crane group

07Crane GroupAnnual Report

Crane GroupAnnual Report 2007

www.crane.com.au

ContentsCase study: Wimmera Mallee Pipeline Project 2Case study: MICO Design Centre 4Financial highlights 6Chairman’s overview 7Managing Director’s review 8The Board of Directors 12Executive Management Team 13Iplex 14Tradelink 16CDNZ 18Metals Distribution 20Crane Copper Tube 22Safety 23Environment 24Corporate Governance 25Six year historical performance 28Annual financial report 29Shareholder information 87Corporate directory 88

Crane Group is a major distributor of plumbing, electrical and metal products in Australasia and a leading manufacturer and distributor of plastic and metal pipeline systems.

Iplex Tradelink CDNZMetals

DistributionCrane Copper

Tube

Iplex Pipelines is Australasia’s largest producer of plastic pipe and fittings. It operates in Australia and New Zealand and supplies pipeline solutions to building products, civil/infrastructure, irrigation, and telecommunications customers.

Tradelink is a leading distributor of plumbing supplies and associated products with 198 branches across Australia. Its major market segments include the supply of plumbing solutions to retail, network and project based customers.

CDNZ is New Zealand’s leading trade-related wholesale merchant for plumbing, pipeline, electrical and safety products with 122 branches. It also offers inventory and facilities management services to industrial and utilities customers.

With 15 branches across Australasia, Austral Wright Metals and MICO Metals have a solid position in their major markets, primarily sourcing and distributing copper, copper alloy, aluminium and stainless steel products to a wide range of customers in the manufacturing industry.

Crane Copper Tube is a major supplier of copper tube in Australia and New Zealand. It has a manufacturing operation at Penrith NSW and also exports high quality plumbing tube to markets in the USA, Asia and the Middle East.

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Crane Group AnnuAl RepoRt 2007 1

Crane Group produced a solid result in 2007. A continued focus on key strategies has seen growth in new project opportunities and increased return for shareholders.

The Wimmera Mallee Pipeline Project and MICO Design Centre discussed in the following pages highlight the diversity of the Crane Group and its growing significance in Australasian business.

2 Crane Group AnnuAl RepoRt 2007

Yaapeet

Natimuk

Horsham

BirchipLakeBuloke

TaylorsLake

LakeTyrrell

WoomelangCulgoa

Swan Hill

Murray RiverLakeAlbacutya

LakeHindmarsh

Wycheproof

Wedderburn

Lake Bellfield

Water flow

The Grampians

Supply System No.6Natimuk Line

Supply System No.1Yaapeet Line

Supply System No.2Woomelang Line

Supply System No.5Culgoa Line

Supply System No.4Wycheproof Line

Supply System No.3Birchip Line

Supply System No.7Lake Bellfield to Taylors Lake

N

CAse sTuDy

Iplex is helping the Victorian Government achieve water savings of 103 GL p.a. through

the supply of 1,520 km of PVC pipe into the Wimmera Mallee Pipeline Project.

Wimmera Mallee Pipeline Project


Iplex is currently supplying pVC pipe and fittings into the Wimmera Mallee pipeline project, one of the largest schemes of its type in the world. the project will replace approximately 17,500 km of open, earthen channels with a 8,500 km piped water distribution system.

the $500 million plus Wimmera Mallee pipeline project will provide reticulated water to some 9,000 rural properties over an area that comprises almost 10% of Victoria.

the existing earthen channel network loses almost 85% of its water to seepage and evaporation and piping the channel system will generate 103 Gigalitres (Gl) p.a. in water savings.

Stage 1 of the project is currently being constructed by Mitchell Water (Vic) pty ltd and is expected to be completed by november 2007. Iplex is supplying approximately 1,520 km of pipe for this stage of the project.

the entire project is expected to be completed by mid-2009.


MICO Design is a comprehensive and innovative offer focused on providing architects, designers, engineers, major builders and developers with access to the latest bathroom and kitchen products and technology. The MICO Design Centre is supported by a dedicated, experienced team of consultants and engineers, its own website (www.mico.com.au) and product catalogues to ensure full satisfaction of the specification requirements of its customer base.

The MICO Design Centre has many features that make it unique in today’s market. The design centre has an 800 m 2 showroom displaying a wide range of reputable brands and new products.

Its innovative bathroom ware displays include product mounted on moveable pods that allow customers to quickly view various combinations of products. This is far more effective than static displays that offer fewer options and quickly become dated.

Unique to the MICO Design Centre is a dedicated area featuring working displays of in-wall systems and installations, simulated water harvesting and grey water re-use. This is an increasingly critical design component in today’s environment.


Crane opened its first MICO Design Centre in east sydney in February 2007. MICO Design showcases the latest bathroom ware and kitchenware products to the architect and design community.

CAse sTuDy

MICO Design Centre


Financial highlights

500

1,000

1,500

2,000

2,500

Revenue$m

2,18

7

2,04

6

2,17

5

2,09

8

1,92

3

07

06

05

04

03

Segment revenue%

Tradelink – 34% CDNZ – 19% Iplex – 29% Metals – 18%

Segment EBITbefore significant items %

Tradelink – 18% CDNZ – 16% Iplex – 53% Metals – 13%

10,000

20,000

30,000

40,000

50,000

Total dividends on ordinary shares$m

40,9

93

35,6

55

34,3

09

32,7

12

33,6

57

07

06

05

04

03

Debt facility profile%

Current – 34% 1-3 years – 36% 4-10 years – 30%

50

100

150

200

250

300

350

Net debt$m

201

187

230

303

253

07

06

05

04

03

Year ended 30 June 2007 2006 % Change

Operating resultsRevenue ($m) 2,186.7 2,046.1 +6.9earnings before interest, tax, depreciation, amortisation and significant items (eBItDA) ($m) 136.3 135.6 +0.5earnings before interest, tax and significant items (eBIt) ($m) 103.0 99.7 +3.3net profit after tax and before significant items ($m) 54.0 47.1 +14.5net profit ($m) 47.8 73.9 -35.3

Balance sheettotal equity ($m) 491.0 453.7 +8.2total assets ($m) 1,156.6 1,068.5 +8.2net debt ($m) 200.7 186.9 +7.4

Key measures earnings per share before significant items (cents) 89.9 80.7 +11.4earnings per share after significant items (cents) 79.6 126.4 -37.0Dividends per share – ordinary (cents – fully franked) 65 60 +8.3Return on average shareholders’ equity after significant items (%) 15.7 18.7 -16.0net debt/net debt + equity (%) 29.0 29.2 –


Chairman’s overviewthis overview forms part of the report of the directors.

the Group generated a net profit after tax but before significant items for the June 2007 financial year of $54 million, an improvement of 14.5% on the previous year. Cash flow from operations remained healthy at $76.5 million in line with last year.

this is a very good result given that in the period under review commodity prices continued to rise and the housing market remained patchy. tradelink’s strategies for cost base reduction, business simplification and network growth is beginning to reap rewards with tradelink growing revenue by 9% to $785 million and earnings Before Interest and tax increasing by 31% to $22.3 million.

In August 2007, Crane Group’s Iplex division completed its acquisition of Kingston Bridge engineering pty ltd, which will enable it to produce larger polyethylene pipe and fittings and increase its manufacturing capacity. tradelink and CDnZ also continued to grow with a total of 10 new branches initiated.

Further improvements have also been made in managing safety risks and in injury management. the lost time Injury Frequency Rate decreased by a further 23% and each member of Crane’s senior management team completed personal safety goals. the focus in 2007/08 will be on safe manual handling, motor vehicle accident prevention and driver training.

Your Board places strong emphasis on good corporate governance. the Company’s approach to safety, the environment and risk management is explained in detail in subsequent sections of this Annual Report.

We declared a final dividend of 33 cents per share fully franked, up 3 cents on the final dividend declared last year. the dividend will be paid on 2nd october 2007. total dividends for the year of 65 cents per share fully franked, are up 5 cents on the previous year.

CDnZ continued its fundraising initiatives for CureKids in new Zealand. total fundraising by CDnZ in its two years of involvement is in excess of $300,000. Further fundraising activities are planned for the coming year. Crane Group has recently become a sponsor of the Royal Institute for Deaf and Blind Children in Australia. the Institute provides educational services to children with hearing and/or vision impairment. All Crane Group businesses will take part in fundraising activities for the Institute.

I thank my fellow Board members for their contributions during the year and on behalf of the Board and management thank all Crane Group employees for their effort and commitment during the year.

With a strong operating result, improved performance of tradelink and the acquisition of Kingston Bridge engineering pty ltd, the June 2007 financial year was rewarding.

Leo Tutt Chairman


Managing Director’s review this review forms part of the report of the directors.

Overviewthe strong result reflected improved trading conditions in Iplex, tradelink and Metals Distribution. net profit after tax (including net significant item losses of $6.2 million after tax) was $47.8 million compared with $73.9 million (including net significant item gains of $26.8 million after tax) for the previous corresponding period.

total dividends relating to the year’s profit were 65 cents, up 8.3% on last year.

the Group continued to make good progress with its performance improvement initiatives during the period. the Iplex capital investment program is on track and this business secured a number of important infrastructure projects further enhancing Iplex’s role in water conservation in Australia. the trade distribution businesses’ branch rollout program continues as planned and several bolt-on acquisitions were completed during the year.

Subsequent to year end the Group acquired 100% of the shares in Kingston Bridge engineering pty ltd (KBe), a leading plastic polyethylene pipe and fittings manufacturer based in Western Australia for approximately A$100 million.

the acquisition of KBe will add further scale and breadth to Crane’s Iplex pipelines business, our largest division, delivering a new capability in large bore polyethylene pipe and fittings. this is consistent with Crane’s objective to consolidate its position in the design and manufacture of pipeline products for the growing irrigation, water, civil and construction markets of Australia.

SafetyAt Crane Group the importance of safety in our business is clear. over the past year we focused our energies on implementing control measures in key risk areas to support our long-term goal of zero incidents and zero injuries.

We recognize that achievement of our goals requires strong leadership and participation from all levels within the organisation. to this end we set personal safety objectives for the executive Management team to further support the safety program.

More stretching business goals were also set to drive greater improvements in our safety performance. these goals included prevention of injuries that involve lost time as well as those involving medical treatment. We term this combined medical treatment and lost time injury measure “total Incident Case Rate” (tICR).

I am pleased to report that over the past year the Crane Group achieved its goals and further improved its key safety indicators. In particular:

– a reduction in total Incident Case Rate by 16%

– a reduction in the rate of lost time Injuries by 23%

– a reduction in the Severity Rate by 47%

– a reduction in the workers’ compensation premium in Australia by 40% since June 2004.

ProfitabilityRevenue for the year of $2.1 billion increased by 6.9% compared with last year, largely driven by the Iplex Group.

earnings before interest and tax (eBIt) from continuing businesses, before significant items, was $103.2 million, up 12.3% compared with last year. total eBIt, including discontinued businesses and before significant items was $103 million, up 3.3% on last year.

net significant item losses of $6.2 million after tax includes an after-tax profit of $4.6 million from the sale of property and other assets relating to the Conex business and an $11.8 million after-tax expense for asset impairment, restructuring and redundancy costs relating to the Group’s metal manufacturing business.

Financingthe Group’s financial position remains strong. At 30 June 2007 net debt was $201 million and gearing, measured as net debt to net debt plus equity, remains steady at 29%. net financing costs were $22.7 million for the period compared with $18.2 million last year. Financing costs were higher than last year reflecting the abnormally low debt levels last year following the divestment of the aluminium businesses in october 2005 and prior to the acquisition of the minority interest in Iplex in March 2006.

It was a good year with trading profit before significant items up 14.5% to $54 million.


sTrATeGIC InITIATIVes

Tradelink opened the first of its MICO Design Centres in East Sydney. MICO Design and its specification team service the architect and design community in Australia providing dedicated product, technical and design advice and support.

Iplex has continued to expand into new water markets, including piping open channels in the Murray Darling and Goulburn Murray regions, transferring bulk water to mining companies to facilitate expansion, providing infrastructure for desalination plants and for treating effluent to a standard suitable for potable water substitution. Most notably Iplex supplied 1,520 km of pipe for Stage 1 of the Wimmera Mallee Pipeline Project and 65 km of Flowtite GRP pipe for recycled water projects in Queensland.

Iplex has been involved in the development and distribution of a number of new products including Smart Trap ®, a patented trap system which reduces foam and noise in bathroom and laundry applications and FK1 ®, a semi-flexible pipe and patented fitting system for domestic gas installations. In addition, its acquisition of Kingston Bridge Engineering will enable production of large bore polyethylene pipe and fittings.

Tradelink has refreshed the Raymor tapware range and extended the brand into a comprehensive range of toilets, basins and bathroom accessories. Sales of the Raymor brand have increased 36% in the last 12 months. CDNZ has just commenced distribution of Raymor in New Zealand.

Tradelink and CDNZ have entered into new distribution agreements with European manufacturers for brands such as Hansgrohe, Keramag and Sphinx.

New Markets New Products ProductivityLean manufacturing continued to improve productivity at Crane Copper Tube with time taken to manufacture copper tube reduced by a third. Iplex introduced a Manufacturing Excellence Program at all plants. This program will increase workforce engagement in the production process and improve factory productivity.


Managing Director’s review continued

net capital expenditure of $44.9 million represents an increase of $12.3 million compared with last year, reflecting investment in manufacturing capacity in Iplex and an acceleration of network development in tradelink.

the Group successfully raised $60 million of ordinary equity through a placement completed in July 2007 which was used to assist in the funding of the KBe acquisition. All shares issued under the placement rank equally with the existing ordinary shares and are entitled to the final dividend declared for the 2007 financial year.

the Group remained focused on working capital management during the year. this was particularly important given the significant increase in metal prices during the period. Working capital was $347 million at 30 June 2007, up $29 million from the same time last year due to higher inventory values in the Group’s metals businesses, which were driven primarily by rising metal prices. on a Group basis, debtors’ days outstanding reduced due to an increased focus on collections. Cash flow from operating activities was $76.5 million for the period.

Operational Commentsoperational highlights within each business are discussed below and further expanded in the divisional section of the Annual Report.

IplexRevenue for the year of $679 million was up 18% on last year, reflecting continued growth in Australian infrastructure, civil and irrigation markets with Iplex supplying a number of larger water pipeline projects during the year. earnings improved with eBIt up 10.6% to $65.5 million.

pVC and pe resin prices remained high, limiting the scope for margin improvement within Iplex. As expected, lower sales in new Zealand and a higher proportion of sales to the project sector in Australia resulted in some margin contraction during the period.

expansion of the Chipping norton manufacturing facility in Sydney has increased Iplex’s opVC capacity whilst capital expenditure at other Iplex locations has focused on increasing productivity and improving unit costs.

Iplex actively participated in large-scale water infrastructure projects in Australia, securing and servicing important pipeline supply and installation contracts including the Wimmera Mallee pipeline project in Victoria and the Western Corridor Recycled Water project in South east Queensland. Both projects are on track to conclude during FY08. the strong activity in this sector is expected

to continue given the increasing government and public awareness of the need to deliver improvements in water management in Australia. Iplex is well positioned to be a leading player in this growing sector.

the acquisition of KBe will enhance Iplex’s large bore polyethylene pipe production capabilities. KBe’s fittings operation will also broaden the range of product that Iplex can offer to the market.

Tradelinktradelink generated revenue of $785 million for the year, up 9% on last year. Growth was seen across all the regions within which tradelink operates.

Consistent with the improved earnings delivered last year, tradelink increased eBIt by 31% to $22 million. Margin growth resulted from a better product range, increased sales in tradelink’s home brand, Raymor, targeted promotional programs and other activities to improve supply chain management across the business.

Costs remain well controlled, customer service levels have increased and working capital management continues to improve. A selective network expansion is now being implemented in tradelink with six new stores opened, three acquired and 21 stores refurbished during the period.

CDNZCDnZ delivered relatively flat revenue of A$452 million reflecting the subdued housing and commercial markets in new Zealand. eBIt of A$20.1 million for the year was down 3.8% compared with last year.

As part of its supply chain initiative CDnZ acquired Hydrotech Sanitar in november 2006. through this acquisition CDnZ gained exclusive rights to the importation and distribution of a number of leading european sanitary ware and tapware brands.

CDnZ commenced a five-year network development plan to address market growth opportunities. As part of this plan four new branches were opened and three relocated during the year.

Market conditions in new Zealand remain a risk factor for the performance of this business in FY08.

Metals DistributionMetals Distribution delivered a strong result with revenue increasing by 23% in the year as a result of higher metal prices and growth in sales volume.

Favourable market conditions together with significant improvements in all areas of the business delivered a strong growth in earnings, with eBIt of $18.2 million, up 90% on last year.

With expectations of continuing volatile metal prices and tight market supply, the sustainability of the current returns from Metals Distribution depends largely on market conditions.

Crane Copper TubeHigh commodity prices and the continued substitution of products in a very competitive market have negatively impacted volumes and margins. Despite revenue growth of 9% volumes were down by 23% in the year. Crane Copper tube recorded an eBIt loss of $2.5 million for the year compared to a profit of $2.7 million last year.

Crane Copper tube will continue to be managed for value with a strong focus on productivity, cost control and working capital management.

Operating Outlookthe year’s achievements and initiatives have demonstrated significant progress with the Group’s ongoing strategy of improving and growing its strong manufacturing and distribution businesses.

We are pleased with the progress during the year. Crane Group’s long-term strategic focus remains:

– concentrating resources on water infrastructure projects at Iplex;

– network development in tradelink and CDnZ;

– innovative product development;

– productivity improvements in our manufacturing operations; and

– developing management capabilities.

Current expectations are that economic conditions in Australia are likely to be more favourable than in new Zealand in FY08.

overall, Crane Group expects an improved underlying performance from the Group’s businesses in the coming year.

AcknowledgmentsI would like to thank all employees within the Crane Group for their contribution during a very challenging year. thank you also to our customers and suppliers for your continued support of the Group. We look forward to working with you in the year ahead.

Greg sedgwick Managing Director


sTrATeGIC InITIATIVes continued

During the year Tradelink opened six new branches in regional and metropolitan areas, refurbished 21 branches and acquired independent plumbing businesses in Darwin, Inverell and Griffith. Tradelink also opened the first of its MICO Design Centres in East Sydney.

CDNZ opened four new branches and relocated three major branches. MasterTrade Hastings was established as the “new generation” MasterTrade store.

New Stores Management DevelopmentDuring the year, a financial basics course was attended by 30 people across the Group. The program will be extended in the coming year.

Early in the year the Executive Management Team participated in a half day training course on facilitating the careers of female employees. This training will be extended to all senior managers in FY08.

As an adjunct to the training received by the Executive Management Team, in December 2006 a group of 12 women identified for career development across the Group took part in a two day leadership course. Following excellent feedback, the course will be repeated in the coming year. As a result of input received at the course Crane Group has introduced a paid parental leave and return to work policy effective from 1 January 2007.

In August 2007 Management held its third leadership program for 34 individuals identified by Executive General Managers as having leadership potential. As with previous courses the program involved an intensive five day live-in program and was facilitated by an external consultant.


The Board of Directors

Leo E Tutt FCA FAIM FAICD

Chairman and Independent Director

Director since September 2001. Appointed Chairman in July 2002. Also Chairman of the Remuneration and nomination Committee and a member of the Audit and Risk Management Committee.

Director of Suncorp-Metway limited since April 2007 following the merger with promina Group limited.

Mr tutt was Chairman of promina Group limited during the previous three years.

Greg L Sedgwick BComm MComm FAIM

Managing Director

Mr Sedgwick joined the Company as Managing Director on 1 January 2004. He came to Crane Group with 19 years experience in sales, marketing and line management with the BoC Group.

In 1996, he was appointed Managing Director of BoC’s industrial and special products business for Australia, new Zealand and the pacific Isles. Since 2000, he held the position of Group Director responsible for the BoC Group’s mergers and acquisitions activity, strategic planning and corporate venturing. Mr Sedgwick also has extensive international experience and has held board positions with listed companies in Japan, India and South Africa.

Mark I Fitzgerald BComm FCPA

Finance Director

Appointed Finance Director in August 2003 after having joined the Company as executive General Manager Finance in november 2002. prior to this Mr Fitzgerald held senior financial and commercial roles with Brambles Industries limited.

Robert D Fraser BEc LLB (Hons)

Independent Director

Director since June 2004. Member of the Remuneration and nomination Committee. Managing Director of tC Corporate pty limited and a director of ARB Corporation limited, Concept Hire limited and taylor Collison limited.

John B Harkness FCA


Director since September 2000. Chairman of the Audit and Risk Management Committee. Chairman of lipa pharmaceuticals limited, ICA property Development Funds, Helmsman Capital Fund and the Sydney Foundation for Medical Research. Director of Goodman Group and Macquarie CountryWide Management limited. president of northern Suburbs Rugby Football Club limited.

Cecil R Stubbs BE


Director since July 1998. Member of the Remuneration and nomination Committee and the Audit and Risk Management Committee.

In the previous three years Mr Stubbs was Chairman of MIAB technology pty limited (April 2001 to october 2006). He is no longer a director of that company.

Leo Tutt

Greg Sedgwick

Mark Fitzgerald

Robert Fraser

John Harkness

Cecil Stubbs


Executive Management Team

Greg L Sedgwick BComm MComm FAIM

Managing Director

please refer to biography on page 12.

Mark Fitzgerald BComm FCPA

Finance Director

please refer to biography on page 12.

Susan Leppinus BEc LLB GDip AppFin (Sec Inst)

General Counsel, Company Secretary

Susan leppinus joined the Company as legal Counsel in october 1999 and was appointed General Counsel and Company Secretary in February 2003. Her previous roles include legal counsel at email limited and senior corporate lawyer at Clayton utz.

Bill WoodExecutive General Manager, Iplex

Bill Wood joined Iplex pipelines in July 1998 after the acquisition of Mainline plastics, of which he was a director. He has over 25 years experience in Sales, Marketing and General Management within the plastic pipe and fittings industry.

Ivor Timmins BBus

Executive General Manager, Tradelink

Ivor timmins joined Crane as executive General Manager, tradelink on 1 July 2004.

Ivor has held senior management positions with CAep Asia/pacific, Bearingpoint, pioneer International and BoC. Ivor has extensive experience in general management and sales and marketing gained in Australia and Asia.

Karl Smith BComm

Executive General Manager, CDNZ

prior to his current role, Karl Smith was General Manager of Mastertrade Corys. He also held senior management roles with Invensys energy Systems and pDl Holdings limited and was Chief Financial officer of MG Marketing limited, progressive enterprises limited, Foodland new Zealand and Citibank new Zealand.

Peter Davidson BE(Mech)

General Manager, Crane Copper Tube

peter Davidson has extensive experience in manufacturing based businesses and prior to joining Crane Group held senior management positions in Southcorp, Chubb and Mitsubishi Motors.

Stephen RobertsonExecutive General Manager, Metals Distribution

Stephen Robertson was appointed in March 2003 and prior to his appointment spent four years as Chief executive officer of MCK Metals Australia.

James Madigan BEc

Chief Information Officer

James Madigan was appointed CIo in February 2004. prior to joining Crane Group he was a partner at Accenture where he was involved in major re-engineering and systems implementation projects for large corporations across Australasia.

Ross Parker BA

Executive General Manager, Human Resources

Ross parker was appointed executive General Manager, Human Resources in February 2004 following a period as a consultant to Crane Group. prior to this he held senior positions in unilever (Australia), tooheys limited and Goodman Fielder limited.

Greg Sedgwick

Mark Fitzgerald

Susan Leppinus

Bill Wood

Ivor Timmins

Karl Smith

Peter Davidson

Stephen Robertson

James Madigan

Ross Parker


Iplex pipelines is Australasia’s largest producer of plastic pipe and fittings.

Revenue for the full year was $679 million up 18.26% from last year. eBIt at $65.5 million represented a 10.6% increase on last year.

overall sales in building products were ahead of last year with the Queensland and Western Australian housing markets being the stand-out performers. Development of advanced light weight pipe technology has resulted in supply to major infrastructure projects within Australia. Iplex pipelines is the pipe supplier for the Wimmera Mallee Water Authority’s pipeline project for approximately 1,520 km of pipe in Stage one.

A strong focus on customer requirements backed up by research, development and technical support provided by the newly established Iplex Water division, led to a strong performance in irrigation and infrastructure projects.

Following the development of Iplex’s biaxially orientated pVC pipe Apollo®‚ in FY07, Iplex was awarded the largest biaxial pipeline ever undertaken in Australia supplying 320 km for the Darling Anabranch pipeline in new South Wales.

During the year, Iplex commissioned a second Black Max®‚ polypropylene twin wall pipe machine in Brisbane to meet growing demand.

Iplex’s exclusive marketing and distribution agreement with Fibrelogic saw Iplex win a major pipe supply contract with the Queensland Government.

Key plastics, Crevet pipelines, Gatic Milnes and nIBF all reported improved results in the past 12 months. these Iplex operations and Iplex’s distribution agreement with AVK Valves complement the core Iplex business by providing a wide range of products to satisfy customer requirements in each market sector.

In the gas and utilities market Iplex’s distribution agreement with Georg Fischer continues to generate business on major projects in the resources sector.

the recently announced Federal Government water initiatives to drought-proof Australian towns and cities, together with the expansion of mining operations in Australia to cope with increased demands for commodity products, augers well for future demand for Iplex products.

