Appendix 4D Half-Year Financial Report

Appendix 4D

Korvest Ltd ABN 20 007 698 106

Half-Year Financial Report 31 December 2012

Results for announcement to the market:

$A’000

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 2012 annual financial report.

Korvest Ltd Directors’ Report

The Directors present their report together with the financial report of Korvest Ltd (“the Company”) for the half-year ended 31 December 2012 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 64 Chairman appointed 1 January 2009 Non-Executive Director Appointed Director in January 2009 Director Hills Holdings Limited Director Automotive Holdings Group Limited

Edward Noel Pretty BA, LLB (Hons) Age 54 A Director since September 2012 Chairman of Audit Committee Managing Director, Hills Holdings Limited Non-Executive Director, NextDC Limited

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

Age 55 A Director since November 1999. Resigned 2 September 2012. Former Managing Director, Hills Holdings Limited

Peter Brodribb F.I.E (Aust)

Age 68 Non-Executive Director A Director since 1984 Appointed Non-Executive Director in January 2005

Alexander Henrik Wilhelm Kachellek C.Eng, Bsc. MIET, FAICD

Age 59 Managing Director A Director since June 2007 Director Austmine Ltd. Director Galvanising Association of Australia

Steven John William McGregor BA (Acc), CA, ACSA, ACIS

Age 41 Finance Director Appointed 1 January 2009 Company Secretary since April 2008

Result

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

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Korvest Ltd Directors’ Report

Other Ratios

Review of Operations

Revenue from trading operations for the half-year decreased by 15.1% to $32.685m whilst profit after tax for the period decreased by 39.3% to $2.258m. As foreshadowed in earlier guidance, the first half result is more in line with the second half result from FY12 which did not contain the significant benefits of a number of large projects that were completed during the first half of FY12. The following table and graph shows the comparison:

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$’000 FY13 1H FY12 2H
Revenue 32,685 33,828 Down 3.4%
Profit After Tax 2,258 2,482 Down 9.0%
Profit After Tax
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
FY10 1H FY10 2H FY11 1H FY11 2H FY12 1H FY12 2H FY13 1H
$'000
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Within the Industrial Products segment, the EzyStrut business was the main beneficiary of the large projects in FY12 1H. There were no extraordinary major projects undertaken during this reporting period. The results were therefore underpinned by smaller projects and day-to-day business and in these segments of the market EzyStrut performed well. Despite the overall reduced level of activity this year, the results from the Western Australian and New South Wales markets exceeded those of the prior year. The overall performance of the EzyStrut business in the current reporting period was approximately 5% down on the FY12 2H result and reflects the level of activity in the general market along with the reduced availability of larger projects.

Sales of the EzyStrut Pipe Support product range increased this reporting period to show the benefit of an investment in this area through improved sales representation, equipment to respond better to customer demands and improved inventory quality.

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EzyStrut continues to utilise the expertise of the Korvest in-house engineering staff to engage with customers to maximise the opportunities from projects. The pipeline of known projects is largely as it was six months ago. EzyStrut’s supply chain, national distribution network and Australian manufacturing facility ensure that it is well placed to secure projects as they become available.

Included in the Industrial Products segment is the Indax handrail and walkway system business. Indax’s performance during the reporting period remained similar to the second half of FY12. The half year started strongly however demand weakened noticeably in the pre-Christmas period. During the reporting period the fabrication capacity at the Kilburn site was expanded and this has allowed all fabrication to be consolidated into this facility in January 2013. The Korvest group will benefit from the increased volumes through the Kilburn galvanising facility and customer lead times should improve by bringing this part of the supply chain in-house. Indax successfully built its presence in the WA market during the half and strong growth from this region was recorded.

Within the Production segment the Galvanising business experienced a continuation of the solid trading conditions experienced over the previous two half years. During the first half, overall plant volumes were up when compared to the same period last year albeit that the volumes through the spin plant were reduced. Reduced activity in the Industrial Products businesses resulted in lower internal tonnes during the reporting period. There are a number of projects that are expected to flow through during the second half and accordingly the performance for the Galvanising business is expected to continue into the second half.

Dividends

The Directors announced a fully franked interim dividend of 26.0 cents per share.

The dividend can be taken as cash only as the Dividend Investment and Share Investment Plans have been suspended. The dividends will be paid on 13 March 2013 and the record date is 27 February 2013.

Events Subsequent to Reporting Date

Events subsequent to the reporting date are included in Note14 of the Condensed Notes to the Interim Financial Report.

2013 Guidance

As a result of stable day-to-day trading, the second half performance is expected to be an improvement on the first half albeit broadly consistent with the last two half years. Whilst the national outlook for construction remains subdued compared to recent years, there are still some sizable projects being undertaken around Australia requiring Korvest products and accordingly this provides some potential in the event that Korvest secures contracts from these projects. The Board has targeted management with seeking new growth opportunities including by way of acquisition.

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 2012.

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 24[th] day of January 2013.

Signed in accordance with a resolution of the Directors:

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PW Stancliffe Director

AHW Kachellek Director

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Lead Auditor’s Independence Declaration

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Korvest Ltd

Interim Statement of Comprehensive Income for the Half-Year Ended 31 December 2012

The Interim Statement of Comprehensive Income is to be read in conjunction with the condensed notes to the interim financial report set out on pages 10 to 15.

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Korvest Ltd

Interim Statement of Changes in Equity for the Half-Year Ended 31 December 2012

The Interim Statement of Changes in Equity is to be read in conjunction with the condensed notes to the interim financial report set out on pages 10 to 15.

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Korvest Ltd Interim Statement of Financial Position as at 31 December 2012

The Interim Statement of Financial Position is to be read in conjunction with the condensed notes to the interim financial report set out on pages 10 to 15.

