High dollar haunts K&S bottom line


Customers volumes lower due to harsher operating climate

By Rob McKay | February 23, 2011

K&S Corporation is looking to disaster reconstruction to help reverse a decline in profits in the first half of the financial year.

Despite a 21.9 percent operating revenue rise, compared with the previous first half, to $264.7 million, K&S saw an 11.3 percent fall in operating profit to $8.1 million and a 30.4 percent fall in return on shareholders’ funds to $3.9 million.

Meanwhile, its gearing rose 83.6% to 26.8 percent.

Much of the pain was sourced back to the affects of the high dollar and tough conditions experienced by its customers.

"The lower result was foreshadowed in our trading update on 26 October 2010, where we outlined that our East Coast operations had experienced weaker trading conditions in the September quarter," the company says.

"This was largely driven by lower steel volumes on the back of reduced production, destocking and a change in product and distribution mix.

"We have also been negatively impacted by the closure of Wesleyvale and Burnie paper mills in Tasmania.

"The result also reflects a general softening of the economy with the majority of road and rail customer volumes lower than the previous year levels.

"The higher Australian dollar has reduced the demand for locally manufactured goods.

"The lower volumes of steel and paper products have impacted on our vehicle utilisation and our ability to double shift our equipment."

The outlook for the domestic economy was "far from certain with the high dollar and interest rates negatively impacting on Australian manufacturers".

"In the longer term we will see a pickup in demand for transport services as the re-building phase commences following the recent floods and cyclones in Queensland," the company says.

Despite this, K&S intends to grow organically and through acquisition, continuing an effort that saw it push into the Western Australian resources support market.

Last year’s purchase of Regal Transport Group was worth $41.85 million and followed its Pacific Transport buy.

Regal added $25.5 million in revenue and $2 million in profit to the group.

K&S Corporation Limited

ABN 67 007 561 837

141-147 Jubilee Highway West

Mount Gambier SA 5290

PO Box 567

Mount Gambier SA 5290

Australia

Ph (08) 87211700

Fax (08) 87211799

Website

www.ksgroup.com.au

News Release

23rd February 2011

K&S Corporation Results for Half Year Ended 31 December 2010

The Directors of K&S Corporation Limited today announced a net profit

after tax of $8.1 million, 11.3% lower than the corresponding period last

year.

Earnings per share were 10.9 cents per share.

Operating revenue for the first half was $264.7 million, an increase of

21.9% on the corresponding period.

The increase in operating revenues is due to the recent acquisitions of

Pacific Transport (January 2010), Regal Transport (July 2010) and the

strong performance of DTM. These acquisitions have performed in line

with our expectation.

Operating profit before interest, tax and depreciation was $29.0 million or

15.4% above the prior period.

On the 20 December 2010 we successfully completed a fully underwritten

one for six non-renounceable entitlement offer that raised $25.9 million.

These funds were used to retire debt.

Our gearing at the half was 26.8% which is in our target range.

K&S Corporation Limited

ABN 67 007 561 837

141-147 Jubilee Highway West

Mount Gambier SA 5290

PO Box 567

Mount Gambier SA 5290

Australia

Ph (08) 87211700

Fax (08) 87211799

Website

www.ksgroup.com.au

Interim Dividend

A fully franked interim dividend of 5.0 cents per share (last year 7.0 cents

per share) has been declared by the Directors.

The interim dividend will be paid on 31 March 2011, with the date for

determining entitlements being 17 March 2011.

The Dividend Reinvestment Plan (DRP) will apply to the interim dividend

and the issue price for the shares under the DRP will be based on the

weighted average trading price of K&S shares in the five trading days

ending 17 March 2011, less a discount of 2.5%.

Outlook

The outlook for the domestic economy is far from certain with the high dollar and interest rates negatively impacting on Australian manufacturers.

In the longer term we will see a pickup in demand for transport services as

the re-building phase commences following the recent floods and cyclones

in Queensland.

Our recent acquisitions will continue to provide the footprint for growth in

the sectors of oil and gas resources in Western Australia.

Our strategy has been, and continues to be, to grow the business through

carefully targeted acquisitions, organic growth and to competitively win

new tenders that deliver benefits to our Shareholders.

