korvest
Annual Report 2015

Plain-text annual report

A N N U A L R E P O R T 2 0 1 5 ANNUAL REPORT 15 Korvest Ltd, 580 Prospect Road, Kilburn, SA 5084 T: 61 8 8360 4500 | F: 61 8 8360 4599 | E: korvest@korvest.com.au www.korvest.com.au www.ezystrut.com.au www.powerstep.com.au www.titantools.com.au www.korvestgalvanisers.com.au 15 1 DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 5 YEAR SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION AUDIT REPORT LEAD AUDITOR’S INDEPENDENCE DECLARATION ASX ADDITIONAL INFORMATION 12 31 32 33 34 35 37 66 67 69 70 Korvest Ltd ABN: 20 007 698 106 Annual Report, 30 June 2015 Gavin Christie General Manager, Manufacturing and Supply Chain 3 KORVEST LTD: A MARKET LEADING INFRASTRUCTURE PROVIDER Korvest Ltd (ASX:KOV) has a strong track record in providing ground-breaking, complete solutions to a wide range of industries across Australia and the world. With our businesses trading under the EzyStrut, Power Step, Titan Technologies and Korvest Galvanisers names, we produce a range of standard as well as customised and innovative products. Through strong market penetration, with a reputation for producing high quality products and delivering on time, Korvest is now one of Australia’s largest suppliers of cable and pipe support systems, hydraulic and electric access systems for mobile equipment, hydraulic and pneumatic tools and wrenches, as well as galvanising services. John Dickie Engineering Manager Steve Jeffs QHSE Manager Patrick Canny Manager, Acquisitions & Growth WHEN CABLES AND PIPES ARE INSTALLED IN ANY CONSTRUCTION PROJECT THEY NEED TO BE SUPPORTED. 5 AUSTRALIA’S LEADING RANGE OF CABLE AND PIPE SUPPORT SYSTEMS EzyStrut manufactures one of the most diverse range of cable and pipe support solutions in the industry, suitable for almost any application and in a variety of finishes. EzyStrut’s products are found in numerous iconic Asia-Pacific locations, including commercial constructions, wharfs, mine sites, tunnels, power stations and more. A contributing factor to EzyStrut’s continued success is the ability to deliver customised cable and pipe support solutions at competitive prices while maintaining an extensive shelf range. EzyStrut remains the largest Australian manufacturer of cable and pipe supports. Chris Hartwig Executive General Manager www.ezystrut.com.au SAFETY ON ANY INDUSTRIAL VEHICLE IS PARAMOUNT. 7 SAFETY ACCESS SYSTEMS FOR ALL LARGE MOBILE EQUIPMENT All access systems supplied by Power Step are designed and manufactured in Australia and offer access solutions for equipment in the mining, rail, marine and aviation industries. Power Step exports its products to Indonesia, Papua New Guinea, New Zealand, New Caledonia and beyond. Since its inception, Power Step has manufactured and sold over 800 access systems. Power Step has designed access systems for all major OEMs. All access systems designed by Power Step comply with the relevant Australian Standards (AS1657/AS3868/SAE J185). Paul Assaf General Manager (Power Step & Titan) www.powerstep.com.au INDUSTRIAL CONSTRUCTION NEEDS STRENGTH AND RELIABILITY TO FASTEN BOLTS OF ANY REQUIRED SIZE. 9 SUPERIOR AND COMPLETE BOLTING SOLUTIONS FOR ANY INDUSTRY Titan Technologies (SE Asia) Pty Ltd sells international brand of Titan Hydraulic Torque Wrenches, AirTite Pneumatic and the E-Tite Electric Continuous Torque Wrenches, Electric/Hydraulic PT Pumps Air/ Hydraulic PT Pumps, and related accessories. Offering sales, hire and service, Titan Technologies has serviced job sites of all sizes across Australia and the Asia-Pacific region. www.titantools.com.au STEEL USED IN CONSTRUCTION OR GENERAL FABRICATION NEEDS PROTECTION AGAINST CORROSION AND GALVANISING OFFERS THE LONGEST TERM AND MOST RESILIENT SOLUTION. 11 QUICK TURNAROUND GALVANISING OF THE LARGEST, SMALLEST, AND MOST COMPLEX CONSTRUCTION INFRASTRUCTURE A member of the Galvanizing Association of Australia (GAA), Korvest Galvanisers is a leading galvaniser in Australia. Korvest operates 2 galvanising kettles in SA: A state-of-the-art ceramic kettle for high temperature spin galvanising of small products and a large hot dip galvanising bath allowing single dipping of structural members up to 13.5m in length. With all work finished to AS/NZS4680:2006 and with stringent quality control throughout the process, Korvest has been sought for international galvanising requirements. Steven Evans General Manager www.korvestgalvanisers.com.au DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 12 13 THE DIRECTORS PRESENT THEIR REPORT TOGETHER WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP COMPRISING OF KORVEST LTD (‘THE COMPANY’) AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 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: COMPANY SECRETARY Mr Steven J W McGregor CA, AGIA, ACIS, 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 Brodribb and Gerard Hutchinson retire from the Board at the forthcoming Annual General Meeting on 26 October 2015. Both are eligible for re-election at that meeting and offer themselves accordingly. Graeme Billings 59 Alexander Kachellek 62 Steven McGregor 43 Gerard Hutchinson 47 Peter Brodribb 70 Gary Francis 60 BCOM, FCA, MAICD BSC.CENG MIET FAICD BA (ACC), CA, AGIA, ACIS MBA, MBL, MSc(IS), BEc, MA (research), FCA, FCAID, FAIM F.I.E (Aust) BSC.HON. (CIVIL), MAICD Mr Billings retired from PricewaterhouseCoopers in 2011 after 34 years where he was a senior partner in the Assurance practice. Director G.U.D. Holdings Limited. Director Clover Corporation Limited. Appointed Chairman 18 September 2014. A Director since May 2013. A Director since June 2007. Company Secretary since April 2008. Appointed 19 November 2014. A Director since 1984. Appointed 11 February 2014. Appointed as Finance Director 1 January 2009. Mr Kachellek has experience in a number of industries including Data Communications and Automotive, Lean Operations Consultancy and Manufacturing. Director Austmine Ltd. Appointed Non-Executive Director in January 2005 after retiring from the position of Managing Director that he had held since 1984. Chairman of Remuneration Committee. Chairman of Audit Committee. Managing Director AusGroup Limited. FORMER DIRECTOR Peter Stancliffe 67 BE (Civil), FAICD Appointed as Director and Chairman on 1 January 2009, retired 18 September 2014. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdManaging DirectorFinance DirectorChairman Independent Non-Executive DirectorIndependentNon-Executive DirectorNon-IndependentNon-Executive DirectorIndependent Non-Executive DirectorIndependentNon-Executive DirectorDIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 14 DIRECTORS’ MEETINGS The number of directors’ meetings (including meetings of commit- tees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: DIRECTOR Mr P Stancliffe Mr A Kachellek Mr P Brodribb Mr S McGregor Mr G Billings Mr G Francis Mr G Hutchinson BOARD MEETINGS AUDIT COMMITTEE MEETINGS RENUMERATION COMMITTEE MEETINGS A 4 21 21 21 21 21 14 B 4 21 21 21 21 21 14 A 1 - 4 - 4 4 3 B 1 - 4 - 4 4 3 A 1 - 2 - 2 2 1 B 1 - 2 - 2 2 1 In line with the Board’s growth strategy, Korvest has been actively engaged in reviewing potential acquisition opportunities during the year. Approximately $0.2m of costs associated with these activities are included in the year’s net profit after tax. 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 $63.0m, down 14.5% on the previous year. Profit after tax was $1.5m compared to $5.6m in the previous year. The overall results for the year were impacted by the impairment of $1.7m of goodwill relating to the Power Step and Titan Technologies businesses. These businesses principally service the mining industry and with the significant slow-down in demand in that sector the results of the businesses have been disappointing. As a result of the uncertainty surrounding the timing of future projects and recovery of activity in the mining sector and on the basis of an impairment assessment performed during the first half the Board took the decision to impair the goodwill. The exit of the Indax business was completed during the year with all remaining equipment and inventory sold. The review of operations set out below contains more detailed commentary in relation to business performance during the year. 15 DIVIDENDS The directors announced a fully franked dividend of 12.0 cents per share compared to 31.0 cents per share last year and 17.0 cents at the half year. The Dividend Reinvestment Plan (DRP) will operate for the final dividend with the issue price calculated at a 5% discount to the volume weighted average market price for the period from 19 to 25 August 2015 inclusive. The dividend will be paid on 4 September 2015 with a record date of 21 August 2015. 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 2015 Interim 2015 ordinary Final 2014 ordinary Total amount 17.0 31.0 1,786 3,246 5,032 Franked dividends declared and paid during the year were franked at the rate of 30 per cent. 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. Fully franked Fully franked 13 March 2015 5 September 2014 Final ordinary Total amount 12.0 1,264 1,264 Fully franked 4 September 2015 The financial effect of these dividends has not been brought to account in the financial statements for the year ended 30 June 2015 and will be recognised in subsequent financial reports. Dividends have been dealt with in the financial report as: Dividends Dividends: subsequent to 30 June 2015 Note 23 23 5,032 1,264 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdDIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 16 17 STRATEGY AND FUTURE PERFORMANCE Korvest’s businesses service a number of major markets including infrastructure, commercial, utilities, mining, food processing, oil & gas, power stations, health and industrial. Korvest continued to supply a small number of large projects during the year. Recent years have been characterised by the lack of medium to large projects and the FY15 year saw no change in this situation. Day-to-day business is yet to show signs of improving on the subdued levels that have been experienced over recent years. Foreshadowing the slowdown in the Australian economy an export strategy was developed and is now being implemented. The target countries are Singapore, Hong Kong, New Zealand and the Philippines. Korvest has yet to benefit from this investment but there has been interest in the target markets. Korvest’s strategy has been to focus on businesses where it holds a strong market position. This strategy resulted in the closure of the Indax business over the past year. The remaining Korvest businesses continue to hold strong market positions and are therefore well equipped to take advantage of opportunities as they arise. Korvest continues to have a strong balance sheet providing the capacity for further growth by acquisition. Korvest would consider taking on a prudent level of debt to fund suitable acquisitions. In which case, as a guide, Korvest would look to maintain a gearing ratio, measured as net debt/(net debt plus equity), at below 30%. Korvest has a long history of paying franked dividends. Since July 2012 the Korvest dividend policy has been to distribute 100% of after tax profits which is slightly above the upper end of the target dividend payout ratio range of 65-90% of after tax profits. The final dividend declared remains at the upper end of the target range. The Board has reactivated the Dividend Reinvestment Plan for the final dividend. This has been done to ensure that Korvest continues to distribute its available franking credits to shareholders whilst also preserving cash to the extent of the DRP participation to be utilised in the growth opportunities that Korvest is actively pursuing. In April 2014 Korvest announced the exit of the Indax grating and handrail business previously included in the Industrial Products group. During the 2015 year the focus has been on selling the business assets. This process was completed during the year with all of the inventory being sold and all of the plant and equipment sold or redeployed. Power Step designs and assembles access systems for large mobile equipment. Titan Technologies supplies specialised tools in the form of torque wrenches, hydraulic pumps and related accessories. Both businesses rely principally on the mining industry and as a consequence the performance of both businesses during the year was disappointing. The cost structure of both the