4

perfOrmance higHligHts FOR THE YEAR ENDED 31 MARCH 2011

Group Financial Performance

Group NPAT down 39.3% from $7.8m to $4.7m, after impact of providing for the loss of $2.0m relating to the UK customer, Focus (DIY) Limited

Excluding impact of loss from this UK customer, Group NPAT down 13.7% from $7.8m to $6.7m

Net Debt increased only 9.3% from $17.4m to $19.1m, guidance was an increase of 15-20%

Group Operating Revenue down 6.0% from $129.8m to $122.1m

EBITDA down 13.4% from $16.7m to $14.5m, excluding impact of UK customer loss

Highlights

Sales in Australia up 12.1% from A$36.6m to A$41.0m

EBITDA in Australia up 62% from A$2.4m to A$3.8m, despite A$0.5m bad debt

Cumulative Hotel installations for Satinjet showers top 21,000 rooms

Second prestigious Red Dot Award won, this time for Tahi Twin Lever tapware system

Key management change in UK in November 2010

Launched Methven brand at premium global trade show in Frankfurt, March 2011

New computer system implemented in New Zealand; delivered on time, and, on budget

Dividend and Cash Flows

Debt and cash fl ow forecast comply comfortably within banking covenants and headroom

Partially imputed fi nal dividend of 4.5 cps to be paid on 30 June 2011, down on June 2010 fi nal dividend of 5.5 cps, to bring total dividend for the year to 10.0 cps (LY 11.00 cps)

4

55

66

7

financial suMMary FOR THE YEAR ENDED 31 MARCH 2011

NZ $000 2011 2010 Change

TRADING RESULTS

Group operating revenue 122,087 129,822 -6.0%

EBITDA 1 12,343 16,698 -26.1%

Net profi t after tax 4,749 7,820 -39.3%

Financial position at year end

Total equity 50,547 53,309

Total assets 99,999 100,958

Intangible assets 38,315 38,306

Net debt 19,074 17,446

Capital expenditure 3,659 2,209

Equity ratio 72.6% 75.3%

Shareholder statistics

Number of shares 66,606,265 66,606,265

Dividend per share 10.00c 11.00c

Share price at year end $1.56 $1.58

Earnings per share 7.1c 11.7c

Net dividend yield 6.4% 7.0%

Gross dividend yield 8.3% 9.9%

Net tangible asset value per share 18.4c 22.5c

1 Excludes impairment, non-operating fx gains/losses and revaluation of the business acquisition option

7

cHairman’s and grOup ceO’s review

8

OUR UNDERLYING MARGINS AND CASH FLOW ARE SOLID WITH BETTER DEBT LEVELS THAN FORECAST AND WE HAVE CONFIDENCE IN OUR FORWARD STRATEGY

It has been a challenging year with a reduced

profi t compounded by the eff ect of our largest UK

customer, Focus (DIY) Limited, entering into voluntary

administration and the Christchurch earthquakes

impacting domestic sales. We’ve made some mistakes

but we have learned from them and are confi dent of

returning the UK to profi t in the coming year.

Our underlying margins and cash fl ow are solid

with better debt levels than forecast and we have

confi dence in our forward strategy allowing us to pay

a fi nal dividend.

We remain committed to our strategies of:

• Design-led product diff erentiation and innovation

• Growing our UK market presence

• Developing the luxury hotel market, and

• Pursuing international distribution opportunities

In addition, we have accelerated our drive to improve

operational effi ciencies in all markets.

Group NPAT for the year to 31 March 2011 was 39.3%

down on last year at $4.7 million, compared to the

previous year of $7.8 million, mainly as a result of the

Focus (DIY) limited loss of $2.0 million. Excluding the

Focus (DIY) Limited loss, Group NPAT was down 13.7%

from $7.8 million to $6.7 million.

Group Net Debt increased only 9.3% from $17.4 million

to $19.1 million and was better than the guidance of up

15-20%, with both Working Capital levels and Capital

Expenditure managed better than forecast.

Our Australian business produced a pleasing result

with sales up 12.1% from A$36.6 million to A$41.0

million and EBITDA up 62.2% from A$2.4 million to

A$3.8 million - this after the Enact Energy bad debt of

A$0.5 million. The continued roll-out of new products

combined with our proven sales methodology has

allowed us to successfully grow our market share.