Further Information:

Mr Legh Winser Mr Bryan Walsh

Managing Director Chief Financial Officer

Ph: (0417) 885861 Ph: (0402) 899889

legh.winser@ksgroup.com.au bryan.walsh@ksgroup.com.au

Appendix 4D

Half Year report

Appendix 4D Page1

Appendix 4D

Half Year report

Name of entity

K&S Corporation Limited

ABN Half yearly

(tick)

Preliminary

final (tick)

Half year/financial year ended (‘current

period’)

67 007 561 837 ?

31st December 2010

Results for announcement to the market

$A’000

Revenues from ordinary activities Up / down 21.9% To 264,725

Profit (loss) from ordinary activities after tax attributable to

members

Up/down 11.3% To 8,113

Net profit (loss) for the period attributable to members Up/down 11.3% To 8,113

Dividends (distributions) Amount per security Franked amount per

security

Interim dividend 5.0c 5.0c

Previous corresponding period 7.0c 7.0c

Record Date for determining dividend Entitlements 17 March 2011

Date Dividend Payable 31 March 2011

Current Period Previous Corresponding

Period

Net tangible asset backing per ordinary security $1.61 $1.95

This half year report is to be read in conjunction with the most recent annual financial

report.

Interim Financial Report

as at

31 December 2010

Pages 2-3 Directors’ Report

Page 4 Statement of Comprehensive Income

Page 5 Statement of Financial Position

Page 6 Statement of Changes in Equity

Page 7 Statement of Cash Flows

Pages 8-15 Notes to the Financial Statements

Page 16 Directors’ Declaration

Pages 17-18 Independent Review Report

Page 19 Auditor’s Independence Declaration

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 2 -

Directors’ Report

Your Directors submit their report for the half-year ended 31 December 2010.

DIRECTORS

The names of the Company’s Directors in office during the half-year and until the date of this report are as below.

Directors were in office for this entire period unless otherwise stated.

Tony Johnson (Chairman – non executive)

Greg Boulton AM (Deputy Chairman – non executive)

Legh Winser (Managing Director)

Richard Nicholson (Non-executive Director)

Bruce Grubb (Non-executive Director)

Ray Smith (Non-executive Director)

CONSOLIDATED RESULTS

Financial overview 6 month

period to

Dec 2010

6 month

period to

Dec 2009 % change

Operating revenue $m 264.7 217.2 21.9

Operating profit before interest and tax $m 16.3 15.1 7.4

Operating profit after tax $m 8.1 9.2 (11.3)

Shareholders’ funds $m 210.5 163.1 29.1

Total assets $m 383.2 285.1 34.4

Earnings per share cents 10.9 13.1 (16.8)

Interim dividend per share cents 5.0 7.0 (28.6)

Net tangible assets per share cents 1.6 2.0 (20.0)

Return on Shareholders’ funds % 3.9 5.6 (30.4)

Gearing % 26.8 14.6 83.6

REVIEW AND RESULTS OF OPERATIONS

The consolidated net profit after tax of the economic entity for the half-year was $8.1 million, which is 11.3% lower than the

previous corresponding half-year.

Operating revenue for the first half was $264.7 million, which is 21.9% higher than the prior corresponding half year.

The increase in operating revenue is due to the recent acquisitions of Pacific Transport (January 2010) and Regal Transport (July

2010) and the strong performance of DTM. These acquisitions have performed in line with our expectation.

The lower result was foreshadowed in our trading update on 26 October 2010 where we outlined that our East Coast operations had

experienced weaker trading conditions in the September quarter. This was largely driven by lower steel volumes on the back of

reduced production, de-stocking and a change in the product and distribution mix.

We have been also negatively impacted by the closure of the Wesleyvale and Burnie paper mills in Tasmania.

The lower volumes of steel and paper products have impacted on our vehicle utilisation and our ability to double shift our

equipment.

Operating profit before interest, tax and depreciation was $29.0 million or 15.4% above the prior period.

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 3 -

Directors’ Report continued

The result also reflects a general softening of the economy with the majority of road and rail customer volumes lower than the

previous year levels. The higher Australian dollar has reduced the demand for locally manufactured goods.

We successfully completed a fully underwritten one for six non-renounceable entitlement offer that raised $26.4 million on 20

December 2010. The funds were used to repay debt. Our gearing at the half year is 26.8% (14.6% Dec 09), which is within our

target range.

