CLOVER CORPORATION
LIMITED
ABN 85 003 622 866
Annual Report
For the Year Ended
31 July 2019
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
Non-Executive Director and Chairman
Non-Executive Director
Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
CORPORATE DIRECTORY
Directors
Mr Rupert A Harrington
Mr Graeme A Billings
Mr Peter J Davey
Mr Ian D Glasson
Ms Cheryl L Hayman
Dr Merilyn J Sleigh
Secretary
Mr Paul A Sherman
Registered Office
39 Pinnacle Road
Altona North VIC 3025
Telephone:
Facsimile:
(03) 8347 5000
(03) 8347 5055
Auditors
PKF Melbourne Audit & Assurance Pty Ltd
Level 12
440 Collins Street
Melbourne VIC 3000
Share Registry
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone:
1300 850 505
Australian Securities Exchange Code
Ordinary Shares
CLV
Website
http://www.clovercorp.com.au
2
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
Table of Contents
Chairman’s Report
About Clover
Directors’ Report
Corporate Governance Statement
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Auditors’ Independence Declaration
ASX Additional Information
4
7
8
23
31
32
33
34
35
65
66
70
71
Vision
To optimise the health and development of adults, infants and children.
Mission Statement
To deliver science-based bioactives which provide health benefits to adults, infants, and children.
3
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CHAIRMAN’S REPORT
Clover Corporation Limited (Clover) reported a net profit after tax (NPAT) for the 12 months ended 31
July 2019 of $10.1m (2018: profit of $7.6m).
Sales revenue in FY2019 was $76.7m (2018: $63.0m) an increase of 21.8%.
Sales Revenue
EBIT
Profit before tax
Profit after tax
2019
Statutory
$000’s
76,682
13,585
13,964
10,101
2018
Statutory
$000’s
62,961
10,220
10,616
7,588
Sales revenue growth in FY2019 was recorded across all territories. Clover has benefited from sales
to new customers, new markets and from new products, whilst maintaining and growing its core
customers. Net Profit After Tax for the year ended 31 July 2019 was $10.1m an increase of 33.1%
on the prior year (2018: $7.6m).
Commercial
Clover has increased its business development activities with staff now located in Europe, China,
New Zealand and dedicated domestic staff focusing on S.E. Asia and Australia. The additional staff
working closely with technical R&D assistance and strategically located distributors are delivering a
targeted face to face customer development program which facilitates the difficult customer adoption
process. The company has benefited from new products developed to address customer
requirements, legislative change requiring the use of DHA in infant formula in an increasing number
of countries, and a market trend toward the fortification of foods, drinks and nutraceuticals with
Omega 3 fatty acids. Clover’s unique range of microencapsulated Omega 3 oils allows customers to
incorporate DHA into their products with no negative impacts on smell and taste. The range of
products available from the company is suitable for blending, cooking and processing in milk-based
or vegan applications.
China
Chinese regulators have introduced DRAFT legislation for what constitutes a can of infant formula,
requiring all infant formula to incorporate a minimum of 15mg/100Kcal of DHA and equivalent dosing
of ARA. If introduced, all global manufacturers would need to meet the minimum Chinese
requirement, as product manufactured in one country may be exported to China. Clover estimates
the average DHA level of infant formula sold in China is 7mg/100Kcal of DHA therefore the
legislation could effectively double the use of DHA. The proposed legislation has been opened to
market feedback and is currently under consideration.
China has two channels to market. The first is known as the CBEC (Cross Border Electronic
Commerce) channel where product is often positioned in bonded warehouses and then sold via
internet shop fronts to Chinese consumers. This channel is extensively used by importers of infant
formula as it reduces costs associated with the domestic retail channel and licensing requirements.
During 2019 the Chinese government has expanded this channel by opening an additional 22
bonded warehouses making the CBEC market more accessible to more consumers.
4
The second channel is the more traditional retail shop front. China has a broad distribution network
for infant formula facilitated via ‘Mum & Baby stores’, supermarkets and speciality outlets. To access
this channel an infant formula brand requires two licences; the first a CNCA licence which provides
accreditation for a manufacturer to be capable of making an infant formula product and the second a
SAMR licence which is effectively a licence to use a brand and to sell the branded product through
the retail channel. The process of achieving a licence has proven to be quite difficult, with only three
western brands achieving a SAMR licence during 2019.
Europe
Clover is working with customers across the European markets to prepare them for the introduction
of the new DHA standard in February 2020 where all infant formula for the EU market must include
20mg/100 Kcal of DHA. Europe has delivered solid growth across the year with new customers
contributing to increased revenue as new products are brought on line. The addition of a new
warehouse facility in Amsterdam has assisted Clover with servicing customers across the EU. The
company successfully displayed its products and technology capabilities at the 2019 Vitafoods trade
show in Geneva resulting in both immediate business and an opportunity pipeline for the future.
Australia & New Zealand
The Australian and New Zealand market has maintained its revenue throughout the year with some
more niche applications coming on board across the functional foods market. Clover has made a
significant investment in the New Zealand market through its partnership business Melody Dairies
which is in the process of building a spray drying facility. When complete the factory will add the
capacity needed to service the company’s current and future growth. The factory is on track to be
available for qualification in Q2 2021.
Americas
The USA has delivered solid growth across 2019, with many opportunities coming in the form of
DHA supplementation of drinks, powders, tablets and gummies. Whilst it is a difficult market to
break into each opportunity provides significant volumes to service the local market. The demands
of the American markets are driving new product innovation. Clover has released a range of vegan
and concentrate products that deliver improved outcomes for customer needs.
Research & Development
Clover has added resources to its R&D business to contribute to a growing demand for tailored
solutions. The business has several new products in pilot trials before being made commercially
available across 2020. Clover’s new products shall open new market segments and deliver solutions
for problems the market has not been able to solve previously. Clover continues to develop new
products which place it as the market leader in microencapsulation technology. The company’s R&D
team plays an integral role in the business development process as customers look to the company
to assist in process technology and applications support in new product development.
Expenditure
Clover has managed operating expenses in 2019 to $10.6m (2018 $8.3m) as the company has
made additional investment in human resources, adding staff across the Sales and Research &
Development areas, to support current and future growth.
Inventories at year end were valued at $27.7m (2018: $19.8m), with the inventory level reflecting a
strong raw material and work in progress holding. The increased inventory positions the company to
meet its continued growth aspirations and to fill additional warehouse facilities in Europe and New
Zealand. The overall cash position of the business at year end was $8.3m (2018: $7.9m). Clover’s
debt position of $13.5m reflects the additional loan facility established to invest in the Melody Dairies
partnership to build the spray drying facility in New Zealand and the 2018 purchase of its Australian
manufacturing site. The business continues to review investment opportunities for expansion into
aligned markets and products.