New Zealand performance was weaker, as building

and renovation activity continued at historic lows,

exacerbated by the adverse eff ect of the Christchurch

earthquakes. Sales were down 8.8% from NZ$43.1

million to NZ$39.3 million resulting in EBITDA

dropping 4.6% from NZ$9.8 million to NZ$9.4

million. We remained committed to our investment

in research and development, increasing our spend

by 50% year on year. We won our second prestigious

Red Dot award for product design, this time for our

Tahi Twin Lever tapware system.

9

10

We commenced new initiatives to turn around the

performance of our United Kingdom operation. In

October 2010 Group Chief Operating Offi cer, Matthew

Crichton, was seconded to the UK to implement

the successful Australian sales model and Methven

design-led culture. In November 2010 we employed

Steve Lee, the highly regarded and experienced

former Chairman and Chief Executive Offi cer of the

Bristan Group, UK’s largest tapware company, to run

Methven UK. The Methven brand was re-launched in

March 2011 and we repositioned the Deva brand and

range of products.

The loss of our largest United Kingdom customer

Focus (DIY) Limited, which entered into voluntary

administration on 6 May 2011, resulted in a one-off

loss totaling NZ$2.0 million after tax and includes

a non-cash customer impairment of NZ$0.4 million

after tax. We are aggressively pursuing all avenues to

recover the outstanding debt.

We have made good progress in the luxury hotel

market winning new projects with the Hilton,

Marriott, Devere, Holiday Inn, Crowne Plaza and

other prestigious hotel chains as well as achieving

brand standard with the IHG Group. Total hotel rooms

globally, fi tted with Satinjet showers, increased 64%

on last years cumulative total and now totals 21,255

rooms worldwide. In Australia, where the initiative

was fi rst developed, hotel rooms won grew 46% on

last year. Although the initiative has taken longer than

anticipated to gain traction in the Asian and European

markets, good progress has been made with rooms

increasing 168% in Asia, albeit from a low base and

Europe adding 1,240 rooms in its fi rst year.

Our eff orts to fi nd new international distributors for

our premium shower and tapware range moved to a

new level when, for the fi rst time, we exhibited at the

premium ISH Kitchen and Bathroom show in Frankfurt

in March 2011. We are prioritising leads received from

more than 29 European and Asian countries.

The successful implementation of a new computer

system in New Zealand - on time and within budget

- gives us the platform from which to generate

continuous operational improvements as we roll out

to each division with the next “cab off the rank” being

our UK operation.

As we look to the future, despite the rigours of the

past, we are confi dent our strategy based on design

and market leadership, supported by a commitment

to continuous operational improvement, will result in

profi table growth.

DIVIDEND AND CASH FLOWSDebt and cash fl ow forecasts comply comfortably

within banking covenants and headroom.

The Directors have exercised due caution in declaring

a partially imputed fi nal dividend of 4.5 cps be

paid on 30 June 2011, down on the June 2010 fi nal

dividend of 5.5 cps. This brings the total dividend for

the year to 10.00 cps compared to 11.00 cps last year.

COVENANTS AND CASHFLOW 2011 2010

Interest cover (EBITA/interest) - not less than 2.5 7.9x 14.8x

Gearing ratio (Net debt/EBITA) - not to exceed 3.5 1.9x 1.5x

Facility utilisation 75% 60%

rooms worldwide. In Australia, where the initiative

was fi rst developed, hotel rooms won grew 46% on

last year. Although the initiative has taken longer than

anticipated to gain traction in the Asian and European

markets, good progress has been made with rooms

increasing 168% in Asia, albeit from a low base and

Europe adding 1,240 rooms in its fi rst year.

paid on 30 June 2011, down on the June 2010 fi nal

dividend of 5.5 cps. This brings the total dividend for

the year to 10.00 cps compared to 11.00 cps last year.