A fully franked interim dividend of 5.0 cents per share (2009: 7.0 cents per share) has been declared by the Directors. The interim

dividend will be paid on 31 March 2011, with the date for determining entitlements being 17 March 2011. The Dividend

Reinvestment Plan (DRP) will apply to the interim dividend and the issue price for shares under the DRP will be based on the

weighted average trading price of K&S shares in the five trading days ending 17 March 2011, less a discount of 2.5%.

The outlook for the domestic economy continues to be uncertain. We expect that the second half of the current financial year will

remain challenging.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes in the state of affairs of the economic entity during the half-year under review.

EVENTS SUBSEQUENT TO BALANCE DATE

On 22 February 2011, the Directors of K&S Corporation Limited declared an interim dividend on ordinary shares in respect of the

2011 financial year. The total amount of the dividend is $4,303,181 which represents a fully franked dividend of 5.0 cents per share.

The dividend has not been provided for in the 31 December 2010 financial statements and is payable on 31 March 2011.

The Dividend Reinvestment Plan (DRP) will apply to the 31 March 2011 interim dividend and the issue price for shares under the

DRP will be based on the weighted average trading price of K&S shares in the five business days ending on 17 March 2011 (the

record date for the interim dividend), less a discount of 2.5%.

Other than the above matters, there has not arisen in the interval between the end of the financial period and the date of this report,

any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect

significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity

in future financial years.

AUDITOR INDEPENDENCE

The entity’s auditor, Ernst & Young has provided the economic entity with an Auditors’ Independence Declaration which is on

page 19 of this report.

Dated at Mount Gambier this 22nd day of February 2011.

Signed in accordance with a resolution of the Directors.

A F Johnson J L Winser

Chairman Managing Director

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 4 -

Statement of Comprehensive Income

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED

31 December 31 December

NOTE 2010 2009

$’000 $’000

Operating revenue 4(a) 264,725 217,174

Cost of goods sold (26,032) (24,884)

Gross profit 238,693 192,290

Other income 4(b) 2,769 2,421

Contractor expenses (82,628) (68,385)

Employee benefits expenses (74,620) (58,326)

Fleet expenses (45,026) (33,753)

Depreciation and amortisation expense 4(d) (12,788) (10,024)

Finance costs 4(c) (4,644) (2,542)

Other expenses (10,278) (9,091)

Share of profits/(losses) of associates 129 -

Profit before income tax 11,607 12,590

Income tax expense (3,494) (3,440)

Profit after income tax 8,113 9,150

Other comprehensive income

Foreign currency translation (706) 98

Other comprehensive income for the period, net of tax (706) 98

Total comprehensive income for the period 7,407 9,248

Earnings per share (cents per share)

? basic for profit for the period attributable to ordinary equity

holders of the parent 10.9 13.1

? diluted for profit for the period attributable to ordinary equity

holders of the parent 10.9 13.1

Dividends per share (cents per share) 6 5.0 7.0

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 5 -

Statement of Financial Position

AS AT 31 DECEMBER 2010

CONSOLIDATED

31 December 30 June

NOTE 2010 2010

$’000 $’000

ASSETS

Current assets

Cash and cash equivalents 5 9,161 12,042

Trade and other receivables 62,351 56,747

Inventories 2,900 2,696

Prepayments 6,423 4,809

Total current assets 80,835 76,294

Non-current assets

Receivables 1,908 2,093

Investments in associates 129 -

Property, plant & equipment 221,656 197,169

Intangibles 72,035 44,761

Deferred tax assets 6,606 5,776

Total non-current assets 302,334 249,799

TOTAL ASSETS 383,169 326,093

LIABILITIES

Current liabilities

Trade and other payables 45,491 44,596

Interest bearing loans and borrowings 15,591 16,462

Income tax payable 1,064 1,270

Provisions 12,989 11,190

Derivatives 934 1,123

Total current liabilities 76,069 74,641

Non-current liabilities

Other payables 4,620 4,340

Interest bearing loans and borrowings 70,540 47,889

Deferred tax liabilities 18,980 18,032

Provisions 2,498 2,122

Total Non-current liabilities 96,638 72,383

TOTAL LIABILITIES 172,707 147,024

NET ASSETS 210,462 179,069

EQUITY

Contributed equity 7 93,662 64,528

Reserves 24,389 25,095

Retained earnings 92,411 89,446

TOTAL EQUITY 210,462 179,069

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 6 -

Statement of Changes in Equity

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

Issued

capital

Retained

earnings

Asset

revaluation

reserves

Forex

translation

reserves

Total

equity

$’000 $’000 $’000 $’000 $’000

CONSOLIDATED

At 1 July 2010 64,528 89,446 26,270 (1,175) 179,069

Profit for period - 8,113 - - 8,113

Other comprehensive income - - - (706) (706)