A pro-active maintenance program across all manufacturing sites has reduced unscheduled breakdowns resulting in higher factory output across all plants. Computer-based plant maintenance systems were upgraded progressively during the year.

Housekeeping and safety have seen considerable improvement since the introduction during the year of Iplex’s Manufacturing excellence program. this program encourages all staff to strive towards shared quality and productivity improvement goals through greater personal involvement in the planning and delivery of workplace improvements.

Focus on improved performance across the supply chain resulted in better customer service levels, stock health and logistics efficiencies. the business placed particular emphasis on materially improving its sales and operations planning activities to support the growth in sales and the increasing number of major projects being serviced.

In the area of Human Resources the focus was on safety and employee relations. our philosophy is “no job is so important or urgent that it can’t be done safely”. this year 13 sites celebrated nil lost time injuries or nil medical treatment injuries for a period of 12 months or more.

Iplex’s ongoing business success is supported by a positive employee relations environment. our goal throughout the year was to ensure compliance with the new Workplace Relations legislation, whilst retaining the employee conditions that provide the productivity and flexibility needed to meet growing customer demand.

In August 2007, Iplex completed the acquisition of Kingston Bridge engineering pty ltd. this acquisition will give Iplex new capability in large bore polyethylene pipe and fittings and provide plant, equipment and warehousing capacity for expansion on the eastern seaboard of Australia.

Iplex pipelines experienced strong demand in all market sectors throughout the year and production plants ran at high capacity to meet customer requirements. A strong focus on safety over the last three years ensured a greatly improved working environment.

Iplex

Bill Wood executive General Manager, Iplex


Iplex has secured a major supply contract with the Queensland Department of

Infrastructure for approximately 65 km of 1,000 mm and 1,200 mm Flowtite GrP

pipe for the Western Corridor project.

CAse sTuDy South East Queensland is currently experiencing the most severe drought in over 100 years with water storages in August 2007 at a combined average of 16% capacity.

In 2005 the Queensland Government embarked on an ambitious program to create a “water grid” to link all major water sources in South East Queensland in a network which will provide vastly improved water supply security to all urban areas of South East Queensland from Brisbane to the Gold Coast.

Iplex has been successful in securing a major supply contract for a portion of the works let to date consisting of the 65 km Lowood to Caboonba section of the Western Corridor project and the 32 km Landers-chute to Morayfield section of the Northern Pipeline Interconnector.

Following an exhaustive investigation by the client, Iplex’s Flowtite GRP pipe in 1,000 mm and 1,200 mm diameters, was selected due to Flowtite’s long-term durability, non-corrosive properties and Iplex Pipelines’ strong track record in major projects.

Iplex has delivered the first stage of the Western Corridor project ahead of schedule, allowing the next stage deliveries to commence much sooner than first anticipated.

Western Corridor project


Despite challenging residential building market conditions, tradelink grew revenue by 9% to $785 million and eBIt by 31% to $22 million.

the residential building market remained depressed. new housing activity grew in Queensland and WA but this did not offset declining activity levels in nSW and Victoria. Whilst new housing activity declined, renovation activity improved slightly in all major markets except nSW. Although market conditions varied in each State and territory, tradelink achieved sales growth in 18 of its 19 regions reflecting the successful implementation of its “grow and improve” strategy.

tradelink’s growth during the year has stemmed from implementation of a network development plan, extension into specification and design, expansion of the Raymor home brand and improved sales effectiveness:

– tradelink continues to successfully implement its network development plan. During the year tradelink acquired three independent plumbing supplies businesses in Darwin, Inverell and Griffith. Six new branches commenced operation in regional and metropolitan markets. twenty-one branches were refurbished including upgrades in Cairns, Bega, Devonport, Bayswater, Mandurah and Fitzroy, improving tradelink’s service offer through upgraded facilities that are better configured to meet local demand requirements. tradelink will accelerate its investment in new branches, upgraded showrooms and better-configured trade operations in the coming two years.

– tradelink opened the first of its MICo specification and design centres in east Sydney in February 2007. the MICo Design team services the architect and design community in Australia, providing dedicated product, technical and design advice and support. the MICo Design Centre has innovative product displays and provides comprehensive access to leading local and overseas manufacturers of bathroom ware and kitchenware products.

– over the last 12 months sales of the Raymor home brand have grown 36%.

– traditionally, the Raymor brand has been associated with good value tapware, however, it now includes a comprehensive range of bathroom ware and accessories.

– Considerable focus has been placed on improving the effectiveness of tradelink sales teams and branch networks with the implementation of the Rogen sales management framework and training which focuses on sales growth and margin management.

In the last 12 months tradelink implemented a range of improvement initiatives to support its growth program in the areas of oH&S, cost management, staff retention and development, and supply chain:

– the focus on warehouse safety, loading and unloading, mobile plant and motor vehicle safety resulted in a further reduction in tradelink’s lost time Injury Frequency Rate over the last 12 months.

– Staff retention and development remains a key priority. tradelink’s regrettable staff turnover rate fell 7.8% during the last 12 months. Improved recruitment and induction processes, performance management and career management and a continued investment in training, have all contributed to a more stable and better equipped workforce.

– A number of supply chain initiatives were progressed this year. the trans-tasman approach to product management has enabled tradelink and CDnZ to provide customers with exclusive product ranges whilst tradelink’s program to reduce the number of active product suppliers is largely complete.

tradelink will continue to implement its “grow and improve” strategy to improve performance and place itself in the best position to take advantage of any future upturn in the housing market.

tradelink’s “grow and improve” strategy has delivered a strong result in a tough market. A focus on network and staff development, margin management and efficient supply chain practices continues to under-pin improving performance.

Tradelink

Ivor Timmins executive General Manager, tradelink


Over the last two years Tradelink has refreshed the Raymor tapware range and extended the brand into a comprehensive range of toilets, basins and bathroom accessories.

Great quality, timeless design and good value for money are the key attributes of Raymor’s product range.

Raymor tapware continues to win design awards, the latest being for the new Tessa mixer at Designex, Australia’s premier design event, held in Melbourne this year. Raymor’s range also includes many long lasting designs such as the Raymor T4 tap that was designed in 1962. The T4 remains an architect’s favourite due to its timeless geometrical design and outstanding value for money.

Raymor product has traditionally been sold into large commercial projects and the project homebuilder markets. Renovators and consumers are increasingly seeking Raymor products through Tradelink’s extensive network of showrooms. Raymor is now available in New Zealand through the MICO Bathroom, MICO Plumbing and MasterTrade outlets.

raymor is Tradelink’s exclusive home brand of tapware and bathroom ware. This enduring and easily recognisable

Australian tapware brand will be 60 years old next year.

CAse sTuDy

Raymor


CDnZ achieved higher revenue largely due to price inflation as margins were maintained across all four specialist product categories of plumbing, pipeline, electrical and personal protection Safety equipment. the specialist trade installation and retail sectors experienced margin erosion, however, there were positive margin increments arising from the commencement of CDnZ’s direct product sourcing strategy for key bathroom and plumbing installation products. expenses increased primarily in response to labour and metropolitan rental cost increases.

CDnZ strengthened its supply chain by focusing on direct sourcing and importing of key product and internationally recognised brand ranges. In november 2006 the acquisition of the well-established plumbing import agency business of Hydrotech Sanitar (HS) was completed. this acquisition included exclusive distribution and agency agreements for new Zealand and the pacific Islands of several major internationally recognised european sanitary ware and tapware brands. CDnZ assisted tradelink to secure many of the same agencies for the Australian market on a trans-tasman basis.

these agencies include Hansgrohe, one of the premier tap and showerware manufacturers in the world including the Hansgrohe, pharo and Axor brands, and the Sanitec Group, the world’s third largest manufacturer of vitreous china and acrylic baths with the key brands of Keramag, Sphinx, Koralle and Albatross. other exclusive plumbing and bathroom ware brands secured in the deal included McAlpine, Haceka, Schwab and Albertoni.

CDnZ commenced roll-out of these exclusive brands in the second half of the year with retail showroom displays installed throughout the MICo and Mastertrade networks. the HS distribution centre is being integrated into CDnZ’s two existing national Devanning Centres.

CDnZ also commenced sourcing of Raymor products for the new Zealand market.

A detailed five year network development plan has been commenced by CDnZ. Detailed external research was undertaken to identify new branch opportunities, formats, network reconfiguration and relocation requirements. During the year four new branches were opened in taranaki, Central otago, Wellington and Counties with a further three branches being relocated during the year. A major highlight in this initial phase was the successful relocation of Mastertrade Hastings and the establishment of this branch as the first “new generation” Mastertrade store encompassing a significantly modernised trade format, together with a contemporary retail bathroom showroom. the “new generation” Mastertrade format was rolled out to a second branch relocation at Victoria Street in central Wellington. We have now established standard format requirements for the MICo and Mastertrade trading brands and will look to complete the same for Corys electrical in the next year. this new format program will form the basis of CDnZ’s network Development plan over the ensuing five years.

CDnZ continued to build upon the momentum of its Health and Safety programs throughout the year, further reducing its lost time Injury Frequency Rate from 2 to 1.3 – a record low. the total Incident Case Rate also achieved a record low at 8.3. Regional Health and Safety Committees continued to strive to embed behavioural changes across the entire branch network. CDnZ will be piloting a national program with the Automobile Association of new Zealand which will see our entire driver community complete a mandatory defensive driving course.

During FY08, CDnZ will continue to implement its business improvement programs while building further momentum in sourcing and importing exclusive and limited distribution branded products. We will also continue executing our network Development plan to expand our sales growth opportunities and cement our position as new Zealand’s largest specialist sales and distribution network.

CDnZ achieved a 1.4% overall lift in revenue to A$452 million for the full year in a somewhat challenging economic environment. eBIt at A$20.1 million was down 3.8%.

CDNZ

Karl smith executive General Manager, CDnZ


This competitive advantage has assisted CDNZ to win contracts for major building projects. The Rees luxury apartments in Queenstown is one of the first major projects where CDNZ is supplying all products on a large scale across Electrical, Plumbing, Bathroomware, Pipelines and Safety segments. The Rees project has also identified additional market opportunities for CDNZ in appliances and audio visual product which are currently being evaluated.

Originally much of the product for The Rees apartments was to be sourced offshore by the developers, SMG Properties. After discussion and negotiations with CDNZ, SMG Properties identified both financial and non-financial benefits in sourcing product through CDNZ. These benefits included CDNZ’s strong relationship management, supply and logistical experience.

With this strong advantage in the market the CDNZ sales team continues to identify opportunities to partner with major developers like SMG Properties.

The Rees apartments is a luxury establishment themed on the life stories of the first European settler to Queenstown, William Rees, and can be viewed at www.therees.co.nz.

As the only distribution company in new Zealand that supplies across five

different markets CDnZ has a significant point of difference over its competitors.

CAse sTuDy

The Rees apartments


the Metals Distribution business has 15 branches across Australasia and has solid positions in all major markets. the business, trading as Austral Wright Metals in Australia and MICo Metals in new Zealand, grew revenue by 23% to A$294 million whilst eBIt improved by 90% to A$18.2 million over the last year.

During the year the business faced record high metal prices resulting in material cost increases in stainless steel and copper alloy products never before experienced.

Due to strong supply partnerships the business was able to maintain good on-going supply and through focused inventory management and strong pricing management both Austral Wright Metals and MICo Metals improved trading margins during the year.

there was continued improvement in our safety management in the business with the major highlight being Austral Wright Metals achieving a lost time Injury free year and MICo Metals achieving tertiary level accreditation under the ACC Workplace Safety Management program (WSMp).

In new Zealand, demand for products was patchy as general economic conditions continued to be tough. Despite this, MICo Metals continued to be a leading supplier of its products, winning a major share of large contracts. Revenue in MICo Metals grew 17.5% finishing in excess of nZ$100 million for the year.

In Australia, market conditions for Austral Wright Metals were generally steady with overall sales volumes exceeding last year and revenue 27% higher than last year due to higher metal prices.

Austral Wright Metals performed well in all of its five State operations with Queensland continuing to improve its market position and Western Australia taking good advantage of strong market demand.

In response to the rising prices of traditional nickel-based stainless steels the business recently launched two new stainless steel products as alternative grades to traditional 304/316 grades. these “new generation” grades (445M2™ and AWM 404Gp™/MICo 404Gp™) are ferritic chromium-based stainless steels with performance levels as good if not better than 304/316 with the cost benefits of a zero nickel content.

Market acceptance of these products is growing rapidly and we believe demand for these products will grow significantly during the next 12 months.

Whilst rising metal prices assisted the Metals Distribution business in improving its trading margins, it put pressure on working capital levels in the business. Despite this, through strong working capital management, overall return on funds employed in the Metals Distribution business improved significantly.

the forthcoming year promises to be challenging for the Metals Distribution business with metal prices continuing to remain very high and beginning to impact on demand, particularly in the area of copper. During FY08 Austral Wright Metals and MICo Metals will continue to market new generation stainless steel products strongly and look to expand its customer base into new geographic regions.

Metals Distribution performed very strongly this year, capitalising on favourable market conditions. product development together with geographical expansion will assist us in continuing to grow this business.

Metals Distribution

stephen robertson executive General Manager, Metals Distribution


These “new generation” stainless steels marketed as grades AWM 404GP™/MICO 404GP™ and 445M2™ are produced in the most technologically advanced steel manufacturing mills in Japan and Austral Wright Metals and MICO Metals have been able to secure strong supply support from these mills.

Traditional 304 and 316 stainless steels contain nickel, which has resulted in costs increasing significantly for these grades in recent times due to world nickel prices soaring.

AWM 404GP™/MICO 404GP™ and 445M2™ are ferritic chromium-based alloys and so have cost benefits over the traditional grades. In addition to this, these new generation steels have proven performance levels as good as the traditional grades and in some cases where forming and bending is required there are added benefits over 304 and 316.

Austral Wright Metals and MICO Metals have focused strongly on advertising, marketing and promotion of these new grades. Product is available ex-stock in coil, sheet and tube form.

Market acceptance of the new grades is growing steadily and Austral Wright Metals and MICO Metals expect to achieve significant growth in the sales of these products in the future.

Crane’s Metals Distribution businesses have successfully introduced two

new grades of stainless steel to the Australasian market in the last 12 months.

CAse sTuDy

“New generation” stainless steel


Crane Copper Tube

Crane Copper tube experienced a challenging year in FY07 as sustained high metal prices started to influence sales volumes. Revenue increased by 9% to $140 million as a result of higher copper prices. However, there was a marked decline in volume sold which had a significant negative impact on profitability. eBIt was a loss of $2.5 million.

Copper prices remained high and volatile during the FY07 year. the average copper price during the year was approximately 40% higher than the average for the FY06 year. In the past three years, the average copper price has more than trebled. the sustained high copper price has seen a worldwide decline in the use of copper tube for plumbing. this substitution (mainly to plastic products) was particularly marked in FY07.

A lean manufacturing philosophy has been successfully introduced at Crane Copper tube and this has resulted in significant improvements to underlying processes, operational efficiencies and customer service. time taken to manufacture copper tube has been reduced by a third, rework

rates from individual machines have been improved by an average of over 30% and machine efficiencies are typically up by approximately 15%. Delivery in full on time performance to customers is running above 95%.

A continued focus on safe behaviours and hazard reduction has seen the frequency of safety incidents (tICR) reduced by 25% this year.

the Viega propress® tube joining system was launched throughout Australia during the year. this integrates state-of-the-art press fit technology and purpose designed fittings to deliver a fast, most cost effective and reliable copper tube connection method for both gas and water applications. plumbers who have adopted the system report significant improvements in productivity with joints being completed in seconds without the use of heat or flame.

More improvements in operational efficiency are expected in FY08 that will further reduce the cost structure of Crane Copper tube and improve its financial performance.

A challenging year where significant progress was made in all areas of the business but gains were more than offset by substitution-driven volume losses.

Peter Davidson General Manager, Crane Copper tube

Crane Copper Tube has successfully launched Viega Propress ®, the ultra fast joining system for copper tube. Viega Propress is a unique press-fit system for professional joining of copper tube in water and gas applications.

Viega Propress ® has many advantages over traditional joining methods including speed of installation and the ability to join pipe that is wet. Because no flame or gas bottles are needed, safety issues are minimised, hot work permits are not necessary and assembly of piping systems is much easier.

Viega Propress ® is a German-made system that has changed the way plumbers connect copper tube in Europe and America. It is now starting to have the same impact in Australia.

The Viega Propress ® system improves productivity.

CAse sTuDy

Viega Propress ®


Grace Westdorp Group Manager, oHS & Workers’ Compensation

the safety program at Crane Group continues to mature and this has resulted in further improvements in safety performance and injury prevention.

Safety

For the past year, safety compliance and control of risks has been included in quarterly performance meetings for each business division. Reviewing safety alongside other business key performance indicators has given greater transparency of injury prevention activities and progress to management.

During the year an audit tool was developed to assist divisions with their safety improvement programs. the audit tool sets out logical and clearly defined activities required to control key risks. Divisions utilise this tool to assess compliance with internal and external standards.

the safety program was supported strongly by the Safety leadership team, which includes each executive General Manager and General Manager. each senior management team member was required to satisfy personal safety goals which comprised dedicated safety inspections of sites, involvement in local safety committee meetings and support of the safety program through communication sessions within their divisions.

Crane Group achieved all its business goals in relation to injury prevention this year. the rate of injuries involving time away from work decreased by 23% with a concurrent 47% reduction in the number of working days lost through injury. A new safety goal of total Incident Case Rate (tICR) was introduced as a key performance indicator. tICR is the combined rate of injuries involving lost time and injuries involving medical treatment. tICR reduced by 16% over the course of the year.

Continuing safety improvement and injury prevention over the past three years led to a 40% reduction in workers’ compensation premiums in Australia representing approximately $4 million in savings.

For the year ahead Crane Group will be focussing on two main areas of key risk – Motor Vehicle Accident prevention and Driver Safety and Manual Handling.

– the Manual Handling project will utilise the audit tool and require divisions to conduct risk assessments on a wide range of products, handling equipment and lifting aids: assess the work environment; identify peak pressure activities and cycles; communicate standards and commence internal audits.

– During 2005 Crane Group established a purchasing standard in relation to a selection of motor vehicle safety features. Standard safety features for passenger vehicles purchased by Crane Group include ABS braking, dual airbags, headlights activated while the vehicle is in operation and reversing sensors.

– the Motor Vehicle Accident prevention and Driver Safety program will be launched in the coming year and includes specialised driver training programs, issue of car safety kits and packs which contain essential information for safe driving and post accident advice. Crane Group’s approach to safe driving also includes review of incident occurrences by the Safety leadership team and consequence management for poor driving behaviours.


Environment

the Group’s manufacturing facilities, located in Australia and new Zealand, operate under specific environmental licence conditions and approvals pursuant to relevant environmental legislation. other facilities used for the distribution, warehousing and retail activities of tradelink, Austral Wright Metals, Iplex, Key plastics, MICo Metals nZ and CDnZ operate under environmental legislation that generally does not require specific licensing.

During the year, two licences were held under the nSW protection of the environment operations Act and four under the QlD environment protection Act. other licences, permits, consents and approvals are also held pursuant to particular legislation, including e.g. dangerous goods legislation. this year several facilities have sought to vary licences or permits to better accommodate their business needs.

pursuant to Crane’s environmental Management System, independent consultants are engaged to undertake environmental compliance audits of large manufacturing sites every second year. this year desktop reviews of manufacturing and non-manufacturing sites were undertaken and visits were conducted at representative sites of each division to assess environmental performance in 2006/07. As a result of the audit some discrepancies in waste reporting to the environment protection Agency were identified and are being rectified. An infringement notice and fine (of $1,500) were issued to the Crane Copper penrith site for breach of a licence condition with respect to maintenance of plant and equipment. other than these items, there were no significant issues identified during the 2006/07 environmental program. All issues identified are being addressed by the divisions in their work plan for the coming year.

Groundwater investigations continue at Crane Copper tube penrith, as part of a Voluntary Investigation Agreement with the nSW Department of environment and Climate Change. Groundwater remediation is progressing satisfactorily. A pump and treatment plant installed on the site in August 2006 is successfully improving the quality of groundwater beneath the site. other remediation options have also been identified and are being investigated through laboratory trials. Consultation has continued with landowners in the area and the relevant authorities.

environmental management and sustainability initiatives have continued at a number of sites during the year. As noted in last year’s report, these include plastics sustainability initiatives, transfer of some motor vehicles to dual lpG/petrol fuel, energy metering and waste reduction and recycling programs. In addition, a number of new initiatives have been taken up: an energy Savings Action plan has been approved by the nSW Department of Water and energy at Crane Copper tube; energy saving light bulbs have been installed throughout a number of large tradelink sites; Iplex is currently installing rainwater tanks at all sites in addition to continuing its water recycling program; Crane Group has registered with the Commonwealth Government energy efficiency opportunities (eeo) program. this program commits Crane Group to energy reduction initiatives over the next five years. Crane Group has appointed an eeo compliance team with representatives from each division to investigate energy efficiency opportunities across the Crane Group and report on the implementation of these initiatives in accordance with the eeo assessment and reporting framework.

At the date of this Report, the directors are not aware of any actual or threatened prosecutions by an environmental authority.

Crane Group’s commitment to the environment expanded in FY07 to include a focus on energy-saving initiatives.


Corporate governance

The Boardthe Board of Directors is responsible for leadership and direction of the Crane Group. It has a formal Board Charter setting out key matters reserved to the Board. these include appraising and approving corporate strategy, approving major investment decisions and financial budgets, monitoring performance against set objectives, determining Crane’s dividend policy, overseeing Crane’s capital management and funding and reviewing the effectiveness of succession planning of senior management and Board members. the Board also continuously reviews the Crane Group’s financial and operational performance and risk management processes. this work is carried out primarily through regular Board meetings and Committee meetings.

the Board currently comprises four independent non-executive directors including the Chairman, and two executive directors being the Managing Director and the Finance Director. non-executive directors are expected to serve no longer than 10 years unless otherwise determined by the Board. performance of non-executive directors is reviewed with the Chairman every two to three years. In September/october 2006 each Director completed a review in the form of a question and answer sheet and a succession plan was agreed. the Chairman also reviews the contributions made by individual directors on an ongoing basis.

Directors may obtain independent professional advice, at Crane’s expense, on matters arising in the course of their Board duties after obtaining the Chairman’s approval, which cannot be unreasonably withheld.

Independence of directorsthe Board has a formal set of criteria on independence of directors. Factors affecting director independence include whether the director:

– is a non-executive director;

– is a substantial shareholder in Crane Group limited;

– has within the last three years been employed as an executive of the Crane Group, been an employee directly involved in the provision of services by any of the Crane Group’s material professional advisers or material consultants or been a director of Crane after ceasing to be employed as an executive of the Crane Group;

– is or has within the last three years been a principal of Crane Group’s external auditors, or of a consultant or professional adviser to the Company where the fees earned from such services exceeds $200,000;

– is a material supplier to or purchaser from the Crane Group or directly or indirectly associated with such a supplier or customer;

– has a contractual relationship with any member of the Crane Group which in total exceeds $100,000 p.a.; or

– has served as a Crane director for a continuous period of more than 10 years.

statement of Position Authority A formal statement of position authority has been adopted by the Board for the Chairman and Managing Director. the Chairman is primarily responsible for providing effective leadership to the Board and ensuring that processes adopted by the Board are adequate. the Managing Director is primarily responsible for developing and implementing strategic plans and managing resources, policies and systems, developing annual budgets and ensuring that the Board is provided with adequate information.

Managing Director and Finance Director sign‑offthe Managing Director and Finance Director have declared, in writing to the Board, in respect of the financial year ended 30 June 2007 that;

– Crane Group’s financial reports:

– are in accordance with the Crane Group Accounting policies and procedures and relevant Australian Accounting Standards;

– give a true and fair view of the financial position of Crane Group as at 30 June 2007 and of its performance, as represented by the results of its operations and cash flows, for the year ended on that date;

– are based on the financial records of the business which have been properly maintained;

– the above statement is founded on a sound system of risk management and internal compliance and control, which implements the policies adopted by the Board; and

– the Group’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

CommitteesCommittees established by the Board of Directors as part of its responsibility to oversee the strategic direction of the Crane Group and to ensure continued business operation on a secure basis are as follows:

Audit and risk Management Committeethe Audit and Risk Management Committee consists of John Harkness (Chairman), leo tutt and Cecil Stubbs. Its primary functions under its Charter are: to act as an interface between the Board and the external auditor; to review the independence of the external auditor to ensure it is not restricted in forming an independent view on Crane Group’s financial report; to review, with management and the auditor, the reliability of the Group’s periodic statutory financial statements and reports; and to monitor procedures in place aimed at ensuring compliance with the Corporations Act 2001 and the ASX listing Rules. For part of each Committee meeting, the external auditor meets with the Committee members without management present.

the Audit and Risk Management Committee is also responsible for overseeing the operation of the Group risk management framework including: to review the activities of the executive Risk Management Committee and Risk Management Group which includes internal audit; to review the systems and controls established by management to safeguard the Group’s assets; and to monitor adherence to and implementation of the Board policy on tax Risk Management.

the Committee has reviewed the independence of the external auditors. the provision of non-audit services by the external auditors to the Group has been restricted by the Board to ensure audit independence.