COVENANTS AND CASHFLOW 2011 2010

Interest cover (EBITA/interest) - not less than 2.5 7.9x 14.8x

Gearing ratio (Net debt/EBITA) - not to exceed 3.5 1.9x 1.5x

Facility utilisation 75% 60%

11

GROUP EBITDA

$NZ

mill

ion

20

15

10

5

02005 2006 2007 2008 2009 2010 2011

GROUP REVENUE

$NZ

mill

ion

140

120

100

80

60

40

20

02005 2006 2007 2008 2009 2010 2011

TRADING RESULTS 2011NZ $000

2010 NZ $000 Change %

Group operating revenue 122,087 129,822 -6.0

EBITDA 1 12,343 16,698 -26.1

Net profi t after tax 4,749 7,820 -39.3

Before Focus (DIY) Limited loss and non-cash customer impairment

EBITDA 1 14,467 16,698 -13.4

Net profi t after tax 6,749 7,820 -13.7

1. Excludes impairment, non-operating fx gains/losses and revaluation of the business acquisition option

AS WE LOOK TO THE FUTURE, DESPITE THE RIGOURS OF THE PAST, WE ARE CONFIDENT OUR STRATEGY BASED ON DESIGN AND MARKET LEADERSHIP, SUPPORTED BY A COMMITMENT TO CONTINUOUS OPERATIONAL IMPROVEMENT, WILL RESULT IN PROFITABLE GROWTH.

market review

AUSTRALIA SALES

$NZ

mill

ion

60

45

30

15

02005 2006 2007 2008 2009 2010 2011

12

AUSTRALIA

Signifi cant earnings growth

AUSTRALIA AU $000 2011 2010

Operating Revenue 40,967 36,553

EBITDA 3,816 2,352

EBITDA % of revenue 9.3% 6.4%

• Operating Revenue up 12.1% from A$36.6 million to

A$41.0 million

• EBITDA up 62.2% from A$2.4 million to

A$3.8 million, despite Enact bad debt of A$486k

• Trading margins have improved particularly due to

weaker USD

• Tapware sales up 30.4%, showers up 25.1%,

Satinjet sales up 8.3%, valve sales down 31.6%

• Won Bunnings’ shower category business

• Strong growth in domestic hotel sales with hotel

rooms up 46%

• Jemfl o technology a winning proposition when

combined with Satinjet

market review

NEW ZEALAND SALES

$NZ

mill

ion

60

45

30

15

02005 2006 2007 2008 2009 2010 2011

13

NEW ZEALAND SALES

$NZ

mill

ion

60

45

30

15

02005 2006 2007 2008 2009 2010 2011

NEW ZEALAND

Softening market aff ected by Christchurch earthquakes

NEW ZEALAND NZ $000 2011 2010

Operating Revenue 39,254 43,050

EBITDA 9,367 9,821

EBITDA % of revenue 23.9% 22.8%

• Operating revenue down 8.8% from $43.1 million

to $39.3 million

• Domestic Revenue down 5.8% from $38.6 million

to $36.4 million. Weak second half with Q4 sales

impacted by Christchurch earthquakes. New

Zealand combined building permits up 1% on prior

year. In the second six months down 11.7%

• EBITDA down 4.6% from $9.8 million to

$9.4 million but EBITDA margin to sales improves

• Second Red Dot award won, this time for Tahi Twin

Lever tapware

• New computer system implemented in NZ on time

and within budget

• Research and development investment increased

by 50%

UNITED KINGDOM

Impact of Focus (DIY) Limited loss, diffi cult economic conditions persist

UNITED KINGDOM GB £000 2011 2010

Operating Revenue 14,543 18,663

EBITDA (991) 1,518

EBITDA % of revenue (6.8)% 8.1%

• Operating Revenue down 22.1% from £18.7 million

to £14.5 million

• EBITDA down from £1.5 million to breakeven before

£1 million reduction due to the 100% provisioning

of receivables and inventory attributed to Focus

(DIY) Ltd.

• Trading margins improved slightly despite

competitive market conditions

• Group COO Matthew Crichton seconded to

implement successful Australian sales model and

Methven design-led culture in October 2010

• Steve Lee the former Chairman and CEO of

Bristan, largest UK tapware company, appointed in

November 2010 to lead Methven UK

• Launched Methven brand at Ecobuild London and

ISH Frankfurt in March 2011

• Repositioning of the Deva product range and brand

14

strategic fOcus

OUR STRATEGIC OBJECTIVES REMAIN UNCHANGED AND OUR FOCUS IS ON THEIR SUCCESSFUL EXECUTION.

We are continuing to:

• Create innovative and proprietary shower and tapware solutions

• Set the platform for profi table growth in the UK

• Increase sales with our luxury hotel market initiative

• Develop new international distributor opportunities

• Improve operational effi ciency in all Divisions

Creating innovative, award-winning and commercially successful products

The foundation for our success is based upon our ability to continue to develop

award-winning and commercially successful shower and tapware solutions and

experiences. With this in mind we will continue to heavily invest in research and

product development.

