Appendix 4D
Half-Year Financial Report
Appendix 4D
Korvest Ltd
ABN 20 007 698 106
Half-Year Financial Report
31 December 2019
Results for announcement to the market: | $A'000 | |||
Revenues | Up | 23.8% | to | 36,128 |
Net profit after tax for the period attributable to | Up | 87.2% | to | 2,130 |
members | ||||
Dividends | Amount per | Franked amount | ||
security | per security | |||
Interim dividend (#) | ||||
- current reporting period | 15.0¢ | 15.0¢ | ||
- previous corresponding period | 9.0¢ | 9.0¢ | ||
# Interim dividend proposed in respect of the current reporting period. The financial effect | ||||
of this dividend will be recognised in the next reporting period. | ||||
Record date for determining entitlements to | ||||
21 February 2020 | ||||
the dividend | ||||
Brief explanation of any of the figures reported above and short details of any bonus or | ||||
cash issue or other item(s) of importance not previously released to the market: | ||||
Refer Directors' report on pages 2 to 4 of this financial report. | ||||
This financial report is all the half-year information provided to the Australian Stock Exchange under listing rule 4.2A. The report also satisfies the half-year reporting requirements of the Corporations Act 2001.
This half-year financial report should be read in conjunction with the 2019 annual financial report.
Korvest Ltd
Directors' Report
The Directors present their report together with the financial report of Korvest Ltd ("the Company") and its subsidiaries ("the Group") for the half-year ended 31 December 2019 and the auditor's review report thereon.
Directors
The Directors of the Company at any time during or since the end of the half-year are:
Graeme Billings BCom, FCA, MAICD
Chairman - appointed 18 September 2014
Independent Non-Executive Director
A Director since May 2013
Director G.U.D. Holdings Limited
Director Clover Corporation Limited
Chairman Azure Healthcare Ltd
Director Domacom Ltd
Chris Hartwig BA(Acc), MAICD
Managing Director
Appointed 28 February 2018
Gary FrancisBSc. (Hons) (Civil), MAICD
Independent Non-Executive Director
Chairman of Remuneration Committee
A Director since February 2014
Gerard HutchinsonMBA, MBL, MSc(IS), BEc, MA (research), FCA, FAICD, FAIM Independent Non-Executive Director - appointed 19 November 2014
Chairman of Audit Committee
Current Chief Financial Officer for AF Construction LLC, a member of the Al-Futtaim Group of Companies Director Depa PLC
Andrew StobartB. Eng (Hons), Grad Dip Bus Admin, GAICD
Independent Non-Executive Director - appointed 1 August 2016
Chairman Nexans Olex Australia & New Zealand
Steven McGregorBA (Acc), FCA, AGIA, ACIS
Finance Director
A Director since January 2009
Company Secretary since April 2008
Result
The profit for the half-year attributable to the members of the Company was:
31 Dec 19 | 31 Dec 18 | ||
In thousands of AUD | |||
Profit after income tax expense | 2,130 | 1,138 | |
Net profit attributable to owners of the Company | 2,130 | 1,138 |
2
Korvest Ltd
Directors' Report
Other Ratios
31 Dec 19 | 31 Dec 18 | |
Net tangible asset (NTA) backing | ||
Net tangible assets per ordinary share* | $2.40 | $2.70 |
Profit before tax / revenue | 8.5% | 5.6% |
Profit after tax / equity interests | 6.7% | 3.8% |
- The application of AASB 16 Leases has affected the calculation of the NTA per ordinary share as the lease liability forms part of the calculation however theright-of-use asset does not. The 31 December 2019 amount would be $2.82 if calculated on a similar basis to 2018.
Review of Operations
Revenue from trading operations for the half-year increased by 23.8% to $36.1 million with Industrial Products project work and a stronger general market being the main contributing factors. Operating cash flows were particularly strong with $7.98 million generated during the half.
Industrial Products
The EzyStrut business had improved revenue as a result of NSW infrastructure projects and stronger day-today markets in a number of states. Two major infrastructure projects were supplied during the first half with both projects largely completed by the end of the period. Unfortunately, in August one of the major project customers entered administration. Disappointingly, Korvest has now been advised that there will be no distribution to unsecured creditors and as a result the expected credit loss provision was increased by $905,000. Aside from this, the EzyStrut result was pleasing with regular smaller project sales to contractors and improved support nationally from the wholesaler market.