Power Step and Titan Technologies businesses were reviewed during the year and a number of savings initiatives were implemented. Production In the Production group the Galvanising business experienced substantially reduced demand during the year. This resulted in plant volumes in both the main bath and the spin plant being less than has been experienced in recent years. External plant volumes suffered the larger decline although the internal volumes also fell as the activity in the Industrial Products segment eased. Risk The Board and Management periodically review and update risk reviews that identify and assess the risks faced by the business and the controls that are in place to mitigate those risks. General Managers report to the board monthly on any changes to the risk profile of their business unit. There have been few changes to the risk environment faced by Korvest over the past year. Operational risks relate principally to continuity of supply and continuity of production. To ensure continuity of supply Korvest monitors the performance of key suppliers and establishes more than one supply source for key products. For many bought in finished goods the ability for the product to also be manufactured in-house mitigates the risk. PRINCIPAL ACTIVITIES AND REVIEW OF OPERATIONS The principal continuing activities of the Group consist of hot dip galvanising, sheet metal fabrication, manufacture of cable and pipe support systems and fittings, design and assembly of access systems for large mobile equipment and sale, repair and rental of high torque tools. Korvest had another good year in terms of plant reliability and low down time. The responsibility for this falls to the Korvest in-house engineering and maintenance department. Preventative maintenance programmes are in place for key processes and items of plant and the low plant down time over recent years is an indicator of the success of those programmes. The Group is comprised of the Industrial Products Group which includes the EzyStrut, Power Step and Titan Technologies and the Production Group which includes the Korvest Galvanisers business. Financial risks faced by the business are typical of those faced by most businesses and centre around management of working capital. In particular trade receivables and inventory levels are constantly reviewed and performance is monitored with key performance indicators on an ongoing basis. Industrial Products In the Industrial Products group the EzyStrut cable and pipe sup- port business supplies products to contractors for small industrial developments and also supplies products for major infrastructure developments. EzyStrut performed credibly in a difficult market. The business continued to supply two major oil and gas projects during the year and these underpinned the EzyStrut performance. Outside of the very small number of large projects the remaining market conditions remained difficult and competitive. During the year Korvest went live with a new Enterprise Resource Planning (ERP) system. There was significant management input on the project in the period leading up to implementation and also post implementation to ensure that the risks associated with projects of this type were mitigated. SIGNIFICANT CHANGES In the opinion of the directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review. REMUNERATION REPORT - AUDITED Principles of compensation Remuneration is referred to as compensation throughout 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 2015, that has significantly affected, or may significantly affect: (i) the operations of the Group; (ii) the results of those operations; or (iii) the state of affairs of the Group; in the financial years subsequent to 30 June 2015. LIKELY DEVELOPMENTS Korvest continues to look for growth by export and acquisition. The types of businesses that are of interest include those that provide vertical integration with existing Group businesses, those that expand the product or service offering to the Group’s existing customer base or those that may be able to benefit from utilising the Group’s existing national distribution network. The appointment of a Manager - Acquisitions and Growth in June 2014 has seen an increased focus on this area and a number of acquisition opportunities have been evaluated over the past year. The broad focus for the existing businesses continues to be on innovation both in relation to new product development and process improvement. With subdued market conditions the focus on customer service remains critical and projects that assist with manufacturing efficiency and improve lead times to improve customer service are a priority. Korvest continues to invest in resources to pursue opportunities in markets in the Asia Pacific region that Korvest has not previously serviced. Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. 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 and related entities. 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. Key Management Personnel (KMP) have authority and responsibility for planning, directing and controlling the activities of the Group, including directors of the Company and other executives. KMP comprise the directors and senior executives of the Group. Compensation levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors and executives. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: (a) the capability and experience of the KMP (b) the KMP’s ability to control performance; and (c) the Group’s performance including the Group’s earnings. Fixed compensation Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the remuneration committee. 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 25 October 2013 and is not to exceed $450,000. Performance linked compensation Performance linked compensation includes both short-term and long-term incentives, and is designed to reward KMP for meeting or exceeding their financial and personal objectives. The short-term incentive (STI) is an ‘at risk’ cash bonus, while the long-term incentive (LTI) is provided as performance rights under the rules of the Korvest Performance Rights Plan. Short-term incentive bonus The key performance indicators (KPIs) for the KMP are set annually. The KPIs include measures relating to financial and operating performance, safety, strategy and risk measures. The KPIs are chosen to directly align the individual’s reward to the KPIs of the Group and to its strategy and performance. The non-financial objectives vary with position and responsibility and include measures such as achieving strategic outcomes, safety and environmental performance. The financial objectives relate to earnings before interest and tax (EBIT) for various parts of the business depending on the KMP. The structure of the STIs was changed in the current year to encompass a wider range of KPIs and with a capped level. Previ- ously STIs were principally based on EBIT and were uncapped. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 18 REMUNERATION REPORT - CONTINUED The table below summarises the nature and weighting of the KPIs included in the STIs. MANAGING DIRECTOR OTHER KMP* Acquisitions & Growth (35%) Acquisitions & Growth Asset Divestment (10%) Asset Divestment Financial performance (45%) Financial performance Safety (10%) Safety *Each KMP have different KPIs and weightings. Some individual’s STI structure do not include all KPI categories listed. Process Improvement Long-term incentive bonus Performance rights are issued under the Korvest Performance Rights Plan to employees (including KMP) as determined by the remuneration committee. Performance rights become vested performance rights if the Group achieves its performance hurdle. If rights become vested performance rights and do not lapse, the holder is able to acquire ordinary shares in the Company for no cash payment. The performance hurdle relates to growth in basic earnings per share (EPS). EPS performance is measured in total over a three year period. The performance hurdle is tested once at the com- pletion of the three year vesting period. The % growth is based on a base year which is the year prior to the commencement of the vesting period. For the most recent issue of Performance Rights the table below sets out the % of rights that vest depending on the level of EPS growth achieved. COMPOUND ANNUAL EPS GROWTH OVER 3 YR VESTING PERIOD Less than 7.5% 7.5% % OF RIGHTS THAT VEST Nil 33.3% Between 7.5% - 15% Pro rata between 33.3% – 100% 15% or greater The EPS objective was chosen because it is a good indicator of the Group’s earnings growth and is aligned to shareholder wealth objectives. 100% 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. Entering into such arrangements has been prohibited by law since 1 July 2011. Service contracts It is the Group’s policy that service contracts for all KMP are unlimited in term but capable of termination by providing 1 to 6 months’ notice depending on the KMP, and that the Group retains the right to terminate the contract immediately by making payment in lieu of notice. The Group has entered into a service contract with each executive KMP. On termination of employment the KMP are also entitled to receive their statutory entitlements and accrued annual leave and long service leave, as well as any entitlement to incentive payments and superannuation benefits. Services from remuneration consultants The remuneration committee engaged the services of AON Hewitt and Lillas Harrison as remuneration consultants to the board to provide benchmarking data for the amount and components of the KMP remuneration. AON Hewitt were engaged to provide benchmarking advice on the executives’ remuneration in comparison with organisations of similar size and complexity to Korvest. Lillas Harrison were engaged to specifically provide benchmarking from a South Australian perspective. AON Hewitt was paid $20,670 for their benchmarking advice. Lillas Harrison was paid $790 for their benchmarking advice. AON Hewitt conducted interviews with each of the KMP to understand the roles and responsibilities of each. Lillas Harrison had no contact with any members of the KMP in preparing their report. Both consultants were engaged by and reported directly to the Chairman of the remuneration committee. With the exception of the interviews conducted by AON Hewitt, there were no other interactions between the consultants and KMP. The scope of the AON Hewitt engagement was to provide data and market commentary only. No recommendations were made in relation to remuneration of KMP. Similarly, Lillas Harrison was also engaged to provide South Australian market benchmarks and made no recommendations in relation to remuneration of KMP. The Board was aware of the process undertaken by AON Hewitt and Lillas Harrison and the interactions with key management personnel and is satisfied that their reports were made free from undue influence by members of the key management personnel. The remuneration committee consists entirely of non-executive directors and is responsible for setting the remuneration levels for KMP. The Board is satisfied that the remuneration committee is able to make a decision on remuneration levels without undue influence by the members of the KMP about whom the recommendations may relate. Non-executive directors Non-executive directors receive a fixed fee. The total remuneration for all non-executive directors was last voted upon by sharehold- ers at the AGM held on 25 October 2013 and is not to exceed $450,000. The current base fees became effective on 1 July 2014 and are: Chairman $123,600 Director $61,800 The Chairman of a Board Committee receives a further $10,300 p.a. Superannuation is added to these fees where appropriate. Non-executive directors do not receive performance-related compensation. Consequences of performance on shareholder wealth In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee have regard to the indices set out in the 5 Year Summary on page 31. FOR THE YEAR ENDED 30 JUNE 2015Korvest Ltd DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 20 REMUNERATION REPORT - CONTINUED Directors and Executive Remuneration Details of the nature and amount of each major element of remuneration of each director of the Company, and other KMP of the Group are: NAME DIRECTORS G Billings Non-executive (Chairman) P Brodribb Non-executive (Director) G Francis (appointed 11 Feb 2014) Non-executive (Director) G Hutchinson (appointed 19 Nov 2014) Non-executive (Director) A Kachellek Executive (Managing Director) S McGregor Executive (Finance Director) FORMER DIRECTOR P Stancliffe (retired 18 September 2014) Non-executive (Director) EXECUTIVES/OTHER KMP C Hartwig Executive General Manager EzyStrut S Evans General Manager Galvanising P Assaf General Manager Power Step & Titan Technologies SHORT TERM POST EMPLOYMENT SHARE BASED PAYMENTS SALARY & FEES $ BONUS $ SUPERANNUATION BENEFITS $ OTHER LONG TERM – LONG SERVICE LEAVE $ * SHARES $ OPTIONS & RIGHTS $ 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 110,725 61,825 61,800 52,100 77,369 25,000 48,067 - 309,000 300,006 272,950 265,005 30,900 100,167 236,900 230,005 200,850 195,004 216,300 209,129 - - - - - - - - 15,991 145,862 10,236 27,011 - - 39,800 160,198 5,523 55,256 4,975 - 10,519 5,719 5,871 4,819 - - 4,566 - 36,604 35,018 26,417 25,009 2,936 9,265 26,230 25,000 24,330 23,287 20,549 24,455 - - - - - - - - 9,293 14,582 7,830 21,798 - - 7,201 9,810 10,182 4,921 12,856 16,948 - - - - - - - - - - - - - - 997 997 997 997 997 997 - - - - - - - - (39,763) 43,478 (31,479) 34,133 - - (21,538) 24,192 (14,911) 15,973 (8,284) 8,284 21 S300A (1)(E)(I) PROPORTION OF REMUNERATION PERFORMANCE RELATED % - - - - - - - - (7.2) 35.1 (7.4) 16.4 - - 6.3 41.0 (4.1) 24.1 (1.3) 3.2 TOTAL $ 121,244 67,544 67,671 56,919 77,369 25,000 52,633 - 331,125 538,946 285,954 372,956 33,836 109,432 289,590 450,202 226,971 295,438 247,393 259,813 * This represents the accounting expense relating to the change in the provision for long service leave. It does not represent cash payments or statutory obligations. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 22 REMUNERATION REPORT - CONTINUED Options and rights over equity instruments granted as compensation Details on performance rights that were granted as compensation to each KMP during the reporting period and details on options that vested during the reporting period are as follows: NUMBER OF PERFORMANCE RIGHTS GRANTED DURING THE YEAR GRANT DATE FAIR VALUE PER OPTION AT GRANT DATE ($) EXPIRY DATE 24,000 19,000 14,000 9,000 5,000 12 Nov 2014 12 Nov 2014 12 Nov 2014 12 Nov 2014 12 Nov 2014 3.76 3.76 3.76 3.76 3.76 30 June 2017 30 June 2017 30 June 2017 30 June 2017 30 June 2017 DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf 23 Exercise of options granted as compensation During the reporting period the following shares were issued on the exercise of performance rights previously granted as compensation. A Kachellek S McGregor C Hartwig S Evans NUMBER OF SHARES AMOUNT PAID PER SHARE 13,895 9,925 9,925 3,970 $nil $nil $nil $nil Analysis of options and rights over equity instruments granted as compensation Details of vesting profiles of the options granted as remuneration to each director and key executive of the Company are detailed below: All performance rights have a nil exercise price. All performance rights expire on the earlier of their expiry date or termination of the individual’s employment. The performance rights are exercisable for one year after the conclusion of the vesting period. In addition to the continuing employment service condition, the ability to exercise performance rights is condition- al on the Group achieving performance hurdles. Details of the performance criterion are included in the long-term incentives discussion on page 18. No equity-settled share-based payment transaction terms (including performance rights granted as compensation to KMP) have been altered or modified by the Group during the reporting period or the prior period. DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf OPTIONS GRANTED NUMBER DATE % VESTED IN CURRENT YEAR % FORFEITED OR LAPSED IN CURRENT YEAR YEAR IN WHICH GRANT VESTS 25,000 24,000 24,000 20,000 19,000 19,000 10,000* 15,000 13,000 14,000 7,500 9,000 9,000 5,000 5,000 Nov 12 Nov 13 Nov 14 Nov 12 Nov 13 Nov 14 Mar 09 Nov 12 Nov 13 Nov 14 Nov 12 Nov 13 Nov 14 Nov 13 Nov 14 -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% 100% 30 Jun-15 -% -% 30 Jun 16 30 Jun 17 100% 30-Jun-15 -% -% -% 30-Jun 16 30 Jun 17 30 Jun 11 100% 30 Jun-15 -% -% 30 Jun 16 30 Jun 17 100% 30 Jun-15 -% -% -% -% 30 Jun 16 30 Jun 17 30 Jun 16 30 Jun 17 * - These options were issued under the previous Korvest Ltd Executive Share Plan. They vested during the year ended 30 June 2011 and were exercised in January 2011. Restricted ordinary shares were issued at an exercise price of $3.79 per share. Under the terms of the previous 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). As a result of these arrangements, under AASBs, the instruments are treated as options until such time as the associated non-recourse loan is fully repaid. The shares remain restricted from transfer until the completion of a 5 year service period from grant date and until such time as the loan is fully paid. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 24 REMUNERATION REPORT - CONTINUED Analysis of movements in options and rights The movement during the reporting period, by value, of options over ordinary shares in the Company held by each company director and KMP are detailed below: DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf VALUE OF RIGHTS/OPTIONS GRANTED IN YEAR $ (A) EXERCISED IN YEAR $ LAPSED OR FORFEITED IN YEAR $ (B) 90,284 71,475 52,666 33,857 18,809 - - - - - 118,357 94,685 71,014 35,507 - (A) The value of performance rights granted in the year is the fair value of the options calculated at grant date using the Black Scholes 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 2013 to 1 July 2016). (B) The value of the options that lapsed during the year represents the benefit forgone and is calculated at the date the option lapsed using the Black Scholes option-pricing model assuming the performance criteria had been achieved. Further details regarding options granted to executives under the Executive Share Plan are in Note 21 to the financial statements. 25 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 KMP, including their related parties, is as follows: HELD AT 1 JULY 2014 IFRS GRANTED AS COMPENSATION EXERCISED OTHER CHANGES* HELD AT 30 JUNE 2015 IFRS HELD AT 30 JUNE 2015 ASX VESTED DURING THE YEAR ASX VESTED AND EXERCISED DURING THE YEAR ENDED 30 JUNE 2015 DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf 62,895 48,925 47,925 20,470 5,000 24,000 (13,895) 19,000 (9,925) (25,000) (20,000) 14,000 9,000 5,000 (9,925) (3,970) - (15,000) (7,500) - 48,000 38,000 37,000 18,000 10,000 48,000 38,000 27,000 18,000 10,000 - - - - - 13,895 9,925 9,925 3,970 - * Other changes represent options that expired, were cancelled or were forfeited during the year. No options held by KMP are vested but not exercisable. HELD AT 1 JULY 2013 IFRS 90,000 60,000 50,000 17,500 - DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf GRANTED AS COMPENSATION EXERCISED OTHER CHANGES* HELD AT 30 JUNE 2014 IFRS HELD AT 30 JUNE 2014 ASX VESTED DURING THE YEAR ASX VESTED AND EXERCISED DURING THE YEAR ENDED 30 JUNE 2014 24,000 (30,000) 19,000 (15,000) 13,000 9,000 5,000 - - - (21,105) (15,075) (15,075) (6,030) - 62,895 48,925 47,925 20,470 5,000 62,895 48,925 37,925 20,470 5,000 13,895 9,925 9,925 3,970 - - - - - - * Other changes represent options that expired, were cancelled or were forfeited during the year. No options held by KMP are vested but not exercisable. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) DIRECTORS’ REPORT (INCLUDING REMUNERATION REPORT) 26 27 REMUNERATION REPORT - CONTINUED 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 KMP, including their related parties, is as follows: HELD AT 1 JULY 2014 PURCHASES ALLOCATED UNDER EMPLOYEE/ EXEC SHARE PLAN HELD AT 30 JUNE 2015 SHARES HELD SUBJECT TO NON-RECOURSE LOANS DIRECTORS P Stancliffe* G Billings P Brodribb S McGregor A Kachellek G Francis G Hutchinson* EXECUTIVES C Hartwig S Evans P Assaf 5,435 590 24,559 18,318 38,498 1,684 N/A 1,305 527 174 - - - - 1,015 3,850 500 - - - - - - 9,925 13,895 - - 10,132 4,177 207 No shares were granted to KMP 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. N/A 590 24,559 28,243 53,408 5,534 500 11,437 4,704 381 - - - - - - - 10,000 - - HELD AT 1 JULY 2013 PURCHASES ALLOCATED UNDER EMPLOYEE/ EXEC SHARE PLAN ALLOCATED UNDER DRP HELD AT 30 JUNE 2014 SHARES HELD SUBJECT TO NON-RECOURSE LOANS DIRECTORS P Stancliffe G Billings P Brodribb S McGregor A Kachellek G Francis* EXECUTIVES C Hartwig S Evans P Assaf* 4,600 500 20,781 500 2,258 N/A 931 272 - - - - - 319 1,425 - - - - - - 15,000 30,000 - 174 174 174 835 90 3,778 2,818 5,921 259 200 81 - 5,435 590 24,559 18,318 38,498 1,684 1,305 527 174 - - - - - - 10,000 - - No shares were granted to KMP 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. *Shareholding has been noted as N/A where the person was not a member of KMP at that date. Purchase and sale transactions have only been recorded where they occurred whilst the person was a member of KMP. Analysis of bonuses included in remuneration Executive bonuses are paid on the achievement of specified performance targets. Those targets vary for each executive and are aligned to each executive’s role and responsibilities. The targets relate to financial, operational, strategic and safety measures. Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of the Company, and to other key management personnel are detailed below. INCLUDED IN REMUNERATION $ (A) % VESTED IN YEAR % FORFEITED IN YEAR (B) SHORT-TERM INCENTIVE BONUS DIRECTORS A Kachellek S McGregor EXECUTIVES C Hartwig S Evans P Assaf 15,991 10,236 39,800 5,523 4,975 12% 23% 40% 11% 12% 88% 77% 60% 89% 88% (A) Amounts included in remuneration for the financial year represent the amount related to the financial year based on the achievement of specified performance criteria. The remuneration committee approved these amounts on 30 July 2015. (B) The amounts forfeited are due to the performance criteria not being met in relation to the current financial year. DIRECTORS’ INTERESTS The relevant interest of each director over the shares and rights or options over such instruments issued by the Company 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: • the non-audit services provided do not undermine the gen- eral principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risk and rewards. KORVEST LTD ORDINARY SHARES 51,115 18,650 590 28,243 5,534 500 KORVEST LTD PERFORMANCE RIGHTS UNVESTED 48,000 - - 38,000 - - A Kachellek P Brodribb G Billlings S McGregor G Francis G Hutchinson NON-AUDIT SERVICES During the year KPMG, the Group’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 Group; and For details of non-audit services fees charged refer to Note 11 to the financial statements. LEAD AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration is set out on page 69 and forms part of the Directors’ report for the financial year ended 30 June 2015. 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. CORPORATE GOVERNANCE The Company’s Corporate Governance Statement can be found on the Korvest website at www.korvest.com.au/index.php?PID=110 Signed at Adelaide this Thursday 30th of July 2015 in accordance with a resolution of the directors. G A BILLINGS, Director A H W KACHELLEK, Director FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd FINANCIAL STATEMENTS Korvest Ltd 2015 5 YEAR SUMMARY 2015 2014 2013 2012 2011 31 SALES REVENUE ($’000) 63,025 73,756 61,723 72,322 67,384 PROFIT AFTER TAX ($’000) 1,455 5,603 3,825 6,201 4,221 DEPRECIATION/AMORTISATION ($’000) 1,642 1,774 1,652 1,542 1,279 CASH FLOW FROM OPERATIONS ($’000) 5,115 4,228 7,524 8,681 3,185 PROFIT FROM ORDINARY ACTIVITIES - As % of Shareholders’ Equity - As % of Sales Revenue DIVIDEND - Total amount paid - Per issued share - Times covered by profit from ordinary activities 4.4% 2.3% 15.1% 7.6% 10.8% 6.2% 17.1% 8.6% 12.7% 6.3% ($’000) 5,032 48.0c 0.3 12,830 146.0c 0.4 4,863 56.0c 0.8 3,299 38.0c 1.9 2,244 26.0c 1.9 EARNINGS PER SHARE 13.9c 64.1c 44.0c 71.6c 48.9c NUMBER OF EMPLOYEES 225 242 217 259 242 SHAREHOLDERS - Number at year end 2,029 2,034 1,627 1,271 1,247 NET ASSETS PER ISSUED ORDINARY SHARE NET TANGIBLE ASSETS PER ISSUED ORDINARY SHARE SHARE PRICE AS AT 30 JUNE $3.13 $3.13 $3.55 $3.501 $3.332 $5.60 $4.01 $3.77 $5.80 $4.13 $4.13 $4.65 $3.79 $3.79 $3.57 1 Net assets per issued ordinary share figure was impacted by the issue of 1,607,000 new shares in June 2014 in relation to the Special dividend and Dividend Reinvestment Plan. Had these not been issued, the figure would have been $4.14. 