5
Dividend
Based on the performance of Clover in FY19 the Directors have decided to declare a fully franked
final dividend for FY19 of 1.75 cent per share. The record date for this dividend will be 30 October
2019, with payment due on 20 November 2019.
Mr Rupert Harrington
Chairman
Date: 20 September 2019
6
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
ABOUT CLOVER
Company Focus: Clover seeks to improve human nutrition and quality of life by developing value-
added nutrients for use in foods or as nutritional supplements. In doing so, Clover provides a
competitive advantage for its customers, value to shareholders and a working environment in which
employees can fully utilise and develop their respective skills.
Company History: Clover was formed in 1988 as a family-owned Australian company providing lipid-
based ingredients for the food industry. Clover was listed on the ASX in November 1999.
In November 2002, Clover entered into a joint venture with the Queensland-based Food Spectrum
Group of companies. The incorporated joint venture, Nu-Mega Ingredients Pty Limited (Nu-Mega),
was 70% owned by Clover. The joint venture ceased in November 2007 when Clover acquired the
remaining 30% of Nu-Mega to make it a wholly owned subsidiary. Nu-Mega has significantly expanded
its markets, introducing new products with a focus on encapsulation technology and the delivery of
bioactive nutritional ingredients.
Company Operations: Clover operates from two sites:
The Company’s registered office and manufacturing plant for tuna oils and related products,
Head Office, Customer Service, Quality Assurance, and Sales and Marketing departments
are located in Altona, Victoria.
Innovation, Research & Development, Product Development, Technical Support
departments are located in Brisbane, Queensland.
Company Technology and Products. The major focus of the Company is on the delivery of
bioactive ingredients using proprietary encapsulation technology to produce ready-to-blend products
containing tuna oil and/or other nutritional lipids. The health benefits of omega-3 fatty acids in the diet
have been well documented and this has assisted in developing the expanding global market for
products containing these nutritionally important dietary components. One material that Clover uses
is tuna oil, which is high in DHA (docosahexaenoic acid), an essential fatty acid, which is recognized
for its importance in brain, nerve and eye tissue development in babies and infants. Clover, through
its subsidiary Nu-Mega, supplies refined Omega 3 oils and a range of other encapsulated ingredients
for use in infant formula, nutraceuticals, pharmaceuticals, and sports nutrition markets.
In addition to its own internally developed intellectual property, Clover has licensed patented
technology from the Commonwealth Scientific Industrial Research Organisation (CSIRO) for the
encapsulation of marine and algal oils to protect them from oxidation and degradation. Nu-Mega’s
Driphorm® range of microencapsulated powders enables the addition of Hi-DHA® tuna and/or algal
oils to a broad spectrum of products in a convenient and stable dry powder form. These ingredients
are marketed globally.
Clover continues to seek other nutritional and medical applications for its products, as well as
developing new types of products, often in conjunction with customers.
7
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity consisting of Clover Corporation Limited
(“the Company”) and the entities it controlled (“the consolidated entity”) at the end of, or during, the
year ended 31 July 2019.
Directors
The following persons were directors of Clover Corporation Limited during the financial year and up
to the date of this report:
Name and qualifications
Experience and special responsibilities
Mr Rupert A Harrington, BTech, MSc,
CDipAF, MAICD.
Non-Executive Director since 1 July 2015
Appointed Chairman 21 September 2017
Rupert Harrington is an experienced Director with a wealth
of experience in business strategy and M & A.
Mr. Harrington’s earlier career was in operational
management in the UK and Australia. His career since
1987 has been in Private Equity where he has an excellent
track record of delivering results for investors in sectors
including: health, technology, industrial services and
manufacturing. He is currently Chairman of
Advent Partners, a pre-eminent mid-market Australian PE
firm.
Mr. Harrington is Non-Executive Director of Pro Pac
Packaging (ASX: PPG) and Integral Diagnostics (ASX:
IDX). At the end of 2017 he resigned as a Non-Executive
Director of Bradken Limited following its successful
acquisition by Hitachi.
Mr Graeme A Billings, BCom, FCA,
MAICD
Non-Executive Director since 14 May 2013
Chair of the Audit Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Mr Billings has been a Chartered Accountant since 1980. Mr
Billings was a partner at Coopers and Lybrand and then
PricewaterhouseCoopers (PwC) for 24 years.
Mr Billings was head of PwC’s Melbourne Assurance
practice for a number of years as well as Global Leader of
PwC’s Industrial Products and Manufacturing industry group.
Mr Billings brings a range of financial, corporate governance,
internal control, commercial and corporate transactional
skills to the Company.
Other current listed company directorships:
GUD Holdings Limited, appointed 2011
Korvest Limited, appointed 2013
Korvest Limited, Chairman appointed 2014
Azure Healthcare, Chairman appointed 2015
DomaCom Ltd, appointed 2014
8
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Name and qualifications
Experience and special responsibilities
Mr Peter J Davey, MBA, GradDip Bus.,
Dip.Art (Design), GAICD.
Managing Director since 11 November
2014
Mr Ian D Glasson BEng (Hons) MIE
Aust, GAICD
Non-Executive Director since 1 February
2017
Member of the Audit Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Mr Davey has a track record of building businesses across
a diverse range of industry sectors. He has held senior
management positions within a number of manufacturing
and distribution companies operating in competitive and
diverse markets. Mr Davey has particular strengths in sales
and marketing, and development and implementation of
strategies for growth.
Mr Davey was formerly Executive Manager AgriProducts
and a director of Viterra Australia Limited, responsible for the
AgriProducts division that traded in agricultural inputs,
fertilizer, seed and wool. In earlier roles, Mr Davey headed
the Sales and Marketing divisions of FMP Products and Hi
Fert Pty Ltd.
During his career, Mr Davey has had a particular focus on
marketing based businesses operating in the Asia and
Oceania regions.
Mr Glasson is former CEO of PGG Wrightson based in
Christchurch, New Zealand. He was formerly CEO of Gold
Coin Group / Zuellig Agriculture which managed a portfolio
of animal feed operations and farming ventures throughout
South East Asia. Prior to that he was CEO for seven years
of Sucrogen (formerly the sugar business of listed entity
CSR and now owned by Wilmar) which generated revenues
of nearly $2 billion and had extensive contacts across the
local and international food and beverage sector and retail
market.