The Power Step and Titan Technologies businesses had flat revenues compared to the prior comparative period (PCP). Profitability was significantly improved as a result of improved margins. This contributed to the significant improvement in profitability compared to the PCP particularly as the current period did not contain the stock write-offs and redundancy costs of the PCP.
Production
The Galvanising business had its best total plant volume since the second half of FY14. Compared to the PCP, volumes were up 15.4% of which the majority came from external customers. Internal work was greater than the PCP as a significant portion of the project work undertaken by EzyStrut was galvanised. Energy costs remain a significant factor for the business. Gas costs increased compared to the PCP, partly as a result of the increased plant volumes but also due to gas pricing increasing. On a positive note the increase in gas costs was more than offset by reduced electricity costs due to a lower contracted price and less consumption following the installation of solar panels and LED lighting during FY19.
Dividends
On 24thJanuary 2020 the Directors announced a fully franked interim dividend of 15.0 cents per share.
The Dividend Reinvestment Plan (DRP) will not operate for the interim dividend. The dividend will be paid on 6 March 2020 and the record date is 21 February 2020.
Events Subsequent to Reporting Date
No matter or circumstance has occurred subsequent to 31 December 2019 that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent years.
3
Korvest Ltd
Directors' Report
2020 Outlook
The small project and day-to-day markets are expected to continue at similar levels of activity during the second half. Tendering and design activity is expected to be particularly active in the large project market during the second half however the supply phase of these projects is likely to largely fall into FY21 and beyond. It is expected that the full FY20 year profit will meet or exceed the FY19 profit notwithstanding that the absence of a current major project being supplied means that the second half profit will most likely be lower than the result achieved in the first half.
The infrastructure pipeline for FY21 and beyond remains strong and significant investment is being made in the Kilburn factory to ensure that Korvest is well positioned to take advantage of that activity.
Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
The lead auditor's independence declaration is set out on page 5 and forms part of the Directors' report for the half-year ended 31 December 2019.
Rounding Off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in accordance with that Instrument, amounts in the financial report and Directors' report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Dated at Kilburn this 24th day of January 2020.
Signed in accordance with a resolution of the Directors:
GA Billings
Chairman
4
Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
To the Directors of Korvest Ltd
I declare that, to the best of my knowledge and belief, in relation to the review of Korvest Ltd for the half-year ended 31 December 2019 there have been:
- no contraventions of the auditor independence requirements as set out in theCorporations Act 2001in relation to the review; and
- no contraventions of any applicable code of professional conduct in relation to the review.
KPMG | Paul Cenko |
Partner | |
Adelaide | |
24 January 2020 |
5
KPMG, an Australian partnership and a member firm | |
of the KPMG network of independent member firms | Liability limited by a scheme |
affiliated with KPMG International Cooperative | approved under Professional |
("KPMG International"), a Swiss entity. | Standards Legislation. |
Korvest Ltd
Condensed consolidated statement of profit or loss and other comprehensive income for the half- year ended 31 December 2019
In thousands of AUD | Note | 31 Dec 19 | 31 Dec 18 |
Revenue | 6(a) | 36,128 | 29,190 |
Other income | 6(a) | - | 8 |
Expenses excluding net financing costs | 6(b) | (33,049) | (27,601) |
Results from operating activities excluding net financing | |||
income | 3,079 | 1,597 | |
Finance income | 41 | 34 | |
Finance costs - lease liability interest | (57) | - | |
Net finance income / (expense) | (16) | 34 | |
Profit before income tax | 3,063 | 1,631 | |
Income tax expense | (933) | (493) | |
Net profit for the period | 2,130 | 1,138 | |
Total comprehensive income for the period | |||
Attributable to: | |||
Owners of the Company | 2,130 | 1,138 | |
Earnings per share | |||
Basic earnings per share | 19.0¢ | 10.2¢ | |
Diluted earnings per share | 19.0¢ | 10.2¢ |
The Condensed consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes set out on pages 10 to 17.
