Endeavour Half Year FINAL June07

Endeavour half year_cover.indd 1 8/05/2007 9:54:36 AM


ENDEAVOUR (INTERNATIONAL) LIMITED – HALF-YEAR REPORT

ERNST & YOUNG 1

Foreword Welcome to the 2007 edition of Endeavour (International) Limited Half-year Financial Report. This 2007 edition continues Ernst & Young’s commitment to raising industry standards, driving accounting excellence and providing clients with the latest developments in financial reporting practices. This edition illustrates the half-year financial report for an Australian entity applying AASB 134 Interim Financial Reporting and the half-year reporting requirements of the Corporations Act 2001 for a 30 June 2007 reporting date (also applicable for 31 December 2007 half-year financial reports). Endeavour (International) Limited is designed to assist you with preparing your half-year financial report in accordance with Australian Accounting Standards that are equivalent to international financial reporting standards (AIFRS). It is an illustrative example of the most common and significant disclosure requirements. It also provides insightful guidance on interpreting the requirements of AIFRS. We hope this edition of Endeavour (International) Limited assists you in preparing your half-year financial report. Should you require further assistance, please turn to the next page to find your local Ernst & Young contact. Please also refer to our website www.ey.com/au/ifrs, for a complete listing of our tools and resources.

John O'Grady Partner and National Leader – Technical Consulting Group Ernst & Young Australia 1 May 2007


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Introduction This publication presents the half-year financial report of a fictitious publicly listed Australian company, Endeavour (International) Limited, an industrial company with subsidiaries (the Group) incorporated and listed in Australia with a half-year reporting date of 30 June 2007. The Group’s functional and presentation currency is AUD ($). The enclosed half-year financial report is intended to illustrate a half-year financial report prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. Users of this publication are cautioned to verify that there have been no further amendments to the requirements of AASB 134 that would be applicable to their half-year financial report. Each part of the half-year financial report is cross-referenced to the source authoritative literature, which is included within the report. The half-year financial report is illustrative only, and does not attempt to show all possible accounting and disclosure requirements and, as such, should not be regarded as a comprehensive checklist of all accounting and disclosure requirements. This publication serves as a general guide and reference in preparing a half-year financial report and must be adapted to the specific circumstances of the entity. AASB Standards applicable as at 30 April 2007 The AASB Standards and Interpretations applied in this half-year financial report are those that were in effect as at 30 April 2007 (refer Appendix A for listing). It is important to note that this half-year financial report will require continual update as standards are issued and/or revised by the AASB. The AASB’s latest developments can be accessed on the AASB website: http://www.aasb.com.au. What’s new in this update? Endeavour (International) Limited has elected in this edition to early adopt the amendments to Australian Accounting Standards in ED 151 Australian Additions to, and Deletions from, IFRSs – approved by the board as an amending standard at its 30 April 2007 meeting. Appendix B also provides an example segment reporting disclosure as required by AASB 8 Operating Segments. The example disclosure provides an illustration of a segment reporting disclosure for an annual financial report and is provided as guidance for entities that may wish to early adopt AASB 8 or better understand the requirements of the standard. Caveat The names of people and corporations included in this illustrative financial report are fictitious and have been created for the purpose of instruction only. Any resemblance to any person or business is purely coincidental. This financial report is illustrative only, and does not attempt to show all possible accounting and disclosure requirements. In case of doubt as to the requirements, it is essential to refer to the relevant source and, where necessary, to seek appropriate professional advice. Although the illustrative financial report attempts to show the most likely disclosure requirements of industrial companies, it should not be regarded as a comprehensive checklist of accounting and disclosure requirements. Abbreviations The following styles of abbreviation are used in the half-year financial report of Endeavour (International) Limited: AASB 134.2 Australian Accounting Standard No. 134, paragraph 2 CA 300A Corporations Act 2001, section 300A Reg.2M.3.03(1) Corporations Regulations 2001, Chapter 2M, Regulation 3.03, paragraph 1 Author’s Note Author’s notes are aimed at explaining how the requirements of AIFRS have been interpreted in

arriving at the illustrative disclosures ASIC CO Australian Securities and Investments Commission Class Order ASIC PN Australian Securities and Investments Commission Practice Note ASX 4.10.5 Australian Securities Exchange Listing Rules, Chapter 4, Rule 10.5 Key Each section of the financial report of the Group is cross-referenced to commentary. Source references to the authoritative literature are also provided. The commentary follows the disclosure contained in each section of the financial report and is intended to highlight disclosure requirements of the note or to explain the particular decisions made in providing the illustrative disclosures in this report.


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Contents

Corporate Information 4

Directors’ Report 5

Balance Sheet 10

Income Statement 11

Statement of Recognised Income and Expense1 12

Cash Flow Statement 13

Notes to the Financial Statements 14

Directors’ Declaration 21

Independent Review Report 22

Appendix A - List of Standards and Interpretations applicable to 30 June 2007 half years 24

Appendix B - AASB 8 Operating Segments Illustrative Disclosure 27


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Corporate Information ABN 00 000 000 000

CA 153

Directors J. Barraclough Chairman M.P. Boiteau Chief Executive C.P. Muller S.K. Pinelli S.E. Sippo C. Smart P.R. García

Company Secretary G.K. Dellas

ASX 4.10.10

Registered office Homefire House Ashdown Square Australia

ASX 4.10.11

Principal place of business Bush Avenue Mulberry Park Australia Phone: 61 3 9876 5432

Share Register Everest Registry Services 23rd Floor 560 Smith Street Australia Phone: 61 3 9876 5431

ASX 4.10.12

Endeavour (International) Limited shares are listed on the Australian Stock Exchange

ASX 4.10.13

Solicitors Solicitors & Co 7 Scott Street Australia

Bankers Bank Limited George Street Australia

Auditors Ernst & Young Australia


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Directors’ Report Your directors submit their report for the half year ended 30 June 2007.1,5,9,10

CA 302(a)

DIRECTORS2

The names of the company’s directors in office during the half year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated.

CA 306(1)(b)

J. Barraclough (Chairman) M.P. Boiteau (Director and Chief Executive Officer) C.P. Muller (Finance Director) F. Van den Berg (resigned 15 January 2007) S.K. Pinelli S.E. Sippo C. Smart P.R. Garcia (alternate director)

REVIEW AND RESULTS OF OPERATIONS2 CA 306(1)(a)

The Group experienced a slight decrease in both revenue and profits during the half year. Sales revenue for the half year was $107,235 (2006: $120,019), representing a decrease of 10.65%. This was largely a result of the strategic decision to remove discount lines from the electronics segment. Gross profit remained steady for the half year at $25,327 (2006: $25,365).

Consolidated net profit from continuing operations after income tax for the half year was $5,178 (2006: $7,442), down 30.42% on the previous corresponding period. This was largely the result of the increased costs of concentrated marketing efforts in both television and newspaper mediums as well as the additional administrative costs of establishing and providing on-site child care and gymnasium facilities so as to ensure the wellbeing of our staff. We firmly believe that these additional costs will provide ongoing benefits in the form of lower staff turnover and improved productivity.

ROUNDING8

ASIC 98/0100

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless otherwise stated) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.


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Directors’ Report (continued) AUDITOR’S INDEPENDENCE DECLARATION3,6,7 CA 306(2)

We have obtained the following independence declaration from our auditors, Ernst & Young.

