korvest Annual Report 2011

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FY2011 Annual Report · korvest

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Korvest Ltd

and its controlled entities

ABN 20 007 698 106

Annual Report

30 June 2011

CoNteNts

Directors’ report (including remuneration report)

Five Year summary

Corporate governance statement

statement of comprehensive income

statement of financial position

statements of cash flows

statements of changes in equity

Notes to the consolidated financial statements

Directors’ declaration

Audit report

Lead auditor’s independence declaration

AsX additional information

John Dickie
Engineering
Manager

Greg Thompson
OHSE
Manager

Steve Jeffs
Quality
Manager

KORVEST PROVIDES A RANGE OF PRODUCTS TO A VARIETY OF MARKETS
INCLUDING MINING, INFRASTRUCTURE AND CONSTRUCTION.

Vertical integration of the galvanising business with the ezystrut
and Indax businesses results in operational efficiencies, cost and lead
time advantages.

In-house engineering capability underpins product innovation and
supports the business units to collaborate with customers for best
practice solutions.

Korvest has a national footprint through a network of branches
and distributors.

EzYSTRUT MANUFACTURES A DIVERSE RANGE OF CABLE AND PIPE SUPPORT SOLUTIONS
IN A VARIETY OF FINISHES AND SUITABLE FOR A LARGE RANGE OF APPLICATIONS
INCLUDING MINING, INFRASTRUCTURE AND INDUSTRIAL CONSTRUCTION.

ezystrut has a manufacturing facility and national warehouse located in Adelaide
with additional sales offices and warehouses in Melbourne, sydney, Brisbane and
Perth. Distributors are located in Darwin, townsville, Hobart and Christchurch (NZ).

Local manufacturing enables ezystrut to respond quickly to customer
requirements for customised products.
4

Chris Hartwig
General
Manager

PREMIUM SUPPLIERS OF GRATING, HANDRAILS, STANCHIONS, MESH AND
OTHER WALKWAY INFRASTRUCTURE.

Indax supplies major engineering, construction and structural
fabrication companies across Australia servicing small through to
very large projects in the mining and industrial sectors.

Andrew Ifkovich
General
Manager

Indax has fabrication facilities in Adelaide and Brisbane.

Steven Evans
General
Manager

KORVEST GALVANISERS IS LOCATED IN ADELAIDE AND FEATURES A 14 METRE HOT DIP
GALVANISING BATH FOR LARGE PRODUCTS AND THE ONLY SOUTH AUSTRALIAN SPIN
GALVANISING PLANT FOR SMALLER PRODUCTS.

Korvest Galvanisers’ customers include infrastructure projects, structural steel
fabricators and manufacturers of castings and hardware products.

Korvest Galvanisers does significant internal work for both ezystrut and Indax.

DIRECTORS’ REPORT

the directors present their report together with the financial
report of Korvest Ltd (‘the Company’) and its controlled entities
(‘the Consolidated entity’ or ‘Group’) for the financial year ended
30 June 2011 and the auditor’s report thereon.

DIRECTORS

the directors of the Company at any time during or since the end
of the financial year are:

Name, qualifications and independence status

Age

Experience, special responsibilities and other directorships

Steven J W McGregor
BA (Acc), CA
Finance Director

Alexander H W Kachellek
Bsc.Ceng MIet
Managing Director

Company secretary since April
2008. Appointed as Finance
Director 1 January 2009.

A Director since June 2007.
Mr Kachellek has
experience in a number
of industries including
Data Communications
and Automotive, Lean
operations Consultancy and
Manufacturing.
Director Austmine Ltd.

Peter W Stancliffe
Be (Civil) FAICD
Chairman, Non-Independent
Non-executive Director

Graham L Twartz
B.A. (Adel), Dip Acc (Flinders)
Non-Independent
Non-executive Director

Peter Brodribb
F.I.e (Aust)
Non-Independent
Non-executive Director

Appointed as a Director and
Chairman on 1 January 2009.
Director Hills Holdings Limited.
Director Automotive Holdings
Group Limited.

A Director since 1999.
Chairman of Audit Committee.
Managing Director
Hills Holdings Limited.

A Director since 1984.
Appointed Non-executive
Director in January 2005 after
retiring from the position of
Managing Director that he had
held since 1984.

COMPANY SECRETARY

Mr steven J W McGregor CA,
BA (Acc) was appointed to the
position of company secretary
in April 2008. Mr McGregor
previously held the role of
chief operating officer and
company secretary with an
unlisted public company for
seven years.

RE-ELECTIONS

In accordance with the
Articles of Association, Peter
stancliffe and steven McGregor
retire from the Board at the
forthcoming Annual General
Meeting on 21 october 2011.
Both are eligible for re-election
at that meeting and offer
themselves accordingly.

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

DIRECTORS’ MEETINGS

the number of directors’ meetings (including meetings of committees of directors) and number of meetings
attended by each of the directors of the Company during the financial year are:

Board Audit Committee Remuneration Committee

Director
Meetings Meetings Meetings

Mr P.W. stancliffe

Mr A.H.W. Kachellek

Mr G.L. twartz

Mr P. Brodribb

Mr s.J.W. McGregor

A = Number of Board meetings attended
B = total Number of Board meetings available for attendance

FINANCIAL RESULTS

the revenue from trading activities for the year under review was $67.384m up 20.8% on the previous year.
Profit after tax was $4.221m up by 6.0%. these results were achieved in an environment where trading conditions
remain inconsistent in a number of markets in which Korvest operates. Activity in the second half improved with
the Industrial Products group in particular experiencing significant improvement.

DIVIDENDS

the directors announced a fully franked final dividend of 15.0 cents per share compared to 15.0 cents per share
last year and 11.0 cents at the half year. the full year dividend in relation to the 2011 year will be 26.0 cents per
share compared to 32.0 cents per share for the previous year.

the final dividend will be paid on 8th september 2011.

A summary of dividends paid or declared by the Company to members since the end of the previous financial
year were:

Cents per
share

Total amount
$’000

Franked/
unfranked

Date of
payment

Declared and paid during the year 2011

Interim 2011 ordinary

Final 2010 ordinary

total amount

11.0

15.0

951

Fully franked

11 March 2011

1,293

Fully franked

7 september 2010

2,244

Franked dividends declared as paid during the year were franked at the rate of 30 per cent.

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

Declared after end of year

After the reporting date the following dividends were proposed by the directors. the dividends have
not been provided for and there are no income tax consequences to the Company.
Final ordinary

1,314

15.0

Fully franked 8 september 2011

total amount
the financial effect of these dividends has not been brought to account in the financial statements for the year
ended 30 June 2011 and will be recognised in subsequent financial reports.

1,314

Dividends have been dealt with in the financial report as:

Dividends

Dividends – subsequent to 30 June 2011

STRATEGY AND FUTURE PERFORMANCE

Note

Total amount
$’000

2,244

1,314

Korvest Ltd’s businesses operate across a range of markets within Australia. It is expected that these markets will
be trending moderately upwards over the course of the 2012 year however the state by state and month by month
inconsistencies that have been observed over the last few years are expected to continue. Korvest is well placed to
take advantage of any improvements in market conditions as they occur and in light of this is expected to produce
a satisfactory result in the 2012 year.

ACTIVITIES

the principal continuing activities of the consolidated entity consist of hot dip galvanising, sheet metal
fabrication, walkway fabrication, manufacture of cable and pipe support systems and fittings.

REVIEW OF OPERATIONS

the consolidated entity is comprised of the Industrial Products Group which includes the ezystrut
and Indax businesses, and the Production Group which includes the Korvest Galvanisers and Korvest
Manufacturing businesses.

Industrial Products

In the Industrial Products group the ezystrut cable and pipe support business supplies products to contractors
for small industrial developments and also supplies products for major infrastructure developments. During the
current year a number of projects have contributed positively to the improved performance for this business.
on a state by state basis all branches achieved revenue growth in the FY2011 year, however the magnitude of that
growth did vary substantially between states where different levels of infrastructure investment were observed.
Product innovation within the cable support business enabled ezystrut to have a competitive advantage in some
product lines and this underpinned the improved performance in FY2011.

Included in the Industrial Products group is the Indax grating and stanchion business. the performance for
this business was below expectations. During the year Indax suffered a decline in margins and profitability,
despite a growth in sales, due to acceptance of larger scale projects carrying lower inherent margins, higher
than anticipated material and distribution costs and additional costs resulting from capacity constraints and
administrative processes. these projects were completed during FY2011.

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

Production

In the Production group the Galvanising business had another difficult year. Volumes remained at similar levels
to those experienced in FY2010 with month to month tonnage tending to vary due to a lack of consistent project
work in the south Australian market. the recent trend of increased pricing pressure due to surplus industry
capacity continued throughout the FY2011 year.

SIGNIFICANT CHANGES

the directors are not aware of any significant changes in the state of affairs of the consolidated entity that have
occurred during the financial year which have not been covered elsewhere in this report.

EVENTS SUBSEQUENT TO REPORTING DATE

At the date of this report there is no matter or circumstance that has arisen since 30 June 2011, that has
significantly affected, or may significantly affect:

(i)

the operations of the consolidated entity;

(ii) the results of those operations; or

(iii) the state of affairs of the consolidated entity;

in the financial years subsequent to 30 June 2011.

LIKELY DEVELOPMENTS

In the opinion of the directors it would prejudice the interests of the consolidated entity if the Directors’ report
was to refer to any additional information as to likely developments in the operations of the consolidated entity,
including the expected results of those operations in subsequent financial years. such information has therefore
not been included in this report.

DIRECTORS AND OFFICERS INSURANCE

since the end of the previous financial year the Company has paid insurance premiums in respect of directors’
and officers’ liability and legal expenses insurance contracts, for current and former directors and officers of the
Company. the insurance premiums relate to:

a) costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal

and whatever their outcome; and

b) other liabilities that may arise from their position, with the exception of conduct involving a wilful breach

of duty or improper use of information or position to gain a personal advantage.

the premiums were paid in respect of all of the directors and officers of the Company. the directors have not
included details of the nature of the liabilities covered or the amount of the premium paid in respect of the
directors’ and officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under the
terms of the contract.