2 Net tangible assets per issued ordinary share figure was impact- ed by the issue of 1,607,000 new shares in June 2014 in relation to Special dividend and Dividend Reinvestment Plan. Had these not been issued, the figure would have been $3.94. FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION 32 In thousands of AUD CONTINUING OPERATIONS 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 FROM CONTINUING OPERATIONS PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME Revaluation of property plant and equipment Related tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO: Equity holders of the Company TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Note 2015 2014 7 8 10 10 63,025 73,756 (60,305) (66,101) 2,720 7,655 41 (3) 38 50 (1) 49 2,758 7,704 12 (1,303) (2,101) 1,455 1,455 - - - 1,455 1,455 5,603 5,603 (854) 256 5,005 5,005 5,005 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 CENTS CENTS 13.9 13.9 64.1 63.6 13 13 In thousands of AUD ASSETS Cash and cash equivalents Trade and other receivables Inventories Tax receivable Assets held for sale TOTAL CURRENT ASSETS Property, plant and equipment Deferred tax asset Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES Bank overdrafts Trade and other payables Employee benefits Provisions Current tax liabilities 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 COMPANY TOTAL EQUITY 33 Note 2015 2014 14A 15 16 6 17 12 18 14A 19 21 22 21 12 22 - 13,592 13,611 273 - 27,476 15,907 - 25 15,932 43,408 500 6,359 2,743 42 - 497 17,706 11,303 - 1,452 30,958 15,912 180 1,755 17,847 48,805 - 8,184 2,255 95 699 9,644 11,233 438 51 333 822 10,466 32,942 12,833 20,109 - 32,942 32,942 657 - 333 990 12,223 36,582 12,764 23,818 - 36,582 36,582 The notes on pages 37 to 64 are an integral part of these consolidated financial statements. The notes on pages 37 to 64 are an integral part of these consolidated financial statements. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdCONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 34 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 Income taxes paid Note 2015 2014 73,394 75,806 (66,273) (69,922) 7,121 5,884 38 49 (2,044) (1,705) NET CASH FROM OPERATING ACTIVITIES 14B 5,115 4,228 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment and assets held for sale Acquisition of property, plant and equipment and intangible assets 17,18 NET CASH FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings Proceeds from issue of share capital Transaction costs related to issue of share capital Dividends paid NET CASH FROM FINANCING ACTIVITIES Net decrease in cash and cash equivalents CASH AND CASH EQUIVALENTS AT 1 JULY 287 (1,367) (1,080) - - - 23 (1,949) (1,926) (167) 9,042 (288) (997) 497 (1,941) 2,438 (BANK OVERDRAFTS) / CASH AND CASH EQUIVALENTS AT 30 JUNE 14A (500) 497 In thousands of AUD Balance at 1 July 2014 TOTAL COMPREHENSIVE INCOME FOR THE YEAR Profit Total comprehensive income for the year TRANSACTIONS WITH OWNERS OF THE COMPANY RECOGNISED DIRECTLY IN EQUITY CONTRIBUTIONS BY AND DISTRIBUTIONS TO OWNERS OF THE COMPANY Shares issued under the Share Plans Dividends to shareholders Share options exercised Total contributions by and distributions to owners of the Company Transfer to profits reserve Balance at 30 June 2015 SHARE CAPITAL EQUITY COMPENSATION RESERVE ASSET REVALUATION RESERVE PROFITS RESERVE RETAINED EARNINGS TOTAL 12,764 343 3,585 19,890 - 36,582 35 - - 69 - - 69 - 12,833 - - - - (132) (132) - 211 - - - - - - - - - - (5,032) - (5,032) 1,455 1,455 1,455 1,455 - - - - 69 (5,032) (132) (5,095) 1,455 (1,455) - 3,585 16,313 Profit Other comprehensive income Total comprehensive income for the year TRANSACTIONS WITH OWNERS OF THE COMPANY RECOGNISED DIRECTLY IN EQUITY CONTRIBUTIONS BY AND DISTRIBUTIONS TO OWNERS OF THE COMPANY Shares issued under the Share Plans Issue of ordinary shares Dividends to shareholders Share options exercised Total contributions by and distributions to owners of the Company Transfer to profits reserve Balance at 30 June 2014 - - - 64 8,643 - 198 8,905 - 12,764 - - - 144 - - - 144 - 343 - - - - - (12,833) - (12,833) - (598) (598) - - - - - - 5,603 (5,603) - 3,585 19,890 - 36,582 - - 5,603 - 5,603 32,942 35,361 5,603 (598) 5,005 - - - - 208 8,643 (12,833) 198 (3,784) 23 (5,032) (12,830) Balance at 1 July 2013 3,859 199 4,183 27,120 (5,032) (4,243) TOTAL COMPREHENSIVE INCOME FOR THE YEAR The notes on pages 37 to 64 are an integral part of these consolidated financial statements. The notes on pages 37 to 64 are an integral part of these consolidated financial statements. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd37 17. PROPERTY, PLANT AND EQUIPMENT 52 18. INTANGIBLE ASSETS AND GOODWILL 19. TRADE AND OTHER PAYABLES 20. LOANS AND BORROWINGS 21. EMPLOYEE BENEFITS 22. PROVISIONS 23. CAPITAL AND RESERVES 24. FINANCIAL INSTRUMENTS 25. OPERATING LEASES 26. CAPITAL AND OTHER COMMITMENTS 27. GROUP ENTITIES 28. KEY MANAGEMENT PERSONNEL DISCLOSURES 29. RELATED PARTY DISCLOSURES 30. SUBSEQUENT EVENTS 31. PARENT ENTITY DISCLOSURES 54 55 55 55 58 58 60 62 62 63 63 63 63 64 NOTES TO THE FINANCIAL STATEMENTS 1. REPORTING ENTITY 2. BASIS OF PREPARATION 3. SIGNIFICANT ACCOUNTING POLICIES 38 38 38 38 (a) Basis of consolidation 39 (b) Foreign currency (c) Financial instruments 39 (d) Property, plant and equipment 39 (e) Leases 40 (f) Intangible assets and goodwill 40 41 (g) Inventories 41 (h) Impairment 41 (i) Employee benefits 42 (j) Provisions 42 (k) Revenue (l) Finance income and finance costs (m) Tax (n) Goods and services tax (o) Earnings per share (p) Segment reporting (q) Assets held for sale (r) New standards and interpretations not yet adopted 43 42 42 43 43 43 43 4. DETERMINATION OF FAIR VALUES 5. SEGMENT REPORTING 6. DISPOSAL GROUP HELD FOR SALE 7. REVENUE AND OTHER INCOME 8 EXPENSES 9. EMPLOYEE BENEFIT EXPENSES 43 45 46 47 47 47 10. FINANCE INCOME AND FINANCE COSTS 48 11. AUDITOR’S REMUNERATION 12. TAXES 13. EARNINGS PER SHARE 14A. (BANK OVERDRAFTS) / CASH AND CASH EQUIVALENTS 14B. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES 15. TRADE AND OTHER RECEIVABLES 16. INVENTORIES 48 48 49 50 51 51 51 FOR THE YEAR ENDED 30 JUNE 2015Korvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 38 39 1. REPORTING ENTITY 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 2015 comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’). The Group is a for-profit entity and is primarily involved in manufacturing businesses as detailed in the Segment Reporting (Note 5). 2. BASIS OF PREPARATION (a) Statement of compliance The consolidated financial statements are general purpose finan- cial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Directors on 30th July 2015. (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. (c) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. 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 the consolidated financial statements in conformity with IFRS 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 ongo- ing 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: 3. SIGNIFICANT ACCOUNTING POLICIES Except as described below, 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 the Group entities. (a) Basis of consolidation Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The Group measures goodwill at acquisition date as: • The fair value of the consideration transferred; plus • The recognised amount of any non-controlling interests in the acquiree; plus • If the business combination is achieved in stages , the fair value of the existing equity interest in the acquiree; less • The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its investment with the entity and has the ability affect those returns through its power over the entity. The financial state- ments of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. • Note 3(c) and 15 – Trade and other receivables • Note 3(g) and 16 – Inventories • Note 3(j) and 22 – Provisions • Note 3(q) and 6 – Assets held for sale • Note 4 – Determination of fair values (b) Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency trans- lated at the exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are generally recognised in profit or loss. (c) Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provision of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or if it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through the profit or loss, held to maturity financial assets, loans and receivables and available-for-sale financial assets. Loans and receivables Loans and receivables are financial assets with fixed or determi- nable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attrib- utable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses (see Note 3 (h)). Cash and cash equivalents / Bank overdrafts Cash and cash equivalents and Bank overdrafts comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Company in the management of its short-term commitments. Non-derivative financial liabilities The Group initially recognises financial liabilities initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest rate method. Other financial liabilities comprise loans and other borrowings, bank overdrafts, and trade and other payables. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management and included as a component of cash and cash equivalents for the statement of cash flows. Share capital Ordinary Shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. (d) Property, plant and equipment Recognition and measurement Items of plant and equipment are measured at cost less accu- mulated depreciation and any accumulated impairment losses. Property is measured at fair value. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following: • The cost of materials and direct labour, • Any costs directly attributable to bringing the assets to a working condition for their intended use, • When the Group has an obligation to remove the assets or restore the site, as estimate of the costs of dismantling and removing the items and restoring the site on which they are located, and • Capitalised borrowing costs. Purchased software that is integral to the functionality of the relat- ed equipment is capitalised as part of that equipment. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 40 41 (d) Property, plant and equipment (continued) When parts of an item of property, plant and equipment have dif- ferent useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Minimum lease payments made under finance leases are appor- tioned between the finance expense and the reduction of the out- standing liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. Subsequent expenditure Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. On-going repairs and maintenance are expensed as incurred. Depreciation Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. Depreciation is calculated to write off the carrying value of property, plant and equipment less the estimated residual values using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. This will be the case if the two following criteria are met: • the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and • the arrangement contains a right to use the asset(s). At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of the relative fair values. If the Group concludes for a finance lease that it is impractical to separate the payments reliably, then an asset and liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate. (f) Intangible assets and goodwill Goodwill Goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets. For the measurement of goodwill at initial recognition, see Note 3(a). The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. • Buildings • Plant and equipment 3-12 years 40 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (e) Leases Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. On 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. Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Other intangible assets Other intangible assets that are required by the Group and have finite useful lives are measured at cost less accumulated amortisa- tion and any accumulated impairment losses. Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific assets to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. Amortisation Except for goodwill, intangible assets are amortised on a straight- line basis in profit or loss over their estimated useful lives, from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows: • Patents and trademarks 5 years Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (g) Inventories Inventories are measured at the lower of cost and net realis- able value. The cost of inventories is based on average cost and includes expenditure incurred in acquiring the inventories, production and conversion costs, and other costs incurred in 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 estimated costs necessary to make the sale. (h) Impairment Non-derivative financial assets A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor or indications that a debtor will enter administration. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. 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. Goodwill is tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount. Any impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amounts does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (i) Employee benefits Short-term benefits Short-term employee benefit obligations are expensed as the related service is provided. A liability is recognised for the amount expected to be paid 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. Share-based payment transactions The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. 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 corre- sponding increase in equity. The fair value of the shares granted is measured using a present value method. The recoverable amount of an asset or CGU 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 or CGU. For impairment testing assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis. Executive Share Plan The Executive Share Plan and the Performance Rights Plan allow Group employees to acquire shares of the Company. The fair value of options or rights 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/ right. The valuation method takes into account the exercise price of the option/right, the life of the option/right, 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/right. Defined contribution superannuation funds A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate en- tity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an employee benefit ex- pense in profit or loss in the periods during which related services are rendered by employees. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 42 43 (i) Employee benefits (continued) Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Other 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 obli- gation 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 high quality corporate bonds at the reporting date which have maturity dates approximating to the terms of the Company’s obligations. (j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimat- ed reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting risk adjusted future expected cash flows at a pre-tax discount rate that reflects the time value of money. The unwinding of the discount is recognised as a finance cost. Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. (k) Revenue Sale of goods Revenue from the sale of goods in the ordinary course of business is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of the revenue can be measured reliably. 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 or upon completion when the customer requests delayed delivery. (l) Finance income and finance costs Finance income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest rate method. Finance expenses comprise interest expense on borrowings. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. (m) Tax Tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss 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. Current tax payable also includes any tax liability arising from the declaration of dividends. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • • • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at 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 taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax cred- its and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they 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. Tax consolidation The Company and the wholly owned Australian subsidiaries set out in Note 27 are part of a tax-consolidated group with Korvest Ltd as the head entity. The implementation date of the tax consolidation system for the tax-consolidated group was 1 March 2013. Current tax expense (income), deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are allocated to the Company and recognised using a ‘group allocation’ approach. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s balance sheet and their tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of a member of the tax consolidation group are assumed by the head entity of the tax-consolidated group and are recognised as amounts payable (receivable) to other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts. Any difference between these amounts is recognised by the member of the tax consolidated group as an equity contribution from or distribution to the head entity. (n) Goods and services tax 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. (o) Earnings per share The Company 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. (p) Segment reporting Segment results that are reported to the Group’s Managing Director (the chief operating decision maker) 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. (q) Assets held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial asset and deferred tax assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale and subsequent gains and losses on re-measurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. (r) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2015, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early, and continues to assess the impact on the entity. NEW OR AMENDED STANDARD SUMMARY OF REQUIREMENTS POSSIBLE IMPACT ON CONSOLIDATED FINANCIAL STATEMENTS IFRS 9 Financial IFRS 9, published in The Group is assessing instruments July 2014, replaces the potential impact on its existing guidance in IAS consolidated financial 39 Financial instru- statements resulting from ments: Recognition and application of IFRS 9. The Measurement. IFRS 9 effect is not expected to includes revised guidance be significant. on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guid- ance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. 4. DETERMINATION OF FAIR VALUES A number of the Group’s accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities. The Group adopted IFRS 13 Fair Value Measurement, with date of initial application of 1 July 2013. IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs. As a result, the Group has applied additional disclosures in this regard (see Notes 6 and 17). In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance pro- spectively and has not provided any comparative information for the new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 44 45 4. DETERMINATION OF FAIR VALUES (Continued) The Group has an established control framework with respect to the measurement of fair values. The Finance Director has overall responsibility for all significant fair value measurements, including Level 3 fair values. (b) Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. (c) Trade and other receivables The fair values of trade and other receivables are estimated as the present value of future cash flows, discounted at the market rate of interest at the measurement date. Short-term receivables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date. (d) Contingent consideration The fair value of contingent consideration arising in a business combination is calculated using the income approach based on the expected payment amounts and their associated probabilities (i.e. probability-weighted). Since the contingent consideration is long-term in nature, it is discounted to present value. (e) Share-based payment transactions The fair value of the performance rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility of the Company’s share prices, adjusted for changes expected due to publicly available information), weighted average expected life of the instruments, expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. (f) Other non-derivative financial liabilities Other non-derivative financial liabilities are measured at fair value, at initial recognition and for disclosure purposes, at each annual reporting date. Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the measurement date. For finance leases the market rate of interest is determined by reference to similar lease agreements. The Finance Director regularly reviews significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, the Finance Director assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of AASB, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Audit Committee. When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on inputs used in the valuation techniques as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices) • Level 3: inputs for asset or liability that are not based on observable market data (unobservable inputs). If inputs used to measure fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in relevant notes. (a) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence. Land and buildings are valued by an independent valuer every three years. In the intervening years between independent valuations the directors make an assessment of the value of the land and buildings having regard for the most recent independent valuation. 5. SEGMENT REPORTING The Group has two reportable segments. The business is organised based on products and services. The following summary describes the operations in each of the Company’s reportable segments. Industrial Products Includes the manufacture of electrical and cable support systems, steel fabrication and access systems. It also includes the sale, hire and repair of high torque tools. It includes the businesses trading under the EzyStrut, Power Step and Titan Technologies names and formerly the Indax name. 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. INDUSTRIAL PRODUCTS PRODUCTION TOTAL In thousands of AUD External revenue Depreciation and amortisation Reportable segment profit before tax Reportable segment assets Capital expenditure In thousands of AUD 2015 2014 58,338 67,199 1,157 5,155 29,561 692 1,218 6,609 33,023 1,010 2015 4,687 291 697 3,896 209 2014 6,557 363 2,085 3,842 57 Reconciliation of reportable segment profit, assets and other material items PROFIT Total profit for reportable segments Impairment of goodwill Unallocated amounts – other corporate expenses (net of corporate income) Profit before income tax ASSETS Total assets for reportable segments Land and buildings Goodwill Other unallocated amounts Total assets CAPITAL EXPENDITURE Capital expenditure – reportable segments Other unallocated amounts Total capital expenditure OTHER MATERIAL ITEMS Depreciation and amortisation – reportable segments Unallocated amounts – other corporate depreciation Total 2015 2014 63,025 73,756 1,448 5,852 33,457 901 2015 5,852 (1,721) (1,373) 2,758 33,457 7,246 - 2,705 43,408 901 466 1,367 1,448 194 1,642 1,581 8,694 36,865 1,067 2014 8,694 - (990) 7,704 36,865 7,080 1,721 3,139 48,805 1,067 881 1,948 1,581 193 1,774 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 46 47 (c) Cumulative income or expense included in other comprehensive income There are no cumulative income or expenses included in other comprehensive income relating to the disposal group. (d) Measurement of fair values (i) Fair value hierarchy The non-recurring fair value measurement for the disposal group of $1,452,000 was categorised as Level 3 fair value based on the inputs used the valuation technique used (see Note 4). (ii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in meas- uring the fair value of the disposal group, as well as significant unobservable inputs used. VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS Fair value property plant and equip- Indicative offers from prospective buyers ment was based on indicative offers from prospective buyers received by the Group. The fair value of inventory reflects recoverable amount determined with reference to market price and consider- ing net realisable value. 