For personal use only - asx.com.au · momentum in sales, will continue into the second half of the 2016 financial year. The directors expect to report net profit after tax for the

PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES A.B.N. 91 075 170 151

ABN 91 075 170 151

INTERIM REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2015

PREPARED IN ACCORDANCE WITH ASX LISTING RULE 4.2A

This document should be read in conjunction with the most recent annual financial report

Contents Page

Results for Announcement to the market 1

Commentary on Result 2

Interim Financial Report 5

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PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Page 1 A.B.N. 91 075 170 151

Appendix 4D Probiotec Limited Half Year Report For the half year ended 31 December 2015

Results for announcement to market Current Reporting Period: Half year ended 31 December 2015 Previous Corresponding Period: Half year ended 31 December 2014

Gross Results Movement ($'000)

Sales Revenue from continuing operations

Up

2.8%

to

30,112

Earnings before interest, tax, depreciation & amortisation (EBITDA)

Up

335.9%

to

3,847

Earnings before interest and tax (EBIT)

Up

281.0%

to

2,419

Net profit from ordinary activities before tax attributable to members (NPBT)

Up

107.6%

to

2,021

Net profit for the period attributable to members (NPAT)

Up

107.9%

to

2,061

Earnings per share

Up

107.9%

to

3.89 ¢

Net Tangible assets per share as at 31 December 2015

Up

17.7%

to

43.8¢

Net Tangible assets per share as at 31 December 2014

37.2¢

Dividends No dividend has been declared or paid in regards to the 2015 or 2016 financial year. No dividends were declared in the prior corresponding period. Please refer to the commentary on the following page for an explanation of the above movements.

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Review of Results For the half year ended 31 December 2015, the Group’s sales revenue from continuing operations increased by 3% to $30.1 million. The Group’s net profit after tax from continuing activities attributable to members for the half year was $0.3 million compared to a loss of $1.0 million for the prior corresponding period. The Group generated free cash flow1 of $5.2 million during the half year ended 31 December 2015 and cash flows from operating activities of $0.3 million. Cash flows from operating activities were negatively impacted by the build-up of working capital to facilitate the increased levels of contract manufacturing orders on hand for the second half of the financial year with cash conversion forecast to improve in the second half. Total interest bearing liabilities, net of cash, as at 31 December 2015 was $9.8 million, a decrease of $5.2 million from $15.0 million as at 30 June 2015. The Group reported a statutory net profit of $2.1 million, which was positively impacted by the $2.0 million in

profit booked on the sale of the ADP Protein Plant sale, and negatively impacted by the $0.2 million loss

booked on the sale of the Group’s Ireland manufacturing facility.

The result for the half year is a significant positive outcome for the business as the Group looks to produce

improved sales and earnings under its now streamlined business model. This streamlined business includes

the consolidation of all manufacturing into the Group’s Laverton pharmaceutical plant, the rationalisation of

non-performing brands and the removal of our Irish manufacturing where, in the United Kingdom, the Group

only maintains essential marketing staff. The Group now has a clear focus on the core pillars of the business

into the future, being:

Contract manufacturing & intellectual property development;

Branded pharmaceutical products; and

Weight loss products.

Improvements and efficiencies are beginning to gain effect through these actions and previously announced

rationalisation and reorganisation activities. Pleasingly, despite operations of the Group remaining seasonally

weighted to the second half of the financial year, due in part to the significant influence of Cold and Flu

products and peak sales of weight loss supplements occurring in the January to April period, a profitable and

cashflow positive result for the first half was still achieved.

Outlook

The directors expect the realisation of these business improvements and efficiencies, together with momentum in sales, will continue into the second half of the 2016 financial year. The directors expect to report net profit after tax for the full year in the range of $3.75 million to $4.0 million. Should this guidance be met, the directors expect the Company to resume the payment of dividends.

Segment Overview

Contract Manufacturing and intellectual property development The Group’s contract manufacturing segment generated $16.9 million in sales, an increase of 4.7% from the prior corresponding period. The Group is continuing to experience solid demand in contract manufacturing and has a strong order book for the balance of the 2016 financial year.

