company had its beginnings in the 1930s, thanks to the vision and passion of one man, Maurice Blackmore (1906-1977), an English immigrant whose ideas about health were ahead of their time. Maurice Blackmore's belief in the health-giving properties of herbs and minerals led him to develop a whole system of healthcare based on naturopathic principles. His views on natural health, preventative medicine, the environment and recycling were nothing short of radical in the 1930s, and his work Damon Brown, Fitter, keeps the Blackmores production lines running efficiently. opened the doors to new ways of treating illness and maximising health. Maurice Blackmore was also responsible for starting one of Australia's first health food stores in Brisbane in 1938 and worked with colleagues and friends to establish the first naturopathic colleges and professional associations in the country. His beliefs are still valid today and his teachings are incorporated into the training programs of many natural health practitioners. Leading the company since 1975, Maurice's son Marcus has furthered the vision established by his father. He has overseen the development of Blackmores and made it a world leader in dietary supplements. Blackmores' heritage and values are coupled with a commitment to superior business performance. Our strategic direction is focused on delivering growth and continuous improvement to maintain and enhance Blackmores' industry leadership position and achieve ongoing success for our company and our shareholders. 5 Blackmores Annual Report 2015 Blackmores Annual Report 2015 4 Chairman's Introduction ---- pressure on our ability to meet the increasing demand for our products. We are committed to maintaining our unrivalled quality standards and this has meant that some of our product lines have not been available in recent months. I'd like to express my sincere thanks to our suppliers for working with us to build our stock volumes whilst never compromising on quality. Our consumers have continued to show their trust in the Blackmores name and we owe it to them to ensure this trust is wellplaced. In the prior two years, our management team has been awarded minimal, if any, incentive payments because our remuneration policy is strongly aligned to shareholder outcomes and our profit growth threshold had not been achieved given numerous market challenges. By contrast this year, it gives me great pleasure to report that maximum incentive payments will be awarded to eligible staff reflecting the strong profit performance of the Group. Our greater team also has benefited from our profit share program whereby 10% of profits are shared amongst staff, which this year was the equivalent of six weeks I was sent this picture of Blackmores' Quality Sourcing Manager overseeing a sustainable harvesting program in Antarctica recently. He's standing in front of an awe-inspiring ice mass. Icebergs are often used in business metaphors because 90% of an iceberg is beneath the surface. When I reflect on the year that has been, I see results generated from initiatives that have been seeded over the last five years, not all of them visible, and together supporting a greater structure. I am enormously proud of the Blackmores team, led by our inspiring CEO Christine Holgate, for having the resilience to persist with the delivery of our business strategy despite the market challenges of recent years; and to have the vision to position our Group to realise opportunities in the past year. Christine and the team have had the support and guidance of my fellow Board members who bring diverse talents and experience from a breadth of industries. I warmly welcome John Armstrong as a Non-Executive Director. We have already benefited from his knowledge of operating in the Asia region and his considerable financial acumen. The Blackmores Group's strategic focus on retaining market leadership in Australia, diversifying our revenue streams through the growth of Blackmores in Asia and recognising the role of innovation and research through our continued investment in BioCeuticals and the Blackmores Institute have been the pillars supporting our recent success. The rapid growth trajectory has not been without its challenges, putting Marcus Blackmore AM, Chairman of the Board. INSET - Wes Ipsen, Quality Sourcing Manager, oversees a sustainable harvesting program in Antarctica. additional pay. At Blackmores, we've always been pleased to see staff ownership of shares in our company, in fact 10 of our top 30 shareholders are current or past employees. I'm pleased to see them benefit from the company they have helped build. Like the iceberg, there is the performance you can see: record sales, profit, share price, 170 new products and range extensions, more advertising and promotion and a growing presence in the Asia region. And some of our greatest achievements are not so visible: the tireless pursuit of quality, the countless hours of our team of 900 staff overcoming daily challenges and dedicated to meeting the needs of our retailers and consumers, and committed to upholding our values every single day without compromise. They are there, and they are bigger than you'll ever see. The best of health Marcus C. Blackmore AM Chairman 7 Blackmores Annual Report 2015 Blackmores Annual Report 2015 6 CEO's year in review ---- Dear Shareholder, Having recently celebrated the 30th year of Blackmores as an Australian publicly listed company, I am very proud to share our full year performance with you - a record sales and profit result for the Group and the highest ever returns for our shareholders. Group sales of $471.6 million were 36% up on the prior year which delivered a $46.6 million profit, an increase of 83% on the prior year's profit. The solid financial results enabled us to continue to improve our balance sheet with strong cash flows delivering low debt. As the leader of this team, I am particularly proud that our growth came from all regions and brands. Twelve months ago we were reporting pleasing momentum, which continued to build as the year progressed. The benefits were further bolstered by operational efficiencies and improvements to the Group's cost base, by leveraging our increased volumes and optimising our Warriewood Campus facility. The higher sales were the culmination of a number of programs we had put in place over recent years including reinvigorating our Australian business, establishing an enterprise in China, investing in our quality and research programs and identifying a strong brand proposition that is supported by a higher level of marketing across the Group. Consumers, both in Australia and Asia, have a clear preference for high quality products with proven efficacy. Supported by improved trade relations between Australia and several markets in Asia, demand for Blackmores products grew as our marketing message resonated with customers locally. Our unprecedented levels of growth (including a 50% sales uplift in the second half) have created supply challenges. Our principal concern has been addressing the needs of our Australian Christine Holgate, Chief Executive Officer with Independent Directors, Helen Nash and John Armstrong. consumers who have loyally supported the Blackmores brand for so many years. We have increased our supply significantly, whilst remaining focused on maintaining our unrivalled quality and commitment to sustainability. Our continued focus has been aligned to the four strategic priorities we committed to deliver at the start of the financial year: Support Blackmores Australia to build our brand and return the business to profitable growth \tInvest in BioCeuticals, Blackmores Asia and Pure Animal