Cenversa Offer Information Statement 2016

Offer Information Statement 2016

FOR AN OFFER OF UP TO 15,000,000 SHARES AT AN ISSUE PRICE OF $0.60 PER SHARE

TABLE OF CONTENTS Important Notice

3

Chairman’s Letter

4

Investment Overview

6

Customer Bonus Share Information

8

Industry Overview

10

Business Overview

14

Investigating Accountant’s Report

21

Risk Factors

28

Additional Information

30

Directors’ Statement

32

Corporate Directory

33

Application Form

34

End Notes

39

IMPORTANT NOTICE Cenversa Limited

The following Information Memorandum (IM) relates to an offer of up to 15,000,000 shares in Vetstar Group Holdings Pty Limited ACN 092 375 221 (Vetstar). Vetstar is the holding company of the Cenvet Group of companies. Details of the Cenvet Group including Cenvet Australia Pty Ltd and Dr Neil’s Pet & Equine Pty Ltd are outlined in the Business Overview section of this IM commencing on page 14.

Vetstar has resolved that it will be converted from a proprietary to a public company, that it will adopt a new Constitution and that it will change its name to “CENVET GROUP HOLDINGS LIMITED”. An application has been lodged with Australian Securities & Investments Commission (ASIC). However at the date of this IM, ASIC has not yet altered the Company’s registration to reflect the Company as a public company. Pending recognition of that change, the Company nevertheless will be referred to throughout this document as “Cenvet Group Holdings Limited”, “Cenvet Group” or “Cenvet”.

Information Memorandum (IM)

This IM is not, and should not be construed as, a recommendation to subscribe for Shares under the Offer.

No person has been authorised by Cenvet to give any information or make any representation not contained in, or not consistent with, this IM.

Offer

This IM is dated 7 June 2013 and relates to an offer (Offer) of Shares by the Cenvet Group. The IM includes the Application Form, which each Applicant must complete in applying for Shares. Investors should read the IM in full before making an investment decision.

Prospective Investors

Any person contemplating the subscription for Shares must make their own independent investigation of the Offer and any projections, forecasts, values, assumptions and

estimates after taking advice from qualified professional advisors. Without limitation, the Company expressly disclaims reliance by any party on any statements relating to future events, projections, forecasts and the like, each of which must be independently investigated and assessed.

The tax treatment of any Investor may vary depending on that Investor’s tax situation. Each Investor should consult their tax advisor regarding the tax effect of participation in the Offer.

Distribution

The Offer is available only to persons to whom this IM has been delivered by Cenversa Limited and is not available to anyone else. Participation in this Offer is available only to select ‘sophisticated investors’ and ‘professional investors’ as defined in sections 708(8) and 708(10) of the Corporations Act and to other persons whose participation in the Offer allows Cenversa Limited to comply with Section 708 of the Corporations Act. This Offer Information Statement is not a prospectus and it has not been lodged with or been reviewed by ASIC or any other regulatory authority.

This Offer Information Statement is not authorised for distribution outside the Commonwealth of Australia.

Privacy Act

The Company collects information about each Applicant for the purposes of processing their Application and to administer their shareholding in the Company. By submitting an Application Form, each Applicant agrees that the Company may use their information for that purpose and may disclose it to a share registry, the Company’s related bodies corporate, agents, contractors and third party service providers (including mailing houses), ASIC and other regulatory authorities. The Corporations Act requires the Company to include information about Shareholders in its members’ register. That information is also used to facilitate distribution of payments and for corporate communications with Shareholders.

LETTER FROM THE CHAIRMAN Dear Prospective Shareholders, I am pleased to share this Information Memorandum with you, which outlines the opportunity for you to become a shareholder in Cenvet Group Holdings Limited (Cenvet), a well-established, Australian-owned and operated wholesaler to the Australian veterinary market and the retail pet product sector.

With a commitment to share our future success with our customers and employees, Cenvet intends to raise up to $9,000,000 at $0.60 per share, with up to a 25% deferred Bonus Share entitlement being offered to those customers who wish to become shareholders and commit to minimum purchase levels for 24 months from Cenvet. The offer is open to individuals who qualify as a Sophisticated Investor under the Corporations Act. Investors may invest in Cenvet as individuals, through their superannuation fund or through their practice structure such as a hospital trading entity with multiple veterinarians.

•

•

•

•

Cenvet is a well-established, profitable business with a proven track record. The business has customer support centres located across Australia and has delivered market leading customer service and on-time delivery performance for over 50 years.

Cenvet is one of the largest Australian owned suppliers to the veterinary market, distributing over 12,000 product lines from 160 manufacturers and suppliers to over 1,000 veterinary practices as well as over 1,500 speciality retail pet products outlets, nationally.

Cenvet is a diversified business, committed to supplying both the Australian veterinary market and retail pet products sector. This commitment extends to expanding the company’s range of exclusive brands and agency products for the benefit of its customers.

By offering a customer/shareholder co-operative model, Cenvet creates a strong platform for growth by rewarding Cenvet customers with the opportunity to participate in the growth of the business that supplies them. Key incentives and aspects of the offer have been designed to make the offer attractive to new and existing customers of Cenvet.

Changing attitudes to pet ownership and an increased awareness of animal health issues are driving a positive industry outlook, with growth rates expected to be in the region of 2.5% - 3.0% per annum over the next five years1,2,3. The industry’s forecast growth coupled with the fact that Cenvet’s largest competitors have been acquired by international conglomerates in recent years places Cenvet in the unique position as one of the largest Australian owned suppliers in the veterinary market operating under a customer co-operative model, to capitalise on future growth opportunities.

The proceeds of the offer will be used predominantly to expand product ranges and repay loans, providing Cenvet with increased flexibility to capitalise on acquisition and/or growth opportunities as they arise through a strengthened balance sheet position. Beyond this strategy, in line with prudent capital management, the Board will apply any surplus proceeds to meeting Cenvet’s on-going working capital needs.

An investment in Cenvet is an exciting proposition, supported by strong business fundamentals including:

In line with our commitment to create a co-operative customer model, the Cenvet Board will consider increasing the number

4

Cenversa Limited

of directors from three (3) at the company’s next Annual General Meeting to be held later this year. This will allow the opportunity for new shareholders to nominate individuals to lead the business into the next exciting stage of the company’s future.

An investment in Cenvet is an exciting proposition, supported by strong business fundamentals.

The following Information Memorandum contains detailed information about Cenvet and the risks associated with an investment in the business. We encourage you to read this Information Memorandum in its entirety and seek independent advice from your accountant or financial advisor before deciding to invest in Cenvet.

To apply for Shares, please fill out and lodge the Application Form accompanying this information memorandum by 16 August 2013. If you have any questions about this Information Memorandum, please contact a Cenvet representative listed on page 9.

The Board is excited about the future prospects of Cenvet and look forward to receiving your application to be a shareholder of the business.

Yours faithfully Cenversa Limited

Lionel Bloom, Chairman

Offer Information Statement

5

INVESTMENT OVERVIEW This section is a summary only and not intended to provide full information for investors intending to apply for shares offered pursuant to this Offer Information Statement. This Offer Information Statement should be read and considered in its entirety.

CENVET INVITES APPLICATIONS FOR UP TO 15,000,000 UNRESTRICTED SHARES

The Company

Cenvet Group Holdings Limited ACN 092 375 221 is the Group Holding Company. Cenvet was first registered as a Company on 7 April 2000. As indicated elsewhere in this IM, the Company has applied to ASIC for its status to be changed from that of a proprietary company to a public company but at the date of this IM, the change has not yet taken effect. The change is expected to take effect when ASIC alters details of the Company’s registration. Pending subscription for Shares pursuant to this Offer, the current issued Share Capital of Cenvet comprises 60,000,000 fully paid issued Ordinary Shares.

Business Model

Cenvet is a wholesaler and distributor of veterinary pharmaceuticals, animal health and pet supplies. The business purchases products from manufacturers and on-sells (with a profit margin) to veterinary practices through its wholly owned subsidiary, Cenvet Australia Pty Ltd (Cenvet Australia) and specialty retail pet product outlets (excluding the grocery supermarket segment) through its wholly owned subsidiary Dr Neil’s Pet & Equine Pty Ltd (Dr Neil’s). The business model also involves the importation of exclusive agency lines and Cenvet Group branded products through Cenvet’s wholly owned subsidiary Veterinary Companies of Australia Pty Ltd (VCA).

Cenvet has a national footprint with distribution centres located in New South Wales, Victoria, Queensland and Western Australia. The South Australian, Tasmanian and Northern Territorian markets are currently serviced from the group’s Victorian distribution centre.

The Offer

This IM invites Applications for a total of up to 15,000,000 Shares in Cenvet at $0.60 per Share (Issue Price), to raise up to $9,000,000. The Offer is not underwritten.

Purpose of the Offer and Use of Funds

The purpose of the Offer is to raise a maximum of $9,000,000.

There is no minimum subscription.

The proceeds of the Offer, depending on the amount finally raised, will be applied: • to the cost of introducing new products and expand existing product ranges.

• in reducing interest bearing loans in the order of up to $1,500,000.