1 Free Cash Flow is calculated as cash provided by operating activities plus cash provided from investing activities

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The Group’s capabilities are becoming increasingly well recognised in the market and the Group is experiencing an increased number of sales inquiries, leads and contracted work. The demand for the Group’s manufacturing services and innovative consumer products continues to underpin strong orders for this segment and this is expected to contribute to further growth in the second half of this financial year. The Group continues to invest in the development of its intellectual property with over one third of its contract manufacturing sales underpinned by Probiotec intellectual property. This intellectual property continues to deliver increasing sales levels with a high level of security. The Group is also pleased to be continuing to expand our research and development relationships with Griffith University, CSIRO and Adelaide University. Branded Pharmaceuticals The Group’s branded pharmaceuticals segment generated $3.8 million in sales, a decrease of 5.0% compared to the prior corresponding period. Although headline sales declined, underlying sales on a like-for-like basis (excluding discontinued product lines) grew by 1%. Under the distribution agreement with the Valeant Group, the Group’s established product ranges performed acceptably in an increasingly competitive pharmacy environment with like-for-like sales growth achieved (excluding the impact of a rationalisation of the product range). Earnings from this segment during the half year was negatively impacted by the clearance of these rationalised product lines (loss of $0.2 million) whilst the prior corresponding period was positively impacted by the early settlement of the Group’s distribution agreement for the divested Milton brand (gain of $0.3 million). The Group is confident that its branded pharmaceutical products will continue to perform well with both a range of new products under development and a revitalised sales and marketing focus from the Group’s distributor expected to contribute to growth in these brands. Weight Loss Earnings from the Group’s weight loss segment grew to $0.8 million for the half year, compared to a breakeven result for the prior corresponding period. This segment generated $7.4 million in sales, a decrease of 16.6% compared to the prior corresponding period. The decline was primarily the result of the rationalisation of non-performing brands. Notably, despite the decline in revenue the earnings generated from this segment grew materially under this streamlined model as efficiencies in the business were increasingly realised. This trend in margin expansion is expected to continue into the second half of the 2016 financial year. The Impromy brand continues to experience growth in both sales and distribution levels. Europe The Group’s European segment generated $2.1 million in sales, an increase of 3.3% from the prior corresponding period. The Group has now completed the sale of its manufacturing operations in Europe to focus on the sales, marketing and distribution of its established weight loss products in the United Kingdom. This segment operated profitably for the half year and is expected to continue to do so in the second half of the 2016 financial year. Specialty products The Group’s specialty products segment generated nominal sales for the period. As set out earlier in this report, the Group has now completed the sale of its ADP Protein Plant, which generated the majority of sales in this segment.

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Audit Status This report is based on accounts which have been reviewed. The accounts are not subject to any dispute, emphasis of matter or qualification. About Probiotec Probiotec Limited is a brand owner, manufacturer, marketer and distributor of a range of prescription and over-the-counter (OTC) pharmaceuticals, complementary medicines, consumer health products and specialty ingredients. The company owns four manufacturing facilities in Australia and Ireland and distributes its products both domestically and internationally. Products are manufactured by Probiotec for both its own products and on behalf of others, including major international pharmaceutical companies. Further details about Probiotec are available at www.probiotec.com.au

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PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES

A.C.N. 075 170 151

FINANCIAL REPORT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

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INDEX TO FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2015

Section Page

DIRECTORS' REPORT………………………………………………………………………………………………

1

AUDITOR'S INDEPENDENCE DECLARATION………………………………………………………………

4

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME…….

5

CONSOLIDATED STATEMENT OF FINANCIAL POSITION………………………..…………………..

6

CONSOLIDATED STATEMENT ON CHANGES IN EQUITY……………………..………………………

7

CONSOLIDATED STATEMENT OF CASH FLOWS…….……………………………………..……………

8

NOTES TO THE FINANCIAL STATEMENTS…………………………………………………………………

9

DIRECTORS’ DECLARATION…………………………………………………………………………………….

