CRANE GROUP FULL YEAR RESULT (12 months to 30 June 2005)

Transcription

1 Crane Group Limited ABN Level 14, Philips House 15 Blue Street North Sydney NSW 2060 Postal address Locked Bag 2125 North Sydney NSW 2059 Australia 3 August 2005 Telephone Facsimile CRANE GROUP FULL YEAR RESULT (12 months to 30 June 2005) Internet Crane Group Limited today announced a net profit after tax for the year ended 30 June 2005 of $38.7 million. Net profit after tax before significant items for the period was $39.4 million up 9.8% on last year. Greg Sedgwick, Managing Director of Crane Group commented, This was a good result driven by solid performances from CDNZ, Iplex and Tradelink. I am particularly pleased with the 23% improvement in operating cash flow and the 45% reduction in workplace injuries during the year. We are now seeing benefits from the recent restructuring changes, an improvement in control from our integrated IT system and strong performance focus in our management team, Mr Sedgwick said. The Board declared a final dividend of 30 cents per share, fully franked. The total dividend for the full year is 60 cents per share, fully franked, unchanged from last year. The Record Date for the final dividend will be 26 August, 2005 and the dividend is payable on 3 October, Financial highlights of the FY05 results are: Sales revenue up 4.1% to $2.2 billion; Earnings before interest, tax, goodwill amortisation and significant items (EBITA) up $9.4 million to $108.1 million despite increased IT costs and substantially higher raw material costs; Net profit after tax before significant items of $39.4 million; Significant improvement in working capital; Strong cash flows from all businesses; Net debt reduced since 30 June 2004 by $73 million to $230 million; and Fully franked final dividend of 30 cents per share, a total of 60 cents for the year

2 2 Financial Overview Tradelink, CDNZ and Iplex delivered improved earnings driving an increase in EBITA to $108.1 million. The 9.5% improvement in EBITA was achieved despite an increase of $9.9 million in ITrelated costs and significant pressure on margins and volumes within the Group's Metals division. As a result of a group-wide focus on working capital management, inventory levels and trade debtors were down compared to the same time last year. Group working capital was $350 million at 30 June 2005, down $23 million from Net operating cash flow for the period remained strong at $119 million. Net debt at 30 June 2005 was down to $230 million from $303 million 12 months ago. Debt has been significantly reduced in the last 18 months with gearing, measured as net debt to net debt plus equity, standing at 33% as at 30 June Results by Division (For the 12 months to 30 June) Segment Revenue Segment EBITA 2005 $million 2004 $million 2005 $million 2004 $million Tradelink CDNZ Iplex Metals Intercompany Eliminations and (127) (135) (15.2) (16.7) Unallocated Items Total 2,185 2, Tradelink Tradelink s operations comprise 189 plumbing supplies outlets located across Australia. Whilst revenue from Tradelink s operations was down slightly on the same period last year, EBITA increased 18% to $16.6 million for the 12 months to 30 June Restructuring changes delivered better cost control, improved store management and more transparent pricing decision making throughout the division during the year. In addition to market share, the ongoing focus for Tradelink is continued improvement in the management of expenses to sales, specifically through the simplification of business processes and improvements in supply chain efficiencies. CDNZ CDNZ is New Zealand s leading plumbing and electrical supplier comprising the Mico Plumbing & Pipelines, MasterTrade and Corys brands. Good market conditions resulted in an increase of 9.8% in CDNZ sales compared to the same time last year. Recent restructuring activities have resulted in more efficient operations and contributed to a 47% increase in EBITA over the previous 12 months. Strong management and excellent product and brand execution underpin the ongoing performance of CDNZ. The focus for this division is on continuing product rationalisation, improved distribution practices and improved presence in the commercial construction segment.

