financial statements · 2015. 12. 22. · plumbing merchants is the lack of breadth of our current...

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Performance Highlights 2

Directors’ Report 4

Financial Statements

Consolidated Income Statement 12

Consolidated Balance Sheet 13

Consolidated Statement of Changes and Equity 14

Consolidated Cash Flow Statement 15

Statement of Accounting Policies 16

Notes to the Financial Statements 25

• Total Group operating revenue up 24.6% to $43.2m and EBITDA up 7.2% to $7.1m

• Group NPAT of $3.8m in line with previous half year with minor adjustments from implementation of International Financial Reporting Standards (IFRS)

• UK acquisition of Deva completed 1 September, contributing fi rst month revenue of $4.9m and EBITDA of $0.4m; integrating well

• Australian shower and tapware division EBITDA up 44.0% to $1.3m and sales up 14.5% to $13.2m

• Australian Nefa valving business transitioned to direct Methven distribution, contributing to EBITDA loss of $0.4m as expected

• Methven New Zealand EBITDA up 1.9% to $6.3m and sales up 7.4% to $21.8m

• Methven USA loss of $0.5m as forecast; no improvement expected in second half but action being taken to reduce defi cit

• Interim dividend 5.7cps to be paid on 14 December 2007

Performance Highlights

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Methven Group reported a satisfactory performance for the six months to 30 September 2007. The half year fi nancial result was slightly ahead of guidance given to shareholders at the July Annual Meeting. International expansion plans, including the integration of the recent UK acquisition, The Deva Tap Company Limited, progressed to plan, however, our fl edgling USA operation continued to underperform.

Group EBITDA of $7.1 million was up 7.2% (up 1.3% excluding Deva) over the corresponding period. This refl ects the sustained growth in Australian shower and tapware profi tability, partly offset by costs associated with the transition of the Australian valving business to direct distribution through Methven Australia. The continued investment in innovation and new product launches, including the proprietary Satinjet Maia beauty shower and losses in the USA, are also refl ected in the result.

Group NPAT of $3.8 million was on a par with the previous half year result after minor adjustments from the implementation of International Financial Reporting Standards (IFRS). Before IFRS and acquisition adjustments, Group NPAT was up 2.8% on prior year, principally due to the impact of one month’s contribution from Deva ($0.1m after fi nancing costs).

Group operating revenue increased 24.6% to $43.2 million (10.5% or $38.3 million excluding Deva).

The acquisition of Deva on 1 September 2007 represented a major strategic milestone, expanding Methven’s international scale and reach through established distribution channels and operations in the UK market. While Deva contributed only modestly to Group earnings in the fi rst month post-acquisition, the outlook for this business remains positive and its integration into the Methven Group is progressing well.

Methven’s start up operation in the USA, while on forecast, is not showing the improvement we would like as our narrow USA product offering has failed to gain traction in traditional plumbing merchant channels despite the commitment of signifi cant in-market resources. Costs are being rationalised and initiatives are under way relating to the product range and alternate distribution channels.

New product releases scheduled for the early part of 2008, combined with the benefi ts of our combined Group procurement initiatives, are expected to contribute to performance improvements in all our key markets.

However, our expectations for the coming year are tempered by the relatively soft market outlook due to slowing housing markets and high interest rates in New Zealand and the UK in particular.

Directors’ Report

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AustraliaThe Methven Australia half year result was pleasing. Australian shower and tapware sales were up 14.5% to $13.2 million with EBITDA up 44.0% to $1.3 million, in line with the focus on growing bottom line profi tability rather than sustaining the aggressive sales growth of 2007. This result was even better in Australian dollar terms with sales up 20.8% and EBITDA up 52.1%.

Satinjet showerware again proved a popular choice for consumers who are increasingly aware of the unique water and energy saving technology and design aesthetics of the expanding range.

We have completed the transition of the Australian NEFA valving business from a third party to our own dedicated, in-market distribution and sales team. While the changeover has affected short term profi tability with a loss of $382,000 for the half year, we believe the new structure will bring long term benefi ts.

New ZealandThe focus in New Zealand, Methven’s single biggest market and strategic hub for development, design and prototyping, has been to maintain leadership.

In the fi rst six months domestic sales grew by 7.4% to $21.8 million in a relatively fl at market, mainly due to price increases necessitated by a continuation of the raw material price rises experienced in 2007.

The quality of Methven New Zealand’s performance is not fully refl ected in its 1.9% increase in EBITDA to $6.3 million. Methven New Zealand carries all Group overheads, research and development and marketing costs which included $280,000 in bringing the one of a kind, Maia beauty shower, to market.

United StatesThe half year loss of $534,000 was in line with budget and we are anticipating a similar result in the second half of this fi nancial year.

A review of our strategy has confi rmed that the root cause of poor uptake and retail support by boutique plumbing merchants is the lack of breadth of our current USA Satinjet range relative to comprehensive competitor offerings, which include matching tapware and a proliferation of new fi nishes and styles unique to the USA. This has also been the barrier to securing the quality distribution agents we have been seeking to leverage our own in-market activity.

We are preparing to release a wider offering in the USA in early 2008. Continued commitment of resources to developing this market is also contingent on securing high quality distribution agents. In the meantime we are scaling back our own in-market distribution activity and related fi xed costs to signifi cantly reduce USA market losses in the 2008-09 year.

Methven’s presence in the USA still has strategic implications for the company, taking us beyond the traditional plumbing channels into the personal care and beauty market.