Crane Group’s risk management framework includes a Risk Management policy that governs the overall risk framework for the Group. An overview of this policy is posted on the Crane website. In addition, the Group keeps a risk register listing the strategic and operational risks to the Group. this list is regularly updated.


executive risk Management Committeethe executive Risk Management Committee oversees the management of business risks and is comprised of Senior executive Management of Crane Group. It reports to the Board’s Audit and Risk Management Committee. A Risk Management Sub-Committee operates in new Zealand, comprising senior new Zealand executive Management and reports to the executive Risk Management Committee.

the Committee and the Sub-Committee monitor the implementation of the Group’s risk management framework, internal audit program and the Group’s compliance with environmental, occupational health and safety, It licensing and trade practices legislation. In addition, the executive Risk Management Committee oversees the Group’s insurance program.

remuneration and nomination CommitteeDuring the period 1 July 2006 to 30 June 2007 the Remuneration and nomination Committee comprised non-executive directors leo tutt (Chairman), Robert Fraser and Cecil Stubbs.

under its Charter, the functions of the Remuneration and nomination Committee include reviewing senior executive performance and remuneration structures, reviewing succession plans, monitoring directors’ remuneration levels and retirement benefits and determining the appropriate method of reviewing the performance of the Board. In its nominations role it is responsible for recommending to the Board criteria for Board membership, reviewing the size and composition of the Board and nominating new directors for the Board’s consideration.

During the financial year the Committee engaged appropriately qualified independent consultants to provide it with advice and recommendations.

the Remuneration Report in respect of directors, non-executive directors and senior executives is set out on pages 31 to 39 of the Report of the directors.

External Auditorthe external auditor attends the annual general meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the independent audit report.

non‑audit servicesDuring the year KpMG, the Group’s auditor, performed certain other services in addition to their statutory duties.

the Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit and Risk Management Committee, is satisfied that the provision of those non-audit services during the year by the auditor is minor and compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons;

– all non-audit services were subject to Crane Group’s corporate governance procedures and have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the integrity and objectivity of the auditor; and

– the non-audit services provided do not undermine the general principles relating to auditor independence as set out in professional Statement FI professional Independence, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Crane Group, acting as an advocate for the Crane Group or jointly sharing risks and rewards.

the lead auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 86 of the financial report.

Fees paid/payable to the auditors’ and its related practices for non-audit services provided during the year total $7,983 comprising:

2007 2006 $ $

taxation – 7,140Workers’ compensation review 7,983 2,850

7,983 9,990

Officers who were partners of the auditorJB Harkness was appointed to the Board of Crane Group limited in September 2000. JB Harkness had been a partner of KpMG until 30 June 2000 but at no stage did he have any involvement in the audit of Crane Group.

Schedule of directors’ interests in Crane Group shares and optionsthe following table shows the number of shares and options as at 13 August 2007 in which each director has a relevant interest as disclosed to the Australian Stock exchange pursuant to section 205G of the Corporations Act 2001.

Shares options

le tutt 54,020 nilGl Sedgwick 349,017 nilMI Fitzgerald 130,000 nilCR Stubbs 2,000 nilJB Harkness 2,305 nilRD Fraser 3,835 nil

Corporate governance continued


Directors’ and Executives’ share tradingCrane Group has a formal policy for share dealing by directors and senior executives, allowing the buying and selling of Crane Group limited shares only during specified periods after the release of the annual and half yearly results announcements and the annual general meeting, except for participation in the Group’s employee share schemes or where exceptional circumstances apply.

Codes of ConductCrane Group has a Code of Conduct for all employees setting out expected standards of behaviour which is posted on the Crane website. there is also a formal Code of Conduct for directors providing guidelines on directors’ duties, professional integrity, conflicts, improper use of information, confidential information and similar issues.

Continuous Disclosure Policy and shareholder InformationCrane Group has procedures in place to ensure the timely disclosure of material information to shareholders and the market generally including a formal policy for continuous disclosure identifying its obligations under ASX listing Rule 3.1 and laying down internal reporting mechanisms to ensure compliance.

All announcements made across the ASX announcements platform are also posted on the Crane website. the slide presentation made at analysts’ briefing sessions held immediately after release of the half and full year results are released to the Australian Stock exchange and webcast live on the Crane Group website. the webcast is archived in the announcement section of the Crane Group website (www.crane.com.au) where corporate governance information and a range of other shareholder information is maintained.

AsX Corporate Governance recommendationsCrane Group limited has complied with the ASX Corporate Governance Recommendations over the reporting period.

schedule of Directors’ Attendance at Meetings1 July 2006 – 30 June 2007

Audit and Risk Remuneration and Board Meeting Management Committee nomination Committee

Held Attended Held Attended Held Attended

le tutt 9 9 4 4 4 4Gl Sedgwick 9 9 1*MI Fitzgerald 9 9 CR Stubbs 9 9 4 4 4 4JB Harkness 9 9 4 4 2*RD Fraser 9 9 2** 4 4

* Mr Sedgwick and Mr Harkness are not members of the Remuneration and nomination Committee, but were invited to attend these particular meetings.

** Mr Fraser is not a member of the Audit and Risk Management Committee but was invited to attend these particular meetings.

In addition to scheduled meetings, the directors attended various strategic and operational meetings with management and undertook site visits.


Six year historical performance

Consolidated 2007 2006 2005 2004 2003 2002

Income statementRevenue $m 2,187 2,046 2,175 2,098 1,923 1,669

profit before interest, tax, depreciation, amortisation and significant items (eBItDA) $000 136,352 135,604 152,649 141,644 134,532 116,063

profit before interest, tax and significant items (eBIt) $000 103,041 99,713 112,407 90,267 97,097 76,412

profit before tax and significant items $000 80,329 81,482 84,876 64,306 77,064 59,304

net profit after tax and minority interests and before significant items $000 53,962 47,134 49,256 35,852 46,425 33,576

net profit (loss) attributable to members of Crane Group limited $000 47,806 73,865 48,557 (15,141) 45,127 33,576

Balance sheettotal assets $000 1,156,547 1,068,532 1,140,088 1,206,313 1,065,495 976,401

net debt $000 200,718 186,921 229,784 302,582 253,328 198,372

equity attributable to members of Crane Group limited $000 490,425 453,133 407,323 389,131 411,715 371,684

total equity $000 490,972 453,657 448,791 430,307 440,920 403,243

share informationDividends on ordinary shares 2 $000 40,993 35,655 34,309 32,712 33,657 25,182

Dividends per ordinary share 2 cents 65.0 60.0 60.0 60.0 65.0 50.0

Dividend payout ratio 2 % 85.7 48.3 70.7 n/a 74.6 75.0

ordinary shares issued during the year 000 1,528 1,716 3,264 2,905 1,517 7,234

number of ordinary shares issued at year end 000 61,491 59,963 58,247 54,983 52,078 50,561

Market capitalisation $000 1,037,352 734,545 495,103 494,295 525,983 433,815

ratios and statisticsReturn on average equity attributable to members of Crane Group ltd % 15.7 18.7 14.8 (3.8) 11.5 9.8

Basic earnings per share 3 cents 79.6 126.4 86.8 (28.0) 85.9 66.0

net debt / equity 4 % 41 41 51 70 57 49

Interest cover (times) 5 4.3 5.4 4.1 3.5 4.8 4.5

net assets per ordinary share attributable to members of Crane Group limited $ 7.98 7.55 7.19 7.07 7.90 7.34

employees at 30 June 5,088 4,956 5,604 6,161 5,814 5,139

1 2007, 2006 and 2005 are based on IFRS whilst 2004 and prior years are based on previous AGAAp.

2 Includes special dividends of 5 cents in 2003. Represents dividends declared in relation to each financial year.

3 earnings per share figures for 2002-2006 have been adjusted for comparative purposes to allow for the bonus element in share issues in subsequent years.

4 Ratio of net debt (Interest-bearing liabilities and bank overdrafts less cash and deposits at call) to total equity attributable to members of Crane Group limited.

5 Before significant items.

29

Crane Group Limited and its controlled entities Annual financial reportFor the year ended 30 June 2007

Report of the directors 30Income statements 40Balance sheets 41Statements of changes in equity 42Statements of cash flows 43Notes to the financial statements 44Directors’ declaration 84Independent auditor’s report 85Lead auditor’s independence declaration 86Shareholder information 87

07 Notes to the financial statements 1 Statement of significant accounting policies 44 2 Segment reporting 50 3 Revenue 51 4 Financing (costs) / income 51 5 Expenses and significant items 52 6 Discontinued operations 53 7 Auditor’s remuneration 53 8 Income tax 54 9 Dividends 57 10 Earnings per share (EPS) 58 11 Cash and cash equivalents 59 12 Current receivables 59 13 Current inventories 59 14 Non-current receivables 59 15 Non-current investments 59 16 Property, plant and equipment 60 17 Intangible assets 62 18 Current payables 63 19 Current loans and borrowings 63 20 Current provisions 63 21 Non-current loans and borrowings 64 22 Non-current provisions 64 23 Issued capital 65 24 Reserves 65 25 Financing arrangements 66 26 Employees’ and directors’ benefits 70 27 Contingent liabilities and assets 74 28 Deed of Cross Guarantee 74 29 Particulars relating to subsidiaries 76 30 Investment in associated companies 77 31 Commitments 77 32 Notes to the statements of cash flows 78 33 Related party disclosures 81 34 Subsequent events 83

Report of the directors For the year ended 30 June 2007

Crane Group Limited

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Crane Group Limited

The directors present their report together with the financial report of Crane Group Limited (“the Company”) and the consolidated financial report of the consolidated entity, being the Company and its subsidiaries, for the year ended 30 June 2007 and the independent audit report thereon.

Directors and Company SecretaryThe directors of the Company in office between 1 July 2006 and the date of this report were LE Tutt, GL Sedgwick, MI Fitzgerald, CR Stubbs, JB Harkness and RD Fraser. The Company Secretary to 30 May 2007 was SL Leppinus after which JM O’Reilly assumed the role. Details of their qualifications, experience and special responsibilities are set out on pages 12 and 13 of the annual report. The number of meetings (including committee meetings) attended by each director while in office during the financial year is set out on page 27 of the annual report.

Review and results of operations and state of affairsA review of the operations of the consolidated entity during the financial year and the results of those operations together with any significant changes in the state of affairs of the consolidated entity are set out in the Chairman’s Overview on page 7 and the Managing Director’s review set out on pages 8 to 10 of the annual report. Those sections also form part of this report of the directors.

Events subsequent to balance dateExcept as disclosed in note 34 of the financial statements no matter or circumstance has arisen since the end of the financial year which, in the opinion of the directors, has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs in future financial years of the consolidated entity.

Likely developments, business strategies and prospects Likely developments in the consolidated entity’s operations, its business strategies and prospects for the next financial year have been commented on generally in the Managing Director’s review set out on pages 8 to 10 of the annual report. That section also forms part of this report of the directors. In the opinion of the directors it would be likely to result in unreasonable prejudice to the consolidated entity to include in this report further information on business strategies and likely developments required to be included by sub-section 299(1)(e) and section 299A of the Corporations Act 2001 and pursuant to section 299(3) and section 299A(3) of the Corporations Act 2001 further information has not been included.

Principal activitiesThe principal activities of the consolidated entity during the financial year were the manufacture and/or distribution of the following:

– plumbing and electrical supplies

– plastic pipeline systems and supplies

– cast and ductile iron pipe, fittings and valves

– copper tube extrusions

– copper and copper alloy sheet and strip, nickel alloys and coin blanks

– brass, copper and stainless steel tubing

– stainless steel plate, sheet and coil

– aluminium sheet and strip

– fasteners

Corporate governanceThe consolidated entity’s statement on the main corporate governance practices in place during the year is set out on pages 25 to 27 of the annual report.

Environmental regulationThe consolidated entity’s performance in relation to environmental regulation is reviewed on page 24 of the annual report.

Directors’ interestsThe directors’ relevant interests in shares and options of the Company are set out on page 26 of the annual report.

OptionsThere were no options issued or exercised during the year or subsequent to year end.

DividendsDividends paid or declared since 1 July 2006, fully franked at the 30% tax rate are:

Amount Date paid/ $000 payable

FINAL dividend for the year ended 30 June 2006 at the rate of 30 cents per ordinary share 17,989 3 October 2006FINAL dividend for the year ended 30 June 2006 at the rate of 5% p.a. on preference shares 10 3 October 2006INTERIM dividend for the year ended 30 June 2007 at the rate of 32 cents per ordinary share 19,469 21 March 2007INTERIM dividend for the year ended 30 June 2007 at the rate of 5% p.a. on preference shares 10 21 March 2007

Total per financial statements – 30 June 2007 37,478

Subsequent to balance date the directors declared:FINAL dividend for the year ended 30 June 2007 at the rate of 33 cents per ordinary share 21,514 2 October 2007FINAL dividend for the year ended 30 June 2007 at the rate of 5% p.a. on preference shares 10 2 October 2007

The final ordinary dividend relating to the year ended 30 June 2007 has not been included as a provision in the financial statements because the dividend was declared after balance date. The final ordinary dividend includes amounts payable on 3,703,704 shares issued as a private placement to institutional investors completed on 10 July 2007.

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Remuneration reportThis report outlines remuneration policies of the Crane Group and provides details of the nature and amount of each major element of the remuneration of each director of the Company and each of the eight senior executives of the Company and the consolidated entity (the key management personnel) listed on pages 37 and 38 of the annual report. Senior executives (other than the executive directors) are those executives receiving the highest remuneration and having the greatest authority and responsibility for planning, directing and controlling the activities of the Company and consolidated entity, directly or indirectly.

Remuneration policy The Remuneration and Nomination (“REM”) Committee is responsible for making recommendations to the Board on remuneration policies and emoluments applicable to the directors and senior executives of the consolidated entity. The remuneration policy in respect of executive directors and senior executives is market and performance based and is designed to ensure that remuneration properly reflects the person’s duties and responsibilities and is competitive in attracting, retaining and motivating people who will contribute to the consolidated entity’s performance. Non-executive directors’ fees reflect the size and complexities of the consolidated entity’s operations and the responsibilities and workload requirements of Board members.

Remuneration structures are competitively set to attract and retain appropriately qualified and experienced directors and senior executives and to effect the broader outcome of aligning executives’ and shareholders’ interests to increase the consolidated entity’s net profit and shareholder wealth. Remuneration packages include a mix of fixed remuneration and variable performance based remuneration.

Independent consultants provide analysis and advice to ensure the directors’ and senior executives’ remuneration are competitive in the market place based on industry trends and surveys on comparative companies in Australasia.

In considering the remuneration for executive directors and senior executives the REM Committee takes into account the following indices in respect of the consolidated entity and the goal of maximising shareholder wealth:

Year ended 30 June 2007 2006 2005

Net profit after tax and before significant items $53,962,000 $47,134,000 $49,256,000Net profit $47,806,000 $73,865,000 $48,557,000Dividends paid $37,478,000 $35,160,000 $33,357,000Share price 30 June $16.87 $12.25 $8.50

Fixed remuneration Annual remuneration consists of fixed salaries, which permit salary sacrifice, paid to executive directors and senior executives and fees paid to non-executive directors. It is calculated on a total cost basis and includes fringe benefits tax related to employee benefits including motor vehicles, as well as employer contributions to superannuation funds.

Remuneration levels of executive directors and senior executives and fees paid to non-executive directors are reviewed annually by the REM Committee through a process that considers individual, segment and overall performance of the consolidated entity.

Variable performance based remunerationPerformance based remuneration includes, where applicable, short-term and long-term incentives and is designed to reward executive directors and senior executives for meeting or exceeding their financial and personal objectives.

Non-executive directors do not receive any performance related remuneration.

(a) Short-term incentivesEach year the REM Committee sets the key performance indicators (KPIs) for executive directors and senior executives for the coming year. The KPIs generally comprise both financial and non-financial measures. Financial measures vary with position and responsibility and include EBIT, net profit, cash flow management and certain personal objectives in order to drive profitability.

Non-financial measures vary with position and responsibility and include occupational health and safety KPIs and certain strategic objectives. At the end of each year the REM Committee assesses actual performance against the KPIs established at the start of the financial year.

(b) Long-term incentivesThe objective of the LTI incentive plan is to reward executive directors and senior executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. As such, LTI share allocations and cash payments are made to executive directors and senior executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the consolidated entity’s performance against the relevant long-term performance hurdles.

The two parts of the LTI incentive plan are explained below:

(i) Share based incentiveLTI share arrangements which were approved by the shareholders in the annual general meetings on 20 October 2003, 18 October 2004 and 2 November 2005 are in place in the form of the Crane Deferred Employee Share Plan (“CDSP”) with amendments approved at the annual general meeting on 1 November 2006.

Offers of shares under the CDSP may be made to executive directors and senior executives but non-executive directors are not eligible for an allocation of shares.


Crane Group Limited

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Crane Group Limited

Shares to be acquired on behalf of participants under the CDSP are either purchased on market or issued by the Company. All shares acquired to date have been purchased on market in the normal course of trading using funds contributed by the Company and were registered in the name of the CDSP Trustee, to be held by the Trustee pending satisfaction of the conditions established under the offers.

Participants in the CDSP have the right to receive dividends and franking credits associated with their CDSP shares, but until the tenure requirements and performance criteria have been satisfied, participants’ (other than the executive directors) gross salary is reduced by the amount of the dividend paid (including any franking credits).

The benefits relating to share based incentives are disclosed in this report as remuneration and are determined on an independent fair value basis (incorporating assumptions relating to the likelihood of the shares vesting and the terms and conditions upon which the shares were granted) pro rated over applicable vesting periods.

The performance and tenure criteria applicable to allocations under the CDSP are as follows:

1. Measurement PeriodExcept in the case of Special Circumstances or a Control Event (defined in sections 7 and 8 respectively), executive directors and senior executives become entitled to the shares under the 2003/04, 2004/05, 2005/06 and 2006/07 allocations (Current CDSP Allocations) if:

(i) they remain employed by the consolidated entity for a period of five years from the commencement of the performance measurement period (Measurement Period), i.e.:

Commencement date Commencement date Financial year for executive directors for senior executives

2004 14 January 2004 2 April 20042005 5 January 2004 29 April 20052006 1 July 2005 28 April 20062007 1 July 2006 1 July 2006

(ii) the Company meets the Performance Criteria applicable to the Current CDSP Allocations described below.

The 2005/06 CDSP allocation also included an offer to GL Sedgwick which has a tenure criteria and no performance criteria (tenure shares). These shares are designed to retain his services. GL Sedgwick received 25,000 tenure shares on 1 July 2006 and a further 25,000 tenure shares on 22 June 2007.

2. What is the Performance Criteria?The Performance Criteria consists of two key financial performance measures.

The first is a measure based on the total shareholder return (“TSR”) of the consolidated entity. This measure will apply to 50% of each of the Current CDSP Allocations. Details of the TSR performance criteria are described in sections 3 to 5 below.

The second measure is based on average return achieved on funds employed (“ROFE”) by the consolidated entity. This measure will apply to the remaining 50% of each of the Current CDSP Allocations. Details of the average ROFE performance criteria are described in section 6 below.

3. Crane TSR Performance CriteriaIn respect of the first 50% of each of the Current CDSP Allocations (TSR Shares), the performance criteria will involve a comparison over the Measurement Period of the TSR of the consolidated entity (Crane TSR) with the TSRs of companies comprising two indices (each a Comparator Index), namely:

– all companies in the S&P/ASX 200 Accumulation Index; and

– the companies which the Board determined at the offer date were relevant for comparative purposes as set out below:

Adelaide Brighton Limited Onesteel LimitedAlesco Corporation Limited Orica LimitedAtlas Group Holdings Limited Pacifica Group LimitedCapral Aluminium Limited Reece Australia LimitedCoates Hire Limited Repco Corporation LimitedCSR Limited Ridley Corporation LimitedFuturis Corporation Limited Sims Group LimitedG.U.D. Holdings Limited Skilled Group LimitedGWA International Limited Smorgon Steel Group LimitedHills Industries Limited Transfield Services LimitedHousewares International Limited United Group LimitedLeighton Holdings Limited Wattyl LimitedNufarm Limited Wesfarmers Limited

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The Board reviews each Comparator Index annually and makes any changes necessary to ensure that they continue to reflect their original scope.

The Crane TSR is defined as share price growth plus dividends reinvested in the Crane Dividend Reinvestment Plan.

4. How will relative TSR performance be measured?Relative performance will be measured by comparing the Crane TSR with the TSRs of the companies in each Comparator Index over the Measurement Period. Performance will be tested in each quarter of the fifth year of the Measurement Period (each a Testing Point). The measurement against the Comparator Index at the Testing Point that results in the most favourable comparative TSR performance will be used to determine the number of TSR Shares that will vest (TSR Testing Point).

In assessing whether the performance hurdles have been met under the CDSP, the REM Committee receives independent data from Godfrey’s Remuneration Group Pty Limited, Hewitt & Associates and Standard & Poor’s, which provides information on the Crane TSR and each Comparator Index.

5. How will TSR vesting be determined?At the TSR Testing Points Crane Group’s TSR performance since the base date is compared to the Comparator Index against which the Crane shares performed best.

If the Crane TSR growth performance is:

– Below 102% of the Relevant Comparator Index growth (i.e. 51st percentile), the executive receives 0% of the TSR Shares;

– 102% of the Relevant Comparator Index growth (i.e. 51st percentile), the executive receives 50% of the TSR Shares;

– 127% or above of the Relevant Comparator Index growth (i.e. 76th percentile), the executive receives 100% of the TSR Shares; and

– Between 102% and 127% of the Relevant Comparator Index growth, the executive receives 50% of the TSR Shares plus 2% for each 1% that the Crane result exceeds 102% of the Relevant Comparator Index growth.

e.g. If the Crane Group percentage change in the TSR from the commencement date of the performance criteria is 120% and the percentage change in the TSR of the Comparator Index is 105% then the number of shares that vest is 74%, calculated as follows:

= 50% of TSR Shares + (((120/105 X 100) – 102) X 2%)= 50% of TSR Shares + 24% of TSR Shares= 74% of TSR Shares

6. What is the ROFE Performance Criteria?The performance criteria for the remaining 50% of shares of each executive directors’ / senior executives’ Current CDSP Allocations (ROFE Shares) will be based on a comparison between:

– the average of the actual 30 June annual ROFE achieved by the Company over the Measurement Period (Actual ROFE); and

– the average of the target annual ROFE determined by the non-executive directors for each year over the Measurement Period (ROFE Target).

The actual annual ROFE achieved by the Company will be calculated by dividing earnings before goodwill amortisation, interest, tax and significant items as reported in the annual accounts by the 13 month average funds employed. The 13 month average funds employed comprises the balance at the start of the year and the balance at the end of each month in the relevant financial year to 30 June.

Performance will be measured by comparing the Actual ROFE against the ROFE Target on 30 June in the fourth and fifth year of the Measurement Period.

If the Actual ROFE is greater than or equal to 90% of the ROFE Target on 30 June of either the fourth or the fifth year of the Measurement Period, then 100% of the participant’s ROFE Shares will vest. If the above ROFE target is not met, none of the participants’ ROFE Shares will vest.

7. Special CircumstancesSpecial Circumstances means:

(a) death;

(b) circumstances which, in the opinion of the Board, constitute total and permanent disablement; or

(c) termination of employment with the Company at the normal retirement age, or at any other time including early retirement with the Company’s consent or redundancy but excluding dismissal or resignation.

On termination of employment due to Special Circumstances the Performance Criteria will be assessed over the period elapsed since the grant date (Special Circumstances Measurement Period). The number of shares eligible for withdrawal, as determined by the assessment of the Performance Criteria over the period elapsed, will then have the prior vesting scale applied to them on a pro rata basis having regard to the number of months since the grant date.

However, in the case of death, the estate of the executive directors or senior executives will be entitled to withdraw a minimum of 50% of the shares subject to satisfaction of the Performance Criteria during the Special Circumstances Measurement Period.

In addition, the Board shall have complete discretion to increase (but not decrease) the level of vesting in the case of Special Circumstances.


Crane Group Limited

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Crane Group Limited

8. Control EventA Control Event means if, in the opinion of the Board, an event occurs or is about to occur that will result in significant changes affecting the control of Crane (including but not limited to, a takeover, scheme of arrangement or voluntary winding up of Crane).

If a Control Event occurs then 100% of the current CDSP Allocations will vest immediately.

(ii) Cash based incentiveThe Company’s cash based incentive plan has two objectives. Firstly, the retention of senior executives in an increasingly competitive remuneration market and secondly, the rewarding of high performance based on goals designed to significantly impact the business.

The cash based incentive covers a two year period to complement the change in the share based incentive to a five year vesting period with the first period commencing on 1 July 2006, and subsequent plans commencing on 1 July each year thereafter. The incentive has two components; 50% of the allocation is a two year tenure-based criteria with the remaining 50% being specified goals to be achieved over a two year period.

The goals have specified performance requirements and measures to be personally achieved by each executive prior to eligibility for payment. The goals cover efficiency, growth and return on investment measures.

LTI cash incentive payments will be paid within a potential range of 15% to 30% of annual remuneration.

Employment contracts Employment contracts outlining the terms and conditions of employment that have been entered into by the consolidated entity with executive directors and senior executives are detailed below.