3 3 Iplex Iplex is the leading supplier of plastic pipeline systems in Australasia servicing the building, rural, mining and telecommunication industries. It is 75% owned by Crane Group. Sales revenue within Iplex was up 4% to $559 million and EBITA was up 14% to $59.8 million compared with the same period last year. Price increases introduced during the first half of the year offset continuing high PVC prices over the period. Improvements were made in extracting supply chain efficiencies throughout the division and excellent working capital management resulted in strong cash flow for the period. An ongoing focus within Iplex is the continued growth in non-residential revenues, specifically the irrigation and civil markets, as well as the further rollout of new products. Metals Group The Metals division comprises metals distribution businesses (Austral Wright Metals and Mico Metals), aluminium manufacturing and distribution businesses (Crane Aluminium Extrusions, Crane Aluminium Systems and Smart Aluminium) and copper and brass manufacturing businesses (Crane Copper Tube and Conex). Overall, Metals division sales were up 7% on the same period last year to $569 million, primarily due to higher metal prices during the period. EBITA was down 25% to $26.2 million, partly as a result of continuing market contraction and increases in raw material prices within the division s manufacturing businesses. The metals distribution businesses performed well, contributing EBITA of $9.0 million, an increase of 125% over last year. This reflects relatively good customer demand and improvements from recent restructuring changes in Austral Wright Metals and Mico Metals. During the year, external parties expressed interest in acquiring Austral Wright Metals and Mico Metals. Crane Group formed the view that the likely transaction price did not reflect the value inherent in these two businesses and discussions were terminated. The aluminium businesses delivered an EBITA of $13.8 million, down 29% on the same period last year. Crane Aluminium Extrusions was negatively impacted by slowing demand and competitive pressures. Crane Aluminium Systems had a disappointing year, the result of a downturn in residential activity, particularly in NSW. Smart Aluminium had a strong year, the result of good demand from the industrial sector and growth from new store openings and an acquisition. The copper and brass manufacturing businesses were adversely impacted by higher metal prices, lower volumes and increasing pressure from imports. EBITA for these businesses was $3.2 million, down 70% on the same period last year. Crane announced on 21 July 2005 that Conex would close by December Overall, Metals will continue to be "managed for value" with a strong focus on return on capital, improved efficiencies and productivity.

4 Safety 4 Crane Group places a strong emphasis on improving safety standards across the Group. Compared to last year, the Group s overall safety performance improved with Lost Time Injuries decreasing by 45%. Further ongoing improvements in safety are targeted across all of the Crane Group operating divisions. Outlook The ongoing focus for Crane Group remains on improving operating efficiencies, effective product and brand management and efficient capital allocation in order to drive margins and return on investment within each of the underlying businesses. With regard to the external environment, raw material prices are expected to remain high during FY06. With approximately 75% of Group sales being building sector related, demand for Crane s products also remains largely dependent on the state of the building cycle in Australia and New Zealand. Crane Group initiatives for the coming year include an ongoing focus on superior product and brand management at CDNZ; new product introduction and improving manufacturing efficiency at Iplex; simplifying business processes and growing the network in key locations at Tradelink; and containing costs and improving margins in Metals. Crane Group s reported earnings for FY06 are expected to be higher due to the impact of the introduction of International Financial Reporting Standards (AIFRS). On a like for like basis however, assuming continued softening in the Australian domestic building sector, FY06 earnings are expected to be broadly in line with those of FY05. Financial Summary (For the 12 months to 30 June) % change Sales revenue ($m) Earnings before interest, tax, depreciation, amortisation and significant items (EBITDA ($m)) Profit from ordinary activities before interest, tax and significant items (EBIT ($m)) Net profit from ordinary activities after tax but before significant items and goodwill amortisation ($m) Net profit from ordinary activities after tax and before significant items ($m) Significant items after tax ($m) (0.7) (51.0) - Net profit after tax ($m) 38.7 (15.1) - Basic earnings per share (cents) 68.3 (27.8) - Total dividend per share (cents fully franked)

5 5 International Financial Reporting Standards We are transitioning our accounting policies and financial reporting from current Australian Standards to Australian equivalents of International Financial Reporting Standards (AIFRS). For the year ended 30 June 2005 net profit after tax under AIFRS is expected to be $10 million higher than under current Australian Accounting Standards due predominantly to adjustments relating to the absence of goodwill amortisation. Net tangible assets under AIFRS will be lower mainly due to the treatment of deferred expenditure and computer software as an intangible asset. The impact on retained earnings at 30 June 2005 is an increase of $49 million mainly relating to the transfer of the capital profits and asset revaluation reserves into retained earnings, offset in part by more robust impairment testing and the write-off of ERP related training costs specifically disallowed under AIFRS. Enquiries contact: Crane Group Greg Sedgwick Mark Fitzgerald Managing Director Finance Director Ph Ph Investor relations Troy Cairns Channel Financial Communication Ph Media Sue Cato Cato Counsel Ph

6 Crane Group Limited (ABN ) Appendix 4E Preliminary final report Financial year ended 30 June 2005 Results for announcement to the market 6 $A'000 Revenues from ordinary activities up 4.1% to 2,184,905 Profit (loss) from ordinary activities after tax attributable to members N/A 38,654 Net profit (loss) for the period attributable to members N/A 38,654 Dividends Amount per security Franked amount per security Final dividend 30.0 cents 30.0 cents (at 30%) Previous corresponding period - Final 30.0 cents 30.0 cents (at 30%) Record Date for determining entitlements to the dividend 26 August 2005