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

REMUNERATION REPORT

Principles of compensation - audited

Remuneration levels are competitively set to attract and retain appropriately qualified and experienced directors
and senior executives. Remuneration packages are made up of fixed remuneration and performance-based
remuneration. the remuneration structure takes into account:

(a) the overall level of remuneration for each director and executive;

(b) the executive’s ability to control performance; and

the Managing Director’s incentive is paid as a fixed percentage on the consolidated earnings before interest
and taxation (eBIt). Incentives for other executives are paid as a fixed percentage of either their divisional or
consolidated eBIt depending on the individual executive’s area of responsibility. the incentive percentage paid
ranges from 0.64% to 3.6%. executives (excluding executive Directors) also receive shares as part of the employee
Bonus share Plan that is equally available to all employees who meet the plan service requirements. executives
including executive Directors were eligible to receive options as part of the executive share Plan. the executive
share Plan was discontinued in 2010 and no issue of options was made under this Plan during the 30 June 2011
year. the Board considers that the above performance structure is generating the desired outcome.

the Company’s securities trading policy prohibits those that are granted share-based payments as part of their
remuneration from entering into other arrangements that limit their exposure to losses that would result from
share price decreases.

Non-executive directors receive a fixed fee. the total remuneration for all non-executive directors was last voted
upon by shareholders at the AGM held on 16 october 2009 and is not to exceed $200,000.

two non-executive directors are also directors of Hills Holdings Limited. transactions with Hills Holdings Limited
are disclosed in Note 30.

service Contracts

It is the Company’s policy that service contracts for key management personnel are unlimited in term but
capable of termination on 1 to 3 months’ notice, and that the company retains the right to terminate the contract
immediately by making payment in lieu of notice. the Company has entered into a service contract with each
executive key management person.

the key management personnel are also entitled to receive on termination of employment their statutory
entitlements and accrued annual leave and long service leave, as well as any entitlement to incentive payments
and superannuation benefits.

Consequences of performance on shareholder wealth

In considering the Company’s performance and benefits for shareholder wealth, the remuneration committee
have regard to the indices set out in the 5 Year summary on page 23.

Short Term

Post employment

Salary & Fees
$

Bonus
$

Superannuation
benefits
$

Termination
benefits
$

Share based
payments
Shares
$

Share based
payments
Options
$

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

REMUNERATION REPORT (CONTINUED)

Directors and executive Remuneration (Company and Consolidated) - audited

Details of the nature and amount of each major element of remuneration of each director of the Company,
each of the five named Company and Group executives who receive the highest remuneration and other key
management personnel are:

NAME

Specified directors

P.W. Stancliffe

Non-executive (Chairman)

G.L. Twartz

Non-executive (Director)

P. Brodribb

Non-executive (Director)

A.H.W. Kachellek

Executive (Managing Director)

S.J.W. McGregor

Executive (Finance Director)

Specified Executives

C.A. Hartwig

General Manager EzyStrut
(commenced 23 June 2010)
General Manager EzyStrut & Indax
(commenced 17 April 2009, ceased
23 June 2010)
General Manager Galvanising
& Indax (ceased 16 April 2009)

S.W. Evans

General Manager Galvanising
(commenced 1 July 2009)

A. P. Ifkovich

General Manager Indax
(commenced 9 August 2010)

Former Executives

C.D. Peck

General Manager Operations
(ceased 23 June 2010)

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

51,666

50,000

31,000

30,000

31,000

30,000

240,005

221,129

202,208

192,579

87,039

67,114

2011

195,004

113,888

4,650

4,500

2,790

2,700

29,944

25,657

18,252

17,389

26,104

2010

179,554

50,549

19,590

2011

2010

2011

2010

2011

2010

153,923

23,789

147,005

19,361

131,110

8,200

16,340

14,505

12,538

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

S300A (1)(e)(i)
Proportion of
remuneration
performance
related %

S300A (1)(e)(vi) Value of
options as proportion of
remuneration %

Total
$

56,316

54,500

31,000

30,000

33,790

32,700

362,623

320,533

220,722

210,230

998

5,635

262

24.0

20.9

33.7

998

2,052

338,046

998

2,052

252,743

20.0

194,052

180,871

151,848

12.2

10.7

5.4

1.55

1.76

0.12

0.61

0.81

140,003

36,969

17,724

101,517

998

1,622

298,833

12.37

0.54

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

REMUNERATION REPORT (CONTINUED)

options and rights over equity instruments granted as compensation – audited

No options were granted during the financial year nor have any options been granted since the end of the
financial year.

exercise of options granted as compensation

During the reporting period the following shares were issued on the exercise of options previously granted as
compensation:

Directors

s McGregor

A Kachellek

Executives

C Hartwig

Number of shares

Amount paid $/share

15,000

30,000

10,000

$3.79

there are no amounts unpaid on the shares issued as a result of the exercise of the options in the 2011
financial year.

Under the terms of the Korvest Ltd executive share Plan upon exercise of the options the individual must
pay the exercise price over a maximum term of 20 years. Dividends, after deduction of an amount intended
for the participant’s tax, are applied in payment of the exercise price. the arrangement to pay the exercise
price over 20 years is interest free and without personal recourse to the participants (recourse is limited to
the shares themselves).

Analysis of options and rights over equity instruments granted as compensation – audited

Details of vesting profiles of the options granted as remuneration to each director and key executive of the
Company are detailed below.

Options Granted

Number

Date

% vested in year

% forfeited or
lapsed in year

Year in which
grant vests

15,000

30,000

Apr 2010

Mar 2009

100%

10,000

Mar 2009

100%

30 June 2011

Directors

A Kachellek

s McGregor

Executives

C Hartwig

there are no unvested options on issue as at reporting date.

the movement during the reporting period, by value, of options over ordinary shares in the Company held by
each company director and key executives are detailed below.

Value of Options

Granted in year $ (A)

Exercised in year $ (B) Lapsed or forfeited in year $ (C)

Directors

A Kachellek

s McGregor

Executives

C Hartwig

20,100

10,050

6,700

(A) the value of options granted in the year is the fair value of the options calculated at grant date using a

binominal option – pricing model. the total value of the options granted is included in the table above.
this amount is allocated to remuneration over the vesting period (i.e. in years 1 July 2009 to 1 July 2014)
which includes the minimum service period.

(B) the value of options exercised during the year is calculated as the market price of the Company on

the Australian securities exchange as at close of trading on the date the options were exercised after
deducting the price paid to exercise the option. No options were exercised for accounting purposes
during the financial year.

the date the option lapsed using a binominal option – pricing model with no adjustments for whether the
performance criteria had been achieved.

Further details regarding options granted to executives under the executive share Plan are in Notes 21 and 29 to
the financial statements.

Analysis of bonuses included in remuneration – audited

With the exception of the Finance Director, executive bonuses are paid based on either consolidated earnings
before interest and taxation (eBIt) or divisional eBIt depending on the responsibilities of the individual executive.
A percentage of eBIt is determined at the beginning of the year based on budgets. this percentage is then
applied to actual eBIt achieved. Potential bonuses paid to executives under this methodology are not capped and
therefore Korvest is unable to disclose the % of short term incentives that vested or were forfeited.

the Finance Director’s bonus is based on achievement of specified outcomes during the year. those outcomes did
not occur and therefore during the financial year 100% of the bonus entitlement was forfeited.

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Directors’ report (continued)

For the year ended 30 June 2011

DIRECTORS’ INTERESTS

ENVIRONMENT

the relevant interest of each director over the shares and rights or options over such instruments issued by the
companies within the consolidated entity and other related bodies corporate. As notified by the directors to
the Australian securities exchange in accordance with s250G(1) of the Corporations Act 2001, at the date of this
report is as follows:

Korvest
Ltd
Ordinary
Shares
1,000

Korvest
Ltd
Share
Options
-

Hills Holdings
Limited
Ordinary
Shares
19,104

Hills Holdings
Limited
Share
Options
-

Hills Holdings
Limited
Performance
Rights
-

30,695

15,781

29,115

15,500

16,469

207,342

100,000

118,926

Peter stancliffe

Alexander Kachellek

Peter Brodribb

Graham twartz

steven McGregor

NON-AUDIT SERVICES

During the year KPMG, the Company’s auditor, has performed certain other services in addition to their
statutory duties. the Board has considered the non-audit services provided during the year by the auditor and in
accordance with written advice provided by resolution of the Audit Committee, is satisfied that the provision of
these services did not compromise the auditor’s independence requirements of the Corporations Act 2001 for the
following reasons:

● all non-audit services were subject to the corporate governance procedures adopted by the Company;

and

●

the non-audit services provided do not undermine the general principles relating to auditor
independence as they did not involve reviewing or auditing the auditor’s own work, acting in
a management or decision making capacity for the Company, acting as an advocate for the
Company or jointly sharing risk and rewards.

For details of non-audit services fees charged refer to Note 9 to the financial statements.

FINANCIAL INSTRUMENTS DISCLOSURE

the consolidated entity’s activities expose it to interest rate fluctuations and credit, liquidity and cash flow risks
from its operations. the Board has established policies and procedures in each of these areas to manage these
risks. For details of financial instruments refer to Note 24 to the financial statements.

the consolidated entity’s operations are subject to various environmental regulations under both Commonwealth
and state legislation. the consolidated entity has established a process whereby compliance with existing
environmental regulations and new regulations is monitored continually. this process includes procedures to be
followed should an incident occur which adversely impacts the environment.

the directors are not aware of any breaches of environmental legislation during the financial year which are
material in nature. the consolidated entity has, in accordance with its compliance policy, been investigating
whether the quality of soil and ground water is affected by the operations of the site’s previous owners.

the directors are satisfied that these investigations and actions taken to date will ensure continued compliance
with environmental legislation.