The USA is the initial focus for the new Satinjet Maia beauty shower and its accessories, starting with sales through beauty counters at exclusive Barney’s department stores.

Beauty editors and retailers, plumbing merchants and consumers have given very positive feedback on this handheld, personal shower, with its chorine extractor and ability to be fi tted with aromatic, essential oil and moisturising infusions.

We are excited about the potential of Maia but must acknowledge that this product and channel strategy is highly ambitious with the technical execution and market risks commensurate with what we believe to be a very signifi cant market opportunity. Offsetting the beauty channel risk is our confi dence that Maia will be taken up well by the top plumbing stores in all markets.

The Maia initiative will operate as a stand-alone business unit with its own dedicated resource. A large percentage of the expenditure required to seed this opportunity will impact our current year result and it will be next fi nancial year before we are in a position to gauge the success of Maia’s potential in the USA and other markets.

United KingdomThe acquisition of leading independent tapware and showerware supplier, Deva, was completed on schedule and is integrating well into the global Methven Group.

The acquisition has the potential to treble worldwide distribution for Methven’s higher margin, branded showerware while also providing selected Deva products to the Australasian offering. Long term, cost savings in procurement and product sourcing are being targeted through leveraging the synergies of Deva’s skills in procurement.

Results from only one month were available for inclusion in the six monthly reporting period and while the start has been slow following acquisition, we are confi dent that we will meet expectations by March 2008.

The business is founded on strong DIY and plumbing merchant relationships that we are using to help grow our share of the project specifi cation market.

Meanwhile preparations are well advanced for launching the eco-friendly Satinjet showerware ranges which are well suited to the UK’s predominantly low water pressure environment.

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Strategic ProgressMethven Group is becoming a truly international and innovative business as the strategy to extend our geographic and distribution reach for our unique product offering gains momentum.

The business model, with New Zealand as the design hub, test-bed and pilot production facility for a pipeline of desirable, proprietary branded products, is now well embedded.

Large scale manufacture continues to be outsourced and despite recent price increases by our Chinese partners, we are confi dent that the benefi ts of this strategy will become more evident in the future, particularly as we use Methven Group’s increased purchasing power and synergies in buying from a larger Chinese supplier base.

A world-class design and engineering team is in place at the global headquarters in Auckland. An exciting range of new era, beauty and water and energy conserving showers, valving and tapware products are being readied for market release in chosen markets to continually provide fresh appeal to consumers.

Methven Satinjet’s eco-effi cient shower technology positions us advantageously in today’s market where conservation and environmental concerns have become powerful drivers of consumer demand in all our key markets. The benefi ts of this positioning are already evident in Australia where sales of Satinjet showers are growing strongly as a result of their growing reputation as the best water effi cient showers in a market plagued with water shortages and restrictions.

DividendHaving reviewed the balance sheet, performance outlook, ongoing investment needs and post Deva acquisition net debt of $32.2 million, the Directors have declared a fully imputed interim dividend of 5.7cps to be paid on 14 December 2007.

As signalled to shareholders at the Annual Meeting, the Board intends to maintain the dividend payment at, or above, previous levels in terms of cents per share while also enabling reasonable reductions in borrowings over the medium term following the acquisition of Deva.

Focus Our focus in New Zealand is to continue to consolidate our leadership position in the more stable renovation market and the higher-end segments where our new products provide growth opportunities.

In Australia, the priority is on achieving growth in bottom line profi tability in the shower and tapware market, rather than seeking to maintain the accelerated sales growth rates of last year, and to leverage the new NEFA distribution structure to lift sales volumes and profi tability.

In the UK we are readying to present Satinjet to the British public through Deva’s wide and well established sales infrastructure and merchant customer base. We will also continue to build on our success in winning project specifi cation work with building companies.

OutlookCost pressure on materials and wages are likely to continue through the second half but we anticipate being able to maintain margins through further effi ciencies from outsourcing and more favourable exchange rate cover on our offshore purchases.

The impact of the global credit crunch has had a major effect on the US building sector and we are seeing signs of it in the UK and New Zealand markets. However, we expect a slowdown rather than a signifi cant fall. We will continue to watch the situation carefully.

Despite the expected increased year on year loss in the USA and Maia development and marketing costs, we are still targeting full year earnings marginally ahead of 2006-07 before factoring in Deva’s business.

The additional profi t contribution from Deva, net of funding costs, is expected to be in line with our pre-acquisition expectations and we look forward to a full year’s contribution in 2008-09.

Key initiatives which we believe will deliver future benefi ts include:

establishing our own NEFA valving sales infrastructure

launch of the Satinjet Maia beauty shower

steps being taken to signifi cantly reduce USA losses

Group procurement initiatives

new product releases

introduction of Satinjet to the UK

While the outlook suggests relatively soft demand in all key markets, we believe these initiatives all auger well for Methven maintaining profi t growth momentum in 2008-09 and beyond.

Richard Cutfi eld Rick Fala CHAIRMAN GROUP CEO

We are addressing product range and cost structure issues with the USA operation to reduce the losses that are detracting from what is in other respects a positive Group performance. At the same time we are continuing to work and invest prudently to realise the potential of Maia as a personal beauty product carrying the Methven brand, marketed via women’s personal care and beauty channels as well as boutique plumbing merchants.

The programme of new products launches of branded showers and tapware are expected to contribute modestly to earnings in 2007-08, with the real benefi ts to fl ow through in 2008-09.