Managing Director and Finance DirectorThe Managing Director has agreed to continue as Managing Director for a further five years commencing 1 March 2007. The duties of GL Sedgwick are those expected of a Managing Director. He is required to report directly to the Board and perform the duties assigned to him by the Board and must also comply with Crane Group’s policies.

GL Sedgwick’s annual remuneration for the current year was $1,100,000 p.a. and, effective 1 July 2007, will be $1,400,000 p.a. MI Fitzgerald’s annual remuneration for the current year was $600,000 p.a. and, effective 1 July 2007, will be $630,000 p.a.

GL Sedgwick and MI Fitzgerald are entitled to an annual short-term cash incentive payment subject to the achievement of annual financial goals of the Crane Group and personal goals agreed with the Board. There is an opportunity for GL Sedgwick and MI Fitzgerald to earn an incentive payment of up to 97.5% and 78% respectively of their annual remuneration.

GL Sedgwick and MI Fitzgerald are entitled to participate in the LTI which includes two elements, being the CDSP and the Cash Plan. They are eligible to participate in the LTI to the equivalent of:

(i) a minimum of 70,000 (GL Sedgwick) and 35,000 (MI Fitzgerald) shares per annum in the CDSP; and

(ii) up to 30% (GL Sedgwick) and 20% (MI Fitzgerald) of their annual remuneration as a cash based incentive in the Cash Plan.

GL Sedgwick and MI Fitzgerald are entitled to the dividends paid on unvested shares. A list of unvested shares for GL Sedgwick and MI Fitzgerald are included in this report.

Payment of any long-term incentive or vesting of shares is subject to performance and vesting criteria set by the Board, as set out in section (b) “long-term incentives” on pages 31 to 34.

GL Sedgwick and MI Fitzgerald may resign from the Crane Group at any time by giving six months written notice.

GL Sedgwick’s employment can be terminated by Crane Group (without cause) by giving him six months notice (or payment in lieu of notice) and severance. Severance on termination by the Company without cause by the Company includes 18 months of annual remuneration and 1.5 times the prior year STI set at the maximum achievable percentage.

Unless terminated earlier GL Sedgwick’s employment will terminate on either 31 August 2011 or 28 February 2012 at the Crane Group Board’s discretion in accordance with the terms of his employment.

MI Fitzgerald’s employment can be terminated by Crane Group (without cause) by giving him six months notice (or payment in lieu of notice) and severance. Severance on termination by the Company without cause includes annual remuneration and the prior year STI set at the maximum achievable percentage.

The notice payment on termination by Crane Group includes six months of GL Sedgwick’s and MI Fitzgerald’s annual remuneration, pro rated STI for the current year and half of the prior year STI set at the maximum achievable percentages.

On termination under the LTI:

(a) all shares that have been allocated to GL Sedgwick in the CDSP and remain unvested will vest; and

(b) a pro rated number of shares allocated to MI Fitzgerald will vest based on the length of time from commencement of the performance measurement period; and

outstanding Cash Plan payments will be made.

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There are provisions for immediate termination for cause in the event that GL Sedgwick or MI Fitzgerald commits a serious or persistent breach of any of their terms and conditions of employment, are guilty of grave misconduct or wilful neglect in the discharge of their duties, becomes bankrupt or commits a serious criminal offence. In the event of termination for such cause, no LTI will be payable.

GL Sedgwick and MI Fitzgerald are restrained during employment and, for up to 18 and 12 months respectively following termination, from competing with the Crane Group and soliciting customers and employees of Crane Group.

Their contracts also contain other general provisions including provisions dealing with confidential information and intellectual property.

Senior executives Senior executives receive STI payments upon the achievement of specific performance hurdles. STI payments will be paid to the executives within a potential range of 33% to 78% of their base salary. The awarding of an STI payment is subject to achievement of individually quantifiable financial and non-financial performance criteria as outlined earlier in this report. LTIs for other senior executives are on the same terms as for the Managing Director and Finance Director set out above except KDM Smith. The CDSP does not operate in respect of New Zealand based executives. KDM Smith receives an LTI bonus entitlement in lieu of receiving a share allocation under the CDSP, subject to the same tenure and performance criteria as the share allocation made under the CDSP. The senior executives were allocated 40,000 shares or entitlements in lieu of allocated shares in total for the year ended 30 June 2007, giving a total of 239,000 shares or entitlements in lieu of shares. A list of unvested shares for senior executives is included in this report.

Modification of terms for equity based compensationDetails of the terms of LTI share based incentives prior to amendment are disclosed in the 2006 remuneration report. The effective date of the modification to the LTI share based incentives approved by shareholders on 1 November 2006 at the annual general meeting were 1 November 2006 for executive directors and 11 January 2007 for other senior executives. The difference between the total of the fair value of the LTI share based incentives immediately before and after the modification was an increase of $1,748,000. The market prices of the underlying shares at the date of modification were $13.04 and $13.30 respectively. The valuation method used to determine the increase in fair value arising from the modification is disclosed in note 3 to this report.


Crane Group Limited

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Analysis of equity based compensation granted as remunerationDetails of the vesting profile of the shares allocated as remuneration to each executive director and senior executive under the CDSP are detailed below:

Commencement date Financial year Number of Date of of performance of vesting shares allocation measurement period 30 June (i)

Executive directorsGL Sedgwick 50,000 23 January 2004 14 January 2004 2009 90,000 22 April 2005 5 January 2004 2009 60,000 5 December 2005 1 July 2005 2011 70,000 1 November 2006 1 July 2006 2012MI Fitzgerald 40,000 23 January 2004 14 January 2004 2009 25,000 22 April 2005 5 January 2004 2009 30,000 5 December 2005 1 July 2005 2011 35,000 1 November 2006 1 July 2006 2012Senior executivesWJA Wood 15,000 16 April 2004 2 April 2004 2009 17,000 29 April 2005 29 April 2005 2010 18,000 19 May 2006 28 April 2006 2011 5,000 2 March 2007 1 July 2006 2012IC Timmins 17,000 29 April 2005 29 April 2005 2010 17,000 19 May 2006 28 April 2006 2011 5,000 2 March 2007 1 July 2006 2012K Kellow 10,000 16 April 2004 2 April 2004 2009 10,000 19 May 2006 28 April 2006 2011 5,000 2 March 2007 1 July 2006 2012SP Robertson 10,000 16 April 2004 2 April 2004 2009 10,000 19 May 2006 28 April 2006 2011 5,000 2 March 2007 1 July 2006 2012 5,000 25 May 2007 1 July 2006 2012J Madigan 10,000 16 April 2004 2 April 2004 2009 10,000 29 April 2005 29 April 2005 2010 12,000 19 May 2006 28 April 2006 2011 5,000 2 March 2007 1 July 2006 2012PJ Davidson 5,000 2 March 2007 1 July 2006 2012

(i) The vesting period has been amended for all shares allocated prior to the annual general meeting held on 1 November 2006.

No shares were vested or forfeited by the executive directors and senior executives during the year ended 30 June 2007 except for 50,000 tenure shares which vested to GL Sedgwick. The minimum value of shares yet to vest is nil as the performance criteria may not be met. The maximum value of shares yet to vest is not determinable as it depends on whether the performance criteria are met and the market price of shares at the end of the performance assessment period.

The average fair value of shares granted during the year were $11.86 (November 2006), $11.77 (March 2007) and $12.20 (May 2007).

Non-executive directorsTotal remuneration for all non-executive directors, last voted upon by the shareholders at the 2003 annual general meeting, is not to exceed $800,000 p.a. Directors’ base fees are disclosed in the following table. Non-executive directors do not receive STI or LTI payments. Directors’ fees cover all main board activities and membership of committees.

Non-executive directors’ retirement benefitsNon-executive directors appointed on or after 1 July 2003 are not entitled to retirement benefits. For non-executive directors appointed prior to 1 July 2003 the retirement benefits have been capped at 30 June 2004 and no further benefits will accrue after 30 June 2004, except for an annual increment equal to the Consumer Price Index increase for the preceding 12 months commencing 1 July 2004. The Company’s liability for non-executive directors’ retirement benefits, which is based on the number of years completed service at the balance date, has been included in the non-executive directors’ retirement provision. Also disclosed on page 37 of this report are the amounts accrued for inflation on the retirement benefits during the year in relation to the relevant non-executive directors.

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Remuneration of directors and senior executives by the consolidated entityThe following table provides details of the nature and amount of the elements of remuneration for the years ended 30 June 2007 and 2006 for each director of the Company and each of the senior executives of the Company and the consolidated entity.

Post Short-term employment Long-term Other

Super- Non- anuation/ Proportion of monetary severence Share LSL remuneration STI Salary benefits benefits incentives Cash Termination expense performance vested or fees STI (note 1) (note 2) (note 3) incentives (note 4) (note 5) Total related (note 6) $ $ $ $ $ $ $ $ $ % %

DirectorsNon-executiveLE Tutt 2007 247,706 – – 28,146 – – – – 275,852 2006 247,706 – – 28,933 – – – – 276,639

CR Stubbs 2007 64,220 – – 61,002 – – – – 125,222 2006 110,092 – – 16,468 – – – – 126,560

JB Harkness 2007 53,516 – – 90,696 – – – – 144,212 2006 128,440 – – 16,852 – – – – 145,292

RD Fraser 2007 110,091 – – 9,909 – – – – 120,000 2006 110,092 – – 9,908 – – – – 120,000

ExecutiveGL Sedgwick 2007 1,057,615 1,059,094 7,392 317,385 780,747 210,000 – 7,560 3,439,793 59.6 98.8 (Managing 2006 1,020,000 994,500 10,819 – 646,586 – – 3,792 2,675,697 61.3 100.0 Director)

MI Fitzgerald 2007 557,615 432,000 – 42,385 320,349 63,000 – 6,824 1,422,173 57.3 92.3 (Finance 2006 532,960 444,600 1,392 37,040 147,167 – – 3,255 1,166,414 50.7 100.0 Director)

Total Directors 2007 2,090,763 1,491,094 7,392 549,523 1,101,096 273,000 – 14,384 5,527,252

2006 2,149,290 1,439,100 12,211 109,201 793,753 – – 7,047 4,510,602


Crane Group Limited

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Post Short-term employment Long-term Other

Super- Non- anuation/ Proportion of monetary severence Share LSL remuneration STI Salary benefits benefits incentives Cash Termination expense performance vested or fees STI (note 1) (note 2) (note 3) incentives (note 4) (note 5) Total related (note 6) $ $ $ $ $ $ $ $ $ % %

Senior ExecutivesWJA Wood 2007 421,176 326,508 52,885 61,824 110,457 37,674 – 11,976 1,022,500 46.4 86.7 (EGM Iplex) 2006 404,800 334,880 34,166 55,200 49,363 – – 13,782 892,191 43.1 93.3

IC Timmins 2007 421,913 271,190 94,145 12,687 77,434 33,899 – 937 912,205 41.9 80.0 (EGM Tradelink) 2006 411,861 175,366 970 12,139 29,032 – – 1,157 630,525 32.4 53.0

KDM Smith 2007 397,442 260,858 5,187 36,479 84,596 31,639 – 71 816,272 46.2 82.4 (EGM CDNZ) 2006 346,229 234,140 4,274 27,704 57,269 – – 1,242 670,858 43.4 78.1

K Kellow 2007 412,409 180,844 97,985 15,897 57,454 31,601 – 5,906 802,096 33.6 86.7 (GM Sales & 2006 377,140 198,730 29,493 32,058 17,111 – – 2,265 656,797 32.9 100.0 Marketing, Iplex)

S Robertson (a) 2007 326,259 198,756 3,892 42,385 66,514 30,000 – 4,494 672,300 43.9 95.6 (EGM Metals 2006 137,226 69,440 – 17,774 10,461 – – 599 235,500 33.9 86.2 Distribution)

J Madigan 2007 297,615 117,504 2,099 42,385 75,792 26,775 – 3,449 565,619 38.9 88.6 (Chief 2006 295,781 115,317 299 28,719 31,140 – – 1,242 472,498 31.0 91.1 Information Officer)

RH Parker 2007 243,797 92,880 – 14,203 – – 195,000 1,670 547,550 17.0 92.3 (EGM Human 2006 296,028 123,840 – 12,139 – – – 1,020 433,027 28.6 92.3 Resources)

PJ Davidson (a) 2007 242,820 75,497 6,895 23,430 11,770 20,768 – 431 381,611 28.3 54.6 (GM Copper 2006 114,820 48,583 – 10,180 – – – 234 173,817 28.0 74.7 Tube)

MW Fraser (b) 2007 – – – – – – – – – – – (EGM Metals) 2006 199,644 88,000 – 2,023 14,323 – 1,008,491 – 1,312,481 7.8 –

Total senior 2007 2,763,431 1,524,037 263,088 249,290 484,017 212,356 195,000 28,934 5,720,153 executives 2006 2,583,529 1,388,296 69,202 197,936 208,699 – 1,008,491 21,541 5,477,694

Total directors and 2007 4,854,194 3,015,131 270,480 798,813 1,585,113 485,356 195,000 43,318 11,247,405 senior executives 2006 4,732,819 2,827,396 81,413 307,137 1,002,452 – 1,008,491 28,588 9,988,296

All executive directors and senior executives of the consolidated entity (with the exception of KDM Smith) were employed by Crane Employment Services Pty Ltd in 2007. In 2006 they were employed (with the exception of KDM Smith) by the Company. Amounts disclosed reflect the amounts expensed to the income statement during the respective year. Amounts disclosed for senior executives have been pro rated for the respective period of their office (see below) during the 2006 year.

(a) Appointed to the executive team on 1 January 2006.

(b) Retired from the position of EGM Metals Group on 16 December 2005.

39

Notes

1 Non-monetary benefits are in addition to total employment cost and are stated on a cost to the company basis and include relocation costs and other benefits that are subject to fringe benefits tax.

2 Retirement and termination benefits are stated on a cost to the company basis and represent benefits accrued during the year arising on retirement or termination and include payments under service agreements and non-compete agreements but exclude annual leave and long service leave entitlements.

3 The fair value of shares allocated under the CDSP (except the tenure shares which were valued at market price on the grant date) have been independently valued by Watson Wyatt Australia Pty Limited at grant/modification date on the following basis:

(a) for TSR shares – Monte Carlo simulation reflecting the likelihood of meeting the performance hurdles. Market conditions have been incorporated in the determination of the fair value of equity compensation benefits; and

(b) for ROFE shares – the share price at the valuation date less the present value of any dividends foregone by the senior executive.

The fair value of allocated shares have been determined in accordance with Australian Accounting Standards.

The CDSP does not operate in respect of New Zealand based executives. KDM Smith receives an LTI bonus entitlement in lieu of receiving a share allocation under the CDSP, which is subject to the same tenure and performance criteria as the share allocations made under the CDSP.

4 The termination benefits in 2006 relating to MW Fraser arose from the successful sale of the Aluminium businesses and the disbanding of the Metals Group. Included in MW Fraser’s termination benefit in 2006 is $84,491 relating to the unamortised amount of CDSP shares which vested on termination.

5 Represents the long service leave expense incurred during the year for accounting purposes.

6 The percentage of short-term incentives which vest in a financial year is based on the achievement of specified performance criteria and personal goals. No amounts vest in future periods in respect of the STIs for a particular financial year.

7 Premiums for the “Company Reimbursement Coverage” section of the Directors’ and Officers’ liability insurance were paid by the consolidated entity in 2006/07 and 2005/06. It is not possible to identify the amounts paid on this insurance policy for directors and senior executives applicable to each of the directors and senior executives. Insured persons under the policies included each of the directors and senior executives, former directors and a number of additional employees taking part in the management of the consolidated entity.

Insurance and indemnification of officersUnder its Constitution, the Company has indemnified current and former officers of the Company (including the directors in office at the date of this report, the company secretary and other executive officers) against:

(a) liabilities to another person (other than the Company or a related body corporate) that may arise from their position as an officer of the Company except where the liability arises out of conduct involving a lack of good faith; and

(b) certain liabilities for costs incurred where the officers successfully defend legal proceedings brought against them in their capacity as an officer of the Company.

The Company’s auditor is not indemnified under the Constitution.

The Company has also entered into indemnity agreements with all directors of the Company in office at the date of this report together with certain retired directors, and on occasion directors of its subsidiaries, whereby the Company has agreed to indemnify the directors against all liability to another person, other than the Company or a related body corporate, arising from their position as a director except liability involving a lack of good faith. The indemnity agreement also provides for an indemnity for legal costs incurred by a director in defending proceedings where there is a judgement in favour of the director or the director is acquitted.

Since the end of the previous financial year, the Company has paid a premium for insurance policies insuring any past, present or future director, secretary, executive officer or employee of the consolidated entity, including directors in office at the date of this report, against certain liabilities. In accordance with commercial practice the insurance policies prohibit disclosure of the premium paid in respect of those policies, and the nature of the liabilities insured by the policies.

Lead auditor’s independence declarationThe lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is set out on page 86.

RoundingThe Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission relating to rounding off of amounts in the financial report and report of the directors. Unless otherwise stated, amounts have been rounded to the nearest thousand dollars.

For and on behalf of the Board and signed in accordance with its resolution.

LE Tutt Chairman

GL Sedgwick Managing Director

13 August 2007 Sydney, NSW

Crane Group Limited

40

Income statements For the year ended 30 June 2007

Consolidated The Company 2007 2006 2007 2006

Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Note $000 $000 $000 $000 $000 $000 $000 $000

Revenue 3 2,186,201 454 2,186,655 1,946,541 99,601 2,046,142 73,790 39,913Expenses 5(a) (2,099,110) (667) (2,099,777) (1,871,597) (91,572) (1,963,169) (43,041) (29,681)

Result from operating activities 87,091 (213) 86,878 74,944 8,029 82,973 30,749 10,232

Financial income 4 1,417 – 1,417 6,183 – 6,183 24,889 27,670Financial expense 4 (24,129) – (24,129) (24,414) – (24,414) (14,881) (13,014)

Net financing (costs) / income 4 (22,712) – (22,712) (18,231) – (18,231) 10,008 14,656

Share of profit of equity accounted investment 30 60 – 60 – – – – –

Profit / (loss) before tax 64,439 (213) 64,226 56,713 8,029 64,742 40,757 24,888Income tax expense 8(a) (20,890) (29) (20,919) (19,850) (2,409) (22,259) (449) (979)

Profit / (loss) after tax but before net gain on sale/closure of discontinued operations and minority interests 43,549 (242) 43,307 36,863 5,620 42,483 40,308 23,909Loss / (profit) for the period attributable to minority interests (30) 59 29 (6,096) (320) (6,416) – –

43,519 (183) 43,336 30,767 5,300 36,067 40,308 23,909Net gain on sale / closure of discontinued operations, net of tax and minority interests 6 – 4,470 4,470 – 37,798 37,798 – –

Profit for the period attributable to equity holders of Crane Group Limited 43,519 4,287 47,806 30,767 43,098 73,865 40,308 23,909

Earnings per security (EPS)Basic EPS attributable to ordinary equity holders (cents per share) 10 72.5 7.1 79.6 52.6 73.8 126.4

Diluted EPS attributable to ordinary equity holders (cents per share) 10 71.5 7.0 78.5 52.0 72.8 124.8

The income statements are to be read in conjunction with the notes to the financial statements.

41

Balance sheets As at 30 June 2007

Consolidated The Company 2007 2006 2007 2006 Note $000 $000 $000 $000

Current assetsCash and cash equivalents 11 51,394 52,977 8,247 7,092 Receivables 12 322,999 308,257 2,482 1,447 Inventories 13 308,920 257,076 – – Prepayments 6,887 6,022 3,656 1,701 Property held for sale 16 – 5,106 – –

Total current assets 690,200 629,438 14,385 10,240

Non-current assetsReceivables 14 3,115 1,369 303,008 281,779 Investments 15 60 – 234,321 232,321 Property, plant and equipment 16 196,811 185,665 4,832 6,468 Intangible assets 17 232,167 223,963 598 – Deferred tax assets 8 34,194 28,097 2,654 3,076

Total non-current assets 466,347 439,094 545,413 523,644

Total assets 1,156,547 1,068,532 559,798 533,884

Current liabilitiesPayables 18 303,994 278,082 11,723 12,250 Loans and borrowings 19 52,267 48,301 1,857 3,929 Employee benefits 26 40,506 33,590 5,423 4,740 Current tax liabilities 21,530 14,606 22,754 13,718 Provisions 20 23,671 30,786 1,399 2,074

Total current liabilities 441,968 405,365 43,156 36,711

Non-current liabilitiesLoans and borrowings 21 199,845 191,597 126,182 127,291 Employee benefits 26 17,005 12,142 1,508 1,545 Deferred tax liabilities 8 – – – – Provisions 22 6,757 5,771 4,516 4,310

Total non-current liabilities 223,607 209,510 132,206 133,146

Total liabilities 665,575 614,875 175,362 169,857

Net assets 490,972 453,657 384,436 364,027

EquityIssued capital 23 354,311 335,469 354,311 335,469 Reserves 6,149 (2,081) 526 1,681 Retained earnings 129,965 119,745 29,599 26,877

Equity attributable to equity holders of Crane Group Limited 490,425 453,133 384,436 364,027 Minority interests 547 524 – –

Total equity 490,972 453,657 384,436 364,027

The balance sheets are to be read in conjunction with the notes to the financial statements.

Crane Group Limited

Crane Group Limited

42

Statements of changes in equity For the year ended 30 June 2007

Reserves

Foreign currency Equity Issued Treasury translation Hedging compensation Total Retained Minority Total capital shares reserve reserve reserve reserves earnings interests equity $000 $000 $000 $000 $000 $000 $000 $000 $000

2007 ConsolidatedBalance at 1 July 2006 342,935 (7,466) (4,644) (137) 2,700 (2,081) 119,745 524 453,657 Net movement in hedging reserve – – – (1,706) – (1,706) – – (1,706)Net profit for the period – – – – – – 47,806 (29) 47,777 Foreign currency difference on translation – – 9,307 – – 9,307 – 52 9,359 Shares issued 19,803 – – – – – – – 19,803 Share based payments – (961) – – 629 629 (108) – (440)Dividends to shareholders – – – – – – (37,478) – (37,478)

Balance at 30 June 2007 362,738 (8,427) 4,663 (1,843) 3,329 6,149 129,965 547 490,972

2007 The Company Balance at 1 July 2006 342,935 (7,466) – (1,019) 2,700 1,681 26,877 – 364,027 Net movement in hedging reserve – – – (1,784) – (1,784) – – (1,784)Net profit for the period – – – – – – 40,308 – 40,308 Shares issued 19,803 – – – – – – – 19,803 Share based payments – (961) – – 629 629 (108) – (440)Dividends to shareholders – – – – – – (37,478) – (37,478)

Balance at 30 June 2007 362,738 (8,427) – (2,803) 3,329 526 29,599 – 384,436

2006 ConsolidatedBalance at 1 July 2005 325,460 (4,965) 4,633 – 1,182 5,815 81,013 41,468 448,791 Initial adoption of AASB 139 – – – (1,156) – (1,156) 134 – (1,022)Net movement in hedging reserve – – – 1,019 – 1,019 – – 1,019 Net profit for the period – – – – – – 73,865 6,416 80,281 Foreign currency difference on translation – – (9,277) – – (9,277) – (294) (9,571)Shares issued 17,475 – – – – – – – 17,475 Acquisition of minority interest – – – – – – – (37,356) (37,356)Share based payments – (2,501) – – 1,518 1,518 (107) – (1,090)Dividends to shareholders – – – – – – (35,160) (9,710) (44,870)

Balance at 30 June 2006 342,935 (7,466) (4,644) (137) 2,700 (2,081) 119,745 524 453,657

2006 The CompanyBalance at 1 July 2005 325,460 (4,965) – – 1,182 1,182 38,101 – 359,778 Initial adoption of AASB 139 – – – (1,400) – (1,400) 134 – (1,266)Net movement in hedging reserve – – – 381 – 381 – – 381 Net profit for the period – – – – – – 23,909 – 23,909 Shares issued 17,475 – – – – – – – 17,475 Share based payments – (2,501) – – 1,518 1,518 (107) – (1,090)Dividends to shareholders – – – – – – (35,160) – (35,160)

Balance at 30 June 2006 342,935 (7,466) – (1,019) 2,700 1,681 26,877 – 364,027

The statements of changes in equity are to be read in conjunction with the notes to the financial statements.