Auditor’s Independence Declaration to the Directors of Endeavour (International) Limited

In relation to our review of the financial report of Endeavour (International) Limited for the half year ended 30 June 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

D. G. Brown Ernst & Young Partner Melbourne 29 July 2007

Liability limited by a scheme approved under Professional Standards Legislation.

Signed in accordance with a resolution of the directors.4 CA 306(3)(a)

CA 306(3)(c)

J. Barraclough Director Melbourne, 29 July 2007 CA 306(3)(b)


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Commentary - Directors’ Report Disclosing entity - CA 302(A) 1. A disclosing entity must prepare a financial report and directors’ report for each half year. Content of directors’ report - CA 306(1)(a), (b) 2. The directors’ report for a half year consists of:

- a review of the entity’s (or consolidated entity’s) operations and results of those operations during the half year; and

- the name of each person who has been a director at any time during or since the end of the half year and the period for which they were a director.

Auditor’s independence declaration - CA 306(2) 3. The directors’ report must include a copy of the auditor’s declaration under CA 307C in relation to the audit or

review of the financial report for the half year. Dating and signing - CA 306(3)(a), (b), (c) 4. The report must:

- be made in accordance with a resolution of the directors; - specify the date on which the report is made; and - be signed by a director.

Transfer of information - ASIC CO 98/2395, ASIC CO 05/0641 5. Any or all of the disclosure requirements for the directors’ report may be transferred to the financial report or to

another document attached to the directors’ report, except as follows: - The following disclosures can only be transferred to an attached document, e.g. a Chairman’s Report, but

are not permitted to be transferred to the financial report: auditor’s independence declaration under CA 306(2); and the management discussion and analysis for listed companies under CA 299A.

A cross-reference to the page numbers to which the disclosures have been transferred must be provided in the directors’ report.

Signing of auditor’s independence declaration – ASIC CO 05/83, ASIC CO 05/910 6. ASIC CO 05/83 allows the auditor’s independence declaration under CA 307C to be signed up to seven days

before the directors’ report, and allows the auditor’s report on the financial report to be signed up to seven days after the directors’ report. The Class Order requires the auditor to provide an update to the independence declaration by way of an additional statement in the auditor’s report where applicable.

7. Auditors are granted an exemption under ASIC CO 05/910 from the requirement to make an independence declaration under CA 307C where the declaration would be required to set out details of any contraventions of s324CE(2), 324CF(2) or 324CG(2). This exemption is available provided that the auditor had reasonable grounds to believe that at the time of the contravention there was a system of quality control in place monitoring compliance with independence requirements in Subdivision B of Division 3 of Part 2m.4 of the Act. Auditors must still provide the directors with a written statement detailing any contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable codes of professional conduct, other than those arising in the sections noted above.

Rounding of amounts - ASIC CO 98/0100 8. If the company is of the kind referred to in ASIC CO 98/0100, dated 10 July 1998, and has consequently

rounded the amounts in the directors’ report and the half-year financial report (e.g. to the nearest hundred, thousand or million dollars), that fact must be disclosed in the directors’ report. This disclosure is not required if it has been included in the notes to the financial statements.

ASIC lodgement date – CA 320 9. ASIC requires disclosing entities to lodge the report within 75 days after the end of the half year. ASX lodgement date – ASX 4.2B 10. ASX requires an entity to lodge the report within two months after the end of the half year unless it is a mining

exploration entity. Mining exploration entities must lodge the report within 75 days after the end of the half year.


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****We highly recommend that you read the following commentary before preparing your half-year financial report****

Commentary – Preparation of the Half-year Financial Report Content of an interim financial report – AASB 134.6, 134.7 1. AASB 134 defines the minimum content of an interim financial report as including condensed financial

statements and selected explanatory notes. The interim financial report is intended to provide an update on the latest annual report. Accordingly, it focuses on new activities, events and circumstances and, except for comparatives, does not duplicate information previously reported.

2. Nothing in AASB 134 is intended to prohibit or discourage an entity from publishing a complete financial report (as described in AASB 101 Presentation of Financial Statements) as its interim financial report, rather than a condensed financial report. Nor does AASB 134 prohibit or discourage an entity from including in condensed interim financial reports more than the minimum line items or selected explanatory notes as set out in AASB 134. The recognition and measurement guidance in AASB 134 applies also to complete financial reports presented as interim financial reports for an interim period, and such reports would include all of the disclosures required by AASB 134 as well as those required by other Australian Accounting Standards.

Minimum components – AASB 134.8 3. An interim financial report shall include, at a minimum, the following components:

- a condensed balance sheet; - a condensed income statement; - a condensed statement of changes in equity showing either:

all changes in equity; or changes in equity other than those arising from transactions with equity holders acting in their

capacity as equity holders; - a condensed cash flow statement; and - selected explanatory notes (as outlined in AASB 134.16 and highlighted in this illustrative half-year

financial report). Publication of a complete financial report – AASB 134.9 4. If an entity publishes a complete financial report as its interim financial report, the form and content of that

report shall conform to the requirements of AASB 101 for a financial report. Publication of a condensed financial report – AASB 134.10 5. If an entity publishes a condensed financial report as its interim financial report, that condensed report shall

include, at a minimum, each of the headings and subtotals that were included in its most recent annual financial report and the selected explanatory notes as required by this Standard. Additional line items or notes shall be included if their omission would make the condensed interim financial report misleading.

Use of the term ‘condensed’ in the heading of financial statements 6. This edition of Endeavour has been prepared as a condensed financial report with full financial statements

consistent with those contained in the previous annual financial report, plus selected explanatory notes. The term ‘condensed’ has been excluded from the heading of each financial statement as the line items in those statements are the same as those in the most recent annual financial statements. Note: Ernst and Young believes that a condensed statement is any presentation of the applicable financial statement that has fewer line items than those required under AASB 101. In such cases the applicable statement should be titled condensed. If the statements comply with AASB 101, there is no requirement to use the term condensed in the heading of the statement. See note 5 above for the minimum requirements of a condensed statement.

Additional/voluntary disclosures – AASB 134.17(a)-(j) 7. AASB 134.17 provides a list of example disclosures that may be made in an interim report in addition to the

minimum disclosure requirements. These additional disclosures would be made as a result of the nature and amount of items affecting assets, liabilities, equity, profit or loss, or cash flows that are unusual because of their nature, size or incidence. Example disclosures include: - the write-down of inventories to net realisable value and the reversal of such write-downs; - recognition of a loss from the impairment of property, plant and equipment, intangible assets, or other

assets, and the reversal of such impairment losses; - the reversal of any provision for the costs of restructuring; - acquisitions and disposals of property, plant and equipment; - commitments for the purchase of property, plant and equipment; - litigation settlements; - corrections of prior period errors; - any loan default or breach of a loan agreement that has not been remedied on or before the reporting date;

and - related party transactions.


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Commentary – Preparation of the Half-year Financial Report Materiality – AASB 134.23 8. In deciding how to recognise, measure, classify or disclose an item for interim financial reporting purposes,

materiality shall be assessed in relation to the interim period financial data. In making assessments of materiality, the fact that interim measurements may rely on estimates to a greater extent than measurements of annual financial data shall be considered.