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The Board of Directors have pleasure in presenting the Interim Financial Statements of Methven Limited, for the half year ended 30 September 2007.

For and on behalf of the Board.

Richard Cutfi eld Rick FalaCHAIRMAN GROUP CEO

29 November 2007

for the half year ended 30 September 2007

FinancialStatements

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08Consolidated Income StatementFOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

Consolidated Balance SheetAS AT 30 SEPTEMBER 2007

6 mths ended 6 mths ended 12 mths ended 30-Sept-07 30-Sept-06 31-Mar-07NZ$000 unaudited unaudited unaudited

Revenue 43,248 34,714 70,401Cost of sales (24,545) (19,038) (39,218)Gross profi t 18,703 15,676 31,183

Design and engineering (1,239) (1,070) (2,198)Sales, distribution, marketing and brand development (9,172) (7,650) (15,252)Administration and other expenses (2,226) (1,173) (2,146)Operating profi t 6,066 5,783 11,587 Finance expenses (479) (89) (228)Finance income 156 15 19Profi t before income tax 5,743 5,709 11,378

Income tax expense (1,908) (1,886) (3,738)Net profi t attributable to shareholders 3,835 3,823 7,640

Earnings per share for profi t attributable to the shareholders: Basic earnings per share (cents) 7.32 7.47 14.92Diluted earnings per share (cents) 5.76 7.43 14.85

The above consolidated income statement should be read in conjunction with the accompanying notes.

Notes As at As at As at 30-Sept-07 30-Sept-06 31-Mar-07NZ$000 unaudited unaudited unaudited ASSETS Current assets Cash and cash equivalents 2,280 879 1,102 Trade receivables 28,971 10,623 12,446 Prepayments and other assets 663 352 459Inventories 32,975 11,198 11,133 Income tax receivable 245 - -Total current assets 65,134 23,052 25,140

Non-current assets Property, plant and equipment 8,588 6,507 6,658 Deferred tax assets - 736 762Intangible assets 7 52,540 5,729 5,821Total non-current assets 61,128 12,972 13,241Total assets 126,262 36,024 38,381

LIABILITIES Current liabilities Trade and other payables 27,925 9,556 8,566Current employee accruals 2,424 1,930 1,710Provisions 608 708 751 Income tax payable - 553 75 Derivative fi nancial instruments 594 582 681 Interest bearing liabilities 160 266 3,547Total current liabilities 31,711 13,595 15,330

Non-current liabilities Interest bearing liabilities 34,353 - -Employee accruals 85 84 85Deferred tax liabilities 5,268 - -Total non-current liabilities 39,706 84 85Total liabilities 71,417 13,679 15,415

Net assets 54,845 22,345 22,966

Equity Share capital 8 46,957 17,116 17,170 Employee share option reserve 7 11 14Derivative fi nancial instrument reserve (277) (390) (456)Retained earnings 8,158 5,608 6,238Total equity 54,845 22,345 22,966

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

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08Consolidated Statement of Changes in EquityFOR THE HALF YEAR ENDED 30 SEPTEMBER 2007


Balance as at the beginning of the fi nancial period 22,966 21,842 21,842

Net profi t for the period 3,835 3,823 7,640Currency translation differences 985 (112) (372)Total recognised income and expense for the period 4,820 3,711 7,268

Issue of share capital, net of transaction costs (note 8) 29,787 - 54 Movement in share option reserve 7 11 14Dividends paid (2,915) (2,606) (5,533)Movement in cash fl ow hedge reserve 256 (915) (1,014)Deferred tax on hedge reserve (76) 302 335Movement in reserves 27,059 (3, 208) (6,144)Total equity period end 54,845 22,345 22,966

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Cash Flow StatementFOR THE HALF YEAR ENDED 30 SEPTEMBER 2007


Operating activitiesReceipts from customers 39,580 32,948 66,795Payments to suppliers (22,777) (20,351) (43,819)Payments to employees (8,016) (7,007) (13,629)Interest received 156 15 19Interest paid (319) (89) (228)Income taxes paid (1,587) (1,392) (3,715)Net cash infl ow / (outfl ow) from operating activities 7,037 4,124 5,423

Investing activitiesPayment for purchase of subsidiary, net of cash acquired (note 6) (43,411) - -Payments for property, plant and equipment, patents and trademarks (2,541) (800) (2,024)Net cash (outfl ow) / infl ow from investing activities (45,952) (800) (2,024)

Financing activitiesNet proceeds from issues of shares and other equity securities 27,451 - 54Dividends paid (2,915) (2,606) (5,533)Proceed/(repayment) of borrowings 15,557 (1,769) 1,512Net cash infl ow / (outfl ow) from fi nancing activities 40,093 (4,375) (3,967)

Net increase / (decrease) in cash and cash equivalents 1,178 (1,051) (568)Foreign currency translation adjustment - (112) (372)Cash and cash equivalents at the beginning of the fi nancial year 1,102 2,042 2,042Cash and cash equivalents at period end 2,280 879 1,102

The above consolidated cash fl ow statement should be read in conjunction with the accompanying notes.