He has also had extensive agribusiness experience with
Goodman Fielder and Gresham Rabo, as well as spending
the first sixteen years of his career in the oil and gas sector
with Esso.
Other current company directorships:
Ricegrowers Ltd, appointed 2016
9
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Name and qualifications
Experience and special responsibilities
Ms Cheryl L Hayman, B.Com, FAICD
Non-Executive Director since 9 July
2008
Member of the Audit Committee
Member of the Remuneration Committee
Chair of the Nomination Committee
Ms. Hayman has extensive consumer goods, packaged
food and functional food industry experience including
being former Marketing Director for the Baking Division of
George Weston Foods (Australia/NZ) where she was
largely responsible for leading the successful launch of the
Hi-DHA Tip Top Up bread range.
Dr Merilyn J Sleigh, B.Sc, PhD,
DipCorp Man, FTSE, FAICD.
Non-Executive Director since 9 July
2008
Member of the Audit Committee
Chair of the Remuneration Committee
Member of the Nomination Committee
Ms. Hayman contributes significant strategic and marketing
expertise derived from a corporate career which spanned
local and global organisations. Her skills
include
developing marketing and business strategy across
diverse industry segments, driving innovation, stimulating
new product development, and business planning and
branding across social media platforms.
Other current directorships:
Non-Executive Director, HGL Ltd (ASX: HNG) appointed
2016
Non–Executive Director, AIFST appointed 2016
Non-Executive Director, Peer Support Australia appointed
2007.
Non-Executive Director, Chartered Accountants Australia
& New Zealand appointed 2018
Dr Sleigh was trained as a Biochemist and was formerly
CEO & Managing Director of EvoGenix Limited, an ASX-
listed biotechnology company; Dean, Faculty of Life
Sciences, University of NSW; Director, Research &
Development at Peptech Limited and Scientist & Senior
Manager, CSIRO.
She was until recently (retired June 2018) a director of
Relationships Australia (NSW) and the Chair of its social
enterprise RASE Pty Ltd, where she remains a director.
She is also a member of the Council of the University of
Technology Sydney.
Dr Sleigh contributes extensive experience in strategic
management of ASX-listed SMEs both as a director, and
as a CEO. She also provides scientific research and
development expertise relevant to Clover’s Innovations
program and commercialisation of its products.
Former listed company directorships in the last three years:
Tyrian Diagnostics Limited, appointed 2008, resigned
2016.
Company Secretary
Mr Paul Sherman, B.Bus, CA, MBA
Appointed 25 November 2016
Mr Sherman is a Chartered Accountant with over 25 years’
experience in executive finance roles across a broad range
of industries.
10
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Principal Activities
The principal activities of the consolidated entity during the course of the financial year were the
refining and sale of natural oils, the production of encapsulated powders and the research and product
development of functional food and infant nutrition ingredients. There were no significant changes in
the nature of the principal activities of the consolidated entity during the financial year.
Operating Results
The results for this report are for the financial year ended 31 July 2019, the comparative period
being the financial year ended 31 July 2018. Total revenue from sale of goods increased 21.8% to
$76,682,000. Net profit after tax is $10,101,000 (2018: profit of $7,588,000).
Review of Operations
A full review of operations is included in the Chairman’s Report appearing on pages 4 to 6 of this
Annual Report.
Employees
The consolidated entity had 42 employees as at 31 July 2019 (2018: 39 employees).
Events Subsequent to Reporting Date
Subsequent to the Reporting Date, 1,128,408 shares were issued by the consolidated entity to the
Clover Corporation Ltd Employee Incentive Plans Trust under the terms of the Long Term Incentive
(LTI) plan rules.
Apart from the above, no matter or circumstance has arisen since 31 July 2019 that has significantly
affected, or may significantly affect the consolidated entity’s state of affairs in future financial years.
Significant changes in the State of the Affairs
Other than as stated above, and in the accompanying Financial Report, there were no significant
changes in the state of the affairs of the consolidated entity during the financial year.
Likely Developments
The consolidated entity will continue to pursue its policy of increasing the profitability and market share
of its operating businesses during the next financial year.
Dividends
A fully franked final dividend of 1.25 cent per share for the 12 months ended 31 July 2018 was paid
on 20 November 2018. The total final 2018 dividend paid was $2,891,000.
The Directors have declared a fully franked final dividend of 1.75 cent per share ($2,890,680) in
respect of the year ended 31 July 2019. The record date for this dividend will be 30 October 2019 with
payment due on 20 November 2019. An interim dividend of 0.625 cent per share was paid for FY2019.
The total dividend declared in respect to FY2019 is 2.375 cent per share, an increase of 0.625 cent
per share compared with the total dividend declared for FY2018.
11
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Environmental Regulations
The consolidated entity’s operations are subject to environmental regulations under the laws of the
Commonwealth and State. The consolidated entity complies with all applicable environmental
regulations.
Directors’ Meetings
The number of directors’ meetings (including meetings of sub-committees of directors) and number
of meetings attended by each of the directors of the Company during the financial year are:
Directors Meetings
Nomination
Committee
Meetings
Audit Committee
Meetings
Remuneration
Committee Meetings
Director
Number
Eligible
to
Attend
Number
Attended
Number
Attended
Number
Eligible
to
Attend
Number
Eligible
to
Attend
Number
Attended
Number
Eligible
to
Attend
Number
Attended
R A Harrington
G A Billings
P J Davey
I D Glasson
C L Hayman
Dr M J Sleigh
15
15
16
14
14
14
14
15
15
13
14
12
Insurance of Directors and Officers
1
1
1
1
1
1
1
1
4
4
4
4
4
4
4
4
3
3
3
3
3
3
3
3
During the financial year, the Company paid a premium in respect of a contract insuring its directors
and officers against all liabilities to another person (other than the Company or a related body
corporate) that may arise from their position, except where the liability arises out of conduct involving
lack of good faith. The contract covers any past, present or future director, secretary, executive officer
or employee of the Company and its controlled entities. Further details have not been disclosed due
to confidentiality provisions of the contract of insurance.
Rounding Off of Amounts
The Company is of a kind referred to in ASIC Corporations Instrument (Rounding in Financial/
Directors’ Reports) 2016/191, and accordingly amounts in the Financial Report and the Directors’
Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Proceedings on behalf of the Company
No person has applied for leave of the Court to bring proceedings on behalf of the Company or to
intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the financial year.
Unissued shares or interests under option
As of the date of this report there are 911,536 performance rights offers whose conditions have
been met, entitling recipients to one share per right, which vest in 2019, 2020 or 2021, and an
additional 405,740 performance rights available, subject to meeting relevant conditions.