7 Crane Group Limited - Preliminary final report 7 Consolidated statement of financial performance for the year ended 30 June Note $A'000 $A'000 Revenue from ordinary activities 3 2,184,905 2,097,984 Expenses from ordinary activities, excluding borrowing costs 4 (2,085,712) (2,078,550) Borrowing costs 4 (27,893) (26,999) Share of net profits (losses) of associates 0 (55) Profit (loss) from ordinary activities before income tax 71,300 (7,620) Income tax expense relating to ordinary activities 24,767 1,568 Net profit (loss) from ordinary activities after income tax 46,533 (9,188) Net profit (loss) attributable to outside equity interests 7,879 5,953 Net profit (loss) for the period attributable to members of Crane Group Limited 38,654 (15,141) Increase in asset revaluation reserve Net exchange difference on translation of financial reports of foreign controlled entities 759 3,796 Total changes in equity other than those resulting from transactions with owners 39,413 (10,545) Earnings per security (EPS) Basic EPS (cents per share) (27.8) Diluted EPS (cents per share) (27.8)

8 Crane Group Limited - Preliminary final report 8 Consolidated statement of financial position as at 30 June Note $A'000 $A'000 Current assets Cash 9 65,613 42,633 Receivables 360, ,601 Inventories 286, ,176 Prepayments 8,018 9,061 Total current assets 720, ,471 Non-current assets Receivables 940 4,704 Investments 0 0 Property, plant and equipment (net) 233, ,463 Intangibles 131, ,902 Deferred tax assets 33,677 39,725 Deferred expenditure 8 43,044 48,048 Total non-current assets 442, ,842 Total assets 1,162,439 1,206,313 Current Liabilities Payables 332, ,692 Interest-bearing liabilities 3,378 30,974 Current tax liabilities 2, Provisions 41,758 57,011 Total current liabilities 379, ,295 Non-current liabilities Interest-bearing liabilities 292, ,241 Deferred tax liabilities 15,663 15,934 Provisions 14,234 10,536 Total non-current liabilities 321, ,711 Total liabilities 701, ,006 Net assets 460, ,307 Equity Contributed equity 323, ,278 Reserves 62,594 63,176 Retained profits 7 33,315 26,677 Equity attributable to Members of Crane Group Limited 419, ,131 Outside equity interests 41,078 41,176 Total equity 460, ,307 Preference capital included as part of equity attributable to Members of Crane Group Limited

9 Crane Group Limited - Preliminary final report 9 Consolidated statement of cash flows for the year ended 30 June 2005 Cash flows from operating activities Note $A'000 $A'000 Cash receipts in the course of operations 2,434,193 2,273,644 Cash payments in the course of operations (2,265,495) (2,128,878) Interest received Borrowing costs (27,893) (26,999) Income taxes paid (22,996) (21,976) 118,704 96,472 Cash flows from investing activities Payments for property, plant and equipment (30,191) (39,383) Acquisition of controlled entities and businesses (net of cash acquired) (2,761) (64,256) Proceeds from sale of businesses 1,906 2,700 Proceeds from sale of non-current assets 9,027 5,151 Deferred expenditure (1,625) (17,171) Other loan repayments 3,164 1,282 (20,480) (111,677) Cash flows from financing activities Proceeds from issues of shares 24,296 22,693 Capital contribution from outside equity interests 0 11,250 Proceeds from borrowings 70,756 80,000 Repayment of borrowings (128,965) (35,578) Dividends paid (33,357) (34,732) Dividends paid to outside equity interests (8,018) (5,753) (75,288) 37,880 Net increase (decrease) in cash held 22,936 22,675 Cash at the beginning of the financial year 42,633 19,678 Foreign currency movements on cash Cash at the end of the financial year 9 65,613 42,633

10 Crane Group Limited - Preliminary final report 10 Note 1: Dividends $A'000 $A'000 Dividends paid (fully franked at the 30% tax rate): Final 2004 dividend at 30 cents per ordinary share (2003: 30.0 cents) 16,502 15,852 Final 2004 dividend at 2.5 cents per preference share (2003: 2.5 cents) Special 2004 dividend at Nil cents per ordinary share (2003: 5.0 cents) 0 2,643 Interim 2005 dividend at 30 cents per ordinary share (2004: 30.0 cents) 16,835 16,217 Interim 2005 dividend at 2.5 cents per preference share (2004: 2.5 cents) Total 33,357 34,732 Subsequent events Since the end of the year, the directors declared the following dividends: Dividends declared (fully franked at the 30% tax rate): Final 2005 dividend at 30.0 cents per ordinary share 17,474 Final 2005 dividend at 2.5 cents per preference share 10 17,484 The financial effect of these dividends has not been brought to account in the consolidated entity financial statements for the year ended 30 June 2005 and will be recognised in subsequent financial reports. The dividend plan in operation is the Crane Group Limited Dividend Reinvestment Plan. The last date for receipt of election notices for the dividend plan is 26 August Date the dividend is payable 3 October 2005 Record Date to determine entitlements to the dividend (ie. on the basis of registrable transfers received by 5.00 pm if securities are not CHESS approved, or security holding balances established by 5.00 pm or such later time permitted by SCH Business Rules if securities are CHESS approved) 26 August 2005