Total comprehensive income for the half-year - 8,113 - (706) 7,407

Transactions with owners in their capacity as

owners

Issue of share capital 29,134 - - - 29,134

Dividends - (5,148) - - (5,148)

At 31 December 2010 93,662 92,411 26,270 (1,881) 210,462

At 1 July 2009 57,425 79,174 20,956 (1,326) 156,229

Profit for period - 9,150 - - 9,150

Other comprehensive income - - - 98 98

Total comprehensive income for the half-year - 9,150 - 98 9,248

Transactions with owners in their capacity as

owners

Issue of share capital 1,103 - - - 1,103

Dividends - (3,510) - - (3,510)

At 31 December 2009 58,528 84,814 20,956 (1,228) 163,070

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 7 -

Statement of Cash Flows

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED

31 December 31 December

NOTE 2010 2009

$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 296,065 242,484

Cash payments to suppliers and employees (261,292) (204,922)

Interest received 42 123

Borrowing costs paid (4,644) (2,542)

Income taxes paid (4,134) (3,104)

Net goods and services tax paid (7,536) (7,741)

Net cash provided by operating activities 18,501 24,298

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of non-current assets 1,770 1,774

Acquisition of subsidiaries (39,185) -

Payments for property plant & equipment (10,497) (2,412)

Net cash (used) in investing activities (47,912) (638)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from share issue 25,870 351

Proceeds from borrowings 55,000 -

Repayments of borrowings (40,000) (9,000)

Lease and hire purchase liability repayments (9,753) (9,403)

Dividends paid (4,544) (3,200)

Net cash (used) in financing activities 26,573 (21,252)

Net increase/(decrease) in cash held (2,838) 2,408

Cash and cash equivalents the beginning of the financial period 12,042 14,717

Effects of exchange rate variances on cash (43) (2)

Cash and cash equivalents at the end of the financial period 5 9,161 17,123

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 8 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

1 CORPORATE INFORMATION

The financial report of K&S Corporation Limited for the half-year ended 31 December 2010 was authorised for issue in accordance with a

resolution of Directors on 22 February 2011.

K&S Corporation Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian

Securities Exchange.

The nature of the operations and principal activities of the Group are described in Note 3.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The general purpose financial report for the half-year ended 31 December 2010 has been prepared in accordance with AASB 134 Interim

Financial Reporting and Corporations Act 2001.

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore

cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing

activities of the consolidated entity as the full financial report.

The half-year report should be read in conjunction with the Annual Report of K&S Corporation Limited as at 30 June 2010. It is also

recommended that the half-year financial report be considered together with any public announcements made by K&S Corporation Limited

and its controlled entities during the half-year ended 31 December 2010 in accordance with the continuous disclosure obligations arising

under the Corporations Act 2001.

Apart from the changes in accounting policies noted below, the accounting policies and methods of computation are the same as those

adopted in the most recent financial report.

Changes in accounting policies

The following amending Standards have been adopted from 1 July 2010. Adoption of these Standards did not have any effect on the

financial position or performance of the Group:

? AASB 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of noncurrent

assets and disposal groups classified as held for sale or discontinued operations are only those set out in AASB 5. The

disclosure requirements of other Accounting Standards, only applies if specifically for such non-current assets or discontinued

operations.

? AASB 107 Statement of Cash Flows: States that only expenditure that results in recognising an asset can be classified as a cash

flow from investing activities. This amendment will impact amongst others, the presentation in the statement of cash flows of the

contingent consideration on the business combination completed in 2010 upon cash settlement.

? AASB 136 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a

business combination, is the operating segment defined in AASB 8 before aggregation for reporting purposes. The amendment

has no impact on the Group as the annual impairment test is performed before aggregation.

? AASB Interpretation 17 Distribution of Non-cash Assets to Owners: This interpretation provides guidance on accounting for

arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The

interpretation has no effect on either, the financial position or the performance of the Group.

The Group has not elected to early adopt any other new Standards or Interpretations that are issued but not yet effective.