• in repaying or reducing amounts owing on loan accounts to the major shareholders of the Company and their

6

Cenversa Limited

Captital Structure

Assuming the Offer is fully subscribed, the capital structure of the Company will be as follows:

SHARE ISSUES

NO. OF SHARES

% OF SHARES

Shares on issue before Offer

60,000,000

76.19

Shares to be issued pursuant to Offer excluding Bonus Shares

15,000,000

19.05

Maximum Bonus Shares available pursuant to Offer

3,750,000

4.76

Position if maximum number of Shares including Bonus Shares are issued pursuant to the Offer

78,750,000

100.00

• •

Associates, up to an amount not exceeding $2,500,000. to meet the expenses of the Offer which are estimated at $350,000. in meeting the ongoing working capital needs of Cenvet.

Key Risks

Prospective Investors in the Company should be aware that subscribing for Shares involves a number of risks. The key risk factors of which Investors should be aware are described in Risk Factors commencing on page 28. Investors are urged to consider these risks carefully before deciding whether to invest in the Company.

Key Dates

The Share Offer will open on 7 June 2013 and is scheduled to close on 16 August 2013 (which is the last date by which the Company must receive Applications for Shares). The Company reserves the right to vary the Opening Date or the Closing Date of the offer.

Applications for Shares

Each Application for Shares must be for a minimum of 5,000 Shares ($3,000), and thereafter in multiples of 5,000 additional Shares.

Applications for Shares must be made on the attached Application Form and, where applicable, must be submitted together with a completed Eligibility Certificate (which appears at the back of the Application Form).

Completed Applications (and Eligibility Certificates) must be

Offer Information Statement

returned to Cenversa Limited at Locked Bag 4365, Blacktown BC, NSW 2148. Attention: Share Offer Administrator Payment must be made in full for all Shares applied for.

Payment may be made either by a cheque drawn on an Australian Bank and made payable to “Cenvet Group Holdings Limited – Share Application Account” and crossed “not negotiable”, or by Electronic Funds Transfer (EFT) into the following bank account: Account Name:

Cenvet Group Holdings Ltd – Share Offer

Account Bank:

ANZ Banking Group Limited

Branch:

Main Street Blacktown

BSB Number:

012-233

Account Number: 836286707 When payment is made by EFT, a copy of the EFT receipt must accompany the Application for Shares. The Applicant’s name should also be included within the reference field.

A completed and lodged Application Form will constitute an irrevocable request by the Applicant to subscribe for the number of Shares applied for.

No Applicant will be allotted Shares representing more than 15% of the increased issued Share Capital of the Company following allotments of Shares pursuant to this Offer.

7

CUSTOMER BONUS SHARES TO REWARD CUSTOMER LOYALTY, CENVET OFFERS UP TO 25% DEFERRED BONUS SHARES AT NO COST

(25% additional deferred share entitlement at no cost) Cenvet will provide an incentive to Applicants who are Customers (veterinarians, veterinary practices or pet product retailers). The incentive will be in the form of additional deferred Bonus Shares for those Applicants who agree to purchase minimum amounts of products from Cenvet during the two years ending 30 June 2014 and 2015.

The minimum amounts of products a Customer can agree to purchase from Cenvet on an annual basis to qualify for deferred bonus shares is fifty per cent of their current annual product purchases.

Providing the terms of the Bonus Share arrangements are met, Cenvet will allot and issue the said Bonus Shares to the qualifying Applicant within 30 days following 30 June 2015.

The Bonus Shares, when issued, will rank in all other respects equally with all of the issued Ordinary Shares in the Company.

Excluding supplier price increases and/or CPI increases, the price paid for products by Customers who commit to minimum amounts of products will be subject to at least the same or more favourable pricing terms that they currently receive from their supplier as at 31 May 2013.

The maximum dollar value of Bonus Shares qualifying Applicants will be entitled to, will, equal 25% of the lesser of: • the value of the Customer’s annual product purchase commitment made; or • the dollar value of the Shares subscribed for.

This dollar value will be converted to the number of Bonus Shares to be issued by dividing $0.60 being the Subscription Price per share For example, a customer may agree to purchase a minimum of $15,000 of products per month (i.e. $180,000 per year) from Cenvet. If that Customer subscribes for 300,000 shares they will qualify to receive an additional 75,000 deferred Bonus Shares at no additional charge. However if that same customer chose to subscribe for more than 300,000 shares, the amount of deferred Bonus Shares in this example would be limited to 75,000 shares.

8

Cenversa Limited

Conversion to Public Company

As previously indicated in this IM, an application has been lodged with ASIC for the Company’s registration to be changed from that of a proprietary company to a public company (and also for the Company’s name to be changed to “Cenvet Group Holdings Limited”). No Shares will be issued pursuant to this IM until the change to a public company takes effect.

Employees

Employees of Cenvet will be permitted to apply for Shares.

The Company intends to make available, up to a maximum of 600,000 shares to Senior Managers of the Company at a discount to the Issue Price, not exceeding 25%.

Allotment of Shares

The allotment of Shares to Applicants will occur as soon as possible after the Offer closes but may occur earlier subject to the director’s discretion. The Company retains absolute discretion in allocating Shares and reserves the right to allot to an Applicant a lesser number of Shares than the number for which the Applicant applies, or to reject an Application. If an Application is not accepted or is accepted in part only, the corresponding portion of the Application monies will be refunded.

The Company will have no liability to any person who is not allocated Shares or is allocated a lesser number of Shares. If no shares have been allotted within 4 months following the date of this IM, all Application monies received will be repaid in

ENQUIRIES

If you have any questions about this IM, please contact one of the Cenvet representatives listed below:

NAME

POSITION

TELEPHONE

EMAIL ADDRESS

NSW & QLD ENQUIRIES Lionel Bloom

CEO

0417 204 486

lionel.bloom@cenvet.com.au

Mark Appleby

Northern Regional Sales Manager

0417 223 599

mark.appleby@cenvet.com.au

Blythe Marques

NSW Senior Account Manager

0439 207 805

blythe.marques@cenvet.com.au

Sam Burdett

NSW Senior Account Manager

0400 355 249

sam.burdett@cenvet.com.au

Tim Carson

QLD Senior Account Manager

0417 204 403

timothy.Carson@cenvet.com.au

Southern Regional Sales Manager

0409 606 230

bryan.hawkins@cenvet.com.au

WA Branch Manager

0429 077 963

scott.shepherd@cenvet.com.au

Lionel Bloom

Chairman

0417 204 486

lionel.bloom@cenvet.com.au

Sam Haynes

Non-executive Director

0417 757 797

sam@sydneyanimalhospitals.com.au

Michael Quirk

Non-executive Director

0419 970 934

michael.quirk@petcorp.com.au

Jason Phillips

Non-executive Director

04XX XXX XXX

jason.phillips@jnpcapital.com.au

+61 2 9011 5565

jason.phillips@jnpcapital.com.au

VIC, TAS & SA ENQUIRIES Bryan Hawkins

WA ENQUIRIES Scott Shepherd

BOARD CONTACTS

CORPORATE & INTERNATIONAL ENQUIRIES Jason Phillips (JNP Capital)

Offer Information Statement

Corporate Advisor & Lead Manager

9

INDUSTRY OVERVIEW Cenversa Limited is a wholesaler and distributor of products to the Australian veterinary market and retail pet product sector. An overview of both the Australian veterinary market and the retail pet product sector is presented below. These markets combined (at a retail level), generate annual revenues of approximately $5.0bn1,2 excluding pet product sales in the grocery / supermarket segment.

From a Growth Perspective the Australian veterinary market and retail pet product sector are forecast to deliver annual growth, between 2013 and 2018, of 2.7% and 3.0% per annum respectively.1,2,3

Approximately 75% of revenue generated by the Australian veterinary market and the retail pet product sector relate to domestic companion animals or pets1,2. Australia is an attractive market for veterinary services with one of the highest incidences of pet ownership in the world3.

The size of the pet population and therefore the demand for the Australian veterinary and retail pet product market is mainly affected by household property sizes and types (owned vs rented), economic conditions and household disposable income levels.

Several trends over the last decade have led to an increase in demand for veterinary and household pet services and products. These trends include: • •

•

increased awareness of animal health issues, resulting in an increased willingness to acquire higher value elective procedures including diagnostic and surgical procedures and increased demand for new pharmaceutical products and premium pet products; changing demographics and increased urbanisation leading to a shift towards medium and high density housing encouraging a move towards smaller breeds, particularly in relation to dogs. Smaller breeds of pets generally live longer and require a greater level of veterinary care as they mature; and changing attitudes towards pets (ie. treating the pet as part of the family), which results in increased demand for relatively new products and services such as pampering services and traditionally human services such as burials.

As illustrated in the table below, most spending on pets relate to veterinary services (~37%) and pet food (~31%).

17

%

31%

PET CARE SERVICES

CONSUMER EXPENDITURE ON PETS (2009)

37%

10

%

PET FOOD

PET PURCHASES

5%

PET CARE PRODUCTS

VETERINARY SERVICES

Source: Contribution of the pet care industry to the Australian economy, 7th Edition 2010, Australian Companion Animal Council Offer Information Statement

11

AUSTRALIAN VETERINARY MARKET Market Definition and Growth Factors

Cenversa Limited, through its wholly owned subsidiary, Cenvet Australia Pty Ltd (Cenvet Australia), generates the majority of its revenue from wholesaling and distributing products to the Australian veterinary market.

