Korvest Ltd Reports 8.3% Revenue Increase and Record Order Book as Kilburn Facility Nears Completion

Financial Results Show Revenue Growth Amidst Investment-Related Costs

Korvest's FY26 financial results ending 30 June 2026 demonstrate a company balancing significant capital investments with revenue expansion. Sales reached $129.5 million, marking an 8.3% rise from $119.57 million in FY25, fueled mainly by strong performance in routine operations and small projects, especially in the latter half of the year. However, EBIT declined 3.3% to $18.29 million from $18.91 million the prior year, impacted by one-time relocation costs related to branch moves in Queensland and Western Australia and expenses from transitioning to a new enterprise resource planning (ERP) system.

Net profit after tax decreased 5.7% to $12.41 million from $13.16 million in FY25, with earnings per share falling 6.3% to 104.9 cents from 112.0 cents. Adjusting for remediation costs, second-half EBIT rose 23% over the first half, indicating operational improvements as the year advanced. The balance sheet strengthened with net assets increasing to $64.8 million from $60.8 million, reflecting retained earnings and capital expenditures. Operating cash flow dropped 68% to $5.99 million from $18.69 million, primarily due to higher working capital needs driven by increased activity and a record order book entering FY27.

Industrial Products Segment Leads Growth Despite Margin Pressure

The Industrial Products division, representing the majority of Korvest's business, recorded sales of $118.35 million, up 8.6% from $108.99 million the previous year. This segment includes the core cable and pipe supports manufactured at the Kilburn facility and the vertically integrated EzyStrut brand. EBIT declined 2.8% to $17.08 million from $17.58 million, with margins compressing from 16.1% to 14.4% due to relocation and increased operating expenses. Growth was driven by enhanced revenue from small projects and daily operations, with five major projects initiated during the year, two starting in the second half.

The division benefits from a robust data centre development pipeline aligned with Australia's infrastructure investment trends. Four projects secured during FY26 are expected to provide ongoing supply revenue into FY27 and beyond, enhancing revenue visibility. The ERP system transition, while incurring costs in FY26, is anticipated to improve operational efficiency and customer service. Expansion of warehouse capacity in New South Wales targets the growing east-coast data centre market. Increased staffing, depreciation, freight, and occupancy expenses contributed to margin compression, reflecting timing differences between capacity investments and full utilization.

Production Services Achieves Record Volumes Amid Rising Input Costs

The Production Services segment, including Korvest Galvanisers, reported sales of $11.19 million, a 5.8% increase from $10.58 million in FY25. EBIT declined 13.4% to $2.39 million from $2.76 million, with margins decreasing from 26.1% to 21.4%. Despite margin pressure, the segment achieved record plant throughput in FY26, driven by a major renewable energy project completed in the second half. Elevated zinc prices throughout the year pressured profitability and pricing.

Improved labor management in the second half enhanced profitability. Capital investments included replacing a galvanising kettle and upgrading burner management to boost gas efficiency and extend equipment life. As South Australia's sole centrifuge galvanising plant and operator of Australia's longest 14-metre galvanising kettle, Korvest Galvanisers holds a strategic position in structural steel galvanising and supports vertical integration for EzyStrut products.

Kilburn Manufacturing Facility Completed On Time and Within Budget

Korvest's major FY26 capital project was redeveloping its Kilburn manufacturing facility in Adelaide, the central hub for cable and pipe supports production. Total Kilburn-related capex was $6.3 million, covering building and equipment investments. The facility was handed over in July 2026, ahead of schedule and on budget, marking a successful strategic milestone. This completion allows progression to fit-out and full operational deployment in the upcoming year.

The new Kilburn plant enhances manufacturing capacity and capabilities to support growth and improved customer service. Planned productivity initiatives include installing a robotic folding cell in late 2026 to increase throughput and consistency, a reverse direction burner system to reduce gas consumption and extend kettle life, and a powder coating line scheduled for 2027. These investments position Korvest for sustained growth in industrial, electrical, and mechanical installation sectors.

Branch Network Expansion Enhances Market Reach and Service

During FY26, Korvest expanded its geographic footprint by relocating and enlarging branch operations in key regions. The Western Australia and Queensland EzyStrut branches moved to larger sites, improving service to growing regional markets and inventory availability. In New South Wales, warehouse capacity was increased with a second facility dedicated to the expanding east-coast data centre sector. These moves incurred approximately $900,000 in one-off relocation capex, contributing to the overall capital expenditure program.