Comparatives – AASB 134.20(a)-(d) 9. An entity shall apply the same accounting policies in its interim financial report as are applied in its annual

financial report, except for accounting policy changes made after the date of the most recent annual financial report that are to be reflected in the next annual financial report.

Comparative information for a highly seasonal business – AASB 134.21 10. For an entity whose business is highly seasonal, financial information for the 12 months ending on the interim

reporting date and comparative information for the prior 12-month period may be useful. Accordingly, entities whose businesses are highly seasonal are encouraged to consider reporting such information in addition to the information called for in AASB 134.20.

Restatement of previously reported interim periods – AASB 134.43 11. A change in accounting policy, other than one for which the transition is specified by a new Australian

Accounting Standard, shall be reflected by restating the financial statements of prior interim periods of the current annual reporting period and the comparable interim periods of any prior annual reporting periods. When a re-statement of comparative information has taken place due either to transition to a new Australian Accounting Standard or an error, the reader should be made aware by describing the re-statement in the notes. Ernst & Young does not believe that comparative information needs to be titled, ‘re-stated’ on the face of the affected financial statement/s (however, an entity may choose to use the term ‘re-stated’ on the face of its financial statement/s).


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AASB 134.8(a) Balance Sheet Consolidated AS AT 30 JUNE 2007 NOTE 30 June 2007

$'000 31 Dec 2006

$'000 AASB 134.20(a)

ASSETS Current Assets Cash and cash equivalents 5 19,189 16,460 Trade and other receivables 20,906 22,762 Inventories 44,918 39,937 Derivative financial instruments 475 325 Other current assets 165 - 85,653 79,484 Non-current assets classified as held for sale 1,545 200 Assets of disposal group classified as held for sale - - Total Current Assets 87,198 79,684 Non-current Assets Receivables 3,250 3,549 Investments in associates 797 764 Available-for-sale financial assets 1,855 1,604 Derivative financial instruments 385 450 Property, plant and equipment 36,453 31,474 Investment properties 8,986 8,893 Deferred tax assets 927 747 Intangible assets 4,290 4,352 Goodwill 3,200 1,700 Pension asset 4 4 Total Non-current Assets 60,147 53,537 TOTAL ASSETS 147,345 133,221 LIABILITIES Current Liabilities Trade and other payables 44,029 45,197 Deferred settlement on acquisition of business 8 8,650 - Interest-bearing loans and borrowings 2,550 2,889 Income tax payable 545 1,645 Provisions 685 784 Derivative financial instruments 505 750 Government grants 599 149 57,563 51,414 Liabilities of disposal group classified as held for sale - - Total Current Liabilities 57,563 51,414 Non-current Liabilities Interest-bearing loans and borrowings 15,578 10,828 Deferred tax liabilities 2,485 2,792 Provisions 396 400 Convertible redeemable preference shares 2,568 2,503 Government grants 1,500 2,000 Total Non-current Liabilities 22,527 18,523 TOTAL LIABILITIES 80,090 69,937 NET ASSETS 67,255 63,284

EQUITY Equity attributable to equity holders of the parent Contributed equity 17,933 17,933 Retained earnings 47,400 43,304 Reserves 1,212 1,199

Parent interest 66,545 62,436 Minority interest 710 848

TOTAL EQUITY 67,255 63,284


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AASB 134.8(b) Income Statement Consolidated FOR THE HALF YEAR ENDED 30 JUNE 2007

NOTE 2007 $'000

2006 $'000

AASB 134.20(b)

Continuing operations Sale of goods 95,876 110,313 Rendering of services 10,131 8,455 Rental revenue 702 506 Other revenue 3 526 745

Revenue 107,235 120,019 Cost of sales (81,908) (94,654)

Gross profit 25,327 25,365 Other income 3 634 1,248 Distribution expenses (5,338) (5,245) Marketing expenses (2,467) (1,350) Occupancy expenses (1,400) (1,854) Administrative expenses (8,083) (7,435) Other expenses 3 (1,775) (1,401) Finance costs (683) (597) Share of profit of an associate 33 81

Profit from continuing operations before income tax

6,248 8,812

Income tax expense (1,070) (1,370)

Profit from continuing operations after income tax

5,178 7,442

Discontinued operations Loss from discontinued operations after income tax 4 - (188)

Net profit for the period 5,178 7,254

Attributable to: Minority interest (138) (239) Members of the parent 5,316 7,493

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the parent:

AASB 134.11

Basic earnings per share 26.16 39.61 Diluted earnings per share 24.50 36.19

Earnings per share for profit attributable to the ordinary equity holders of the parent:

Basic earnings per share 26.16 35.29 Diluted earnings per share 24.50 31.87


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AASB 134.8(c)(ii) AASB 134.13

Statement of Recognised Income and Expense1 Consolidated

FOR THE HALF YEAR ENDED 30 JUNE 2007 2007 $'000

2006 $'000

AASB 134.20(c)

Net gains on available-for-sale financial assets 81 123 Cash flow hedges: Gain/(loss) taken to equity 28 (34) Transferred to balance sheet (63) (25) Net gain on hedge of net investment 118 48 Foreign currency translation (201) (225) Actuarial gain/(loss) on defined benefit plans (1) 2 Revaluation of land and buildings to fair value 86 43 Depreciation transfer - (80) Income tax/(expense) on items taken directly to or transferred from equity (35) (22)

Net income/(loss) recognised directly in equity 13 (170) Profit for the period 5,178 7,254

Total recognised income/(expense) for the period 5,191 7,084

Attributable to: Equity holders of the parent 5,329 7,323 Minority interest (138) (239)

5,191 7,084

Commentary - Statement of Recognised Income and Expense Same format as annual report – AASB 134.13 1. An entity follows the same format in its interim statement of changes in equity as it did in its most recent annual

statement. For example, if an entity included a Statement of Changes in Equity in its most recent annual report then this is the format it must use for its next interim report.


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AASB 134.8(d)

Cash Flow Statement Consolidated

FOR THE HALF YEAR ENDED 30 JUNE 2007 Note 2007 2006 AASB 134.20(d) $'000 $'000 Cash flows from operating activities Receipts from customers (inclusive of GST) 107,961 116,820 Payments to suppliers and employees (inclusive of GST) (106,865) (114,049) Interest paid (615) (515) Income tax paid (3,546) (2,898) Receipt of government grants - 1,552

Net cash flows from/(used in) operating activities (3,065) 910

Cash flows from investing activities Proceeds from sale of property, plant and equipment 910 2,032 Purchase of property, plant and equipment (642) (2,214) Proceeds from sale of available-for-sale financial assets 29 134 Payments for available-for-sale financial assets (222) (568) Interest received 265 308 Dividends received 56 185 Purchase of investment property - (1,786) Acquisition of subsidiary, net of cash acquired 8 (370) - Proceeds on disposal of subsidiary, net of cash disposed 142 -

Net cash flows from/(used in) investing activities 168 (1,909)

Cash flows from financing activities Proceeds from issue of shares - 200 Proceeds from borrowings 5,411 4,135 Repayment of borrowings (1,000) (1,784) Repayment of finance lease liability (350) (295) Equity dividends paid 1,220 1,166 Dividends paid to minority interest - (24)

Net cash flows from financing activities 5,281 3,398

Net increase in cash and cash equivalents 2,384 2,399 Net foreign exchange differences 130 89 Cash and cash equivalents at beginning of period 15,683 12,286

Cash and cash equivalents at end of period 5 18,197 14,774


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AASB 134.8(e) Notes to the Financial Statements FOR THE HALF YEAR ENDED 30 JUNE 2007

1 BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of preparation This general purpose condensed financial report for the half year ended 30 June 2007 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.