The Australian veterinary market is made up of veterinary practitioners and animal hospitals. At a retail level, the industry generates approximately $2.5bn per annum1.

The Australian veterinary market’s growth, in general, can be monitored via the number of registered veterinarians. As shown in the graph below, the number of registered veterinarians has grown at an average compound annual growth rate (CAGR) of 4.4% since 19911. Going forward (2013-2018), the number of registered veterinarians is anticipated to grow at 2.7% per annum1.

2.7%

14,000 12,000 4.4%

10,000 8,000

4.1% C

C AG

R

%C

4.7

AG

C AG

R

R

AG R

6,000 22%

4,000 2,000 0 1991

2001

2013

2018

Market Size

The wholesale Australian veterinary market sources products from pharmaceutical and animal health manufacturers and supplies these to veterinary practices and animal health hospitals.

Cenversa Limited management estimates that the wholesale Australian veterinary market generates revenues of approximately $600m per annum.

Competitors

Cenversa Limited management believe the wholesale Australian veterinary market is highly concentrated with three distributors including Cenvet Australia, accounting for over 80% of the market in Australia. These dynamics make it relatively difficult for new participants to enter into the market and/or achieve significant market share in the short term.

There has been strong acquisitive interest in the wholesale Australian veterinary market, with a number of major industry players having been acquired by international conglomerates in the last 3 years. This has resulted in Cenvet Australia being one of the largest Australian owned and operated companies in the local market. Cenversa Limited’s management believes that this status gives Cenvet Australia a competitive advantage to retain and attract customers and is also beneficial in retaining and recruiting employees.

12

Cenversa Limited

RETAIL PET PRODUCT MARKET Market Definition and Growth Factors

In addition to supplying the Australian veterinary market, Cenversa Limited, through its wholly owned subsidiary, Central Pet is a wholesaler and distributor to the retail pet product market. This is a significant strength and unique point of difference of Cenversa Limited, compared to its major competitors in the Australian veterinary market, as it allows the company to leverage its logistical capabilities, product range, expertise and sales force across two complementary and growing market segments. The retail pet product market includes businesses that sell pets, pet products and provide pet services. Businesses in the industry include pet stores and other retailers that sell pet food (e.g. supermarkets), animal shelters, grooming and pet boarding operations.

At a retail level, the overall retail pet product market generates approximately $5.6bn per annum1. Central Pet’s target market is a sub-segment of the retail pet products sector - pet specialty retail businesses excluding the grocery supermarket segment.

There are over 7,000 businesses operating in the retail pet products sector in Australia with the top four players in the industry accounting for less than 7% of revenue2. Pet Shops are the dominant non-grocery distribution channel accounting for 28.5% of sales. Pet superstores and veterinary practices are the next largest non-grocery distribution channels accounting for 7.7% and 7.8% of sales respectively4. This research supports Cenversa Limited’s management view that the size of its target market (ie: retail pet speciality market excluding the grocery supermarket segment) is approximately $2.5bn. The retail pet products sector is relatively resilient and only minimally affected by economic downturns as illustrated by the following chart which shows expenditure on pet care products between 2006 and 2009.

350 CAGR = 9.7%

300

$ MILLION

250 200 150 22%

100 50 0 2006

2007

2008

2009

Market Size

The wholesale and distribution market to the retail pet product sector sources products from various pet product manufacturers which are predominantly overseas, and supplies these to speciality pet retailers and supermarkets. Cenversa Limited management estimates that the size of the Australian wholesale pet product market, excluding the grocery/ supermarket segment, is approximately $500 million per annum.

Barriers to entry

The principal barrier to entry for new market participants relate to the ability to secure distribution agreements with manufacturers. The manufacturer base is highly concentrated and if a manufacturer decides to supply an unproven new market participant, it is likely such an arrangement would include significant supply and/or financial burdens.

It is also likely that the extent of market concentration in the wholesale product veterinary market would prove to be a natural barrier to entry, as it would be unlikely for a new market participant to achieve critical market share within a commercially viable time frame.

Participants in the wholesale Australian veterinary and pet product markets require a wholesale veterinarian drug licence to operate. In general terms, this is relatively easy to obtain and does not represent a significant barrier to entry for new competitors in the market.

Offer Information Statement

13

1960

Cenvet Pty Ltd commenced business in July 1960.

BUSINESS OVERVIEW

1967

Began importing agency lines from overseas for the vet market.

1976

Introduced the “Kiss” system. The first colour coded patient record keeping system for vets in Australia

1984

Sales reached $3.8m.

1985

Set-up a national warehouse distribution system with facilities in Sydney, Brisbane, Melbourne, Adelaide & Perth.

1986

Launched “Vetkem”. The first ‘Vet Only’ Flea control product line.

1988

Appointed the exclusive agent for Hills “Prescription Diets” in Australia.

1990

Sales reached $18m.

1992

Launched CET (Pet Dental Homecare Care) in Australia.

and suppliers. Cenversa Limited operates nationally, out of

1994

Launched “Advantage Club”- the first loyalty rewards program for Australian vets.

Melbourne, Brisbane, Perth and Launceston under a third

1998

Introduced frequent flyer points & credit card payments.

With a strong focus on customer service and on-time

2000

Sales reached $39m.

2003

Launched “Greenies” dental dog treats in Australia.

2005

Sales reached $64.5m.

2010

Acquired Dr Neil’s Pet & Equine; Sales reached $117m.

2011

Launched Galaxy Rewards Program.

2013

Converted to a public company and created a co-operative equity model.

2014

Acheived sales of $95.5m

2015

Achieved sales of $106m.

Launched shareholder rewards program CenSational Rewards.

Increased shareholder base to 231 members

Cenversa Limited is a well-established Australian-owned and operated wholesaler and distributor of animal health and retail pet products. The business distributes a wide range of products including antibiotics, vaccines, surgical instruments, disposables, flea control and super-premium food for dogs and cats.

Cenversa Limited supplies over 1,000 veterinary practices, as well as over 1,600 pet stores and retail outlets nationally. The business warehouses and distributes over 19,000 individual product lines and adds on average 125 new product lines into their system each month for over 175 manufacturers warehouses and customer support centres located in Sydney, party logistics arrangement.

deliveries, Cenversa Limited has a proven track record as one of Australia’s leading animal health and retail pet product supply companies.

Cenversa Limited’s core trading business units are Cenvet Australia Pty Ltd (Cenvet Australia) and Central Pet Pty Ltd (Central Pet) These two businesses account for over 90% of the Cenversa Limited’s revenue combined.

The balance of Cenversa Limited’s revenue is generated by Veterinary Companies of Australia Pty Ltd (VCA), Full Petential trading as Obay and Star I.P. VCA distributes exclusive agency and Cenvet branded products. Obay is an online vet endorsed retailer and Star I.P is the holding company for two

2016 14

businesses acquired in July 2015.

XXXXXX XXXX

Cenversa Limited

Corporate and Operational Structure

Cenversa Limited

Cenvet Australia Pty Ltd

Central Pet Pty Ltd

Veterinary Companies of Australia Pty Ltd

Full Petential Pty Ltd (Trading as Obay)

Cenversa Services Pty Ltd

Cenvet Veterinary Hospitals Pty Ltd

Supporting Business Unit

Subsidiary Holding Company

Trading Business Units

An overview of Cenvet’s trading and support business units are outlined in the table below:

BUSINESS

Cenvet Australia

Central Pet

VCA

Full Petential trading as Obay

Cenversa Services

SALES FY16: $85.2m FY15: $72.41m FY14: $67.47m FY13: $64.31m FY12: $64.15m

FY16: $39.6m FY15: $29.39m FY14: $23.95m FY13: $20.87m FY12: $21.97m FY16: $4.3m FY15: $4.02m FY14: $4.1m FY13: $3.66m FY12: $4.30m FY16: $143K FY15: $225K FY14: $301K FY13: $285K FY12: $163K

N/A

DESCRIPTION • National wholesaler and distributor of animal health and pet products to the Australian veterinary market.

• Oldest and largest trading entity within the Cenversa Group, representing approximately 65% of Cenversa Group’s total revenue.

• Offers a wide range of products and premium support services such as industry ‘Best Practice’ inventory management systems and customer loyalty programs.

• National wholesaler and distributor of animal health and pet products to pet stores and related retail outlets.

• Represents over 30% of Cenversa’s FY16 total revenue.

• Importer of exclusive agency and ‘private label’ lines for animal health and pet products.

• These items are sourced from trade shows and are important for developing new markets products.

• Obay is an ecommerce business promoting online sales of animal health and pet products in partnership with veterinary practices. Veterinarians receive a commission when their customers order and reference their unique code. Customers are also eligible for discounts on particular products when the unique code is referenced.

• Important and strategic channel for the Cenversa Group.

• Undertakes all warehouse and distribution activities for the Cenversa Group.

• Provides centrally managed support services including: Finance, administration, human resource management; and Information Technology support.

Cenvet Veterinary Hospitals Pty Ltd

Offer Information Statement

N/A

• CVH has been formed to purchase a equity position from veterinarians who are shareholders of Cenversa Limited.

15

PERTH BRISBANE

SYDNEY (HEAD OFFICE)

ADELAIDE MELBOURNE LAUNCESTON (3PL)

LOCATIONS Cenvet has support centres and warehouses situated in four locations around Australia. The locations of these centres have been strategically selected to ensure customer delivery times and freight costs are minimised.