LEAD AUDITOR’S INDEPENDENCE DECLARATION

the lead auditor’s independence declaration is set out on page 76 and forms part of the Directors’ report for the
financial year ended 30 June 2011.

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.

signed at Adelaide this Monday 22 August 2011 in accordance with a resolution of the directors.

P. W. stANCLIFFe, Director

A. H. W. KACHeLLeK, Director

Korvest Ltd and its controlled entities

For the year ended 30 June 2011

FIVE YEAR SUMMARY

Sales Revenue

2011

2010

($’000)

67,384

55,774

2009

62,892

2008

54,877

2007

45,434

Profit after tax

($’000)

4,221

3,983

5,655

4,716

4,583

Depreciation/Amortisation

($’000)

1,279

1,060

985

695

605

Cash flow from operations

($’000)

3,185

3,864

7,590

2,178

3,244

Profit from ordinary activities

- As % of shareholders’ equity

- As % of sales Revenue

- Per issued share

Dividend

- total amount

- Per issued share

- times covered by profit from
ordinary activities

12.7%

13.2%

6.3%

48.9c

7.1%

46.3c

19.5%

9.0%

65.8c

18.1%

8.6%

54.9c

21.1%

10.1%

53.7c

($’000)

2,244

26.0c

2,921

32.0c

2,660

34.0c

2,395

28.0c

2,219

27.0c

1.9

1.4

2.1

2.0

Number of employees

242

221

204

194

187

Shareholders

- equity to total assets ratio

- Number at year end

75%

1,247

79%

1,165

77%

1,094

75%

1,056

75%

1,125

Net assets per issued ordinary share

$3.79

$3.49

$3.36

$3.06

$2.54

Share price as at 30 June

$3.57

$4.65

$3.70

$5.15

$5.78

Korvest Ltd and its controlled entities

For the year ended 30 June 2011

CORPORATE GOVERNANCE STATEMENT

this statement outlines the main corporate governance practices in place throughout the financial year, which
comply with the AsX Corporate Governance Council recommendations, unless otherwise stated.

Principle 1 - Lay solid foundations for management and oversight

the Company complies with the AsX recommendation of recognising and publishing the respective roles and
responsibilities of Board and management.

the Board’s primary role is the protection and enhancement of long-term shareholder value. the Board believes
that good corporate governance is essential to fulfilling its role and that it positively contributes to long-term
shareholder value.

the Board delegates responsibility for the day-to-day management of the Company to the Managing Director
and senior executives, but remains responsible for overseeing the performance of the management team. to
ensure that this responsibility is clearly defined, the Board has delegated a range of authorities to management
through formal delegations. these include limited expenditure authority along with the limited authority to enter
into contracts and engage staff.

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies,
practices, management and operations of the Company. It is required to do all things that may be necessary to be
done in order to carry out the objectives of the Company. the Board has the final responsibility for the successful
operations of the Company. Without intending to limit this general role of the Board, the specific or principal
functions and responsibilities include:

● Acting as an interface between the Company and shareholders;

● setting the goals of the Company;

● Reviewing the annual progress and performance of the Company in meeting its objectives;

● Providing the overall strategic direction of the Company;

● Determining policies governing the operations of the Company;

● Appointing and approving the terms and conditions of the appointment of the Managing Director (MD);

● Reviewing and providing feedback on the performance of the MD;

● endorsing the terms and conditions for senior executives reporting to the MD through the Remuneration

Committee;

● establishing and determining the powers and functions of the committees of the Board, including the

Audit and the Remuneration Committee;

● Approving major operating plans;

● Approving the annual budget and long-term budgets;

● Board approval of all banking facilities;

● Approving all significant items of capital expenditure;

● Approving all significant operational expenditures outside budget;

● Approving all mergers and acquisitions, and property acquisitions and disposals;

● Approving the issue or cancellation of shares;

● Approving all significant loans to outside parties or employees;

● Approving half-yearly and yearly accounts;

● Keeping the market informed about Korvest in accordance with AsX rules;

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

● Reviewing its own performance;

● Resolution of major issues of material nature affecting the organisation;

● Approving management reporting processes and documentation;

● Approving all significant contracts, leases and other company commitments; and

● ensuring that all requirements of the AsX, AsIC, ACCC, Ato and other relevant legislation are met.

A copy of the Board Charter and responsibilities is available on the Company website at www.korvest.com.au

executive performance

the Managing Director via a formal performance management process reviews the performance of senior
executives regularly. the executives are assessed on their performance against specified performance objectives.
During the reporting period each senior executive has undertaken this process with the Managing Director.

Principle 2 - Structure the Board to add value

AsX recommends the Company have a Board of an effective composition, size and commitment to adequately
discharge its responsibilities and duties. the Company has not complied with all aspects of this Principle and the
areas of divergence are detailed below.

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

the role of the Chairman

the Chairman, Mr P W stancliffe, whilst non-executive, is a non-independent director. this is not in accordance
with AsX recommendation 2.2 but is considered appropriate given that Hills Holdings Limited holds 48.1%
of the shares in the Company. Mr stancliffe’s considerable experience in the various industries within which
the company operates and the various positions and activities engaged in outside the entity are considered
invaluable in his role as Chairman.

the Board believes that the role of Chairman should be filled by the person most suited to the role, with the
most relevant skills and experience and who adds the greatest value to the Board and to the company.

In accordance with Recommendation 2.3 the roles of Chairman and Ceo are not held by the same person with
Mr A Kachellek being the Managing Director for the Company.

Nomination Committee

the Board has not established a Nomination Committee due to the size of the Company.

A director appointed to fill a casual vacancy must stand for election at the next Annual General Meeting. one
third of the non-executive directors must retire at each Annual General Meeting, being those longest in office
since their last election. those directors are eligible for re-election at that meeting.

Board composition

Board performance

the Company constitution allows for a maximum of ten directors. the Company Board currently comprises five
directors, three being non-executive directors plus the Managing Director and Finance Director. the directors
come from a variety of business and professional backgrounds and bring to the Board a range of skills and
experience relevant to the consolidated entity. Details of the directors’ experience, expertise and terms in office
are set out on page 10 of this annual report.

Board independence

three non-executive directors are non-independent. two of the directors that are non-independent,
Mr P W stancliffe and Mr G L twartz are considered non-independent primarily due to their positions
as directors at Hills Holdings Limited which holds a major interest in Korvest. the other, Mr P Brodribb
is considered non-independent due to his former position of Managing Director of Korvest.

In the event of a tied vote, the Chairman, a non-independent non-executive director, has the casting vote.
this is not in accordance with AsX recommendation 2.1 but is considered appropriate by the directors for
a small, established public company.

the Board believes that the first priority in the selection of directors is their ability to add value to the
Board and enhance the performance whilst safeguarding shareholders’ interests. Accordingly, relevant
expertise and competence is considered as important as technical independence.

the skills and experience of each director is set out in the Directors’ report.

the Company’s Board informally reviews the operations of the Board and its committees and the performance of
its individual directors. the review is conducted annually, focusing on a few key issues each year with a view to
assessing overall performance over a three year period. the Board has also formalised a process for the induction
of new directors to ensure they are provided with the information required to properly perform their role.

Board operations

During 2011 the Board met 13 times and the directors’ attendance at those meetings is set out on page 12 of
this annual report. the directors receive a comprehensive Board pack, which includes financial statements and
executive reports. the Chairman and the Managing Director communicate regularly between Board meetings.
senior executives attend and present to Board and committee meetings on particular issues when required.

All directors have unrestricted access to company records, information and personnel and the Board has a policy
of allowing individual directors to seek independent professional advice at the Company’s expense, subject to the
approval of cost by the Chairman. such approval shall not be unreasonably withheld.

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

Principle 3 - Promote ethical and responsible decision-making

Audit Committee

the Company complies with the AsX recommendation that the Company actively promote ethical and
responsible decision making.

While the Board has adopted those AsX principles of good corporate governance that it has deemed pertinent,
it believes that these types of rules and regulations are of limited value unless supported by a foundation of
honesty and integrity.

the Board has adopted a formal (written) Code of Conduct for Korvest, effectively a corporate creed that is best
applied by asking “What is the right thing to do?” the code applies to all employees within the company from the
Board, through management to all other staff. the code encourages all staff and other stakeholders to report any
breaches of the code to the Chairman of the Board, who is required to investigate and report on all such matters.

the Code of Conduct is supported by more detailed policies setting out the philosophy of the company in
relation to its various stakeholders. A copy of the code is available on the website at www.korvest.com.au

share dealings by directors and officers

In accordance with the Company’s constitution, all directors are required to be shareholders and hold a minimum
of 500 shares within two months of their appointment. the company has for many years encouraged the holding
of its shares by directors and employees.

the Board has adopted a securities trading policy that specifically precludes directors and officers from buying or
selling shares during specified black out periods relative to the announcement of the annual or half-year results
or if in possession of price sensitive information not generally available to the public. employees are not to deal
in shares on a short term basis. A copy of the policy is available on the Korvest website and details of directors’
individual shareholdings are set out in Note 29 to the financial statements.

Principle 4 - Safeguard integrity in financial reporting

the Company complies with the AsX recommendation that a structure be in place to independently verify and
safeguard the integrity of the Company’s financial reporting.

Commitment to financial integrity

the Board has policies designed to ensure that the Company’s financial reports meet high standards of disclosure
and provide the information necessary to understand the Company’s financial performance and position.
the policies require that the Managing Director and Finance Director provide to the Board prior to the Board
approving the annual and half-year accounts, a written statement that the accounts present a true and fair view,
in all material respects, of the Company’s financial performance and position and are in accordance with relevant
accounting standards, laws and regulations.

the Board has an Audit Committee. the committee has a Board approved charter setting out its role,
responsibilities, structure and membership requirements. A copy of its charter can be found on the
Korvest website.

the committee consists of three directors, all of whom are non-executive and non-independent. the Chairman
of the committee is a non-independent director who is not the Chairman of the Board. the composition of the
committee is not in accordance with AsX recommendation 4.3 but is considered appropriate by the directors for
a small, established public company. the Managing Director, Finance Director and external auditors are invited
to attend the committee meetings. Details of membership and attendance at committee meetings are set out on
page 12 of this annual report.