12
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report
The Remuneration Report outlines the director and executive remuneration arrangements of the
Company for the 2019 financial year in accordance with the requirements of the Corporations Act
2001 and its Regulations. It has been audited in accordance with section 300 of the Corporations Act
2001 (as amended).
(i) Key Management Personnel
Key Management Personnel (KMP) in this report are those individuals having responsibility for
planning, directing and controlling the major activities of the Company during the financial year. They
include Non-Executive Directors, Executive Directors, and Executive KMP. The Directors and Chief
Executive Officer determined that those persons having authority and responsibility for planning,
directing and controlling activities are as listed below.
Name
Directors
R A Harrington
G A Billings
P J Davey
I D Glasson
C L Hayman
Dr M J Sleigh
Executive KMP
P J Davey
P A Sherman
(ii) Remuneration Policy
Position
Non-Executive Chairman
Non-Executive Director
Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer and Managing Director
Chief Financial Officer and Company Secretary
The Company operates from two locations in Australia and markets its products internationally. All
Executive KMP are based in Australia.
Through an effective remuneration framework, the Company aims to:
Provide fair and equitable rewards;
Align rewards to business outcomes that are linked to creation of shareholder value;
Stimulate a high performance culture;
Encourage the teamwork required to achieve business and financial objectives;
Attract, retain and motivate high calibre employees; and
Ensure that remuneration is competitive in relation to peer companies in Australia.
13
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
(iii) Remuneration Framework Responsibilities
The Board has established a Remuneration Committee to assist it in establishing a suitable
remuneration framework for the Company. Responsibilities of the Remuneration Committee are to
review and make recommendations to the Board on the following issues:
The structure of the total remuneration package (TRP) including base salary, other benefits,
Short Term Incentive (STI) and share-based long term incentive for the CEO;
The mechanism to be used to review and benchmark the competitiveness of this TRP;
The Key Performance Indicators (KPIs) to be set for the CEO;
Changes in the amounts of different components of the TRP following annual performance
review of the CEO;
Decision on whether the Long Term Incentive (LTI) Plan will be offered for any year; the
number of performance rights to be awarded to the CEO and specified Executives under this
plan when offered; and setting of associated performance indicators for future assessment;
Determination of the number of performance rights vesting at the end of each assessment
period of the LTI Plan, based on financial performance and other strategic indicators
previously established; and
The remuneration and any other benefits of the Non-Executive Directors.
The Remuneration Committee consists of four independent Non-Executive directors, Dr Merilyn
Sleigh (Chair), Cheryl Hayman, Ian Glasson and Graeme Billings. The Company Secretary may act
as secretary of the Remuneration Committee. The Board Chairperson and any other Non-Executive
Directors may attend committee meetings in an ex officio capacity. Executives including the CEO,
and any advisors retained by the Committee may attend by invitation. More information on
Remuneration Committee meetings held during the year and Directors’ attendance at these meetings
can be found on page 12 of this report.
The Board is responsible for reviewing and resolving on recommendations from the Remuneration
Committee. In addition it:
Considers matters relating to remuneration of Executives reporting to the CEO;
Approves the establishment of or amendment to employee share, performance rights and any
other deferred incentive plan;
Considers matters related to Executive succession planning; and
Considers recommendations from the Nomination Committee in relation to Board succession
planning, to ensure an appropriate mix of skills, experience, expertise and diversity (subject
to the power of shareholders in General Meeting to elect or re-elect directors).
(iv) Non-Executive Directors’ Remuneration
A remuneration pool of $500,000 for the payment of Non-Executive directors was approved by
shareholders at the Annual General Meeting held in November, 2011. Total Non-Executive Directors
remuneration including superannuation paid at the statutory prescribed rate for the year ended 31
July 2019 was $363,516 which is within the approved amount.
The Board believes that the remuneration approved for Non-Executive Directors must:
enable the Company to attract and retain suitably qualified directors with appropriate
experience and expertise; and
be appropriate in the context of the overall financial performance of the company.
14
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
The Remuneration Committee reviews fees for Non-Executive directors annually, utilising data on and
trends in Director and Chairperson remuneration in the relevant group of the top 500 ASX-listed
companies in Australia (from published reports), as well as data obtainable on director remuneration
in a number of peer companies either from the same industry or with similar market capitalisation and
financial performance. Remuneration consultants (2019, Godfrey Remuneration Group) have been
used every three years to assist in this process with one engagement for this purpose within the last
financial year.
The Board has to date selected a simple remuneration policy whereby only fees and statutory
superannuation benefits are payable. The table on page 19 of this report shows fees paid to Non-
Executive Directors for the 2019 and 2018 financial years. Non-Executive Directors do not participate
in any share or performance rights plans. Non-Executive Directors are entitled to reimbursement of
travel or other reasonable expenses incurred by them in the course of discharging their duties.
(v) Executive Remuneration and Link to Business Strategy
The diagram below outlines components which may be included as part of the TRP for Executives.
Total fixed remuneration
(cash salary,
superannuation and
non-monetary benefits)
FIXED
TOTAL REMUNERATION PACKAGE
+
STI (cash
payment)
+
LTI (performance
rights)
=
Total
Remuneration
Package
VARIABLE
The Managing Director and specified Executives (Executives) are eligible for STI payments, while the
Managing Director and Executives may also have access to an LTI in the form of Performance Rights.
The most recent LTI Offer was made to the CEO and Executives in August 2019.
The total fixed remuneration of the Managing Director is set against market benchmarks by use of a
remuneration consultant. The Company seeks this benchmark information every 2-3 years, including
during FY19 for setting remuneration from FY20. Non-Executive Directors are responsible for
appointing, briefing external consultants and managing this process. At other times, increases in fixed
remuneration are determined by consideration of CPI salary increases applied across the whole
company, and use of published information on CEO/MD salaries in the top 500 ASX-listed companies
and in companies from related industries of similar market capitalisation and financial status, as
described for review of fees for Non-Executive Directors.
The Company’s Executive remuneration is directly linked to its business strategy. The Board engages
in an annual strategy review with management, identifying key goals and challenges for the year and
the longer term. Following this, business plans and an annual budget are prepared and approved,
with KPIs (both financial and non-financial) established for the business.
15
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
These are the basis for KPIs for the CEO, set by the Board, and for other Executives, set by the CEO
according to the area of responsibility of each Executive.
A formal review of the achievement of each Executive is conducted by the CEO annually and
proposed changes in fixed remuneration and the STI to be paid are submitted to the Board for noting.