6
Korvest Ltd
Condensed consolidated statement of changes in equity for the half-year ended 31 December 2019
In thousands of AUD
Balance at 1 July 2019
Total comprehensive income for the period Profit for the period
Total comprehensive income for the period Transactions with owners of the Company recognised directly in equity
Shares issues under share plans Dividends paid
Total transactions with owners of the Company
Transfer to the profits reserve Balance at 31 December 2019
Equity | Asset | Profits | |||
Share | compens- | revaluation | reserve | Retained | |
capital | ation | reserve | earnings / | Total | |
reserve | (loss) | ||||
14,142 | 304 | 3,735 | 12,743 | - | 30,924 |
- | - | - | - | 2,130 | 2,130 |
- | - | - | - | 2,130 | 2,130 |
29 | 64 | - | - | - | 93 |
- | - | - | (1,461) | - | (1,461) |
29 | 64 | - | (1,461) | - | (1,368) | |||||||
- | - | - | 2,130 | (2,130) | - | |||||||
14,171 | 368 | 3,735 | 13,412 | - | 31,686 | |||||||
Balance at 1 July 2018 | 14,084 | 248 | 3,735 | 11,854 | (209) | 29,712 | |
Total comprehensive income for the period | |||||||
Profit for the period | - | - | - | - | 1,138 | 1,138 | |
Total comprehensive income for the period | - | - | - | - | 1,138 | 1,138 | |
Transactions with owners of the Company | |||||||
recognised directly in equity | |||||||
Shares issued under share plans | 30 | 27 | - | - | - | 57 | |
Dividends paid | - | - | - | (781) | - | (781) | |
Total transactions with owners of the | |||||||
Company | 30 | 27 | - | (781) | - | (724) | |
Balance at 31 December 2018 | 14,114 | 275 | 3,735 | 11,073 | 929 | 30,126 |
The Condensed consolidated statement of changes in equity is to be read in conjunction with the notes set out on pages 10 to 17.
7
Korvest Ltd
Condensed consolidated statement of financial position as at 31 December 2019
In thousands of AUD | Note | 31 Dec 19 | 30 Jun 19 |
Current Assets | |||
Cash and cash equivalents | 8,323 | 3,126 | |
Investments | 275 | 275 | |
Trade and other receivables | 10 | 10,042 | 14,080 |
Prepayments | 375 | 272 | |
Inventories | 8,681 | 10,504 | |
Total current assets | 27,696 | 28,257 | |
Non-Current Assets | |||
Property, plant and equipment | 13,302 | 13,033 | |
Right-of-use asset | 4,718 | - | |
Total non-current assets | 18,020 | 13,033 | |
Total assets | 45,716 | 41,290 | |
Current Liabilities | |||
Trade and other payables | 4,310 | 5,974 | |
Employee benefits | 2,425 | 2,472 | |
Tax payable | 1,847 | 864 | |
Lease liabilities | 803 | - | |
Provisions | 29 | 32 | |
Total current liabilities | 9,414 | 9,342 | |
Non-Current Liabilities | |||
Deferred tax liabilities | 34 | 431 | |
Employee benefits | 169 | 140 | |
Lease liabilities | 3,960 | - | |
Provisions | 453 | 453 | |
Total non-current liabilities | 4,616 | 1,024 | |
Total liabilities | 14,030 | 10,366 | |
Net assets | 31,686 | 30,924 | |
Equity | |||
Issued capital | 11 | 14,171 | 14,142 |
Retained earnings | - | - | |
Reserves | 17,515 | 16,782 | |
Total equity attributable to owners of the Company | 31,686 | 30,924 | |
Total equity | |||
31,686 | 30,924 |
The Condensed consolidated statement of financial position is to be read in conjunction with the notes set out on pages 10 to 17.
8
Korvest Ltd
Condensed consolidated statement of cash flows for the half-year ended 31 December 2019
In thousands of AUD | Note | 31 Dec 19 | 31 Dec 18 |
Cash flows from operating activities | |||
Cash receipts from customers | 45,075 | 32,897 | |
Cash payments paid to suppliers and employees | (36,738) | (33,935) | |
Interest received | 41 | 34 | |
Interest paid lease liabilities | (57) | - | |
Income taxes received / (paid) | (346) | (137) | |
Net cash provided by / (used in) operating activities | 7,975 | (1,141) | |
Cash flows from investing activities | |||
Proceeds from sale of property, plant and equipment | 23 | 23 | |
Acquisition of property, plant and equipment | (940) | (610) | |
Net cash used in investing activities | (917) | (587) | |
Cash flows from financing activities | |||
Transaction costs related to the issue of share capital | (1) | (2) | |
Payment of lease liabilities | (399) | - | |
Dividends paid | (1,461) | (781) | |
Net cash used in financing activities | (1,861) | (783) | |
Net increase / (decrease) in cash and cash equivalents | 5,197 | (2,511) | |
Cash and cash equivalents at the beginning of the period | 3,126 | 5,119 | |
Cash and cash equivalents at 31 December | 8,323 | 2,608 |
The condensed consolidated statement of cash flows is to be read in conjunction with the notes set out on pages 10 to 17.