Reconciliation of consolidated net profi t to net cash fl ow from operating activities

Net profi t after tax for the period 3,835 3,823 7,640 Items not involving cash fl ow: Depreciation and amortisation 888 866 1,797Intangible asset amortisation 163 (14) 36Write-off of assets 5 - -Movement in deferred tax (182) 11 18Employee share options amortisation 7 11 14

Changes in working capital:Trade receivables (3,589) (1,760) (3,583)Inventory (2,685) (1,985) (2,269) Other receivables, prepayments, and other assets 514 16 (91)Trade creditors 4,689 1,908 1,347Other creditors, accruals and provision 3,392 1,248 165Net cash infl ow from operating activies 7,037 4,124 5,074

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1. GENERAL INFORMATION

Methven Limited (the “Company”) and its subsidiaries (together “Methven” or the “Group”) designs, manufactures and distributes showers, tapware and valve products. On 31 August 2007 the Group acquired control of The Deva Tap Company Limited, a tap and shower supplier operating in the United Kingdom.

The Company is a limited liability company incorporated and domiciled in New Zealand. The address of its registered offi ce is 447 Rosebank Road, Avondale, Auckland.

These fi nancial statements have been approved for issue by the Board of Directors on 29 November 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The fi nancial statements have been prepared in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and will be used in the full year accounts to 31 March 2008.

Methven Limited is a company registered under the Companies Act 1993.

(a) Basis of preparation of fi nancial statementsThe interim fi nancial statements have been prepared in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) NZ IAS 34 Interim Financial Statements. These are the Group’s fi rst interim fi nancial statements prepared in accordance with NZ IAS 34 and IAS 34 Interim Financial Statements. NZ IFRS 1 First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards has been applied. The consolidated interim fi nancial statements do not include all of the information required for full annual fi nancial statements.

Financial statements of the Company until 31 March 2007 had been prepared in accordance with previous New Zealand Financial Reporting Standards (NZ FRS). NZ FRS differs in certain respects from NZ IFRS. When preparing the Company’s interim fi nancial report for the half year ended 30 September 2007, certain accounting and valuation methods applied in the previous NZ FRS fi nancial statements have been amended to comply with NZ IFRS. The year ending 31 March 2008 fi nancial statements will be the Group’s fi rst full year fi nancial statements which comply with NZ IFRS.

Reconciliation and descriptions of the effect of the transition from NZ FRS to NZ IFRS on the Group’s equity and its net income and cash fl ows are provided in Note 10.

Entities reportingThe consolidated fi nancial statements are for the economic entity comprising Methven Limited and its subsidiaries (together “Methven” or the “Group”).

Statutory baseMethven Limited is a company registered under the Companies Act 1993 and an issuer in terms of the Securities Act 1978. The fi nancial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. The Company and Group are designated as profi t oriented entities for fi nancial reporting purposes.

Measurement BaseThese fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of certain assets as identifi ed in specifi c accounting policies below.

(b) Group fi nancial statements

SubsidiariesThe consolidated fi nancial statements incorporate the assets and liabilities of all subsidiaries of Methven as at balance date and the results of all subsidiaries for the period then ended.

Subsidiaries are all entities over which the Group has the power to govern the fi nancial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully de-consolidated from the date on which control ceases.

The purchase method is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of

Statement of Accounting PoliciesFOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries’ accounting policies have been changed where necessary to ensure consistency with policies adopted by the Group.

(c) Segment reportingA business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

Foreign currency translation

Functional and presentation currencyItems included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The consolidated fi nancial statements are presented in New Zealand dollars, which is the Company’s functional and presentation currency.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classifi ed as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security.

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Translation differences related to changes in amortised cost are recognised in profi t or lossand other changes in carrying amount are recognised in equity.

Translation differences on non-monetary fi nancial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary fi nancial assets and liabilities such as equities held at fair value through profi t or loss are recognised in profi t or loss as part of the fair value gain or loss. Translation differences on non-monetary fi nancial assets such as equities classifi ed as available for sale, are included in the available-for-sale reserve in equity.

Group companiesThe results and fi nancial position of all the Group entities (none of which has the currency of a hyper-infl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(c) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(d) Revenue recognitionRevenue comprises the fair value of the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, net of goods and service tax, rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:

Sales of goodsSale of goods are recognised when a Group entity has dispatched the goods sold. This is the point where risks and rewards associated with ownership of the goods have been transferred and collectibility of the related receivables is reasonably assured.

Interest incomeInterest income is recognised on a time-proportion basis using the effective interest method.

(e) InventoriesRaw materials, work-in-progress and fi nished goods are stated at the lower of cost and anticipated net realisable value. Cost determined using the fi rst in, fi rst out (FIFO) method. The cost of fi nished goods and work-in-progress comprises of raw material, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains/losses on qualifying cash fl ow hedges purchases of raw materials.

(f) Property, plant and equipmentAll property, plant and equipment are stated at historical cost less depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Group and the costs of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.

Land is not depreciated. Depreciation of property, plant and equipment is calculated using the straight-line method to allocate the cost of each asset to its residual value over its estimated useful life, as follows:

Motor vehicles 5-10 years

Plant and equipment 3-20 years

Fixtures, fi ttings and offi ce equipment 3-12.5 years

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. An assets’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is less than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(g) Intangible assetsGoodwillGoodwill represents the excess of cost of a business acquisition over the fair value of the Group’s share of the net identifi able assets of the subsidiary at the date of the acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefi t from the business combination in which the goodwill arose. The Group allocates goodwill to the Australian, UK and New Zealand entities.

Patents and trademarksThe registration cost of patents and trademarks are capitalised from the date of application. They have a defi nite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of patents and trademarks over their estimated useful live (15-20 years). Capitalised costs relating to applications that are turned down are expensed immediately into the income statement.

