KORVEST LTD — Interim / Quarterly Report 2010

Jan 27, 2010

Appendix 4D Half-Year Financial Report

Appendix 4D

Korvest Ltd ABN 20 007 698 106 and its Controlled Entities

Half-Year Financial Report 31 December 2009

Results for announcement to the market:

$A’000

Results for announcement to the market: $A’000	Results for announcement to the market: $A’000	Results for announcement to the market: $A’000
Revenues Net profit after tax for the period attributable to members	Down 17.4% to 28,398 Down 13.5% to 2,526
Dividends	Amount per security	Franked amount per security
Interim dividend (#) - current reporting period - previous corresponding period 17.0¢ 17.0¢ 17.0¢ 17.0¢ # Interim dividend proposed in respect of the current reporting period. The financial effect of this dividend will be recognised in the next reporting period.	17.0¢ 17.0¢	17.0¢ 17.0¢
Record date for determining entitlements to the dividend	19 February 2010
Brief explanation of any of the figures reported above and short details of any bonus or cash issue or other item(s) of importance not previously released to the market: Refer directors’ report on pages 2 to 4 of this financial report.

This financial report is all the half-year information provided to the Australian Stock Exchange under listing rule 4.2A. The report also satisfies the half-year reporting requirements of the Corporations Act 2001.

This half-year financial report should be read in conjunction with the 2009 annual financial report.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities Directors’ Report

The directors present their report together with the consolidated financial report of Korvest Ltd (“the Company”) and its controlled entities for the half-year ended 31 December 2009 and the auditor’s review report thereon.

Directors

The directors of the Company at any time during or since the end of the half-year are:

Peter William Stancliffe BE(Civil) FAICD

Age 61 Chairman appointed 1 January 2009 Non-Executive Director Appointed Director in January 2009 Director Hills Industries Limited Director Automotive Holdings Group Limited Director Harris Scarfe Pty Ltd

Graham Lloyd Twartz B.A. (Adel), Dip Acc (Flinders)

Age 52 A Director since November 1999. Chairman of Audit Committee. Managing Director, Hills Industries Limited.

Peter Brodribb F.I.E (Aust)

Age 65 Non-Executive Director A Director since 1984. Appointed Non-Executive Director in January 2005.

Alexander Henrik Wilhelm Kachellek C.Eng, Bsc. MIEE

Age 56 Managing Director A Director since June 2007.

Steven John William McGregor BA (Acc), CA

Age 38 Finance Director Appointed 1 January 2009. Company Secretary since April 2008

Consolidated Result

The consolidated profit for the half-year attributable to the members of the Company was:

In thousands of AUD Profit after income tax expense Net profit attributable to members of the Company	31 Dec 09 31 Dec 08 2,526 2,921
	2,526 2,921

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities Directors’ Report

Other Ratios

	31 Dec 09	31 Dec 08
Net tangible asset (NTA) backing
Net tangible assets per ordinary share	$3.52	$3.22
Profit before tax / revenue	13.1%	12.2%
Profit after tax / equity interests	8.4%	10.5%

Review of Operations

Revenue from trading operations for the half-year decreased by 17.4% to $28.398m whilst profit after tax for the period decreased by 13.5% to $2.526m. Included in the profit after tax is a foreign currency translation expense of $0.1m relating to the non-operating New Zealand subsidiary that was deregistered in August 2009. Excluding the impact of this one-off item the underlying trading profit after tax for the half year decreased by 10.1%. These results reflected the weaker market conditions in the mining and infrastructure industries over the period under review and in particular the caution taken in commencing projects given the global economic circumstances.

EzyStrut experienced a reduction in project work in the half year and whilst “day-to-day” business remained strong the general conditions reflected those experienced late in FY2009. Putting aside seasonal factors the latter part of the first half did show signs that activity in the market was improving.

The Galvanising business experienced difficult trading conditions during the first half with weaker demand in the industry experienced for much of the first half. Overall plant volumes decreased although increased activity from the Indax business mitigated the decline in general work available in the greater market. The plant continues to operate efficiently and to make process and productivity improvements. During the recent Christmas 2009 shut-down period the galvanising bath was successfully replaced. This is a “once a decade” task and it was pleasing that production recommenced in early January 2010 as planned.

Indax, the walkway and handrail business, continued to focus on growing market share and in particular establishing a customer base outside of South Australia. The Company was most successful in the Queensland market where the benefits of dedicated sales representation in that state were clear. As a result of that success Indax will be opening a Queensland fabrication facility in March 2010 to better service the large Queensland market and to increase overall fabrication capacity and flexibility for the business. The order book for Indax remains strong.