9
Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
-
Reporting entity
Korvest Ltd (the Company) is a company domiciled in Australia. The condensed consolidated financial statements as at and for the half year ended 31 December 2019 comprise the Company and its subsidiaries (together referred to as the 'Group' and individually as 'Group entities').
The annual financial report of the Group as at and for the year ended 30 June 2019 is available upon request from the Company's registered office at 580 Prospect Road Kilburn SA 5084 or at www.korvest.com.au. - Statement of compliance
The interim condensed consolidated financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reportingand the Corporations Act 2001.
The interim consolidated financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the Group as at and for the year ended 30 June 2019.
This interim financial report was approved by the Board of Directors on 24 January 2020.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 and in accordance with that Instrument, amounts in the Financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. - Significant accounting policies
Except as described below, the accounting policies applied by the Company in this interim financial report are the same as those applied by the Group in its financial report as at and for the year ended 30 June 2019.
The Group has adopted AASB 16 Leaseseffective from 1 July 2019. The group applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly the comparative information presented is not restated. In the comparative period the only lease arrangements that the Group had were considered to be operating leases and therefore the lease payments were recognised in profit or loss on a straight line basis over the term of the lease. This now changes under AASB 16 and the details of the changes in accounting policies are disclosed below.
AASB 16 Leases
At the inception of a contract, the Group assesses whether a contract is, or contains, a lease which will be the case if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
At the commencement or modification of a contract that contains a lease the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying assets or to restore the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight line method from the commencement date to the end of the lease term. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
10
Korvest Ltd- 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
3. Significant accounting policies (cont)
AASB 16Leases (cont)
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate.
The Group determined its incremental borrowing rate by obtaining indicative interest rates from its bankers.
The lease liability is measured at amortised cost using the effective interest rate method. It is remeasured when there is a change in future lease payments arising from a change in index or rate or if the Group changes its assessment of whether it will exercise an extension option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of use asset has been reduced to zero.
The Group's leases consist of property leases for warehouse and factory facilities as well as leases for forklifts.
Short term leases
The Group has elected to not recognise a right-of-use asset and lease liability for short term leases. For these leases the Group recognises the lease payments as an expense on a straight line basis over the lease term. The Group only has one such short term lease which relates to a property where the Group has a month-to month tenancy.
Impact on transition
On transition to AASB 16, the Group recognised right-of-use assets and lease liabilities. As these two amounts were the same there was no impact on retained earnings. The impact on transition is summarised below.
In thousands of AUD | 1 Jul 2019 |
Right-of-use asset - Land and buildings | 5,013 |
Right-of-use asset - Property, plant and equipment | 149 |
Lease liabilities | (5,162) |
When measuring lease liabilities for leases that were previously classified as operating leases, the Group discounted lease payments using a borrowing rate of 2.75%.
In thousands of AUD | 1 Jul 2019 |
Operating lease commitments at 30 June 2019 as disclosed in the | |
Group's consolidated financial statements | 2,225 |
Discounted using the incremental borrowing rate at 1 July 2019 | 5,162 |
The difference between the above two numbers is due to the inclusion of extension options reasonably certain to be exercised which is a requirement of AASB 16 but were not disclosed as lease commitments previously.
To assist with the understanding of the impact of the application of AASB 16 in this initial period refer to the following summary.
Right-of-use assets | |||
In thousands of AUD | |||
Warehouses | Forklifts | Total | |
Balance at 1 July 2019 | 5,013 | 149 | 5,162 |
Depreciation of right-of-use asset | (421) | (23) | (444) |
Balance at 31 December 2019 | 4,592 | 126 | 4,718 |
11 |
Korvest Ltd- 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
Lease liabilities
In thousands of AUD
Balance at 1 July 2019 | 5,162 |
Reduction in liability | (399) |
Balance at 31 December 2019 | 4,763 |
Comparison of previous AASB 117 accounting treatment and new AASB 16 treatment
The following table has been included to compare the new accounting treatment under AASB 16 with how the same transactions would have been shown under the previous AASB 117 for the period from 1 July 2019 to 31 December 2019.