Audit process

the Company’s financial accounts are subject to an annual audit by an independent, professional auditor,
who also reviews the half-year accounts. the Board requests the external auditor to attend the Annual General
Meeting each year and to be available to answer shareholder questions regarding the conduct of the audit and
the preparation and content of the auditor’s report.

Auditor independence

the Board has in place policies for ensuring the quality and independence of the company’s external auditor.
the majority of fees paid to the external audit firm for work other than the audit of the accounts were for taxation
services. Details of the amounts paid for both audit and non-audit services are set out in Note 9 of this annual
report. the Board requires that adequate hand-over occurs in the year prior to rotation of an audit partner to
ensure an efficient and effective audit under the new partner.

Risk management and oversight

the Managing Director is charged with implementing appropriate risk systems within the Company. He includes
in his report to the Board any issues or concerns.

the Board reviews all major strategies for their impact on the risks facing the Company and takes
appropriate action. similarly, the Company reviews all aspects of its operations for changes to the risk profile
on an annual basis.

Principle 5 - Make timely and balanced disclosure

the Company complies with the AsX recommendations that the Company should promote timely and balanced
disclosures of all material matters concerning the Company.

the Board has established continuous disclosure controls to ensure compliance with AsX Listing Rules that
include senior executives providing regular sign-off concerning matters that require disclosure to the AsX.

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

Principle 6 - Respect the rights of shareholders

the Company complies with the AsX recommendations that the Company should respect the rights of
shareholders and facilitate the effective exercise of those rights.

the Board is committed to ensuring that shareholders are informed of all non-confidential material matters.
It accomplishes this through:

●

the annual report distributed during september each year; and

● making appropriate disclosure to the market where necessary.

shareholders are encouraged to attend the Annual General Meeting where the Board is available to answer
questions raised by shareholders.

Principle 7 - Recognise and manage risk

the company complies with the AsX recommendation that the Company should establish a sound system of risk
oversight and management and internal control.

the Audit and Compliance Committee oversees the operation of the risk management controls established by
the Company.

the Managing Director is charged with implementing appropriate risk systems within the company. He includes
in his report to the Board any issues or concerns.

In accordance with recommendation 7.3 the Managing Director and Finance Director have declared, in writing
to the Board, that the financial risk management and associated compliance and controls have been assessed
and found to be operating efficiently and effectively. the operational and other risk management compliance
and controls, have also been assessed and found to be operating efficiently and effectively. All risk assessments
covered the whole financial year and the period up to the signing of the annual financial report for all material
operations in the company.

Principle 8 - Remunerate fairly and responsibly

the AsX recommendation is that the Company should ensure that the level and composition of remuneration is
sufficient and reasonable and that its relationship to corporate and individual performance is defined.

the Company has complied with this Principle during the reporting period. For further information see the
Remuneration report in the Directors’ report.

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

Commitment to responsible executive remuneration

the Board believes that it has a responsibility to ensure that executive remuneration is fair and reasonable,
having regard to the competitive market for executive talent, structured effectively to motivate and retain valued
executives and designed to produce value for shareholders.

Remuneration Committee

the Remuneration Committee sets policies for directors’ and senior officers’ remuneration, makes specific
recommendations to the Board on the remuneration of directors and senior officers and undertakes a detailed
review of the performance of the Managing Director at least annually. the committee consists of three non-
executive, non-independent directors. Details of membership and attendance at committee meetings are set out
on page 12 of this annual report.

Directors’ remuneration

the remuneration of non-executive directors is different to that of executives. executive directors receive a salary
and may receive shares in accordance with plans approved by shareholders. Further details in respect of executive
remuneration are set out on pages 15 to 19 of this report.

Non-executive directors receive a set fee per annum and are fully reimbursed for any out of pocket expenses
necessarily incurred in carrying out their duties. they do not receive any performance related remuneration, nor
shares or options as part of their remuneration.

When reviewing directors’ fees, the Board takes into account any changes in the size and scope of the company’s
activities, the potential liability of directors and the demands placed on them in discharging their responsibilities.
the Board also considers the advice of independent remuneration consultants.

Retirement benefits

Directors receive their statutory superannuation entitlements only.

Korvest Ltd and its controlled entities

Corporate governance statement (continued)

For the year ended 30 June 2011

Other items

Indemnity and insurance of directors

In accordance with the Company’s constitution and to the extent permitted by law, the Company indemnifies
every person who is, or has been, a director or secretary and may agree to indemnify a person who is or has been
an officer of a group company against a liability incurred by that person in his or her capacity as such a director,
secretary or officer, to another person (other than the Company or a related body corporate of the Company)
provided that the liability does not arise out of conduct involving a lack of good faith. In addition, the Company
has directors and officers insurance against claims and expenses that the Company may be liable to pay under
these indemnities.

Commitment to its staff

the Company aspires to be a well regarded and progressive employer that provides safe and rewarding
workplaces for all of its staff so that they can fully contribute their talents to the achievement of corporate goals.

the Company encourages its staff to become shareholders and share in the success of the company. the current
employee share plan offers all permanent staff with more than two years continuous service ordinary shares in
the Company.

the Company is committed to protecting the health, safety and wellbeing of its staff, contractors and visitors to
its premises.

Commitment to the environment

the Company cares about the environment and recognises that protection of it is an integral and fundamental
part of its business. the Company has an environmental management system in place and management assists
staff to understand and implement the relevant aspects of this system in their day-to-day work. environmental
compliance is monitored with relevant issues being reported through management to the Board.

Commitment to the community

the Board believes that the Company has a responsibility to the Australian, south Australian and local community.
the Company aspires to be a good corporate citizen through the effective provision of quality products and
services, through the taxes it pays, the employment and training it provides its staff, the involvement of its staff in
professional, educational and community organisations and through the donations it makes to various charities.
the Company is justifiably proud of its reputation as a dependable Australian entity.

FINANCIAL STATEMENTS

Korvest Ltd and its controlled entities
For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Financial statements

For the year ended 30 June 2011

STATEMENT OF COMPREHENSIVE INCOME

STATEMENT OF FINANCIAL POSITION

In thousands of AUD

Revenue

expenses, excluding net finance costs

Profit before financing costs

Finance income

Finance expenses

Net finance income

Profit before income tax

Income tax expense

Profit for the year

Other comprehensive income

Revaluation of property, plant & equipment

Foreign currency translation differences

Total comprehensive income for the period

Attributable to:

equity holders of the parent

Total comprehensive income for the period

Earnings per share attributable to the ordinary equity
holders of the Company:

Basic earnings per share from continuing operations

Diluted earnings per share from continuing operations

Note

Consolidated

2011

67,384

(61,363)

6,021

(27)

6,024

(1,803)

4,221

908

5,129

0.49

2010

55,774

(50,187)

5,587

149

5,736

(1,753)

3,983

100

4,083

0.46

the statement of comprehensive income is to be read in conjunction with the notes of the financial statements
set out on pages 41 to 71.

In thousands of AUD

Assets

Cash and cash equivalents

trade and other receivables

Inventories

Current tax receivable

Total current assets

Property, plant and equipment

Total non-current assets

Total assets

Liabilities

trade and other payables

employee benefits

Income tax payable

Provisions

Total current liabilities

employee benefits

Deferred tax liability

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

Korvest Ltd and its controlled entities

Financial statements

As at 30 June 2011

Consolidated

Note

2011

2010

1,577

16,025

9,176

26,778

17,243

44,021

7,459

1,187

237

8,883

467

1,120

333

1,920

10,803

33,218

3,713

4,250

25,255

33,218

2,605

10,825

9,806

23,249

15,296

38,545

5,256

1,061

496

6,813

385

880

196

1,461

8,274

30,271

3,662

3,331

23,278

30,271

the statement of financial position is to be read in conjunction with the notes to the financial statements set out
on pages 41 to 71.

Korvest Ltd and its controlled entities

Financial statements

For the year ended 30 June 2011

STATEMENT OF CASH FLOWS

In thousands of AUD

Cash flows from operating activities

Cash receipts from customers

Cash paid to suppliers and employees

Cash generated from operations

Interest received

Interest paid

Income taxes paid

Net cash from operating activities

Cash flows from investing activities

Proceeds from sale of property, plant and equipment

Acquisition of property, plant and equipment

Net cash from investing activities

Cash flows from financing activities

Dividends paid

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at 1 July

Consolidated

Note

2011

2010

68,769

(63,885)

4,884

(27)

(1,702)

3,185

(2,041)

(1,969)

(2,244)

(1,028)

2,605

61,696

(55,655)

6,041

149

(2,326)

3,864

(2,362)

(2,340)

(2,921)

(1,397)

4,002

Cash and cash equivalents at 30 June

1,577

2,605

the statement of cash flows is to be read in conjunction with the notes to the financial statements set out on
pages 41 to 71.

Korvest Ltd and its controlled entities

Financial statements

For the year ended 30 June 2011

STATEMENT OF CHANGES IN EQUITY

Consolidated

In thousands of AUD

Balance at 1 July 2010

total comprehensive income

Revaluation of Property,
Plant & equipment

shares issued under
the share Plans

Dividends to shareholders

Share
capital

3,662

Balance at 30 June 2011

3,713

Balance at 1 July 2009

3,617

total comprehensive income

shares issued under
the share Plans

Dividends to shareholders

Balance at 30 June 2010

3,662

Equity
compensation
reserve

Translation
reserve

Asset
revaluation
reserve

Retained
earnings

Total

(100)

100

3,275

23,278

30,271

4,221

908

(2,244)

4,183

25,255

33,218

3,275

22,216

29,050

3,983

4,083

(2,921)

3,275

23,278

30,271

the statement of changes in equity is to be read in conjunction with the notes to the financial statements set out
on pages 41 to 71.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements

For the year ended 30 June 2011

1.
2.
3.