Computer softwareAcquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c software. These costs are amortised over their estimated useful lives (3 to 5 years). Costs associated with maintaining computer software programs are recognised as an expense when incurred.

Customer relationsCustomer relations acquired due to a business acquisition are capitalised based on fair value. The relationships are deemed to have a fi nite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of these assets over their useful life which is estimated to be 13 years.

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0818 Statement of Accounting

Policies (continued)FOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

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Research and developmentResearch expenditure is recognised as an expense as incurred. Development costs are recognised as assets if they meet the recognition criteria, otherwise, the costs of development activities are expensed as incurred. Development costs recognised as assets are amortised over their estimated useful lives.

(h) Impairment of non-fi nancial assetsAssets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

(i) Income taxThe income tax expense recognised for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profi t or taxable profi t or loss.

Deferred tax assets are recognised for deductible temporary differences and unusual tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments of operations where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

(j) Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation and default or delinquency in payments are considered indicators that the trade receivable is impaired. An estimate is made for doubtful receivables based on a review of all outstanding amounts at period end. Bad debts are written off during the period in which they are identifi ed. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

(k) Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call with the banks and other short-term highly liquid investments with original maturities of three months or less.

(l) Share capitalOrdinary shares are classifi ed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(m) BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, any difference between the proceeds (net of transactions) and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest rate. Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(n) ProvisionsProvisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outfl ow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outfl ow will be required in settlement is determined by considering the class of obligations as a whole.

WarrantyA liability is recognised for the expected value of claims on product sales that are still under warranty at balance date. Expected costs are based on historical data relating to product returns.

Deferred maintenanceA liability is recognised to cover a contractual obligation to perform remedial work at the Auckland premises. The provision is based on third party quotations and is released as and when expenditure is incurred. The level of the liability is reassessed annually.

(o) Goods and services tax (GST)The income statement and statement of cash fl ows have been prepared so that all components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of receivables and payables which include GST invoiced.

(p) LeasesLeases of property, plant and equipment where the Group has substantially all the risk and rewards of ownership are classifi ed as fi nance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The rental obligations, net of fi nance charges, are recognised in the balance sheet. The interest element of the fi nance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under fi nance leases are depreciated over the shorter of the asset’s useful life and the lease term.

Leases where the lessor effectively retains substantially all the risks and rewards of ownership are classifi ed as operating leases. Payments made under operating leases (net of any incentives from the lessor) are charged to the income statement on a straight line basis over the period of the lease.

Statement of Accounting Policies (continued)FOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

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calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

(v) Statement of cash fl owsThe following are the defi nitions of the terms used in the statement of cash fl ows:

(a) Operating activities include all transactions and other events that are not investing or fi nancing activities.

(b) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant, equipment and investments. Investments can include securities not falling within the defi nition of cash.

(c) Financing activities are those activities that result in changes in the size and composition of the capital structure. This includes both equity and debt not falling within the defi nition of cash. Dividends paid in relation to the capital structure are included in fi nancing activities.

(w) Financial instrumentsFinancial instruments carried on the balance sheet include cash and bank balances, receivables, trade creditors, borrowings and derivatives. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

Derivative fi nancial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of highly probable forecast transactions (cash fl ow hedges).

The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash fl ows of hedged items.

The fair values of various derivative fi nancial instruments used for hedging purposes are disclosed in movements in the cash fl ow hedging reserve in shareholders’ equity.

Forward foreign exchange contractsWhere a hedging transaction is undertaken to establish the price of particular goods to be purchased or sold, the exchange difference on the hedging transaction up to the date of purchase or sale, and any costs associated with the hedge transaction to that date, are deferred and included in the measurement of the purchase or sale transaction. Where a forward foreign exchange contracts is terminated early and the underlying hedged transaction is:

a) still expected to occur as designated, the gains or losses arising on the contract upon its early termination continue to be deferred and are progressively recognised over the period during which the hedged transactions are recognised,

b) no longer expected to occur as designated, the gains or losses arising on the contract upon its early termination are recognised in the income statement at the date of termination.

Where a foreign exchange contract is not expected to occur as originally designated, or if the hedge is no longer expected to be effective, any previously deferred gains or losses are recognised as revenue or an expense immediately.

Cash fl ow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profi t or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-fi nancial asset (for example, inventory) or a non-fi nancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(q) InvestmentsInvestments in subsidiaries are stated at cost in the balance sheet of the Parent.

(r) Employee benefi tsLiabilities for wages and salaries, including non-monetary benefi ts, annual leave and accumulating sick leave are recognised in the provision for employee benefi ts in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

Provision for long service leave is calculated and accrued from the date of employment to the extent that it is probable that the leave entitlement will vest. In addition, the provision for sick leave, being an accumulating compensated absence, is recognised based on the expectation the Group will pay sick leave as a result of the unused entitlement that has accumulated at the balance sheet date.

(s) Equity-settled share-based compensationThe group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profi tability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Incremental costs directly attributable to the issue of new shares or options are shown as equity as a deduction, net of tax, from the proceeds.

(t) Dividend distributionDividend distribution to shareholders is recognised as a liability in the Group’s fi nancial statements in the period in which the dividends are approved by the Parent’s shareholders.