43


Cash flows from operating activities Cash receipts from customers 2,417,996 2,307,574 34,256 29,662 Cash payments to suppliers and employees (2,300,402) (2,185,397) (42,710) (10,862)

Cash generated from / (used in) operations 117,594 122,177 (8,454) 18,800 Dividends received – – 38,500 15,594 Interest received 1,407 5,831 24,889 27,670 Interest paid (22,780) (23,619) (14,355) (12,422)Income taxes paid (19,727) (24,897) (5,751) (176)

Net cash inflow from operating activities 32 (ii) 76,494 79,492 34,829 49,466

Cash flows from investing activities Payments for property, plant and equipment (45,668) (31,429) (2,695) (2,609)Acquisition of subsidiaries and businesses (net of cash acquired) 32 (iv) (14,023) – (114) (67,122)Acquisition of minority interest 32 (iv) – (105,222) – – Proceeds on disposal of businesses 32 (iv) 759 127,275 – – Working capital relating to businesses disposed / closed – 5,990 – – Payments related to sold / closed businesses (256) (13,252) – (226)Proceeds from sale of assets related to closed businesses 11,986 – – – Proceeds from sale of non-current assets 719 4,091 – 56 Development expenditure (1,722) – (793) –Loans repaid by / (extended to) controlled entities – – (6,535) 120,785 Loans extended to joint venture entity (11,164) – – – Other loans repaid 90 405 – –

Net cash (outflow) / inflow from investing activities (59,279) (12,142) (10,137) 50,884

Cash flows from financing activities Proceeds from borrowings 3,628 39,314 – – Repayment of borrowings (2,939) (83,377) (1,816) (82,162)Purchase of treasury shares (2,432) (2,782) (2,432) (2,782)Dividends paid (net of reinvested dividends) (17,675) (17,685) (17,675) (17,685)Dividends paid to minority interests – (14,957) – –

Net cash outflow from financing activities (19,418) (79,487) (21,923) (102,629)

Net (decrease) / increase in cash held (2,203) (12,137) 2,769 (2,279)Cash and cash equivalents at the beginning of the financial year 52,977 65,613 5,217 7,496 Foreign currency movements on cash 620 (499) – –

Cash and cash equivalents at the end of the financial year 32 (i) 51,394 52,977 7,986 5,217

The statements of cash flows are to be read in conjunction with the notes to the financial statements.

Statements of cash flows For the year ended 30 June 2007

Crane Group Limited

Notes to the financial statements For the year ended 30 June 2007

Crane Group Limited

44


Crane Group Limited

These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing this consolidated financial report, the significant judgements made by management in applying the consolidated entity’s accounting policies and the key sources of estimating uncertainty were the same as those that applied to the consolidated financial report for the year ended 30 June 2006.

Principles of consolidationSubsidiariesThe consolidated financial statements include the financial statements of the Company, being the parent entity, and its subsidiaries. Subsidiaries are entities controlled by the Company.

Investments in subsidiaries are carried in the financial statements at cost less impairment losses.

Where an entity either began or ceased to be controlled during the year, its results are included in the financial statements from the date control commenced or up to the date control ceased. Where control ceases, a gain or loss is recognised as the difference between net sales proceeds, if any, and the consolidated carrying amount (including post acquisition share of profits, goodwill and equity).

All balances and transactions between subsidiaries are eliminated in preparing the consolidated financial statements.

Minority interests in the equity and results of the subsidiaries that are controlled by the Company are shown as a separate item in the consolidated financial statements.

Joint venture operationThe consolidated entity’s interest in an unincorporated joint venture operation is brought to account by including in the respective classification categories the consolidated entity’s proportional share of:

– the individual assets employed in the joint venture;

– liabilities incurred by and in relation to the joint venture;

– expenses incurred in relation to the joint venture; and

– revenue from sale of output.

Associates and joint venture entitiesAssociates are those entities in which the consolidated entity has significant influence, but not control, over financial and operating policies. Joint ventures are those entities over whose activities the consolidated entity has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and joint ventures, including partnerships, are accounted for using the equity method. The consolidated financial statements include the consolidated entity’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the consolidated entity, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the consolidated entity’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the consolidated entity has an obligation or has made payments on behalf of the investee.

Note 1: Statement of significant accounting policies Reporting entityCrane Group Limited (“the Company”) is a company domiciled in Australia. The consolidated financial report of the Company comprises the Company and its subsidiaries (“the consolidated entity”) and the consolidated entity’s interest in associates and jointly controlled entities.

Statement of complianceThe consolidated financial report was authorised for issue by the directors on 13 August 2007.

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group also complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board. The Company’s financial report does not comply with IFRSs as the Company has elected to apply the relief provided to parent entities by AASB 132 Financial Instruments: Presentation and Disclosure in respect of certain disclosure requirements.

Except as described below, the accounting policies applied by the consolidated entity in this consolidated financial report are the same as those applied by the consolidated entity in its consolidated financial report for the year ended 30 June 2006.

In the prior financial report the consolidated entity adopted AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139 Financial Instruments: Recognition and Measurement in accordance with the transitional rules of AASB 1 First-time Adoption of Australian Equivalents of International Financial Reporting Standards. This change has been accounted for by adjusting the opening balance of retained earnings and reserves at 1 July 2005, as disclosed in the statements of changes in equity.

The consolidated entity has elected to early adopt AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments. The early adoption of this standard has disclosure impacts only.

IFRSs form the basis of Australian Accounting Standards adopted by the AASB, being Australian equivalents to IFRS (AIFRS).

Basis of preparationThe financial report is presented in Australian dollars which is the Company’s functional currency and the functional currency of the majority of the consolidated entity.

The financial report has been prepared on the basis of historical costs except that derivative financial instruments and liabilities for cash settled share based payment arrangements are measured at their fair value.

Accounting estimates and judgementsThe preparation of the financial report required management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The development, selection and disclosure of the consolidated entity’s critical accounting policies and estimates and the application of these policies and estimates are approved by the Audit and Risk Management Committee.

45

The consolidated entity has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005.

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statements. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see hedging accounting policy).

The consolidated entity does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

The types of derivatives which are used are interest rate swaps, forward rate agreements, interest rate options, foreign currency forward exchange contracts, foreign currency options, commodity futures contracts and commodity swaps.

(i) Cash flow hedgesChanges in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in the fair value are recognised in the income statements.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains in equity until the forecast transactions occur. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statements.

When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in equity is transferred to the income statements in the same period that the hedged item affects the income statements.

(ii) Fair value hedges When a derivative financial instrument hedges the changes in the fair value of a recognised asset or liability (or an identified portion of such asset or liability) any gain or loss on the hedging instrument is recognised in the income statements. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the income statements.

Net financing costsNet financing costs comprise interest payable on borrowings, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statements.

Interest income is recognised in the income statements as it accrues. The interest expense component of finance lease payments is also recognised in the income statements.

Income taxIncome tax expense comprises current and deferred tax. Income tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Note 1: Statement of significant accounting policies (continued)Revenue recognitionSale of goodsRevenue from the sale of goods (measured as the fair value of consideration received or receivable, net of returns, discounts and allowances) is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

Dividends receivedDividend revenue is recognised net of any franking credits. Dividends from subsidiaries are recognised by the Company when they are declared by subsidiaries.

Management and administrative feesManagement and administrative fee revenue is recognised by the Company when services are provided to subsidiaries.

Goods and services taxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authorities. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of GST.

The net amount of GST recoverable from or payable to the taxation authorities is included either as a current asset or liability in the balance sheet.

Cash flows are included in the statements of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authorities are classified as operating cash flows.

Foreign currencyTransactionsForeign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rates of exchange ruling at balance date.

Exchange differences relating to amounts payable and receivable in foreign currencies are included in the income statement for the period in which the exchange rates change, as exchange gains or losses to the extent these amounts have not been hedged.

Translation of overseas entitiesThe net assets of foreign subsidiaries, including goodwill and fair value adjustments arising on acquisition, are translated to Australian currency at the rates of exchange ruling at balance date. The income statements of foreign subsidiaries are translated at a weighted average rate of exchange for the period. Exchange differences arising on translation of the net assets of the foreign subsidiaries are taken directly to the foreign currency translation reserve. These are transferred to the income statements on disposal.

Derivative financial instrumentsThe consolidated entity’s borrowings and transactions in foreign currencies give rise to an exposure to market risks from changes in interest rates and foreign exchange rates. Certain other transactions create risks associated with changes in the price of commodities. Derivative financial instruments are utilised by the consolidated entity to reduce those risks.


Crane Group Limited

46


Crane Group Limited

Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the Company’s obligation to make payments for tax liabilities to the relevant tax authorities.

The Company in conjunction with other members of the tax consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the Company default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

Classification of assets and liabilitiesAssets and liabilities have been allocated into current and non-current portions. Current assets are cash and other assets that would in the ordinary course of business be consumed or converted into cash within 12 months.

Current liabilities are liabilities that would in the ordinary course of business be due and payable within 12 months.

Cash and cash equivalents Cash and cash equivalents comprises cash balances and call deposits with an original maturity of three months or less.

ReceivablesTrade debtorsTrade debtors are carried at amounts due and are usually settled within 60 days. At balance date collectibility is assessed and provision is made for any impairment.

Other debtorsOther debtors consist mainly of rebates from suppliers and are carried at amounts due.

LoansLoans have been made to employees pursuant to the GE Crane Holdings Limited Employee Share Plan. The loans are interest-free.

Other loans have also been made to other entities and a market rate of interest is charged on the amounts outstanding. All loans are carried at the present value of amounts due. The collectibility of all loans is assessed at balance date and a provision is made for any impairment.

Amounts that are due to be paid in excess of 12 months are discounted to net present value.

InventoriesInventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Manufacturing activitiesCost is based on the method most appropriate to each business using either weighted average cost or first-in, first-out principles and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of both variable and fixed costs. Fixed costs have been allocated on the basis of normal operating capacity.

Distribution activitiesCost is based on the method most appropriate to each business using either weighted average cost or first-in, first-out principles and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition.

Note 1: Statement of significant accounting policies (continued)Income tax (continued)Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax consolidationThe Company is the head entity of the tax consolidated group comprising all the Australian wholly owned subsidiaries set out in note 29. The implementation date for the tax consolidated group is 1 July 2003. Subsidiaries that became wholly owned during the financial year joined the tax consolidated group from the time they became wholly owned.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the group allocation approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the Company in the tax consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution.

The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the Company only.

Nature of tax funding arrangements and tax sharing arrangementsThe Company, in conjunction with other members of the tax consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the Company equal to the current tax liability (asset) assumed by the Company and any tax-loss deferred tax asset assumed by the Company, resulting in the Company recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. The inter-entity receivable (payable) is at call.

47

Intangible assets(i) GoodwillGoodwill represents the excess of the purchase consideration and directly attributable costs over the fair value of the identifiable net assets acquired on the acquisition of a subsidiary or business.

Goodwill acquired before 1 July 2004 is included on the basis of its deemed cost. Goodwill acquired subsequent to 1 July 2004 is stated at cost less any accumulated impairment losses. Goodwill is allocated to the lowest cash generating unit (group of units) level and is no longer amortised, rather it is tested annually for impairment. If there is any impairment it will be recognised immediately in the income statements.

Negative goodwill arising on an acquisition is recognised directly in the income statements.

(ii) Trade namesTrade names acquired are included in the balance sheet at the lower of cost of acquisition and recoverable amount and tested annually for impairment.

Independent valuations of trade names are obtained at the date of acquisition and every three years thereafter. Those independent valuations are disclosed in the financial statements. Expenditure incurred in developing, maintaining and enhancing trade names is charged to the income statements in the year in which it is incurred. No amortisation is provided against the carrying value of trade names on the basis that the useful and legal lives of these assets are considered unlimited at this point in time. If an event occurs which results in a permanent diminution in the value of a trade name then the difference between recoverable amount and book value is charged to the income statements.

(iii) Research and development expenditure Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the income statements as an expense as incurred.

Expenditure (excluding training expenditure) on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development.

The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statements as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses.

(iv) AmortisationAmortisation is charged to the income statements on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date that they are available for use. The estimated useful lives in the current and comparative periods for capitalised development expenditure is 10 years.

ImpairmentThe carrying amounts of the consolidated entity’s assets, other than inventories and deferred tax assets, are reviewed annually to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated on a discounted cash flow basis.

For assets that have an indefinite useful life, the recoverable amount is estimated at each balance sheet date.

Note 1: Statement of significant accounting policies (continued)Property, plant and equipmentRecognition and measurementItems of property, plant and equipment are recorded at cost or deemed cost less accumulated depreciation and impairment losses. The cost of property, plant and equipment constructed by the consolidated entity includes the cost of materials, direct labour, and an appropriate proportion of directly attributable fixed and variable overheads. The cost of self-constructed and acquired assets includes:

(i) the initial estimate at the time of installation and during the period of use, when relevant, of the costs of dismantling and removing the items and restoring the site on which they are located; and

(ii) changes in the measurement of existing liabilities recognised for those costs.

Certain items of property, plant and equipment that had been revalued to fair value on or prior to 1 July 2004, the date of transition to AIFRS, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation. Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the consolidated entity in future years. Costs that do not meet the criteria for capitalisation are expensed as incurred.

Depreciation and amortisationItems of property, plant and equipment, excluding freehold land, are depreciated/amortised over their estimated useful lives using the straight-line method. Assets are depreciated/amortised from the time an asset is held ready for use.

The range of depreciation/amortisation rates used for each class of asset for the current and prior period is as follows:

– buildings 3% to 4%;

– leasehold improvements 10% to 25%; and

– plant and equipment 7% to 33%.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads.

Leased assetsLeases of assets under which the Company or its subsidiaries assume substantially all the risks and rewards of ownership are classified as finance leases. Other leases are classified as operating leases.

Finance leases are capitalised. A lease asset and a liability equal to the present value of the minimum lease payments are recorded at the inception of the lease. Capitalised lease assets are amortised on a straight-line basis over the term of the relevant lease or, where it is likely the consolidated entity will obtain ownership of the asset, the life of the asset. Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are included in the income statements.

Payments made under operating leases are charged against the income statements in equal instalments over the accounting periods covered by the lease term.


Crane Group Limited

48


Crane Group Limited

Annual leaveThe provision for employee benefits to annual leave represents the amount which the consolidated entity has an expected obligation to pay resulting from employees’ services provided to balance date. The provision has been calculated using expected wage and salary rates and includes related on-costs.

Long service leave and retirement benefits The liability for employees’ benefits to long service leave and non-executive directors’ retirement benefits represents the present value of the estimated future payments to be made by the consolidated entity resulting from their services provided to balance date. Liabilities for long service leave and retirement benefits which are not expected to be settled within 12 months are discounted using the rates attaching to national government guaranteed securities at balance date which most closely match the terms of maturity of the related liabilities.

In determining the liability for employee benefits, consideration has been given to future increases in remuneration rates and to the consolidated entity’s experience with employee departures. Related on-costs have also been included in the liability.

Defined contribution fundObligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statements as incurred.

Defined benefit superannuation fundsThe consolidated entity’s net obligation in respect of its defined benefit superannuation fund is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.

The discount rate (tax effected) is the yield at the balance sheet date on government bonds that have maturity dates approximating the terms of the consolidated entity’s obligations. The calculation is performed by a qualified actuary.

When the benefits of a fund are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statements on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statements.

Actuarial gains and losses that arise in calculating the consolidated entity’s obligation in respect of the fund, are recognised in the income statements.

When the calculation results in fund assets exceeding liabilities to the consolidated entity, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the fund.

Past service cost is the increase in the present value of the defined benefit obligation for employee services in prior periods resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service costs may either be positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).

Note 1: Statement of significant accounting policies (continued)Impairment (continued)An impairment loss is recognised whenever the carrying amount of an asset of a cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statements.

Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Calculation of recoverable amount The recoverable amount of assets is the greater of their fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed. In respect of other assets impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed to the income statements if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

PayablesA liability for trade creditors and accrued expenditure is recognised for amounts to be paid in the future for goods or services received, whether or not billed to the consolidated entity at balance date. Trade creditors and accruals are usually settled within 60 days and are carried at the amounts owing. Amounts that are due to be paid in excess of 12 months are discounted to net present value.

DividendsDividends payable are recognised as a liability in the period in which they are declared.

Loans and borrowingsLoans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statements over the period of the borrowings on an effective interest basis.

Employee and directors’ benefitsLiabilities are included in the financial statements for benefits which arise in respect of salaries, wages, short-term incentives, annual leave, long service leave and where relevant non-executive directors’ retirement benefits.

Profit sharing and bonus plans A liability is recognised for profit sharing and bonus plans, including benefits based on the future value of equity instruments.

49

Note 1: Statement of significant accounting policies (continued)Employee and directors’ benefits (Continued)Share based compensation transactions The share based compensation plans allow employees of the consolidated entity to acquire shares of the Company. The cost of the share based compensation transactions with employees is measured by reference to their fair value at the date at which they are granted. In valuing the transactions, the market price of the shares of Crane Group Limited is used.

The fair value of share based compensation transactions is recognised, together with a corresponding increase in equity, over the period commencing on the grant date of the share based compensation and ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cumulative expense recognised for share based compensation transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired.

Shares in the Company held by the share based compensation plans are classified and disclosed as treasury shares and deducted from equity. The fair value of shares allocated under the CDSP is independently valued at grant date where appropriate using Monte Carlo simulation to allow for the likelihood of meeting performance hurdles.

When the Company grants shares under the share based compensation plans to employees of subsidiaries the fair value at grant date is recognised as an increase in the investment in subsidiaries with a corresponding increase in equity of the subsidiary over the vesting period of the grant.

The consolidated entity has applied the requirements of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards in respect of share based compensation transactions and has applied AASB 2 Share Based Payments only to equity instruments granted after 7 November 2002 that had not vested on or before 1 January 2005.

ProvisionsA provision is recognised when there is a present legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation. If the effect is material, a provision is determined by discounting the expected future cash flows required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Provision for rationalisationA provision for rationalisation is recognised when the consolidated entity has approved a detailed and formal restructuring plan and the restructuring either has commenced or has been announced publicly. Costs expected to be incurred to restructure an acquired entity’s activities must be treated as post-acquisition expenses, unless the acquired entity has a pre-existing liability for restructuring activities. Future operating costs are not provided for.

Provision for warrantiesProvision is made for the consolidated entity’s estimated liability on expected claims. The estimate is based on the consolidated entity’s warranty cost experience over previous years and known claims.

Provision for environmental rehabilitation A provision for site restoration in respect of contaminated land is recognised. The provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date.

Application and revision of accounting estimates and policiesThe estimates and underlying assumptions used in the preparation of the financial statements are reviewed continually based on historical experience and various other factors. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

Changes in accounting policies are recognised by restating comparatives rather than making current year adjustments with note disclosure of prior year effects.

RoundingThe Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission relating to rounding off of amounts in the financial report and report of the directors. Unless otherwise stated, amounts have been rounded to the nearest thousand dollars.

New standards and interpretations not yet adopted A number of accounting standards and amendments with applicable commencement dates subsequent to year end were available for early adoption in these financial statements. The application of these standards is not expected to have an impact on the financial results of the Company and the consolidated entity on initial adoption in future reporting periods.


Crane Group Limited

50

Discontinued Total Continuing Operations Operations Operations

Unallocated items and inter-segment Tradelink CDNZ Iplex Metals eliminations Total Metals Business segments $000 $000 $000 $000 $000 $000 $000 $000

Note 2: Segment reporting2007Segment revenue 784,805 452,360 679,344 428,373 (158,681) 2,186,201 454 2,186,655

Profit / (loss) before financing costs, tax and minority interests * 22,289 20,106 65,875 (785) (20,394) 87,091 (213) 86,878

Net financing costs (22,712) – (22,712)Share of profit of equity accounted investment 60 – 60 Income tax expense (20,890) (29) (20,919)Minority interests (30) 59 29 Net gain on sale / closure of discontinued operations, net of tax – 4,470 4,470

Profit for the period 43,519 4,287 47,806

Segment assets 278,996 179,030 448,790 170,153 79,575 1,156,544 3 1,156,547

Segment liabilities 131,945 68,593 106,130 70,021 286,814 663,503 2,072 665,575

Capital expenditure 8,126 5,697 26,742 2,407 2,696 45,668 – 45,668

Impairment losses – – – 13,961 – 13,961 – 13,961

Depreciation / amortisation 8,971 3,586 12,615 3,311 4,828 33,311 – 33,311

Other significant non-cash expenses – – (371) 2,513 – 2,142 – 2,142

* includes significant items losses / (gains) – – (371) 16,474 – 16,103 – 16,103

2006Segment revenue 721,988 446,282 574,763 353,636 (150,128) 1,946,541 99,601 2,046,142

Profit / (loss) before financing costs, tax and minority interests * 16,374 20,239 52,283 4,965 (18,917) 74,944 8,029 82,973

Net financing costs (18,231) – (18,231)Share of profit of equity accounted investment – – – Income tax expense (19,850) (2,409) (22,259)Minority interests (6,096) (320) (6,416)Net gain on sale / closure of discontinued operations, net of tax – 37,798 37,798

Profit for the period 30,767 43,098 73,865

Segment assets 278,992 209,299 377,915 170,829 18,959 1,055,994 12,538 1,068,532

Segment liabilities 126,631 51,986 114,313 86,403 217,022 596,355 18,520 614,875

Capital expenditure 3,574 5,418 17,490 2,320 2,610 31,412 17 31,429

Impairment losses – 254 2,139 – – 2,393 – 2,393

Depreciation / amortisation 9,691 3,618 15,076 3,843 2,484 34,712 1,179 35,891

Other significant non-cash expenses 593 413 4,736 8,065 540 14,347 – 14,347

* includes significant items losses 593 667 6,875 8,065 540 16,740 – 16,740

51

Note 2: Segment reporting (continued) Segment information is presented in respect of the consolidated entity’s business segments. The primary segment reporting format, business segments, is based on the consolidated entity’s management and internal reporting structure.

The major products and services from which the segments derive revenue are:

Segment Products and services Tradelink Distribution of plumbers’ supplies in Australia

Crane Distribution NZ (CDNZ) Distribution of plumbers’ and electricians’ supplies in New Zealand

Iplex Manufacture and / or distribution of: – plastic pipeline systems and supplies – cast and ductile iron pipe, fittings and valves

Metals Manufacture and / or distribution of: (a) continuing – copper tube extrusions – copper and copper alloy sheet and strip, nickel alloys and coin blanks – brass, copper and stainless steel tubing – stainless steel plate, sheet and coil – aluminium sheet and strip – fasteners

(b) discontinued – aluminium extrusions – aluminium products and window components – copper alloy rod and bar extrusions

Unallocated items mainly comprise corporate expenses.

Inter-segment pricing is determined on an arm’s length basis.

Geographic segmentsThe consolidated entity operates wholly in Australasia.


Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total $000 $000 $000 $000 $000 $000 $000 $000

Note 3: RevenueSale of goods – external 2,145,631 – 2,145,631 1,941,524 97,643 2,039,167 – – – to joint venture 29,406 – 29,406 – – – – – Dividends from controlled entities – – – – – – 38,500 15,594 Other revenues 11,164 454 11,618 5,017 1,958 6,975 35,290 24,319

2,186,201 454 2,186,655 1,946,541 99,601 2,046,142 73,790 39,913

Note 4: Financing (costs) / incomeInterest income– bank accounts 1,407 – 1,407 5,831 – 5,831 24,889 27,670 – other 10 – 10 352 – 352 – –

Financial income 1,417 – 1,417 6,183 – 6,183 24,889 27,670 Interest (expense) – bank loans/overdraft (22,780) – (22,780) (23,619) – (23,619) (14,355) (12,422)– finance leases (358) – (358) (617) – (617) (248) (433)– other (991) – (991) (178) – (178) (278) (159)

Financial (expense) (24,129) – (24,129) (24,414) – (24,414) (14,881) (13,014)

Net financing (costs) / income (22,712) – (22,712) (18,231) – (18,231) 10,008 14,656

Net financing costs have not been allocated to discontinued operations as the consolidated entity’s debt is managed on an aggregated basis and assumptions on divisional gearing requirements would render the allocation arbitrary.


Crane Group Limited

52


Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total $000 $000 $000 $000 $000 $000 $000 $000

Note 5: Expenses and significant items(a) Expenses excluding net financing costs

and before income tax expense comprise:Cost of goods sold 1,592,537 – 1,592,537 1,383,258 73,251 1,456,509 – – Selling and distribution 364,954 – 364,954 345,567 17,721 363,288 – – General and administration 141,619 667 142,286 142,772 600 143,372 43,041 29,681

2,099,110 667 2,099,777 1,871,597 91,572 1,963,169 43,041 29,681 (b) Depreciation, amortisation and

impairment Depreciation and amortisation Property 5,547 – 5,547 5,204 222 5,426 – – Plant and equipment 21,558 – 21,558 24,720 736 25,456 3,555 2,851 Development expenditure 6,206 – 6,206 4,788 221 5,009 195 –

33,311 – 33,311 34,712 1,179 35,891 3,750 2,851 Impairment Plant and equipment 10,219 – 10,219 2,393 – 2,393 – – Development expenditure 2,967 – 2,967 – – – – – Goodwill 775 – 775 – – – – –

13,961 – 13,961 2,393 – 2,393 – –

Total depreciation, amortisation and impairment 47,272 – 47,272 37,105 1,179 38,284 3,750 2,851

(c) Significant items Significant item losses / (gains) included in profit after tax but before net gain on sale/closure of discontinued operations and minority interests are: Rehabilitation costs – Penrith site – – – 7,320 – 7,320 – – Restructure and redundancy costs 2,142 – 2,142 7,027 – 7,027 – 2,840 Impairment of plant and equipment 10,219 – 10,219 2,393 – 2,393 – – development expenditure 2,967 – 2,967 – – – – – goodwill 775 – 775 – – – – –

16,103 – 16,103 16,740 – 16,740 – 2,840 Income tax benefit (4,587) – (4,587) (5,077) – (5,077) – (852)Change of tax bases (1,307) – (1,307) – – – – – Income tax expense arising from tax rate change in New Zealand 417 – 417 – – – – – Minority interests – – – (596) – (596) – –

10,626 – 10,626 11,067 – 11,067 – 1,988

The above pre-tax significant items have been charged to general and administration costs.

