KORVEST LTD — Annual Report 2017

Jul 31, 2017

==> picture [186 x 46] intentionally omitted <==

FY2017 Results Alexander Kachellek Steven McGregor

==> picture [86 x 450] intentionally omitted <==

Agenda

• FY17 Key Points

• Financial Results

• Outlook

• Company Overview

==> picture [186 x 46] intentionally omitted <==

2

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

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 has sales offices warehouses in Adelaide, Melbourne, Sydney, Brisbane and Perth, 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

• Korvest business sell to a wide variety of industry sectors

3

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Headline Numbers

	June 2017	June 2016	% Change
Sales	$44.73m	$54.98m	(18.6%)
EBIT	($2.29m)	$1.30m	(276%)
Operating cashflow	($0.38m)	$7.43m	(105%)
EPS	(14.4c)	8.9c	(262%)
Dividend per share	13c	20c	(35%)

Profit After Tax

• No major project sales during period

• • International strategy refocussed

• • Higher input costs

==> picture [306 x 146] intentionally omitted <==

----- Start of picture text -----

4,000 3,265
3,000 2,338
1,845
2,000 1,330
1,278
1,000 635
0 124 (88) 1,038 (395)
FY14 1H FY14 2H FY15 1H FY15 2H FY16 1H FY16 2H FY17 1H FY17 2H
(1,000 )
(1,033)
(2,000 )
Statutory Underlying
----- End of picture text -----

1 Underlying Profit after Tax is a non-IFRS measure. Details of how it is calculated including a reconciliation to statutory numbers are set out on page 15

4

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Industrial Products

June 2017 June 2016 % Change Sales $40.27m $50.70m (20.6%) EBIT ($1.63m) $2.99m (154.5%) EBIT % (4.0%) 5.9%

==> picture [93 x 22] intentionally omitted <==

• Trading Update

• • Lack of major projects

• Day-to-day work improved

• Inconsistent activity state by state

• NSW most active market

• Margins reduced

• Static sell prices

o Increasing input costs (eg steel, energy)

• Improved result

• Cost base reduced in June (WA site closed, some admin moved to Head Office)

==> picture [102 x 24] intentionally omitted <==

5

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Production Services

	June 2017	June 2016	% Change
Sales	$4.46m	$4.28m	4.2%
Statutory EBIT	($0.30m)	($0.05m)
EBIT %	(6.7%)	(1.2%)

==> picture [111 x 24] intentionally omitted <==

Trading Update

==> picture [111 x 22] intentionally omitted <==

Galvanising volume

• More external, less internal tonnes

• • 2H improvement

• Margin pressure

==> picture [289 x 112] intentionally omitted <==

• Increasing zinc cost (35%)

• Surplus market capacity

• Energy costs $120k 2H increase

==> picture [301 x 27] intentionally omitted <==

----- Start of picture text -----

FY14 2H FY15 1H FY15 2H FY 16 1H FY 16 2H FY17 1H FY17 2H
External Internal
----- End of picture text -----

6

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Balance Sheet

ASSETS $m	June 2017	June 2016	June 2015
Cash & Investments	2.0	5.1	(0.5)
Receivables	9.5	8.2	13.6
Inventories	10.7	11.5	13.6
Property, Plant & Equipment	13.8	14.6	15.9
Other	0.1	1.0	0.3
Total Assets	36.1	40.4	42.9

LIABILITIES

Payables	(4.0)	(4.2)	(4.2)
Other Liabilities	(2.9)	(3.7)	(3.7)
Total Liabilities	(6.9)	(7.9)	(7.9)
NET ASSETS	29.2	32.5	32.5

NET ASSETS

Receivables – 4Q sales $1.8m higher in FY2017 than FY2016 Inventories – Focus on reducing inventory

7

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Dividends

Dividends
	FY 2017	FY 2016	FY 2015	FY 2014	FY 2013
Interim	10c	10c	17c	26c	26c
Special Interim	-	-	-	100c	-
Final Dividend	3c	10c	12c	31c	20c
Total Dividend	13c	20c	29c	157c	46c
Franking	100%	100%	100%	100%	100%

• DRP suspended for final dividend Key Dates

Record Date: 25 August 2017 Payment Date: 8 September 2017

8

==> picture [86 x 450] intentionally omitted <==

Outlook

• Domestic market is primary focus

• Market outlook encouraging

• Product cost improvement

• supply chain

• new machinery investment

• Price rises

• Inventory reduction

• Update on trading at AGM

==> picture [186 x 46] intentionally omitted <==

9

==> picture [186 x 46] intentionally omitted <==

Company Overview

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Industrial Products

==> picture [241 x 293] intentionally omitted <==

• 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

11

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Industrial Products

==> picture [240 x 151] intentionally omitted <==

• Hydraulic/Electric Safety Access Systems for mobile vehicles

• Design

• Manufacture

• Safety Lighting

• Filter Crushers

• Queensland Based

• Sales Representatives/agents in:

==> picture [243 x 124] intentionally omitted <==

• QLD, WA, NSW

• Chile, Brazil, South Africa

12

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Industrial Products

==> picture [239 x 160] intentionally omitted <==

• Hydraulic tools and wrenches

• Sale

• Hire

• Repair

• Markets

• Large scale construction

==> picture [242 x 111] intentionally omitted <==

• Power stations

• Industrial sites

• Mines

• Wind towers

13

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Production Services

==> picture [219 x 269] intentionally omitted <==

• Longest galvanising kettle in Australia (14m)

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

• Predominantly structural work for SA projects or fabrications

• In-house work for EzyStrut

14

==> picture [86 x 450] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

Calculations

Underlying Profit After Tax is a non-IFRS measure. The chart showing Profit after Tax on Page 4 shows underlying and statutory Profit after Tax. The calculations of the underlying numbers included in this presentation are set out below.

Underlying Profit After Tax

$’000	FY15 1H	FY16 1H	FY16 2H
Statutory EBIT	124	(88)	1,038
Adjustments
Restructuring		248	240
Acquisition related costs		475
Goodwill impairment	1,721
Underlying EBIT	1,845	635	1,278

15

==> picture [86 x 450] intentionally omitted <==

==> picture [160 x 36] intentionally omitted <==

==> picture [159 x 47] intentionally omitted <==

==> picture [168 x 39] intentionally omitted <==

==> picture [158 x 42] intentionally omitted <==

==> picture [186 x 46] intentionally omitted <==

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

16