15

INDEPENDENT AUDITOR’S REVIEW REPORT……………………..……………………………………

16

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Page 1

DIRECTORS’ REPORT

The Directors submit the financial report of Probiotec Limited (Company) and its controlled entities (Group) for the half-year ended 31 December 2015. Directors The names of the directors in office at any time during or since the end of the half-year are: Robert Maxwell Johnston Chairman Wesley Stringer Executive Director Graham Harry Buckeridge Non-Executive Director Richard David Kuo Non-Executive Director Robin Tedder Non-Executive Director Directors have been in office since the start of the half-year reporting period to the date of this report unless otherwise stated. Company Secretary The company secretary to the date of this financial report was: Jared Stringer The company secretary has been in office since the start of the half-year reporting period to the date of this report. Dividends No dividend was paid or declared during the half-year ended 31 December 2014. No dividend has been declared during the half year ended 31 December 2015 or since the end of the half year. Review of operations For the half year ended 31 December 2015, the Group’s sales revenue from continuing operations increased by 3% to $30.1 million. The Group’s net profit after tax from continuing activities attributable to members for the half year was $0.3 million compared to a loss of $1.0 million for the prior corresponding period. The Group generated free cash flow1 of $5.2 million during the half year ended 31 December 2015 and cash flows from operating activities of $0.3 million. Cash flows from operating activities were negatively impacted by the build-up of working capital to facilitate the increased levels of contract manufacturing orders on hand for the second half of the financial year with cash conversion forecast to improve in the second half. Total interest bearing liabilities, net of cash, as at 31 December 2015 was $9.8 million, a decrease of $5.2 million from $15.0 million as at 30 June 2015.

The Group reported a statutory net profit of $2.1 million, which was positively impacted by the $2.0 million

in profit booked on the sale of the ADP Protein Plant sale, and negatively impacted by the $0.2 million

loss booked on the sale of the Group’s Ireland manufacturing facility.

The result for the half year is a significant positive outcome for the business as the Group looks to

produce improved sales and earnings under its now streamlined business model. This streamlined

business includes the consolidation of all manufacturing into the Group’s Laverton pharmaceutical plant,

1 Free Cash Flow is calculated as cash provided by operating activities plus cash provided from investing activities

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Page 2

the rationalisation of non-performing brands and the removal of our Irish manufacturing where, in the

United Kingdom, the Group only maintains essential marketing staff. The Group now has a clear focus

on the core pillars of the business into the future, being:

Contract manufacturing & intellectual property development;

Branded pharmaceutical products; and

Weight loss products.

Improvements and efficiencies are beginning to gain effect through these actions and previously

announced rationalisation and reorganisation activities. Pleasingly, despite operations of the Group

remaining seasonally weighted to the second half of the financial year, due in part to the significant

influence of Cold and Flu products and peak sales of weight loss supplements occurring in the January to

April period, a profitable and cashflow positive result for the first half was still achieved.

Contract Manufacturing and intellectual property development The Group’s contract manufacturing segment generated $16.9 million in sales, an increase of 4.7% from the prior corresponding period. The Group is continuing to experience solid demand in contract manufacturing and has a strong order book for the balance of the 2016 financial year. The Group’s capabilities are becoming increasingly well recognised in the market and the Group is experiencing an increased number of sales inquiries, leads and contracted work. The demand for the Group’s manufacturing services and innovative consumer products continues to underpin strong orders for this segment and this is expected to contribute to further growth in the second half of this financial year. The Group continues to invest in the development of its intellectual property with over one third of its contract manufacturing sales underpinned by Probiotec intellectual property. This intellectual property continues to deliver increasing sales levels with a high level of security. The Group is also pleased to be continuing to expand our research and development relationships with Griffith University, CSIRO and Adelaide University. Branded Pharmaceuticals The Group’s branded pharmaceuticals segment generated $3.8 million in sales, a decrease of 5.0% compared to the prior corresponding period. Although headline sales declined, underlying sales on a like-for-like basis (excluding discontinued product lines) grew by 1%. Under the distribution agreement with the Valeant Group, the Group’s established product ranges performed acceptably in an increasingly competitive pharmacy environment with like-for-like sales growth achieved (excluding the impact of a rationalisation of the product range). Earnings from this segment during the half year was negatively impacted by the clearance of these rationalised product lines (loss of $0.2 million) whilst the prior corresponding period was positively impacted by the early settlement of the Group’s distribution agreement for the divested Milton brand (gain of $0.3 million). The Group is confident that its branded pharmaceutical products will continue to perform well with both a range of new products under development and a revitalised sales and marketing focus from the Group’s distributor expected to contribute to growth in these brands. Weight Loss Earnings from the Group’s weight loss segment grew to $0.8 million for the half year, compared to a breakeven result for the prior corresponding period.