Wellbeing to continue to diversify our business and build new sources of growth Build our product leadership position through the valued research and knowledge within Blackmores Institute and a program of product range innovation Continue to improve operational effectiveness and transform our cost profile Financial and Operational Highlights Group Sales of $471.6 million, up 36% on the previous year Record net profit after tax of $46.6 million, up 83% on the previous year 170 new product launches and range extensions Seventh consecutive year as Most Trusted Brand* in our category Net debt decreased by 87% to $7.1 million Almost doubled operating cash flow Net assets per share increased by 38% to $5.27 Earnings per share of 270.7cents, up 81.4% * Reader's Digest Most Trusted Brand Survey net profit after tax 500 $ Millions $ Millions SALES 9 400 Blackmores Annual Report 2015 Blackmores Annual Report 2015 8 50 40 300 30 200 20 100 10 0 FY 11 0 12 13 14 15 FY 11 12 13 14 15 Group revenue for the year of $471.6 million represented growth of 36% on last year's result. Group Net Profit after Tax (NPAT) of $46.6 million for the year represents growth of 83% on last year's reported profit. Supporting our Australian and New Zealand retail businesses and building our consumer brand Pleasingly Blackmores Australia grew its profitability by 88%. Sales in Australia were up 43% to $317.4 million. This was achieved with double digit underlying growth across all sales channels including community pharmacy. We worked to deepen our relationships with retailers and to support consumer pull-through with more than 20% increased investment in integrated brand activity. The Australian sales result was further boosted by increased sales to Chinese consumers and entrepreneurs through Australian retailers. The profitability of our Australian business benefited from our ability to leverage the scale of our growing Group as a result of the success of our export sales. The Blackmores Sydney Running Festival attracted more than 33,000 participants from over 60 countries and raised nearly $1 million for charities. Blackmores Yoga was another successful participation event and offered free yoga as part of a greater brand experience. Blackmores' website was upgraded with a refreshed design and improved functionality to enhance consumer engagement and make it easier to navigate products online. Almost one million consumers are connected to Blackmores through the Group's various social media and online platforms. Blackmores New Zealand achieved sales growth of 13%, its strongest result since Blackmores has been in the New Zealand market. Investing to Grow - Blackmores Asia, BioCeuticals, Pure Animal Wellbeing Blackmores Asia Asia is a key region for Blackmores, providing an important platform to secure profitable growth, an opportunity to better leverage our capital investments, and provide sources of alternative currencies which enable a natural hedge against the cost of raw materials that are sourced from all over the world. The increased scale, resulting from growth in Asia, has improved the profitability of our Australian business with better protection from fluctuations in the Australian dollar, improved recoveries, and has enabled the creation of more than 100 new roles for employees in Australia. This success is the result of a long-term strategy that began 35 years ago when Blackmores started exporting to the region. The overall contribution from Asia is significant and growing, despite continued challenges in Thailand. Asia sales were up 26% for the year to $84.0 million, which is double that of five years ago. Earnings before interest and taxes (EBIT) from Asia were up 82% to $8.3 million. Blackmores Malaysia sales were up 10%, and EBIT was up 22% to $3.3 million. Thailand continues to be impacted by a soft market with sales down 7% and EBIT down 27%. However, Thailand remains profitable, contributing $6.3 million to Group earnings. We have strong local leadership and Nathan Cheong and Keith Dunne train for the Big Red Run, a series of five marathons through the Simpson Desert to raise funds to help find a cure for Type 1 Diabetes. an experienced team and are optimistic about our future prospects. Our smaller markets in the region, Korea, Singapore and Hong Kong, have all delivered pleasing sales results and are growing. Our headquarters in Asia, based in Singapore, is now fully operational. Having a regional base offers improved proximity to our Asian markets, as well as the resources and infrastructure to operate more effectively. Singapore is recognised as a research and development hub giving us access to expertise and infrastructure including a strong talent pool of management personnel proficient in numerous languages and with the necessary skills and experience in the region. We have access to various government bodies which is important given the strict regulations we operate within our Asia markets. Sales to China have multiplied. Supported by the Wholly ForeignOwned Enterprise (WFOE) established the prior year. The opening of free trade zones net debt 200 175 earnings per share 75 cents 225 $ millions CENTS dividends 11 60 Blackmores Annual Report 2015 Blackmores Annual Report 2015 10 300 250 45 200 150 30 125 0 75 FY 11 150 15 100 12 13 14 15 Including this year's final dividend of 135 cents per share, total ordinary dividends for the year were 203 cents per share (fully franked). This represents a 60% increase over last year's total ordinary dividends of 127 cents per share. FY 11 100 12 13 14 15 The Group's net debt level was $7.1 million at 30 June 2015. This is compared to $54.4 million in the prior year. Gearing, as measured by Net Debt / (Net Debt + Shareholders' Equity) was 5.1%, compared to 34.3% last year. FY 11 12 13 14 15 Earnings per share increased by 81.5% to 270.7cents. PAW veterinarian Charmaine Tham uses a hands-on approach when developing animal health products. in 2014 created a substantial opportunity, especially as Blackmores was one of only a few companies in this category to secure a licence to directly trade within the zone. There are a growing number of Chinese consumers shopping for our products through Australian retailers given the high level of demand for our products in China. Adding in the estimated sales to China through Australian retailers, the value of Asian consumers to Group sales is approximately $150 million for the year. Blackmores has a growing fan base of consumers in China, the most influential of those is Chinese tennis legend Li Na. In April, Li Na was announced as a Blackmores brand ambassador, she will feature in advertising campaigns and will partner with us on health and nutrition initiatives. Li Na has been recognised in Time Magazine's list of the most influential people in the world. BioCeuticals BioCeuticals achieved an 18% increase in sales, compared to prior corresponding period, delivering $55 million. When Blackmores acquired this company in 2012, we had expected to reach this target by 2017. This performance validates the strong fit for this company in our Group and is the result of a successful pipeline of innovative new products and a talented team. Three years ago shareholders supported our decision to acquire this business which was fully debt funded. I'm pleased to report that every cent borrowed for this has now been repaid. The BioCeuticals team has not only grown its top line, it has made an impressive contribution to our Group earnings and profitability has almost doubled since acquisition. BioCeuticals has continued to lead with product innovation such as the launch of the first listed vitamin K2 product sold in Australia, UB 500 - the