AASB 134.19

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 31 December 2006 and considered together with any public announcements made by Endeavour (International) Limited during the half year ended 30 June 2007 in accordance with the continuous disclosure obligations of the ASX listing rules.

Not Mandatory

Apart from the changes in accounting policy noted below, the accounting policies and methods of computation are the same as those adopted in the most recent annual financial report.

AASB 134(16)(a)

Changes in Accounting Policy1 AASB 134.16(a) Since 1 January 2007 the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group. • AASB 7 Financial Instruments: Disclosures • AASB 2005-10 Amendments to Australian Accounting Standards (AASB 132, 101,

114, 117, 133, 139, 1, 4, 1023 and 1038) • Interpretation 8 Scope of AASB 2 Share-based Payment • Interpretation 9 Reassessment of Embedded Derivatives • Interpretation 10 Interim Financial Reporting and Impairment The Group has also early adopted the amendments to Australian Accounting Standards as set out in AASB 2007-xx Amendments to Australian Accounting Standards (AASB xx,xx,xx,)* *ED 151 Australian Additions to, and Deletions from, IFRSs was approved by the board as an amending standard at its 30 April 2007 meeting, after the publication of this document. As such we have not been able to provide the complete reference for the amending standard.

Commentary – Basis of Preparation and Accounting Policies Applying new accounting standards and interpretations to interim financial reports – AASB 134.28 1. Entities preparing their financial reports are required to adopt in those interim reports any new or amended

Standards and Interpretations that are required to be applied in their next annual financial statements. For example, if a Standard or Interpretation is applicable for annual periods beginning on or after 1 January 2007, a company with a December year end preparing an interim financial report for the half year ended 30 June 2007 would be required to adopt and apply the requirements of the Standard or Interpretation in that interim financial report.

AASB 134.8(e)


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

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2 SEGMENT INFORMATION1 AASB 134.16(g)

The primary reporting format for the group is business segments.

Business segment

The following table presents revenue and profit information for business segments for the half years ended 30 June 2007 and 30 June 2006.

Continuing Operations Discontinued

Operations Total

Operations

Electronics

Fire prevention equipment

Investment property Total Rubber

equipment

$'000 $'000 $'000 $'000 $'000 $'000

Half year ended 30 June 2007 Revenue Sales to external customers 31,842 64,034 - 95,876 - 95,876 Other revenues from external customers 3,377 6,754 702 10,833 - 10,833

Other revenue - - 93 93 - 93 Inter-segment sales 4,518 - 4,518 - 4,518

Total segment revenue 39,737 70,788 795 111,320 - 111,320

Inter-segment elimination (4,518) - (4,518) Unallocated revenue 433 - 433

Total consolidated revenue 107,235 - 107,235

Result Segment result 1,778 4,381 138 6,297 - 6,297

Unallocated expenses/income (49) - (49) Net profit/(loss) before income tax 6,248 - 6,248

Half year ended 30 June 2006 Revenue Sales to external customers 36,636 73,677 - 110,313 15,206 125,519 Other revenues from external customers 2,793 5,662 506 8,961 - 8,961

Other revenues - - 125 125 - 125 Inter-segment sales 3,768 - - 3,768 - 3,768

Total segment revenue 43,197 79,339 631 123,167 15,206 138,373

Inter-segment elimination (3,768) - (3,768) Unallocated revenue 620 - 620

Total consolidated revenue 120,019 15,206 135,225

Result Segment results 2,363 5,633 165 8,161 (193) 7,968

Unallocated expenses/income 651 - 651

Net profit/(loss) before income tax 8,812 (193) 8,619

AASB 134.8(e)



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Commentary - Segment Information Minimum requirements - AASB 134.16(g) 1. An entity shall include the following information, as a minimum (assuming the entity has not early adopted

AASB 8 – in which case, see Appendix B for half-year disclosure requirements): - segment revenue and segment result for business segments or geographical segments, whichever is the

entity’s primary basis of segment reporting (disclosure of segment data is required in an entity’s interim financial report only if AASB 114 Segment Reporting requires that entity to disclose segment data in its annual financial report).

Impact of AASB 8 Operating Segments 2. AASB 8 has been approved and will be applicable for reporting periods beginning on or after 1 January 2009.

AASB 8 will supersede AASB 114, is only applicable to listed entities and is available for early adoption. A non-listed entity may adopt AASB 8 early and as such would not have to provide segment reporting disclosures. For those listed entities choosing to early adopt AASB 8, we have provided in Appendix B an illustrative example of a Segment Information Note with disclosure being based on both a full-year annual financial report and a half-year financial report.

Consolidated 2007

$'000 2006 $'000

3 REVENUE, INCOME AND EXPENSES1

(a) Other Revenue Interest 265 308 Fair value gain on hedged loan 15 25 Fair value gain on investment property 93 125 Dividends 56 185 Other 97 102

526 745

(b) Other Income Government grants released 50 847 Net gains on disposal of available for sale investments 29 180 Net gains on disposal of property, plant and equipment 455 221 Net gain on held for trading derivatives 100 -

634 1,248

(c) Other Expenses Net loss on held for trading derivatives - 285 Direct operating expenses from rental earnings 245 185 Consulting 530 470 Research on product development 1,000 461

1,775 1,401

Commentary – Revenue, Income and Expenses Selected explanatory notes - AASB 134.16(c) 1. Although AASB 134.16(c) only requires an entity to disclose events or transactions that are material, it is

recommended that additional disclosure be provided to assist users in understanding the half-year financial report. Ernst & Young believes that reconciliations of the above items are useful to the users of financial statements but notes that they are not mandatory disclosures.

AASB 134.8(e)



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4 DISCONTINUED OPERATIONS AASB 134.16(i)

No components of the entity have been disposed of or classified as held for sale in the current half-year reporting period. On 22 September 2005, the Board of Directors entered into a sale agreement to dispose of Pipe Limited, a company that manufactures rubber hosepipes. The disposal was completed on 28 February 2006, on which date control of the business passed to the acquirer.

In addition to this, the Board of Directors decided to dispose of Hose Limited, a company that also manufactures rubber hosepipes. Endeavour (International) Limited announced this decision publicly on 1 May 2006. The disposal was completed on 1 December 2006, on which date control of the business passed to the acquirer.

Both Pipe Limited and Hose Limited formed the rubber equipment segment that was part of the Australian operations. These businesses had been operating in an unpredictable product environment, making it difficult for management to achieve any real growth and profitability from the segment.

The results of the discontinued operations for the period of the half year until disposal are presented below:

Consolidated 2006 Hose Ltd Pipe Ltd Total $'000 $'000 $'000 Revenue 7,124 8,082 15,206 Expenses (7,190) (8,132) (15,322)

Gross profit/(loss) (66) (50) (116) Gain on disposal - 6 6 Finance costs (50) (33) (83)

Loss before tax from discontinued operations

(116) (77) (193)

Income tax 3 2 5

Loss for the year from discontinued operations after tax

(113) (75) (188)

Commentary - Discontinued Operations Required disclosure - AASB 134.16(i) 1. AASB 134.16(i) requires that an entity provide information on the effect of changes in its composition,

including discontinued operations. However, AASB 134 does not provide guidance on what level of disclosure is required for discontinued operations for the half-year financial report. The disclosures provided above are not the complete disclosures required by AASB 5 Non-current Assets Held for Sale and Discontinued Operations. Each entity will need to make an assessment of the appropriate level of disclosure required and this will depend on the size and economic value of the discontinued operations.