Customers

The table below provides an overview of Cenvet’s customer profile across the group’s core trading business units.

CENVET AUSTRALIA

CENTRAL PETS

MARKET(S)

Veterinary

Retail pet products

# CUSTOMERS

1,000

1,500

TARGET CUSTOMER TYPE

Veterinary practices & animal hospitals

Speciality pet stores excluding supermarkets

CUSTOMER CONCENTRATION

11%

11+89 81+19 TOP 10 CUSTOMERS

89

%

OTHER CUSTOMERS

16

19%

TOP 10 CUSTOMERS AS A % OF CENVET'S F12 REVENUE

TOP 10 CUSTOMERS

TOP 10 CUSTOMERS AS A % OF CENTRAL PET'S REVENUE

89%

OTHER CUSTOMERS

Cenversa Limited

CENVERSA MANAGES OVER 500,000 PRODUCT MOVEMENTS PER MONTH

Logistics and Information Technology

A core value proposition of the Cenvet Group, both from a customer service and profitability perspective, is its logistical capabilities. The Cenvet Group has developed a proprietary computerised warehousing and distribution system, which: • •

•

•

caters for over 165,000 product movements per month enables real-time comprehensive and exception reporting and information on stock availability, expiry dates and backorder due dates. allows for multi-site warehouse distribution facilitating the holding of fast moving items in satellite warehouses around the country and allowing for the management of slower moving stock centrally from the Sydney head office distribution centre. Both these measures result in improved profitability through the holding of reduced stock levels; and incorporates ‘split order’ technology which allows customers to order any Cenvet Group or Dr Neil’s product without any additional administrative cost or delivery times.

The Cenvet Group’s logistical capabilities enables the group to maintain ‘best practice’ inventory management, leading to lower warehouse leasing costs, efficient order timeframes and increased fulfilment accuracy rates for the benefit of the Cenvet Group’s customers.

Suppliers and Products

The Cenvet Group distributes over 19,000 product lines from 175 different manufacturers and suppliers. The Cenvet Group’s

Offer Information Statement

wide range of products, include antibiotics and vaccines, surgical instruments, disposables, flea control and superpremium food for dogs and cats.

The Cenvet Group contracts with suppliers are typically renewed on an annual basis. The Cenvet Group sources its products from a concentrated number of manufacturers with 20 suppliers accounting for 85% of the Cenvet Group’s purchases.

In recent years, the Cenvet Group, through its VCA business, has also developed an extensive range of ‘private label’ consumable and disposable items, such as IV sets, extension sets, swabs, and examination gloves. For the retail pet products market, the Cenvet Group has also developed a comprehensive range of treats, shampoos and odour control products. These items have been sourced predominantly from overseas manufacturers. These ‘private label’ product lines: • • •

provide the business with more control over the supply of selected high volume items. can be sourced more cost effectively resulting in higher margins. if required, these items may also be used by the business as ‘loss leader’ products’ (as they are low cost) to source new customers and obtain greater market share.

In addition to the Cenvet Group’s strategy to develop an extensive range of ‘private label’ products, VCA’s focus has been, and will continue to be, on securing exclusive agency arrangements, (which normally enjoy higher margins) to create a point of difference in the market.

17

BOARD OF DIRECTORS

Mr Lionel Bloom B.Com, GAICD

Dr Sam Haynes BSc, BVMS, GCM (VP)

Mr Lionel Bloom commence with Cenversa Limited in 1984.

He has a commercial degree from the University of New South Wales and has held the position of Chairman and CEO of Cenversa Limited for the past 12 years. He has a proven track record in business and brings to Cenversa Limited a high level of expertise in a number of areas including business management, marketing, supply chain management and stock control. Lionel is a member and graduate of the Australian Institute Company Directors.

Dr Sam Haynes is the founder of the Sydney Animal Hospital Group. He brings to the Cenversa Limited Board a deep understanding of the changing needs of veterinarians and extensive veterinary hospital management experience. Sam is a member of the Australian Veterinary Association (AVA). He has held various committee and board roles with the AVA in the past, including being elected president of the NSW division of the AVA in 1997 and as a committee member of the ASAVA between 1999 and 2001 and the AVA board between 1996 and 1998.

Mr Michael Quirk BSC. Hns, Mech Eng, MBA

Mr Jason Phillips BCom, Grad Dip App Fin, Dip FS(FP), FCA

Mr Michael Quirk brings extensive business managment experience to the Cenversa Limited Board. Michael's business experience ranges from working in a Divisional General Manager role for a multi-national construction products company to acquiring and developing a chain of childcare centres in Sydney in anticipation of an initial public offer (IPO) on the Australian Securities Exchange. In 2004, prior to an IPO, an offer to acquire the chain by a large listed childcare company was accepted.

Following the sale of his chain of child care centres, Michael established Petcorp Pty Ltd in 2005. Petcorp is the owner and operator of the Vet Friends veterinary hospitals group.

Mr Jason Phillips was appointed as a non-executive director on the 22nd October 2015. Jason brings extensive financial management and corporate advisory experience to the Cenversa Limited Board. As a Chartered Accountant with over 25 years of public practice and commercial experience, Jason has held senior roles in some of Australia's leading accounting firms and financial institutions. In these roels, Jason has advised clients on taxation, business valuation and corporate finance related matters. Jason is a Fellow and former Chairman (NSW State Council) of the Institute of Chartered Accountants Australia and New Zealand.

Chairman and CEO

Non-executive Director

18

Non-executive Director

Non-executive Director

Cenversa Limited

Cenversa Limited’s Board is supported by an experienced management team and well-established staff structure of approximately 100 full-time equivalent (FTE) employees. An overview of Cenversa Limited’s operational team structure and the applicable head count for each function is outlined in the table below. Each functional team is headed up by an executive manager who is a long standing employee of the Group.

Group CEO / Managing Director

Cenvet Australia FTE = 29

Central Pet FTE = 11

Logistics FTE = 39

Finance FTE = 8.5

HR FTE = 1.5

IT FTE = 5

Vision & Future Initiatives Whilst the Directors believe that the future initiatives described below will contribute to increased revenue, improved profitability and the maximisation of shareholder value, there can be no certainty that all of these expectations can be achieved and accordingly Investors are referred to the paragraph headed “Future Prospects and Performance”, included in the RISK FACTORS section commencing on page 28 of this IM. The Cenvet Board have endorsed the strategic vision and core initiatives supporting the forecast financial performance of the group. This vision and initiatives are aimed at increasing revenue, improving profitability and maximising shareholder value. A summary of Cenvet’s vision and supporting initiatives is outlined in the table below:

VISION / INITIATIVE

RATIONALE & BENEFITS TO CENVET SHAREHOLDERS

Creation of a co-operative model where

By creating a co-operative style model, Cenvet’s customers and key employees have the opportunity to share in the

the company’s future growth and

potential profitability improvements and capital growth of the business. Such a co-operative model is expected to

success is shared with customer and

retain and increase sales from existing customers and attract new customers and therefore grow revenue providing

employee shareholders.

customers and staff with the potential to receive on-going dividends.

Further expansion of a diversified

Cenvet’s management have identified growth opportunities in the retail pet product sector. Solid growth is forecast

business, leveraging its core strengths

for the sector and the wholesale and distribution market to that industry is relatively fragmented (compared to the

across multiple markets, capitalising

veterinary services industry) presenting Cenvet with opportunities to gain market share in the sector.

on potential growth opportunities and mitigating the risk of a potential downturn (slower growth) in a single market.

Cenvet’s superior logistical capabilities will be increasingly important as the retail pet product sector consolidates.

Product suppliers, including Cenvet will need to be able to efficiently service networks of stores around the country.

Cenvet has the advantage of being able to leverage off its logistical capabilities including its national warehouse footprint, which represents a significant competitive advantage, through shorter delivery times, to secure contracts in the sector.

The first quarter of calendar year 2013 also saw Cenvet commence offering premium pet food to Dr Neil’s and Obay customers. Offering pet food is seen by Cenvet management as a critical step to grow revenue as it accounts for approximately 31% of total consumer expenditure on pets4 and is the largest single product item in the sector.

Through the offering of pet food Cenvet management anticipate the following:

• existing customers will add pet food to their regular orders as long as the offering is price competitive; and • Dr Neil’s and Obay should acquire new customers who will be attracted by the opportunity to source all products from a single supplier.

Notwithstanding the early stage of this strategy, in the first quarter of calendar year 2013, the Dr Neil’s business secured a commitment of $5m in annual sales from a new customer operating in the speciality retail pet product sector.

Offer Information Statement

19

FINANCIAL PERFORMANCE Cenvet’s trading statements and consolidated balance sheet is detailed in the Investigating Accountant’s report included in this Information Memorandum. A summary of Cenvet’s financial performance and relevant commentary is outlined below:

$AusM Total Sales

FY10

FY11

FY12

FY13(f)

FY14(f)

FY15(f)

117.09

112.89

94.45

91.83

105.60

116.81

-3%

13%

10%

18.25

20.69

22.92

20%

20%-

20%

15.46

16.47

17.33

17%

16%

15%

4.37

5.47

6.84

1%

25%

25%

Growth % Gross Profit

21.61

22.11

19.43

GP % Total Expenses

15.41

16.85

16.73

% of Sales EBITDA

7.79

7.19

Growth %

Sales

The reduction in gross sales since FY10 can be attributable to the following: •

•

In line with the change in Cenvet management’s strategic direction, annual sales to non-core markets (eg: overseas customers and internet retailers) have decreased from $18.2m in FY10 to $1m in FY13. This was regarded as a positive step for the group, due to the low margins being achieved from such sales and reflects Cenvet management’s decision to reduce its exposure to these markets.