As noted in section (iii) above, the performance of the CEO against agreed KPIs is reviewed by the
Remuneration Committee, and recommendations on adjustment to total fixed remuneration and
payment of the STI are made to the Board, for approval.
The STI is a variable cash payment with the maximum payment based on a percentage of the
Executive’s total fixed remuneration. For the Managing Director 50% applied in 2019 (50% in 2018),
while for other Executives, 10-20% applied in 2019 (10% applied in 2018). The Company awards STI
payments on evidence that the Executives have achieved stretching work plan objectives and dealt
with unexpected challenges in a way that contributes to both short-term performance and long term
prospects of the Company. The Board retains discretion to vary STI payments outside of the set
formula to recognise overall company performance, changes in the Company’s circumstances during
the year and exceptional contributions by particular Executives.
KPIs set for the CEO each year include financial, strategic and operational targets as summarised in
the table below. KPIs for individual Executives reporting to the CEO include the overall financial goals
for the Company, and may otherwise focus principally on operational goals in areas contributing to
the overall goals (short and long term) for the Company, and for which the Executive is responsible.
The financial targets are set at two levels, with the initial target establishing a gateway to an
entitlement to an STI payment.
KPI type
Financial
Percent
contribution
to STI
40-60%
Sustainability
20-40%
Strategic
20-50%
Description - Examples
Link to Company Strategy
Achievement of revenue,
profit and free cash flow
targets set for the year in
the annual budget.
Establishment of agreed
plans to secure the longer
term sustainability of the
company and progress
towards their
implementation.
Commercial development
of new products from the
R&D team; expansion of
sales – new products, new
customers; meeting
regulatory challenges;
manufacturing efficiencies
and cost effective sourcing
of raw materials; effective
management of inventory,
debtors and creditors
(working capital
requirements).
Sets target for growth in sales and profits for
each year, contributing to increasing
shareholder value. Net free cash flow
provides for further investment in the
business and capacity to pay increasing
dividends each year.
Sustainability KPIs address the medium to
long term prospects for the company,
including developing new products,
technologies, expanding markets, contracting
with customers and suppliers, forming
alliances, and contributing to mitigation of
business risk.
Strategic KPIs address key priorities for the
company to advance to the next stage of its
planned strategic direction, in the key
management areas of Sales and Marketing,
R&D output, Manufacturing, Regulatory and
Cash Management. Examples include fast-
tracking the output from the R&D team into
profitable products attracting new sales.
Adjustment to the changing nature of the
market, to raw material availability and to
manufacturing efficiency are all required to
maintain both short term performance of the
Company, and longer term growth.
16
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
(vi) Long Term Incentive Plan
An LTI may be offered each year to the CEO at the discretion of the Board. The incentive, when
offered, is in the form of Performance Rights (rights to receive shares in the Company) which are
delivered according to the terms of the Clover Corporation LTI Plan and a Letter of Invitation from the
Board to the CEO, setting out the terms for vesting of Performance Rights at the end of an assessment
period. Performance Rights are issued for nil consideration and entitle the recipient to receive one
Clover Corporation share at no cost for each Performance Right that vests at the end of the
assessment period.
The number of Performance Rights offered for a financial year is determined from a percentage of the
CEO’s total fixed remuneration for that year. This dollar value is converted into a number of
Performance Rights based on the Volume Weighted Average Price of Clover Corporation shares on
the ASX for the two week period up to and including the last day of the previous financial year. Hurdles
for vesting of Performance Rights reflect long term growth and financial performance of the Company
relevant to growth in shareholder value, including such parameters as Earnings per Share (EPS)
growth over a three year period, Return on Equity (ROE) over the same period, and achievements in
building the company’s product portfolio, as reflected in New Product Sales.
Executives may also be invited to participate in the Company’s LTI Plan. Performance Rights offered
are on the same basis as for the CEO with the number calculated by taking a percentage of the
Executive’s total fixed remuneration for that year and converting this value to the number of
Performance Rights granted using the same methodology as for the CEO, as described above.
Shares underlying Performance Rights that vest as a result of achievement of performance hurdles
are either purchased on-market by the Company on behalf of the CEO and Executives, or shares can
be issued provided that in the case of the CEO (who is also a director of the Company) shareholder
approval is obtained. Any Performance Rights not vesting at the end of the assessment period lapse.
17
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
The grants which were current during the financial year were:
Targeted
result for
year ended
31 July 2017
Targeted
result for
year ended
31 July 2018
Targeted
result for
year ended
31 July 2019
Targeted
result for
year ended
31 July 2020
Year of
Offer
2016
Performance
conditions
Target – EPS
Max - EPS
2016
Target –ROE (%)
Max–ROE (%)
2017
Target – EPS
Max - EPS
2017
Target –ROE (%)
Max–ROE (%)
2018
Target – EPS
Max - EPS
2.5c
3.2c
13.5%
17.1%
-
-
-
-
-
-
2.9c
3.7c
14.7%
18.8%
2.9c
3.7c
14.7%
18.8%
-
-
3.4c
4.3c
16.4%
20.8%
3.4c
4.3c
16.4%
20.8%
-
-
Targeted
result for
year ended
31 July
2021*
-
-
-
-
-
-
-
-
-
-
-
-
3.8c
4.6c
17.8%
22.8%
-
-
8.03c
9.18c
Note – 50% of the Performance Rights that are subject to a particular performance condition, vest on achievement of the target and a further
50% on achievement of the maximum. In relation to the 2018 Performance Rights, the performance condition of 50% of them is based on
achieving the EPS growth as noted above, and the other 50% is based upon achieving certain levels of New Product Sales. * The maximum
achievement of the EPS Target by the end of FY21 would represent a compound annual growth rate of 26% over the three year period FY19-21.
As at 31 July 2019 the following are the performance rights whose conditions have been met, and
their vesting profile:
P Davey
P Sherman
Balance at 31
July 2019
Rights granted
plan dated
345,591
313,880
38,199
34,526
732,196
2016
2017
2016
2017
Rights
exercisable
after
31 July 2019
31 July 2020
31 July 2019
31 July 2020
The most recent performance assessment period of the above 2016 and 2017 Performance Rights
ended on 31 July 2019 and the board of directors of the Company determined that the relevant
performance conditions had been satisfied for the FY19 period. In consequence, the 2016
Performance Rights that have vested can now be exercised and the approved tranches of the 2017
Performance Rights may be exercised after 31 July 2020, subject to the continued employment of the
Executive.