Reporting entity
Basis of preparation
significant accounting policies

Financial instruments

Leased assets
Inventories
Impairment
employee benefits
Provisions

(a) Basis for consolidation
(b) Foreign currency
(c)
(d) share Capital
(e) Property, plant and equipment
(f )
(g)
(h)
(i)
(j)
(k) Revenue
(l)
(m) operating lease payments
(n)
(o) Goods and services tax
(p) earnings per share
(q) segment reporting
(r)
(s) New standards and interpretations not yet adopted

Presentation of financial statements

Finance income and expenses

Income tax

4
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.

Financial risk management
segment reporting
Revenue and other income
expenses
Personnel expenses
Auditors’ remuneration
Net financing costs
Income tax expense
earnings per share
Cash and cash equivalents
trade and other receivables
Inventories
Current tax assets and liabilities
Deferred tax assets and liabilities
Property, plant and equipment
trade and other payables
Loans and borrowings
employee benefits
Provisions
Capital and reserves
Financial instruments
operating leases
Capital and other commitments
Consolidated entities
Reconciliation of cash flows from operating activities
Key management personnel disclosures
Non-key management personnel disclosures
subsequent events
Parent entity disclosures

42
42
43
43
43
43
44
45
45
45
46
47
48
48
48
48
48
49
49
49
49
49
50
51
53
53
53
54
54
54
55
56
56
56
56
57
58
59
59
60
62
62
64
66
66
67
67
68
70
71
71

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

1. REPORTING ENTITY

3. SIGNIFICANT ACCOUNTING POLICIES

Korvest Ltd (the ‘Company’) is a company domiciled in Australia. the address of the Company’s registered
office is 580 Prospect Road, Kilburn sA 5084. the consolidated financial statements of the Company as at and
for the year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the
‘Group’ or ‘Consolidated entity’). the Group primarily is involved in manufacturing businesses as detailed in
the segment note.

2. BASIS OF PREPARATION

(a) Statement of compliance

the financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting standards (AAsBs) (including Australian Interpretations) adopted by the Australian Accounting
standards Board (AAsB) and the Corporations Act 2001. the consolidated financial report of the Group complies
with International Financial Reporting standards (IFRss) and interpretations adopted by the International
Accounting standards Board (IAsB).

the financial report was approved by the Board of Directors on 22 August 2011.

(b) Basis of measurement

the consolidated financial statements have been prepared on the historical cost basis except for land and
buildings, which are measured at fair value.

these consolidated financial statements are presented in Australian dollars, which is the Company’s functional
currency and the functional currency of the majority of the Group. 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, all financial information presented
in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

(d) Use of estimates and judgements

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

estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial year are included in the following notes:

● Note 14 – trade and other receivables

● Note 15 – Inventories

● Note 22 – Provisions

the accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of consolidation

(i) Subsidiaries

subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable are taken into account. the financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until
the date that control ceases.

(ii) Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

(i) Foreign currency transactions

transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Australian
dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to
Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

(ii) Foreign operations

the assets and liabilities of foreign operations, including fair value adjustments arising on consolidation,
are translated to Australian dollars at foreign exchange rates ruling at the reporting date. the income
and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign
exchange rates ruling at the dates of the transactions.

Foreign currency differences are recognised directly in equity. When a foreign operation is disposed of, in part or in
full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss.

(i) Non-derivative financial instruments

Non-derivative financial instruments includes: trade and other receivables, cash and cash equivalents, loans
and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially
at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction
costs, except as described below. subsequent to initial recognition non-derivative financial instruments are
measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the
financial assets expire or if the Group transfers the financial asset to another party without retaining control or
substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted
for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are
derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Non-derivative financial instruments (continued)

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows.

Trade and other receivables

trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost
less any impairment charges.

Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not
billed to the Group. they are initially recognised at fair value and subsequently measured on the amortised
cost basis, using the effective interest basis.

trade payables are non-interest bearing and are normally settled on 30 to 60 day terms.

(e) Property, plant and equipment

(i) Land and Buildings

Land and buildings are stated at fair value. Land and buildings are independently valued at least every four
years on an existing use basis, and in the intervening years are valued by the directors based on the most
recent independent valuation.

(ii) Plant and Equipment

Items of plant and equipment are stated at cost or deemed cost less accumulated depreciation and
impairment losses. the cost of self-constructed assets includes the cost of materials, direct labour, the initial
estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which
they are located, and an appropriate proportion of production overheads.

(iii) Subsequent costs

the cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic benefits embodied within the part will flow to the Group
and its cost can be measured reliably. the costs of the day-to-day servicing of property, plant and equipment
are recognised in the statement of comprehensive income as incurred.

Interest-bearing borrowings

(iv) Depreciation

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the statement of comprehensive income over the
period of the borrowings on an effective interest basis.

(d) Share capital

Ordinary shares

Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction
from equity, net of any related income tax benefit.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

Depreciation is provided so as to write off the cost of each non-current asset excluding freehold land over its
effective useful life ranging from 3 to 40 years. the straight line method is used. the depreciation rates used
for each class of asset for the current and comparative period are buildings – 2.5% and plant and equipment
– a range of depreciation rates averaging 10%. the residual value, the useful life and the depreciation method
applied to an asset are reassessed at least annually.

(v) Disposal

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net
within “other income” in the statement of comprehensive income. When revalued assets are sold, the amounts
included in the revaluation reserve are transferred to retained earnings.

(f) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its
fair value and the present value of the minimum lease payments. subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.

other leases are operating leases and the leased assets are not recognised on the Group’s statement of
financial position.

(g) Inventories

Inventories are measured at the lower of cost and net realisable value. the cost of inventories is based on
the first-in first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them
to their existing location and condition. In the case of manufactured inventories and work in progress, cost
includes an appropriate share of production overheads based on normal operating capacity. Net realisable
value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Impairment

(i) Financial assets

(i) Employee benefits

(i) Defined contribution superannuation funds

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that
it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount, and the present value of the estimated future cash flows discounted at the
original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. the remaining
financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in
profit or loss.

(ii) Non-financial assets

the carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets,
are reviewed at each reporting date to determine whether there is any indication of impairment. If any such
indication exists then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows
that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss.

the recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions
into a separate entity and will have no legal or constructive obligation to pay further amounts. obligations for
contributions to defined contribution superannuation funds are recognised as a personnel expense in profit
or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or
a reduction in future payments is available.

(ii) Long-term benefits

the Group’s net obligation in respect of long-term service benefits is the amount of future benefit that
employees have earned in return for their service in the current and prior periods. the obligation is calculated
using expected future increases in wage and salary rates, including related on-costs and expected settlement
dates, and is discounted using the rates attached to the Commonwealth Government bonds at the reporting
date which have maturity dates approximating to the terms of the Group’s obligations.

(iii) Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting
from employees’ services provided to reporting date and are calculated at undiscounted amounts based on
remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs,
such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as
medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost
to the Group as the benefits are taken by the employees.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing
plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.

(iv) Share-based payment transactions

the fair value of options at the date granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period in which the employees become unconditionally entitled to
the options. the amount recognised is adjusted to reflect the actual number of share options that vest, except
for those that fail to vest due to market conditions not being met.

Employee Share Bonus Plan

the employee share Bonus Plan allows Group employees to acquire shares of the Company. shares
are allotted to employees who have served a qualifying period. Up to $1,000 per year in shares is allotted
to each qualifying employee. the fair value of shares issued is recognised as an employee expense with
a corresponding increase in equity. the fair value of the shares granted is measured using a present
value method.

Executive Share Plan

the executive share Plan allows Group employees to acquire shares of the Company. the fair value of options
granted is recognised as an employee expense with a corresponding increase in equity. the fair value is
measured at grant date and spread over the period during which the employees become unconditionally
entitled to the options. the valuation method takes into account the exercise price of the option, the life of
the option, the current price of the underlying shares, the expected volatility of the share price, the dividends
expected of the shares and the risk-free interest rate for the life of the option.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Provisions

(o) Goods and services tax

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the liability.

(k) Revenue

(i) Goods sold

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net
of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant
risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable,
the associated costs and possible return of goods can be estimated reliably, and there is no continuing
management involvement with the goods. transfer of risks and rewards vary according to the terms of
individual sale contracts. transfer usually occurs when the product is received by the customer.

(l) Finance income and expenses

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues.

Finance expenses comprise interest expense on borrowings. Interest expense is recognised as it accrues.

(m) Operating lease payments

Payments made under operating leases are recognised in the statement of comprehensive income on a straight-
line basis over the term of the lease. Lease incentives received are recognised in the statement of comprehensive
income as an integral part of the total lease expense and spread over the lease term.

(n) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available
against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Revenue, expenses and assets are recognised net of the amount of goods and services tax (Gst), except where
the amount of Gst incurred is not recoverable from the taxation authority. In these circumstances, the Gst is
recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of Gst included. the net amount of Gst recoverable from,
or payable to, the Ato is included as a current asset or liability in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis. the Gst components of cash flows
arising from investing and financing activities which are recoverable from, or payable to, the Ato are classified as
operating cash flows.

(p) Earnings per share

the Group presents basic and diluted earnings per share (ePs) data for its ordinary shares. Basic ePs is calculated
by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted ePs is determined by adjusting the profit or
loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(q) Segment reporting

Determination and presentation of operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating results are regularly reviewed by the Group’s Managing
Director to make decisions about resources to be allocated to the segment and assess its performance, and for
which discrete financial information is available.

segment results that are reported to the Managing Director include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets,
head office expenses, and income tax assets and liabilities.

segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment.