Increased competition in the Australian veterinary market has seen Cenvet Australia experience a reduction in annual sales of $8.5m since FY10. Since 1 July 2012 this trend has been reversed with Cenvet Australia increasing sales in FY13.

Cenvet’s management believe the move to a customer co-operative model will attract new customers and retain existing customers. Key aspects of the Offer have also been designed to incentivise new and existing customers to increase their purchases from Cenvet over the next 24 months.

The offering of premium pet food by Dr Neil’s and Obay from early 2013 should also see sales increase in FY14 as food is the largest single product item in the sector. Furthermore, Cenvet’s move to a state based distribution model in 2013 has resulted in shorter delivery times and ‘best practice’ inventory management, thereby creating a competitive advantage and platform for sales growth.

20

4.34

Gross Profit Margin

Increased competition in the retail pet products sector has seen the gross margin in relation to Dr Neil’s sales decrease in FY12 and FY13(f). Cenvet’s management believe the combination of introducing food product lines to Dr Neil’s and Obay and a market leading logistics model presents a significant competitive advantage for Dr Neil’s to compete on service delivery and product range rather than price, creating a foundation to increase sales and improve gross margins in the Dr Neil’s and Obay businesses in FY14.

In addition to increased competition in the pet product market, VCA has not been able to source its largest selling product due to quarantine issues during FY13. This product is a high margin product contributing approximately $250,000 to gross profit in FY12. It is anticipated that the Australian quarantine issue will be resolved, including the possibility of Cenvet manufacturing the product in Australia under licence, in first quarter FY14. At that time, sales of this product and associated high gross margins are expected to return to FY12 levels during FY14.

Cenvet Australia increased its product range of exclusive and/ or higher margin items in 2013. Sales from these new products including Carestream digital x-ray equipment have been very encouraging in late third and fourth quarter FY13. Cenvet Management anticipates that this success will continue in FY14.

Profitability

Cenvet has undertaken a continuous operational improvement program since FY12. These initiatives have resulted in a lower expense-to-sales ratio and improved profitability in FY13.

Cenvet management anticipate further improvements in the expense- to-sales ratio and profitability in FY14 and FY15.

Cenversa Limited

03 June 2013

The Directors Cenvet Group Holdings Limited 26 Binney Road Kings Park NSW 2148

Dear Sirs

CENVET GROUP HOLDINGS LIMITED – INVESTIGATING ACCOUNTANTS’ REPORT

INTRODUCTION

We have prepared the Investigating Accountants’ Report (‘the Report’) at the request of the Directors of Cenvet Group Holdings Limited (the ‘Company’ or ‘Cenvet’) for inclusion in an Information Memorandum (IM) to be dated June 2013 to be issued by the Company regarding an offer to take up shares in the Company.

References to Cenvet, the Company, and other terminology used in this report have the same meaning as used in the IM in which this report appears.

SCOPE OF REPORT

You have requested that Commercial Associates Accountants and Advisors Pty Ltd (Commercial Associates) prepare an Investigating Accountants’ Report reviewing the following financial information:

a) the Audited Historical Consolidated Balance Sheets of Cenvet as at 30 June 2010, 30 June 2011, 30 June 2012;

b) the Audited Historical Consolidated Income Statements of Cenvet to 30 June 2010, 30 June 2011, 30 June 2012;

c) the Pro Forma Consolidated Trading Statements as at 30 June 2010, 30 June 2011 and 30 June 2012 which assume completion of pro forma transactions and adjustments;

Together we refer to the above hereafter as the ‘Historical Financial Information’.

d) the forecast Consolidated Trading Statements for 30 June 2013, 30 June 2014 and 30 June 2015

e) the interim Consolidated Balance Sheet as at 13 April 2013, and the Pro Forma interim Consolidated Balance Sheet at a date assuming the completion of the share offer.

The items at d) and e) above being referred to as ‘Prospective Financial Information’.

Y P O C S T T F DR A OUNTAN C C A 5 R 1 E 0 T 2 LET

21

The Pro Forma Consolidated Trading Statement for 30 June 2010, 30 June 2011 and 30 June 2012 has been derived from the Audited Consolidated Financial Statements of Cenvet after allowing for the pro forma transactions and adjustments with respect to completed cost saving measures, non arms length transactions or once off abnormal items.

The Pro Forma Consolidated Trading Statement for 30 June 2010, 30 June 2011 and 30 June 2012 were reviewed by Commercial Associates in accordance with the Australian Auditing Standard on Review Engagements ASRE 2400 Review of a Financial Report Performed by an Assurance Practitioner Who is Not the Auditor of the Entity

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.

The Directors of Cenvet are responsible for the preparation of the Historical and Prospective Financial Information, including the determination of the pro forma transactions and/or adjustments. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the Historical Financial Information.

The Historical and Prospective Financial Information is presented in an abbreviated form in so far as it does not include all of the detail or disclosures required by Accounting Standards in Australia applicable to annual financial reports prepared in accordance with the Corporations Act 2001.

SCOPE OF REVIEW HISTORICAL FINANCIAL INFORMATION

We have reviewed the Historical Financial Information of Cenvet in order to state whether, on the basis of the procedures described, anything has come to our attention which causes us to believe that the Historical Financial Information is not presented fairly in the IM.

Our review of the Historical Financial Information has been conducted in accordance with Australian Auditing Standard on Review Engagements ASRE 2400 Review of a Financial Report Performed by an Assurance Practitioner Who is Not the Auditor of the Entity. We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

PROSPECTIVE FINANCIAL INFORMATION

We have reviewed the Prospective Financial Information of Cenvet in order to provide limited assurance on whether, on the basis of the procedures described, anything has come to our attention which causes us to believe that the Prospective Financial Information is not presented fairly in the IM.

We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances.

Y P O C S T T F A N R A T D N U O C C A 5 R 1 E 0 T 2 LET

22

Cenversa Limited

These procedures do not provide all the evidence that would be required in an audit or a review. We have not performed an audit or review and, accordingly, we do not express an audit or review opinion.

We disclaim any responsibility for the achievability of such results indicated by the Prospective Financial Information.

REVIEW STATEMENT HISTORICAL FINANCIAL INFORMATION

Based on our review, which is not an audit, we believe that:

a) the Audited Historical Consolidated Balance Sheets of Cenvet as at 30 June 2010, 30 June 2011 and 30 June 2012;

b) the Audited Historical Consolidated Income Statements, Statements of Cenvet for the period ended 30 June 2010, 30 June 2011, and 30 June 2012;

c) the Pro Forma Consolidated Trading Statements of Cenvet as at 30 June 2010, 30 June 2011 and 30 June 2012, which assumes completion of the proposed pro forma transactions and adjustments relating to introduced cost saving measures, non arms length transactions or once off abnormal items;

do present fairly the pro forma consolidated financial position of Cenvet for the periods ending 30 June 2010, 30 June 2011, and 30 June 2012. As presented in the IM dated May 2013.

PROSPECTIVE FINANCIAL INFORMATION

Based on our inspection, which does not constitute and audit or review, we believe that the forecast Consolidated Trading Statements for 30 June 2013, 30 June 2014 and 30 June 2015, do with limited but reasonable assurance provide adequate grounds for the preparation of the Prospective Financial Information.

Based on representations from the directors and officers of the company, which do not constitute and audit or review, the interim Consolidated Balance Sheet as at 13 April 2013, and the Pro Forma interim Consolidated Balance Sheet at a date assuming the completion of the share offer, do provide qualified limited assurance as adequate grounds for the preparation of the Prospective Financial Information.

Given the nature of forecasts, and unaudited interim results in general, actual results may differ.

SUBSEQUENT EVENTS

Subsequent to 30 June 2012 and up to the date of this Report, nothing has come to our attention that would cause us to believe material transactions or events outside of the ordinary course of business of Cenvet have occurred, other than matters dealt with in this Report or the IM, which would require comment on, or adjustment to, the information in our Report or that would cause such information to be misleading.

Y P O C S T T F A N DR OUNTA C C A 5 R 1 E T 20 LET

Offer Information Statement

23

INDEPENDENCE AND DISCLOSURE OF INTERESTS

Commercial Associates does not have any interest in the outcome of this issue other than the preparation of this Report for which normal professional fees will be received.

RESPONSIBILITY

Commercial Associates has consented to the inclusion of this Investigating Accountants’ Report in the IM in the form and context in which it is so included, but has not authorised the issue of the IM. Accordingly, Commercial Associates makes no representation regarding, and takes no responsibility for, any other statements, or material in, or omissions from, the IM. Further, the financial information attached to this report, historical or prospective, is not intended to imply authorship by Commercial Associates, or limit in any way the responsibility of the directors for that information.