(u) Earnings per shareBasic earnings per share is calculated by dividing the profi t attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is

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Policies (continued)FOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

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5. SEGMENT INFORMATION


Segment assets New Zealand 66,242 31,494 34,317Australia 15,739 10,675 11,801 USA 416 109 117 UK 83,378 - -Eliminations (39,513) (6,254) (7,854)Consolidated 126,262 36,024 38,381 Sales revenue New Zealand 22,234 23,205 46,724 Australia 16,072 11,501 23,653 USA 43 8 24 UK 4,899 - -Consolidated 43,248 34,714 70,401 Net profi t for the period New Zealand 3,467 3,524 7,029 Australia 366 310 698 USA 1 - (73)UK 104 - -Unallocated (103) (11) (14)Consolidated 3,835 3,823 7,640

On 31 August 2007 Methven acquired 100% of The Deva Tap Company Ltd, a tap and showerware supplier operating in the UK.

On 1 July 2007 Methven established a dedicated Nefa Australia sales and distribution team to replace the third party distributor. The Australian segment results include the new Nefa Australia division from this date. The 30 September 2006 New Zealand segment sales included export sales of $2,879,000, including Nefa valves.

Methven established a USA subsidiary in September 2005 to distribute Satinjet showers to the US market. The Group operates in one industry segment, being the design and supply of tap and showerware and domestic water control valves. Inter-segment sales are on an arm’s-length basis.

Derivatives that do not qualify for hedge accountingCertain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

3. TRANSITION TO IFRS

(a) Application of NZ IFRS 1The Group fi nancial statements for the period ended 30 September 2007 are the fi rst fi nancial statements that are prepared under NZ IFRS. The Group has applied NZ IFRS 1 in preparing these fi nancial statements.

Methven’s transition date is 1 April 2006. The Group prepared its opening NZ IFRS balance sheet at that date. The reporting date of these fi nancial statements is 30 September 2007. The Group’s NZ IFRS adoption date is 1 April 2007.

In preparing these fi nancial statements in accordance with NZ IFRS 1, the Company and Group have applied the mandatory exemptions and none of the optional exemptions from full retrospective application of NZ IFRS.

The reconciliation’s in note 8 provide a quantifi cation of the effect of the transition to NZ IFRS. The reconciliations provide details of the impact of the transition on:

• Profi t for the period ended 30 September 2006

• Profi t for the year ended 31 March 2007

• Equity at 1 April 2006

• Equity at 30 September 2006

• Equity at 31 March 2007

There are no material differences between the cash fl ow statement presented under NZ IFRS and the cash fl ow statement presented under the NZ FRS.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of fi nancial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, rarely equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are outlined below.

(a) Goodwill impairment The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

(b) Income taxesThe Group is subject to income taxes in numerous jurisdictions. Signifi cant judgement is required in determining the worldwide provision in income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the original course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination are made.

(c) Customer relations The valuation of the customer relations which were acquired in the business combination are determined based on future sales and margins expected to be generated from the customer relations. These calculations require the use of estimates.

Statement of Accounting Policies (continued)FOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

Notes to the Financial StatementsFOR THE HALF YEAR ENDED 30 SEPTEMBER 2007

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6. BUSINESS COMBINATIONS

On 31 August 2007, the Group acquired 100% of the share capital of The Deva Tap Company Limited, a tap and showerware supplier operating in the United Kingdom. The acquired business contributed revenues of $4,899,000 and net profi t after tax of $104,000 for the one month to 30 September 2007. The business combination accounting is provisional and will be completed when the fair value of the assets and liabilities are fi nalised.

Details of net assets acquired and goodwill are as follows: GB£000 NZ$000

Purchase Consideration- Cash paid 15,920 43,039- Deferred consideration 2,000 5,406- Value of shares issued to vendors (1,117,170 shares issued) 864 2,336- Direct costs relating to the acquisition 405 1,095

Total consideration 19,189 51,876Fair value of net assets acquired (9,485) (25,642)

Goodwill 9,704 26,234

The goodwill is attributable to The Deva Tap Company Limited’s established operating infrastructure, brand, supplier relations and management capabilities.

The assets and liabilities arising from the acquisition are as follows:

Acquiree’s Carrying Amount Fair Value Fair Value GB£000 GB£000 NZ$000

Property, plant and equipment 129 129 348Inventories 6,722 6,722 18,171Receivables 5,961 6,102 16,494Cash and cash equivalents 267 267 723Payables (5,389) (5,389) (14,565)Debt (3,637) (3,637) (9,834)Customer relations (included in intangibles, note 7) - 7,626 20,617 Deferred tax liability on customer relations - (2,288) (6,185)Derivative fi nancial instruments - (47) (127)Net Assets Acquired 4,053 9,485 25,642

GB£000 NZ$000

Purchase consideration 19,189 51,876Less deferred consideration (2,000) (5,406)Less share issued to the vendors (864) (2,336)Less cash and cash equivalents in the subsidiary acquired (267) (723)Cash outfl ow on acquisition 16,058 43,411

7. INTANGIBLE ASSETS

Other Customer NZ$000 Intagibles Goodwill Relations Total

SIX MONTH ENDED 30 SEPTEMBER 2007 Opening net book amount 31 March 2007 440 5,381 - 5,821Additions 66 26,234 20,617 46,917Amortisation charge (60) - (138) (198)

Closing net book amount 446 31,615 20,479 52,540

AS AT 30 SEPTEMBER 2007 Methven Ltd 430 3,504 - 3,934Methven Australia 16 1,877 - 1,893Methven UK - 26,234 20,617 46,851