strongest probiotic on the market, and UltraClean 85 - the most concentrated fish oil and the only one with sustainability certified by the Marine Stewardship Council. BioCeuticals Theracurmin continues to be well received by doctors and other health care professionals and is supported by a growing body of evidence. The BioCeuticals Research Symposium held in the year attracted more than 350 health care professionals for a three-day conference and masterclass series. It reflected the position of the practitioner-only brand as a thought leader in evidence -based integrative medicine with overwhelmingly positive participant feedback and delivery of a high quality of education. Blackmores Animal Health Pure Animal Wellbeing (PAW) sales increased by 32% to $5.2 million. The range is developed by veterinarians with specialised expertise in natural healthcare and based on the strong research and education focus of the broader Blackmores Group. The Animal Health team has developed an education program including a podcast series, which has been instrumental in helping it secure a leadership position in the natural animal health category. The Animal Health division was honoured to receive two Australian Business Awards in recent weeks including commendation for Product Innovation and as an Employer of Choice. Building our Product and Research Leadership Position Blackmores Institute Blackmores Institute held research and education symposia in Australia, New Zealand and Malaysia, offering delegates access to thought-leaders in integrative medicine. The announcement of the Maurice Blackmore Chair 02 03 01 12 04 05 13 06 10 07 11 14 15 08 09 16 17 1. Jos Delavega, Blackmores Gym Supervisor 2. Lauren McConnell, Human Resources Coordinator 3. One of Blackmores' best-selling products, Omega Daily 4. Evangaline Manhuyod, Distribution Operator 5. Pito Hatherly, Caf Staff; Scott Choi, Junior Legal Counsel; Jackie Smiles, Environment & Sustainability Manager 6. Danielle Steedman, Advisory Naturopath 7. Amanda Judge, Employee Communications Manager 8. Michael Elvidge, National Business Manager - PAW 9. Agus Susilo, Line Warden 10. Pito Hatherly in the Blackmores staff gym 11. Ivy Wen, Quality Associate 12. David Tuffin, National Field Sales Manager 13. Helen Nash, Brent Wallace (centre) and John Armstrong, Independent Directors 14. Multi-Action + Omega packaged for Korea 15. Ailsa Reynolds, Quality Technician 16. Paul Brazel, Distribution Operator 17. Leah Boonthanom, Corporate Communications Executive 13 Blackmores Annual Report 2015 Blackmores Annual Report 2015 12 Neal Mercado, Director of Research & Development for BioCeuticals, and his team developed over 50 new products for BioCeuticals and IsoWhey. of Integrative Medicine at the Sydney Medical School, University of Sydney honoured the legacy of our founder and reflected the growing interest in complementary medicine and its integration with other treatment modalities. In an Australian-first, Blackmores collaborated with Griffith University to launch an independent accredited short course in evidencebased integrative medicine for pharmacists and other healthcare professionals. In 2015, Blackmores trained more than 25,000 health care professionals with independently accredited education courses in complementary medicine. The Blackmores Group has more than 25 active clinical trials underway and is strongly committed to leading with reputable research and education. Improving our Operational Effectiveness Our new operating model, with a central function servicing the operational needs of all business divisions, has delivered significant financial and operational benefits to all business units. It has improved our buying power and enables us to secure improved returns from our facility at Warriewood. Blackmores' Operations have been adapting to the increased sales rate. We produced a record 35 million units at the Blackmores Campus over the year and shipped them to 25,000 points of distribution. Though the higher volumes have challenged us with some lines out of stock, they have improved recoveries of fixed costs and have continued to benefit our cost of goods, which can been seen in our strong earnings before interest and tax (EBIT). The Group has considerably improved financial health, which can be seen in the strength of our balance sheet. Net debt is down from $54.4 million to $7.1 million, an 87% improvement. Interest costs are down by $1.3 million, which is 29% lower than prior year. Our interest cover at 21.1 times is up considerably, from 8.2 times in the prior year. We have almost doubled our operating cash flow. Several years ago, shareholders noted our dependency on the Blackmores Australian business and supported a move to diversify our revenue base. Today, over 40% of our sales are generated from outside our core Australian consumer business. Furthermore, we are proud that this core business has continued to grow and remains the heart of the Blackmores Group. Dividends The Board has declared a final dividend of 135 cents per share (fully franked), taking total dividends for the year to 203 cents (up 60% compared to last year). The dividend is payable on 22 September. The record half year and full year dividends reward shareholders who have supported our strategy and shared our confidence in the future prospects of the Blackmores Group. Commitment to a richly diverse workforce Blackmores now employs around 900 people across the Group, with more than 400 sales and marketing employees in Asia. We celebrate and value the importance of diversity in our workforce. Our commitment to creating a flexible working environment and recruiting on the basis of talent has resulted in a richly diverse workplace with a blend of skills, experience and perspective from individuals, irrespective of culture, gender or age. \tMore than 80% of Blackmores staff in the Group are female \tMore than half of our staff have Asian origins, and more than 25 languages are spoken 20% of staff based in Australia are part-time workers, many of whom balance work and family commitments One in five of our staff have a healthcare qualification In summary Of our numerous achievements this year, the one that has been the most valued is the 92% vote of commitment to the organisation noted in our staff climate survey. It reflects our passionate, driven and engaged team, who have worked tirelessly throughout this year. I thank them for their energy and professionalism as they lived our values. This has been a year of big milestones for our company. Not least of those were the 30th year anniversary of Blackmores' public listing on the ASX and the 70th birthday of Marcus Blackmore. Marcus continues to be an inspirational business leader, a passionate advocate for our industry and a generous benefactor of many social causes. He is led by his values, commitment to learning and his sense of purpose, and it is with that spirit the Blackmores team will approach the coming year. Outlook We are pleased with our full year performance, the strong financial results and the momentum in the organisation. However, we are mindful of the challenges including the need to satisfy our consumers as we manage supply to meet the growing demand for our products, and experience shortages in raw materials that meet our high quality standards. We remain focused on the delivery of our strategic priorities for the coming year: Deepening our relationship with consumers, improving our connectivity to customers and expanding our digital presence \tInvesting in growth in Asia and continuing to tailor our products and services to meet the demands of our Asian consumers Leveraging the knowledge within the Blackmores Institute and BioCeuticals to drive product leadership and innovation and be the authoritative voice of natural health Striving to continuously improve our operational effectiveness The Board has continued confidence in our strategy, in the capability of our team and in the strength of the brands within the Group, and we are committed to growing this business and delivering improved shareholder returns in the coming year. Thank you for your support of Blackmores. Christine Holgate Chief Executive Officer Blackmores Annual Report 2015 15 Blackmores Annual Report 2015 14 Blackmores Annual Report 2015 $46.6M net profit after taX 83% we've grown... 