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Page 3

This segment generated $7.4 million in sales, a decrease of 16.6% compared to the prior corresponding period. The decline was primarily the result of the rationalisation of non-performing brands. Notably, despite the decline in revenue the earnings generated from this segment grew materially under this streamlined model as efficiencies in the business were increasingly realised. This trend in margin expansion is expected to continue into the second half of the 2016 financial year. The Impromy brand continues to experience growth in both sales and distribution levels. Europe The Group’s European segment generated $2.1 million in sales, an increase of 3.3% from the prior corresponding period. The Group has now completed the sale of its manufacturing operations in Europe to focus on the sales, marketing and distribution of its established weight loss products in the United Kingdom. This segment operated profitably for the half year and is expected to continue to do so in the second half of the 2016 financial year. Specialty products The Group’s specialty products segment generated nominal sales for the period. As set out earlier in this report, the Group has now completed the sale of its ADP Protein Plant, which generated the majority of sales in this segment. Significant Changes in State of Affairs There was no other significant change in the state of affairs of the Group other than that referred to in the financial statements or notes thereto and elsewhere in the financial report of the Company and its controlled entities for the half-year ended 31 December 2015.

Significant After Balance Date Events There has not been any matters or circumstances that have arisen since the end of the half-year that have significantly affected or may significantly affect, the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in half-year subsequent to the end of the half-year. Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4 of this report. Signed in accordance with a resolution of the Board of Directors.

…………………………………………….

Director Wesley Stringer Signed at Melbourne this 24th day of February 2016

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ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

Auditor’s Independence Declaration under Section 307C of the Corporations Act

2001 to the Members of Probiotec Limited and its Controlled Entities

I declare that, to the best of my knowledge and belief, during the half-year ended 31 December 2015 there has been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review, and

(ii) no contraventions of any applicable code of professional conduct in relation to the review.

ShineWing Australia Chartered Accountants

Rami Eltchelebi Partner Melbourne, 24 February 2016

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Half-year Half-year

ended ended

31 Dec 2015 31 Dec 2014

$ $

Sales revenue from continuing operations 30,111,665 29,297,403

Cost of goods sold (19,267,798) (18,631,348)

Gross profit 10,843,867 10,666,055

Other income 4 42,702 144,949

Warehousing and distribution expenses (2,436,770) (2,398,856)

Sales and marketing expenses (3,586,957) (3,415,107)

Finance costs (397,635) (644,296)

Administration and other expenses 5 (4,203,585) (5,445,360)

Profit / (loss) from continuing activities before income tax expense 261,622 (1,092,614)

Income tax benefit relating to continuing activities 39,133 133,194

Profit / (loss) for the period attributable to members of the parent

entity from continuing activities300,755 (959,420)

Profit / (loss) from discontinued operations 6 1,759,771 (25,178,716)

Profit / (loss) for the period attributable to members of the parent

entity2,060,526 (26,138,136)

Other Comprehensive income

Items that will not be reclassified subsequently to profit or loss:

Foreign currency translation differences 33,689 38,421

Write back of revaluation reserve - (127,999)

Other comprehensive income for the half-year, net of tax 33,689 (89,578)

Total comprehensive income for the half-year 2,094,215 (26,227,714)

Total comprehensive income for the half-year attributable to

members of the parent entity2,094,215 (26,227,714)

Basic (cents per share) 3.89 (49.38)

Diluted (cents per share) 3.89 (49.38)

Basic (cents per share) 0.57 (1.81)

Diluted (cents per share) 0.57 (1.81)

The accompanying notes form part of these financial statements


Consolidated

Earnings per share for profit from continuing activities attributable to members of the parent entity

PROBIOTEC LIMITED

A.C.N. 075 170 151

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

Note

Earnings per share for profit attributable to members of the parent entity

Page 5

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Note 31 Dec 2015 30 Jun 2015