11 Crane Group Limited - Preliminary final report 11 Note 2: SEGMENT Tradelink CDNZ Iplex Metals Inter-segment Segment Unallocated Total REPORTING transactions Totals items Business segments $A'000 $A'000 $A'000 $A'000 $A'000 $A'000 $A'000 $A' Segment revenue 718, , , ,638 (132,615) 2,184, ,184,905 Consolidated profit (loss) from ordinary activities before interest and tax (note (a)) 15,293 20,725 56,608 22, ,894 (16,847) 98,047 Segment assets 282, , , ,500 (45,353) 1,074,678 87,761 1,162,439 Segment liabilities 124,291 63, , ,916 (45,376) 403, , ,878 Capital expenditure 3,287 8,340 13,148 5, , ,191 Depreciation and amortisation expense 13,913 4,494 19,143 12, ,557 3,277 52,834 Share of net profits of associates Other non - cash expenses 6,572 6,154 9,408 5, ,085 2,154 30, Segment revenue 737, , , ,030 (135,979) 2,097, ,097,984 Consolidated profit from ordinary activities before interest and tax (note (b)) (9,599) 7,944 44,528 (4,794) 0 38,079 (19,738) 18,341 Segment assets 322, , , ,969 (47,959) 1,151,407 54,906 1,206,313 Segment liabilities 151,517 58, , ,493 (49,745) 432, , ,006 Capital expenditure 13,745 4,776 14,919 5, , ,383 Depreciation and amortisation expense 12,857 5,339 18,861 13, , ,377 Share of net profits of associates (55) 0 (55) 0 (55) Other non - cash expenses 17,460 8,190 7,756 11, ,738 4,818 49,556 Note (a) - includes significant item profits (losses) 710 (29) 427 (2,034) 0 (926) (357) (1,283) Note (b) - includes significant item profits (losses) (21,789) (5,529) (4,851) (36,783) 0 (68,952) (2,974) (71,926) The major products and services from which the segments derive revenue are: Segments Tradelink Crane Distribution NZ (CDNZ) Iplex Metals Products and services Distribution of plumbers' supplies in Australia Distribution of plumbers' and electricians' supplies in New Zealand Manufacture and/or distribution of: - plastic pipeline systems and supplies - cast and ductile iron pipe, fittings and valves Manufacture and distribution of: - copper tube and aluminium extrusions - copper alloy rod and bar extrusions - aluminium products and window components - 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 Unallocated items mainly comprise interest or dividend earning assets and revenue, borrowings and corporate assets, liabilities and expenses. Inter-segment pricing is determined on an arms-length basis. Geographic segments The consolidated entity operates predominantly in Australasia.

12 Crane Group Limited - Preliminary final report 12 Note 3: Revenue from ordinary activities $A'000 $A'000 Revenue from operating activities Sale of goods 2,168,040 2,087,686 Interest received from: Other parties Bad debts received Commission received Debtor accommodation fees Other revenues 5,163 2,776 2,175,878 2,092,833 Revenue from outside operating activities Gross proceeds from sale of property, plant and equipment 9,027 5,151 2,184,905 2,097,984 Note 4: Expenses, borrowing costs and significant items (a) Expenses from ordinary activities, excluding borrowing costs and before income tax expense comprises: Raw materials, consumables and finished goods used 1,598,720 1,504,857 Change in inventories of finished goods and work in progress 10,638 (11,497) Employee expenses Restructuring and redundancy costs 1,282 14,720 Salaries, wages and on costs 287, ,148 Depreciation and amortisation Property 5,251 5,596 Plant and equipment 33,435 32,096 Deferred expenditure 5,425 5,299 Goodwill 8,723 8,386 Total depreciation and amortisation 52,834 51,377 Write-down of non-current assets to recoverable amount (refer note (d) below) ,454 Written down value of property, plant and equipment sold 7,666 4,389 Operating lease rental expense 50,937 54,635 Foreign exchange losses 42 0 Other expenses from ordinary activities 75, ,467 2,085,712 2,078,550 (b) Borrowing costs paid or payable to other persons comprises: Interest Bank loans and overdraft 26,775 26,297 Finance leases Other ,893 26,999 (c) Other Cost of goods sold 1,754,276 1,657,156 Loss (gain) on sale of property, plant and equipment (1,361) (2,509) Net bad and doubtful debts expense including movement in provision for doubtful debts 3,452 2,267