Yours faithfully, Commercial Associates

Fleming Stojanovski Director

Y P O C S T T F A N R A T D N U O C C A 5 R 1 E 0 T 2 LET

24

Cenversa Limited

Cenvet Group Holdings Ltd Proforma Historical Trading Statements Financial Year 2010, 2011, 2012

Sales Sale of Goods Rebates and Recoveries Other income Discounts Allowed Total Sales Cost of Sales Gross Profit % of Sales

Total Expenses % of Sales

2010-­‐2011

2011-­‐2012

$116,511,730 $112,782,349

1,578,636 1,895,687 5,134 44,858

-­‐1,008,315 -­‐1,828,226

117,087,185 112,894,668

95,481,566 90,780,720

21,605,619 22,113,948

18.45% 19.59%

15,413,602 16,845,485

13.16% 14.92%

6,192,017 5,268,463 5.29% 4.67%

7,791,901 7,189,260

$96,453,705 1,072,797 43,274 -­‐3,119,226 94,450,550

75,016,224 19,434,326 20.58%

16,734,226 17.72%

Y P O C S T T F A N R A T D N U O C C A 5 R 1 E 0 T 2 LET

Profit before income tax % of Sales

EBITDA

2009-­‐2010

2,700,100 2.86%

4,343,581

Cenvet Group Holdings Ltd

Proforma Prospective Trading Statements (Projections) 2013, 2014, 2015

Sales Sale of Goods Rebates and Recoveries Other income Discounts Allowed Total Sales

Cost of Sales Gross Profit % of Sales

Total Expenses % of Sales

Profit before income tax % of Sales

EBITDA

2012-­‐2013

$90,682,038 607,382

-­‐2,263,519 89,025,901 70,771,336

2013-­‐2014

18,254,565

19.88%

15,463,586

16.84%

2,790,979

3.04%

4,367,949

$107,578,685 643,195

-­‐2,624,920 105,596,960 84,908,144

2014-­‐2015

20,688,816

19.59%

16,466,653

15.59%

4,222,163

4.00%

5,467,779

$118,741,987 967,594 -­‐2,897,305 116,812,276

93,891,596 22,920,680 19.62% 17,328,291 14.83% 5,592,389 4.79% 6,842,168

Cenvet Group Holdings Interim Balance Sheets 2013

Offer Information Statement

25

Current Assets Cash Assets Cash Raised pursuant to IM

Trade Receivables (net provision)

Trade Receivables provision

Income Tax Refundable

Inventories

Loans Receivable from related parties

Total Current Assets

Actual Note 30th April 2013

Proforma at time of share issue

12,376

12,375

5,000,000

11,266,841 (756,897)

24,457

10,116,646

11,266,841

(756,897)

24,457

10,116,646

Y P O C S T T F A N R A T D N U O C C A 5 R 1 E 0 T 2 LET

Non-­‐ Current Assets Inventories (net provision)

Inventory Provision

Plant and Equipment

Lease Hold Improvements

Motor Vehicles

Office Equipment

Furniture and Fittings

Fixed Assets under Lease

Related Party Asset

Deferred tax assets

Other Assets

Intangible Assets Goodwill

Intangible Assets Trademarks and Patents

26

183,236

1

20,846,659

554,034

(352,132)

436,978

1,010,250

77,066

240,677

197,546

631,046

1,076,723

898,656

59,968

45,250

5,022,224

25,663,422

554,034

(352,132)

436,978

1,010,250

77,066

240,677

197,546

631,046

898,656

59,968

45,250

8,822,224

Cenversa Limited

Intangible Assets Accumulated Amortisation

Total Non current Assets

TOTAL ASSETS Current Liabilities Trade Payables

Finance Lease Obligations

Related Party Loans

Employee Entitlements

Operating Lease payables

Payables to related parties

Interest Bearing Liabilities

Total Current Liabilities

1

(2,139,500)

(2,139,500)

7,758,786

10,482,063

28,605,445

12,567,315

204,511

82,873

635,178

26,760

127,873

9,126,048

36,145,485

12,567,315

204,511

635,178

26,760

867,391

7,626,048

Y P O C S T T F A N DR OUNTA C C A 5 R 1 E 0 T 2 LET

Non-­‐Current Liabilities Operating lease payables

Borrowings-­‐Finance Lease Obligations

Related Party Loans

Long term provisions-­‐Employee Benefits

Total non-­‐current liabilities

TOTAL LIABILITIES Net Assets (liabilities) Equity Contributed Equity

Shares issued during the period

Retained Profits TOTAL EQUITY Note 1 Note 1

1

22,770,558

87,121

286,474

21,927,203

87,121

286,474

616,605

59,399 59,399

1,049,599 432,994

23,820,157 22,360,197

4,785,288 13,785,288

4 4

4,785,284 4,785,288

9,000,000

4,785,284 13,785,288

It is anticipated that the Related Party Asset will be transferred from the Cenvet group to Mr Bloom or entities associated with him and that the debt owed by the Company and its subsidiaries is to be released and taken over by Mr Bloom or his associated entities prior to 30 June 2013. Given that this transaction had not occurred prior to the issue of the IM and invitations being made to prospective investors to subscribe for shares, Mr Bloom has entered into an agreement with the Company pursuant to which he has undertaken to procure their release from the loan obligation associated with the Related Party Asset and personally indemnify Cenvet from any further liability arising from this obligation.

Offer Information Statement

27

RISK FACTORS An investment in Cenversa Limited is not risk free and the directors strongly recommend potential investors to consider the risk factors described below, together with information contained elsewhere in this Offer Information Statement, having regard to their own investment objectives and financial circumstances and consult their professional adviser(s), before deciding whether to apply for shares pursuant to this Offer Information Statement.

There are specific risks which relate directly to the Cenversa Limited business. In addition, there are other general risks, many of which are largely beyond the control of the Directors.

The risks identified in this section, or other risk factors, may have a material impact on the financial performance of Cenversa Limited and/ or the value of an investment in Cenversa Limited.

The factors detailed below should not be taken as an exhaustive list of all possible risks. Additional risks and uncertainties not presently known to the Directors may also have an adverse effect upon the Company.

Future Prospects and Performance

There are a number of statements made in this IM about the Company’s future expectations and performance, including its financial performance. These are referred to, for example under the Vision & Future Initiatives commencing on page 19 and are also included in the Prospective Trading Statements (Projections) for the 2013, 2014 and 2015 years as shown in the pro forma accounts on page 25 of this IM. Whilst the Company’s management and its Directors believe that there are good reasons to expect and to look forward to these positive future outcomes, increased sales and greater profitability, there can be no certainty that this will eventuate or that the results foreshadowed will necessarily be achieved. If the increased sales, opportunities to gain market share, additional customer orders and new customers do not eventuate or the product supply issue on page 20 is not satisfactorily resolved then it is unlikely that the foreshadowed level of performance will be achieved, as indicated in the pro forma, prospective trading statements.

No Minimum Subscription

There is no minimum subscription requirement. If the amount subscribed falls below the amount required by the Company to meet its objectives, and the Company proceeds to allot shares to Applicants, there is a risk that the Cenversa Limited may not be able to achieve some or all of its stated aims in the short term, or at all.

28

Unlisted Shares

Investments in shares which are not traded on an exchange involve a higher degree of risk and are less liquid than investment in companies whose shares are listed. As such, an investment in the Company may be difficult to realise. The value of the Shares may go down as well as up and may not reflect the underlying value of the Company. Potential investors may have only a limited opportunity to sell their Shares and may therefore have to bear the economic risk of holding their investment for an indefinite period of time.

General economic conditions

The Company’s operating and financial performance is influenced by a variety of general economic conditions including the level of inflation, interest rates, exchange rates, taxation rates, industrial disputes, changes to applicable laws and accounting/auditing practices and government fiscal, monetary and regulatory policies. Any prolonged deterioration in general economic conditions may discourage people from introducing pets into their household which may reduce the demand for pet products and services. Additionally, existing pet owners may spend less on their pets, which would reduce the demand for pet products and services.

Acquisitions and Investments

The Company intends to assess and from time to time consider making strategic acquisitions or investments in businesses or services which are allied to or compatible with the Company’s business activities. In such circumstances it may become necessary to raise additional capital, in the form of issuing additional shares in the Company and/or borrowing additional funds, to finance such acquisitions and investments. The issue of additional Shares would result in a corresponding dilution in the percentage holding of the Company’s Shareholders.

Increases in the Company’s debt levels may increase the overall risk profile of your investment in the Company. The success or failure of any such acquisitions or investments cannot be determined or assessed in advance.

The Directors will also consider the introduction of one or more significant investors who may potentially become involved in the Company either as Shareholders and/or in a participating role. If such an investment eventuates, it may be by way of a transfer of Shares by the Company’s controlling Shareholders (resulting in a diminution in their level of control) or an issue of additional Shares.

Supply risk

There is a risk that the supply of stock to the Company is

Cenversa Limited

interrupted, delayed or may completely cease. This may occur for a variety of reasons including manufacturer issues, changes to distribution agreements or quarantine restrictions.

If this occurs, particularly in relation to the Company’s key product lines, there could be a material adverse impact on the Company’s operating and financial performance.

Exchange rate fluctuations

Information technology and logistics system risk There is a risk that there are issues with the proprietary logistics system that controls the Company’s inventory management, ordering and distribution to customers. If there is a malfunction in the logistics system, there could be a material adverse impact on the Company’s operating and financial performance.