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 9 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

3 OPERATING SEGMENTS

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team

in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on the nature of the services provided, the identity of the service line manager

and the country of origin. Discrete financial information about each of these operating businesses is reported to the executive management

team on at least a weekly basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the services provided and/or the

products sold, as these are the sources of the Group’s major risks and have the most effect on the rates of return.

The Group comprises the following main business segments, based on the consolidated entity’s management reporting system:-

? K&S Aust. – The provision of interstate and local logistical services to customers under the brand K&S in Australia.

? K&S Fuels - The distribution of fuel to fishing, farming and retail customers within the South East of South Australia.

? DTM - The provision of local logistical services to customers under the brand DTM.

? Regal - The provision of intrastate logistical services to customers under the brand Regal Transport.

? K&S NZ – The provision of logistical services to customers under the brand K&S in New Zealand.

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments are the same as those contained in note 2 to the accounts and in the prior

period except as detailed below:

Inter-entity sales

Inter-entity sales are recognised based on an internally set transfer price. The price is set periodically and aims to reflect what the business

operations could achieve if they sold their output and services to external parties at arm’s length.

Corporate charges

Corporate charges are allocated to each operating segment on a proportionate basis linked to segment revenue so as to determine a

segmental result.

Segment loans payable and loans receivable

Segment loans are initially recognised at the consideration received excluding transaction costs. Intersegment loans receivable and loans

payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates.

It is the Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated assets or liabilities

are also not allocated to segments. This is to avoid asymmetrical allocations within segments which management believe would be

inconsistent.

The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core

operations of any segment:

? Finance costs.

? Income tax expense.

? Fair value gains/losses on derivative classified as held for trading.

The following table presents revenue and profit information for reportable segments for the half-years ended 31 December 2010 and 31

December 2009.

K&S Aus Regal K&S Fuels DTM K&S NZ Total

$’000 $’000 $’000 $’000 $’000 $’000

Half-year ended 31 December 2010

Revenue

Sales to external customers 159,354 38,280 28,039 27,620 11,390 264,683

Inter-segment sales 299 207 18,860 269 - 19,635

Total segment revenue 159,653 38,487 46,899 27,889 11,390 284,318

Inter-segment elimination (19,635)

Interest revenue 42

Total revenue per Statement of

Comprehensive Income

264,725

Result

Segment net operating profit after tax 6,474 2,231 447 1,013 194 10,359

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 10 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

3 OPERATING SEGMENTS (continued)

K&S Aus Regal K&S Fuels DTM K&S NZ Total

$’000 $’000 $’000 $’000 $’000 $’000

Reconciliation of segment net profit

to net profit before tax

Income tax expense at 30% (2009:

30%)

4,440

Fair value gain on held for trading

derivatives

176

Net interest expense (4,601)

Net gain on disposal of property, plant

and equipment

1,233

Total net profit before tax per

Statement of Comprehensive Income

11,607

Segment assets

Segment operating assets 327,720 21,512 16,005 9,420 19,281 393,938

Inter-segment elimination (17,375)

Deferred tax assets 6,606

Total assets per the Statement of

Financial Position

383,169

Half-year ended 31 December 2009

Revenue

Sales to external customers 156,021 - 27,310 22,846 10,874 217,051

Inter-segment sales 99 - 16,903 284 - 17,286

Total segment revenue 156,120 - 44,213 23,130 10,874 234,337

Inter-segment eliminations (17,286)

Interest revenue 123

Total revenue per Statement of

Comprehensive Income

217,174

Result

Segment net operating profit after tax 7,915 - 495 694 191 9,295

Reconciliation of segment net profit

to net profit before tax

Income tax expense at 30% (2008:

30%)

3,978

Fair value gain on held for trading

derivatives

576

Net interest expense (2,419)

Net gain on disposal of property, plant

and equipment

1,160

Total net profit before tax per

Statement of Comprehensive Income

12,590

Segment assets

Segment operating assets 240,260 - 15,210 15,541 22,582 293,593

Inter-segment eliminations (14,293)

Deferred tax assets 5,801

Total assets per the Statement of

Financial Position

285,101

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 11 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