Closing net book amount 446 31,615 20,479 52,540

SIX MONTH ENDED 30 SEPTEMBER 2006 Opening net book amount 31 March 2006 294 5,381 - 5,675Additions 41 - - 41Amortisation charge 13 - - 13

Closing net book amount 348 5,381 - 5,729

AS AT 30 SEPTEMBER 2006 Methven Ltd 321 3,504 - 3,825Methven Australia 27 1,872 - 1,899


YEAR ENDED 31 MARCH 07 Opening net book amount 31 March 2006 294 5,381 - 5,675Additions 182 - - 182Amortisation charge (36) - - (36)


AS AT 31 MARCH 2007 Methven Ltd 413 3,504 - 3,917

Methven Australia 27 1,877 - 1,904


Notes to the Financial Statements (continued)FOR THE HALF YEAR ENDED 30 SEPTEMBER 2007


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10. EXPLANATION OF TRANSITION TO NEW ZEALAND EQUIVALENTS TO IFRS(1) Reconciliation of equity reported under NZ FRS to equity under NZ IFRS

(a) At the date of transition to NZ IFRS: 1 April 2006

Effect of TransitionNZ$000 Note NZ FRS to NZ IFRS NZ IFRS

ASSETSCurrent assets Cash and cash equivalents 2,042 - 2042Trade receivables 8,863 - 8,863 Prepayments and other assets 368 - 368 Inventories 9,213 - 9,213Total current assets 20,486 - 20,486

Non-current assetsProperty, plant and equipment 10 (5) (a) 6,670 (57) 6,613 Deferred tax assets 10 (5) (e) 555 (110) 445Intangible assets 10 (5) (a) (b) 5,872 (197) 5,675Total non-current assets 13,097 (364) 12,733Total assets 33,583 (364) 33,219

LIABILITIES Current liabilities Trade and other payables 7,143 - 7,143 Employee accruals 1,720 - 1,720Provisions 665 - 665 Income tax payable 70 - 70Derivative fi nancial instruments 10 (5) (c) - (333) (333)Interest bearing liabilities 67 - 67Total current liabilities 9,665 (333) 9,332

Non-current liabilitiesInterest bearing liabilities 1,968 - 1,968Employee accruals 77 - 77Total non-current liabilities 2,045 - 2,045Total liabilities 11,710 (333) 11,377

Net assets 21,873 (31) 21,842

Equity Share capital 17,116 - 17,116Employee share option reserve 10 (5) (d) - 28 28Derivative fi nancial instrument reserve 10 (5) (c) - 223 223Retained earnings 10 (5) (b) (d) 4,757 (282) 4,475Total equity 21,873 (31) 21,842

8. SHARE CAPITAL 6 mths ended 6 mths ended 12 mths ended 30-Sept-07 30-Sept-06 31-Mar-07NZ$000 unaudited unaudited unaudited

Issued and net paid up capitalBalance at period beginning 17,170 17,116 17,116

Shares issued 30,056 - -Share options exercised 323 - 54Costs attributed to raising share capital (592) - - 29,787 - 54Balance at the period end 46,957 17,116 17,170

6 mths ended 6 mths ended 12 mths ended 30-Sept-07 30-Sept-06 31-Mar-07NZ$000 unaudited unaudited unaudited Ordinary sharesBalance at period beginning 51,221,623 51,188,810 51,188,810Shares issued 15,171,408 Share options exercised 195,769 32,813Balance at the period end 65,588,800 51,188,810 51,221,623

All shares are fully paid and rank equally with one vote attached to each fully paid ordinary share.

9. EVENTS OCCURRING AFTER THE BALANCE SHEET DATESubsequent to Period end the Board of Directors has resolved to pay an interim dividend of 5.7 cents per share. There have been no other events occurring after balance date which would materially affect the accuracy of these fi nancial statements.



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(2) Reconciliation of profi t for the period ended 31 March 2007


Revenue 70,401 70,401Cost of sales (39,218) - (39,218)Gross profi t 31,183 - 31,183

Design and engineering (2,198) (2,198)Sales, distribution, marketing and brand development (15,252) (15,252)Administration and other expenses 10 (5) (a) (b) (d) (2,482) 336 (2,146)Finance expense (228) - (228)Finance income 19 - 19Profi t before income tax 11,042 336 11,378Income tax expense (3,738) - (3,738)Net profi t attributable to shareholders 7,304 336 7,640

(b) At the end of the last reporting period under NZ FRS: 31 March 2007


Current assets Cash and cash equivalents 1,102 - 1,102Trade receivables 12,446 - 12,446Prepayments and other assets 459 - 459Inventories 11,133 - 11,133Total current assets 25,140 - 25,140

Non-current assets Property, plant and equipment 10 (5) (a) 6,747 (89) 6,658Deferred tax assets 10 (5) (e) 537 225 762Intangible assets 10 (5) (a) (b) 5,636 185 5,821Total non-current assets 12,920 321 13,241Total assets 38,060 321 38,381

LIABILITIES Current liabilities Trade and other payables 8,566 - 8,566Employee accruals 1,710 - 1,710Provisions 751 - 751Income tax payable 75 - 75Derivative fi nancial instruments 10 (5) (c) - 681 681Interest bearing liabilities 3,547 - 3,547Total current liabilities 14,649 681 15,330

Non-current liabilities Interest bearing liabilities - - - Deferred tax liabilities - - -Employee accruals 85 - 85Total non-current liabilities 85 - 85Total liabilities 14,734 681 15,415