This branch expansion aligns with Korvest's growth strategy and confidence in market demand across regions. The company operates sales offices and warehouses in Adelaide, Melbourne, Sydney, Brisbane, and Perth, with distribution partners in Darwin, Townsville, Hobart, and New Zealand. The expanded NSW warehouse targets the booming data centre sector, reducing lead times and enhancing customer service compared to overseas competitors with longer supply chains. Maintaining local manufacturing in Kilburn supported by a distributed warehouse network offers flexibility and responsiveness to customer needs.

Record Order Book Sets Stage for Strong FY27 Revenue

Entering FY27, Korvest reported a record order book, providing solid forward revenue visibility and confidence in near-term trading. This backlog reflects success in growth markets, especially data centres and major infrastructure projects. Projects secured in FY26 are expected to deliver substantial volumes throughout FY27, subject to client schedules. Management anticipates continued strong day-to-day and project market activity, while remaining cautiously optimistic amid macroeconomic uncertainties.

The record order book validates Korvest's market positioning and customer trust in its project delivery capabilities. Four FY26 projects are expected to generate multi-year supply into FY27 and beyond. However, elevated working capital requirements linked to the order book may continue to pressure operating cash flow despite revenue growth. The company plans to provide further trading updates at its annual general meeting to keep investors informed on order book and trading progress.

Successful ERP Implementation Expected to Boost Productivity

Korvest completed a major ERP system transition during FY26 as part of operational modernization. Although transition costs contributed to margin compression in the Industrial Products segment, management expects ongoing benefits including improved efficiency, enhanced customer service, and better decision-making data. The new ERP system supports optimized business processes and operational leverage across manufacturing and distribution.

This foundational ERP investment underpins Korvest’s growth strategy by enabling superior inventory management, order processing, and customer communications. Ongoing ERP optimization initiatives are expected to drive margin improvements and productivity gains in FY27 and beyond. The successful ERP rollout highlights Korvest’s ability to execute complex projects while sustaining revenue growth, an important factor for investors assessing management capability.

Remediation Settlement and Dividend Reflect Financial Strength

Korvest finalized a $1.1 million remediation claim in July 2026, to be recorded as income in FY27. This settlement removes a balance sheet contingency and provides a one-off earnings boost. The timing post-financial year-end demonstrates the company's focus on resolving legacy issues while advancing operational and growth priorities.

Reflecting solid balance sheet and earnings, Korvest maintained a dividend policy of 65 cents per share for FY26, comprising a 25-cent interim and 40-cent fully franked final dividend. This compares to a 75-cent total dividend in FY25, which included a 10-cent special dividend. The FY26 dividend aligns with FY24 levels and reflects capital allocation prudence amid significant capex. A Dividend Reinvestment Plan (DRP) is active for the final dividend, with a record date of 4 September 2026 and payment on 25 September 2026.

Strategic Focus on Infrastructure and Data Centres Supports Growth Outlook

Korvest’s leadership in cable and pipe supports is reinforced by strong infrastructure and data centre development trends in Australia. The company identified the data centre pipeline as a key growth driver and invested in warehouse capacity to serve this market. The Industrial Products division secured five major projects in FY26, with two starting in the second half and four expected to provide ongoing supply into FY27 and beyond. This project revenue complements steady day-to-day business and enhances medium-term earnings visibility.

Korvest’s market leadership, supported by local manufacturing and a national sales and warehouse network, positions it to capture growth opportunities while leveraging vertical integration with galvanising services. Local manufacturing enables rapid response and custom fabrication, differentiating Korvest from overseas competitors. The company’s vision to be a leading vertically integrated supplier of engineered solutions for industrial, electrical, and mechanical installations is supported by investments in manufacturing, geographic reach, and systems. Planned initiatives like the 2027 powder coating line and robotic manufacturing will further extend integrated offerings.

Working Capital and Capex Pose Near-Term Cash Flow Challenges

Despite revenue growth and profitability, Korvest’s operating cash flow fell sharply to $5.99 million from $18.69 million, a 68% decline. This was mainly due to elevated working capital needs from increased activity and the record order book. Capital expenditure totaled $11.29 million, funded from operating cash, supporting growth and manufacturing modernization. Working capital demands are expected to remain high in FY27, potentially constraining cash flow.

The balance sheet shows receivables rose to $29.5 million from $21.2 million and inventories increased to $22.7 million from $18.5 million. Inventory growth of $900,000 includes products for data centre applications, highlighting strategic positioning. Stable receivables aging indicates increases stem from volume growth rather than collection issues. A $1.5 million bank overdraft was utilized in FY26 compared to no usage previously, reflecting cash flow pressures from capex and working capital. Continued elevated working capital in FY27 may limit cash available for dividends or further investments, an important consideration for investors focused on cash generation and dividend sustainability.