Regulation and legal issues

Operating cost variation risk

A change to the current taxation regime in Australia may affect Cenversa Limited and its Shareholders. Personal tax liabilities are the responsibility of each individual Shareholder.

The Company is also exposed to the risk of variations in operating costs including staff salaries, wages, rental and other variables.

Key Employees

The Company’s success will depend largely on the expertise of the Directors and the executive management team. The retention of their services cannot be guaranteed. The loss of key personnel could impact on the performance of the Company.

Competition

There is always the risk of increased competition from other product and service providers. There can be no assurance that the actions of these competitors including heavy discounting to increase market share or changes in customer choice will not adversely affect the Company’s performance. It is also possible that new competitors will enter the industry and this also may adversely affect the Company’s performance.

Customer Consolidation risk

There is a risk that customers may merge or consolidate, particularly in the retail pet product sector, at a retail level. In an environment of customer consolidation, there is a risk that the Company’s customers will have an increased ability to influence trading terms with the Company, which may adversely affect the Company’s performance.

Additionally, some customers may choose to source and warehouse product themselves (including developing their own private label products) if they achieve sufficient scale. This may result in reduced business for the Company, which may adversely affect its performance.

Offer Information Statement

The Company may be affected by exchange rate fluctuations that may influence the price of its products. In some circumstances, the Company may not be in a position to pass on price increases caused by adverse exchange rate fluctuations.

The Company’s business is subject to a number of regulatory requirements. Changes in the laws, regulations, government policy and administration regimes, may adversely affect the Company.

Tax

Sufficiency of funding

The Directors expect that the proceeds of the Offer will provide sufficient resources to enable the Company to achieve its medium term business objectives. However, the Directors can give no assurances that there will be no future borrowings or further capital raisings. If such borrowings or capital raisings are required, the availability of capital and terms of such arrangements are not known at this time.

Insurance

The Company maintains insurance policies covering its usual business risks. There are, however, some losses, such as from floods and earthquakes or other unforeseen circumstances, that are generally not insured at replacement cost or that are insured subject to large deductibles. The availability of ongoing insurance will be dependent upon a number of factors such as continued availability of coverage, the nature of risks to be covered, the extent of the proposed coverage and costs involved.

Legal Action

Cenversa Limited is not aware of any material legal claims against it or grounds for making of any such claim. However, there is always the possibility of legal proceedings involving the Company or which may be related to the supply of its products.

Litigation or disputes may adversely affect the profitability of the Company, the value of its assets, or the value of its Shares.

29

ADDITIONAL INFORMATION Registration

Cenvet was registered on 7 April 2000. Vetstar Group Holdings Pty Limited ACN 092 375 221 has resolved that it will be converted from a proprietary to a public company limited by shares, that it will adopt a new Constitution and that it will change its name to “CENVET GROUP HOLDINGS LIMITED”. An application has been lodged with ASIC. However at the date of this IM, ASIC has not yet altered the details of the Company’s registration to reflect the Company as a public company. The Directors expect the Company will be taxed in Australia as a public company.

Constitution

The following is a summary of the key provisions of the Cenversa Limited’s Constitution. A copy of the constitution will be made available on request.

Shares

Shares in the capital of the Company may be issued with preferred, deferred or other rights, as determined by the Directors from time to time. Unissued shares are under the control of the Directors.

Share transfers

Shares may be transferred by any instrument in writing in any usual or common form.

Meeting procedure

Each shareholder and Director of the Company is entitled to receive notice of and attend a general meeting of the Company. Two shareholders must be present to constitute a quorum for a general meeting and no business may be transacted at any meeting (except the election of a Chairman or an adjournment), unless the quorum is present at the start of business. The Company is obliged to convene and hold an annual general meeting.

Voting rights

The Shares which are the subject of this Offer carry the right to cast one vote on a show of hands and on a poll, one vote for each fully paid share held.

Directors

There must be a minimum of three Directors and a maximum of 12 Directors (not including alternate Directors). Elections of Directors by members in general meeting must occur each year. The constitution provides that some Directors must retire each year, but they are eligible for re-election.

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A director is generally disallowed from voting on any contract or arrangement in which they have a material interest.

Dividends

If the Directors determine that a dividend is payable, it will be paid on all Shares of the same class proportionate to the total amount for the time being paid on each Share of that class.

Dividends may only be paid if permitted by the Corporations Act. The payment of Dividends is dependent on the Company’s profitability.

The Directors have the power to capitalise and distribute the whole or part of the undivided profits of the Company.

Indemnities and insurance

The Company indemnifies current and past Directors, secretaries and executive officers against any liability incurred by them by virtue of their holding office as, and acting in the capacity of, director, secretary or executive officer, other than a liability owed to the Company or a related body corporate of the Company or a pecuniary penalty order or compensation order or where the liability does not arise out of conduct in good faith. The Company may also pay insurance premiums for officers to the extent permitted by the Corporations Act.

Director Interests

At the time of preparing this Offer Information Statement, Shares in the Company held by Directors or interests associated with the Directors are as follows:

Name of Director

Number of Shares

Mr Lionel Bloom

60,000,000

The Directors may subscribe for additional Shares under this Offer.

Mr Lionel Bloom, the Company’s Chairman / Group Chief Executive Officer and controlling Shareholder has interests in other businesses which are customers of Cenversa Limited.

These include the following: • •

Greenhills Veterinary Centre Pty Limited which operates a veterinary hospital in East Maitland. Mr Bloom is a Director of this entity.

Pet General Pty Ltd. Mr Bloom is not a director of this

Cenversa Limited

•

entity but holds a small interest (less than 10%) through a related entity.

Ganan Ltd a New Zealand based company. Mr Bloom is a director and shareholder of Ganan Ltd.

Mr Lionel Bloom has an interest in DK Media. DK Media supplies some graphic design, websites and internet hosting services to both Cenversa Limited and Cenvet Australia customers.

Interests associated with Mr Lionel Bloom have entered into various Put and Call Agreements with a number of Shareholders of Vetshare Limited which may potentially result in the acquisition of some or all of those Shares.

Mrs Melanie Bloom (Mr Bloom’s spouse) leases to the Company the premises at Kings Park NSW. The lease has been entered into on arm’s length terms. In addition to the premise’s lease, art work and some furniture & fittings utilised by the company are owned by Mrs Bloom. Charges relating to use of these assets are on arm’s length terms.

Dr Sam Haynes, an independent director of the company has interests in other businesses which are customers of Cenversa Limited. These businesses are known as the Sydney Animal Hospital Group. Dr Haynes has an interest in an entity owning a significant shareholding in Vetshare Limited.

Mr Michael Quirk, an independent director of the company has an interest in other businesses which are customers of Cenvet.

These businesses, collectively, are known as the Vetfriends Group.

Remuneration of Directors

No amounts of any kind (whether in cash, Shares or otherwise) have been paid or agreed to be paid to any Director to induce him to become, or to qualify as, a Director.

The Constitution provides that the Directors (other than the managing director or an executive director) may collectively be paid as remuneration for their services a fixed sum not exceeding an amount per annum determined by members in general meeting. The Company has determined the maximum sum to be $150,000 for the financial year ended 30 June 2014.

reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties. The remuneration of an executive Director is determined by the Directors.

Related party transactions

There are no related party transactions contemplated by the Company at the time of preparation of this Offer Information Statement other than as disclosed in this Offer Information Statement.

Material Contracts

On 31 May 2013 Mr Lionel Bloom and Cenvet executed a Deed pursuant to which Cenvet acquired from Mr Bloom, certain trademarks (including the “Vetstar” trademark).

At the same time, the pre-existing Trademark License Agreement pursuant to which Cenvet had paid Mr Bloom an annual royalty was terminated.

There are no other material contracts with the exception of those expressly mentioned in other parts of the IM.

Consents and disclaimers of responsibility

None of the parties referred to below has made the Offer, nor have they made any statement that is included in this IM or any statement on which a statement made in this Offer Information Statement is based, except as specified below.

Each of the parties referred to below, to the maximum extent permitted by law, expressly disclaims, and takes no responsibility for, any part of this IM, other than the reference to its name and a statement included in this Offer Information Statement with the consent of that party, as specified below: JNP Capital Pty Limited (JNP Capital) has given and has not withdrawn its consent to be named in this IM as the Corporate Advisor and Lead Manager, in the form and context in which it is named. JNP Capital has not authorised or caused the issue of this IM and takes no responsibility for any part of this IM other than references to its name.

Commercial Associates Accountants and Advisors (CAAA) has given and has not withdrawn its consent to be named in this IM as the Investigating Accountant, in the form and context in which it is named. CAAA has not authorised or caused the issue of this IM and takes no responsibility for any part of this IM other than references to its name.

A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be

Offer Information Statement

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DIRECTOR'S STATEMENT The Directors state that they have made all reasonable enquiries and have reasonable grounds to believe that the statements by the Directors in this Offer Information Statement are true and not misleading and that, in respect of statements made in the Offer Information Statement by persons other than the Directors, the Directors have made reasonable enquiries and have reasonable grounds to believe that the persons making the statements were competent to make such statements.

In the Directors’ opinion, following completion of the Offer, the Company will have sufficient working capital to carry out its stated objectives.