Please see Endeavour (International) Limited 31 December 2006, Note 11, for an illustrative example of the complete disclosures required by AASB 5 in a full financial report.

AASB 134.8(e)



ERNST & YOUNG 18

Consolidated

2007 $'000

2006 $'000

5 CASH AND CASH EQUIVALENTS

For the purpose of the half-year cash flow statement, cash and cash equivalents are comprised of the following:

Cash at bank and in hand 13,393 12,669 Short-term deposits 5,796 5,085

19,189 17,754 Bank overdrafts (992) (2,980)

18,197 14,774

Commentary – Cash and Cash Equivalents Selected explanatory notes - AASB 134.16(c) 1. Although AASB 134.16(c) requires an entity to disclose only those events or transactions that are material, it is

recommended that additional disclosure be provided to assist users in understanding the half-year financial report. A reconciliation of ‘cash’ in the cash flow statement and the balance sheet may be useful to users of the financial statements, but it is not a mandatory disclosure.

6 DIVIDENDS PAID AASB 134.16(f)

(a) Dividends declared and paid during the half year on ordinary shares:

Final franked dividend for the financial year ended 31 December 2006: 5.9 cents, paid 15 February 2007 (2005: 5.81 cents)

1,220

1,166

(b) Dividends proposed and not yet recognised as a liability Not Mandatory Interim franked dividend for the half year ended 30 June 2007: 5.65 cents, proposed to be paid 15 August 2007 (2006: 5.42 cents)

890

851

7 COMMITMENTS AND CONTINGENCIES AASB 134.16(j)

The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below.

Capital commitments AASB 134.17(e) At 30 June 2007 the Group had commitments of $4,590 (2006: $4,500) relating principally to the completion of Sprinklers Inc. operating facilities and commitments of $310 (2006: $516) relating to the Group’s interest in the jointly controlled operation, Showers Pty Ltd. These commitments are for the acquisition of new machinery.

Legal claim An overseas customer has commenced an action against the Group in respect of equipment claimed to be defective. The liability, should the action be successful, is estimated to be $850. A trial date has not yet been set and therefore it is not possible to estimate the timing of any payment. The Group has been advised by its Counsel that it is possible, but not probable, that the action will succeed and accordingly no liability has been recognised in these financial statements.

AASB 134.17(f)

AASB 134.8(e)



ERNST & YOUNG 19

8 BUSINESS COMBINATION AASB 134.16(i) AASB 3.66

Acquisition of Extinguishers Limited AASB 3.67,68 On 1 June 2007, Endeavour (International) Limited acquired 100% of the voting shares of Extinguishers Limited, an unlisted public company based in Australia specialising in the manufacture of fire retardant fabrics.

The total cost of the combination was $9,250 and comprised costs of $600 and a deferred settlement of $8,650 to be paid on 15 July 2007.

At the date of acquisition, Endeavour (International) Limited was involved in the manufacture of protective fire clothing. As part of the purchase negotiations it was agreed that the manufacture of such clothing would be discontinued as soon as possible after the acquisition.

The fair value of the identifiable assets and liabilities of Extinguishers Limited as at the date of acquisition are:

Consolidated Recognised

on acquisition $'000

Carrying value $'000

Property, plant and equipment 7,042 5,384 Deferred tax asset 300 300 Cash and cash equivalents 230 230 Trade receivables 1,736 1,736 Inventories 3,678 2,179 Patents 1,200 -

14,186 9,829

Trade payables (3,380) (3,380) Provision for maintenance warranties (400) (325) Provision for restructuring (500) (500) Deferred tax liability (2,156) (1,322)

(6,436) (5,527)

Fair value of identifiable net assets 7,750 4,302

Goodwill arising on acquisition 1,500

9,250

Cost of the combination: Deferred cash payment to be made 15 July 2007 8,650 Costs associated with the acquisition 600

Total cost of the combination 9,250

The cash outflow on acquisition to date is as follows: Net cash acquired with the subsidiary 230 Cash paid (600)

Net cash outflow (370)

From the date of acquisition, Extinguishers Limited has contributed $50 to the net profit of the Group.

AASB 3.70

If the combination had taken place at the beginning of the half year, the profit for the Group would have been $8,567 and revenue from continuing operations would have been $139,856.

The provision for restructuring of $500 relates to certain product lines that Extinguishers Limited had, prior to the acquisition, decided to eliminate.

AASB 134.8(e)



ERNST & YOUNG 20

Commentary - Business Combination Selected explanatory notes - AASB 134.16(i) 1. An entity shall include the following information, as a minimum:

- the effect of changes in the composition of the entity during the interim period, including business combinations. In the case of business combinations, the entity shall disclose the information required to be disclosed under paragraphs 66-73 of AASB 3 Business Combinations.

Please see Endeavour (International) Limited illustrative annual report for the year ended 31 December 2006, commentary on Note 40 for further information.

9 EVENTS AFTER THE BALANCE SHEET DATE

On 14 July 2007, a building with a net book value of $1,695 was severely damaged by an earthquake. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of inventories by $750.

AASB 134.16(h)

Not Mandatory

Commentary – Disclosures not Illustrated in the Half-year Financial Report Required disclosures not illustrated - AASB 134.16(b), (d), (e) The following mandatory disclosures were not illustrated in the half-year financial report for Endeavour (International) Limited as they were not relevant to the Group’s business or would not have materially affected the Group’s operations for the interim period. 1. An entity shall include the following information, as a minimum, in the notes to the interim financial

statements, if material and if not disclosed elsewhere in the interim financial report. The information shall normally be reported on an annual reporting period-to-date basis. However, the entity shall also disclose any events or transactions that are material to an understanding of the current interim period: − explanatory comments about the seasonality or cyclicality of interim operations. An example disclosure

would be: “Due to the seasonal nature of the Electronics segment, higher revenues and operating profits are expected in the second half of the year compared with the first six months. Higher sales during the period July to September are mainly attributable to the increased demand for aviation electronic equipment as this coincides with the timing of major maintenance works by airlines.”

− the nature and amount of changes in estimates of amounts reported in prior interim periods of the current annual reporting period or changes in estimates of amounts reported in prior annual reporting periods, if those changes have a material effect in the current interim period (see Endeavour (International) Limited annual report for the year ended 31 December 2006 page 87 for an example disclosure of a change in estimates).

− issuances, repurchases, and repayments of debt and equity securities. If this were to be applicable to an entity, a reconciliation and description of the movements as contained in the annual report would be an appropriate disclosure (see Endeavour (International) Limited annual report for the year ended 31 December 2006 page 151 for an example disclosure).