18
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
Rights whose
conditions
were fulfilled in
year ending 31
July 2018
Rights whose
conditions
were fulfilled in
year ending 31
July 2019
Sub total
Rights whose
conditions
were fulfilled
Rights Granted
Rights yet to
be fulfilled,
subject to
achievement
of targets
and service
conditions
P Davey
P Sherman
#
329,736
36,362
366,098
#
329,735
36,363
366,098
#
659,471
72,725
732,196
#
293,149
32,171
325,320
#
952,620
104,896
1,057,516
Fair value of
the rights as
compensation
$
764,986
84,361
849,347
Fair value of
the rights as
compensation
$
764,984
84,363
849,347
Fair value of
the rights as
compensation*
$
1,529,970
168,724
1,698,694
P Davey
P Sherman
* Note: No LTI compensation has been paid in year ending 31 July 2019. The actual value of the Performance Rights will be
dependent on the Clover share price at the time of vesting. Rights valued at 31 July 2019 ASX market price of $2.32
(viii) Remuneration of Non-Executive Directors and Executive KMP
The following tables disclose details of the remuneration of the Directors and Executive KMP of the
consolidated entity.
2019
Directors
R A Harrington
G A Billings
P J Davey 1,2
I D Glasson
C L Hayman
Dr M J Sleigh
Executive KMP
P A Sherman 1,2
Salary
and Fees
Superannuation
Contributions
$
97,867
58,528
416,805
58,528
58,528
58,528
748,784
$
9,297
5,560
22,813
5,560
5,560
5,560
54,350
Salary
and Fees
Superannuation
Contributions
$
218,866
218,866
$
22,029
22,029
STI
Remun-
eration
$
-
-
196,753
-
-
-
196,753
STI
Remun-
eration
$
43,073
43,073
Non-cash
Benefits
LTI Rem-
uneration
$
-
-
$
-
-
15,458 1,015,578
-
-
-
15,458 1,015,578
-
-
-
Total
$
107,164
64,088
1,667,407
64,088
64,088
64,088
2,030,923
Non-cash
Benefits
LTI Rem-
uneration
Total
$
-
-
$
111,996
111,996
$
395,964
395,964
1. STI consist of amounts accrued in respect to 2019
2.
LTI consists of an accrual value for performance rights that are expected to vest in 2019, 2020 and 2021, as noted
above
19
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Remuneration Report (continued)
2018
Directors
R A Harrington
P R Robinson
G A Billings
P J Davey 3,4
I D Glasson
C L Hayman
Dr M J Sleigh
Salary
and Fees
Superannuation
Contributions
$
89,082
15,913
57,100
394,018
57,100
57,100
57,100
727,413
$
8,463
1,512
5,424
41,520
5,424
5,424
5,424
73,191
STI
Remun-
eration
$
-
-
-
191,954
-
-
-
191,954
Non-cash
Benefits
LTI Rem-
uneration
Total
$
-
-
-
32,189
-
-
-
32,189
$
-
-
-
$
97,545
17,425
62,524
514,392 1,174,073
62.524
62.524
62.524
514,392 1,539,139
-
-
-
Executive KMP
P A Sherman 3,4
Salary
and Fees
Superannuation
Contributions
$
213,756
213,756
$
21,203
21,203
STI
Remun-
eration
$
23,496
23,496
Non-cash
Benefits
LTI Rem-
uneration
Total
$
-
-
$
56,728
56,728
$
315,183
315,183
3. STI consist of amounts accrued in respect to 2018 (paid in 2019)
4.
LTI consists of an accrual value for performance rights that are expected to vest in 2019, and 2020, as noted above
(ix) Employment Contracts
There are no specific employment contracts with Non-Executive Directors. Non-Executive Directors
are appointed under a letter of appointment and are subject to election and rotation requirements as
set out in the ASX listing rules and the Company’s constitution, per the ‘Board Nomination Policy and
Procedure for Selection and Appointment of Directors’ policy, which can be viewed in the Corporate
Governance section of the Company’s website at www.clovercorp.com.au.
Managing Director Mr Peter Davey was employed by the Company under a contract of employment
dated 24 October 2017. The contract provides for base salary and continuing access to incentive
remuneration subject to Remuneration Committee approval, 6 months’ termination notice by either
party, and non-solicitation and non-compete clauses.
Other Executives (standard contract)
All other Executives have rolling contracts. The Company may terminate the Executive’s employment
agreement by providing between one and three months’ written notice or providing payment in lieu of
the notice period (based on the fixed component of the executive’s remuneration), together with
statutory termination entitlements. The Company may terminate the contract at any time without notice
if serious misconduct has occurred. Where termination with cause occurs, the Executive is only
entitled to that portion of remuneration that is fixed, and only up to the date of termination.
20
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Directors’ interests
The relevant interest of each director in the share capital of the Company, as notified by the directors
to the Australian Stock Exchange in accordance with section 205G(1) of the Corporations Act 2001,
at the date of this report is as follows:
Director
R A Harrington
G A Billings
P J Davey
I D Glasson
C L Hayman
Dr M J Sleigh
Ordinary
Shares
Performance
Rights*
433,751
50,000
23,454
60,000
200,000
312,397
1,079,602
-
-
659,472
-
-
-
659,472
* There are an additional 293,149 performance rights available to Mr Davey subject to
meeting relevant performance and employment conditions
Auditor’s Independence and Non-audit Services
The Board of Directors is satisfied that the provision of non-audit services during the period is
compatible with the general standard of independence for auditors imposed by the Corporations Act
2001. The directors are satisfied that the services disclosed below did not compromise the external
auditor’s independence for the following reasons:
all non-audit services are reviewed and approved by the Board of Directors prior to
commencement to ensure they do not adversely affect the integrity and objectivity of the auditor;
and
the nature of the services provided do not compromise the general principles relating to auditor
independence as set out in the APES110 Code of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
The following fees for non-audit services were paid/payable to the external auditors during the year
ended 31 July 2019:
Taxation structural and compliance services
$
29,975
29,975
21
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ REPORT (continued)
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations
Act 2001 has been received by the Directors, and a copy is attached at page 70.
Signed in accordance with a resolution of the Board of Directors.
Rupert Harrington
Chairman
Melbourne
Date: 20 September 2019
22
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE
The Board of Clover Corporation Limited is committed to ensuring its policies and practices reflect
good corporate governance and recognises that for the success of the Company an appropriate
culture needs to be nurtured and developed throughout all levels of the Company.