13 Crane Group Limited - Preliminary final report 13 Note 4: Expenses, borrowing costs and significant items (continued) $A'000 $A'000 (d) Significant items Significant items included in the profit (loss) from ordinary activities are: Management restructure 57 5,138 Operational restructure: - Restructuring and redundancy costs 1,282 17,334 - Write-down of plant and equipment ,381 - Write-down of goodwill 0 3,885 - Write-down of tradenames 0 4,516 IT system carrying value: - Write-down of deferred systems reengineering expenditure 0 24,826 - Write-down of software 0 3,846 Surplus provision for write down of investment and associated costs (803) 0 1,283 71,926 Income tax expense (benefit) (518) (19,028) Income tax (benefit) arising from adoption of tax consolidation 0 (1,408) Outside equity interests (66) (497) ,993 The above significant items reflect primarily the results of a review of the Metals Group partially offset by surplus restructuring provisions from prior periods. In the prior year significant items reflect primarily the results of a comprehensive review of the Group's operations announced on 29 June The financial impact of the review is a total charge of $71,926,000 before tax ($52,049,000 after tax), largely relating to non-cash costs. The charge relates to: - redundancy and changeover costs of the new and more efficient management structure; - costs associated with the closure or "right sizing" of underperforming business units; - the write-down of certain assets to reflect their recoverable value to the business; and - the write-down of software and deferred expenditure relating to the Peoplesoft IT system due to the fact that cost overruns incurred during the implementation do not provide additional benefits. Note 5: Earnings per security (EPS) Calculation of the following is in accordance with AASB 1027: Earnings per Share (a) Basic EPS (cents) 68.3 (27.8) Adjusted weighted average number of ordinary shares. 56,589,408 54,516,057 (b) Diluted EPS (cents) 68.3 (27.8) Adjusted weighted average number of ordinary shares. 56,589,408 54,521,496 For comparative purposes, the figures for the previous corresponding period have been adjusted for the bonus element in issues during the current period. Earnings reconciliation Net profit (loss) 46,533 (9,188) Net (profit) loss attributable to outside equity interests (7,879) (5,953) Preference dividends (20) (20) Basic earnings 38,634 (15,161) Diluted earnings 38,634 (15,161)

14 Crane Group Limited - Preliminary final report 14 Note 6: NTA backing $A'000 $A'000 Net tangible asset backing per ordinary security $4.94 $4.54 Note 7: Retained profits Retained profits at the beginning of the financial year 26,677 76,550 Net profit (loss) attributable to members of Crane Group Limited 38,654 (15,141) Transfer from foreign currency translation reserve 1,341 0 Total available for appropriation 66,672 61,409 Dividends paid 33,357 34,732 Retained profits at end of the financial year 33,315 26,677 Note: 8 Deferred expenditure Deferred expenditure: Systems re-engineering - at cost 53,099 52,892 Accumulated amortisation (10,055) (4,844) 43,044 48,048 In 2004 the carrying value of deferred systems re-engineering costs was written down to recoverable amount. The write down amounted to $24,826,000. Systems re-engineering deferred expenditure relates to a major project to implement the enterprise-wide information system throughout the consolidated entity. This initiative, which commenced in 2000, includes the major re-engineering of business processes to world's best practice. The implementation program was completed in July 2004.

15 Crane Group Limited - Preliminary final report 15 Note 9: Reconciliation of cash $A'000 $A'000 Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Cash on hand and at bank 65,613 42,633 Bank overdraft 0 0 Total cash at end of period 65,613 42,633 Note 10: Acquisition and disposal of controlled entities DATE INTEREST CONSID- NET TANGIBLE ACQUIRED/ ACQUIRED/ ERATION ASSETS SOLD SOLD ACQUIRED/SOLD $A'000 $A' During the year the consolidated entity acquired the business and assets of: Aluminium Distributors 9 August % 1,844 1,009 During the year the consolidated entity sold through its 75% owned subsidiary Iplex Pipelines Australia Pty Limited: Certain ICON precast concrete business assets July/August % 1,306 1, During the year the consolidated entity acquired through its 75% owned subsidiary Iplex Pipelines Australia Pty Limited a 100% interest in the following company: Milnes Holdings Limited 1 August % 63,245 8,367 Other businesses acquired during the period by the consolidated entity: H&L Builders Supplies 2 February % 3,256 2,364 Colemans Plumbing Supplies 2 March % 4,428 1,884 Stolbergs Plumbing Supplies 4 May % Other Tradelink acquisitions 100% 1,836 1,384 73,614 14,248 During the year the consolidated entity sold through its 75% owned subsidiary Iplex Pipelines Australia Pty Limited: Certain ICON precast concrete business assets 30 June % 4,658 2,821 Note 11: Contingent liabilities There were no material changes in contingent liabilities since 30 June The maximum contingent liability for termination benefits under service agreements with executive directors and specified executives of the consolidated entity is $10,276,000 (2004: $8,260,000).