In thousands of AUD | Statement of | Statement of |
profit or loss | cash flows | |
Previous AASB 117 accounting treatment | ||
Expenses (lease payments) | (456) | |
Expenses (lease payments short term leases) | (48) | |
Cash flows from operating activities | (504) | |
Total | (504) | (504) |
New AASB 16 treatment | ||
Expenses (lease payments short term leases) | (48) | |
Interest expense | (57) | |
Lease liability | ||
Depreciation right-of-use asset | (444) | |
Cash flows from operating activities | (105) | |
Cash flows from financing activities | (399) | |
Total | (549) | (504) |
4. Judgements and Estimates
The preparation of the interim financial report requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this interim financial report, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the financial report as at and for the year ended 30 June 2019, except for the new significant judgements related to lessee accounting under AASB 16, which are described in note 3 and inventory provisioning described in note 8.
5. Financial risk management
The Group's financial risk management objectives and policies are consistent with those disclosed in the financial report as at and for the year ended 30 June 2019.
31 Dec 19 | 31 Dec 18 | ||
6. | Revenues and Expenses | ||
In thousands of AUD | |||
(a) | Revenue | ||
Sales revenue | |||
Sale of goods | 36,128 | 29,190 | |
Other income | |||
Profit on sale of fixed assets | - | 8 | |
12 |
Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
6. | Revenues and Expenses (cont) | 31 Dec 19 | 31 Dec 18 |
(b) | Expenses | ||
Costs of goods and services sold | 21,992 | 17,627 | |
Sales, marketing and warehousing expenses | 6,282 | 6,331 | |
Distribution expenses | 2,406 | 2,298 | |
Administration expenses | 1,460 | 1,341 | |
Bad and doubtful debts expense | 905 | 4 | |
Loss on sale of fixed assets | 4 | - | |
33,049 | 27,601 | ||
(c) Depreciation | |||
Buildings | 21 | 21 | |
Plant and equipment | 623 | 731 | |
Total depreciation of property, plant and equipment | 644 | 752 | |
Right-of-use assets | 444 | - |
7. Segment disclosures
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 Group's reportable segments.
- Industrial Products - includes the manufacture of electrical and cable support systems and steel fabrication. It includes the businesses trading under the EzyStrut, Power Step and Titan Technologies names.
- Production - represents the Korvest Galvanising business, which provides hot dip galvanising services.
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.
Information about reportable segments
Industrial Products | Production | Total | ||||
In thousands of AUD | 31 Dec 19 | 31 Dec 18 | 31 Dec 19 | 31 Dec 18 | 31 Dec 19 | 31 Dec 18 |
External Revenues | 32,895 | 26,406 | 3,233 | 2,784 | 36,128 | 29,190 |
Reportable segment profit before tax | 2,974 | 1,735 | 389 | 231 | 3,363 | 1,966 |
Reportable segment assets | 18,949 | 22,692 | 4,936 | 3,969 | 23,885 | 26,661 |
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Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
7. Segment Disclosures (cont)
Reconciliation of reportable segment profit and assets | |||
In thousands of AUD | 31 Dec 19 | 31 Dec 18 | |
Profit | |||
Total profit or (loss) for reportable segments | 3,363 | 1,966 | |
Unallocated amounts - other corporate expenses | (300) | (335) | |
Profit / (loss) before income tax | 3,063 | 1,631 | |
Assets | |||
Total assets for reportable segments | 23,885 | 26,661 | |
Land and buildings | 7,313 | 7,320 | |
Right-of-use assets | 4,718 | - | |
Cash and investments | 8,598 | 3,401 | |
Unallocated amounts - other assets | 1,202 | 1,041 | |
Total assets | 45,716 | 38,423 |
Geographical segments
The Group operates predominantly in Australia.
Customers
Revenues from one customer in the Industrial Products segment represents approximately $4,585,000 (2018: $3,969,000) of the Group's total revenues.
-
Write-downof obsolete inventory
During the six months ended 31 December 2019 the Group increased its obsolescence provision against inventory by $207,000 (31 December 2018: no change) as a result of a change in accounting estimates. - Property, plant and equipmentAcquisitions and disposals
During the six months ended 31 December 2019, the Company acquired assets with a cost of $940,000 (six months ended 31 December 2018: $610,000). No assets were acquired through business combinations. Assets with a net book value of $27,000 were disposed of during the six months ended 31 December 2019 (six months ended 31 December 2018: $15,000), resulting in a $4,000 loss on disposal (six months ended 31 December 2018: $8,000 profit).