Dividends

The Company’s dividend policy is to pay 50% of its after-tax profits to shareholders as dividends as long as the following conditions are met:

• no change in the law in connection with the distribution of accumulated franking credits; and

• • an acceptable level of profitability.

The directors announced a fully franked interim dividend of 17.0 cents per share. This dividend can be taken as cash only as the Dividend Investment and Share Investment Plans have been suspended. The dividend will be paid on 5 March 2010 and the record date is 19 February 2010.

Events Subsequent to Reporting Date

Events subsequent to the reporting date are included in note15 of the Condensed Notes to the Consolidated Interim Financial Report.

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Appendix 4D Half-Year Financial Report

2010 Guidance

There are indications that the markets that Korvest operates in could improve in the second half of F2010. In light of this it is expected that the full year’s results should be in line with last year’s.

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

The lead auditor’s independence declaration is set out on page 5 and forms part of the directors’ report for the half-year ended 31 December 2009.

Rounding Off

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and, in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Dated at Kilburn this 28[th] day of January 2010.

Signed in accordance with a resolution of the directors:

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PW Stancliffe Director

AHW Kachellek Director

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Appendix 4D Half-Year Financial Report

Lead Auditor’s Independence Declaration

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities

Consolidated Interim Statement of Comprehensive Income for the Half-Year Ended 31 December 2009

In thousands of AUD Note Revenue 6(a) Expenses excluding net financing costs 6(c) Results from operating activities excluding net financing costs Financial income Financial expenses Net financing costs Profit before income tax expense Income tax expense Net profit for the period Attributable to: Shareholders of the Company Profit for the period Other comprehensive income Foreign currency translation differences Total comprehensive income for the period Basic earnings per share Diluted earnings per share	Consolidated 31 Dec 09 31 Dec 08 28,398 34,367
	28,398 34,367 (24,765) (30,206)
	3,633 4,161
	84 44 - (2)
	84 42
	3,717 4,203 (1,191) (1,282)
	2,526 2,921
	2,526 2,921
	2,526 2,921
	100 3
	2,626 2,924
	29.4¢ 33.9¢ 29.2¢ 33.9¢

The statement of comprehensive income is to be read in conjunction with the condensed notes to the consolidated interim financial report set out on pages 10 to 14.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities

Consolidated Interim Statement of Changes in Equity for the Half-Year Ended 31 December 2009

Consolidated In thousands of AUD Balance at 1 July 2009 Total recognised income and expense Shares issued under the Share Plans Dividends to shareholders Balance at 31 December 2009 Balance at 1 July 2008 Total recognised income and expense Shares issued under the Employee Share Bonus Plan Dividends to shareholders Balance at 31 December 2008	Share capital Equity compens- ation reserve Trans- lation reserve Asset revaluation reserve Retained earnings Total
	3,617 42 (100) 3,275 22,216 29,050
	- - 100 - 2,526 2,626
	- 7 - - - 7
	- - - - (1,460) (1,460)
	3,617 49 - 3,275 23,282 30,223
	3,580 27 (101) 3,275 19,220 26,001 - - 3 - 2,921 2,924 18 11 - - - 29 - - - - (1,199) (1,199)
	3,598 38 (98) 3,275 20,942 27,755

The statement of changes in equity is to be read in conjunction with the condensed notes to the consolidated interim financial report set out on pages 10 to 14.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities Consolidated Interim Statement of Financial Position as at 31 December 2009

In thousands of AUD Note Current Assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-Current Assets Property, plant and equipment Total non-current assets Total assets Current Liabilities Trade and other payables Income tax payable Employee benefits Provisions Total current liabilities Non-Current Liabilities Deferred tax liabilities Employee benefits Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity attributable to equity holders of the parent Total equity	Consolidated 31 Dec 09 30 June 09 4,891 4,002 9,614 11,195 9,133 8,483
	23,638 23,680
	14,603 14,034
	14,603 14,034
	38,241 37,714
	4,523 5,064 483 756 1,077 1,027 506 571
	6,589 7,418
	821 683 386 335 222 228
	1,429 1,246
	8,018 8,664
	30,223 29,050
	3,617 3,617 3,324 3,217 23,282 22,216
	30,223 29,050
	30,223 29,050

The statement of financial position is to be read in conjunction with the condensed notes to the consolidated interim financial report set out on pages 10 to 14.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities

Consolidated Interim Statement of Cash Flows for the Half-Year Ended 31 December 2009