(r) Presentation of financial statements

the Group applies revised AAsB 101 Presentation of Financial statements (2007), which became effective as of
1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner
changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of
comprehensive income.

(s) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual reporting
periods beginning after 1 July 2010, and have not been applied in preparing these consolidated financial
statements. None of these are expected to have a significant effect on the consolidated financial statements of
the Company.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

4. FINANCIAL RISK MANAGEMENT

Overview

the Group and the Company has exposure to the following risks from their use of financial instruments:

● credit risk;

● liquidity risk; and

● market risk.

the board of directors has overall responsibility for the establishment and oversight of the risk management
framework.

Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. the Audit Committee oversees how management
monitors compliance with the risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.

Credit risk

4. FINANCIAL RISK MANAGEMENT (CONTINUED)

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Group’s income or the value of its holdings of financial instruments. the objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.

Currency risk

the Group is exposed to currency risk with respect to some purchases that are denominated in currencies
other than Australian Dollars (AUD). the currency in which these transactions are primarily denominated is
Us dollars (UsD).

Interest rate risk

the Group is not currently exposed in any material way to interest rate risk. the risk is limited to the re-pricing of
short term deposits utilised for surplus funds. such deposits generally re-price approximately every 30 days.

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s receivables from customers.

Other market price risk

trade and other receivables

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and committed transactions.

Management has established a credit policy under which each new customer is analysed individually for
creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. the Group’s
review includes external ratings and trade references. Purchase limits are established for each customer, which
represent the maximum open amount without requiring further approval. these limits are reviewed monthly.
Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a
prepayment basis.

the maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as
summarised in Note 24.

In most cases goods are sold subject to retention of title clauses, so that in the event of non-payment the Group
may have a priority claim. the Group does not require collateral in respect of trade and other receivables.

the Group has established an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. the main components of this allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component established for groups of similar assets in respect
of losses that have been incurred but not yet identified.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. the
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group’s reputation. the Group manages liquidity risk by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. surplus funds
are generally only invested in instruments that are tradeable in highly liquid markets.

the Group has no material financial instrument exposure to other market price risk as it is not exposed to either
commodity price risk or equity securities price risk. the Group does not enter into commodity contracts other
than to meet the Group’s expected usage requirements.

Capital management

the Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.

there were no changes in the Group’s approach to capital management during the year.

5. SEGMENT REPORTING

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 in the manner reported to
the chief operating decision maker as defined in AAsB 8. 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.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

5. SEGMENT REPORTING (CONTINUED)

In thousands of AUD

external revenue

Depreciation and amortisation

Reportable segment profit before tax

Reportable segment assets

Capital expenditure

Industrial Product

Production

Total

2011

61,799

735

5,430

29,281

1,691

2010

50,013

576

5,296

23,444

1,682

2011

5,585

417

664

4,221

237

2010

5,761

355

858

4,801

575

2011

67,384

1,152

6,094

33,502

1,928

2010

55,774

931

6,154

28,245

2,257

In thousands of AUD

2011

2010

Reconciliation of reportable segment profit, assets and other material items

Profit

total profit 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

Other material items

Depreciation – reportable segments

Unallocated amounts – other corporate depreciation

Consolidated total

Geographical segments

the entity operates predominately in Australia.

Customers

the Group does not derive 10% or more of its revenue from any single customer.

6,094

(70)

6,024

33,502

10,519

44,021

6,154

(418)

5,736

28,245

10,300

38,545

1,152

127

1,279

931

129

1,060

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Consolidated

Note

2011

2010

In thousands of AUD

6. Revenue and other income

Revenue

sales of goods

7. Expenses

Cost of goods sold

Distribution expenses

sales and marketing expenses

Administration expenses

Restructuring costs

Foreign currency translation reserve on winding up of NZ subsidiary

other expenses

Profit from ordinary activities before income tax has been
arrived at after charging / (crediting) the following items

Depreciation of buildings

Depreciation of plant and equipment

Increase / (decrease) in provisions

executive share plan expense

employee share bonus plan expense

Impairment loss/(reversal) on trade receivables

Impairment loss/(reversal) on inventories

(Gain) / loss on disposal of property, plant and equipment

Research and development expense

8. Personnel expenses

Wages and salaries

other associated personnel expenses

Contributions to defined contribution superannuation funds

Increase in liability for annual leave

Increase/(decrease) in liability for long service leave

equity-settled transactions

21,23

21a

21b

67,384

55,774

39,776

6,207

13,532

1,807

30,966

4,574

12,207

2,136

186

100

61,363

50,187

1,221

1,279

(308)

318

146

1,002

1,060

(65)

207

(182)

368

15,727

13,486

2,374

1,220

150

2,293

1,119

19,592

17,041

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Consolidated

Note

2011

2010

63,500

60,000

27,594

23,223

(27)

149

2,039

(87)

1,952

(149)

1,803

1,565

(9)

1,556

197

1,753

In thousands of AUD

9. Auditors’ remuneration

Audit services

Auditors of the Company

KPMG Australia:

Audit and review of financial reports

Other services

Auditors of the Company

KPMG Australia:

taxation services

In thousands of AUD

10. Net financing costs

Interest income on bank deposits held

Interest expense from bank overdrafts

Net financing income

11.

Income tax expense

Recognised in the statement of comprehensive income

Current tax expense

Current year

Adjustments for prior years

Deferred tax expense

origination and reversal of temporary differences

total income tax expense in statement of comprehensive income

Consolidated

In thousands of AUD

11.

Income tax expense (continued)

Numerical reconciliation between tax expense and pre-tax net profit

Profit before tax

Income tax using the domestic corporation tax rate of 30%
(2010: 30%)

Increase in income tax expense due to:

Non-deductible expenses

Under / (over) provided in prior years

Income tax expense on pre-tax net profit

12. Earnings per share

2011

2010

6,024

5,736

1,807

1,721

(87)

(9)

1,803

1,753

Basic and diluted earnings per share
the calculation of basic earnings per share at 30 June 2011 was based on the profit attributable to
ordinary shareholders of $4,221,110 (2010: $3,983,343) and a weighted average number of ordinary
shares outstanding during the financial year ended 30 June 2011 of 8,624,404 (2010: 8,597,020).
the calculation of diluted earnings per share at 30 June 2011 was based on the profit attributable to
ordinary shareholders of $4,231,842 (2010: $3,997,323) and a weighted average number of ordinary
shares outstanding during the financial year ended 30 June 2011 of 8,710,358 (2010: 8,670,787).

Weighted average number of ordinary shares

In thousands of shares

Issued ordinary shares at 1 July

effect of shares issued during year

Weighted average number of ordinary shares at 30 June

Weighted average number of ordinary shares (diluted)

In thousands of shares

Weighted average number of ordinary shares (basic)

effect of executive share Plan

Weighted average number of ordinary shares at 30 June

Earnings per share

Basic and diluted earnings per share

In AUD

From continuing operations

2011

8,611

2010

8,591

8,624

8,597

2011

8,624

2010

8,597

8,710

8,671

2011

0.49

2010

0.46

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Consolidated

In thousands of AUD

13. Cash and cash equivalents

Bank balances

Call deposits

Consolidated

Note

2011

2010

985

592

1,577

1,470

1,135

2,605

Cash and cash equivalents in the statement of cash flows

the Group had an undrawn overdraft facility of $1.7 million as at 30 June 2011.

14. Trade and other receivables

Current

other receivables and prepayments

trade receivables

141

15,884

16,025

117

10,708

10,825

Group trade receivables are shown net of provided impairment losses amounting to $499,000
(2010: $239,000).

15.

Inventories

Raw materials and consumables

Work in progress

Finished goods

863

8,246

9,176

1,535

120

8,515

9,806

Finished goods are shown net of impairment losses amounting to $1,078,000 (2010: $932,000) arising
from the likely inability to sell a product range.

16. Current tax assets and liabilities

the current tax liability for the consolidated entity of $236,545 (2010: $13,240 asset) represents the
amount of income taxes payable (2010 receivable) in respect of current and prior periods.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

In thousands of AUD

17. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

In thousands of AUD

Property, plant and equipment

Inventories

Provisions / accruals

other items

tax (assets) / liabilities

set off of tax

Consolidated

Assets

Liabilities

Net

2011

(323)

(602)

(150)

(1,075)

1,075

2010

(22)

(280)

(532)

(71)

(905)

2011

1,845

346

2,195

905

(1,075)

2010

1,410

372

1,785

(905)

2011

1,845

(602)

(146)

1,120

Net tax (assets) / liabilities

1,120

880

1,120

2010

1,388

(532)

(68)

880

Movement in temporary differences during the year

In thousands of AUD

Balance
30 June 10

Recognised in
income

Recognised
in equity

Balance
30 June 11

Consolidated

Property, plant and equipment

(1,388)

Inventories

Provisions / accruals

other items

In thousands of AUD

Property, plant and equipment

Inventories

Provisions / accruals

other items

(92)

532

(880)

Balance
1 July 09

(1,279)

(22)

544

(683)

(68)

149

(389)

(1,845)

(23)

602

146

(389)

(1,120)

Recognised in
income

Recognised
in equity

(109)

(70)

(12)

(6)

(197)

Balance
30 June 10

(1,388)

(92)

532

(880)

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

In thousands of AUD

19. Trade and other payables

other trade payables and accrued expenses

Non-trade payables and accrued expenses

Consolidated

Note

2011

2010

5,738

1,721

7,459

3,937

1,319

5,256

20. Loans and borrowings

this note provides information about the contractual terms of the consolidated entity’s interest-bearing
loans and borrowings. For more information about the consolidated entity’s exposure to interest rate and
foreign currency risk, see Note 24.