$ $

Current Assets

Cash and cash equivalents 123,514 120,296

Trade and other receivables 9,333,180 8,339,440

Inventories 10,220,493 9,881,550

Assets held for sale - 3,074,173

Other current assets - 246,570

Total Current Assets 19,677,187 21,662,029

Non-Current Assets

Property, plant and equipment 26,797,649 27,220,861

Deferred tax assets 6,001,945 5,688,083

Intangible assets 18,545,873 18,436,431

Total Non-Current Assets 51,345,467 51,345,375

Total Assets 71,022,654 73,007,404

Current Liabilities

Trade and other payables 10,924,405 10,672,682

Short-term borrowings 8,537,876 12,788,766

Short-term provisions 1,313,494 797,519

Total Current Liabilities 20,775,775 24,258,967

Non-Current Liabilities

Long-term borrowings 1,370,250 2,274,746

Deferred tax liabilities 6,664,416 6,390,007

Long-term provisions 486,843 452,529

Total Non-Current Liabilities 8,521,509 9,117,282

Total Liabilities 29,297,284 33,376,249

Net Assets 41,725,370 39,631,155

Equity

Contributed equity 3 33,686,519 33,686,519

Equity Translation Reserve (329,412) (363,101)

Asset Revaluation Reserve 4,320,595 4,320,595

Retained earnings 4,047,668 1,987,142

Total Equity 41,725,370 39,631,155


PROBIOTEC LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

A.C.N. 075 170 151

Consolidated

Page 6

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Ordinary

Share Retained

Capital Reserves Earnings Total

$ $ $ $

Balance as at 1 July 2014 33,686,519 3,904,444 26,729,444 64,320,407

Total comprehensive income for the half-year

Profit for the half-year - - (26,138,136) (26,138,136)

Other comprehensive income - (89,578) - (89,578)

Total comprehensive income for the half-year - (89,578) (26,138,136) (26,227,714)

Transactions with owners in their capacity as owners

Balance as at 31 December 2014 33,686,519 3,814,867 591,308 38,092,694


Profit for the half-year - - 1,395,834 1,395,834

Other comprehensive income - 142,627 - 142,627

Total comprehensive income for the half-year - 142,627 1,395,834 1,538,461


Balance as at 1 July 2015 33,686,519 3,957,494 1,987,142 39,631,155


Profit for the half-year - - 2,060,526 2,060,526

Other comprehensive income - 33,689 - 33,689

Total comprehensive income for the half-year - 33,689 2,060,526 2,094,215


Balance as at 31 December 2015 33,686,519 3,991,183 4,047,668 41,725,370

PROBIOTEC LIMITED

A.C.N. 075 170 151


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Half-year Half-year

ended ended

31 Dec 2015 31 Dec 2014

Note $ $

Cash Flows From Operating Activities

Receipts from customers 29,117,924 31,280,041

Payments to suppliers and employees (28,442,950) (29,941,809)

Interest and other costs of finance paid (397,635) (644,296)

Net cash provided by operating activities 277,339 693,936

Cash Flows From Investing Activities

Payments for property, plant and equipment (1,534,294) (1,178,855)

Proceeds from sale of property, plant and equipment 6,825,000 1,923,294

Payments for intangible assets (409,442) (589,677)

Net cash (used in) / provided by investing activities 4,881,264 154,762

Cash Flows From Financing Activities

Proceeds from borrowings 670,557 1,175,322

Repayment of borrowings (5,825,942) (2,914,765)

Net cash used in financing activities (5,155,385) (1,739,443)

Net increase / (decrease) in cash and cash equivalents 3,218 (890,745)

Cash and cash equivalents at the beginning of the period 120,296 1,116,587

Cash and cash equivalents at the end of the period 123,514 225,842


PROBIOTEC LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS


A.C.N. 075 170 151

Consolidated

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1

Working Capital Deficiency

31 Dec 2015 31 Dec 2014

2 DIVIDENDS $ $

Ordinary Shares

Dividends paid for during the half-year - -

Dividends not recognised at the end of the half-year - -

3 CONTRIBUTED EQUITY

Balance at 1 July 2015 33,686,519

Issue of shares -

Cancellation of shares -

Share issue costs -

Balance at 31 December 2015 33,686,519

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards

Board (AASB) that are relevant to their operations and effective for the current reporting period. There was not a significant impact

on the financial statements as a result of the adopted standards and interpretations.

PROBIOTEC LIMITEDA.C.N. 075 170 151

BASIS OF FINANCIAL REPORT PREPARATION

NOTES TO THE FINANCIAL STATEMENTS

The condensed financial statements have been prepared on the basis of historical cost, except for land and buildings and

derivative financial instruments which are measured at fair value. Cost is based on the fair values of the consideration given in

exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.