(d) OtherLoss / (gain) on sale of property, plant and equipment 784 – 784 (143) 16 (127) 872 8

Operating lease rental expense 47,713 – 47,713 46,983 1,612 48,595 1,574 1,937

Employee expenses Restructuring and redundancy costs 822 – 822 7,027 8,315 15,342 – 540 Share based payments 2,008 – 2,008 1,610 – 1,610 1,681 1,024 Salaries, wages and on-costs 270,934 208 271,142 253,791 13,113 266,904 17,795 11,539

273,764 208 273,972 262,428 21,428 283,856 19,476 13,103

53

Consolidated The Company 2007 2006 2007 2006 $000 $000 $000 $000

Note 6: Discontinued operationsThe gain on sale and loss on closure included in the profit after tax and minority interests of discontinued operations comprises: Consolidated Extrusions gain on sale of property, plant and equipment 6,880 3,649 – – loss on closure (33) (7,704) – – Gain on sale of Aluminium businesses and related restructuring costs (223) 49,477 – –

6,624 45,422 – – Income tax (expense) (2,154) (7,624) – –

Net gain on sale/closure of discontinued operations after tax 4,470 37,798 – –

A discontinued operation is a component of the consolidated entity’s business that represents a separate major line of business. The effect of the Aluminium businesses disposal in 2006 on individual assets and liabilities of the consolidated entity is disclosed in note 32 (iv). As stated in note 4 net financing costs have not been allocated to discontinued operations.

The discontinued Aluminium operations comprised the businesses of Crane Aluminium Extrusions, Crane Aluminium Systems and Smart Aluminium.

Cash flows relevant to the discontinued operations not already disclosed individually in the cash flow statement are: cash flows generated from operations $1,263,000 (2006: $12,193,000).

Consolidated The Company 2007 2006 2007 2006 $ $ $ $

Note 7: Auditor’s remuneration Audit services: Auditor of the Company – KPMG audit and review of: the financial reports 1,366,470 1,289,507 494,748 363,747 Aluminium business completion accounts – 131,967 – –

1,366,470 1,421,474 494,748 363,747

Other services: Auditor of the Company – KPMG taxation – 7,140 – – workers compensation review 7,983 2,850 2,000 1,350

7,983 9,990 2,000 1,350

1,374,453 1,431,464 496,748 365,097


Crane Group Limited

54


Note 8: Income taxIncome tax expense – recognised in the income statementReconciliation of income tax expense included in the income statements with income tax calculated on the profit / (loss)

(a) Profit before net gain from the sale / closure of discontinued operations 64,226 64,742 40,757 24,888

Income tax expense calculated at 30% (2006: 30%) 19,268 19,423 12,227 7,466 Increase / (decrease) in income tax expense due to: Entertainment 899 633 32 3 Impairment of non-current assets 232 – – – Change of tax bases (1,307) – – – Employee share plan 102 176 – – Recoupment of tax losses – – – (1,841) New Zealand note issue (730) (687) – – Tax offset on dividend income – – – (4,678) Dividend from tax consolidated subsidiaries – – (11,550) – Overseas tax rate differential 774 689 – – Under / (over) provided in prior year 385 1,415 (325) 46 Other 917 610 65 (17) Change in New Zealand company tax rate 379 – – –

20,919 22,259 449 979

(b) Net gain from the sale / closure of discontinued operations 6,624 45,422 – –

Income tax expense calculated at 30% (2006: 30%) 1,987 13,627 – –Increase / (decrease) in income tax expense due to: Tax benefit on sale of land and buildings – (1,560) – – Change of tax bases – (2,401) – – Recoupment of tax losses – (1,841) – – Other 167 (201) – –

2,154 7,624 – –

(c) Income tax expense relates to:Profit before net gain on sale / closure of discontinued operations 20,919 22,259 449 979 Net gain on sale / closure of discontinued operations 2,154 7,624 – –

23,073 29,883 449 979

Total income tax expense comprises: Current tax expense in income statements 32,172 42,473 (635) 2,212 Deferred tax expense in income statements (9,099) (12,590) 1,084 (1,233)

Income tax expense recognised in income statements 23,073 29,883 449 979 Deferred tax in equity (800) 110 (764) (373)

22,273 29,993 (315) 606

55

Asset Liability Net 2007 2006 2007 2006 2007 2006 Consolidated $000 $000 $000 $000 $000 $000

Note 8: Income tax (continued)Deferred tax assets and liabilitiesReceivables 4,946 3,472 – – 4,946 3,472 Inventories 5,569 5,109 – – 5,569 5,109 Property, plant and equipment 3,888 3,643 (1,480) (4,912) 2,408 (1,269)Intangible assets – – (5,981) (7,988) (5,981) (7,988)Employee entitlements 10,959 10,233 – – 10,959 10,233 Provisions 7,669 10,392 – – 7,669 10,392 Payables 8,747 6,039 – – 8,747 6,039 Financial instruments 1,192 – (436) (55) 756 (55)Share based payments – – (1,319) (1,430) (1,319) (1,430)Other items 1,397 3,594 (957) – 440 3,594 Set off (10,173) (14,385) 10,173 14,385 – –

34,194 28,097 – – 34,194 28,097

Movement in temporary differences during the year Balance Recognised Recognised * Other Balance 1 July 2006 in income in equity movements 30 June 2007 2007 Consolidated $000 $000 $000 $000 $000

Receivables 3,472 1,424 – 50 4,946 Inventories 5,109 1,337 – (877) 5,569 Property, plant and equipment (1,269) 5,011 – (1,334) 2,408 Intangible assets (7,988) 2,129 – (122) (5,981)Employee entitlements 10,233 594 – 132 10,959 Provisions 10,392 (2,817) – 94 7,669 Payables 6,039 2,598 – 110 8,747 Financial instruments (55) 55 800 (44) 756 Share based payments (1,430) 88 – 23 (1,319)Other items 3,594 (1,320) – (1,834) 440

28,097 9,099 800 (3,802) 34,194

Balance Recognised Recognised * Other Balance 1 July 2005 in income in equity movements 30 June 2006 2006 Consolidated $000 $000 $000 $000 $000

Receivables 3,730 (201) – (57) 3,472 Inventories 5,275 5,460 – (5,626) 5,109 Property, plant and equipment 1,212 (2,536) – 55 (1,269)Intangible assets (10,511) 2,387 – 136 (7,988)Employee entitlements 12,223 (506) – (1,484) 10,233 Provisions 5,815 4,939 – (362) 10,392 Payables 4,138 2,120 – (219) 6,039 Financial instruments – – (110) 55 (55)Share based payments (807) (623) – – (1,430)Other items 64 1,550 – 1,980 3,594

21,139 12,590 (110) (5,522) 28,097

* Other movements includes foreign currency and business combination adjustments.


Crane Group Limited

56

Asset Liability Net 2007 2006 2007 2006 2007 2006 The Company $000 $000 $000 $000 $000 $000

Note 8: Income tax (continued)Deferred tax assets and liabilitiesReceivables 150 – – – 150 – Property, plant and equipment 11 – – (19) 11 (19)Employee entitlements 800 868 – – 800 868 Provisions 290 1,360 – – 290 1,360 Payables 2,126 2,626 – – 2,126 2,626 Financial instruments 1,192 373 – – 1,192 373 Share based payments – – (1,319) (1,430) (1,319) (1,430)Other items 195 – (791) (702) (596) (702)Set off (2,110) (2,151) 2,110 2,151 – –

2,654 3,076 – – 2,654 3,076

Movement in temporary differences during the year Balance Recognised Recognised * Other Balance 1 July 2006 in income in equity movements 30 June 2007 2007 The Company $000 $000 $000 $000 $000

Receivables – 150 – – 150 Property, plant and equipment (19) 40 – (10) 11 Employee entitlements 868 70 – (138) 800 Provisions 1,360 (1,070) – – 290 Payables 2,626 (500) – – 2,126 Financial instruments 373 55 764 – 1,192 Share based payments (1,430) 88 – 23 (1,319)Other items (702) 83 – 23 (596)

3,076 (1,084) 764 (102) 2,654

Balance Recognised Recognised * Other Balance 1 July 2005 in income in equity movements 30 June 2006 2006 The Company $000 $000 $000 $000 $000

Property, plant and equipment 40 (60) – 1 (19)Employee entitlements 944 (52) – (24) 868 Provisions 96 1,264 – – 1,360 Payables 1,644 982 – – 2,626 Financial instruments – – 373 – 373 Share based payments (807) (623) – – (1,430)Other items (184) (278) – (240) (702)

1,733 1,233 373 (263) 3,076

* Other movements in deferred tax for the Company relate to intra-group transfers.

57


Note 9: Dividends Dividends paid (fully franked at the 30% tax rate):Final 2006 dividend at 30.0 cents per ordinary share (2005: 30.0 cents) 17,989 17,474 17,989 17,474 Final 2006 dividend at 2.5 cents per preference share (2005: 2.5 cents) 10 10 10 10 Interim 2007 dividend at 32.0 cents per ordinary share (2006: 30.0 cents) 19,469 17,666 19,469 17,666 Interim 2007 dividend at 2.5 cents per preference share (2006: 2.5 cents) 10 10 10 10

37,478 35,160 37,478 35,160

Subsequent eventThe final dividends relating to the year ended 30 June 2007 have not been included as a provision in the final statements because the dividends were declared after balance date. The final ordinary and preference dividends declared on 13 August 2007 (fully franked at the 30% tax rate) were 33 cents per ordinary share and 2.5 cents per preference share amounting in total to $21,524,000. The final ordinary dividend includes amounts payable on 3,703,704 shares issued as a private placement to institutional investors on 10 July 2007 (refer note 34).

The Company 2007 2006 $000 $000

Dividend franking account30% franking credits available to shareholders of Crane Group Limited for payment in subsequent financial years 29,522 28,951

The ability to utilise the franking account credits is dependent upon there being sufficient available profits from which to declare dividends. The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to reduce it by $9,225,000 (2006: $7,714,000). In accordance with the tax consolidation legislation, the Company as the head entity in the tax consolidated group has assumed the franking credits of its wholly owned subsidiaries who are members of the Australian tax consolidated group.

Franking credits are measured as the amount of income tax paid.


Crane Group Limited

58

Consolidated 2007 2006

Note 10: Earnings per security (EPS)Earnings per security attributable to ordinary equity holders from continuing operations(a) Basic EPS (cents) from continuing operations 72.5 52.6 Weighted average number of ordinary shares 60,023,948 58,403,988

(b) Diluted EPS (cents) from continuing operations 71.5 52.0 Weighted average number of ordinary shares 60,843,353 59,174,828

$000 $000

Earnings reconciliation – basic and diluted Net profit before minority interests 43,549 36,863 Net profit attributable to minority interests (30) (6,096) Preference dividends (20) (20)

Net profit attributable to ordinary shareholders 43,499 30,747

Earnings per security attributable to ordinary equity holders from discontinued operations (a) Basic EPS (cents) from discontinued operations 7.1 73.8 Weighted average number of ordinary shares 60,023,948 58,403,988

(b) Diluted EPS (cents) from discontinued operations 7.0 72.8 Weighted average number of ordinary shares 60,843,353 59,174,828

$000 $000

Earnings reconciliation – basic and diluted Net profit before minority interests 4,228 43,418 Net profit attributable to minority interests 59 (320)

Net profit attributable to ordinary shareholders 4,287 43,098

Earnings per security attributable to ordinary equity holders (a) Basic EPS (cents) attributable to ordinary equity holders 79.6 126.4 Weighted average number of ordinary shares 60,023,948 58,403,988

(b) Diluted EPS (cents) attributable to ordinary equity holders 78.5 124.8 Weighted average number of ordinary shares 60,843,353 59,174,828

$000 $000

Earnings reconciliation – basic and diluted Net profit before minority interests 47,777 80,281 Net profit attributable to minority interests 29 (6,416) Preference dividends (20) (20)

Total net profit attributable to ordinary shareholders 47,786 73,845

Basic EPS is calculated by dividing the net profit (loss) attributable to members of the parent entity for the reporting period by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of the financing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus issue. The average market value of the Company’s shares for the purposes of calculating the dilutive effect of potential ordinary shares was based on quoted market prices for the period the securities were outstanding.

For comparative purposes, the 2006 figures have been adjusted for the bonus element in shares issued during 2006.

59


Note 11: Cash and cash equivalentsCash at bank and on hand 51,394 52,977 8,247 7,092

Note 12: Current receivablesTrade debtors – external 306,171 299,274 28 260 – joint venture entity 1,019 – – – Provision for impairment (12,075) (9,108) – –

295,115 290,166 28 260 Amounts owing by joint venture partner 849 701 – – Amounts owing by joint venture entity 10,000 – – – Other debtors 17,035 17,390 2,454 1,187

322,999 308,257 2,482 1,447

Note 13: Current inventoriesFinished goods:

At cost 307,200 248,893 – –Write down to net realisable value (15,443) (12,512) – –

291,757 236,381 – –Raw materials and stores at cost 8,685 15,761 – –Work in progress at cost 8,478 4,934 – –

308,920 257,076 – –

Note 14: Non-current receivablesLoans to controlled entities – – 301,158 280,686 Loan to joint venture entity 1,164 – – – Other loans 101 1,035 – – Provision for impairment – (759) – –

1,265 276 301,158 280,686 Defined benefit plan asset 1,850 1,093 1,850 1,093

3,115 1,369 303,008 281,779

Note 15: Non-current investmentsUnlisted shares in subsidiaries at cost – – 234,321 232,321 Investment in joint venture entity 30 60 – – –

60 – 234,321 232,321


Crane Group Limited

60


Note 16: Property, plant and equipmentCurrent assetsProperty held for sale – 5,106 – –

Non-current assetsFreehold land: At cost 35,190 32,423 – –

Buildings: At cost 57,859 55,364 – – Accumulated depreciation (10,817) (9,047) – –

47,042 46,317 – –

Leasehold improvements: At cost 35,275 30,735 – – Accumulated amortisation (25,356) (22,051) – –

9,919 8,684 – –

Plant and equipment: At cost 306,550 303,112 7,224 6,669 Accumulated depreciation (234,692) (225,085) (4,279) (3,770)

71,858 78,027 2,945 2,899

Leased plant and equipment : At capitalised cost 10,471 11,821 8,172 8,172 Accumulated amortisation (7,606) (6,385) (6,285) (4,603)

2,865 5,436 1,887 3,569

Capital works in progress: At cost 29,937 14,778 – –

Total property, plant and equipment 196,811 185,665 4,832 6,468

ReconciliationsFreehold land: Carrying amount at beginning of year 32,423 35,170 – – Additions 2,157 – – – Disposals – (900) – – Transfer to property held for sale – (1,167) – – Foreign currency translation 610 (680) – –

Carrying amount at end of year 35,190 32,423 – –

61


Note 16: Property, plant and equipment (continued) Buildings: Carrying amount at beginning of year 46,317 56,512 – – Additions 781 283 – – Transfers – capital works in progress / plant and equipment 319 1,899 – – Disposals – (5,229) – – Depreciation (1,621) (1,828) – – Transfer to property held for sale – (3,939) – – Foreign currency translation 1,246 (1,381) – –


Leasehold improvements: Carrying amount at beginning of year 8,684 8,842 – – Additions 4,525 1,212 – – Transfers from capital works in progress 345 2,690 – – Disposals (68) (33) – – Amortisation (3,926) (3,598) – – Foreign currency translation 359 (429) – –


Plant and equipment: Carrying amount at beginning of year 78,027 92,795 2,899 1,111 Acquisitions 306 – – – Additions 8,995 9,244 2,695 2,609 Transfers – capital works in progress, buildings and leased plant and equipment 14,755 14,603 – – Transfers – intra-group – – 96 – Disposals (1,435) (11,894) (872) (92) Depreciation (19,770) (22,952) (1,873) (729) Impairment (see note below) (10,219) (2,393) – – Foreign currency translation 1,199 (1,376) – –

Carrying amount at end of year 71,858 78,027 2,945 2,899

Leased plant and equipment – at capitalised cost: Carrying amount at beginning of year 5,436 9,286 3,569 5,691 Transfers from plant and equipment (783) (1,346) – – Depreciation (1,788) (2,504) (1,682) (2,122)

Carrying amount at end of year 2,865 5,436 1,887 3,569

Capital works in progress: Carrying amount at beginning of year 14,778 12,177 – – Additions 29,210 20,690 – – Transfers to asset categories (14,636) (17,846) – – Foreign currency translation 585 (243) – –


The impairment of plant and equipment in 2007 arises from the negative impact of high commodity prices on volumes and margins in Crane’s metal manufacturing business. In 2006 impairment was due to decisions to restructure several businesses.

Independent valuations of the above properties disclosed as non-current assets were made in June 2006 by Mr C Cotman FAPI of Laing + Simmons Commercial Pty Limited as at 30 June 2006. Such valuations were on the basis of the existing use of the properties, unless it was the intention of the consolidated entity to dispose of a property, in which case the current market value was used. The items of land and buildings covered by these valuations had a carrying value of $79,297,000 as at 30 June 2007. The independent valuations in relation to these properties determined a value of $155,663,000.


Crane Group Limited

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Note 17: Intangible assetsGoodwill at cost 186,976 171,587 – – Accumulated impairment losses (775) – – –

186,201 171,587 – –

Trade names at cost 23,121 22,131 – – Accumulated impairment losses (4,672) (4,236) – –

18,449 17,895 – – Development expenditure: System re-engineering and computer software at cost 50,108 49,217 793 – Accumulated amortisation and impairment losses (22,591) (14,736) (195) –

27,517 34,481 598 –

232,167 223,963 598 –

ReconciliationsGoodwill Carrying amount at beginning of year 171,587 120,984 – – Acquisitions 9,472 75,574 – – Impairment (775) – – – Disposals – (22,164) – – Foreign currency translation 5,917 (2,807) – –


Trade names Carrying amount at beginning of year 17,895 18,514 – – Foreign currency translation 554 (619) – –


Development expenditure Carrying amount at beginning of year 34,481 41,733 – – Additions 1,722 – 793 – Impairment (2,967) – – – Disposals – (1,291) – – Amortisation (6,206) (5,009) (195) – Foreign currency translation 487 (952) – –

Carrying amount at end of year 27,517 34,481 598 –

Independent valuations of the above trade names were made in June 2006 by Ernst & Young. The trade names covered by these valuations had a carrying value of $18,449,000 as at 30 June 2007. The independent valuations in relation to these trade names determined a value of $49,986,000.

Systems re-engineering development expenditure relates to the implementation of an enterprise-wide information system throughout the consolidated entity.

The main component of the carrying amount of the consolidated entity’s goodwill relates to the Iplex Group totalling $154.1 million (2006: $138.0 million). The recoverable amount of this goodwill has been determined on the value in use calculations. Those calculations use cash flow projections based on operating budgets. Cash flows for a further four year period are extrapolated using a 2% growth rate. This growth rate is consistent with the long-term average growth rate for the industry. A pre-tax discount rate of 9.4% has been used in discounting the projected cash flows.

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Note 18: Current payablesTrade creditors 257,033 229,628 3,241 1,811 Other creditors and accruals 46,434 46,612 8,482 10,439 Amounts owing to joint venture partner 527 1,842 – –

303,994 278,082 11,723 12,250

Note 19: Current loans and borrowings Bank overdraft – – 261 1,875 Bank loans – unsecured 49,887 45,234 – –Finance lease liabilities 2,380 3,067 1,596 2,054

52,267 48,301 1,857 3,929

Note 20: Current provisionsEnvironmental rehabilitation 6,736 7,600 – – Rationalisation 9,211 16,664 967 2,074 Warranties 4,137 4,431 – – Other 3,587 2,091 432 –

23,671 30,786 1,399 2,074

ReconciliationsReconciliations of the carrying amounts of each class of provision are set out below:

Environmental rehabilitation Carrying amount at beginning of year 7,600 270 – – Provisions made during the year 324 7,814 – – Payments made during the year (1,188) (484) – –


Rationalisation Carrying amount at beginning of year 16,664 9,423 2,074 320 Provisions made during the year 1,292 24,347 114 2,300 Payments made during the year (8,829) (17,005) (1,221) (546) Foreign currency translation 84 (101) – –

Carrying amount at end of year 9,211 16,664 967 2,074

Warranties Carrying amount at beginning of year 4,431 3,150 – – Provisions made during the year 2,220 3,847 – – Payments made during the year (2,578) (2,490) – – Foreign currency translation 64 (76) – –

Carrying amount at end of the year 4,137 4,431 – –

Other Carrying amount at beginning of year 2,091 1,624 – – Provisions made during the year 1,591 884 432 – Payments made during the year (95) (417) – –

Carrying amount at the end of the year 3,587 2,091 432 –


Crane Group Limited

64

Note 20: Current provisions (continued) Environmental rehabilitationIn accordance with the consolidated entity’s environmental policy and applicable legal requirements, a provision for site restoration in respect of affected land is recognised. The provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date.

RationalisationA provision for rationalisation is recognised as the consolidated entity has approved a detailed and formal restructuring plan and the restructuring has commenced. Future operating costs are not provided for.

WarrantiesA provision for warranties is recognised for the consolidated entity’s estimated liability on anticipated claims. The estimate is based on the consolidated entity’s warranty cost experience over previous years and known claims.

OtherOther provisions are recognised for the consolidated entity’s liability for various activities and events that create a present liability at balance date.


Note 21: Non-current loans and borrowingsBank loans – unsecured 73,469 63,328 – –Finance lease liabilities 477 2,370 283 1,392 Unsecured US notes 82,479 91,348 82,479 91,348 Hedge liabilities relating to unsecured US notes 43,420 34,551 43,420 34,551

199,845 191,597 126,182 127,291

Note 22: Non-current provisionsDeferred consideration 5,351 4,310 4,516 4,310Make good 873 940 – –Dismantling and restoration 533 521 – –

6,757 5,771 4,516 4,310

Reconciliations

Make good Carrying amount at beginning of year 940 875 – – Provisions made / (reversed) during the year (88) 89 – – Foreign currency translation 21 (24) – –

Carrying amount at end of year 873 940 – –

Dismantling and restoration Carrying amount at beginning of year 521 534 – – Foreign currency translation 12 (13) – –

Carrying amount at end of year 533 521 – –

Deferred consideration A provision for the deferred consideration payable on achieving certain performance criteria by the acquired businesses are recognised based on the probability of achieving those criteria. The increase during the year relates to the acquisition of Hydro-tech Sanitar.

Make goodA provision for make good is recognised for the consolidated entity’s estimated liability on exiting of leased premises as per the terms and conditions. The estimate is based on the consolidated entity’s experience over previous years.

Dismantling and restorationA provision for dismantling and restoration is recognised for the consolidated entity’s estimated liability on exiting of leased premises. The estimate is based on the consolidated entity’s experience over previous years.

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Note 23: Issued capitalShare capital 61,490,738 (2006: 59,962,817) ordinary shares, fully paid 362,338 342,535 362,338 342,535

Treasury shares 819,405 (2006: 770,840) issued ordinary shares (8,427) (7,466) (8,427) (7,466)

Preference shares 400,000 (2006: 400,000) non-redeemable, non-participating,

cumulative 5% p.a. preference shares, fully paid 400 400 400 400

354,311 335,469 354,311 335,469

During the year, the Company issued the following shares:

877,049 ordinary shares fully paid and issued at $10.75 per share pursuant to the Crane Group Limited Dividend Reinvestment Plan; and

650,872 ordinary shares fully paid and issued at $15.94 per share pursuant to the Crane Group Limited Dividend Reinvestment Plan.

Terms and conditions Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. Holders of preference shares are entitled to a dividend of 5% p.a., in priority to others, as declared and are not entitled to vote at shareholders’ meetings.

In the event of a winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceedings of liquidation. Preference shareholders shall be entitled, in priority to other shareholders, to the right on a winding up of the Company to be repaid the amount of capital paid.

Note 24: ReservesNature and purpose of reservesForeign currency translation reserveThe foreign currency translation reserve records the foreign currency differences arising from the translation of foreign operations where their functional currency is different to the presentation currency of the reporting entity.

Hedging reserveThe hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to underlying hedged transactions.

Equity compensation reserveThe equity compensation reserve represents the fair value of shares expensed during the periods over which an employee provides the related services, i.e. over the vesting period.


Crane Group Limited

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Note 25: Financing arrangementsFinancing facilitiesAs at 30 June 2007, the consolidated entity has committed financing arrangements totalling $477.751 million (2006: $480.176 million). These arrangements consist of the following facilities:

Summary of financing facilities Facilities Facilities Available utilised at not utilised facilities balance date at balance date $000 $000 $000

2007 Overdraft 7,765 – 7,765Unsecured bank loans 341,230 123,356 217,874Unsecured US notes 82,479 82,479 –Hedge liabilities relating to US notes 43,420 43,420 –Leases 2,857 2,857 –

477,751 252,112 225,639

2006 Overdraft 9,914 – 9,914Unsecured bank loans 338,926 108,562 230,364Unsecured US notes 91,348 91,348 –Hedge liabilities relating to US notes 34,551 34,551 –Leases 5,437 5,437 –

480,176 239,898 240,278

Unsecured bank loansUnsecured facilities, including overdraft, available to the Company and certain wholly owned controlled entities total $348.995 million (2006: $348.840 million) of which $123.356 million were utilised as at 30 June 2007 (2006: $108.562 million).

