KORVEST LTD — Annual Report 2016

Aug 1, 2016

Korvest Ltd

FY2016 Results Alexander Kachellek Steven McGregor

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Agenda

• FY16 Key Points

• Financial Results

• Outlook

• Company Overview

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Introduction to Korvest

• Korvest (ASX:KOV) is headquartered in South Australia and provides cable and pipe supports, access systems for large mobile equipment, hydraulic tools and wrenches, and galvanising services

• Listed in September 1970

• Korvest’s businesses sell to a wide variety of industry sectors through a number of channels to market

• EzyStrut has sales offices/warehouses in Adelaide, Melbourne, Sydney, Brisbane, Perth and Singapore, with distributors in Darwin, Townsville, Hobart and New Zealand

• Manufacturing, fabrication and galvanising in Adelaide

• Power Step and Titan Technologies in Brisbane

• Overseas supply chain provides make vs buy flexibility

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Headline Numbers June 2016 June 2015 % Change Sales $54.98m $63.03m (12.8%) Underlying EBIT[1] $2.68m $4.44m (39.6%) Operating cashflow $7.43m $5.12m 45.1% Underlying EPS[1] 17.8c 30.3c (41.3%) Dividend per share 20c 29c

Profit After Tax

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3,500 3,265
3,000 2,482
2,258 2,338
2,500
1,845
2,000 1,567
1,330
1,500 1,278
1,000 635
500 1,038
124 (88)
0
(500 ) FY12 FY13 FY 13 FY 14 FY 14 FY 15 FY 15 FY 16 FY 16
2H 1H 2H 1H 2H 1H 2H 1H 2H
Statutory Underlying
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• Day-to-day and medium sized project conditions soft

• Major LNG Projects largely finished

• Strong operating cashflows

• Restructure costs

• Acquisition related costs

• Board renewal

• Excellent safety performance

1 Underlying EBIT and underlying EPS are non-IFRS measures. Details of how these measures are calculated including reconciliations to statutory numbers are set out on page 15

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Industrial Products

June 2016 June 2015 % Change Sales $50.70m $58.33m (13.1%) Statutory EBIT $2.99m $5.16m - Restructuring Costs $0.29m Underlying EBIT $3.28m $5.16m (36.4%) Underlying EBIT % 6.5% 8.8%

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Industrial Products

Trading Update

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• LNG projects largely complete during 2H

• All domestic markets contracted

• General market remained skewed to commercial

• NZ sales grew

• Singaporean Business Development resource in place

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• Poor performance due to lack of mining activity

• • Prototype for new rail product ordered for 1H FY17 delivery

• Provision for slow moving stock ($645k)

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Production Services

June 2016 June 2015 % Change Sales $4.28m $4.69m (8.7%) Statutory EBIT ($0.05m) $0.7m - Restructuring Costs $0.27m Underlying EBIT $0.22m $0.7m (68.6%) Underlying EBIT % 5.1% 14.9% Trading Update • Lowest annual plant volumes for a Galvanising volume decade • Last three halves similar volumes • Market share retained • Less internal tonnes • Benefits of restructuring to be realised in FY17 • Further rail electrification work announced FY12 FY13 FY14 FY15 FY16

• Benefits of restructuring to be realised in FY17

• Further rail electrification work announced in recent SA budget

External Internal

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Balance Sheet

ASSETS $m	June 2016	June 2015	June 2014
Cash	5.1	(0.5)	0.5
Receivables	8.2	13.6	17.7
Inventories	11.5	13.6	11.3
Property, Plant & Equipment	14.6	15.9	15.9
Other	1.0	0.3	-
Assets held for sale	-	-	1.5
Goodwill and intangibles	-	-	1.8
Total Assets	40.4	42.9	48.8
LIABILITIES
Payables	(4.2)	(6.4)	(8.2)
Other Liabilities	(3.7)	(3.6)	(4.0)
Total Liabilities	(7.9)	(10.0)	(12.2)
NET ASSETS	32.5	32.9	36.6

• Improved working capital position as major project requirements unwind

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Dividends

	FY 2016	FY 2015	FY 2014	FY 2013	FY 2012
Interim	10c	17c	26c	26c	18c
Special Interim	-	-	100c	-	5c
Final Dividend	10c	12c	31c	20c	30c
Total Dividend	20c	29c	157c	46c	53c
Franking	100%	100%	100%	100%	100%

• DRP suspended for final dividend Key Dates Record Date: 26 August 2016 Payment Date: 9 September 2016

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Outlook

• Little change expected in domestic underlying trading conditions

• Recovery tied to non-residential construction/investment cycle

• Build on good FY16 performance in NZ

• Pivotal period for SE Asia strategy with local resource in place

• New products and approvals a focus, achieved DNV accreditation that opens up new oil & gas market

• Passive approach to M&A activity

• Continue to pursue process innovations resulting in cost reductions and product enhancements

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Company Overview

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Industrial Products

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• • • • •

Cable and pipe supports

Market leader in cable supports

Manufacturing facility in Kilburn, SA

Overseas supply chain

Sells to EPCMs, Wholesalers, and direct to project contractors and trade

Local manufacture allows quick response time and ability to manufacture specials – a differentiator to overseas competition National sales and warehouse network

Vertical integration with Korvest Galvanisers

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Industrial Products

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• Hydraulic/Electric Safety Access Systems for mobile vehicles

• Design

• Manufacture

• Queensland Based

• Sales Representatives/agents in:

• QLD, WA, NSW

• Chile, Brazil, South Africa

• Hydraulic tools and wrenches

• Sale

• Hire

• Repair

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Production Services

• Longest galvanising kettle in Australia (14m)

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• South Australia’s only centrifuge plant (national market)

• Predominantly structural work for SA projects or fabrications

• In-house work for EzyStrut

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Calculations

Underlying EBIT and EPS are non-IFRS measures. The calculation of the underlying numbers included in this presentation is set out below.

Underlying EBIT

UnderlyingEBIT
$’000	June 16	June 15
Statutory EBIT	1,303	2,720
Adjustments
Restructuring	697	-
Acquisition related costs	679	-
Goodwill impairment	-	1,721
Underlying EBIT	2,679	4,441

Underlying EPS

UnderlyingEPS
$’000	June 16	June 15
Statutory Profit after tax	950	1,455
After tax adjustments
Restructuring	488	-
Acquisition related costs	475	-
Goodwill impairment	-	1,721
Underlying Profit after tax	1,913	3,176
Shares (weighted average)	10,720k	10,484k
Underlying EPS (cents)	17.8c	30.3c

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Australia’s leading range of cable & pipe supports. www.ezystrut.com.au

Safety Access solutions for all large mobile equipment. www.powerstep.com.au

Superior bolting solutions for any industry. www.titantools.com.au

Quick turnaround galvanising of the largest, smallest, and most complex construction members. www.korvestgalvanisers.com.au

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