2014-15 has been a year of strong sales and success from all regions and brands. 36% increase in group sales for the year $471.6m Achieved $1.5 Billion market value ------- 170 new products and range extensions launched $150m EST. sales contribution of asian consumers to the group 100 38% increase in net tangible assets per share to $5.27 81% increase in earnings per share New roles in the Blackmores group 17 Blackmores Annual Report 2015 16 Blackmores Annual Report 2015 Blackmores Annual Report 2015 19 18 new products and range extensions across the group 170 ---- 21 The Blackmores Group proudly supported the following organisations, individuals and wellbeing initiatives in the 2014/15 year: Community Blackmores proudly sponsors Australian Para Canoe Sprinter Sam Bloom (foreground) and other inspirational athletes. Health Arthritis New Zealand Australian Himalayan Foundation Big Red Run Cancer Council Childline Thailand Chris O'Brien Lifehouse Cure Brain Cancer Foundation Diabetes Malaysia \tHeart Research Institute \tMacular Disease Foundation Australia \tMacular Degeneration New Zealand \tMindd Foundation \tNational Cancer Society Malaysia Quest for Life Foundation Sarah Tait and Chantelle Knapman participate in Clean Up Day at Mona Vale Beach as part of Blackmores' environmental commitment to the local community. The Blackmores Sydney Running Festival 2014 attracted more than 33,000 participants from over 60 countries and raised almost $1 million for charity. Blackmores also held over 26 free yoga classes across Australia with more than 1,000 registrations. Community \tMC38 Sailing Regatta \tYachting Australia Bilgola Big Swim Bilgola Surf Life Saving Club Business Chicks Collingwood Football Club FoodBank \tHolly Wawn, surfer \tMat Belcher & Will Ryan, Olympians Oxfam \tPeople's Association and Project We Care Management Committee, Singapore \tRSPCA Sam Bloom, Para Canoe Sprinter \tPrograms for underprivileged children supported by Blackmores Malaysia and Blackmores Sungapore Environment Clean Up Day \tGhostNets Australia \tNational University of Singapore (tree planting project) \tWorld Wildlife Fund Staff rolled up their sleeves to help renovate the Quest for Life retreat at Bundanoon in NSW, as well as coordinating numerous fundraising initiatives such as BBQ breakfasts and cupcake days to benefit local organisations and colleagues in need. Matched donations Employees are encouraged to participate in a charitable scheme whereby a percentage of their taxable pay is deducted each payday and placed in an interestbearing trust account. The Company matches this and twice yearly each participating employee nominates a registered charity to receive the donation. Blackmores Annual Report 2015 Blackmores Annual Report 2015 20 23 Healthy people, healthy planet ---- Blackmores has a strong commitment to environmental sustainability stemming from the vision of founder, Maurice Blackmore, who had views on recycling that were ahead of his time. Maurice Blackmore understood the link between healthy people and a healthy planet, which is still core to who we are today. Once again, Blackmores received the 'High Achiever' accolade by the Australian Packaging Covenant (APC) for reducing the environmental impact of packaging. As a founding signatory to the APC, Blackmores actively explores ways to reduce the environmental impact of product packaging, increase recycling rates and develop innovative sustainable packaging solutions. The Australian Packaging Covenant is a sustainable packaging initiative that aims to change the culture of business. It is an agreement between government, industry and community groups to find and fund solutions to address packaging sustainability issues. A significant achievement for Blackmores in 2014 was the introduction of the 'closed loop' process for bulk deliveries into the packaging facility at Warriewood. This process removed inbound cardboard and plastic waste, reduced handling time and waste removal costs, and increased operational efficiencies. Twelve months on we are pleased to report that this process has resulted in the removal of nearly four times what we set out to achieve. Innovative new packaging The introduction of recyclable amber polypropylene packs for larger bottles of capsules and tablets is a great example of how Blackmores strives to extend innovation beyond product formulation. This year we proudly received three Australian Design Awards and a prestigious WorldStar Award for packaging excellence. Our Quality team has full visibility over the composition of materials to ensure the packs are free of toxic chemicals (e.g. plasticisers, mercury and BPA) that can leach out of other packaging materials. The anti-tamper closure ring on the lid was designed to prevent it from separating from the bottle, which is a common threat to wildlife. Sustainable supply chains Blackmores has partnerships with several stewards in sustainability including the World Wildlife Fund (WWF), Marine Stewardship Council (MSC) and Antarctic Wildlife Research Fund (AWR). Our krill oil products are certified as sustainable and we are progressing toward achieving a certification for our fish oil products. These huge projects involve ongoing dialogue, engagement and change management with suppliers all over the world. The WWF considers MSC to be the most credible certification recognising sustainable fisheries management. Blackmores sources only MSC certified krill and our entire krill supply chain, over which we have full transparency from catch to capsule, has been audited and certified by MSC to ensure complete traceability and integrity. We have also sent our own sourcing manager to observe the catch firsthand and ensure we are comfortable that it is fished within the Commission for the Conservation of Antarctic Marine Living Resources framework. Through our AWR partnership, Blackmores supports research on the Antarctic ecosystem to help improve the management of the Antarctic krill fishery. Consumers can be assured of our product quality and commitment to environmental sustainability. Ghost Nets Blackmores continued its partnership with WWF to support a conservation project called Ghost Nets. Marine debris enters the northern coastal regions of Australia from South East Asia during the monsoonal seasons. Spanning three to six kilometres in length, these 'Ghost Nets', or discarded fishing nets, threaten coastal and marine ecosystems that are integral to the indigenous communities who depend upon them. Blackmores' support is focused on initiatives to prevent this issue and further raise awareness through a travelling art exhibition featuring pieces made from recycled waste. We are proud to support a local project that helps ensure our unique environment can be shared by future generations. Sustainability in the Community Blackmores recognises that sustainability starts at home with the local community. Staff volunteers once again participated in the APC 'Business Clean Up Day', picking up rubbish ranging from discarded flippers to old chip