These facilities are supported by interlocking guarantees between the Company and certain wholly owned controlled entities.

Unsecured US notesThe US$70.0 million (A$82.479 million) unsecured note facility (2006: US$70.0 million, A$91.348 million) which is fully drawn. The notes have various maturities extending to June 2014 at a weighted average fixed USD interest rate of 6.98%. This facility is supported by guarantees provided by certain wholly owned subsidiaries. The repayment of the US$70.0 million drawn under this facility was hedged at the time of the drawing such that the Australian dollar amount required to repay the principal at maturity was fixed at A$125.899 million. Under the hedge of the US notes the Company receives an average 6.98% fixed USD interest rate and pays floating AUD interest rates, reset quarterly. This hedging relationship has been designated as a fair value hedge under AASB 139 Financial Instruments: Recognition and Measurement.

The changes in fair value of the US notes and the hedge relating to the US notes are recognised in the income statements. The impact on the consolidated entity’s income statements for the year ended 30 June 2007 is a gain of $5,000 after tax (2006: $16,000 gain after tax).

Lease liabilitiesSecured facilities available to the Company and certain wholly owned controlled entities total $2.857 million (2006: $5.437 million). These facilities are secured by the assets being financed, as in the event of default, the leased assets revert to the lessor.

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Note 25: Financing arrangements (continued)Summary of facility maturities <1 year 1 to 3 years 4 to 10 years Total $000 $000 $000 $000

2007 Overdraft 7,765 – – 7,765Unsecured bank loans 151,343 139,887 50,000 341,230Unsecured US notes – 20,620 61,859 82,479Hedge liabilities relating to US notes – 10,855 32,565 43,420Leases 2,380 477 – 2,857

161,488 171,839 144,424 477,751

2006 Overdraft – 9,914 – 9,914Unsecured bank loans 185,234 153,692 – 338,926Unsecured US notes – 22,964 68,384 91,348Hedge liabilities relating to US notes – 8,511 26,040 34,551Leases 3,067 2,370 – 5,437

188,301 197,451 94,424 480,176

Financial instruments(a) Interest rate riskThe consolidated entity has entered into cross currency swap agreements to manage the interest rate and currency risks associated with the US$70.0 million unsecured notes. These agreements fully hedge the repayment of principal at maturity of the notes and swap the fixed rate US dollar interest commitment to a floating rate Australian dollar commitment. This relationship is treated as a fair value hedge.

The consolidated entity enters into interest rate forward rate agreements, swaps and options to manage risks associated with floating rate borrowings. Forward rate agreements are used to manage risk out to one year with swaps and options used for periods between one and five years. There were no interest rate options or forward rate agreements outstanding at 30 June 2007 (2006: $Nil). The consolidated entity uses interest rate swap contracts to swap floating rate borrowings into fixed rates. At 30 June 2007, the consolidated entity had interest rate swaps with a face value of $86.168 million or approximately 43% of the net debt (2006: 37% of net debt) at fixed interest rates of between 6.62% and 8.15% (2006: $69.907 million at 6.00% to 7.36%) and with maturity dates between June 2008 and June 2010.

The consolidated entity adopts a policy of ensuring that its exposure to changes in interest rates on borrowings is at an acceptable level. Interest rate swaps, denominated in Australian and New Zealand dollars, have been entered into to achieve an appropriate mix of fixed and floating rate exposure within the consolidated entity’s policy.

The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value. The net fair value of swaps at 30 June 2007 was $1,167,000 comprising assets of $1,167,000 and liabilities of $Nil. These amounts were recognised as fair value derivatives.

Effective interest rates and repricing analysis In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.


Crane Group Limited

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Note 25: Financing arrangements (continued) Effective Floating More than interest rate interest rate 1 year or less 1 to 5 years 5 years Total Consolidated entity Note % $000 $000 $000 $000 $000

2007Financial assetsCash # 11 5.66 51,394 – – – 51,394

51,394 – – – 51,394

Financial liabilities Bank overdraft # 19 – – – – – –Unsecured bank loan # 19, 21 8.92 123,356 – – – 123,356Unsecured US notes # 21 6.98 – – 60,092 22,387 82,479Hedge liabilities relating to US notes 21 6.98 – – 31,635 11,785 43,420Lease liabilities 19, 21 8.41 – 2,380 477 – 2,857

123,356 2,380 92,204 34,172 252,112

Interest rate/cross currency swaps #* 39,731 22,676 (28,235) (34,172) –

2006Financial assetsCash # 11 5.39 52,977 – – – 52,977

52,977 – – – 52,977

Financial liabilitiesBank overdraft # 19 9.0 – – – – –Unsecured bank loan # 19, 21 8.03 108,562 – – – 108,562Unsecured US notes # 21 6.98 – – 22,964 68,384 91,348Hedge liabilities relating to US notes 21 6.98 – – 8,511 26,040 34,551Lease liabilities 19, 21 8.40 – 3,067 2,370 – 5,437

108,562 3,067 33,845 94,424 239,898

Interest rate/cross currency swaps #* 55,992 20,561 17,871 (94,424) –

# Floating interest rate assets and liabilities reprice three monthly or less.* Notional principal amounts.

(b) Foreign exchange riskThe consolidated entity enters into foreign currency forward exchange contracts and option contracts to manage the cash flow risks associated with purchase and sale commitments denominated in foreign currencies.

The consolidated entity hedges up to a maximum of 100% of all trade receivables and trade payables denominated in a foreign currency as well as contractual commitments to pay or receive foreign currency. The consolidated entity uses forward exchange contracts to hedge its foreign currency risk. Most of the forward exchange contracts have maturities of less than one year after the balance sheet date.

The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value.

The net fair value of forward exchange contracts used as hedges of forecasted transactions at 30 June 2007 was ($2,967,000) comprising assets of $33,000 and liabilities of $3,000,000 that were recognised in fair value derivatives.

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the income statements. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognised as part of net financing costs (see note 4). The fair value of forward exchange contracts used as economic hedges of monetary assets and liabilities in foreign currencies at 30 June 2007 was $Nil (2006: $Nil) for the consolidated entity.

The unsecured US note is denominated in USD, however, the currency risk associated with the principal and interest payments has been managed through a cross currency swap on the same terms as the unsecured US note. The result of this arrangement is an AUD floating interest rate loan.

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Note 25: Financing arrangements (continued)(c) Credit risk exposureCredit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

The consolidated entity’s credit policy requires credit evaluations to be performed on all customers requiring credit over a certain amount, allowing ongoing evaluation of credit exposure. The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties in various countries. The consolidated entity is not exposed materially to any individual overseas country or individual customer.

Transactions involving derivative financial instruments are with Board approved counterparties with whom the consolidated entity has a signed netting agreement as well as having sound credit ratings. Given their high credit ratings, the consolidated entity does not expect any counterparty to fail to meet its obligations.

Credit risk on commodity derivatives is minimised with all counterparties being either financial intermediaries (including the consolidated entity’s major banks) or, in the case of futures contracts, a recognised futures exchange. The maximum credit exposure relating to commodity derivatives to any one counterparty as at 30 June 2007 was $302,000 (2006: $60,000).

(d) Fair valuesThe fair values of financial assets and liabilities at 30 June 2007 together with the carrying amounts shown in the balance sheet are as follows:

Carrying amount Fair value Consolidated Note $000 $000

Cash and cash equivalents 11 51,394 51,394 Trade receivables 12 322,999 322,999 Trade payables 18 (303,994) (303,994)Bank loans – unsecured 19,21 (123,356) (123,356)Unsecured US notes 21 (82,479) (82,479)Hedge liabilities relating to US notes 21 (43,420) (43,420)Interest rate swaps assets 25(a) 1,167 1,167 Interest rate swaps liabilities 25(a) – –Finance leases 19,21 (2,857) (2,930)Foreign exchange contracts assets 25(b) 33 33 Foreign exchange contracts liabilities 25(b) (3,000) (3,000)

(183,513) (183,586)

Unrecognised (losses) / gains (73)

Estimation of fair values The major methods and assumptions used in estimating the fair values of financial assets and liabilities reflected in the table above are summarised as follows:

(i) DerivativesThe fair value of derivatives are the estimated amount that the consolidated entity would receive or pay to terminate the derivative at the balance sheet date, taking into account current interest rates, exchange rates and the current credit worthiness of the derivatives counterparties.

(ii) Interest-bearing loans and borrowingsFair value is calculated based on discounted expected future principal and interest cash flows.

(iii) Finance lease liabilitiesThe fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates.

(iv) Trade and other receivables / payablesFor receivables / payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.

(v) Interest rates used for determining fair valueThe consolidated entity uses the government yield curve as of 30 June 2007 plus an adequate credit spread where appropriate to discount financial instruments. The interest rates used are as follows:

Derivatives 4.7% – 8.5% Unsecured US note 4.5% – 5.5%Hedge liabilities relating to US note 4.5% – 7.0%Leases 6.0% – 7.0%


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Note 26: Employees’ and directors’ benefitsLiability for employees’ and directors’ benefitsThe aggregate liability included in the financial statements for employees’ and directors’ entitlements is:

CurrentProvision for annual and long service leave 19,604 22,077 1,159 1,346 Accrued liabilities in relation to salaries, wages, superannuation and on-costs 20,902 11,513 4,264 3,394

40,506 33,590 5,423 4,740

Non-currentProvision for long service leave 16,334 11,479 837 882 Provision for directors’ retirement 671 663 671 663

17,005 12,142 1,508 1,545

Total liability for employees’ and directors’ benefits 57,511 45,732 6,931 6,285

SuperannuationThe Company and controlled entities contribute to various employee superannuation funds. Employee contributions are based on various percentages of their gross salaries. All employees are entitled to join a fund providing benefits on retirement, disability, death or resignation.

The funds provide either defined benefits based on years of service and final average salary, or benefits related to accumulated contributions plus investment earnings. The Company and controlled entities are under no legal obligation to make up any shortfall in the funds’ assets to meet payments due to employees except any contributions outstanding pursuant to the Funding and Solvency certificate.

The defined benefits superannuation plan in which the consolidated entity is a participant is a category of the Crane Group Superannuation Scheme (the “Scheme”) for which an actuarial assessment was carried out by Mr T Snoyman BSc (Hons) FIA, FIAA of Watson Wyatt Worldwide (the “Actuary”) as at 1 June 2007.

(a) Movement in the liability for changes in the present value of the defined benefit obligations Consolidated 2007 2006 $000 $000

Liability for defined benefit obligations at beginning of the year 2,984 3,623 Current service cost 119 165 Interest cost 150 176 Contributions by plan participants 59 77 Actuarial (gain) / loss (134) 305 Benefits paid (213) (1,362)

Liability for defined benefit obligations at the end of the year 2,965 2,984

(b) Changes in the fair value of fund assetsFair value of plan assets at beginning of the year 4,077 4,191 Expected return on plan assets 314 345 Actuarial gains 397 625 Employer contributions 181 201 Contributions by plan participants 59 77 Benefits paid (213) (1,362)

Fair value of plan assets at end of the year 4,815 4,077

(c) Movement of assets and liabilities recognised in the balance sheets of the fundPresent value of funded defined benefit obligations at end of the year (2,965) (2,984)Fair value of plan assets at end of the year 4,815 4,077

Net asset recognised in the balance sheets at the end of the year 1,850 1,093

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Consolidated 2007 2006 $000 $000

Note 26: Employees’ and directors’ benefits (continued)In 2005, at the end of the year, the present value of funded defined benefit obligations was ($3,623,000) and the fair value of plan assets was $4,191,000, giving net assets recognised in the balance sheets of $568,000.

The consolidated entity has used the AASB 1 paragraph 20A exemption and disclosed amounts under AASB 119 paragraph 120A(p) for each annual reporting period prospectively from the transition date.

(d) Expense / (gain) recognised in the income statementsCurrent service cost 119 165 Interest cost 150 176 Expected return on plan assets (314) (345)Actuarial (gains) / losses (531) (320)

Expense / (gain) recognised in the income statements (576) (324)

The expense is recognised in general and administration expenses in the income statement.

(e) Plan assets of the fundThe percentage invested in each asset class at the balance sheet date: Australian equities 25% 25%Overseas equities 22% 22%Fixed interest securities 30% 30%Property 8% 8%Cash and hedge funds 15% 15%

The fair value of plan assets includes no amounts relating to: – any of the consolidated entity’s own financial instruments; and – any property occupied by, or other assets used by, the consolidated entity.

(f) Expected rate of return on assets of the fundThe expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees.

(g) Actual return on plan assets of the fundActual return on plan assets 711 970

(h) Principal actuarial assumptions at the balance sheet date Discount rate (gross of tax) 5.90% 5.60%Discount rate (net of tax) 5.00% 4.75%Expected return on investments 7.50% 7.50%Future salary increases 4.25% 4.00%

(i) Expected contributions of the schemeThe estimated contributions to be paid to the fund during the year ending 30 June 2008 from expected employer contributions are $143,222 and expected contributions by plan participants are $46,500.


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Note 26: Employees’ and directors’ benefits (continued)Employee ownership plansSet out below is a summary of the main terms of the employee share plans of Crane Group Limited which have been approved by the shareholders.

Employee Share Plans

Loan Plan GESP GESP (NZ) CDSP see (a) see (c) see (d) see (e) 2007 2006 2007 2006 2007 2006 2007 2006

Number of shares issued pursuant to the plans 2,075,878 2,075,878 ¹1,478,930 ¹1,478,930 373,754 373,754 ²786,000 ²565,000

At beginning of year:Number of shares held under the plans 76,750 159,750 447,550 766,688 137,245 217,576 533,000 346,000

During the year: Number of new shares issued – – – – – – 221,000 219,000Number of employees participating in the issues – – – – – – 11 8Total market value/fair value of issues at issue date – – – – – – 3$2,444,408 3$978,900Proceeds received/receivable from issues under the plans ($000) – – – – – – – –Number of shares vested/transferred (38,500) (83,000) (189,099) (319,138) (21,840) (80,331) (50,000) (32,000)

At 30 June: Number of shares held under the plans 38,250 76,750 258,451 447,550 115,405 137,245 704,000 533,000Number of employees participating in the plans 4 7 1,828 2,212 717 847 11 8Market price per share $16.87 $12.25 $16.87 $12.25 $16.87 $12.25 $16.87 $12.25Loans outstanding $129,000 $322,000 – – – – – –

The total number of ordinary shares and options allowed under all employee ownership plans is determined by the rules of the GESP and by a formula set by the Australian Securities and Investments Commission (ASIC) as a condition of its Class Orders relating to employee share schemes. At balance date the total number of ordinary shares and options issued is within the requirements of the relevant ASIC Class Order. Under the rules of the GESP, the total number of ordinary shares and options still available for issue amounted to 3,234,282 (2006: 3,081,490).

1 In relation to the GESP, the number of shares issued includes 60,729 shares purchased on market during the year ended 30 June 1998 and 78,613 shares purchased on market during the year ended 30 June 2003.

2 In relation to the CDSP, all shares allocated were purchased on market.

3 Relates to the fair value of shares at grant date as there is no market for these shares.

(a) GE Crane Holdings Limited Employee Share Plan – Loan PlanThe directors may invite senior full-time employees (including executive directors with the approval of shareholders) of the Company or any of its subsidiaries to become members of the plan and specify the number of fully paid ordinary shares in the Company (plan shares) to be allocated to those employees. There are no current executive directors or senior executives who are members of the plan (2006: Nil).

The discount from the market price of the ordinary shares received by a plan member, except in relation to a rights issue, is up to 10% as determined by the directors from time to time. No shares have been issued at a discount in the last 10 years.

The Company provides an interest-free loan of 100% of the purchase price of plan shares except for rights issues, where the maximum extent of any financial assistance by the Company to a plan member is determined by the directors at the time of each rights issue. Loans to plan members to assist in the acquisition of plan shares are repaid by way of instalments equal to the amount of any dividend received relating to the plan shares.

There are restrictions on the plan member dealing in the plan shares for a period of three years after the date of initial allotment of plan shares to the member.

Where a plan member ceases to be an employee of the Company (or a subsidiary) for any reason and the loan balance is repayable prior to the member receiving title to the member’s plan shares, or where the plan trustee must, in accordance with the rules of the plan, sell the shares and apply the proceeds to repayment of any loan balance, the member’s liability shall not exceed the market value of those plan shares.

(b) Executive Share Option PlanThe Crane Executive Share Option Plan, approved by shareholders on 9 October 1997, provides that eligible employees invited by the Board may be granted options over unissued ordinary shares in the Company. There are no unissued ordinary shares under option in respect of this plan.

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Note 26: Employee and directors’ benefits (continued)(c) General Employee Share Plan (Australia) – GESPFull-time and permanent part-time employees resident in Australia (excluding members of the GE Crane Holdings Limited Employee Share Plan) and employed by Crane Group Limited or any of its subsidiaries for a continuous 12 month period (or for an aggregate of 36 months non-continuously) can at the Board’s discretion be offered up to $1,000 worth of Crane Group Limited shares per annum at no cost to the employee. Employees with a lesser period of service may be eligible to acquire shares with Board approval. In determining whether an allocation for a particular financial year will be made after the end of that financial year and the extent of that allocation, the Board takes into consideration the relative financial performance of the consolidated entity. Allotments made to date are as follows:

Number of shares per employee Date allotted

73 23 December 199775 5 January 2000100 8 December 2000100 20 January 200395 17 December 200391 21 December 2004

During the financial year ended 30 June 2007 no fully paid ordinary shares in Crane Group Limited were issued under the GESP.

The shares are registered in the name of each participant and held by an administration company subject to the plan rules. The shares must normally be held in the plan for at least three years but can be withdrawn upon earlier cessation of employment with Crane Group Limited or any of its subsidiary entities. There are no loans currently applicable under the GESP.

(d) General Employee Share Plan (New Zealand) – GESP(NZ)The GESP(NZ) was established in March 1998 to comply with the provisions of Section DF 7 of the New Zealand Income Tax Act and, as such, operates through a trust. GE Crane NZ Limited, a subsidiary of Crane Group Limited, is the trustee which administers the plan and holds shares for employee participants.

GESP(NZ) has been designed to operate in a manner which is as far as possible consistent with the provisions of the GESP in Australia. Full-time and permanent part-time employees resident in New Zealand and employed by Crane Distribution NZ Limited or Iplex Pipelines NZ Limited for a continuous 12 month period (or for an aggregate of 36 months non-continuously) may be eligible to participate in an issue under the GESP(NZ).

Shares issued are subject to a restrictive period of three years from the date of allotment, at the end of which period the shares are transferable to the participant. If the participant ceases to be employed by his/her employer or by any other employer in the Crane Group during the restrictive period due to normal retirement, accident, sickness, redundancy or death, then the shares may be transferred into the participant’s name or (in the case of death) into the name of the participant’s estate.

If the participant ceases employment for any other reason during the restrictive period, including resignation, the shares are forfeited to the trustee and the participant receives only the amount paid by him/her on application for their shares.

There are no loans currently applicable under the GESP(NZ).

During the financial year ended 30 June 2007 no fully paid ordinary shares in Crane Group Limited were issued under the GESP(NZ).

(e) Crane Group Limited Deferred Employee Share Plan (CDSP)Offers of shares under the CDSP may be made to consolidated entity executives (including executive directors, with shareholder approval where required, but excluding non-executive directors). The Board may determine to allocate shares to participants for no cash consideration. If so, participants will generally not become entitled to withdraw those shares from the CDSP unless minimum tenure requirements and performance criteria pre-determined by the Board have been met, subject to specified special circumstances or change of control provisions.

Shares to be acquired on behalf of participants under the CDSP are either purchased on market or issued by the Company. 2006/07 offers were purchased on market in the normal course of trading using funds contributed by the Company and were registered in the name of the CDSP trustee, to be held by the trustee pending satisfaction of the conditions established under the offers.

Participants in the CDSP have the right to receive dividends and franking credits associated with their CDSP shares, but, until the tenure requirements and performance criteria have been satisfied, participants’ (other than the executive directors) gross salary is reduced by the amount of the dividend (including any franking credits).

In the event of special circumstances (including death or permanent incapacity) a proportion of shares will vest based on tenure since allocation. A minimum of 50% of the shares will vest upon death. In the event of a change in the control of the Company, all shares held will vest.


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Note 27: Contingent liabilities and assets The estimated maximum amounts of contingent liabilities not provided for in the financial statements as at 30 June 2007 are set out below. The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

Contingent liabilities – unsecuredGuarantee given by Crane Group Limited for bank loans and overdraft facilities of controlled entities – – 82,794 69,201

Under the terms of a Deed of Cross Guarantee, described in note 28, the Company has guaranteed any deficiency which might arise if any company subject to the Deed of Cross Guarantee is wound up. No deficiency in net assets exists in these companies at 30 June 2007.

In the ordinary course of business, the Group is involved in various claims and legal proceedings. Where appropriate, Crane takes legal advice. A liability has been recognised for any known losses expected to be incurred where such losses are capable of reliable measurement. The Group does not consider that the outcome of any claims of legal proceedings not provided for in the financial statements is likely to have a material effect on its operations or financial position.

A guarantee has been provided to a customer of Crane Aluminium pursuant to the sale of Crane Aluminium to Capral Limited whereby Crane agrees to compensate the customer up to a maximum of $4 million for losses incurred in the event Capral is unable to meet its supply obligations to the customer in certain circumstances before 30 June 2008. Based on current information available, the Group is not aware of any event or circumstances that would result in Capral being unable to meet its supply obligations.

During the year the consolidated entity provided two bank guarantees totalling $12.5 million in relation to a construction agreement made between an external customer and its 50% owned joint venture entity.

The guarantees become payable should any default event occur under the agreement. The guarantees expire at various key milestones throughout the project. Based on present estimates, the guarantees will remain until:

– 30 June 2008 for the $10 million guarantee; and

– 30 June 2010 for the $2.5 million guarantee.

If for any reason, $5 million or more of the initial two bank guarantees are utilised in accordance with the agreement, the consolidated entity has agreed to provide an additional bank guarantee of $5 million.

A separate agreement has been entered with the 50% joint venture partner such that any product related contract failure causing the guarantee to become payable is the responsibility of the consolidated entity, whereas any construction contract related failure causing the guarantees to become payable is the responsibility of the joint venture partner.

Note 28: Deed of Cross GuaranteePursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, relief was granted to the wholly owned subsidiaries listed below from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and directors’ reports.

It is a condition of the Class Order that the Company and each of these subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of the winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.

The subsidiaries subject to the Deed are:– Austral Bronze Crane Copper Limited – Crane Enfield Metals Pty Limited– Crane Distribution Limited– GE Crane Investments Pty Limited– Iplex Pipelines Australia Pty Limited and its subsidiaries noted in note 29 (Iplex joined during 2006)

A consolidated income statement and consolidated balance sheet position, comprising the Company and subsidiaries which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30 June 2007 and 2006 are set out on the following page.

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Consolidated 2007 2006 $000 $000

Note 28: Deed of Cross Guarantee (continued)Income statementProfit / (loss) before income tax 33,347 81,962 Income tax expense (13,789) (18,737)

Net profit / (loss) after income tax 19,558 63,225 Minority interests for the period – (4,257)

Net profit / (loss) after minority interests 19,558 58,968 Retained earnings at beginning of financial year 106,880 62,745 Share based payments adjustment to retained earnings (108) (107)Dividends paid (37,478) (35,160)Net transfer of subsidiaries from / to the Deed of Cross Guarantee – 20,434

Retained earnings at end of financial year 88,852 106,880

Balance sheetCash and cash equivalents 37,857 42,524 Receivables 240,909 237,481 Inventories 215,635 183,185 Prepayments 5,557 4,361 Property held for sale – 5,106

Total current assets 499,958 472,657

Receivables 28,282 28,630 Investments 67,443 79,313 Property, plant and equipment 111,308 114,625 Intangible assets 151,470 154,370 Deferred tax assets 26,345 22,285

Total non-current assets 384,848 399,223

Total assets 884,806 871,880

Payables 214,596 218,499 Loans and borrowings 2,380 3,067 Current tax liabilities 22,587 13,168 Employee benefits 31,973 28,007 Provisions 21,642 19,035

Total current liabilities 293,178 281,776

Loans and borrowings 126,376 128,907 Deferred tax liabilities – – Employee benefits 15,365 10,860 Provisions 5,631 5,425

Total non-current liabilities 147,372 145,192

Total liabilities 440,550 426,968

Net assets 444,256 444,912

Issued capital 354,311 335,469 Reserves 1,093 2,563 Retained earnings 88,852 106,880

Total equity 444,256 444,912


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Interest Place of 2007 2006 Note incorporation % %

Note 29: Particulars relating to subsidiaries Details of subsidiaries are reflected below: Crane Group Limited ACT – –

Subsidiaries Austral Bronze Crane Copper Limited (a) ACT 100 100 Consolidated Extrusions Management Pty Limited NSW 66.7 66.7 Consolidated Extrusions Pty Limited NSW 66.7 66.7 Wright & Co Pty Limited (e) NSW – 100Cloudgard No.96 Pty Limited (b) NSW 100 100Crane Employee Services Pty Limited (b) NSW 100 –Crane Enfield Metals Pty Limited (a) ACT 100 100Crane Distribution Limited (a), (c) NSW 100 100 GE Crane Superannuation Pty Limited (b) NSW 100 100 GE Crane Superannuation No. 2 Pty Limited (b) NSW 100 100GE Crane Investments Pty Limited (a) NSW 100 100 GE Crane NZ Limited (c), (d) NZ 100 100 GE Crane NZ Holdings Limited (d) NZ 100 100 Iplex Pipelines NZ Limited (d) NZ 100 100 Crane Distribution NZ Limited (d) NZ 100 100 Crane Distribution Properties Limited (d) NZ 100 100 Extruded Metals New Zealand Limited (d) NZ 66.7 66.7GE Crane Securities Pty Limited (b) NSW 100 100Iplex Pipelines Australia Pty Limited (a) NSW 100 100 Iplex Properties Pty Limited (b) NSW 100 100 Crevet Limited (a) QLD 100 100Crevet Pipelines Pty Limited (a) QLD 100 100 Northern Iron & Brass Foundry Pty Limited (a) QLD 100 100 Associated Water Equipment Pty Limited (b) QLD 100 100 AWE Unit Trust QLD 100 100 Charmac Industries Pty Limited (b) QLD 100 100 Thor Plastics Pty Limited (b) QLD 100 100Milnes Holdings Limited (a) NSW 100 100 Milnes-Gatic Pty Limited (b) NSW 100 100 Gatic Pty Limited (a) VIC 100 100 Icon Industries (WA) Pty Limited (e) WA – 100 Key Plastics Pty Limited (a) NSW 100 100 Icon Industries National Administration Pty Limited (b) NSW 100 100 Key Plastics Distribution Pty Limited (b) QLD 100 100

(a) Each of these companies has entered into a Deed of Cross Guarantee with Crane Group Limited in respect of relief granted from specified accounting and financial reporting requirements in accordance with a Class Order (refer note 28).