The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and

AASB 134 ‘Interim Financial Reporting’ . The half-year financial report does not include notes of the type normally included in an

annual financial report and shall be read in conjunction with the most recent annual financial report and any public announcements

made by Probiotec during the interim reporting period in accordance with the continuous disclosure requirements of the

Corporations Act 2001 . Probiotec is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Reconciliation of fully paid ordinary shares

As presented in the statement of financial position, the group has a net working capital deficiency of $1,098,588 (30 June 2015:

$2,596,938). This is caused by $7,536,794 worth of liabilities which exist under a facility due to expire on dates subsequent to 31

December 2016 being classified as current due to an annual review clause included in the finance facility which would require the

group to repay the debt if the bank was not satisfied with the financial condition of the group. The group has complied with all

financial covenants within the finance facility and there have been no indications given by the financier that they intend to recall any

portion of the debt prior to the expiry date of the finance facility. Excluding these loans, the group has a net working capital balance

of $6,438,206 and believes that it will continue as a going concern for a period of 12 months from the date of the directors'

declaration.

Since the end of the half-year the directors have not declared any dividends.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with

those adopted and disclosed in the Company’s financial report for the financial year ended 30 June 2015.

These interim financial statements were authorised for issue on 24 February 2016.

Comparative information has been reclassified where appropriate to enhance comparability.

New and Revised Standards and Interpretations

Page 9

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4 OTHER INCOME

31 Dec 2015 31 Dec 2014

Other income for the half-year comprised: $ $

Government grants 2,016 -

Other income 40,686 144,949

42,702 144,949

5 ADMINISTRATION & OTHER EXPENSES

Administration & other expenses comprises:

Insurance 193,919 283,455

Employee costs 2,855,966 3,542,834

Office expenses 204,946 230,245

Compliance costs 88,538 102,317

Other expenses 860,216 1,286,509

4,203,585 5,445,360

6 DISCONTINUED OPERATIONS

Sale of ADP Protein Plant

Reconciliation of profit from discontinued operations

$

Net gain on sale of ADP Protein Plant 2,040,003

Loss on transition of European manufacturing assets (293,265)

Profit from discontinued brands 13,033

Profit from discontinued operations 1,759,771

On 28 September 2015 Australian Dairy Proteins Pty Ltd (“ADP”), a wholly owned subsidiary of Probiotec Limited, (“Probiotec” or

“the Company”) completed the sale of its ADP Protein Plant (“the Assets”) located in Jervois, South Australia to Beston Pure

Dairies Pty Ltd ("BPD") following the conditional agreement announced on 24 June 2015.

Further agreements have been entered into between ADP and BPD relating to technical assistance and the future supply of dairy

protein products over the coming years.

This sale resulted in a net gain on sale of $2,040,003 before tax and resulted in a reduction in assets held for sale of $3,074,174

and Property , Plant and Equipment of $830,003.

European manufacturing assets

During the half year, the Group completed the transition of its Irish manufacturing assets, following the sale completed in June

2015. This transition resulted in a non-recurring loss of $293,265 being incurred during the half year ended 31 December 2015.

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7 SUBSEQUENT EVENTS

8 FAIR VALUE MEASUREMENTS

(a)

(b)

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial assets:

Cash and cash equivalents 123,514 123,514 120,296 120,296

Trade and other receivables 9,333,180 9,333,180 8,339,440 8,339,440

9,456,694 9,456,694 8,459,736 8,459,736

Financial liabilities:

Trade and other payables 11,449,405 11,449,405 10,672,682 10,672,682

Borrowings 9,908,126 9,908,126 15,063,512 15,063,512

21,357,531 21,357,531 25,736,194 25,736,194

(c)

Recurring fair value measurements Level 1 Level 2 Level 3 Total

Non-financial assets $ $ $ $

Freehold land - 3,800,000 - 3,800,000

Freehold buildings - 9,249,000 - 9,249,000

Total non-financial assets recognised at fair value

on a recurring basis - 13,049,000 - 13,049,000

Total non-financial assets recognised at fair value - 13,049,000 - 13,049,000

There has not been any matter or circumstance that has arisen since the end of the half year that has significantly affected or may

significantly affect, the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs

after the half year.