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Korvest Ltd

Interim Statement of Cash Flows for the Half-Year Ended 31 December 2012

The Interim Statement of Cash Flows is to be read in conjunction with the condensed notes to the interim financial report set out on pages 10 to 15.

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Korvest Ltd – 31 December 2012 Interim Financial Report Condensed Notes to the Interim Financial Report

1. Reporting entity

Korvest Ltd (the Company) is a company domiciled in Australia.

The annual financial report of the Company as at and for the year ended 30 June 2012 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 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 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 annual financial report of the Company as at and for the year ended 30 June 2012.

This interim financial report was approved by the Board of Directors on 24 January 2013.

The Company 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 Company in this interim financial report are the same as those applied by the Company in its financial report as at and for the year ended 30 June 2012.

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 interim financial report, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the financial report as at and for the year ended 30 June 2012.

5. Financial risk management

The Company’s financial risk management objectives and policies are consistent with that disclosed in the financial report as at and for the year ended 30 June 2012.

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Korvest Ltd– 31 December 2012 Interim Financial Report Condensed Notes to the Interim Financial Report

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Korvest Ltd – 31 December 2012 Interim Financial Report Condensed Notes to the Interim Financial Report

7. Segment disclosures

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

Reconciliation of reportable segment profit and assets

Geographical segments The Company operates in Australia.

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8. Write-down of obsolete inventory

During the six months ended 31 December 2012 the Company increased its write-down provision for finished goods inventory by $8,000 (31 December 2011: $80,000).

9. Property, plant and equipment

Acquisitions and disposals

During the six months ended 31 December 2012, the Company acquired assets with a cost of $635,000 (six months ended 31 December 2011: $898,000). No assets were acquired through business combinations. Assets with a net book value of $4,000 were disposed of during the six months ended 31 December 2012 (six months ended 31 December 2011: $120,000), resulting in a $2,000 profit on disposal (six months ended 31 December 2011: $104,000 loss).

Capital commitments

The Company has $131,000 in capital commitments at 31 December 2012 (31 December 2011: $294,000).

10.

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 made one issue of ordinary shares under the Employee Share Bonus Plan during the period. During the comparative period to 31 December 2011 one issue was made 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:

Shares issued to employees under the Employee Share Bonus Plan are recognised in equity at the fair value of the shares issued being $26,860 (2011: $25,902). The fair value has been measured consistently with the previous annual report and takes into account that the shares issued are unable to be sold by employees for a period of 7 years after issue.

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Share-based payment – Executive Share Plan

In August 2011 the Company established the Korvest Performance Rights Plan. The Plan is designed to provide long term incentives to eligible senior employees in the Company and entitles them to acquire shares in the Company, subject to the successful achievement of performance hurdles related to earning per share (EPS).

Under the plan, eligible employees are offered Performance Rights which enables the employee to acquire one fully paid ordinary share in the Company for no monetary consideration once the Performance Rights vest. The conditions attached to the Performance Rights are measured over the three year period commencing at the beginning of the financial year in which the Performance Rights are granted. If the performance conditions at the end of the three year period are met, in whole or in part, all or the relevant percentage of the Performance Rights will vest.

A total of 80,500 Performance Rights were issued in November 2012.

The previous share plan, the Korvest Ltd Executive Share Plan is still operational for employees granted options under that plan. The share option plan entitled selected senior managers to acquire shares in the Company subject to successful achievement of performance targets related to improvements in total shareholder returns.

The shares issued pursuant to these options are financed by an interest free loan from the Company repayable within twenty years from the proceeds of dividends declared by the Company. These loans are of a non-recourse nature. For accounting purposes these 20 year loans are treated as part of the options to purchase shares until the loan is extinguished at which point the shares are recognised.

Fair value of Performance Rights granted

The fair value assessed in accordance with AASB 2 Share Based Payment at grant date of Performance Rights granted during the period ended 31 December 2012 was $4.7343 per Performance Right. The fair value at grant date is determined using a Black Scholes valuation methodology that takes into account a number of factors. Those factors have been set out below including details of the model inputs used for the purposes of valuing the Performance Rights in accordance with AASB 2 Share based Payment for the period ended 31 December 2012.

• a) Exercise price: $0.00

• b) Vesting period: 3 years

• c) Grant date (for Accounting Standards): 2 November 2012

• d) Expiry date: 30 June 2015

• e) Share price at grant date: $6.40

• f) Expected price volatility of the Company’s shares: 35% g) Expected dividend yield: 8.28%

• h) Risk-free interest rate: 3.11%

• i) Cost of borrowing: 10.99% j) Restricted period: 2 years

Total expenses arising from share-based transactions recognised during the period as part of employee benefit expense were as follows:

Dividend and Share Investment Plans

The Dividend Investment Plan and Share Investment Plan remain suspended.

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Korvest Ltd – 31 December 2012 Interim Financial Report Condensed Notes to the Interim Financial Report

11. Dividends

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

The financial effect of these dividends 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 Interim 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 Interim Statement of Cash Flows is reconciled to the related items in the Interim Statement of Financial Position as follows:

13. Contingent Liabilities and Contingent Assets

There have been no material changes in contingent liabilities or contingent assets since 30 June 2012.

14. Events Subsequent to Reporting Date

No matter or circumstance has occurred subsequent to 31 December 2012 that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent years.

Dividends

For dividends declared after 31 December 2012 refer to 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 2012 Annual Financial Report.

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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 15, are in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the financial position of the Company as at 31 December 2012 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.

• 3 the Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the half-year ended 31 December 2012.

Dated at Kilburn this 24[th] day of January 2013.

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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