(b) Australian companies, which are small proprietary companies as defined by the Corporations Act 2001 and are not required to be audited for statutory purposes.

(c) Refers to ordinary and preference shares.

(d) Carries or carried on business in New Zealand.

(e) These companies were liquidated during 2007.

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Consolidated Interest Investment carrying amount Dividends received 2007 2006 2007 2006 2007 2006 % % $000 $000 $000 $000

Note 30: Investment in associated companies Mitchell Water (Vic) Pty Ltd (Pipeline construction) 50.0 – 60 – – –Iplex Asia Pte Limited (Plastic pipelines and fittings) 50.0 50.0 – – – –

60 – – –

Iplex Asia Pte Limited is a dormant company.

Mitchell Water (Vic) Pty Ltd was registered on 3 July 2006. A summary of financial information for Mitchell Water (Vic) Pty Ltd, not adjusted for the percentage ownership held by the Group, is detailed below:

2007 $000

Revenues 60,317 Expenses (60,197)

Profit before income tax 120 Income tax expense (36)

Net profit 84

Total current assets 20,844 Total non-current assets –

Total assets 20,844

Total current liabilities 20,760 Total non-current liabilities –

Total liabilities 20,760

Net assets 84


Note 31: CommitmentsFinance leasesFinance lease commitments payable: not later than one year 2,533 3,415 1,692 2,292 later than one year but not later than five years 483 2,501 288 1,465

3,016 5,916 1,980 3,757 Less: future finance charges 159 479 101 310

Lease liabilities provided in the financial statements 2,857 5,437 1,879 3,447

The consolidated entity leases plant and equipment under finance leases expiring from one to five years. At the end of the lease term, the consolidated entity has the option to purchase the equipment at a price deemed to be a bargain purchase option.


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Note 31: Commitments (continued)Capital expenditure commitments Plant and equipment purchases not later than one year 7,563 6,505 641 420

Operating leasesFuture operating lease rentals of property, plant and equipment not provided for in the financial statements, and due: not later than one year 50,473 42,098 1,251 1,270 later than one year but not later than five years 97,361 71,259 3,599 1,818 later than five years 12,531 7,051 – –

160,365 120,408 4,850 3,088

The nature of operating leases are: Property 129,679 96,965 4,065 1,955 Plant and equipment 30,686 23,443 785 1,133

160,365 120,408 4,850 3,088

The consolidated entity’s leases under operating leases expire from two to seven years. Leases generally provide the consolidated entity with a right to renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria.

Note 32: Notes to the statements of cash flows(i) Reconciliation of cashFor the purposes of the statements of cash flows, cash includes cash on hand and at bank and deposits at call, net of outstanding bank overdrafts and short-term borrowings. Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the balance sheets as follows:

Cash and cash equivalents 11 51,394 52,977 8,247 7,092 Bank overdraft 19 – – (261) (1,875)

51,394 52,977 7,986 5,217

(ii) Reconciliation of profit / (loss) after income tax to net cash provided by operating activitiesNet profit / (loss) after income tax but before minority interests 47,777 80,281 40,308 23,909 Adjustments for: (Profit) / loss on sale of non-current assets 784 (127) 872 8 Net / (gain) loss on sale / closure of discontinued operations before tax (6,624) (45,422) – 2,300 Depreciation and amortisation 33,311 35,891 3,750 2,851 Write down of non-current assets 13,961 2,393 – – Defined benefit plan asset (increase) (757) (525) (757) (525) Equity accounted profit (60) – – – Employee share plan expense 2,008 1,610 1,681 1,024 Finance lease interest 358 617 248 433 Other non-cash interest 981 (174) 278 159 Income tax expense 23,073 29,883 449 979

Net cash provided by operating activities before change in assets and liabilities 114,812 104,427 46,829 31,138

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Note 32: Notes to the statements of cash flows (continued)Change in assets and liabilities: Decrease / (increase) in inventories (39,913) (13,521) – – Decrease / (increase) in prepayments (689) (454) (1,956) 506 Decrease / (increase) in trade / term debtors 2,520 897 (1,035) 5,157 Increase / (decrease) in trade and other creditors 16,393 19,398 (3,156) 8,606 Increase / (decrease) in employee entitlements 11,216 (8,532) 645 727 Increase / (decrease) in other provisions (8,118) 2,174 (747) 3,508 Income tax paid (19,727) (24,897) (5,751) (176)

Net cash provided by operating activities 76,494 79,492 34,829 49,466

(iii) Non-cash financing and investment activities The dividend reinvestment plan resulted in the allocation of 1,527,921 (2006: 1,715,361) ordinary shares. These transactions are not reflected in the statements of cash flows.

(iv) Acquisition and disposal of minority interests / businesses Minority interest/net Interest Cost of tangible assets acquired acquisition acquired/sold Date acquired/sold /sold $000 $000

2007During the year the consolidated entity acquired the businesses of:– Hydro-tech Sanitar 1 November 2006 100% 6,145 1,225– Plumbing stores by Tradelink Various 100% 8,543 2,809

14,688 4,034Cost adjustments relating to acquisitions in previous years (1,182) –

13,506 4,034

2006During the year the consolidated entity acquired the minority interest held by Wavin Alpha IV BV and Wavin Alpha V BV in Iplex Pipelines Australia Pty Ltd and Iplex Pipelines NZ Ltd 28 March 2006 25% 112,930 37,356

During the year the consolidated entity sold the business and assets of: Aluminium businesses comprising Crane Aluminium Extrusions, Crane Aluminium Systems and Smart Aluminium 31 October 2005 100% 126,675 42,046


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Consolidated 2007 2006 $000 $000

Note 32: Notes to the statements of cash flows (continued)(iv) Acquisition and disposal of minority interests / businesses (continued)

Details of acquisitions of minority interests / businesses in aggregate are as follows: Cash consideration paid: Purchase consideration 13,635 104,500 Costs related to the acquisitions 388 722

Cash outflow 14,023 105,222 Deferred consideration 778 4,208 Non-cash costs related to the acquisition (1,295) 3,500

Total cost of acquisition 13,506 112,930

Fair value of net assets acquired: Property, plant and equipment 306 – Inventories 4,164 – Other assets 402 – Employee entitlements (116) – Other liabilities (722) –

4,034 –

Minority interest – 37,356

Goodwill arising on acquisition 9,472 75,574

Details of disposals in aggregate are as follows: Cash consideration received: Disposal consideration – 124,410 Cash received from property sale – 2,265

Cash inflow – 126,675 Costs related to the disposal (including transactional costs) – (12,661)Net assets disposed – (64,537)

Profit on disposal before tax – 49,477

Net assets disposed: Property, plant and equipment – 18,059 Inventories – 27,129 Deferred tax assets – 1,552 Intangible assets – 22,491 Other assets – 556 Employee entitlements – (4,452) Other liabilities – (798)

– 64,537

Deferred receipt on sale of business from prior period 759 600

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Note 33: Related party disclosuresIdentity of related partiesThe following persons and entities are regarded as related parties:

(a) Subsidiaries – the names of subsidiaries are listed in note 29.

(b) Joint venture operation – Consolidated Extrusions Management Pty Limited was the manager of a joint venture operation between Austral Bronze Crane Copper Limited, a subsidiary, and Sims Group Limited. The joint venture operation’s principal activity was the semi-fabrication of copper and brass extruded products. Austral Bronze Crane Copper Limited has a two-thirds interest in the joint venture operation. The Board of Consolidated Extrusions announced the closure of its operations on 21 July 2005. Operations ceased on 31 December 2005.

(c) Associates and joint venture entities – the names of associates and joint venture entities are listed in note 30.

(d) Directors and senior executives of the Company.

The following were directors or senior executives (key management personnel) of the consolidated entity during the year and, unless otherwise indicated, were so for the entire year:

Non-executive directors Senior executivesLE Tutt WJA Wood (EGM Iplex)JB Harkness IC Timmins (EGM Tradelink)CR Stubbs KDM Smith (EGM CDNZ)RD Fraser K Kellow (GM Sales & Marketing, Iplex) SP Robertson (EGM Metals Distribution) Executive directors J Madigan (Chief Information Officer) GL Sedgwick (Managing Director) RH Parker (EGM Human Resources) MI Fitzgerald (Finance Director) PJ Davidson (GM Copper Tube)

There has been no change in directors and senior executives after year end and prior to the date of this report.

Related parties include directors and senior executives, directors’ and senior executives’ spouses, domestic partners, children, dependants, relatives, siblings and other director / executive related entities.

In determining the disclosures noted below, directors and senior executives have made appropriate enquiries to their best ability and the information presented reflects their knowledge.

Directors’ and senior executives’ compensation Directors’ and senior executives’ compensation is as follows:

Consolidated The Company 2007 2006 2007 2006 $ $ $ $

Short-term 8,139,805 7,641,628 475,533 7,056,985Post employment 798,813 307,137 189,753 279,433Long-term – share incentive 1,585,113 1,002,452 – 945,183Long-term – cash incentive 485,356 – – –Termination 195,000 1,008,491 – 1,008,491LSL expense 43,318 28,588 – 27,346

11,247,405 9,988,296 665,286 9,317,438

All executive directors and senior executives of the consolidated entity (with the exception of KDM Smith) were employed by Crane Employment Services Pty Ltd in 2007. In 2006 they were employed (with the exception of KDM Smith) by the Company.

Individual director and senior executive compensation disclosuresDetails of the remuneration of individual directors and senior executives are set out in the remuneration report section of the report of the directors on pages 31 to 39.

LoansThere were no loans outstanding at or during the years ended 30 June 2007 and 2006 to directors and senior executives or their related parties.

Other transactionsApart from the details disclosed in this note, note 26 and the remuneration report, no director or senior executive or their related parties has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts existing at year end which did not occur within a normal customer relationship on terms and conditions no more favourable than those available on similar transactions with other employees or customers.


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Note 33: Related party disclosures (continued)SharesThe movement during the reporting period in the number of ordinary shares of Crane Group Limited held directly, indirectly or beneficially, by each director and senior executive including related parties for the respective periods of their office during the year is as follows:

Granted / acquired as compensation Held at 1 July Purchased under CDSP Sold / vested Held at 30 June

Owned sharesDirectorsLE Tutt 2007 51,519 2,501 – – 54,020 2006 48,615 2,904 – – 51,519JB Harkness 2007 2,199 106 – – 2,305 2006 2,075 124 – – 2,199CR Stubbs 2007 2,000 – – – 2,000 2006 2,000 – – – 2,000RD Fraser 2007 2,199 1,636 – – 3,835 2006 2,075 124 – – 2,199GL Sedgwick 2007 10,623 18,394 50,000 – 79,017 2006 10,000 623 – – 10,623Senior executivesJ Madigan 2007 – – – – – 2006 3,100 – – (3,100) –RH Parker 2007 1,140 – – – 1,140 2006 1,140 – – – 1,140

Equity compensation shares DirectorsGL Sedgwick 2007 250,000 – 70,000 (50,000) 270,000 2006 140,000 – 110,000 – 250,000MI Fitzgerald 2007 95,000 – 35,000 – 130,000 2006 65,000 – 30,000 – 95,000Senior executivesWJA Wood 2007 50,000 – 5,000 – 55,000 2006 32,000 – 18,000 – 50,000IC Timmins 2007 34,000 – 5,000 – 39,000 2006 17,000 – 17,000 – 34,000KDM Smith * 2007 95 – – – 95 2006 95 – – – 95K Kellow* 2007 20,095 – 5,000 – 25,095 2006 10,095 – 10,000 – 20,095SP Robertson 2007 20,000 – 10,000 – 30,000 2006 10,000 – 10,000 – 20,000J Madigan 2007 32,000 – 5,000 – 37,000 2006 20,000 – 12,000 – 32,000PJ Davidson 2007 – – 5,000 – 5,000 2006 – – – – –MW Fraser** 2007 – – – – – 2006 32,095 – – (32,095) –

* Comprises/includes 95 shares issued under the Crane General Employees Share Plan.

** Retired on 16 December 2005. CDSP shares vested.

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Note 33: Related party disclosures (continued)Shares allocated and held under the Crane Deferred Employee Share Plan are held by the trustee until vesting conditions are met in accordance with the Crane Deferred Employee Share Plan. Shares held at 30 June 2007 and 30 June 2006 under the CDSP were unvested.

During the year and at balance date, directors and senior executives of the Company held no options in unissued shares in Crane Group Limited issued pursuant to the Crane Executive Share Option Plan.

Other related party transactionsTransactions between the Company and subsidiaries and between subsidiaries have been eliminated in the consolidated financial statements.

The aggregate amounts of transactions between the Company and subsidiaries and between controlled entities are in the respective classification categories in the financial statements. The nature, terms and conditions of each different type of transaction are as follows:

(i) Inter-entity loansLoans between the Company and subsidiaries are unsecured, attract interest at commercial rates (refer note 14).

(ii) Management and administration servicesThe Company provides management and administration services to certain subsidiaries. The fees for these services are charged at normal commercial rates and included in other revenues (refer note 3).

(iii) Raw materials and finished goodsTransactions comprising the purchase and sale of raw materials and finished goods are made in the ordinary course of business with payment on normal commercial terms and conditions.

(iv) Tax lossesUnder the tax funding agreement, members of the tax consolidated group make tax contributions to the Company. The contributions are calculated on a stand-alone basis such that entities with losses previously booked are compensated at values pursuant to the terms of the tax funding agreement.

(v) Dividends The Company receives dividends from other companies within the consolidated entity (refer note 3).

Note 34: Subsequent eventsSubsequent to year end Iplex Pipelines Australia Pty Limited, a 100% owned subsidiary of Crane Group Limited, entered into an agreement to acquire 100% of the shares in Kingston Bridge Engineering Pty Ltd (KBE), a leading plastic polyethylene pipe and fittings manufacturer based in Western Australia. ACCC clearance, the final condition precedent required for the acquisition to proceed, was received on 10 August 2007. Consequently the completion date for the acquisition is expected to be 31 August 2007.

The final cost of the acquisition and the fair value of assets and liabilities acquired cannot be fully quantified due to the completion date being after the date this report was approved for issue. However, based on preliminary information available, the estimated price of the acquisition is approximately $100 million and the initial estimate of the value of net tangible assets to be acquired approximates $45 million.

Crane Group Limited raised $60 million of ordinary capital through an institutional placement completed on 10 July 2007 to partly fund the acquisition. All shares issued under the placement will rank equally with the existing ordinary shares and will be entitled to the final dividend declared for the 2007 financial year.

The financial effects of the above post balance date transactions have not been brought to account in the financial statements for the year ended 30 June 2007.

Directors’ declaration For the year ended 30 June 2007

Crane Group Limited

84

1 In the opinion of the directors of Crane Group Limited:

(a) the financial statements and notes, set out on pages 40 to 83, and the remuneration disclosures that are contained in pages 31 to 39 of the remuneration report in the report of the directors are in accordance with the Corporations Act 2001, and:

(i) give a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2007 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date; and

(ii) comply with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1;

(c) the remuneration disclosures that are contained in pages 31 to 39 of the remuneration report in the report of the directors comply with Australian Accounting Standard AASB 124 Related Party Disclosures; and

(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2 There are reasonable grounds to believe that the Company and the subsidiaries identified in note 29 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those subsidiaries pursuant to ASIC Class Order 98/1418.

3 The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Managing Director and the Finance Director for the financial year ended 30 June 2007.

Signed in accordance with a resolution of the directors.

LE Tutt GL Sedgwick Chairman Managing Director


Independent auditor’s report For the year ended 30 June 2007

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Report on the financial report and AASB 124 remuneration disclosures contained in the report of the directorsWe have audited the accompanying financial report of Crane Group Limited (“the Company”) which comprises the balance sheets as at 30 June 2007, and the income statements, statements of changes in equity, and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 34 and the directors’ declaration comprising both the Company and the entities it controlled at the years’ end or from time to time during the financial year.

As permitted by the Corporations Regulations 2001, the Company has disclosed information about the remuneration of directors and executives (“remuneration disclosures”), required by Australian Standard AASB 124 Related Party Disclosures, under the heading “Remuneration report” in the report of the directors and not in the financial report. We have audited these remuneration disclosures.

Directors’ responsibility for the financial report and the AASB 124 remuneration disclosures contained in the report of the directorsThe directors of Crane Group Limited are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

In note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the Consolidated Entity, comprising the financial statements and notes, complies with International Financial Reporting Standards. The financial report of the Company does not comply with International Financial Reporting Standards due to the election made to apply the relief provided to parent entities by AASB 132 Financial Instruments: Presentation and Disclosure in respect of certain disclosure requirements.

The directors of Crane Group Limited are also responsible for the remuneration disclosures contained in the report of the directors.

Auditor’s responsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Our responsibility is also to express an opinion on the remuneration disclosures contained in the report of the directors based on our audit.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report and the remuneration disclosures contained in the report of the directors. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report and the remuneration disclosures contained in the report of the directors, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report and the remuneration disclosures contained in the report of the directors in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration disclosures contained in the report of the directors.

We performed the procedures to assess whether in all material respects the financial report presents fairly in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent with our understanding of the Company’s and the Group’s financial position and of their performance and whether the remuneration disclosures comply with Australian Accounting Standard AASB 124.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s opinion on the financial reportIn our opinion:(1) the financial report of Crane Group Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2007 and of their performance for the year ended on that

date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

(2) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.

Auditor’s opinion on AASB 124 remuneration disclosures contained in the report of the directorsIn our opinion the remuneration disclosures that are contained in the remuneration report section in the report of the directors comply with Australian Accounting Standard AASB 124 Related Party Disclosures.

KPMG

KA Leighton Partner


Crane Group Limited

Lead auditor’s independence declaration For the year ended 30 June 2007

Crane Group Limited

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To the directors of Crane Group Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the year ended 30 June 2007 there have been:

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

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

KPMG

KA Leighton Partner


1. Distribution of shareholding as at 29 August 2007 Number of shareholdersNumber of shares held Ordinary shares Preference shares

1 – 1,000 7,148 –1,001 – 5,000 3,206 –5,001 – 10,000 444 –10,001 – 100,000 241 1100,001 – and over 45 2

Totals 11,084 3

2. Voting rightsOrdinary shareholders are entitled to one vote for each member on a show of hands and one vote for each share on a poll. Preference shareholders have the same voting rights as ordinary shareholders when the preference share dividends are in arrears for more than six months.

3. Substantial shareholdersThe Register of Substantial Shareholders disclosed the following relevant interests as at 29 August 2007.

Perpetual Trustees Australia Ltd 6,953,365Barclays Global Investors Australia Limited 3,852,912AMP Limited 4,061,308DFA Australia Limited 3,728,695AXA Asia Pacific Holdings Limited 3,810,506

Under the provisions of the Corporations Act, a shareholder and his or her associates may be deemed to have a relevant interest in shares in which the holder has no beneficial interest. As more than one shareholder may be deemed to have a relevant interest in the same shares, the above figures should not be aggregated.

4. Twenty largest holders of ordinary shares as at 29 August 2007 Number of shares % of total shares

J P Morgan Nominees Australia Limited 7,887,010 12.10HSBC Custody Nominees (Australia) Limited 5,361,767 8.22National Nominees Limited 5,242,053 8.04Citicorp Nominees Pty Limited 4,929,863 7.56RBC Dexia Investor Services Australia Nominees Pty Limited <Pipooled A/C> 4,028,967 6.18ANZ Nominees Limited <Cash Income A/C> 2,341,528 3.59AMP Life Limited 1,632,066 2.50Cogent Nominees Pty Limited 1,557,336 2.39ANZ Nominees Limited <Income Reinvest Plan A/C> 1,351,541 2.07RBC Dexia Investor Services Australia Nominees Pty Limited <PIIC A/C> 1,143,657 1.75Queensland Investment Corporation 778,982 1.19CPU Share Plans Pty Ltd <CRG DSP Control A/C> 755,000 1.16Cogent Nominees Pty Limited <SMP Accounts> 646,428 0.99UBS Nominees Pty Ltd 596,762 0.92Citicorp Nominees Pty Limited <CFSIL CWLTH AUST SHS 4 A/C> 573,608 0.88Argo Investments Limited 570,364 0.87Milton Corporation Limited 562,089 0.86HSBC Custody Nominees (Australia) Limited A/C 2 393,240 0.60PMC Investments Pty Ltd 310,365 0.48Citicorp Nominees Pty Limited <CFSIL CWLTH SML COS 3 A/C> 299,641 0.46

5. Preference shareholders as at 29 August 2007 Number of shares % of total shares

AMP General Insurance Limited 200,000 50.0NRMA Life Limited 160,000 40.0Mrs M Elkington 40,000 10.0

Totals 400,000 100.00

Shareholder information For the year ended 30 June 2007

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Crane Group Limited

Registered OfficeLevel 14, Fujitsu House 15 Blue Street North Sydney NSW 2060 Telephone (02) 8923 3000 Facsimile (02) 9954 5544 www.crane.com.au

AuditorsKPMG 10 Shelley Street Sydney NSW 2000

SolicitorsBlake Dawson Waldron

BankersAustralia and New Zealand Banking Group Limited Westpac Banking Corporation National Australia Bank Limited

Stock Exchange ListingListed on the Australian Stock Exchange (Code CRG)

Principal Share RegistryComputershare Investor Services Pty Ltd GPO Box 2975 Melbourne Victoria 3001 Australia Enquiries (within Australia) 1300 855 080 (outside Australia) 61 3 9415 5000 Facsimile 61 3 9473 2500 [email protected] www.computershare.com.au

Visit the Crane Group web site for the latest Company and shareholder information

www.crane.com.au


Crane Group Limited

88

DirectoryCrane Group Limited

Notice of MeetingThe annual general meeting of the Company will be held at the Four Seasons Hotel, 199 George Street, Sydney on Friday 26 October 2007 at 11.00 am. Further information regarding the meeting is contained in the separate notice of meeting and proxy form issued to shareholders with this report.

ContentsCase study: Wimmera Mallee Pipeline Project 2Case study: MICO Design Centre 4Financial highlights 6Chairman’s overview 7Managing Director’s review 8The Board of Directors 12Executive Management Team 13Iplex 14Tradelink 16CDNZ 18Metals Distribution 20Crane Copper Tube 22Safety 23Environment 24Corporate Governance 25Six year historical performance 28Annual financial report 29Shareholder information 87Corporate directory 88

Crane Group is a major distributor of plumbing, electrical and metal products in Australasia and a leading manufacturer and distributor of plastic and metal pipeline systems.

Iplex Tradelink CDNZMetals

DistributionCrane Copper

Tube

Iplex Pipelines is Australasia’s largest producer of plastic pipe and fittings. It operates in Australia and New Zealand and supplies pipeline solutions to building products, civil/infrastructure, irrigation, and telecommunications customers.

Tradelink is a leading distributor of plumbing supplies and associated products with 198 branches across Australia. Its major market segments include the supply of plumbing solutions to retail, network and project based customers.

CDNZ is New Zealand’s leading trade-related wholesale merchant for plumbing, pipeline, electrical and safety products with 122 branches. It also offers inventory and facilities management services to industrial and utilities customers.

With 15 branches across Australasia, Austral Wright Metals and MICO Metals have a solid position in their major markets, primarily sourcing and distributing copper, copper alloy, aluminium and stainless steel products to a wide range of customers in the manufacturing industry.

Crane Copper Tube is a major supplier of copper tube in Australia and New Zealand. It has a manufacturing operation at Penrith NSW and also exports high quality plumbing tube to markets in the USA, Asia and the Middle East.

CraNe Group LIMITeD ABN 91 008 410 302

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07Crane GroupAnnual Report

Crane GroupAnnual Report 2007

www.crane.com.au

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