EBIT FOR FY 2020The Company’s delivery processes were disrupted...

EBIT FOR FY 2020

The Company’s delivery processes were disrupted by COVID-19 in late March 2020. By October 2020 the Company recovered those processes and product delivery resumed at a continually accelerating rate suggestive of a 2020 EBIT in the range $20-30 million. Under the recovery plan shipments increase each month.

On 18 December 2020 EOS was advised that around 12 days of December shipments would not be received by the foreign customer before 31 December 2020, as required for EOS to recognise the revenue for those items.

• The specific causes of the disruption are international air freight bottlenecks and a fall in import license activity in the offices of the customer (foreign) governments.

• In a normal year this event would be unremarkable, but in this year the December shipments exceed any other month as delivery momentum increases. The heavy skew of revenue and profits to Q4, and specifically December, has made the outcome for the full year unusually dependent on activity in the final weeks of the year.

• The affected revenue, for which all costs have already been incurred in 2020, may exceed $20 million. This will now be shifted into Q1 2021 along with associated profit.

There is another, less significant FX impact on 2020 underlying EBIT from the rising value of the Australian dollar against the US dollar:

• The A$ has strengthened to 76 cents per US$, compared to 72 cents at the time of the last guidance update. Manufacturing costs are largely A$ denominated versus revenue which is largely in US dollars. This exposure of the underlying EBIT could not be hedged due to uncertainty about the timing of income due to COVID-19 delays.