16 Crane Group Limited Preliminary final report 16 Note 12: Impact of Adopting International financial reporting standards Crane Group Limited and its controlled entities will be required to prepare for the first time financial statements that comply with Australian equivalents to International Financial Reporting Standards (AIFRS) as issued by the Australian Accounting Standards Board when reporting during the year ending 30 June This financial report has been prepared in accordance with Australian accounting standards and other financial reporting requirements (AGAAP) applicable for the reporting period ending on 30 June Transition Crane Group Limited is transitioning its accounting policies and financial reporting from current Australian Standards to AIFRS. An AIFRS project group has been established which has, where appropriate, engaged expert consultants to conduct impact assessments to isolate key areas that will be impacted by the transition to AIFRS and to assist in the interpretation of AIFRS. The project is achieving its scheduled milestones and the consolidated entity is expected to be in a position to fully comply with the requirements of AIFRS for the 31 December 2005 half year and 30 June 2006 annual financial reports. As Crane Group has a 30 June year end, priority has been given to considering the preparation of an opening balance sheet in accordance with AASB equivalents to AIFRS as at 1 July This will form the basis of accounting in accordance with AIFRS in the future, and is required when Crane Group prepares its first fully AIFRS compliant financial report for the half year ending 31 December 2005, which will include comparatives for the half year ended 31 December Impact of transition to AIFRS The differences between AGAAP and AIFRS identified to date as having potentially a significant effect on the consolidated entity's financial performance and financial position are summarised below. The summary should not be taken as an exhaustive list of all the differences between AGAAP and AIFRS as no attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions or events are presented. Any assessments in respect of the quantification on transition to AIFRS may require adjustment before inclusion in the first complete half year and annual financial reports prepared in accordance with AIFRS due to new or revised standards or interpretations, changes in the operations of the business, or additional guidance on the application of AIFRS in a particular industry or to a particular transaction. Set out below are the consolidated entity s best estimates of the quantitative impact of the changes on total assets, total liabilities, retained earnings and total equity as at the date of transition, 1 July 2004, and 30 June 2005 and on reported net profit for the year ended 30 June 2005.

17 Crane Group Limited Preliminary final report 17 (i) (ii) Consolidated Note $000 s 30 June 2005 Reconciliation of net profit for the year ended 30 June 2005 under AGAAP to that under AIFRS. Net profit reported under AGAAP 38,654 Amortisation of goodwill (a) 8,723 Depreciation of impaired assets -property, plant & equipment (b) 2,465 -deferred expenditure (b) 566 Deferred expenditure - training costs (d) 1,328 Defined benefit plan (f) (111) Employee share plans (g) (256) Other (576) Income tax (expense) credit (e) (1,287) Outside equity interests (822) Total AIFRS adjustments 10,030 Net Profit reported under AIFRS 48,684 Reconciliation of retained earnings as presented under AGAAP to that under AIFRS Total reported under AGAAP - 30 June ,315 AIFRS adjustments per note (i) above - year ended 30 June ,030 AIFRS adjustments included in equity note (iii) below - as at 1 July 2004 (18,846) Transfer from asset revaluation reserve (h) 29,154 Transfer from realised capital profit reserve (i) 28,807 82,460 Note 30 June 2005 Total Total Assets Liabilities Total Equity Total Assets 1 July 2004 Total Liabilities Total Equity $000 $000 $000 $000 $000 $000 (iii) Reconciliation of total equity, total liabilities and total assets as presented under AGAAP to that under AIFRS (a) Consolidated Total reported under AGAAP 1,162, , ,561 1,206, , ,307 Goodwill - amortisation (a) 8,723-8, Goodwill - impairment (a) (522) - (522) (522) - (522) Deferred expenditure - impairment (b) (3,775) * (1,132) (2,643) (4,341) * (1,302) (3,039) - training (d) (9,737) * (2,921) (6,816) (11,065) * (3,363) (7,702) Property, plant & equipment - impaired (b) (4,972) * (1,492) (3,480) (7,437) * (2,231) (5,206) Defined benefit plan (f) 568 * * Employee share plans (g) (2,056) * 115 (2,171) (2,102) * 37 (2,139) Impact of taxation - AASB 112 (e) 17 3,368 (3,351) 41 3,323 (3,282) Other (449) (253) (196) (507) (709) 202 Total AIFRS adjustments (12,203) (2,144) (10,059) (25,254) (4,041) (21,213) Total reported under AIFRS 1,150, , ,502 1,181, , ,094 *represents the tax effect of AIFRS adjustments.