In thousands of AUD

Non-current liabilities

Unsecured government loan at nominal value

Fair value adjustment

Unsecured government loan at fair value

2011

2010

(40)

In thousands of AUD

18. Property, plant and equipment

Balance at 1 July 2009

other acquisitions

Disposals

Balance at 30 June 2010

Balance at 1 July 2010

Revaluation

other acquisitions

Disposals

Balance at 30 June 2011

Depreciation and impairment losses

Balance at 1 July 2009

Depreciation charge for the year

Disposals

Balance at 30 June 2010

Balance at 1 July 2010

Depreciation charge for the year

Disposals

Revaluation

Balance at 30 June 2011

Carrying amounts

At 1 July 2009

At 30 June 2010

At 1 July 2010

At 30 June 2011

Land and
buildings
(fair value)

Consolidated

Plant and
equipment
(cost)

Total

6,989

1,111

8,100

128

(186)

6,919

6,861

8,100

13,940

2,362

(92)

16,210

2,041

(232)

18,019

6,825

1,002

(52)

7,775

1,221

(120)

8,876

7,115

8,435

9,143

20,929

2,362

(92)

23,199

1,111

2,041

(232)

26,119

6,895

1,060

(52)

7,903

1,279

(120)

(186)

8,876

14,034

15,296

17,243

An independent valuation of Land and Buildings was carried out in May 2011 by Mr Jeffrey Millar, AAPI of AoN
Valuation services, on the basis of the open market value of the properties concerned in their existing use. Land
was valued at $5,000,000 and buildings were valued at $3,100,000. the carrying amount of the Land and Buildings
at cost at 30 June 2011 if not revalued would be $1,138,585.

A deferred tax liability of $389,000 was recognised in relation to the revaluation of land and buildings.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

In thousands of AUD

21. Employee benefits

Current

Liability for annual leave

Liability for long service leave

Non Current

Liability for long-service leave

total employee benefits

Consolidated

2011

2010

890

297

740

321

1,187

1,061

467

1,654

385

1,446

(a) Defined contribution superannuation funds

the consolidated entity makes contributions to defined contribution superannuation funds. the amount
recognised as expense was $1,220,238 for the financial year ended 30 June 2011 (2010: $1,119,055).

(b) Share based payments

In March 2005, the Group established a share option plan that entitled selected senior executives to
acquire shares in the entity subject to the successful achievement of performance targets related to
improvements in total shareholder returns over a two-year option period. the plan was discontinued in
2010.

the options are exercisable if the total shareholder return (measured as share price growth plus dividends
paid) over a two-year period from the grant date exceeds ten percent plus CPI per annum. once exercised
the shares are forfeited if the holder ceases to be an employee of the Group within a further three-year
period. the shares issued pursuant to these options are financed by an interest free loan from the holding
company repayable within twenty years from the proceeds of dividends declared by the holding 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.

the options are offered only to selected senior executives. Details of the options are as follows:

Grant date

Number of options

Number outstanding at
balance date AIFRS

Number outstanding at
balance date ASX

March 2005

March 2009

total share options

60,000

85,000

145,000

52,500

65,000

117,500

options subject to a non-recourse loan for the purchase of shares are not recognised as exercised by
International Financial Reporting standards, until the loan is extinguished at which point the shares
are recognised.

21. Employee benefits (continued)

(b) Share based payments (continued)

Grant
date

Exercise
date

Expiry date

Exercise
price

Consolidated 2011

Mar 05

Mar 09

Apr 10

Jan 07

Jan 11

Jan 2027

Jan 2031

$4.36

$3.79

Weighted average exercise price

Consolidated 2010

Mar 05

Mar 08

Mar 09

Apr 10

Jan 07

Jan 10

Jan 11

Jan 2027

Jan 2030

Jan 2031

$4.36

$6.00

$3.79

Number of
options at
beginning
of year

Options
granted

Options
lapsed /
forfeited

Options
exercised

Number of
options at
end of year
on issue

52,500

60,000

15,000

127,500

$4.03

52,500

60,000

85,000

(10,000)

(60,000)

(25,000)

15,000

197,500

15,000

(85,000)

52,500

50,000

15,000

117,500

$4.04

52,500

60,000

15,000

127,500

$4.03

Weighted average exercise price

$4.61

$3.79

Consolidated

In thousands of AUD

share options granted in 2005

share options granted in 2007

share options granted in 2008

share options granted in 2009

expense arising from employee share scheme

total expense recognised as employee costs

2011

2010

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Consolidated

In thousands of AUD

22. Provisions

Balance at 1 July 2010

Provisions made during the year

Provisions reduced during the year

Provisions used during the year

Balance at 30 June 2011

Current

Non-current

Site restoration and safety

692

(308)

(51)

333

An initial provision of $360,000 was made during the financial year ended 30 June 2003 and further
provisions have been made in the intervening years in respect of the consolidated entity’s obligation
to rectify potential environmental damage and site safety issues at the main site premises in Kilburn.
some expenditure was required in relation to these issues during the financial year ended 30 June 2011
at a cost of $51,000 (2010: $72,000). During the financial year ended 30 June 2011 the provision was
reassessed and reduced by $308,000.

In thousands of shares

23. Capital and reserves

Share capital
on issue at 1 July

Issued under the employee share Bonus Plan

on issue at 30 June – fully paid

The Company
Ordinary shares

2011

2010

8,611

8,640

8,591

8,611

the Company made two issues of ordinary shares under the employee share Bonus Plan during the year.
All employees meeting the service criteria were eligible to participate in the issue. the shares are issued at
market value.

effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the
concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in
respect of its issued shares.

the holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the
Company’s residual assets.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

23. Capital and reserves (continued)

Translation reserve

the translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations where their functional currency is different to the presentation
currency of the reporting entity.

Revaluation reserve

the revaluation reserve relates to land and buildings measured at fair value in accordance with Australian
Accounting standards.

Equity Compensation reserve

the reserve for own shares represents the value of shares held by an equity compensation plan that the
consolidated entity is required to include in the consolidated financial statements. this reserve will be
reversed against share capital or retained earnings when the underlying shares vest in the employee. No
gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the consolidated
entity’s own equity instruments.

Dividends

Dividends recognised in the current year by the Company are:

In thousands of AUD

Cents per share

Total amount

Franked /
unfranked

Date of
payment

2011

Interim 2011 ordinary

Final 2010 ordinary

total amount

2010

Interim 2010 ordinary

Final 2009 ordinary

total amount

11.0

15.0

17.0

951

Fully franked

1 March 2011

1,293

Fully franked

7 september 2010

2,244

1,460

Fully franked

5 March 2010

1,461

Fully franked

1 september 2009

2,921

Franked dividends declared or paid during the year were franked at the tax rate of 30%.
After the balance sheet date the following dividends were proposed by the directors. the dividends
have not been provided. the declaration and subsequent payment of dividends has no income tax
consequences.

In thousands of AUD

Cents per share

Total amount

Franked /
unfranked

Date of
payment

Final ordinary

total amount

15.0

1,314

Fully franked

8 september 2011

1,314

the financial effect of these dividends have not been brought to account in the financial statements for
the financial year ended 30 June 2011 and will be recognised in subsequent financial reports.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

In thousands of AUD

23. Capital and reserves (continued)

Dividends

The Company

2011

2010

30% franking credits available to shareholders of Korvest Ltd for
subsequent financial years

11,458

10,602

the above available amounts are based on the balance of the dividend franking account at year-end
adjusted for:

(a) franking credits that will arise from the payment of the current tax liabilities;

(b) franking debits that will arise from the payment of dividends recognised as a liability at the year-end;

consolidated group at the year-end; and

(d) franking credits that the entity may be prevented from distributing in subsequent years.

the ability to utilise the franking credits is dependent upon there being sufficient available profits to declare
dividends. the impact on the dividend franking account of dividends proposed after the reporting date but not
recognised as a liability is to reduce it by $563,022 (2010: $553,674).

In thousands of AUD

24. Financial instruments

Consolidated

Note

2011

2010

Credit risk
Exposure to credit risk
the carrying amount of the Group’s financial assets represents the maximum credit exposure.
the maximum exposure to credit risk at the reporting date is summarised below:

Cash and cash equivalents

trade and other receivables

1,577

16,025

2,605

10,825

Impairment losses
the ageing of the Group’s trade and other receivables at the reporting date was:
Group

In thousands of AUD

Not past due

Past due 0-30 days

Past due 31-90 days

More than 91 days

Gross

Impairment

Gross

Impairment

2011

7,665

5,209

2,842

808

16,524

2011

(15)

(110)

(73)

(301)

(499)

2010

7,377

3,321

250

116

11,064

2010

(123)

(116)

(239)

In thousands of AUD

24. Financial instruments (continued)

Consolidated

2011

2010

the movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Group

Balance at 1 July

Amounts written off against allowance

Impairment loss (recognised) / reversed

Balance at 30 June

(239)

(260)

(499)

(249)

(75)

(239)

Based on historic default rates, the Group generally believes that no impairment allowance is necessary
in respect of trade receivables not past due or past due by up to 91 days. However in the current
year allowances have been made in all ageing categories as a result of a customer being placed into
administration in June 2011.

the Group sells to a variety of customers including wholesalers and end users and does not have a
concentration of credit risk in any one sector. the Group’s entire credit risk is within the geographic region
of Australia.

Liquidity risk
the following are the contractual maturities of financial liabilities, including estimated interest payments.
the amounts disclosed are the contractual undiscounted cash flows (inflows shown as positive, outflows as
negative).

Consolidated

2011

2010

In thousands of AUD

Carrying
amount

Contractual
cash flows

6 mths
or less

Carrying
amount

Contractual
cash flows

6 mths
or less

Non-derivative financial liabilities

trade and other payables

7,459

(7,459)

5,256

(5,256)

Currency risk

Exposure to currency risk

the Group did not have any material exposure to foreign currency risk and as a result movements in the
Australian dollar against other currencies will not have a material impact on the Group’s profit or equity.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

24. Financial instruments (continued)

Interest rate risk
Exposure to interest rate risk
Movements in interest rates will not have a material impact on the Group’s profit or equity.