In thousands of AUD Note Cash flows from Operating Activities Cash receipts from customers Cash payments paid to suppliers and employees Interest received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from Investing Activities Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Net cash (used in) / provided by investing activities Cash flows from Financing Activities Repayment of borrowings Dividends paid to members of the parent entity 11 Net cash (used in) / provided by financing activities Net increase / (decrease) in cash held Cash at the beginning of the period Effects of exchange rate fluctuations on the balances of cash held in foreign currencies Cash at the end of the period 12	Consolidated 31 Dec 09 31 Dec 08 32,795 38,760 (28,101) (34,491) 76 44 - (2) (1,326) (1,359)
	3,444 2,952
	13 - (1,107) (1,467)
	(1,094) (1,467)
	- - (1,461) (1,199)
	(1,461) (1,199)
	889 286 4,002 2,012 - 1
	4,891 2,299

The statement of cash flows is to be read in conjunction with the condensed notes to the consolidated interim financial report set out on pages 10 to 14.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities – 31 December 2009 Interim Financial Report Condensed Notes to the Consolidated Interim Financial Report

1. Reporting entity

Korvest Ltd is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the six months ended 31 December 2009 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”).

The consolidated annual financial report of the consolidated entity as at and for the year ended 30 June 2009 is available upon request from the Company’s registered office at 580 Prospect Road Kilburn SA 5084 or at www.korvest.com.au.

2. Statement of compliance

The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting and the Corporations Act 2001.

The consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the consolidated entity as at and for the year ended 30 June 2009.

This consolidated interim financial report was approved by the Board of Directors on 28 January 2010.

The consolidated entity is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

3. Significant accounting policies

The accounting policies applied by the consolidated entity in this consolidated interim financial report are the same as those applied by the consolidated entity in its consolidated financial report as at and for the year ended 30 June 2009.

4. Estimates

The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this consolidated interim financial report, the significant judgements made by management in applying the consolidated entity’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 30 June 2009.

5. Financial risk management

The consolidated entity’s financial risk management objectives and policies are consistent with that disclosed in the consolidated financial report as at and for the year ended 30 June 2009.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities – 31 December 2009 Interim Financial Report Condensed Notes to the Consolidated Interim Financial Report

6. Revenues and Expenses In thousands of AUD (a) Revenue Sales revenue Sales of goods Total revenue (c) Expenses Costs of goods and services sold Sales and marketing expenses Distribution expenses Administration expenses Occupancy expenses Other expenses Foreign currency translation reserve on winding up of NZ subsidiary (d) Depreciation Depreciation of buildings Depreciation of plant and equipment Total depreciation of property, plant and equipment	Consolidated 31 Dec 09 31 Dec 08 28,398 34,367
	28,398 34,367
	15,064 18,509 5,731 6,091 2,238 2,497 1,165 1,982 408 400 59 727 100 -
	24,765 30,206
	29 28 486 509
	515 537

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities – 31 December 2009 Interim Financial Report Condensed Notes to the Consolidated Interim Financial Report

7. Segment disclosures

The entity has two reportable segments. The business is organised based on products and services. The following summary describes the operations in each of the Group’s reportable segments.

• Industrial Products - includes the manufacture of electrical and cable support systems and steel fabrication. It includes the businesses trading under the EzyStrut and Indax names.

• • Production – represents the Korvest Galvanising business, which provides hot dip galvanising services. The reportable segment also includes light to medium fabrication of components and machine guarding.

Both reportable segments consist of the aggregation of a number of operating segments in accordance with AASB 8 Operating Segments.

Information regarding the operations of each reportable segment is included below. Performance is measured based on segment earnings before interest and tax (EBIT). Inter-segment transactions are not recorded as revenue. Instead a cost allocation relating to the transactions is made based on negotiated rates.

Information about reportable segments

	Industrial Products	Industrial Products	Production	Production	Total	Total
$’000s	31 Dec 09	31 Dec 08	31 Dec 09	31 Dec 08	31 Dec 09	31 Dec 08
External Revenues	25,456	29,941	2,942	4,426	28,398	34,367
Reportable segment profit before tax	3,392	4,534	667	862	4,059	5,396
	31 Dec 09	30 Jun 09	31 Dec 09	30 Jun 09	31 Dec 09	30 Jun 09
Reportable segment assets	20,905	22,591	4,601	3,433	25,506	26,024