Capital commitments
The Group has capital commitments of $1,016,000 at 31 December 2019 (31 December 2018: $330,000).
10. Trade receivables | 31 Dec 19 | 30 June 19 | |
Trade receivables | 11,555 | 14,688 | |
Less: Allowance for impairment | (1,513) | (608) | |
Net trade receivables | 10,042 | 14,080 | |
Movement in allowance for impairment | |||
Balance at 1 July 2019 | (608) | ||
Impairment loss recognised | (905) | ||
Balance at 31 December 2019 | (1,513) |
14
Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
11. Share Capital | ||
31 Dec 19 | 30 June 19 | |
In thousands of AUD | ||
Issued and paid-up capital | ||
11,240,467 ordinary shares fully paid (30 June 2019: 11,178,235) | 14,171 | 14,142 |
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders' meetings. In the event of the winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.
Employee Share Bonus Plan
The Company issued ordinary shares under the Employee Share Bonus Plan during the period. All employees meeting the service criteria were eligible to participate in the issue. The shares are issued at market value for no consideration. Details of the issue are as follows:
Number of | ||||
Shares issued | participating | |||
Date of | Total number of | Market value of | per participating | executive |
issue | shares issued | shares issued $ | employee | directors |
31 December 2019 | ||||
4 October 2019 | 19,080 | 59,911 | 159 | - |
31 December 2018 | ||||
14 September 2018 | 25,168 | 60,403 | 208 | - |
Shares issued to employees under the Employee Share Bonus Plan are recognised in equity at the fair value of the shares issued. For the issue made during the period this was $30,000 (2018: $30,000). The fair value has been measured consistently with the previous annual report and takes into account that the shares issued are unable to be sold by employees for a period of 7 years after issue.
Share-based payment - Executive Share Plan
In August 2011 the Company established the Korvest Performance Rights Plan. The Plan is designed to provide long term incentives to eligible senior employees in the Company and entitles them to acquire shares in the Company, subject to the successful achievement of specified performance hurdles.
Under the plan, eligible employees are offered Performance Rights which enables the employee to acquire one fully paid ordinary share in the Company for no monetary consideration once the Performance Rights vest. The conditions attached to the Performance Rights are measured over the three year period commencing at the beginning of the financial year in which the Performance Rights are granted. If the performance conditions at the end of the three year period are met, in whole or in part, all or the relevant percentage of the Performance Rights will vest.
A total of 91,796 Performance Rights were issued in November 2019 (2018: 102,105).
The previous share plan, the Korvest Ltd Executive Share Plan is still operational for employees granted options under that plan. The share option plan entitled selected senior managers to acquire shares in the Company subject to successful achievement of performance targets related to improvements in total shareholder returns.
The shares issued pursuant to these options are financed by an interest free loan from the Company repayable within twenty years from the proceeds of dividends declared by the Company. These loans are of a non-recourse nature. For accounting purposes these 20 year loans are treated as part of the options to purchase shares until the loan is extinguished at which point the shares are recognised.
15
Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
11. Share Capital (cont)
Fair value of Performance Rights granted
For the Performance Rights issued during the period, half will be tested against an Earning Per Share (EPS) measure whilst the other half will be tested against a Return on Invested Capital (ROIC) measure.
The fair value at grant date was assessed in accordance with AASB 2 Share Based Payments.A Black Scholes valuation methodology was used to value both the EPS and ROIC performance rights and the value was $2.63 per Performance Right. The inputs to the calculations have been set out below.
- Exercise price: $0.00
- Vesting period: 3 years
- Grant date (for Accounting Standards): 25 October 2019
- Expiry date: 30 June 2022
- Share price at grant date: $3.24
- Expected price volatility of the Company's shares: 35%
- Expected dividend yield: 6.8%
- Risk-freeinterest rate: 1.06%
- Cost of borrowing: 6.99%
- Restricted period: 2 years (post vesting)
Total expenses arising from share-based transactions recognised during the period as part of
employee benefit expense were as follows: | |||
In thousands of AUD | 31 Dec 19 | 31 Dec 18 | |
Performance rights issued under Korvest Performance | |||
Rights Plan | 64 | 27 | |
Shares issued under Employee Share Bonus Plan | 29 | 30 | |
93 | 57 |
12. Dividends
Dividends paid or provided for by the Company in the current period and the previous corresponding period are:
Cents per | Total amount | Franked / | Date of | |||
share | $'000 | unfranked | payment | |||
31 December 2019 | ||||||
Final - ordinary | 13.0 | 1,461 | Franked | 6 | September 2019 | |
31 December 2018 | ||||||
Final - ordinary | 7.0 | 781 | Franked | 7 | September 2018 | |
Subsequent events | ||||||
Since the end of the half-year, the Directors declared the following dividends: | ||||||
Interim - ordinary | 15.0 | 1,688 | Franked | 6 | March 2020 |
The financial effect of these dividends has not been brought to account in this financial report. It will be recognised in the next reporting period.