In the past year we released two new ranges of shower and tapware as well as a

suite of products adapted to meet United Kingdom requirements - a total of 84 new

products. The Tahi Twin Lever tapware range was the winner of a prestigious 2011

German Red Dot Award for product design, our second such award. Tahi Twin Lever

tapware provides for improved water and energy savings, intuitive operation and

design excellence for our Methven range.

We have also developed more environmentally-friendly products such as the Kiri

Ultra-Low fl ow shower - a new Satinjet product that uses less than six litres of water

a minute. This product won the Gold award in the Sustainable Product Category at

the 2010 New Zealand Best Design Awards.

In the coming year we plan the international launch of three new Satinjet shower

ranges with complementary tapware ranges. This is a total of 59 new Methven

branded products that will increase the breadth of our off ering and fi ll the

remaining price point gaps for the consumer.

Innovative solutions for subsequent years will include digital thermostatic shower

technology that eliminates temperature fl uctuations, is intuitive and easy to use

and provides better water and energy effi ciency. In addition further development

of the Shower Skincare range (previously called HomeSpa) will include additional

applications for use of the de-chlorination and shower infusion technology.

15

16

Setting the platform for profi table growth in our UK business

Transforming the UK business continues to be our top priority. The turnaround

plan began in October 2010 with many of the foundations now in place. The

unforeseen loss of the Focus (DIY) Limited business has put some further risk into

meeting our profi t objectives and to mitigate this we have accelerated our plans

to improve operational effi ciency.

The key actions for this year include;

• Rollout of the Methven brand and product range into high end bathroom stores

• Launch of the new Deva brand and product range

• Achieve product and supplier rationalisation benefi ts

• Implement new computer system using the New Zealand template

• Relocate to a modern effi cient warehouse

• Improve operating processes

We are confi dent these actions will not only return the UK operation to profi t,

but provide a sound basis for strong market share growth based upon our

diff erentiated brand and product strategy.

Increase Sales in the Luxury Hotel Market

This niche market provides exciting opportunities to grow sales and leverage

our unique Satinjet/Jemfl o proposition that provides hotel guests with a

luxurious water and energy-effi cient shower experience.

After four years of investment in the Australian hotel market, we are now

reaping the benefi ts, resulting in hotel rooms won increasing 46% on the

previous year. With two years in the Asian market and one year in Europe,

we have a large pipeline of quotes in place and will be looking to turn these

into orders in this coming year.

New Satinjet shower products due for release this year will be able to be utilised

for specifi c hotel applications.

Improve Operational Effi ciency

With sales growth expected to remain challenging in the current global

economic climate, we will look to signifi cantly improve productivity levels and

reduce costs in all Divisions. Product and supplier rationalisation across the

Group will enable us to reduce the total cost and investment in stock levels.

The implementation of new computer systems, warehousing and processes will

generate further operational improvements.

17

18

19

OutlOOkOutlOOk

acknOwledgements

We are confi dent that, despite what has been

a tough year coupled with some setbacks,

we have taken heed of the lessons we have

learned and can achieve our vision of being

the leading shower brand that delivers life-

enhancing shower experiences.

The Directors wish to thank Group CEO

Rick Fala and the global Methven team for

their tireless eff orts to grow our brand and

market presence in what has been the most

challenging market conditions we have faced.

We will continue to keep the market and

shareholders regularly updated on our

progress, particularly in regards to the

turnaround of our UK operation.

Phil Lough

Chairman

Rick Fala

Managing Director and Group CEO

As a result of all the actions underway that

support our strategic objectives, we are

forecasting profi t will rise signifi cantly on last

year to give a Net Profi t After Tax in excess

of $8.5 million, up more than 25% on prior

year profi t before the impact of the major UK

customer failure (up more than 80% on prior

year reported profi t).

We will continue to invest in our future. Our

commitment to research and development

remains and will not be cut, thus ensuring we

maintain our vision of being the leading shower

brand with design-led product diff erentiation.

Australia’s economic conditions are expected

to soften. We expect modest top line growth

and will focus on improving operational

effi ciencies to ensure we maintain our current

profi t growth rate.

In New Zealand weak building and retail

sectors have been compounded by the

Christchurch earthquakes. The New Zealand

operation is expected to be static until the

Christchurch re-build fully gets underway.

The UK market remains challenging. Our focus

will be on rationalisation and executing our

turnaround strategy. We expect to return to

profi t for the 2012 fi nancial year and have a

sustainable base for growth.