packets at Mona Vale Beach and surrounding parklands. Our 'Buy, Swap, Sell Day' gave staff the opportunity to turn one person's junk into another person's treasure. On Campus we host permanent onsite collection points where staff can deposit their end-oflife batteries, mobile phones and accessories for recycling. Laptops are donated to selected charities throughout the year. Our Sustainable Seafood Day, held to coincide with Clean Oceans Day, showcased sustainable seafood dishes at our staff caf and provided education on making sustainable seafood choices at the supermarket. Blackmores also participated in the worldwide Earth Hour - excitingly managing to turn off the lights on a krill harvesting vessel in the Southern Oceans of Antarctica! Blackmores Campus The Blackmores Campus at Warriewood on Sydney's Northern Beaches is designed to reflect the Company values and embodies our commitment to environmental sustainability. The installation of one of Australia's first gas-fired tri-generation plants provides most of the building's energy needs, including electrical, heating and cooling. Water from the pond located at the main entrance assists in the building cooling system. Solar chimneys facilitate ventilation and create a natural working environment. A syphonic rainwater collection provides selfsufficiency for our landscaped gardens. Stormwater is controlled by urban design practices on site before reaching local creeks and water bodies. Additionally, the Campus utilises environmentallyfriendly, low-volatile and low-emission furnishings including carpets, paints and furniture. Blackmores Annual Report 2015 Blackmores Annual Report 2015 22 AWARDS ---- Best in Class Australian Business Awards - Employer of Choice (Blackmores Animal Health) Canstar Blue for Most Satisfied Customers, Multivitamins in Australia Brand Laureate for Nutraceutical Man of the Year - Marcus Blackmore, in Malaysia Brand Laureate for Best Brand in Wellness - Natural Health Solutions, in Malaysia \tInfluential Brands Award for Top Brand, Health Supplement in Singapore \tReaders Digest Most Trusted Brand for Vitamins/Health Supplements in Australia, Malaysia, Singapore and New Zealand (Highly Commended) Superbrand of the Year in Thailand and Malaysia Business, Export, Product Arthritis New Zealand Business Development Award Australian Business Awards - Winner for Product Excellence (Blackmores Animal Health) \tHong Kong Australia Business Association Business Excellence Award \tNSW Export Award - Health & Pharmaceutical Science (Finalist) \tNSW Export Award - Highly Recommended Certificate \tNutraIngredients Finished Product of the Year - Immune (Finalist) for Blackmores Kids vitamin C + zinc gummies Environmental/Packaging AusCham Westpac Australia China Business Award for Sustainability and Social Impact Australian Packaging Design Awards o\tGold for health and beauty o Silver for accessibility o Bronze for innovation and emerging technologies Australian Packaging Covenant award for Sustainability in Medium Pharmacy & Personal Care \tNSW Business Chamber - North Eastern Sydney Business Award for Excellence in Sustainability \tWorldStar Award for Packaging Excellence Pharmacy & Beauty API Pharmacist Advice Store Support Award Complementary Medicines Australia award for Most Outstanding Contribution to the Industry Cosmo Kiss Beauty Award in Thailand \tInstyle Best Beauty Buys Award in Thailand \tNational Pharmacies Supplier Award for Best Retail Supplier (>$1M in purchases) \tPriceline Pinky Award for Most Trusted General Wellbeing Brand \tWatsons' Health, Wellness, Beauty Award for Bestselling Vitamin C Product (Blackmores Bio C) in Thailand 25 executive team 01 ---- 01 03 03 05 Chief Executive Officer & Managing Director Christine has 30 years of international sales and marketing experience in highly regulated industries, including telecommunications, finance, media and healthcare. Christine was appointed to her current role as Chief Executive Officer by the Board in November 2008. She has held numerous board and senior management positions, working in Europe, Asia, the Americas and Australia. Christine's prime responsibilities have been leading teams through significant change, growth and start-up. Christine has three postgraduate diplomas in Management, Marketing, and Purchasing and Supply; and a Master's Degree in Business Administration (MBA). Christine is also a Non-Executive Director for Ten Network Holdings Limited. Christine was awarded the 2011 (inaugural) International Executive Study Scholarship by Chief Executive Women and the Women's Leadership Institute Australia, and was honoured with the Rotary Paul Harris Award in 2013. Managing Director, Australia & NZ David brings over 20 years of retail experience and a deep understanding of both grocery and smaller retail customers to Blackmores. With an emphasis on business transformation and leadership, David combines his commercial acumen to set strong strategic foundations with his ability to attract, motivate and lead teams, to achieve exceptional operational results. David has held key leadership positions in Tesco in Europe and Safeway in the UK. Here in Australia he led Red Group, a chain of book and stationery stores. More recently David has worked with leadership teams from a diverse range of brands including Jenny Craig, Ecco Shoes, Metallicus and Review. Managing Director, Asia Peter is responsible for Blackmores' Asia business including nine Asian subsidiary companies in Taiwan, Hong Kong, Singapore, Malaysia, Thailand, Korea, and China; distribution partnerships in Macau, Cambodia and Vietnam; and overall strategy for Blackmores' growth objectives in Asia. Prior to joining Blackmores, Peter was one of Australia's most senior trade diplomats working with the Australian Trade Commission in China, Taiwan, and Hong Kong. Peter also spent several years in Fiji as the Trade & Investment Director of the South Pacific Forum Secretariat and served as the South Pacific Expert Adviser on trade development to the UN Conference on Trade and Development and the UN Commission for Sustainable Development. Peter has lived and worked in Asia for over 25 years and speaks Mandarin-Chinese. Christine Holgate 02 04 02 Richard Henfrey 05 06 07 08 Chief Operating Officer Richard Henfrey has over 25 years of experience in strategic and business development roles in a wide range of blue chip, start up and strategy consulting businesses in Europe, North America and Australia, including key leadership positions with Telstra. Much of his career has focused on developing and implementing new businesses or change initiatives that create significant new value. Richard joined Blackmores as Director of People and Strategy in 2009 and since 2011 he has been leading Blackmores' Strategic Sourcing division. He was appointed Chief Operating Officer in 2014. Richard is also the Board President of the industry association, Complementary Medicines Australia. He leads a positive approach to engagement with regulators and governments for greater recognition of complementary medicines in the development of health policy and regulatory regime. David Fenlon 04 Nathan Cheong Managing Director, BioCeuticals With over 14 years' experience in the complementary medicine industry, Nathan first joined BioCeuticals in September 2012 as Director of Sales & Marketing, moving into the Managing Director role earlier this year. Prior to this, Nathan was General Manager of Herbs of Gold, a subsidiary of Vita Life Science. Nathan is a qualified Naturopath and Herbalist, holding degrees in Health Science, Science and Social Work, and graduating with majors in Biochemistry and Psychology. He currently sits