5. SEGMENT REPORTING (CONTINUED) Geographical segments The Group operates predominately in Australia. Customers Revenue from one customer of the Group’s Industrial Products segment represented $13,029,000 (2014: $8,154,000) of the Group’s total revenues. 6. DISPOSAL GROUP HELD FOR SALE In April 2014 Korvest advised that the Indax business would be exited and accordingly the assets associated with that business were presented as a disposal group held for sale. During 2015 all inventory has been sold and all plant and equipment has been either sold or redeployed within the remaining Korvest business. (a) Impairment loss relating to the disposal group As at 30 June 2014 impairment losses of $678,000 for write- downs of the disposal group to the lower of its carrying amount and its fair value less costs to sell were included in administration expenses. In current year the impairment losses were applied to the carrying amount of the property, plant and equipment ($263,000) and inventory ($415,000) within the disposal group. The impairment losses were reversed to offset cost of property, plant and equipment and inventory sold and shown as a reduction in administrative expenses (see note 8). (b) Assets and liabilities of disposal group held for sale At 30 June 2014, the disposal group was stated at fair value less costs to sell and comprised the following assets and liabilities: In thousands of AUD Plant and equipment Inventories ASSETS HELD FOR SALE Payables LIABILITIES HELD FOR SALE Note 17 2015 2014 - - - - - 582 870 1,452 - - 7. REVENUE AND OTHER INCOME In thousands of AUD REVENUE Sales of goods 8. EXPENSES In thousands of AUD Cost of goods sold 2015 2014 63,025 63,025 73,756 73,756 Note 2015 2014 36,515 41,293 Sales, marketing and warehousing expenses 14,769 16,590 Administration expenses Distribution expenses Goodwill impairment Other expenses PROFIT BEFORE INCOME TAX HAS BEEN ARRIVED AT AFTER CHARGING / (CREDITING) THE FOLLOWING ITEMS Depreciation of buildings Depreciation of plant and equipment Decrease in provisions Executive share plan expense Employee share bonus plan expense Impairment loss on trade receivables Impairment loss on disposal group held for sale Loss on disposal of property, plant and equipment Research and development expense 9. EMPLOYEE BENEFIT EXPENSES In thousands of AUD Wages and salaries Other associated personnel expenses Contributions to defined contribution superannuation funds Termination benefits Increase in liability for annual leave Increase in liability for long service leave Equity-settled share-based payments 2,876 4,253 1,721 171 2,971 5,177 - 70 60,305 66,101 36 1,582 1,618 (53) (132) 69 65 - 34 64 79 1,695 1,774 (74) 156 64 37 678 71 128 17 22 21 21 6 Note 2015 2014 19,227 18,879 21 21 21 21 2,161 1,493 140 41 228 (63) 2,319 1,521 34 145 331 220 23,227 23,449 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 48 49 10. FINANCE INCOME AND FINANCE COSTS In thousands of AUD Interest income on bank deposits held Interest expense from bank overdrafts Net financing income recognised in profit or loss 11. AUDITOR’S REMUNERATION In AUD AUDIT SERVICES Auditors of the Group KPMG Australia: Audit and review of financial statements OTHER SERVICES Auditors of the Group KPMG Australia Other taxation, consulting and due diligence services 12. TAXES In thousands of AUD TAX RECOGNISED IN PROFIT OR LOSS Current tax expense Current year DEFERRED TAX EXPENSE Origination and reversal of temporary differences Total income tax expense in Statement of profit or loss and comprehensive income NUMERICAL RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX NET PROFIT Profit before tax Income tax using the domestic corporation tax rate of 30% (2014: 30%) Non-deductible expenses – impairment of goodwill Non-deductible expenses Recognition of tax effect of previously unrecognised tax losses Income tax expense on pre-tax net profit 2015 2014 41 (3) 38 50 (1) 49 2015 2014 93,300 93,300 82,800 82,800 9,900 9,900 26,933 26,933 2015 2014 1,381 1,381 (78) 1,303 2,758 827 516 (40) - 1,303 2,815 2,815 (714) 2,101 7,704 2,311 - 40 (250) 2,101 12. TAXES (Continued) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets and liabilities are attributable to the following: ASSETS LIABILITIES NET In thousands of AUD Property, plant and equipment Inventories 2015 - (269) 2014 - (482) Provisions / accruals (1,119) (1,053) Other items Tax loss carried forward Tax (assets) / liabilities Set off of tax Net tax (assets) / liabilities (319) (250) (1,957) 1,957 - (255) (250) (2,040) 1,860 (180) 2015 1,552 453 - 3 - 2,008 (1,957) 51 2014 1,488 372 - - - 1,860 (1,860) - 2015 1,552 184 2014 1,488 (110) (1,119) (1,053) (316) (250) 51 - 51 (255) (250) (180) - (180) MOVEMENT IN DEFERRED TAX BALANCES DURING THE YEAR In thousands of AUD Property, plant and equipment Inventories Provisions / accruals Other items Tax loss carried forward In thousands of AUD Property, plant and equipment Inventories Provisions / accruals Other items Tax loss carried forward BALANCE RECOGNISED BALANCE 30 JUNE 2014 IN PROFIT 30 JUNE 2015 (1,488) 110 1,053 255 250 180 (64) (294) 66 61 - (231) (1,552) (184) 1,119 316 250 (51) BALANCE RECOGNISED RECOGNISED RECOGNISED BALANCE 30 JUNE 2013 IN PROFIT IN OCI DIRECTLY IN 30 JUNE 2014 (1,825) 217 917 158 78 (455) 81 (107) 136 11 172 293 256 - - - - 256 EQUITY - - - 86 - 86 (1,488) 110 1,053 255 250 180 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 50 13. EARNINGS PER SHARE Basic and diluted earnings per share The calculation of basic earnings per share at 30 June 2015 was based on the net profit attributable to ordinary shareholders of $1,454,245 (2014: $5,602,803) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2015 of 10,484,041 (2014: 8,774,067). The calculation of diluted earnings per share at 30 June 2015 was based on the profit attributable to ordinary shareholders of $1,454,245 (2014: $5,602,803) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2015 of 10,484,416 (2014: 8,816,524). 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 cents Basic earnings per share from continuing operations Diluted earnings per share from continuing operations 14A. (BANK OVERDRAFT) / CASH AND CASH EQUIVALENTS In thousands of AUD Cash in hand Bank balances Call deposits (Bank overdraft) / cash and cash equivalents in the statement of cash flows The Group had an overdraft facility of $0.75m as at 30 June 2015. 2015 10,427 57 2014 8,710 64 10,484 8,774 2015 10,484 - 2014 8,774 43 10,484 8,817 2015 13.9 13.9 2015 1 (640) 139 (500) 2014 64.1 63.6 2014 2 (1,531) 2,026 497 14B. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES In thousands of AUD CASH FLOWS FROM OPERATING ACTIVITIES Profit for the period Adjustments for: Depreciation and amortisation Impairment of property, plant and equipment Impairment of trade receivables Impairment of inventories classified as held for sale Impairment of goodwill Loss on sale of property, plant and equipment Equity-settles share-based payment (reversal)/expenses Decrease / (increase) in trade and other receivables Increase in inventories* (Decrease) / increase in trade and other payables Increase / (decrease) in deferred tax liabilities (Decrease) / increase in income taxes payable Increase in provisions and employee benefits NET CASH FROM OPERATING ACTIVITIES * Movement includes disposals of assets classified as held for sale as at 30 June 2014 15. TRADE AND OTHER RECEIVABLES In thousands of AUD CURRENT Trade receivables Other receivables and prepayments 51 Note 2015 2014 17, 18 17 8 8 8 8 21 1,455 5,603 1,642 1,774 - 62 - 1,721 34 (63) 263 214 415 - 47 208 4,851 8,524 4,052 (1,438) (1,825) 231 (972) 216 (5,376) (3,082) 3,304 (292) 748 402 5,115 4,228 Note 2015 2014 13,343 17,471 249 235 24 13,592 17,706 Trade receivables are shown net of provided impairment losses amounting to $627,000 (2014: $562,000). 16. INVENTORIES In thousands of AUD Raw materials and consumables Work in progress Finished goods 2015 2,623 506 10,482 13,611 2014 832 105 10,366 11,303 Finished goods are shown net of impairment losses amounting to $891,000 (2014: $891,000) arising from the likely inability to sell a product range at or equal to the cost of inventory. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 52 17. PROPERTY, PLANT AND EQUIPMENT In thousands of AUD COST Balance at 1 July 2013 Revaluation Acquisitions Disposals Reclassification to assets held for sale Balance at 30 June 2014 Balance at 1 July 2014 Acquisitions Disposals Transfer from assets held for sale Transfer of hire equipment to inventory Balance at 30 June 2015 DEPRECIATION AND IMPAIRMENT LOSSES Balance at 1 July 2013 Depreciation charge for the year Revaluation Impairment Disposals Reclassification to assets held for sale Balance at 30 June 2014 Balance at 1 July 2014 Depreciation charge for the year Disposals Transfer from assets held for sale Transfer of hire equipment to inventory Balance at 30 June 2015 CARRYING AMOUNTS At 1 July 2013 At 30 June 2014 At 30 June 2015 LAND AND BUILDINGS (FAIR VALUE) PLANT AND EQUIPMENT (COST) TOTAL 8,169 (1,089) - - - 7,080 7,080 202 - - - 18,128 - 1,948 (244) (1,424) 18,408 18,408 1,150 (131) 581 (44) 26,297 (1,089) 1,948 (244) (1,424) 25,488 25,488 1,352 (131) 581 (44) 7,282 19,964 27,246 155 79 (234) - - - - - 36 - - - 36 8,014 7,080 7,246 8,633 1,695 - 263 (173) (842) 9,576 9,576 1,582 (77) 225 (3) 8,788 1,774 (234) 263 (173) (842) 9,576 9,576 1,618 (77) 225 (3) 11,303 11,339 9,495 8,832 8,661 17,509 15,912 15,907 53 Fair value hierarchy At least every three years the directors obtain an independent valuation to support the fair value of Land and Buildings. This valuation is used by the directors as a guide in determining the directors’ valuation for the Land and Buildings. An independent valuation of Land and Buildings was carried out in March 2014 by Mr Mark Klenke, AAPI MRICS FFIN of AON Valuation Services on the basis of the open market value of the properties concerned in their highest and best use and was used as a reference for direc- tor’s valuation as at 30 June 2015. The carrying amount of the Land and Buildings at cost at 30 June 2015 if not revalued would be $1,217,209. Level 3 fair values The following table shows a reconciliation from the opening bal- ances to the closing balances for Land and Buildings being based on Level 3 fair values: In thousands of AUD Opening balance at 1 July 2013 Depreciation for the year Change in fair value recognised in Asset Revaluation Reserve Tax effect of revaluation Closing balance at 30 June 2014 Opening balance at 1 July 2014 Additions Depreciation for the year Closing balance at 30 June 2015 8,014 (80) (598) (256) 7,080 7,080 202 (36) 7,246 Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of Land and Buildings, as well as the significant unobservable inputs used. VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS INTER-RELATIONSHIP BETWEEN KEY UN- OBSERVABLE INPUTS AND FAIR VALUE MEASUREMENT Capitalised income Market yield - 9.5% The estimated market Potential rental rate $56/m2 Land value for vacant land $150/m2 value would increase if: • Market yields were higher • Potential rental return was higher • Land value was higher approach: the valuation model applies a yield to the property’s value to assess its value less any required capital expenditure. The yield applied to the potential rental return from the property is based on recent sales and has been calculated by dividing the estimated rental return from comparable sales to derive a fair market sales price. Capitalised value has been increased by value of a vacant land as the property has below average site coverage indicating further capacity for development. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 54 18. INTANGIBLE ASSETS In thousands of AUD COST Balance at 1 July 2013 Impact of post-acquisition reassessment Balance at 30 June 2014 Balance at 1 July 2014 Impairment Acquisitions Balance at 30 June 2015 ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES Balance at 1 July 2013 Amortisation for the year Balance at 30 June 2014 Balance at 1 July 2014 Amortisation for the year Balance at 30 June 2015 CARRYING AMOUNTS At 1 July 2013 At 30 June 2014 At 30 June 2015 GOODWILL PATENTS & TRADEMARKS 2,071 (350) 1,721 1,721 (1,721) - - - - - - - - 2,071 1,721 - 44 - 44 44 - 15 59 1 9 10 10 24 34 43 34 25 TOTAL 2,115 (350) 1,765 1,765 (1,721) 15 59 1 9 10 10 24 34 2,114 1,755 25 Impairment testing for cash generating units containing goodwill For the purposes of impairment testing, goodwill is allocated to the The value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the Group’s operating divisions. The aggregate carrying amounts of unit. Value in use as at 30 June 2015 was determined similarly to goodwill allocated to each CGU are as follows. the 30 June 2014 goodwill impairment test and was based on the In thousands of AUD Power Step and Titan Technologies 2015 - 2014 1,721 During the year ended 30 June 2015 the Group recognised an following key assumptions: Discount rate Terminal growth rate 14.6% 3.0% impairment of goodwill in relation to the Power Step and Titan Sales growth rate (average of next five years) 7.2% Technologies businesses. The carrying amount of the cash gener- ating unit (CGU) was determined to be higher than its recoverable amount and an impairment loss of $1,721,000 (30 June 2014: $nil) was recognised. The impairment loss was allocated fully to The values assigned to the key assumptions represent Management’s assessment of future trends in the industry and are based on historical data from both internal and external sources. goodwill and reduced the goodwill to $nil. The amount has been Following the impairment loss relating to the Power Step and Titan separately disclosed in Note 8. Technologies businesses the recoverable amount is equal to the carrying amount. Other CGU’s were not tested for impairment as there were no impairment indicators at 30 June 2015. 55 Note 24 2015 3,139 3,220 6,359 2014 4,338 3,846 8,184 2015 2014 40 (40) - 2015 1,271 1,472 2,743 40 (40) - 2014 1,230 1,025 2,255 438 3,181 657 2,912 are financed by an interest free loan from the Company repayable within twenty years from the proceeds of dividends declared by the Company. These loans are of a non-recourse nature. For accounting purposes these 20-year loans are treated as part of the options to purchase shares, until the loan is extinguished at which point the shares are recognised. 19. TRADE AND OTHER PAYABLES In thousands of AUD Other trade payables and accrued expenses Non-trade payables and accrued expenses 20. LOANS AND BORROWINGS This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’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 21. EMPLOYEE BENEFITS Current In thousands of AUD Liability for annual leave Liability for long service leave Non-Current Liability for long-service leave Total employee benefits (a) Defined contribution superannuation funds The Group makes contributions to defined contribution superannuation funds. The amount recognised as an expense was $1,492,663 for the financial year ended 30 June 2015 (2014: $1,520,782). (b) Share based payments (equity-settled) Executive Share Plan (ESP) - discontinued 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 with no new issues made under the plan since that time. The plan remains in operation for those employees granted options under that plan prior to 2010. The options were exercisable if the total shareholder return (measured as share price growth plus dividends paid) over a two-year period from the grant date exceeded ten per cent 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 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 56 57 Total share options / performance rights 323,500 203,500 178,500 Weighted average exercise price $Nil $Nil $Nil 21. EMPLOYEE BENEFITS (Continued) The options were offered only to selected senior executives. Details of the options are below: Korvest Performance Rights Plan (KPRP) In August 2011 the Company established a performance rights plan to replace the ESP. In November 2011 the first performance rights were granted under the plan and further issues have been granted annually since. The plan is designed to provide long term incentives to eligible senior employees of the Group and entitles them to acquire shares in the Company, subject to the successful achievement of performance hurdles related to earnings per share (EPS). Under the plan, eligible employees are offered Performance Rights, which enables the employee to acquire one fully paid ordinary share in the Company for no monetary consideration, once the Performance Rights vest. The conditions attached to the Performance Rights are measured over the three year period commencing at the beginning of the financial year in which the Performance Rights are granted. If the performance conditions at the end of the three year period are met, in whole or in part, all or the relevant percentage of the Performance Rights will vest. GRANT DATE March 2005 March 2009 November 2013 November 2014 PLAN ESP ESP KPRP KPRP NUMBER OF OPTIONS / RIGHTS INITIALLY GRANTED 60,000 85,000 79,500 99,000 NUMBER OUTSTANDING AT BALANCE DATE NUMBER OUTSTANDING AT BALANCE DATE AASBs 15,000 10,000 79,500 99,000 ASX - - 79,500 99,000 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. Measurement of fair values The fair value of the rights granted through the KPRP was mea- sured based on the Black-Scholes formula. Expected volatility is estimated by considering historic share price volatility over the twelve months prior to grant date. The inputs used in the measurement of the fair value at grant date of the KPRP were as follows. Fair value at grant date Share price at grant date Exercise price Share price volatility Dividend yield Fair value at grant date Risk free interest rate (based on government bonds) Advised Restriction period (after vesting) 2015 $3.76 $5.22 - 32.0% 10.92% 3.34% 2014 $4.97 $6.44 - 32.7% 7.14% 4.17% 3yrs 3yrs 2yrs 2yrs RECONCILIATION OF OUTSTANDING SHARE OPTIONS/RIGHTS GRANT DATE EXERCISE DATE EXPIRY DATE EXERCISE PRICE RIGHTS GRANTED NUMBER OF OPTIONS / RIGHTS AT BEGINNING OF YEAR LAPSED FORFEITED EXERCISED EXERCISABLE AT 30 JUNE NUMBER OF OPTIONS AT END OF YEAR ON ISSUE 2015 PREVIOUS PLAN Mar 05 Jan 07 Jan 2027 $4.36 Mar 09 Jan 11 Jan 2031 $3.79 Weighted average exercise price CURRENT PLAN Nov 12 Jul 15 Jun 2015 Nov 13 Jul 16 Jun 2016 Nov 14 Jul 17 Jun 2017 - - - 15,000 10,000 25,000 $4.13 73,000 79,500 - - - - - - 99,000 - - - (73,000) - - 152,500 99,000 (73,000) 2014 PREVIOUS PLAN Mar 05 Jan 07 Jan 2027 $4.36 Mar 09 Jan 11 Jan 2031 $3.79 Apr 10 Jan 11 Jan 2031 $3.79 Weighted average exercise price CURRENT PLAN Nov 11 Jul 14 Jun 2014 Nov 12 Jul 15 Jun 2015 Nov 13 Jul 16 Jun 2016 - - - 45,000 45,000 15,000 105,000 $4.03 110,000 73,000 - - - - - - - 79,500 - - - - (66,330) - - 183,000 79,500 (66,330) - - - - - - - - - - - - - - - - - - - - - - 15,000 10,000 25,000 $4.13 - 79,500 99,000 178,500 - - - - - - - $Nil $Nil (30,000) 15,000 (35,000) 10,000 (15,000) - (80,000) 25,000 $4.00 $4.13 - - - - - - - - - 43,670 73,000 79,500 - - 152,500 43,670 Weighted average exercise price $Nil $Nil $Nil $Nil $Nil EXPENSE RECOGNISED IN PROFIT OR LOSS Equity-settled share-based payment transactions In thousands of AUD Share options granted in 2008 Share options granted in 2009 Performance rights granted in FY 2012 Performance rights granted in FY 2013 Performance rights granted in FY 2014 Performance rights granted in FY 2015 Expense arising from employee share scheme Total expense recognised for equity-settled share-based payment 2015 2014 - - - - (132) - 69 (63) 11 1 12 - 132 - 64 220 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 58 59 22. PROVISIONS In thousands of AUD Balance at 1 July 2014 Provisions made during the year Provisions reduced during the year Provisions used during the year Balance at 30 June 2015 Current Non-current Site restoration and safety A provision of $360,000 was initially made during the financial year ended 30 June 2003 in respect of the Company’s obligation to rectify potential environmental damage at the main site premises in Kilburn. The provision is reassessed annually and is now based on an estimate of the current day cost to rectify the site. It has been assumed that the rectification would occur in 10 years. Provisions are determined by discounting risk adjusted future expected cash flows at a pre-tax discount rate that reflects the time value of money. A discount rate of 6.5% and an inflation rate of 3.0% have been used for the calculation. 23. CAPITAL AND RESERVES In thousands of shares On issue at 1 July Issued under the Employee Share Bonus Plan Issued under the Executive Share Plan Issued under Dividend Reinvestment Plan Issued for cash On issue 30 June - fully paid ORDINARY SHARES 2015 10,427 43 37 - - 2014 8,710 30 80 692 915 10,507 10,427 In the previous year the Company issued new shares under the Dividend Reinvestment Plan applying to the Special Dividend. Eligible shareholders (those with registered address in Australia or New Zealand) had an opportunity to reinvest all or part of their Special Dividend entitlement in the Company’s shares instead of receiving cash. The new shares were issued at a 5% discount with a cap price of $5.50 per share. 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. Asset revaluation reserve The revaluation reserve relates to land and buildings measured at fair value in accordance with Australian Accounting Standards. Profits reserve The profits reserve represents current year and accumulated profits transferred to a reserve to preserve the characteristic as a profit and not appropriate against prior year accumulated losses. Such profits are available to enable payment of franked dividends in the future. Equity compensation reserve The Equity compensation reserve represents the accumulated expense recognised for share-based payments granted by the Company to date. 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 Company’s own equity instruments. SITE RESTORATION WARRANTIES 333 - - - 333 - 333 333 95 27 (79) (1) 42 42 - 42 Dividends Dividends recognised in the current year by the Company are: In thousands of AUD 2015 Interim 2015 ordinary Final 2014 ordinary Total amount 2014 Special 2014 Interim 2014 ordinary Final 2013 ordinary Total amount CENTS PER SHARE TOTAL AMOUNT FRANKED / UFRANED DATE OF PAYMENT 17.0 31.0 100.0 26.0 20.0 1,786 3,246 5,032 8,822 2,269 1,739 4,863 Fully franked 13 March 2015 Fully franked 5 September 2014 Fully franked 27 June 2014 Fully franked 12 March 2014 Fully franked 6 September 2013 Warranties Power Step assemblies are sold with a warranty period of 12 months from installation date or 18 months from invoice date, whichever occurs first. The provision is based on estimates made from historical warranty data associated with similar products. The entire warranty provision has been treated as current. 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 FULLLY FRANKED DATE OF PAYMENT Final ordinary Total amount 12.0 1,264 1,264 Fully franked 4 September 2015 2015 9,939 2014 10,975 The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June 2015 and will be recognised in subsequent financial reports. DIVIDEND FRANKING AMOUNT In thousands of AUD 30% franking credits available to shareholders of Korvest Ltd for subsequent financial years 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; (c) franking credits that will arise from the receipt of dividends recognised as receivables by the tax 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 being able 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 $541,662 (2014: reduce by $1,388,685). FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 60 61 24. FINANCIAL INSTRUMENTS Financial risk management Overview The Group 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 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. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is summarised below: In thousands of AUD Cash and cash equivalents Note 14A 2015 - 2014 497 Trade and other receivables 15 13,592 17,706 Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, manage- ment also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances. There is an established 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 in some trade references when applicable and available. Purchase limits are established for each customer, which represent the maximum open amount without requiring further approval. These limits are subject to on-going review. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis. Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The Group otherwise does not require collateral in respect of trade and other receivables. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. 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. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. The maximum exposure to credit risk for trade and other receiva- bles at the end of the reporting period by geographic region was as follows. In thousands of AUD Australia South East Asia Other CARRYING VALUE 2015 2014 12,657 16,844 807 128 778 84 13,592 17,706 At 30 June 2015, the Group’s most significant customer, located in Australia, accounted for $2,683,600 of the trade and other receivables carrying amount (2014: $4,981,412). Impairment losses The ageing of the trade and other receivables at the reporting date that were not impaired was as follows: In thousands of AUD Not past due nor impaired Past due 0-30 days Past due 31-90 days More than 91 days GROSS 2015 7,902 3,125 2,354 211 2014 11,387 5,612 707 - 13,592 17,706 The movement in the allowance for impairment in respect of trade receivables during the year was as follows: In thousands of AUD Balance at 1 July Amounts written off against allowance Impairment loss recognised 2015 (562) 25 (90) (627) 2014 (525) 148 (185) (562) The impairment loss at 30 June 2015 relates to a number of customers where an assessment has been made that the amounts are likely to be uncollectable. 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. Impairment losses (Continued) Based on the Group’s monitoring of customer credit risk, the Group believes that, except as indicated above, no impairment allowance is necessary in respect of trade receivables not past 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. (Bank overdraft) / cash and cash equivalents The Group had a bank overdraft of $500,000 (2014: cash and cash equivalents of $497,000) at 30 June 2015, which represents its maximum credit exposure on these assets. The bank overdraft / cash and cash equivalents is held with major Australian banks. The Group monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables. In addition, the Group maintains the following lines of credit: Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. • $0.75m overdraft facility that is unsecured. The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments. The amounts disclosed are the contractual undiscounted cash flows (inflows shown as positive, outflows as negative). In thousands of AUD Non-derivative financial liabilities Bank overdraft Trade and other payables 2015 2014 CARRYING AMOUNT CONTRACTUAL CASH FLOWS 6 MTHS OR LESS 6 – 12 MNTHS CARRYING AMOUNT CONTRACTUAL CASH FLOWS 6 MTHS OR LESS 6 – 12 MNTHS 500 6,359 6,859 (500) (500) (6,359) (6,359) (6,859) (6,859) - - - - 8,184 8,184 - - (8,184) (8,184) (8,184) (8,184) - - - 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 instru- ments. 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 on sales and purchases that are denominated in a currency other than the Australian dollar (AUD). The currency in which these transactions primarily are denominated is US dollars (USD). 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. 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. Exposure to interest rate risk Movements in interest rates will not have a material impact on the Group’s profit or equity. Other market price risk 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 (net debt and equity) 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. During the year the Group was not subject to externally imposed capital requirements. There were no changes in the Group’s approach to capital management during the year. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 62 63 24. FINANCIAL INSTRUMENTS (Continued) Accounting classifications and fair values Fair values vs carrying values The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows: In thousands of AUD Note CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT 2015 2014 Trade and other receivables Cash and cash equivalents Bank overdraft Trade and other payables 15 14A 14A 19 13,592 - (500) (6,359) 6,733 13,592 - (500) (6,359) 6,733 17,706 497 - (8,184) 10,019 FAIR VALUE 17,706 497 - (8,184) 10,019 The carrying amounts of the above financial assets and liabilities are considered to be a reasonable approximation of their fair values. 25. OPERATING LEASES Leases as lessee 26. CAPITAL AND OTHER COMMITMENTS At the end of the reporting period, the future minimum lease payments under non-cancellable operating leases are payable as follows: In thousands of AUD Capital expenditure commitments PLANT AND EQUIPMENT 2015 2014 In thousands of AUD Less than one year 2015 838 2014 778 Contracted but not provided for and payable: Between one and five years 1,580 1,043 Within one year - - 133 133 More than five years - - 2,418 1,821 The Group 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 periodically to reflect market rentals. None of the leases includes contingent rentals. Rentals are increased by CPI or similar each year. During the financial year ended 30 June 2015, $929,913 was recognised as an expense in the Statement of profit or loss and other comprehensive income in respect of operating leases. (2014: $897,585). COUNTRY OF INCORPORATION OWNERSHIP INTEREST Australia Chile Australia 2015 (%) 2014 (%) 100 100 100 100 100 100 29. RELATED PARTY DISCLOSURES Identity of related parties The Company has a related party with its key management personnel (see Note 28). Hills Limited was considered a related party until 18 September 2014 by virtue of Peter Stancliffe being a director of both companies. Hills Limited ceased to be a related party on 18 September 2014 when Peter Stancliffe retired as a Korvest Director. Transactions between the Company and Hills Limited were carried out under normal commercial terms and conditions. 30. SUBSEQUENT EVENTS There has not arisen between the end of the year and the date of this report any item, transaction or event of a material nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group in subsequent financial periods. 27. GROUP ENTITIES Power Step (Australia) Pty Ltd Power Step (Chile) SpA Titan Technologies (SE Asia) Pty Ltd 28. KEY MANAGEMENT PERSONNEL DISCLOSURES The following were key management personnel of the Company at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period: Non-executive Directors Graeme Billings (Chairman) Peter Brodribb Peter Stancliffe (Retired 18 September 2014) Gary Francis (Appointed 11 February 2014) Gerard Hutchinson (appointed 19 November 2014) Executive Directors Alexander Kachellek (Managing Director) Steven McGregor (Finance Director and Company Secretary) Executives Chris Hartwig (Executive General Manager, EzyStrut) Steven Evans (General Manager, Galvanising) Paul Assaf (General Manager, Power Step & Titan Technologies) Key management personnel compensation The key management personnel compensation comprised: In AUD 2015 2014 Short-term employee benefits 1,641,386 1,826,568 Post employment benefits 158,022 152,572 Long term benefits 47,362 68,059 Equity compensation benefits (112,984) 129,051 1,733,786 2,176,250 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 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 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 Group From time to time, key management personnel of the Group, or their related entities, may purchase goods from the Group. These purchases are on the same terms and conditions as those entered into by other Group employees or customers and are trivial or domestic in nature. FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdNOTES TO THE FINANCIAL STATEMENTS 64 31. PARENT ENTITY DISCLOSURES As at, and throughout, the financial year ending 30 June 2015 the parent entity of the Group was Korvest Ltd. In thousands of AUD Result of parent entity Profit for the period Other comprehensive income Total comprehensive income for the period Financial position of 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 Guarantees entered into by the Company Bank guarantees given by the Company in favour of customers amounted to $124,899 (2014: $456,953). The Group’s bankers have provided an overdraft facility that is interchangeable between the Australian Group entities. The Company has guaranteed the subsidiaries’ debt under this facility. Contingent liabilities of the Company The Company does not have any contingent liabilities other than the guarantees disclosed above. Parent entity capital commitments for acquisition of property, plant and equipment At 30 June 2015, the Company had contractual commitments for the acquisition of property, plant and equipment totalling $nil (2014: $133,000). These commitments are not recognised as liabilities as the relevant assets have not yet been received. 2015 2014 2,027 - 2,027 25,055 45,015 8,783 11,201 12,833 20,981 - 5,995 (598) 5,397 29,017 49,112 11,008 12,230 12,764 24,118 - 33,814 36,882 FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdDIRECTOR’S DECLARATION AUDIT REPORT 66 67 1 In the opinion of the Directors of Korvest Ltd (the Company): (a) the consolidated financial statements and notes that are set out on pages 37 to 64 and the Remuneration report in the Directors’ report, set out on pages 17 to 27, 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 2015 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards 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 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 2015. 3 The Directors draw attention to Note 2(a) to the financial statements, which includes a statement of compliance with International Financial Reporting Standards. Dated at Adelaide this 30th day of July 2015. Signed in accordance with a resolution of directors: GRAEME BILLINGS Director FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd AUDIT REPORT 68 LEAD AUDITOR’S INDEPENDENCE DECLARATION 69 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest LtdASX ADDITIONAL INFORMATION ASX ADDITIONAL INFORMATION 70 Additional information required by the Australian Securities Ex- change Limited Listing Rules and not disclosed elsewhere in this report is set out below. SHAREHOLDINGS (AS AT 28 JULY 2015) Substantial Shareholders The number of shares held by substantial shareholders and their associates are set out below: SHAREHOLDER NUMBER Perpetual Limited 10.1% 1,063,197 Colonial First State Asset Management (Australia) Limited Donald Cant Pty Ltd 9.2% 6.2% 972,869 650,724 VOTING RIGHTS Ordinary shares Refer to note 23 in the financial statements Options Refer to note 21 in the financial statements Distribution of equity security holders NUMBER OF EQUITY SECURITY HOLDERS CATEGORY 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over TOTAL HOLDERS 934 759 195 131 10 2,029 UNITS 370,738 1,896,903 1,448,663 2,938,250 3,877,766 10,532,320 % ISSUED CAPITAL 3.52 18.01 13.75 27.90 36.82 100.00 The number of shareholders holding less than a marketable parcel of ordinary shares is 252. Securities Exchange The Company is listed on the Australian Securities Exchange. The Home exchange is Adelaide. Other information Korvest Ltd, incorporated and domiciled in Australia, is a publicly listed company limited by shares. On Market Buy Back There is no current on-market buy back. 71 NUMBER OF ORDINARY SHARES HELD PERCENTAGE OF CAPITAL HELD 1,068,075 10.14 800,715 650,724 320,000 319,094 294,337 168,122 165,359 100,276 87,919 84,327 65,000 64,546 61,481 60,720 54,644 51,440 50,000 50,000 49,859 7.60 6.18 3.04 3.03 2.79 1.60 1.57 0.95 0.83 0.80 0.62 0.61 0.58 0.58 0.52 0.49 0.47 0.47 0.47 4,566,638 43.34 TWENTY LARGEST SHAREHOLDERS NAME Citicorp Nominees Pty Limited RBC Investor Services Australia Nominees Pty Limited Donald Cant Pty Ltd De Bruin Securities Pty Ltd Brazil Farming Pty Ltd J P Morgan Nominees Australia Limited Angueline Capital Pty Limited BNP Paribas Noms Pty Ltd National Nominees Limited Keiser Investments Pty Ltd Gotterdamerung Pty Limited Bourgeoisie Calypso Pty Ltd Allegro Two Super Fund Pty Ltd Mr William Francis Cannon Mr John Frederick Bligh Mr Geoffrey Neil Huddleston + Mrs Raelene Jane Huddleston Manovert Pty Ltd Fosterton Holdings Pty Limited Mr Francis Stephen Rudolph Sullivan R & GK Holdings Pty Limited OFFICES AND OFFICERS Company Secretary Steven John William McGregor BA(Acc), CA, AGIA, ACIS Principal Registered Office Korvest Ltd 580 Prospect Road Kilburn, South Australia, 5084 Ph: (08) 8360 4500 Fax: (08) 8360 4599 Locations of Share Registry Adelaide Computershare Investor Services Pty Ltd Level 5 115 Grenfell Street Adelaide, South Australia, 5000 Ph: (08) 8236 2300 Fax: (08) 8236 2305 FOR THE YEAR ENDED 30 JUNE 2015FOR THE YEAR ENDED 30 JUNE 2015Korvest LtdKorvest Ltd 

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