KORVEST LTD — Interim / Quarterly Report 2017

Jan 29, 2017

Korvest Ltd

December 2016 Half-Year Results Alexander Kachellek Steven McGregor

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Agenda

• 1H FY17 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 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

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Headline Numbers
Dec 16 (1H) June 16 (2H) Dec 15 (1H) % Change vs
Dec 15
Sales $21.29m $27.65m $27.33m (22.1%)
EBIT ($1.49m) $1.45m ($0.15m)
Operating cashflow ($0.2m) $6.0m $1.43m
EPS (9.4c) 9.7c (0.8c)
Dividend per share 10c 10c 10c
Profit After Tax
3,500 3,265
•
3,000 Results in Guidance range
2,338
2,500 • No major projects in 1H
1,845
2,000
1,330 •
1,500 1,278 International strategy refocussed
1,000 635 • Improved Power Step
500
124 1,038
0 (88) performance
(500 ) FY14 FY14 FY15 FY15 FY16 FY16 FY17
1H 2H 1H 2H 1H 2H 1H
(1,000 )
(1,033)
(1,500 ) Statutory Underlying
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• International strategy refocussed

• • Improved Power Step 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

	Dec 2016	June 2016	Dec 2015	% Change
	(1H)	(2H)	(1H)	Vs. Dec 2015
Sales	$19.26m	$25.83m	$24.90m	(22.6%)
EBIT	($0.99m)	$2.09m	$0.90m	(210.0%)
EBIT %	(5.1%)	8.1%	3.6%

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Trading Update

• Lack of major projects in 1H

• Reduced activity in most states

• NSW improved and has best infrastructure opportunities

• Margin pressure due to excess capacity in market

• Trading Update

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• Best combined results for a half under KOV ownership

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Production Services

Dec 2016 June 2016 Dec 2015 % Change (1H) (2H) (1H) Vs. Dec 2015 Sales $2.02m $1.85m $2.43m (17.2%) EBIT ($0.28m) ($0.61m) $0.13m (315.4%) EBIT % (13.9%) (33.0%) 5.3% Trading Update Galvanising volume

• More external, less internal tonnes

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• Overall tonnes low

• Margin pressure

• Increasing zinc cost

• Surplus market capacity

FY14 1H FY14 2H FY15 1H FY15 2H FY 16 1H FY 16 2H FY17 1H External Internal

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Balance Sheet

ASSETS $m	Dec 2016	June 2016	Dec 2015
Cash & Investments	3.5	5.1	(0.2)
Receivables	7.7	8.2	10.8
Inventories	11.6	11.5	13.2
Property, Plant & Equipment	14.0	14.6	15.4
Other	0.1	1.0	0.7
Total Assets	36.9	40.4	39.9
LIABILITIES
Payables	(3.6)	(4.2)	(4.6)
Other Liabilities	(2.9)	(3.7)	(3.2)
Total Liabilities	(6.5)	(7.9)	(7.8)
NET ASSETS	30.4	32.5	32.1

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Dividends

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

• DRP activated for interim dividend

Key Dates

Record Date: 24 February 2017 Payment Date: 10 March 2017

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Outlook

• Little change in day-to-day trading expected

• Improvement in major projects

• Domestic infrastructure projects reaching supply stage in 2H FY2017

• Lower cost base post international business refocus

• Return to profitability expected in 2H

9

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

• Safety Lighting

• Filter Crushers

• Queensland Based

• Sales Representatives/agents in:

• QLD, WA, NSW

• Chile, Brazil, South Africa

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Industrial Products

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• Hydraulic tools and wrenches

• Sale

• Hire

• Repair

• Markets

• Large scale construction

• Power stations

• Industrial sites

• Mines

• Wind towers

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Production Services

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• 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

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Calculations

Underlying EBIT 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	FY14 2H	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

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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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