ERNST & YOUNG 21

CA 303(1)(c) Directors’ Declaration In accordance with a resolution of the directors of Endeavour (International) Limited, I state that:

CA 303(5)(a)

In the opinion of the directors: (a) the financial statements and notes of the consolidated entity are in accordance

with the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position as at 30 June 2007

and the performance for the half year ended on that date of the consolidated entity; and

CA 303(4)(d)(ii)

(ii) complying with Accounting Standard AASB 134 Interim Financial

Reporting and the Corporations Regulations 2001; and CA 303(4)(d)(i)

(b) there are reasonable grounds to believe that the company will be able to pay its

debts as and when they become due and payable. CA 303(4)(c)

On behalf of the Board,

J. Barraclough Director

CA 303(5)(c)

Melbourne, 29 July 2007 CA 303(5)(b) Commentary – Directors’ Declaration CA 303(1)(c) 1. The financial report for a half year includes the directors’ declaration about the financial statements and notes

to the financial statements. CA 303(4)(c), (d)(i), (d)(ii) 2. The directors’ declaration is a declaration by the directors as to whether, in the directors’ opinion:

- there are reasonable grounds to believe that the disclosing entity will be able to pay its debts as and when they become due and payable; and

- the financial statements and notes are in accordance with the Corporations Act 2001, including: CA 304 (compliance with accounting standards); and CA 305 (true and fair view).

CA 303(5)(a), (b), (c) 3. The directors’ declaration must be:

- made in accordance with a resolution of the directors; - dated the day on which the declaration is made; and - signed by a director.


ERNST & YOUNG 22

CA 309(1)

Independent Review Report To the members of Endeavour (International) Limited Report on the Half-year Condensed Financial Report We have reviewed the accompanying condensed half-year financial report of Endeavour (International) Limited and the entities it controlled during the half year, which comprises the balance sheet as at 30 June 2007 and the income statement, statement of recognised income and expense and cash flow statement for the half year ended on that date, other selected explanatory notes and the directors’ declaration. Directors’ responsibility for the half-year Financial Report The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report to ensure that it 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. Auditor’s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as the 30 June 2007 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory financial reporting requirements in Australia. As the auditor of Endeavour (International) Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation.


ERNST & YOUNG 23

Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report. The Auditor’s Independence Declaration would have been expressed in the same terms had it been given to the directors at the date that this auditor’s report is signed. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Endeavour (International) Limited and the entities it controlled during the half year is not in accordance with: (a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position as at 30 June 2007 and of its performance for the half year ended on that date; and

(ii) complying with Accounting Standard AASB 134 Interim Financial

Reporting and the Corporations Regulations 2001; and (b) other mandatory financial reporting requirements in Australia.

Ernst & Young

D.G. Brown Partner Melbourne Date: 29 July 2007 Commentary - Independent Review Report Audit opinion – CA 309(4), (5) 1. An auditor who reviews the financial report for a half year must report to members on whether the auditor

became aware of any matter in the course of the review that made the auditor believe that the financial report does not comply with Division 2.


ERNST & YOUNG 24

Appendix A - List of Standards and Interpretations applicable to 30 June 2007 half years AUSTRALIAN ACCOUNTING STANDARDS

The Australian Accounting Standards are sequentially listed as follows: • IFRS-equivalent standards are numbered from AASB 1 – 99; • IAS-equivalent standards are numbered from AASB 101 – 199; • Australian-specific standards are numbered as AASB 10XX; and • Standards issued to amend accounting standards are numbered in a series using the year of issue and a generic

title (AASB 200X-XX).

Reference Title Framework Framework for the Preparation and Presentation of Financial Statements AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting

Standards AASB 2 Share-based Payment AASB 3 Business Combinations AASB 4 Insurance Contracts AASB 5 Non-current Assets Held for Sale and Discontinued Operations AASB 6 Exploration for and Evaluation of Mineral Resources AASB 7 Financial Instruments: Disclosures AASB 8 Operating Segments – applicable to annual reporting periods beginning on or after

1 January 2009 AASB 101 Presentation of Financial Statements AASB 102 Inventories AASB 107 Cash Flow Statements AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 110 Events after the Balance Sheet Date AASB 111 Construction Contracts AASB 112 Income Taxes AASB 114 Segment Reporting AASB 116 Property, Plant and Equipment AASB 117 Leases AASB 118 Revenue AASB 119 Employee Benefits AASB 120 Accounting for Government Grants and Disclosure of Government Assistance AASB 121 The Effects of Changes in Foreign Exchange Rates AASB 123 Borrowing Costs AASB 124 Related Party Disclosures AASB 127 Consolidated and Separate Financial Statements AASB 128 Investments in Associates AASB 129 Financial Reporting in Hyperinflationary Economies AASB 130 Disclosure in the Financial Statements of Banks and Similar Financial Institutions AASB 131 Interests in Joint Ventures AASB 132 Financial Instruments: Presentation AASB 133 Earnings per Share AASB 134 Interim Financial Reporting AASB 136 Impairment of Assets AASB 137 Provisions, Contingent Liabilities and Contingent Assets AASB 138 Intangible Assets AASB 139 Financial Instruments: Recognition and Measurement AASB 140 Investment Property AASB 141 Agriculture AASB 1004 Contributions AASB 1023 General Insurance Contracts AASB 1031 Materiality


Appendix A - List of Standards and Interpretations applicable to 30 June 2007 half years (cont)

ERNST & YOUNG 25

Reference Title AASB 1038 Life Insurance Contracts AASB 1039 Concise Financial Reports AASB 1045 Land Under Roads: Amendments to AAS 27A, 29A and AAS 31A AASB 1048 Interpretation and Application of Standards AASB 1049 Financial Reporting of General Government Sectors by Governments – applicable

to annual reporting periods beginning on or after 1 July 2008 AASB 2007-1 Amendments to Australian Accounting Standards (AASB 2) – applicable to annual

reporting periods beginning on or after 1 March 2007 with early adoption required if AASB Interpretation 11 is applied to the period

AASB 2007-2 Amendments to Australian Accounting Standards (AASB 1, 117, 118, 120, 121, 127, 131, 139) – applicable to annual reporting periods beginning on or after 1 January 2008 with early adoption required if AASB Interpretation 12 is applied to the period

AASB 2007-3 Amendments to Australian Accounting Standards (AASB 5, 6, 102, 107, 119, 127, 134, 136, 1023, 1038) – applicable to annual reporting periods beginning on or after 1 January 2009 with early adoption required if AASB 8 is applied to the period

AASB 2007-xx Amendments to Australian Accounting Standards (AASB xx,xx,xx…) – applicable to annual reporting periods beginning on or after 1 July 2007 with early adoption being permitted to annual reporting periods beginning on or after 1 January 2005. *ED 151 Australian Additions to, and Deletions from, IFRSs was approved by the board as an amending standard at its 30 April 2007 meeting, after the publication of this document. As such we have not been able to provide the complete reference for the amending standard.

AAS 25 Financial Reporting by Superannuation Plans AAS 27 Financial Reporting by Local Governments AAS 29 Financial Reporting by Government Departments AAS 31 Financial Reporting by Governments


Appendix A - List of Standards and Interpretations applicable to 30 June 2007 half years (cont)

ERNST & YOUNG 26

AASB INTERPRETATIONS (INTERPRETATION)

The Interpretations are listed in numerical order as follows: • IFRIC-equivalent interpretations are numbered from Interpretation 1 – 99; • SIC-equivalent interpretations are numbered from Interpretation 101 – 199; and • Australian-specific interpretations are numbered as Interpretation 10XX.