on Complementary Medicines Australia's Complaints Resolution Panel and Practitioner Medicine Technical Committee. Nathan is a member of the Australian Institute of Company Directors and Australian Institute of Management. Peter Osborne 06 Cecile Cooper Company Secretary & Director of Corporate Affairs Cecile is an accountant and company secretary with over 30 years of commercial experience. She is responsible for Blackmores' board administration, secretariat, governance, risk management, compliance and corporate communications initiatives. She has held a variety of senior positions at Blackmores including business manager for development, marketing and sales. Her financial roles at Blackmores have included statutory and management accounting and taxation compliance in the Australian and overseas operations. She is a Chartered Secretary and a Certified Practicing Accountant and holds a Bachelor of Business (Accounting) and a Graduate Diploma of Applied Corporate Governance with the Governance Institute of Australia. She is a graduate of the Australian Institute of Company Directors. In addition, Cecile is the Chair of Community Care (Northern Beaches) Limited and serves on the Governance Institute of Australia's Legislation Review Committee. 07 Aaron Canning Chief Financial Officer Aaron joined Blackmores in December 2014 and brings with him a wealth of general management and financial leadership experience. He has worked in Asia, Australia, New Zealand, UK and USA for a variety of ASX-listed and multinational organisations including Goodman Fielder, Westfield and Diageo Plc. His most recent experience was with Goodman Fielder as the Managing Director of Grocery Category; prior to this he was the Managing Director Asia Pacific and Finance Director Asia Pacific. Aaron has a Bachelor of Commerce degree in Marketing and Management and a Postgraduate Honours degree in Management (First Class) from Otago University in New Zealand. He is a qualified Accountant, Fellow of the Association of Chartered Certified Accountants, and a member of Australian Institute of Company Directors. 08 Dr Lesley Braun Director, Blackmores Institute Lesley is an Adjunct Associate Professor of Integrative Medicine at the National Institute of Complementary Medicine and an Adjunct Senior Research Fellow at the Monash/Alfred Psychiatric Research Centre. She has also held positions at The Alfred Hospital as a Research Pharmacist and is a member of key industry groups including the Australian Therapeutic Goods Advisory Council, the informal working party for complementary medicine regulation reform (TGA), the Advisory Committee for the Australasian Integrative Medicine Association and on the executive for the complementary and integrative therapies group within COSA. Lesley co-authored the best-selling textbook 'Herbs and Natural Supplements - an evidence based guide', is founding editor-in-chief of the journal 'Advances in Integrative Medicine', and is a regular columnist for the Australian Journal of Pharmacy. She regularly presents at national and international conferences about integrative medicine in addition to undertaking her own complementary medicine research projects. Blackmores Annual Report 2015 Blackmores Annual Report 2015 24 5 26 27 Blackmores Annual Report 2015 Blackmores Annual Report 2015 year history ---- $'000 2015\t2014\t2013\t2012\t2011 Sales1 Earnings before interest, tax, depreciation and amortisation (EBITDA) Depreciation and amortisation Earnings before interest and tax (EBIT) Net interest expense Profit before tax Income tax expense Profit for the year Financial report ---- 27 28 31 35 46 47 49 50 51 52 53 54 89 90 Five Year History Directors' Profiles Directors' Report Remuneration Report Auditor's Independence Declaration Independent Auditor's Report Directors' Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Financial Statements Additional Information Company Information 471,615 346,760 326,603 260,832 234,423 78,655 6,391 72,264 3,432 68,832 22,276 46,556 46,055 6,266 39,789 4,826 34,963 9,534 25,429 44,692 5,989 38,703 4,752 33,951 8,975 24,976 46,879 4,922 41,957 2,761 39,196 11,390 27,806 46,587 4,529 42,058 2,736 39,322 12,017 27,305 Net debt Shareholders' equity Total assets Current assets Current liabilities Net tangible assets 7,069 132,915 293,407 187,844 114,998 90,809 54,401 104,226 236,594 131,376 58,040 65,185 69,043 98,051 231,477 124,030 45,035 58,860 33,040 86,166 174,771 99,993 42,024 79,629 29,832 79,112 153,130 78,521 33,207 74,108 Net operating cash flows 71,127 37,491 22,014 20,846 21,635 Number of shares on issue ('000s) 17,224 17,113 16,972 16,780 16,744 Earnings per share (EPS) - basic (cents) 270.7 149.2 147.9 165.8 163.2 Ordinary dividends per share (cents) 203.0 127.0 127.0 127.0 124.0 Share price at 30 June $75.27 $27.20 $26.94 $26.25 $26.70 Net tangible assets per share $5.27 $3.81 $3.47 $4.75 $4.43 Return on shareholders' equity2 35.0%\t24.4%\t25.5%\t32.3%\t34.5% Return on assets3 27.3%\t17.0%\t19.1%\t25.6%\t27.4% Dividend payout ratio 75.0%\t85.1%\t85.9%\t76.6%\t76.0% Gearing ratio4 5.1%\t34.3%\t41.3%\t27.7%\t27.4% EBIT to sales 15.3%\t11.5%\t11.9%\t16.1%\t17.9% Effective tax rate 32.4%\t27.3%\t26.4%\t29.1%\t30.6% Current assets to current liabilities (times) 1.63 2.25 2.75 2.38 2.36 Net interest cover (times) 21.1 8.2 8.1 15.2 15.4 Gross interest cover (times) 18.8 7.7 7.9 14.3 14.5 % change on prior year Sales 36.0% 6.2%\t25.2%\t11.3% 9.1% EBITDA 70.8% 3.1%\t(4.7%)\t0.6% 13.1% EBIT 81.6% 2.8% (7.8%) (0.2%)\t13.5% Profit for the year 83.1% 1.8%\t(10.2%) 1.8% 12.4% EPS 81.4% 0.9%\t(10.8%) 1.6% 11.2% Ordinary dividends per share 60.0%\t0.0%\t0.0%\t2.4% 10.7% 1.\tRepresents revenue from the sale of goods and excludes other revenue items. 2.\tCalculated as net profit after tax divided by closing shareholders' equity. 3.\tCalculated as EBIT divided by average total assets. 4.\tGearing ratio is calculated as net debt divided by the sum of net debt and shareholders' equity. 29 Directors' profiles Blackmores Annual Report 2015 Blackmores Annual Report 2015 28 ---- 01 03 05 07 ND, MAICD, D Univ 01 BCOMM, MBA, CA, FAICD BA (HONS), GAICD B BUS, MBA, CPA, MAICD Marcus C Blackmore AM Chairman of the Board Executive Director Mr Blackmore has served on the Board since October 1973 and is the Chairman of the Company. He is also an Honorary Doctor of Southern Cross University, a Director of the Young Endeavour Youth Scheme, National Chair of the Defence Reserves Support Council, an honorary trustee of the Committee for the Economic Development of Australia (CEDA), an Alumnus of Harvard Business School, and an Honorary Fellow of the Heart Research Institute. 02 Christine Holgate 02 03 04 05 06 07 Chief Executive Officer and Managing Director Ms Holgate was appointed to her current role by the Board in November 2008 and has over 30 years of international sales and marketing experience in highly regulated industries, including telecommunications, finance, media and healthcare. She has held numerous board and senior management positions, working in Europe, Asia, the Americas and Australia. Ms Holgate's prime responsibilities have been leading teams through significant change, growth and start-up. Ms Holgate has three post graduate diplomas in Management, Marketing, and Purchasing and Supply and a Masters Degree in Business Administration (MBA). Ms Holgate is a Non-Executive Director of Ten Network Holdings Limited (since 2010). She was previously a Director of KeyCorp Limited. Stephen Chapman Deputy Chairman, Chair of the Nominations Committee and Lead Independent Director Mr Chapman is an investment banker and joined the Board in September 1993. He is a founder and the Executive Chairman of Baron Partners Limited, an Australian investment bank. He is an independent Chairman of E Trade Australia Limited and is an independent Director of ANZ Wealth Group. 