4 REVENUE, INCOME AND EXPENSES

CONSOLIDATED

2010 2009

$’000 $’000

Revenue

(a) Operating revenue

- Rendering of services 236,644 189,741

- Sale of goods 28,039 27,310

- Finance revenue 42 123

264,725 217,174

(b) Other income

- Net gains on disposal of property, plant and equipment 1,233 1,160

- Net gain on derivatives classified as held for trading 176 576

- Other 1,360 685

2,769 2,421

Expenses

(c) Finance costs

- Bank loans and overdrafts 2,733 946

- Finance charges payable under finance leases and hire purchase contracts 1,911 1,596

Total finance costs 4,644 2,542

(d) Depreciation and amortisation expense

Depreciation

- Buildings 915 850

- Motor vehicles 10,322 8,023

- Plant and equipment 1,349 1,151

Amortisation

- IT development costs 202 -

Total depreciation expense 12,788 10,024

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 12 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

5 CASH AND CASH EQUIVALENTS

CONSOLIDATED

31 Dec 2010 30 June 2010

$’000 $’000

For the purpose of the half-year statement of cash flows, cash and cash equivalents are

comprised of the following:

Cash 46 42

Cash deposits with banks 9,115 12,000

9,161 12,042

Cash at bank earns interest at floating rates based on daily bank deposit rates.

6 DIVIDENDS PAID AND PROPOSED

CONSOLIDATED

2010 2009

$’000 $’000

Declared and paid during the period:

Dividends on ordinary shares

Final franked dividend for the financial year ended 30 June 2010: 7.0 cents

(2009: 5.0 cents)

5,148 3,510

Proposed (not recognised as a liability as at 31 December):

Dividends on ordinary shares

Interim franked dividend for the half year ending 31 December 2010:

5.0 cents (2009: 7.0 cents)

4,303 4,957

9,451 8,467

Dividend Reinvestment Plan

The consolidated entity has a Dividend Reinvestment Plan under which holders of ordinary shares may elect to acquire additional shares

in lieu of cash dividends. Shares are issued at a discount of 2.5% (or as otherwise determined by the Board of Directors from time to

time) of their market value which is determined by referenced to the weighted average market price of K&S shares during the five trading

days up to and including the relevant dividend record date.

The last date for receipt of election notices for the Dividend Reinvestment Plan is 5pm on 17 March 2011.

K&S CORPORATION LIMITED

ABN 67 007 561 837

- 13 -

Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

7 CONTRIBUTED EQUITY

CONSOLIDATED

31 Dec 2010 30 June 2010

$’000 $’000

Issued and paid-up share capital 93,662 64,528

(i) Ordinary shares

Fully paid ordinary shares carry one vote per share, either in person or by proxy, at a meeting of the Company and carry the right to receive

dividends as declared.

Thousands $’000

Movements in ordinary shares on issue

At 1 January 2010 70,309 58,528

Issued to acquire Pacific Transport

- 500,000 ordinary shares at $2.80 per share 500 1,400

Issued through Dividend Reinvestment Plan

- 165,955 ordinary shares at $2.75 per share 166 457

Issued through Share Purchase Plan

- 1,618,199 ordinary shares at $2.56 per share 1,618 4,143

At 30 June 2010 72,593 64,528

Issued to acquire Regal Transport

- 950,000 ordinary shares at $2.80 per share 950 2,660

Issued through Dividend Reinvestment Plan

- 225,552 ordinary shares at $2.68 per share 225 604

Issued through Rights Issue

- 12,295,560 ordinary shares at $2.15 per share, net transaction costs 12,296 25,870

At 31 December 2010 86,064 93,662

8 COMMITMENTS AND CONTINGENCIES

The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below:

Legal claim

There are a number of minor legal actions pending against companies within the consolidated entity. Liability has not been admitted and

the claims will be defended. The Directors do not believe these actions will result in any significant cost to the consolidated entity.

9 EVENTS SUBSEQUENT TO BALANCE DATE

On 22 February 2011, the Directors of K&S Corporation Limited declared an interim dividend on ordinary shares in respect of the 2011

financial year. The total amount of the dividend is $4,303,181, which represents a fully franked dividend of 5.0 cents per share. The

dividend has not been provided for in the 31 December 2010 financial statements and is payable on 31 March 2011.

The Dividend Reinvestment Plan (DRP) will apply to the 31 March 2011 interim dividend and the issue price for shares under the DRP will

be based on the weighted average trading price of K&S shares in the five business days ending on 17 March 2011 (the record date for the

interim dividend), less a discount of 2.5%.