Fair values
the fair values together with the carrying amounts shown in the statement of financial position are as follows:

Consolidated

In thousands of AUD

trade and other receivables

Cash and cash equivalents

trade and other payables

Note

Carrying
amount

2011

16,025

1,577

(7,459)

10,143

Fair value

2011

16,025

1,577

(7,459)

10,143

Carrying
amount

2010

10,825

2,605

(5,256)

8,174

Fair value

2010

10,825

2,605

(5,256)

8,174

All fair value instruments recognised in the statement of financial position are Level 3, i.e. inputs for the
asset or liability that are not based on observable market data (unobservable inputs).

In thousands of AUD

25. Operating leases

Leases as lessee
Non-cancellable operating lease rentals are payable as follows:

Less than one year

Between one and five years

More than five years

Consolidated

2011

2010

732

1,367

2,099

699

1,398

2,097

the consolidated entity leases a number of warehouse and factory facilities under operating leases. the
leases typically run for a period of five years, with an option to renew the lease after that date. Lease
payments are increased every five years to reflect market rentals. None of the leases includes contingent
rentals. Rentals are increased by CPI each year.

During the financial year ended 30 June 2011, $792,826 was recognised as an expense in the statement of
comprehensive income in respect of operating leases (2010: $656,996).

In thousands of AUD

26. Capital and other commitments

Capital expenditure commitments

Plant and equipment

Contracted but not provided for and payable:

Within one year

one year or later and no later than five years

Later than five years

Consolidated

2011

2010

170

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Country of
Incorporation

Ownership interest

2011

2010

Australia

New Zealand

27. Consolidated entities

Ultimate Parent entity

Hills Holdings Limited

Subsidiaries

Korvest NZ Ltd

Hills Holdings Limited controls Korvest Ltd by virtue of their control of the Company’s Board through the
chairman’s casting vote, effective management of the Company and exposure to the risks and benefits of
ownership, or control of voting rights through the dilution of minority shareholders.

the New Zealand operations ceased trading in November 2007 and the company Korvest NZ Ltd was
deregistered in August 2009.

In thousands of AUD

Note

2011

2010

Consolidated

28. Reconciliation of cash flows from operating activities

Cash flows from operating activities

Profit for the period

Adjustments for:

Depreciation

Impairment / (reversal) of trade receivables

Impairment / (reversal) of inventories

(Gain) / loss on sale of property, plant and equipment

Impairment of receivable

equity-settled share-based payment expenses

Foreign currency translation reserve on winding up

Profit before changes in working capital

(Increase)/decrease in trade and other receivables

(Increase)/decrease in inventories

(Decrease)/increase in trade and other payables

(Decrease)/increase in deferred tax liabilities

(Decrease)/increase in income taxes payable

(Decrease)/Increase in provisions and employee benefits

Net cash from operating activities

4,221

3,983

18,7

21(b)

1,279

318

146

6,066

(5,519)

485

2,151

(149)

250

(99)

3,185

1,060

207

(182)

100

5,245

163

(1,141)

150

197

(769)

3,864

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

29. Key management personnel disclosures

the following were key management personnel of the consolidated entity at any time during the
reporting period and unless otherwise indicated were key management personnel for the entire period:

Non-executive Directors

Peter W Stancliffe (Chairman)

Graham L Twartz

Peter Brodribb

Executive Directors

Alexander H W Kachellek (Managing Director)

Executives

C A Hartwig (General Manager ezystrut & Indax)
17 April 2009 to 23 June 2010, (General Manager,
ezystrut) since 23 June 2010.

S W Evans (General Manager Galvanising)

A P Ifkovich (General Manager, Indax) Commenced
9 August 2010.

Steven J W McGregor (Finance Director and
Company secretary)

C D Peck (General Manager, operations) Ceased
employment 23 June 2010.

the key management personnel compensation included in ‘personnel expenses’ (see Note 8) are as follows:

In AUD

short-term employee benefits

other long term benefits

termination benefits

equity compensation benefits

Consolidated

2011

2010

1,268,833

1,164,261

110,617

8,947

102,066

101,517

12,565

1,388,397

1,380,409

Individual directors and executives compensation disclosures

Information regarding individual directors and executives compensation and some equity instruments
disclosure as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration
report section of the Directors’ report.

Apart from the details disclosed in this note, no director has entered into a material contract with the
Company or the consolidated entity since the end of the previous financial year and there were no
material contracts involving directors’ interests existing at year-end.

Other key management personnel transactions with the Company or its controlled entities

From time to time, key management personnel of the Company or its controlled entities, or their related
entities, may purchase goods from the consolidated entity. these purchases are on the same terms and
conditions as those entered into by other consolidated entity employees or customers and are trivial or
domestic in nature.

29. Key management personnel disclosures (continued)

Options and rights over equity instruments

the movement during the reporting period in the number of options over ordinary shares in Korvest Ltd
held, directly, indirectly or beneficially, by each key management person, including their related parties, is
as follows:

Held at 1
July 2010
IFRS

Granted
as
compen-
sation

Exercised

Other
changes*

Held at
30 June
2011
IFRS

Held at
30 June
2011
ASX

ASX Vested and
exercised
during the year
ended 30 June
2011

Directors

A Kachellek

s McGregor

Executives

C Hartwig

30,000

15,000

10,000

30,000

15,000

10,000

30,000

15,000

10,000

* other changes represent options that expired, were cancelled or were forfeited during the year.

No options held by key management personnel are vested but not exercisable.

Held at 1
July 2009
IFRS

Granted
as
compen-
sation

Exercised

Other
changes*

Held at
30 June
2010
IFRS

Held at
30 June
2010
ASX

ASX Vested and
exercised
during the year
ended 30 June
2010

Directors

A Kachellek

s McGregor

Executives

C Hartwig

60,000

15,000

20,000

(30,000)

30,000

(15,000)

15,000

(10,000)

10,000

* other changes represent options that expired or were forfeited during the year.

options subject to a non-recourse loan for the purchase of shares are not recognised as exercised
by International Financial Reporting standards, until the loan is extinguished at which point the
shares are recognised.

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements (continued)

For the year ended 30 June 2011

29. Key management personnel disclosures (continued)

31. Subsequent events

Movements in shares
the movement during the reporting period in the number of ordinary shares in Korvest Ltd held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:

there has not arisen between the end of the year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors of the consolidated entity, to
affect significantly the operations of the consolidated entity in subsequent financial periods.

Held at 1
July 2010

Purchases

Allocated
under
Employee
share plan

Received on
exercise of
options

Sales

Held at 30
June 2011

Directors

P. stancliffe

G. twartz

P. Brodribb

s. McGregor

A. Kachellek

Executives

C. Hartwig

s. evans

1,000

29,115

15,781

500

695

310

219

15,000

30,000

10,000

A. Ifkovich
No shares were granted to key management personnel during the reporting period as compensation
other than those provided under the employee share plan on the same terms and conditions as for all
employees.

1,000

29,115

15,781

15,500

30,695

10,529

30. Non-key management personnel disclosures

Identity of related parties
the consolidated entity has a related party relationship with its ultimate parent entity (see Note 27), its
former subsidiary (see Note 27) and with its key management personnel (see Note 29).

Other related party transactions
Ultimate Parent Entity
During the year the following material transactions took place with Hills Holdings Limited under normal
commercial terms and conditions.

In AUD ($)

sales

Purchases

Payment of dividends

Amounts payable at reporting date (current)

Amounts receivable at reporting date (current)

Consolidated

2011

2010

157,212

495,511

1,050,634

1,014,237

1,057,191

1,346,519

95,526

210,369

10,091

45,512

32. Parent entity disclosures

As at, and throughout the year ended 30 June 2011 the parent company of the Group was Korvest Ltd.

In thousands of AUD

Result of the parent entity

Profit for the period

other comprehensive income

total comprehensive income for the period

Financial position of the parent entity at year end

Current assets

total assets

Current liabilities

total liabilities

Total equity of the parent entity comprising of:

share capital

Reserves

Retained earnings

Total Equity

Parent entity capital commitments

Plant and equipment

Contracted but not provided for and payable:

Within one year

Company

2011

2010

4,221

908

5,129

3,983

26,778

44,021

23,249

38,545

8,883

10,803

6,813

8,274

3,713

4,250

25,255

33,218

3,662

3,331

23,278

30,271

170

Korvest Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2011

Korvest Ltd and its controlled entities

Directors’ declaration

DIRECTORS’ DECLARATION

1. In the opinion of the directors of Korvest Ltd (the Company):

(a) the consolidated financial statements and notes set out on pages 36 to 71 and the Remuneration report
in the Directors’ report, set out on pages 15 to 19, are in accordance with the Corporations Act 2001,
including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2011 and of its performance

for the financial year ended on that date; and

(ii) complying with Australian Accounting standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable.

2. there are reasonable grounds to believe that the Company and the group entities identified in Note 27 will be

able to meet any obligations or liabilities to which they are or may become subject to.

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 financial year ended 30 June 2011.

4. the directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement

of compliance with International Financial Reporting standards.

Dated at Adelaide this 22nd day of August 2011.

signed in accordance with a resolution of directors:

Peter stancliffe

Director

Korvest Ltd and its controlled entities

Audit report

Korvest Ltd and its controlled entities

Audit report (continued)

Korvest Ltd and its controlled entities

Lead Auditor’s Independence Declaration

Korvest Ltd Annual Report 2011

AsX Additional information

АSX ADDITIONAL INFORMATION

Additional information required by the Australian securities exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below.

Shareholdings (as at 11 August 2011)

Substantial shareholders

the number of shares held by substantial shareholders and their associates are set out below:

Shareholder

Hills Finance Pty Ltd

Donald Cant Pty Ltd

Voting rights

For ordinary shares refer to note 23 in the financial statements.

For options refer to note 21 in the financial statements.

Distribution of equity security holders

Number

4,210,349

527,203