Net assets 23,326 (360) 22,966

Equity Share capital 17,170 - 17,170 Employee share option reserve 10 (5) (d) - 14 14Derivative fi nancial instrument reserve 10 (5) (c) - (456) (456)Retained earnings 10 (5) (b) (d) 6,156 82 6,238Total equity 23,326 (360) 22,966



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(4) Reconciliation of profi t for the period ended 30 September 2006


Revenue 34,714 - 34,714Cost of sales (19,038) - (19,038)Gross profi t 15,676 - 15,676

Design and engineering (1,070) - (1,070)Sales, distribution, marketing and brand development (7,650) - (7,650)Administration and other expenses 10 (5) (a) (b) (d) (1,336) 163 (1,173)Finance expense (89) - (89)Finance income 15 - 15Profi t before income tax 5,546 163 5,709

Income tax expense (1,886) - (1,886)Net profi t attributable to shareholders 3,660 163 3,823

(3) Reconciliation of equity reported under NZ FRS to equity under NZ IFRSAt the date of transition to NZ IFRS: 30 September 2006


ASSETS Current assetsCash and cash equivalents 879 - 879Trade receivables 10,623 - 10,623 Prepayments and other assets 352 - 352 Inventories 11,198 - 11,198Total current assets 23,052 - 23,052

Non-current assetsProperty, plant and equipment 10 (5) (a) 6,555 (48) 6,507Deferred tax assets 10 (5) (e) 544 192 736Intangible assets 10 (5) (a) (b) 5,761 (32) 5,729Total non-current assets 12,860 112 12,972Total assets 35,912 112 36,024

LIABILITIESCurrent liabilitiesTrade and other payables 9,556 - 9,556Employee accruals 1,930 - 1,930Provisions 708 - 708Income tax payable 553 - 553Derivative fi nancial instruments 10 (5) (c) - 582 582Interest bearing liabilities 266 - 266Total current liabilities 13,013 582 13,595

Non-current liabilitiesInterest bearing liabilities - - -Deferred tax liabilities - - -Employee accruals 84 - 84Total non-current liabilities 84 - 84Total liabilities 13,097 582 13,679

Net assets 22,815 (470) 22,345

EquityShare capital 17,116 - 17,116Employee share option reserve 10 (5) (d) - 11 11Derivative fi nancial instrument reserve 10 (5) (c) - (390) (390)Retained earnings 10 (5) (b) (d) 5,699 (91) 5,608Total equity 22,815 (470) 22,345



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(5) NZ IFRS adjustments

(a) Reclassifi cation of software to Intangible Assets Software assets which are not an integral part of the computer hardware have been separated out

and reclassifi ed as intangibles along with the associated depreciation reclassifi ed to amortisation to comply with NZ IAS 38 Intangible Assets.

(b) Goodwill impairment testing and write back of amortisation Under NZ IAS 38 Intangible Assets, goodwill can no longer be amortised and annual impairment testing

is now required with any loss written off to the income statement. Impairment testing of the 1 April 2006 opening comparative year and 31 March 2007 show no impairment and amortisation has been written back. On transition to NZ IFRS the goodwill relating to Voumard of $254,000 was impaired and written off, as it was not supported by the value-in-use calculations.

(c) Derivative fi nancial instrument In accordance with NZ IAS 39 Financial Instruments; Recognition and Measurement, hedge accounting

criteria has been applied with all derivatives recognised at fair value on the balance sheet.

(d) Employee share options In compliance with NZ IFRS 2 Share Based Payments, the fair value of senior employee share options has

been allocated over the vesting period of the share option scheme.

(e) Deferred Taxation A deferred tax movement has been recognised on fi nancial instruments and intangible assets identifi ed

on acquisition, in compliance with NZ IAS 12 Income Tax.

(f) The cumulative effect on retained earnings of the above changes is as follows:


Retained profi ts under NZ FRS 7,991 5,699 6,156 Goodwill amortisation reversed 524 174 350Customer relations amortised (net of tax) (96)Impaired goodwill (254) (254) (254)Employee share option amortised (7) (11) (14)Adjustment to retained earnings 167 (91) 82 Retained profi ts under NZ IFRS 8,158 5,608 6,238


Methven Limited447 Rosebank RoadPrivate Bag 19996AvondaleAuckland 1026New ZealandTelephone +64 9 829 0429Facsimile +64 9 829 0439www.methven.biz

Methven Australia Pty Limited16 Gipps StreetCollingwoodVictoria 3002AustraliaTelephone +61 3 9462 1288Facsimile +61 3 9462 1192

Methven USA Inc.1860 Renaissance BoulevardSturtevantWisconsin 53177USATelephone +1 800 975 5409Facsimile +1 800 920 3610

The Deva Tap Company LimitedBrooklands MillEnglish StreetLeighLancashire WN7 3EHTelephone +44 1942 687209Facsimile +44 1942 680190Sales +44 870 8488400

AuditorsPricewaterhouseCoopersPricewaterhouseCoopers Tower188 Quay StreetPrivate Bag 92 162Auckland 1030New Zealand

SolicitorsSimpson GriersonLumley Centre88 Shortland StreetPrivate Bag 92 518Auckland 1036New Zealand

Share RegistryLink Market Services138 Tancred StreetPO Box 384Ashburton 8300New Zealand

BankersBank of New ZealandBank of New Zealand Tower125 Queen StreetPO Box 2139AucklandNew Zealand

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