KORVEST LTD — Interim / Quarterly Report 2021

Jan 21, 2021

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December 2020 – Half Year Chris Hartwig and Steven McGregor

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Agenda

• FY21 1H 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 and 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

• Sell to a wide variety of industry sectors

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Headline Numbers Dec 20 (1H)

	Dec 20 (1H)	**June 20 (2H) **	Dec 19 (1H)	Dec 20 vs
				Dec 19
Sales	$32.6m	$27.0m	$36.1m	(9.7%)
EBIT	$4.16m	$2.76m	$3.08m	35.1%
NPAT	$2.84m	$1.90m	$2.13m	33.3%
Operating cash flow	$2.74m	$4.24m	$7.98m
EPS	25.1c	16.8c	19.0c	32.1%
Dividend per share	15c	13c	15c	-

Profit After Tax

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2,835 •
3,000 Less project work compared to PCP
•
2,130 General market down a little
2,500
1,897
1,748 •
JobKeeper ($1.86m before tax)(2H
2,000
FY20 $1.06m)
1,500 1,138
827
1,000
500
0
FY18 2H FY19 1H FY19 2H FY20 1H FY20 2H FY21 1H
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COVID-19

• $1.86m before tax JobKeeper income in FY20

• Did not qualify for JobKeeper 2

• International shipping delays and rising costs

• VIC branch continued to operate during prolonged lockdown

• SA 3-day lockdown affected production, increased overtime

• • COVID-19 preventative protocols continue to be embedded into normal operations

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Industrial Products

Dec 20 (1H) June 20 (2H) Dec 19 (1H) Dec 20 vs Dec 19

Sales	$29.47m	$24.20m	$32.89m	(10.4%)
EBIT	$2.41m	$1.52m	$2.97m	(18.9%)
EBIT %	8.2%	6.3%	9.0%

Trading Update

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• One major project supplied during 1H FY21 vs two in 1H FY20

• General market improved compared to 2H FY20 however was below 1H FY20

• Strong competition impacting project margins

• Small decrease in revenue

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• Improved margin has been maintained

• • Continues to operate profitably

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Production Services

	Dec 20 (1H)	**June 20 (2H) **	Dec 19 (1H)	Dec 20 vs
				Dec 19
Sales	$3.15m	$2.77m	$3.23m	(2.5%)
EBIT	$0.29m	$0.30m	$0.39m	(25.6%)
EBIT %	9.2%	10.8%	12.1%

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Galvanising volume

Trading Update

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• Strong volume, increased project mix

• • Small decline in external work more than offset by increased EzyStrut work

• Energy costs stabilised

• Zinc cost increased 10% during period

• • Expenses associated with tank replacement

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FY18 2H FY19 1H FY19 2H FY20 1H FY20 2H FY21 1H
External Internal
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Strategic and operational initiatives

Automation

• Robotic Ladder Weld Cell has arrived and currently being commissioned

• Robotic Tray Stacking Capex approved for installation during 2H

Operational

• 4 new pre-treatment tanks successfully installed in Galvanising during end-of-year shutdown

• Continued progress of ERP system enhancements in factory

• Review international sourcing arrangements

Cost optimisation

• 270kw Solar System currently being installed

• New (lower) gas rates from Jan 1, 2021

• New IT provider with cost savings

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Balance Sheet

ASSETS $m Dec 2020 Jun 2020 Dec 2019

Cash & Investments	6.4	6.7	8.6
Receivables	10.3	10.1	10.0
Inventories	11.4	10.6	8.7
Property, Plant & Equipment	16.4	15.9	13.3
Right-of-use Asset	4.2	4.7	4.7
Other	0.5	0.3	0.4
Total Assets	49.2	48.3	45.7
LIABILITIES
Payables	(5.5)	(5.9)	(4.3)
Lease Liabilities	(4.3)	(4.7)	(4.8)
Other Liabilities	(5.2)	(5.1)	(4.9)
Total Liabilities	(15.0)	(15.7)	(14.0)
NET ASSETS	34.2	32.6	31.7

Increased project stock holding at Dec 20

Ongoing investment in factory

Timing of zinc and project related purchases

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Dividends

	FY 2021	FY 2020	FY 2019	FY 2018	FY 2017
Interim	15c	15c	9c	5c	10c
Final Dividend		13c	13c	7c	3c
Total Dividend		28c	22c	12c	13c
Franking	100%	100%	100%	100%	100%

• DRP suspended for final dividend

Key Dates

Record Date: 19 February 2021 Payment Date: 5 March 2021

Outlook

• Supply to major infrastructure project to continue throughout 2H at similar levels to 1H

• Infrastructure pipeline for the next 3-5 years remains strong

• Day-to-day and small project markets expected to remain at 1H levels throughout 2H

• Uncertainty around future impact of COVID-19

• Steel prices starting to rise significantly and predicted to continue

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Company Overview

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

Industrial Products

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• Hydraulic/Electric Safety Access Systems for mobile vehicles

• Design

• Manufacture

• Safety Lighting

• Filter Crushers

• Queensland Based

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Industrial Products

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• Hydraulic tools and wrenches

• Sale

• Hire

o Repair

• Markets

o Large scale construction o Power stations

o Industrial sites o Mines

o Wind towers

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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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

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

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