Reconciliation of reportable segment profit and assets

In thousands of AUD Profit Total profit or loss for reportable segments Unallocated amounts – other corporate expenses Consolidated profit before income tax Assets Total assets for reportable segments Other unallocated amounts Consolidated total assets Geographical segments The Group operates in Australia.	31 Dec 09 31 Dec 08 4,059 5,396 (342) (1,193) 3,717 4,203 31 Dec 09 30 Jun 09 25,506 26,024 12,735 11,690 38,241 37,714

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Appendix 4D Half-Year Financial Report

8. Write-down of inventory

During the six months ended 31 December 2009 the consolidated entity increased its write-down provision for finished goods inventory by $25,000 (31 December 2008: Increase of $500,000). This forms part of the Other Expenses disclosed in note 6(c).

9. Property, plant and equipment

Acquisitions and disposals

During the six months ended 31 December 2009, the consolidated entity acquired assets with a cost of $1,107,000 (six months ended 31 December 2008: $1,467,000). No assets were acquired through business combinations. Assets with a net book value of $22,000 were disposed of during the six months ended 31 December 2009 (six months ended 31 December 2008: $nil), resulting in an $11,000 loss on disposal (six months ended 31 December 2008: $nil gain).

Capital commitments

The consolidated entity has $232,000 in capital commitments at 31 December 2009 (six months ended 31 December 2008: $145,000).

10. Share Capital In thousands of AUD Issued and paid-up capital 8,643,735 (30 June 2009: 8,643,735) ordinary shares fully paid	Consolidated 31 Dec 09 30 June 09 3,617 3,617

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of the winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.

Employee Share Bonus Plan

The Company did not make an issue of ordinary shares under the Employee Share Bonus Plan during the period. During the comparative period to 31 December 2008 one issue of ordinary shares was made out under the Employee Share Bonus Plan. All employees meeting the service criteria were eligible to participate in the issue. The shares are issued at market value for no consideration. Details of the issue are as follows:

				Number of
			Shares issued	participating
Date of	Total number of	Market value of	per participating	executive
issue	sharesissued	sharesissued	employee	directors
31 December 2009
-	-	-	-	-
31 December 2008
1 October 2008	11,232	$47,960	96	0

Shares issued to employees under the Employee Share Bonus Plan are recognised in equity at the fair value of the shares issued being $nil (2008: $18,033). The fair value has been measured consistently with the previous annual report.

Dividend and Share Investment Plans

The Dividend Investment Plan and Share Investment Plan remains suspended.

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Appendix 4D Half-Year Financial Report

Korvest Ltd and its Controlled Entities – 31 December 2009 Interim Financial Report Condensed Notes to the Consolidated Interim Financial Report

11. Dividends

Dividends paid or provided for by the Company in the current period and the previous corresponding period are:

Cents per share	Total amount $’000 Franked / unfranked Date of payment
31 December 2009
Final – ordinary 17.0	1,460 Franked 1 September 2009
31 December 2008 Final – ordinary 14.0 1,199 Franked 1 September 2008 Subsequent events Since the end of the half-year, the directors declared the following dividend: Interim – ordinary 17.0 1,467 Franked 5 March 2010

The financial effect of this dividend has not been brought to account in this financial report. It will be recognised in the next reporting period.

All dividends paid or declared are fully franked at the tax rate of 30%. The directors expect that dividends will be fully franked for the foreseeable future.

12. Reconciliation of Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and short term deposits at call, net of outstanding bank overdrafts. Cash at the end of the period as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

In thousands of AUD Cash	31 Dec 09 31 Dec 08 4,891 2,299

13. Contingent Liabilities and Contingent Assets

There have been no material changes in contingent liabilities or contingent assets since 30 June 2009.

14. Events Subsequent to Reporting Date

Dividends

For dividends declared after 31 December 2009 refer Note 11.

15. Related Parties

Arrangements with related party transactions continue to be in place. For details on these arrangements, refer to the 30 June 2009 Annual Financial Report.

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Appendix 4D Half-Year Financial Report

Korvest Ltd Directors’ Declaration

In the opinion of the directors of Korvest Ltd (“the Company”):

• 1 the financial statements and notes set out on pages 6 to 14, are in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the financial position of the Consolidated Entity as at 31 December 2009 and of its performance, for the half-year ended on that date; and

• (b) complying with Australian Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001; and

• 2 there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Dated at Kilburn this 28[th] day of January 2010.

Signed in accordance with a resolution of the directors:

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PW Stancliffe Director

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AHW Kachellek Director

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Appendix 4D Half-Year Financial Report

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Appendix 4D Half-Year Financial Report

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