All dividends paid or declared are fully franked at the tax rate of 30%. The Directors expect that dividends will be fully franked for the foreseeable future.
16
Korvest Ltd - 31 December 2019 Interim Consolidated Financial Report
Notes to the Condensed Interim Consolidated Financial Report
-
Financial Instruments
Carrying amounts versus fair values
The fair values of all financial assets and liabilities approximate their carrying amounts. - Contingent Liabilities and Contingent Assets
There have been no material changes in contingent liabilities or contingent assets since 30 June 2019. - Events Subsequent to Reporting Date
No matter or circumstance has occurred subsequent to 31 December 2019 that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent years.
-
Related Parties
There have been no material changes to arrangements with related parties since 30 June 2019. - Standards issued but not yet effective
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2020, and have not been applied in preparing these consolidated financial statements. None of these standards are expected to have any material impact on Korvest.
17
Korvest Ltd
Directors' Declaration
In the opinion of the Directors of Korvest Ltd ("the Company"):
- the condensed consolidated financial statements and notes set out on pages 6 to 17, are in accordance with theCorporations Act 2001, including:
- giving a true and fair view of the financial position of the Group as at 31 December 2019 and of its performance, for thehalf-year ended on that date; and
- complying with Australian Accounting Standard AASB 134 "Interim Financial Reporting" and the
Corporations Regulations 2001; and
- there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Dated at Kilburn this 24th day of January 2020.
Signed in accordance with a resolution of the Directors:
GA Billings
Chairman
18
Independent Auditor's Review Report
To the shareholders of Korvest Ltd
Report on the Half-year Financial Report
Conclusion
We have reviewed the accompanying Half-yearFinancial Reportof Korvest Ltd.
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Half-year Financial Report of Korvest Ltd is not in accordance with the Corporations Act 2001, including:
- giving a true and fair view of theGroup'sfinancial position as at 31 December 2019 and of its performance for the Half-year ended on that date; and
- complying withAustralian Accounting Standard AASB 134 Interim Financial Reporting and theCorporations Regulations 2001.
TheHalf-year Financial Report comprises:
- Condensed consolidated statement of financial position as at 31 December 2019
- Condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for theHalf-year ended on that date
- Notes 1 to 17 comprising a summary of significant accounting policies and other explanatory information; and
- The Directors' Declaration.
The Groupcomprises Korvest Ltd (the company) and the entities it controlled at the Half year's end or from time to time during the Half-year.
Responsibilities of the Directors for the Half-year Financial Report
The Directors of the Company are responsible for:
- the preparation of theHalf-year Financial Report that gives a true and fair view in accordance with Australian Accounting Standardsand the Corporations Act 2001;and
- such internal control as the Directors determine is necessary to enable the preparation of theHalf-year Financial Report that is free from material misstatement, whether due to fraud or error.
KPMG, an Australian partnership and a member firm | 19 |
of the KPMG network of independent member firms | Liability limited by a scheme |
affiliated with KPMG International Cooperative | approved under Professional |
("KPMG International"), a Swiss entity. | Standards Legislation. |
Auditor's responsibility for the review of the Half-year Financial Report
Our responsibility is to express a conclusion on the Half-year Financial Report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Half-year Financial Report is not in accordance with the Corporations Act 2001including: giving a true and fair view of the Group's financial position as at 31 December 2019 and its performance for the half- year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reportingand the Corporations Regulations 2001. As auditor of Korvest Ltd, ASRE 2410requires that we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of a Half-year Financial Report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standardsand consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.
KPMG | Paul Cenko |
Partner | |
Adelaide | |
24 January 2020 |
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Korvest Limited published this content on 24 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 January 2020 08:34:07 UTC