The following tables provide the fair values of the Group's assets and liabilities measured and recognised on a recurring basis after

initial recognition and their categorisation within the fair value heirarchy:

Valuation Techniques

The following table represents a comparison between the carrying amounts and fair values of financial assets and liabilities:

In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques

to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances

and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on

the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent

with one or more of the following valuation approaches:

- Market approach : valuation techniques that use prices and other relevant information generated by market transactions for

identical or similar assets or liabilities.

- Income approach : valuation techniques that convert estimated future cash flows or income and expenses into a single

discounted present value.

- Cost approach : valuation techniques that reflect the current replacement cost of an asset at its current service capacity.

Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or

liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that

maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data

(such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally

use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and

therefore are developed using the best information available about such assumptions are considered unobservable.

Financial Instruments

31 December 2015

31-Dec-15 30-Jun-15

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Recurring fair value measurements Level 1 Level 2 Level 3 Total

Non-financial assets $ $ $ $

Freehold land - 3,800,000 - 3,800,000

Freehold buildings - 9,500,000 - 9,500,000


on a recurring basis - 13,300,000 - 13,300,000

Non-recurring fair value measurements

ADP Plant held for sale - - 3,074,173 3,074,173


on a non-recurring basis - - 3,074,173 3,074,173

Total non-financial assets recognised at fair value - 13,300,000 3,074,173 16,374,173

(d) Valuation techniques and inputs used to measure Level 2 fair values

Description

Fair Value at

31 Dec 2015

Non-financial assets

Freehold land * 3,800,000

Freehold buildings 9,249,000

13,049,000

(e) Reconciliation of recurring Level 3 fair value measurements

Balance at the beginning of the year 3,074,173

Disposals during the year (3,074,173)

Balance at the end of the year -

ADP Plant held for sale

Valuation technique(s)

Market approach using recent

observable market data for

similar properties;

Market approach using recent

observable market data for

similar properties;

Price per square metre ($140 -

$160 psm);

Inputs used

Price per square metre ($140 -

$160 psm);

* The fair value of freehold land and buildings is determined at least every three years based on valuations by an independent

valuer. At the end of each intervening period, the directors review the independent valuation and, when appropriate, update the fair

value measurement to reflect current market conditions using a range of valuation techniques, including recent observable market

data.

30 June 2015

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9 SEGMENT INFORMATION

(a)

Business Segments Segment name

Segment 1 Branded Pharmaceuticals

Segment 2 Contract manufacturing

Segment 3 Weight Loss and Sports Nutrition

Segment 4 Europe

Segment 5 Specialty products

Half year ended 31 December 2015 Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Consolidated

($'000) ($'000) ($'000) ($'000) ($'000) ($'000)

- - 207 - - 207

3,831 16,917 7,167 2,179 18 30,112

Total segmental revenue 3,831 16,917 7,374 2,179 18 30,319

- - 13 (293) 2,040 1,760

299 547 767 392 - 2,005

Total segmental profit 299 547 780 99 2,040 3,765

Interest (398)

(1,345)

(1,743)

262

1,760

2,022

Income tax expense 39

Net profit after tax 2,061




Unallocated corporate expenses

Profit from discontinued operations before income tax

Weight Loss and Sports Nutrition

Profit from continuing activities before income tax

Segmental profit / (loss) from continuing operations

Segmental profit / (loss) from discontinued operations

The contract manufacturing segment involves the contract manufacturing of pharmaceutical, food and animal nutrition products on behalf

of domestic and international pharmaceutical and food companies.

The weight loss and sports nutrition segment is involved in the manufacture and sale of a range of products across a number of channels

including FMCG, pharmacy, health food stores and online. The majority of sales of this segment are made domestically with a small

portion being sold to New Zealand and several other countries. This segment includes the Celebrity Slim brand along with the Impromy

program, which was launched in May 2014.

Europe

The Europe segment is involved in the manufacture and sale of products within Europe. This segment produces products at the Group's

Ireland manufacturing facility with the majority of sales revenue generated from the United Kingdom and Ireland.