This statement outlines the Company’s Corporate Governance practices in place throughout the year,
unless otherwise stated, and has been summarised into sections in line with the 8 core principles set
the ASX Corporate Governance Council’s “Corporate Governance Principles and
out
Recommendations – 3rd Edition”.
in
Principle 1 – Lay solid foundations for management and oversight
The Board is ultimately responsible for the operations, management and performance of the
Company. In discharging this responsibility, the Board delegates to senior management whose role
it is to manage the Company in accordance with the directions and policies set by the Board. The
Board monitors the activities of senior management in the performance of their delegated duties.
It is the responsibility of the Board to determine policies, practices, management and the operations
of the Company and to ensure that the Company is compliant with statutory, legal and other regulatory
obligations.
Responsibilities of the Board include the following:-
Determining corporate strategies, policies and guidelines for the successful performance of the
Company in the present and in the future;
Monitoring the performance and conduct of the Company;
Accountability to shareholders;
Ensuring that risk management procedures and compliance and control systems are in place
and operating effectively;
Monitoring the performance and conduct of senior management, and ensuring adequate
succession plans are in place; and
Ensuring the Company continually builds an honest and ethical culture.
The Board has delegated responsibility for the following to management:
Production of performance measurement reports;
Day to day management of the Company;
Managing the compliance and risk management systems;
Management of staff including, appointment, termination, staff development and performance
measurement.
The CEO is responsible for ensuring that the responsibilities delegated by the Board to management
are properly discharged.
The performance of the CEO is evaluated by the Board with reference to the overall performance of
the Company, its subsidiaries and associates in which the CEO represents the Company. Both
qualitative and quantitative measures are used to evaluate performance.
The CEO evaluates the performance of the other senior executives and reports to the Board. The
Board also reviews the performance of these executives via their attendance at Board meetings and
the monthly Board reports.
The performance of the senior executives of the Company was assessed, as set out above, during
the reporting period.
The Board is responsible for evaluating candidates and recommending individuals for appointment as
Directors. The Company undertakes appropriate background and screening checks prior to
nominating a Director for election by shareholders.
23
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 1 – Lay solid foundations for management and oversight (continued)
The Company maintains written agreements with each Director and senior Executives that sets out
the terms of their appointment and outlines all relevant roles and obligations.
The Company Secretary is accountable to the Board, through the Chairman, and is responsible for
advising the Board and its Committees on governance matters, monitoring the Board and ensuring
Committee policies and procedures are followed, and coordinating the timely completion of Board
and Committee papers.
Diversity
The Company values and respects the skills that people with diverse backgrounds, experiences and
perspectives bring to the organisation. The Company is committed to rewarding performance and
providing opportunities that allow individuals to reach their full potential irrespective of background or
difference. When appointing or promoting people within the organisation the most suitably qualified
candidates are selected. As a result, diversity is promoted throughout the organisation.
In March 2012, the Company established a Diversity Policy to formalise its commitment to providing
equal access to opportunities irrespective of background, beliefs or other factors. The policy may be
viewed in the Corporate Governance section of the Company’s web site at www.clovercorp.com.au.
The policy governs the conduct of the Company, its wholly owned subsidiaries and all Directors and
employees of those entities.
The Company has adopted the ASX Corporate Governance Principles and Recommendations on
diversity. As at 31 July 2019 the organisation had 42 employees. The proportion of women
employees in the whole organisation as at 31 July 2019 was 36%. While the Company believes that
this represents a good level of gender diversity, it will continue to ensure that neither gender nor any
other differences interfere with the employment of individuals based on their suitability for the position
available.
The proportion of women in senior executive positions as at 31 July 2019 was 17%. The Company’s
objective is to incrementally grow this as vacancies allow and suitably qualified candidates are
available. The aim is to achieve female representation of 30% or more. The small number of senior
executive positions within the organisation and the low turnover rate limits the opportunity to increase
female representation in this area.
Two of the five Non-Executive Directors are women. The Board will continue to assess candidates
on their skills, knowledge and experience and on the relevance of these to the Company’s needs.
Principle 2 – Structure the Board to add value
The Company’s constitution states that its Board is to comprise no less than three and no more than
ten Directors. The names and details of the Directors of the Company at the date of this statement
are set out in the Directors’ Report.
At the date of this report the Board consisted of five Non-Executive Directors and one Executive
Director. Each Director has undertaken to provide the Board with all information that is relevant to
the assessment of his/her independence in a timely manner. The Board has assessed the
independence of its members and is of the view that the following Directors are independent:
Mr R A Harrington - Non-Executive
Mr G A Billings - Non-Executive
Mr I D Glasson – Non-Executive
Ms C L Hayman - Non-Executive
Dr M J Sleigh - Non-Executive
24
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 2 – Structure the Board to add value (continued)
The Company has established a Nomination Committee which currently consists of four independent
Non-Executive Directors and is chaired by one of the independent Non-Executive directors. The
Committee periodically reviews the Board’s membership having regard to the Company’s particular
needs, both present and future. Where a Board member is due for re-election at the next Annual
General Meeting, that Director abstains from consideration of their nomination for re-election.
The Company has a Board Nomination Policy that sets out the process by which new Director
candidates are identified and selected, the use of professional intermediaries and the requirement for
a diverse range of candidates to be considered. This policy may be viewed in the Corporate
Governance section of the Company’s web site at www.clovercorp.com.au.
The Nomination Committee considers the structure, balance and skills of the Board in making
decisions regarding appointment, retirement and nominations for re-election. When a vacancy
occurs, the necessary and desirable skills, expertise and experience required to complement the
Board are identified and a process to identify the most appropriate candidates is implemented. The
committee engages recruitment consultants and other independent experts to undertake research
and assessment as required.
Directors are initially appointed by the full Board, subject to election by the shareholders of the
Company at the next Annual General Meeting. Under the Constitution, one third of the Board is
required to retire from office each year. Retiring Directors may stand for re-election subject to
approval by the Board.
The company has an established induction procedure which allows new Board appointees to
participate fully and actively in Board decision making at the earliest opportunity.