Reference Title Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments Interpretation 4 Determining whether an Arrangement contains a Lease Interpretation 4 (revised) Determining whether an Arrangement contains a Lease – applicable to annual

reporting periods beginning on or after 1 January 2008 with early adoption required if AASB Interpretation 12 is applied to the period

Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment

Interpretation 7 Applying the Restatement Approach under AASB 129 Interpretation 8 Scope of AASB 2 Interpretation 9 Reassessment of Embedded Derivatives Interpretation 10 Interim Financial Reporting and Impairment Interpretation 11 AASB 2 – Group and Treasury Share Transactions – applicable to annual

reporting periods beginning on or after 1 March 2007 Interpretation 12 Service Concession Arrangements – applicable to annual reporting periods

beginning on or after 1 January 2008 Interpretation 107 Introduction of the Euro Interpretation 110 Government Assistance – No Specific Relation to Operating Activities Interpretation 112 Consolidation – Special Purpose Entities Interpretation 113 Jointly Controlled Entities – Non-Monetary Contributions by Venturers Interpretation 115 Operating Leases – Incentives Interpretation 121 Income Taxes – Recovery of Revalued Non-Depreciable Assets Interpretation 125 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease Interpretation 129 Disclosure – Service Concession Arrangements Interpretation 129 (revised)

Service Concession Arrangements: Disclosures – applicable to annual reporting periods beginning on or after 1 January 2008 with early adoption required if AASB Interpretation 12 is applied to the period

Interpretation 131 Revenue – Barter Transactions Involving Advertising Services Interpretation 132 Intangible Assets – Web Site Costs Interpretation 1001 Consolidated Financial Reports in relation to Pre-Date-of-Transition Dual Listed

Company Arrangements Interpretation 1002 Post-Date-of-Transition Stapling Arrangements Interpretation 1013 Consolidated Financial Reports in relation to Pre-Date-Of-Transition Stapling

Arrangements Interpretation 1017 Developer and Customer Contributions for Connection to a Price-Regulated

Network Interpretation 1019 The Superannuation Contributions Surcharge Interpretation 1030 Depreciation of Long-lived Physical Assets: Condition-Based Depreciation and

Related Methods Interpretation 1031 Accounting for the Goods and Services Tax (GST) Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry Interpretation 1047 Professional Indemnity Claims Liabilities in Medical Defence Organisations Interpretation 1052 Tax Consolidation Accounting Interpretation 1055 Accounting for Road Earthworks


ERNST & YOUNG 27

Appendix B - AASB 8 Operating Segments Illustrative Disclosure (The following is an illustrative disclosure of the requirements of AASB 8 for a full-year financial report. Comparatives have not been included for the purpose of this illustration; however, they would be required. The numbers used are based on those included in the 31 December 2006 version of Endeavour (International) Limited. That version illustrates a Segment Reporting note prepared in accordance with AASB 114, and comparison of the two different illustrative disclosures may be useful in the preparation/selection of your operating segments under AASB 8. NOTE XX – SEGMENT INFORMATION

Identification of reportable segments AASB 8.22(a) The Group has identified its reportable operating segments based on the internal reports that are reviewed and used by the chief executive officer and her management team in assessing performance and in determining the allocation of resources. The reportable operating segments are based on the similarity of the products produced and sold and/or the services provided, as these are the sources of the Group’s major risks and have the most effect on the rates of return. The separate groups of similar products and services are divided into operating businesses and these businesses are then further segmented into operating segments based on the manner in which the product is sold, whether retail or wholesale, and the nature of the services provided. The operating performance of each of these groups is reported to the chief executive officer and her management team on at least a monthly basis. Types of products and services AASB 8.22(b)

Electronics The electronics business is a producer and supplier of electronic equipment for defence, aviation and electrical safety markets. The products are used in the areas of electronics, safety, thermal and electrical architecture. The equipment produced and sold is similar in size, price and nature and as such is grouped as one operating segment. In addition, the electronics business provides services in the form of installation of equipment as well as ongoing support and maintenance. These services are provided under existing contracts as well as on an ad-hoc basis, however the ad-hoc service revenue is immaterial and as such is not reported separately. Instead, it is grouped with contract service for the purpose of reporting operating segments. Fire prevention equipment The fire prevention equipment business is a producer of fire prevention equipment and fire retardant fabrics for industrial markets. The equipment produced and sold is, due to its nature, grouped as one operating segment. In addition, the fire prevention business provides services in the form of assessment, installation of equipment, training and ongoing support and maintenance. The services are provided under contract and are grouped for the purpose of reporting operating segments. Investment property The investment property business leases offices and manufacturing sites owned by the Group that are surplus to the Group’s requirements. It does not actively trade in the investment property market.


Appendix B - AASB 8 Operating Segments Illustrative Disclosure (cont)

ERNST & YOUNG 28

Rubber equipment The rubber equipment business, which comprised Hose Limited and Pipe Limited prior to their discontinuance, produced rubber hosepipes for industrial application. The rubber equipment segment was disposed of during the period and as a result ceased to be an operating segment. It has been included as part of discontinued operations in the segment reporting table. Please refer to the Discontinued Operations note xx for further information. Accounting policies and inter-segment transactions AASB 8.27 The accounting policies used by the Group in reporting operating segments are the same as those contained in note 1 to the accounts and in the prior period. The following items are not allocated to operating segments as they are not considered part of the core operations of any segment: • Interest revenue • Dividend revenue • Fair value gains/losses on held-for-trading derivatives • Fair value gains on hedged loan • Net gains on disposal of available-for-sale investments • Finance costs – including adjustments to provisions due to discounting • Impairment of assets – impairment losses on non-financial assets including goodwill are not

included in the measurement of segment profit or loss where they are not considered part of continuing operations and are not expected to recur. In the current period, the Group incurred losses due to a fire at a manufacturing facility (refer note xx), which are not included in the measure of segment profit or loss as they are not expected to recur

• Income tax expense • Gains/losses on pension asset/liability. So as to ensure there are no asymmetrical allocations to reportable segments, the following assets and liabilities have been excluded from operating segments: • Cash and cash equivalents • Assets and liabilities held within the disposal group • Current and deferred tax balances • Interest bearing loans and borrowings • Convertible redeemable preference shares • Loan notes receivable • Held-for-trading derivatives • Pension asset • Goodwill. Transfer prices between business segments are set on an arms’ length basis in a manner similar to transactions with third parties. Major customers AASB 8.34 The Group has a number of customers to which it provides both products and services. The Group does not rely on any of these customers and none of them amount to 10% or more of external revenue. The most significant client accounts for 5% of external revenue and the next most significant client accounts for only 2% of external revenue.