Other than the above matters, there has not arisen in the interval between the end of the financial year and the date of this report any item,

transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the

operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

K&S CORPORATION LIMITED

ABN 67 007 561 837

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Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

10 PROPERTY, PLANT AND EQUIPMENT

Acquisition and disposal

During the half-year ended 31 December 2010, the Group acquired assets, with a cost of $38,333,000 (2009: $5,469,000).

Assets with a net book value of $537,000 were disposed of by the Group during the half-year ended 31 December 2010 (2009: $614,000),

resulting in a gain on disposal of $1,233,000 (2009: $1,160,000).

11 INTEREST-BEARING LOANS AND BORROWINGS

During the half-year, the economic entity acquired property, plant and equipment with an aggregate fair value of $10,079,000 by means of

finance lease or hire purchase arrangements (2009: $3,057,000).

Stand by letters of credit

During the half-year ended 31 December 2010, the Group had the following amended guarantees:

? Bank guarantee of $11,216,000 (2009: $9,484,000) provided by the Westpac Banking Corporation to Comcare for the due

discharge of its liabilities to pay compensation and other amounts under the Safety Rehabilitation and Compensation Act 1988.

? Bank guarantee of $798,000 (2009: $1,150,000) provided by the Westpac Banking Corporation to Victorian Work Cover.

12 BUSINESS COMBINATIONS

On 8 July 2010, K&S Corporation Limited acquired the Perth based Regal Transport Group ("Regal"). The Regal Transport Group was

formed in March 2009 with the merger of N&L Transport and Strategic Transport Services Pty Ltd. At the time of acquisition, Regal

generated annual revenues of $50 million and employed over 120 people. The Regal acquisition will extend the footprint achieved by the

Pacific Transport acquisition to the oil & gas/resources sectors of Western Australia.

The consideration transferred was $41,849,000 and comprised an issue of equity instruments and cash. The Group issued 950,000 ordinary

shares with a fair value of $2.80 each. The provisional fair value of identifiable net assets is $14,100,000.

Key factors contributing to the $27,749,000 of goodwill are the synergies existing within the acquired business and synergies expected to be

achieved as a result of combining Regal Transport with Pacific Transport and the rest of the Group. The Regal acquisition will extend the

footprint achieved by the Pacific Transport acquisition to the oil & gas/resources sectors of Western Australia.

The provisional fair values of identifiable assets and liabilities is as follows:

Fair value at

acquisition date Carrying value

$’000 $’000

Cash and cash equivalents 20 20

Trade and other receivables 7,695 7,695

Plant and equipment 17,757 15,608

Prepayments 206 67

Deferred tax asset 269 -

25,947 23,390

Cash and cash equivalents (220) (220)

Trade and other payables (3,137) (3,137)

Interest bearing loans and borrowings (6,828) (6.828)

Income tax payable (80) (80)

Provision for employee entitlements (896) (747)

Deferred tax liability (690) -

11,851 11,012

Provisional fair value of identifiable net assets 14,096

Goodwill arising on acquisition 27,749

41,845

K&S CORPORATION LIMITED

ABN 67 007 561 837

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Notes to the Financial Statements

FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

12 BUSINESS COMBINATIONS (continued)

Fair value at

acquisition date

$’000

Acquisition-date fair-value of consideration transferred

Shares issued 2,660

Cash paid 39,185

Consideration transferred 41,845

Direct costs relating to the acquisition 150

Cash outflow on acquisition is as follows:

Net cash acquired with the subsidiary (200)

Cash paid (39,189)

Net consolidated cash outflow (39,389)

The consolidated Statement of Comprehensive income includes sales revenue and net profit for the period ending 31 December 2010 of

$25,500,000 and $2,001,000 respectively, as a result of the acquisition of Regal Transport.

K&S CORPORATION LIMITED

ABN 67 007 561 837

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Directors’ Declaration

In accordance with a resolution of the Directors of K&S Corporation Limited, I state that:

In the opinion of the Directors:

(a) The financial statements and notes of the consolidated entity, are in accordance with the Corporations Act 2001,

including;

(i) Giving a true and fair view of the financial position as at 31 December 2010 and the performance for the

half-year ended on that date of the consolidated entity.

(ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations

Regulations 2001

(b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due

and payable.

On behalf of the Board

A F Johnson

Chairman

Mount Gambier, 22 February 2011

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