Revenue from external customers

Total unallocated income / (expense)

Revenue from discontinued operations

The specialty products segment is involved in the sale of human and animal nutrition products, incorporating the sale of ingredients and

additives for use in the pharmaceutical and food industries. This segment also incorporates the Group's newly relocated and upgraded

ADP Protein Plant, which produces several specialty dairy proteins, being Lactoferrin and Immunoglobulins.

Description of segments

Management has determined the operating segments based on reports reviewed by the executive management committee for making

strategic decision. The executive management committee comprises the chief executive officer, chief financial officer and divisional

managers. The committee monitors the business based on product and geographic factors and have identified 5 reportable segments.

Branded Pharmaceuticals

The branded pharmaceuticals segment involves the sale of branded pharmaceutical products (both owned and licensed brands)

predominantly throughout Australia and also to slected South East Asian countries.

Contract manufacture

Specialty products

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Half year ended 31 December 2014 Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Consolidated

($ '000) ($ '000) ($ '000) ($ '000) ($ '000) ($ '000)

4,033 16,150 8,841 2,110 317 31,451

Total segmental revenue 4,033 16,150 8,841 2,110 317 31,451

801 697 26 (353) (519) 652

Total segmental profit 801 697 26 (353) (519) 652

Interest (644)

Unallocated other income -

Impairment expenses (24,251)

(1,189)

(26,084)

(25,432)

(1,103)

(26,535)

Income tax expense 397

Net profit after tax (26,138)

(b) Reconciliation of segmental revenue to total revenue 2015 2014

$ $

Segmental revenue 30,111,665 31,451,374

Other income 42,702 144,949

Total revenue 30,154,367 31,596,323

(c) Segment revenue

(d) Segment profit

PROBIOTEC LIMITED

The board assesses the performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes

the effects of non-recurring expenditure from the operating segments such as restructuring costs, legal expenses and goodwill

impairments when the impairment is the result of an isolated, non-recurring event. This measurement basis also exlcudes the effects of

any non-recurring items of revenue or income. Interest income and expenditure are not allocated to segments, as this type of activity is

driven by the central treasury function, which manages the cash position of the group.

Segmental profit from continuing operations

Unallocated corporate expenses

Total unallocated income / (expense)

Profit from continuing activities before income tax

Sales between segments (if they occur) are carried out at arm's length and are eliminated on consolidation. The revenue from external

parties reported to the board is measured in a manner consistent with that in the statement of comprehensive income.

A.C.N. 075 170 151

Revenues from external customers are derived from the sale of products on both a wholesale and business-to-business basis from each of

the business segments outlined earlier in this note. A breakdown of revenue is provided in the tables above.

Loss from discontinued operations before income tax

Revenue from external customers



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Page 15

PROBIOTEC LIMITED

AND ITS CONTROLLED ENTITIES A.C.N. 075 170 151

DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Probiotec Limited, the directors of the

company declare that:

The financial statements and notes are in accordance with the Corporations Act 2001,

including:

a. complying with Accounting Standard AASB 134: Interim Financial Reporting; and

b. giving a true and fair view of the consolidated entity’s financial position as at 31

December 2015 and of its performance for the half-year ended on that date.

In the directors’ opinion there are reasonable grounds to believe that the company will be

able to pay its debts as and when they become due and payable.

………………………………………………….. Director Wesley Stringer Dated at Melbourne this 24th day of February 2016

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ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.

INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Probiotec Limited and its Controlled Entities which comprises the consolidated statement of financial position as at 31 December 2015, and the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and explanatory information and the directors’ declaration. Directors’ Responsibility for the Half-Year Financial Report

The directors of Probiotec Limited and its Controlled Entities(“the company”) are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard ASRE 2410: Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not prepared, in all material aspects, in accordance with the Corporations Act 2001 including: giving a true and fair view of the company’s financial position as at 31 December 2015 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Probiotec Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Probiotec Limited, would be in the same terms of provided to the directors as at the time of this auditor’s review report. F

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Conclusion

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the half-year financial report of Probiotec Limited and its Controlled Entities is not in accordance with the Corporations Act 2001 including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

(ii) complying with AASB 134: Interim Financial Reporting and the Corporations Regulations 2001.

ShineWing Australia Chartered Accountants

Rami Eltchelebi Partner Melbourne, 25 February 2016

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Documents

For personal use only - asx.com.au · momentum in sales, will continue into the second half of the 2016 financial year. The directors expect to report net profit after tax for the