ERNST & YOUNG 29

YEAR ENDED 31 DECEMBER 2006

Electronics sales $'000

Electronics services

$'000


sales $'000


services $'000

Investment property

$'000

Unallocated items $'000

Total operations

$'000

Revenue Sales to external customers

38,211 25,474 76,840 51,227 - - 191,752 AASB 8.23(a), .32

Other revenues from external customers

2,284 3,426 4,569 6,852 1,404 - 18,535

Other revenue - - - - 68 207 275 Interest revenue 600 600 AASB 8.23(c ) Inter-segment sales 4,524 4,511 1,265 365 - - 10,665 AASB 8.23(b) Total segment revenue 45,019 33,411 82,674 58,444 1,472 807 221,827

Inter-segment elimination

(10,665)

Total consolidated revenue from continuing operations

211,162

AASB 8.28(a) Revenue from discontinued operations

42,809

Total consolidated revenue

253,971

AASB 8.28(a)

Result Segment results 3,121 2,081 6,153 4,102 321 - 15,778 Share of profit of associate

83 83 AASB 8.23(g)

Finance costs (1,366) (1,366) AASB 8.23(d) Write off of assets destroyed in fire

- - - - - (956) (956) AASB 8.23(f),(i)

Other expenses/income - - - - - 238 238 Profit /(loss) before income tax from continuing operations

13,777

AASB 8.28(b) Income tax expense - - - - - (3,755) (3,755) AASB 8.23(h) Profit from continuing operations

10,022

Discontinued operations after income tax

(19)

AASB 8.23(f)

Net profit for the period 10,003

Assets and liabilities Segment assets 21,750 14,500 28,221 18,815 12,051 24,309 119,646 Investments in associate and joint ventures

764

764

AASB 8 24(a)

Discontinued operations 12,811 Total assets 133,221 AASB 8.28( c )

Segment liabilities 7,070 4,713 10,728 7,152 3,704 22,943 56,310 Discontinued operations 13,627 Total liabilities 69,937 AASB 8.28 (d)



ERNST & YOUNG 30

YEAR ENDED 31 DECEMBER 2006

Electronics sales $'000

Electronics services

$'000


sales $'000


services $'000

Investment property

$'000

Unallocated items $'000

Total operations

$'000

Other segment information

Capital expenditure 2,380 1,588 5,554 3,704 338 - 13,564 AASB 8.24(b) Depreciation and amortisation 773 515 1,081 720 454 - 3,543

AASB 8.23(e)

Impairment losses - - - - - 207 207 AASB 8.23(i) Increase in fair value of investment properties

- - - - 68 - 68 AASB 8.23(i)

Write off of assets destroyed in fire

- - - - - 956 956 AASB 8.23(i)

Other non-cash expenses 54 35 39 26 6 36 196 AASB 8.23(i)

Cash flow information (a) Net cash flow from operating activities

3,500 2,290 9,523 4,082 1,238 4,199 24,832 AASB 107.50(d) Not Mandatory

Net cash flow from investing activities

(1,496) (641) (5,781) (1,927) (338) (4,830) (15,013)

Net cash flow from financing activities

(1,508) (646) (1,133) (486) - (1,654) (5,427)

(a) For the purpose of reconciling total cash flows to the cash flow statement, this column also includes cash flows that relate to discontinued operations. Geographical segments The Group’s geographical segments are determined based on the location of the Group’s assets. The following table presents revenue, expenditure and certain asset information regarding geographical segments for the years ended 31 December 2006 and 31 December 2005. YEAR ENDED 31 DECEMBER 2006

Australia $'000

United States $'000

Total $'000

Revenue Sales to external customers * 157,935 33,817 191,752 AASB 8.33(a) Discontinued operations 42,809 - 42,809 Geographic segment revenue 200,744 33,817 234,561

*Revenues are allocated to geographic segment based on the location of the customer. AASB 8.33(a) Other segment information Geographic non-current assets 39,886 9,154 49,040 AASB 8.33(b)

Commentary - Appendix B Scope of application – AASB 8 1. AASB 8 applies to for-profit entities whose debt or equity instruments are traded in a public market or that

files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

2. Application date is for annual reporting periods beginning on or after 1 January 2009 with early adoption permitted for annual reporting periods beginning on or after 1 January 2005. The early adoption option also applies to non-listed reporting entities that are currently required to apply AASB 114 Segment Reporting. As soon as these entities elect to adopt AASB 8, they will no longer be required to apply AASB 114 and because they are scoped out of AASB 8 they will no longer be required to present segment information in their financial reports.



ERNST & YOUNG 31

Commentary - Appendix B Core principle – AASB 8.1 3. An entity shall disclose information to enable users of its financial statements to evaluate the nature and

financial effects of the business activities in which it engages and the economic environments in which it operates.

Identification of segments – AASB 8.5, .6 4. An operating segment is defined as a component of an entity:

− that engages in business activities from which it may earn revenues and expenses (including revenues and expenses relating to transactions with other components of the same entity);

− whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and

− for which discrete financial information is available. Under this definition Ernst & Young would expect most entities applying AASB 8 to identify more reportable operating segments than would have been the case under AASB 114.

5. An operating segment may be a business activity that is yet to earn revenue i.e. a start-up operation. Alternatively not every part of an entity would be considered an operating segment, for example a corporate headquarters. An entity’s post-employment benefit plans are not operating segments for the purpose of AASB 8.

Chief operating decision maker – AASB 8.7, .8 6. The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title.

That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but it may be a group of executives or others.

7. If the chief operating decision maker uses more than one set of segment information, other factors may identify a single set of components as constituting an entity’s operating segments, including the nature of the business activities of each component, the existence of managers responsible for them, and information presented to the board of directors.

Aggregation of operating segments – AASB 8.12, .16 8. Two or more operating segments may be aggregated into a single operating segment if aggregation is

consistent with the core principle of this standard and the segments have similar economic characteristics. AASB 8.16 also allows the aggregation of immaterial segments into an ‘all other segment’ category.

Quantitative thresholds – AASB 8.13, .15, .19 9. An entity shall report separately information about an operating segment that meets any of the following

quantitative thresholds: − its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10%

or more of the combined revenue, internal and external, of all operating segments; − the absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of (i)

the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss; or

− its assets are 10% or more of all combined assets of all operating segments. 10. If the total external revenue reported by operating segments constitutes less than 75% of the entity’s revenue,

additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in note 9, above) until at least 75% of the entity’s revenue is included in reportable segments. AASB 8.19 notes that disclosure of more than 10 operating segments is impractical and in such cases the entity should re-consider its operating segments.

Measurement of segment items – AASB 8.25, .28 11. The amount of each segment item reported shall be the measure reported to the chief operating decision maker.

Adjustments and eliminations made in preparing an entity’s financial statements and allocations of revenues, expenses, gains or losses, assets and liabilities shall be included in determining reported segment profit or loss only if they are included in the measure of the segment’s profit or loss that is used by the chief operating decision maker. AASB 8.28 requires you to provide reconciliations of operating segment revenues, profit or loss, assets and liabilities to those reported by the entity in the financial statements.



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Commentary - Appendix B Interim Reporting – AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 12. If AASB 8 is early adopted, an entity would also need to apply the related amendments to paragraph 16(g) of

AASB 134 set out in AASB 2007-3, namely the requirement to disclose the following segment information:

− revenues from external customers, if included in the measure of segment profit or loss reviewed by the chief operating decision maker or otherwise regularly provided to the chief operating decision maker;

− intersegment revenues, if included in the measure of segment profit or loss reviewed by the chief operating decision maker or otherwise regularly provided to the chief operating decision maker;

− a measure of segment profit or loss; − total assets for which there has been a material change from the amount disclosed in the last annual

financial report; − a description of the differences from the last annual financial report in the basis of segmentation or in the

basis of measurement of segment profit or loss; − a reconciliation of the total of the reportable segments’ measures of profit or loss to the entity’s profit or

loss before tax expense and discontinued operations. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments’ measures of profit or loss to profit or loss after those items. Material reconciling items shall be separately identified and described in that reconciliation.



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Endeavour Half Year FINAL June07