18 Crane Group Limited Preliminary final report 18 (iv) Restated AIFRS Statement of Cash Flows for the year ended 30 June 2005 No material impacts are expected to the cashflows presented under AGAAP on adoption of AIFRS. The key potential implications of the conversion to AIFRS on the consolidated entity, effective 1 July 2004 including transitional elections in accordance with AASB 1 First time Adoption of Australian equivalents to International Financial Reporting Standards are as follows: a b c d e Goodwill will no longer be amortised, rather it will be replaced by an annual impairment test, which may give rise to an impairment expense if the assessment of the fair value of the goodwill is lower than its carrying value. This will result in a change in the group's current accounting policy, which amortises goodwill over its estimated useful life but not exceeding 20 years. The impact on the profit for the year ended 31 June 2005 is an increase of $8,723,000. The impairment of goodwill is assessed using a present value of expected net cash flow approach and is completed at the lowest cash generating unit level. If there is any impairment, it will be recognised immediately in the income statement. The impact of applying the stricter tests to the lowest cash generating unit level results in an expected asset impairment loss of goodwill on transition to AIFRS of $522,000 which will be charged to retained earnings. Impairments of assets will be determined on a discounted cash flow basis, with strict tests for determining whether goodwill and the assets of cash generating operations have been impaired. Excluding goodwill which is discussed in (a) above the impact of the stricter tests relating to cash generating units results in an expected asset impairment loss on transition to AIFRS of $11,778,000 which will be charged to retained earnings. The write-downs relate to deferred expenditure ($4,341,000) and property, plant & equipment ($7,437,000). The impact on the income statement for the year ended 30 June 2005 is an increase in profit of $3,031,000 arising from lower depreciation of $2,456,000 and lower amortisation of $566,000 for impaired assets. Expenditure incurred in relation to systems re-engineering costs associated with the consolidated entity s enterprise-wide information system comprising development expenditure and associated implementation costs is disclosed in the balance sheet for AGAAP purposes as deferred expenditure. Under AIFRS this expenditure will be disclosed in the balance sheet as an intangible asset. At 30 June 2005 the written down value of deferred expenditure was $43,044,000 ($48,048,000 at 30 June 2004). In addition, capitalised software costs amounting to $11,819,000 at 30 June 2005 ($12,637,000 at 30 June 2004) will be disclosed in the balance sheet as an intangible asset instead of plant & equipment. Expenditure amounting to $11,065,000 was incurred in relation to the initial training associated with the installation and implementation of the consolidated entity's enterprise-wide information system. On adoption of AIFRS this will not be recognised as an intangible asset as it is specifically excluded under AIFRS and will be written off against retained earnings. The impact on the profit for the year ended 30 June 2005 is an increase of $1,328,000 arising from the lower amortisation charge. On adoption of AASB 112, deferred tax balances are determined using the balance sheet method which calculates temporary differences between the carrying amount of assets and liabilities for accounts purposes and their associated tax values. As the income statement method applicable under the 1989 AASB 1020 only recognises deferred taxes for timing differences between accounting and taxable income, on adoption of AASB 112 more deferred tax assets and liabilities will be recognised. The expected impact on the consolidated entity at 1 July 2004 of the change in basis and the transitional adjustment on the deferred tax balances is an increase in deferred tax liabilities of $3,323,000, an increase in deferred tax assets of $41,000, and a decrease in retained earnings of $3,282,000 (mainly relating to the asset revaluation reserve which has been transferred to retained earnings as outlined in point (h) below). Of the deferred tax liabilities, $3,163,000 relates to land and buildings which were previously revalued.

