Korvest’s Kilburn expansion meets record work on hand

Record work on hand meets a softer profit result

Korvest Ltd (ASX:KOV) finished FY26 with its strongest forward order position on record, but the growth came with a less flattering earnings conversion. Revenue rose 8.3% to $129.54 million as day-to-day and small-project activity improved, while profit after tax fell from $13.16 million to $12.41 million and basic earnings per share declined from 112.0 cents to 104.9 cents.

The company attributed the revenue increase to stronger activity in its Industrial Products segment, which includes EzyStrut, as well as improving demand through the year. Data centre development supported both the day-to-day and small-project markets, while major project work remained just below the unusually high FY25 level.

Kilburn factory adds capacity for FY27

The centrepiece of Korvest’s investment program was a new 3,500 square metre fabrication building at its Kilburn site in South Australia. Construction began in October 2025 and was completed in July 2026, a few weeks ahead of schedule and within budget, according to the annual report. Machinery including roll formers, a laser cutter and weld bays is due to be commissioned during the first half of FY27.

That expansion is not yet the full bill. Phase 2 includes further machinery, a powder-coating line and noise-attenuation work, with total expenditure expected to be about $4 million and at least $2 million likely to fall in FY27. Korvest says the project should expand capacity and capability, improve service, support potential market-share growth and open access to additional markets, although the report provides no FY27 earnings guidance.

Cash flow and dividend resilience tested

The investment cycle put visible pressure on the balance sheet. Capital expenditure rose to $10.87 million from $3.69 million, while operating cash flow dropped to $5.99 million from $18.69 million as receivables and inventories increased. Korvest ended June with a $1.54 million bank overdraft, compared with $13.03 million of cash a year earlier, although it had a committed $5 million overdraft facility and directors said forecast cash flows supported its liquidity for at least the next 12 months.

Despite the weaker profit and cash conversion, the board declared a 40-cent fully franked final dividend, matching the ordinary final dividend from FY25 but excluding last year’s 10-cent special payment. Together with the 25-cent interim dividend, FY26’s ordinary distribution is 65 cents per share. The final dividend is subject to the company’s general liquidity considerations and is scheduled for payment on 25 September 2026.

Supplier settlement and operating execution

A $1.1 million supplier settlement is expected to be recorded as other income in FY27 after Korvest incurred a further $566,000 in remediation costs during FY26 relating to a third-party design fault. That payment is a subsequent-event contingent asset rather than FY26 operating income, and its timing will matter alongside the commissioning of the new factory.

The production business also reached a record level of galvanising tonnes, helped by demand from South Australian fabricators and a renewable-energy project. A replacement galvanising kettle and upgraded burner-management system were completed ahead of schedule during the Christmas shutdown, while volume-adjusted gas consumption fell 7%. Even so, the company’s return on invested capital fell to 21.8% from 27.1%, and one lost-time injury contributed to an LTI frequency rate of 1.72.

Board change arrives with the October AGM

Gary Francis will retire from the board at the 30 October 2026 annual meeting and will not seek re-election. Finance Director and Company Secretary Steven McGregor will also retire by rotation and has offered himself for re-election. The leadership change comes as Korvest moves from building capacity to proving that the new assets can convert a record work pipeline into earnings and cash.