04 Brent W Wallace BCOMM (MARKETING), FAICD Chair of the Audit and Risk Committee Independent Director Mr Wallace joined the Board in October 2005. He is a co-founder and CEO of Galileo Kaleidoscope, a company known for its strategic marketing, brand and consumer research solutions. Mr Wallace has over 30 years' experience in marketing, advertising and brand development across a wide variety of consumer categories. He has held senior positions in London and Sydney advertising agencies and until 1996 was Managing Director of Ogilvy & Mather in Australia. Mr Wallace is also a Board Director and Governor of World Wildlife Fund, the global environmental group. Helen Nash Chair of the People and Remuneration Committee Independent Director Ms Nash joined the Board in October 2013. Ms Nash has more than 17 years' experience in brands and marketing, including seven years in fast moving consumer goods at Procter & Gamble, followed by three years in publishing at IPC Media. She has held a variety of roles at McDonald's Australia over a period of nine years and most recently held the position of Chief Operating Officer, overseeing restaurant operations, marketing, menu, insights and research and information technology. Ms Nash is currently a Non-Executive Director and the Chair of the Remuneration Committee of Pacific Brands Limited and a NonExecutive Director of Southern Cross Media Group Limited. 06 David Ansell BA (COMMUNICATION), GAICD Independent Director Mr Ansell joined the Board in October 2013, following a highly successful career in consumer facing organisations in Australia, Singapore and the United States. He played a pivotal role in the start-up years of Foxtel and was CEO of advertising agency, Saatchi & Saatchi. He has led business units of Mars Incorporated in Australia and the United States. Mr Ansell has a strong Operating and Supply Chain skill set and a deep understanding of Consumer and Customer Strategy. Mr Ansell is the Chairman and Managing Director of JDE AU Pty Ltd and a Director of Cycling Australia. John Armstrong Independent Director Mr Armstrong joined the Board in May 2015. He is currently the Chief Financial Officer of SEEK Limited, an ASX 100 listed leading recruitment and education provider. He has over 20 years' experience in various financial and commercial management roles and has significant oversight and involvement in SEEK's Asian operations and investments, including Directorships of SEEK's business in China, Zhaopin, and SEEK Asia, which operates across South East Asia. Mr Armstrong is a Non-Executive Director of ASX listed iProperty Group Ltd. 31 ac k Directors' Report FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 mores A eport 2 0 1 5 COMMITTEE MEMBERSHIPS As at the date of this Report, the Company had an Audit and Risk Committee, a Nominations Committee and a People and Remuneration Committee. Members of the Board acting on the Committees during the year were: DIRECTORS nn u a l R DIRECTORS' SHAREHOLDINGS The following table sets out each Director's relevant interest in all financial instruments issued by Blackmores as at the date of this report: Audit and Risk: Brent Wallace, Chair1 David Ansell John Armstrong2 Stephen Chapman3 Verilyn Fitzgerald4 Nominations: Stephen Chapman3 , Chair David Ansell John Armstrong2 Marcus Blackmore Verilyn Fitzgerald4 Christine Holgate Helen Nash Brent Wallace People and Remuneration: Helen Nash, Chair5 Marcus Blackmore Stephen Chapman3 Verilyn Fitzgerald4 Brent Wallace David Ansell John Armstrong Marcus Blackmore Stephen Chapman Christine Holgate Helen Nash Brent Wallace Total FULLY PAID ORDINARY SHARES SHARE RIGHTS 1,000 - 4,268,815 27,528 68,102 34,436 1,000 13,701 4,380,146\t34,436 SHARE RIGHTS GRANTED TO DIRECTORS AND SENIOR EXECUTIVES Selected Senior Executives are invited annually by the Board to participate in the Executive Performance Share Plan (EPSP). Under this plan, eligible Senior Executives are granted rights to acquire shares in Blackmores. Refer to the Remuneration Report on pages 35 to 45 for more details. During the year, the following rights to shares were granted: 2015 NUMBER1, 2 1. Brent Wallace was appointed the Chair of the Committee on 28 Apr 2015. 2. John Armstrong joined as a Director 5 May 2015. 3. Stephen Chapman was on an unpaid leave of absence from 14 Apr 2015. 4. Verilyn Fitzgerald retired as a Director and the Chair of the Committee on 23 Oct 2014. 5. Helen Nash was appointed the Chair of the Committee on 23 Oct 2014. Executive Director Christine Holgate 34,436 COMPANY SECRETARIES Senior Executives Cecile Cooper, BBus, Dip Inv Rel (AIRA), GAICD. Ms Cooper joined Lesley Braun 6,120 Blackmores in 3 Aaron Canning 1991 as Finance Manager. She has held a variety of 5,143 positions and her experience includes enterprise resource planning Nathan Cheong 5,773 system implementations, design of business reporting solutions Cecile Cooper 4,724 and business management. Ms Cooper is a Certified Practising David Fenlon 8,568 Accountant and Chartered Secretary. Richard Henfrey 8,012 Aaron Canning, BCom(Hons), FCCA, MAICD. Mr Canning joined Peter Osborne 6,528 Blackmores in 2014 as Chief Financial Officer. He has extensive Total 79,304 management experience in Asia, New Zealand, UK, USA and 1. Nil shares vested in the 2015 Financial Year. 2. Rights granted during the 2015 Financial Year vest provided specific performance objectives and Australia from ASX listed and multinational organisations including hurdles are met over the three year period commencing 1 Jul 2014 to the year ending 30 Jun 2017. Goodman Fielder, Westfield and Diageo Plc. His most recent 3. Rights granted during the 2015 Financial Year for Aaron Canning are for the period as a Senior Executive (4 Dec 2014 to 30 Jun 2015). experience was with Goodman Fielder as the Managing Director - Grocery Category. Prior to this he was the Managing Director - Asia SHARE OPTIONS Pacific and Finance Director - Asia Pacific. Mr Canning is a Fellow of During and since the end of the financial year, no share options were the Association of Chartered Certified Accountants and a member of in existence and no new share options were granted to Directors or the Australian Institute of Company Directors. Senior Executives of Blackmores. PRINCIPAL ACTIVITIES REMUNERATION OF DIRECTORS AND KEY MANAGEMENT The principal activity of the Blackmores Group in the course of the PERSONNEL financial year was the development, sales and marketing of natural Information about remuneration of Directors and Key Management health products for humans and animals including vitamins, herbal Personnel is set out in the Remuneration Report of this Directors' and mineral nutritional supplements. The Blackmores Group has Report, on pages 35 to 45. operations in Australia, New Zealand and Asia. Directors' report ---- RESULTS The Financial Report for the years ended 30 June 2015 and 30 June 2014 and the results herein have been prepared in accordance with Australian Accounting Standards. The net profit after tax (NPAT) attributable to the shareholders of the Blackmores Group for the financial year was $46.6 million (2014: $25.4 million). DIVIDENDS The amounts paid or declared by way of dividend since the start of the financial year were: a final dividend of 83 cents per share fully franked in respect of the year ended 30 June 2014, as detailed in the Directors' Report for that financial year, was paid on 3 October 2014; Blackmores Annual Report 2015 Bl 30 Directors' Report Directors' Report FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 an interim dividend of 68 cents per share fully franked in respect of the year ended 30 June 2015 was paid on 13 April 2015; and on 25 August 2015, Directors declared a final dividend for the year ended 30 June 2015 of 135 cents per share fully franked, payable on 22 September 2015 to shareholders registered on 8 September 2015. This will bring total ordinary dividends to 203 cents per share fully franked (2014: 127 cents per share fully franked) for the full year. CHANGES IN STATE OF AFFAIRS During the financial year there was no significant change in the state of affairs of the Blackmores Group other than that referred to in the Consolidated Financial Statements or notes thereto and elsewhere in the Annual Report of Blackmores for the year ended 30 June 2015. REVIEW OF OPERATIONS AND FINANCIAL RESULTS Blackmores has operations in Australia, New Zealand and Asia. Blackmores operations include product innovation and formulation, sourcing of the highest quality ingredients, quality programs to ensure compliance with standards of good manufacturing practice and the marketing, sales and distribution of products to customers and consumers. Our operations are structured to service and deliver to multiple channels including pharmacy, mass merchandisers, grocery, health food stores, practitioners and online. Our Animal Health range is also sold to vets and wholesalers. Activities across the Group for the 2015 financial year were aligned to four key strategic priorities with some key highlights: Consumer Centricity - Significant increases in brand investment and in understanding the consumer in our core Australian market supported by improvements in e-commerce and digital platforms. Asia Growth - Support continued growth of the Blackmores Asia business with the establishment of an Asian based regional management and operating structure to enable more efficient decision making and improved operational efficiencies. Product Leadership - A focus on continuing to cement Blackmores' position as a clear leader in the area of research and development with increased investment in the Blackmores Institute, a program of product range innovations and the establishment of the Maurice Blackmore Chair of Integrative Medicine at Sydney University. Operational Effectiveness - Improved operational efficiencies were derived from investment in and with our supply chain partners, leveraging our Central Services business model and optimising our increased size into scale benefits. The Blackmores Group NPAT for the financial year was $46.6 million (2014: $25.4 million) which represents an 83% increase compared to the prior year. Sales for the year were $471.6 million (2014: $346.8 million), an increase of 36% compared to the prior year. Operating cash flow improved by 90% on the prior year as a result of a strong trading performance, continued focus on working capital improvements and an improved treasury capability. Basic earnings per share (EPS) increased from 149.2 cents per share to 270.7 cents per share, an increase of 81%. Strong sales resulting in our 13th consecutive year of sales growth were attributable to double digit sales growth across all segments. This was led by the Australian business, new product launches and the continued growth of Blackmores in international markets. This growth was complemented by record sales performances across Asia, BioCeuticals, Blackmores New Zealand and Pure Animal Wellbeing. Sales in Asia are almost 18% of Group sales and BioCeuticals represents 12% of Group sales. Australian invoiced sales were up 43% compared to the prior year. The business continued to build momentum throughout the year with encouraging performances across existing products and 33 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 strong take up of new products. The Australian business continued to benefit from increases in Chinese tourists and entrepreneurs shopping in Australia and Chinese Australian consumers purchasing for relatives and friends and shipping to China. By combining the contribution from these consumers with our Asia-based revenues, the value of the region to our Group sales is approximately $150 million for the year. 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 the prior year. The opening of free trade zones in 2014 created a substantial opportunity, especially as Blackmores was 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. This growth enables the Group to better leverage capital investments and provides sources of alternative currency that are intended to provide a natural hedge against the cost of raw materials that are sourced from all over the world. Blackmores Asia achieved record sales, with full year sales up 26% in Australian dollars and EBIT up 82% to $8.3 million, a strong result in the context of ongoing economic challenges in Thailand. Excluding Thailand, total Asia sales were up 55%. Blackmores Malaysia delivered 14% growth as the leading vitamin and supplements brand in that market with strong sales of new products and continued growth across existing channels. The signing of an endorsement deal with Chinese tennis player Li Na in April as Blackmores' ambassador was a key achievement in the year. Time Magazine listed Li Na as one of the 100 most influential people in the world. Other Asian markets, in particular Korea, performed strongly, predominately in the TV shopping channel, with new products developed specifically for this market in the weight management and joint care categories delivering in excess of 300% increase in sales performance. BioCeuticals sales grew 18%, with strong growth in the practitioneronly range. This performance, combined with successful new product launches, positive sales mix performances and a close management of the cost base, delivered EBIT growth of 27% on the prior year. Blackmores New Zealand and PAW reported as part of the 'Other' segment had strong performances with sales growth of 13% and 32% respectively. As a result of the increased demand across the Group, maintaining stock on shelves to satisfy our consumers has been a challenge as have shortages in raw materials that meet our high quality standards A number of initiatives, from investing in the company's capacity programs through to putting in additional partnership arrangements with suppliers and customers, have been executed in the year. Total expenses for the year were $400.3 million representing a 30% increase over the prior year. Total sales growth of 36% was the primary contributor with sales-related expenses of raw materials, rebates and freight up 34% to $237.7 million. The remaining expenses of $162.6 million included employee performance related incentives which were $10 million greater than the prior year. Excluding the impact of incentives underlying expenses increased 18%, half the rate of sales growth. The Group remained focused on controlling business expenses in the year whilst also taking the opportunity to invest in strategic and operational initiatives including the Warriewood facility supply chain expansion and the establishment of the Blackmores Institute in Asia. Total income tax expense increased by 134% to $22.3 million reflecting the record profit performance at an effective tax rate of 32.4% (2014: 27.3%). The key drivers of the increased effective tax rate related to higher dividends from Thailand as we repatriated cash from that market, and initial start-up losses on the establishment of Blackmores International which were not recognised for tax purposes in the year. FINANCIAL POSITION OF THE GROUP Total current assets have increased by $56 million to $188 million, 43% up, largely refle