19 Crane Group Limited Preliminary final report 19 f g The expected impact on the income statement for the year ended 30 June 2005 is an increase in deferred income tax expense of $69,000 for the consolidated entity. Deferred tax liabilities of the consolidated entity are expected to increase by $45,000 and deferred tax assets are to decrease by $24,000. Adjustments to the carrying amounts of assets and liabilities resulting from the adoption of other AIFRS adjustments will be tax effected. Surpluses and deficits in the defined benefits superannuation plan sponsored by entities within the consolidated entity will be recognised in the balance sheet and the income statement based on an actuarial calculation of the position of the fund. The impact on transition to AIFRS is to reflect the surplus of $679,000 as an increase in retained earnings at 1 July The consolidated entity has elected to reflect any gain or loss immediately in the income statement. The impact on the income statement for the year ending 30 June 2005 is an expense of $111,000. At 1 July 2004 the market value of the defined benefit superannuation plan was $7,946,000 which reduced to $4,191,000 at 30 June 2005 following the transfer of most of the remaining members to the accumulation fund. Share-based compensation in the form of shares will be recognised as an expense in the periods during which the employee provides the related services, i.e. over the vesting periods. AIFRS requires that the issue of all shares under share based remuneration be accounted for based on the fair value at grant date and be amortised over the vesting periods. Share issues under the General Employee Share Plan have been accounted for under AGAAP on the basis of the issue price and in respect of deferred shares issued as part of the long-term incentive arrangements (Crane Deferred Employee Share Plan) with executive directors and senior executives, on the cost of those shares. Deferred employee shares forming the CDSP will be considered to have been reacquired by the Group and hence are treated under AIFRS as negative equity (treasury shares) until the shares ultimately vest with the executive. On transition to AIFRS, only those GESP shares unvested at 1 January 2005 are recognised in the financial statements. The impact of applying AIFRS on transition was a charge to equity, excluding retained earnings, of $1,930,000; retained earnings of $209,000 and to the income statement during the year ended 30 June 2005 an expense of $256,000. In accordance with AASB 1 First-time adoption of Australian Equivalents to International Financial Reporting Standards no retrospective adjustment has been made for previous share based compensation payments which vested before 1 January h On transition to AIFRS the consolidated entity is required to derecognise items where AIFRS does not permit such recognition. As an election was made by the consolidated entity to adopt deemed cost as an accounting policy, the asset revaluation reserve will be derecognised as it is not a valid reserve under the deemed cost basis under AIFRS. The balance of the asset revaluation reserve amounting to $29,154,000 (prior to AIFRS adjustments) will be transferred to retained earnings on transition to AIFRS. i The balance of the capital profits reserve amounting to $28,807,000 will be transferred to retained earnings following the transfer of the asset revaluation reserve referred to in (h) above. Other implications of the conversion to AIFRS on the consolidated entity that may impact future reporting periods are as follows: j Financial instruments must be recognised in the statement of financial position and all derivatives and most financial assets must be carried at fair value. The foreign currency hedging policy and documentation will qualify as cash flow hedges under hedge accounting and therefore there will not be any material impact on the income statement. The current portfolio of US dollar cross currency swaps, Australian dollar interest rate swaps and New Zealand dollar interest rate swaps provides an effective economic hedge of a portion of the exposure to movements in interest rates. All of the US dollar cross currency swaps and New Zealand dollar interest rate swaps and a majority of the Australian dollar interest rate swaps qualify as either fair value or cash flow hedges under AIFRS hedge accounting and therefore will have no material impact on the income statement. The remainder of the Australian dollar interest rate

20 Crane Group Limited Preliminary final report 20 swaps (A$60 million) will not qualify for hedge accounting under AIFRS and therefore from 1 July 2005 movements in the fair value of these swaps will be reflected in the income statement. k l Costs expected to be incurred to restructure an acquired entity's activities must be treated as postacquisition expenses under AIFRS, unless the acquired entity has a pre-existing liability for restructuring its activities. There are no adjustments to existing rationalisation provisions arising on acquisition at transition date. Changes in accounting policies will be recognised by restating comparatives rather than making current year adjustments with note disclosure of prior year effects. Note 13: Subsequent event On 21 July 2005, the Board of Consolidated Extrusions announced the proposed closure of its manufacturing operations. Consolidated Extrusions is a joint venture owned 2/3 by Crane Group and 1/3 by Sims Group Limited. Crane Group s share of the total costs of the proposed closure is expected to result in a loss of $5.8 million ($4.2 million after tax) which will be substantially offset by an expected gain on the sale of Consolidated Extrusions freehold property at Ingleburn, NSW estimated to be $2.9 million before and after tax. The financial effects of the above transaction have not been brought to account in the financial statements for the year ended 30 June The annual meeting will be held as follows: Place Time Four Seasons Hotel Ballroom George St Sydney, NSW am Date 2 November 2005 Approximate date the annual report will be available 30 September 2005