The Directors of the Company report that, in their opinion, there have not been any circumstances that have materially affected or will materially affect the financial position of the Company or the value of assets and liabilities, except as disclosed in this IM. This IM has been signed by the Directors of the Company.

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Mr Lionel Bloom

Dr Sam Haynes

Mr Michael Quirk

Mr Jason Phillips

Cenversa Limited

CORPORATE DIRECTORY Board of Directors Mr Lionel Bloom Chairman and Chief Executive Officer Dr Sam Haynes Non-executive Director Mr Michael Quirk Non-executive Director Mr Jason Phillips Non-executive Director

Company Secretary Mr Danny Putica

Registered Office Address 26 Binney Road Kings Park NSW 2148

Principal Place of Business 26 Binney Road Kings Park NSW 2148

Auditor CIB Accountants and Advisor Suite 6, 5-7 Ross Street Parramatta NSW 2150

Lawyer Minter Ellison Governor Maquarie Tower 1 Farrer Place Sydney NSW 2000

Shareholder Enquiries Locked Bag 4365, Blactown BC NSW 2148 shareholder@cenvet.com.au

Offer Information Statement

33

Cenvet Group Holdings Limited ACN 092 375 221

ATTACH CHEQUE OR EFT RECEIPT

APPLICATION FORM

PLEASE READ THE INSTRUCTIONS AT THE END OF THIS FORM

1. Number of Shares applied for:

Please make cheque or EFT payments to “Cenvet Group Holdings Limited – Share Application Account”.

2. $

(Amount paid)

3. Number of deferred Bonus Shares applied for: The maximum dollar value of free deferred Bonus Shares will not exceed 25% of the lesser of the dollar amount in 2 above which is paid to Cenvet or the Minimum Annual Amount specified in the attached Deed. The number of Bonus Shares to be issued will be determined by dividing the dollar value by $0.60 being the Subscription Price per Share. The issue of such Bonus Shares is conditional on receipt by Cenvet of the attached Deed, properly completed and executed by the relevant customer, and execution thereof by Cenvet in its sole and absolute discretion, and the Customer satisfying their minimum annual product purchase commitment.

4. Investor Type Individual

Joint

Sole Trader

Company

Superannuation Fund

Trust

Partnership

Association

5. Investor Details A. Individual title First names: Date of birth (dd/mm/yyyy):

Last name: /

/

Tax file number: (see instructions) or TFN exemption:

Residential Address Unit / Street Number:

Street Name:

Suburb:

Country: Phone (after hours): Mobile:

State:

Postcode:

Phone (business hours): Email address:

By providing this email address, we agree that Cenvet may provide us with information by email regarding our investment.

34

Cenversa Limited

B. All Other Account Holders Company name / Corporate Trustee: Name of superannuation fund, trust, partnership, association: Tax file number: (see instructions) or ABN: c/Unit / Street Number:

Street Name:

Suburb:

Country:

State:

Phone (after hours):

Postcode:

Phone (business hours):

Mobile:

Email address:

By providing this email address, we agree that Cenvet may provide us with information by email regarding our investment.

INSTRUCTIONS Please read and follow these instructions: Please complete all relevant sections of the Application Form using BLOCK LETTERS. A Write the full name you wish to appear on the statement of shareholdings.

B See next page for the Guide to Completing “Investor Details”.

C Enter your Tax File Number [TFN] or exemption category. Collection of TFNs is authorised by taxation laws.

Disclosure of your TFN is not compulsory.

D Please enter your postal address and email address for all correspondence. All communications to you from

the Share Registry will be mailed to the address shown.

E

If paying your Application Monies by cheque, make the cheque payable to “Cenvet Group Holdings Limited –

F

Share Applications Account”, in Australian currency and cross the cheque ‘Not Negotiable’.

If paying your Application Monies by EFT make the payment into the following bank account:

Account Name:

Cenvet Group Holdings Ltd – Share Offer Account

Bank:

ANZ Banking Group Limited

Branch:

Main Street Blacktown

BSB Number:

012-233

Account Number:

836286707

NB: When paying by EFT the Applicant’s name must be include within the reference field.

Lodgement of Applications Detach your completed Application Form and mail it with your cheque or EFT receipt to:

Cenvet Group Holdings Limited Locked Bag 4365, Blacktown BC, NSW 2148.

Attention: Share Offer Administrator

Offer Information Statement

35

GUIDE TO COMPLETING THE “INVESTOR DETAILS” SECTION OF THE APPLICATION FORM INVESTOR TYPE WHO SHOULD SIGN

INVESTOR TYPE

WHO SHOULD SIGN

Individual

Individual

Company

For a company: • two directors or • a director and company secretary or • if the company has a sole director/secretary, by that person or a representative authorised by the company.

Companies can also sign under power of attorney.

Partnership

Partners

Trust Individual trustee(s)

If more than one trustee, all trustees should supply their details and sign.

Corporate trustee

See “Company” investors above.

Superannuation Funds Individual trustee(s)

If more than one trustee, all trustees should supply their details and sign.

Corporate trustee

See “Company investors above.

Other entity

Office bearer(s) – if more than one office bearer, all office bearers should supply their details and sign.

ELIGIBILITY CERTIFICATES – Applicant details Insert full name and address of Applicant for shares in Cenvet Group Holdings Limited Name: Address: Telephone Business: Facsimile:

Telephone Private: Email:

We acknowledge that: • • •

this certificate is given to Cenvet Group Holdings Limited to enable it to determine whether it is able to offer Shares to me in compliance with the Corporations Act; offers of Shares made to me by Cenvet Group Holdings Limited may be made on the basis of this certificate; and my eligibility for the purposes of the Offer will be determined by completion of the separate forms of certification two below.

EACH Applicant to sign below:

36

Cenversa Limited

A: Qualified account’s certification - SOPHISTICATED INVESTOR Insert full name and address of qualified accountant Name: Address:

Telephone Business:

Telephone Private:

Facsimile:

Email:

Declaration by qualified Accountant

I, the qualified accountant named above certify that the following is true and correct:

[a] I am a qualified accountant; [b] this certificate is given at the request of the Applicant described above in relation to shares to be issued by Cenvet

Group Holdings Limited; [c] the Applicant is known to me and for the purposes of sub-section 708(8) Corporations Act the Applicant has:

[i] net assets of at least $2.5 million; or

[ii] a gross income for each of the last two financial years of at least $250,000 a year.

Signature of qualified accountant

Date:

/

/

B – PROFESSIONAL INVESTOR The Applicant certifies that we constitute: [tick applicable box]

a person who controls at least $10 million (including any amount held by an associate or under a trust that the person manages) for the purposes of investment in securities; or

a regulated superannuation fund, an approved deposit fund, a pooled superannuation fund or a public sector superannuation scheme within the meaning of the Superannuation Industry [Supervision] Act 1993 [Cth] if the fund, trust or scheme has net assets of at least $10 million; or

another category of person (specify which) referred to in sub section 708 (11) of the Corporations Act, namely

Offer Information Statement

37

DEED 1. CUSTOMER: Name: Address Unit No.

Suburb:

2. APPLICANT:

Street No.

Street name:

State:

Postcode:

Name: 3. The Customer acknowledges that the Applicant has applied for

Shares

deferred Bonus Shares (Bonus Share) in Cenversa Limited pursuant to the

and

Information Memorandum issued by Cenvet dated 7 June 2013.

4. If Cenvet agrees to the grant of those Bonus Shares by executing this Deed, then the Customer hereby undertakes to

Cenvet that: a. During the two 12 month periods to end on each of 30 June 2014 and on 30 June 2015 (each referred to as an Order Year), the Customer will purchase products (Products) from one or more subsidiaries of Cenvet (Subsidiaries) to

purchase products sold by those Subsidiaries (Products) having a purchase price (excluding GST) based on their

published prices (Purchase Price) aggregating not less than

(Minimum Annual Amount);

in each Order Year

$

b. The Customer will pay the Purchase Price for those Products to the Subsidiaries in a timely manner, in accordance

with their terms of trade;

c. The Customer will be bound by the Subsidiaries’ terms of trade which have previously been made available to the

Customer and such terms of trade will apply to the Products purchased.

5. If the Customer purchases the minimum annual amount of products during each order year, and pays for these products

in accordance with the above terms of trade, then within 30 days following 30 June 2015, Cenvet should allot and issue

the said Bonus Shares to the Applicant.

EXECUTED AS A DEED: By:

(on behalf of the customer)

Accepted by: CENVERSA LIMITED

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(director)

(witness)

(director / secretary)

Cenversa Limited

END NOTES IBISWorld industry report 08640, Veterinarian Services in Australia, September 2012.

IBISWorld industry report X0011 – Household Pet Products and Services in Australia, December 2012.

3 Central Pet’s management estimates in relation to the growth estimate excluding grocery supermarkets 4 Contribution of the pet care industry to the Australian economy, 7th edition, 2010, Australian Companion Animal Council 5 Based on the Cenvet’s FY11 total purchases.

1 2

Offer Information Statement

39

Cenversa Limited ACN 092 375 221

P. 02 9679 5777 F. 02 9679 5767 E. NSWsales@cenvet.com.au 26 Binney Road, Kings Park NSW 2148

www.cenvet.com.au