The Board considers that the current Directors bring an appropriate mix of skills, breadth and depth
of knowledge and experience and diversity to meet the Board’s responsibilities and objectives. The
range of skills and experience possessed by the each of the Directors is set out in the Directors’
Report, and is summarised in the table below:
25
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 2 – Structure the Board to add value (continued)
Skill Category
Description of Attribute
Board experience
and governance
Demonstrated commitment to highest standards
of governance, listed company expertise and
member of governance body
Current Board
Representation
Five Directors
Five Directors
Executive
leadership,
Capability as
Board Chair or
Committee Chair
Healthcare, infant
formula, nutrition
sector experience,
and working in the
health sciences
Strategy
Development
Financial and Risk
Management
Wholesale and
Distribution;
Inventory
Management and
Control
Business
Acquisition, Capital
Projects and
Integration
Remuneration,
Organisation
Development
Technical IP
Development, and
Protection
Marketing, Sales
and
Communications
Sustainable success in business at a Senior
Executive level in relevant industries, including
health, science, finance, investment, consumer
goods
Relevant business or Board experience in
operational sectors, local or international;
Knowledge of managing research, science and
development in a high technology environment
Five Directors
Experience in developing, implementing and
challenging plans of action designed to achieve
long term company goals and sustainable
competitive advantage and growth
Experience in financial accounting and reporting,
corporate finance, internal controls and/or
experience in business risk management at a
Board level in listed entity
Knowledge of supply chain and inventory
management; Experience working with
manufacturing, production, supply chain,
logistics and distribution nuances
Experience working with large scale capital
outlays and long-term investment horizons;
M&A, new business acquisition experience,
track record in developing an asset or business
portfolio over the long term that remains resilient
to systemic risk
Background in an industry that has faced
disruptive change; anticipating risks and facing
major market change. Board Remuneration
Committee membership or management in
relation to remuneration, and organisational
development or transformation
Development and management of IP,
trademarks and protection mechanisms for
competitive advantage, both local and global
scale; Knowledge and experience in
commercialising new product development
Senior executive experience in Marketing,
Communications and Brand development;
detailed understanding of corporate purpose to
create long-term company value, external
relationship building and valuable customer
experiences
Five Directors
Five Directors
Three Directors
Four Directors
Five Directors
Four Directors
Three Directors
In the discharge of their duties and responsibilities the Directors, either individually or jointly, have the
right to seek independent professional advice at the Company’s expense. In respect of advice to
individual Directors, the prior approval of the Chairman is required; such approval is not to be
unreasonably withheld. The Chairman is entitled to receive a copy of any such advice obtained.
26
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 2 – Structure the Board to add value (continued)
The Chairman is responsible for monitoring and assessing the performance of individual Directors,
each Board committee and the Board as a whole. The Chairman interviews each Director and
provides feedback regarding their performance. In 2019 each Director independently completed an
external confidential assessment of the performance of the Board. The results of the assessments
are compiled into a written report which is presented to the Board and discussed. The performance
of each Director of the Company was assessed during the reporting period.
Principle 3 – Act ethically and responsibly
Code of Conduct
The Company has an established code of conduct dealing with matters of integrity and ethical
standards. The Board recognises the need for the Directors and employees to adhere to the highest
standards of behaviour and business ethics.
Professional conduct and ethical standards;
All Directors and employees are expected to abide by the code of conduct which covers a number of
areas including the following:-
Compliance with laws and regulations;
Relationships with shareholders, customers, suppliers and competitors;
Confidentiality and continuous disclosure;
Standards of workplace behaviour and equal opportunity;
Privacy and anti-discrimination;
Proper use of Company assets;
The environment; and
Investigation and reporting of breaches of the code.
Share Trading
The Company has established a share trading policy which may be viewed in the Corporate
Governance section of the Company’s web site at www.clovercorp.com.au.
Principle 4 – Safeguard integrity in financial reporting
The Company has an established Audit Committee, which has a formal charter outlining the
committee’s function, composition, authority, responsibility and reporting. The Audit Committee
charter may be viewed in the Corporate Governance section of the Company’s web site at
www.clovercorp.com.au.
There are currently four members of the Audit Committee, all of whom are non-executive Directors
and are considered to be independent (refer to principle 2 above).
Mr Billings, who is the Chair of the Audit Committee, is not the Chairman of the Board. The Chairman
of the Board is not a member of the Audit Committee (but may attend committee meetings in an ex
officio capacity). The details of the Audit Committee members at the date of this statement and their
attendance at meetings are set out in the Directors’ Report.
The Non-Executive Chairman, CEO, and Company Secretary may attend Audit Committee meetings
by invitation. The external auditors, PKF, are requested by the Audit Committee to attend appropriate
meetings to report on the results of their half-year review and of their planning for and result of the full
year audit.
27
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 4 – Safeguard integrity in financial reporting (continued)
The function of the Audit Committee is to assist the Board in fulfilling its statutory and fiduciary
responsibilities relating to:
The external reporting of financial information, including the selection and application of
accounting policies;
The independence and effectiveness of the external auditors;
The effectiveness of internal control processes and management information systems;
Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements;
The application and adequacy of risk management systems within the Company.
The CEO and the Chief Financial Officer are required to state in writing to the Board, by submission
to the Audit Committee, that the Company’s financial statements present a true and fair view, in all
material respects, of the Company’s financial position and operational results and that they are in
accordance with relevant accounting standards. A declaration under Section 295A of the Corporations
Act from the CEO and Chief Financial Officer has been received in respect of the current reporting
period.
Principle 5 – Make timely and balanced disclosure
The Board recognises the need to ensure that all investors have equal and timely access to material
information regarding the Company and for announcements to be factual, clear, balanced and
complete.
The Company has established a Continuous Disclosure Policy to ensure compliance with the ASX
and Corporations Act continuous disclosure requirements. The policy requires timely disclosure
through the ASX company announcements platform of information concerning the Company that a
reasonable person would expect to have a material effect on the price or value of the Company’s
securities or which would materially influence the decision making of investors. Internal procedures
are in place to ensure that relevant information is communicated promptly.
The Chairman and CEO are responsible for determining disclosure obligations and the Company
Secretary is the nominated continuous disclosure officer for the Company.
Principle 6 – Respect the rights of security holders
The Board is committed to ensuring that shareholders are fully informed of all material matters
affecting the Company in a timely manner.
The dissemination of information is mainly achieved as follows:-
An Annual Report is distributed (electronically if preferred) to shareholders in November each
year;
A newsletter is periodically distributed to shareholders;
Announcements to the ASX and press releases advising of events which are of particular
significance to the progress and prospects of the Company, and
Significant information is also posted on the Company’s website.
In addition, shareholders are encouraged to attend and participate in the Annual General Meeting
(AGM) of the Company. The external auditor attends the AGM to answer shareholders’ questions
with regard to the conduct of the audit and the content of the Auditor’s Report.
28
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 7 – Recognise and manage risk
The Company is committed to identifying and managing areas of significant business risk to protect
shareholders, employees, earnings and the environment. Arrangements in place include:-
Regular detailed financial, budgetary and management reporting;
Procedures to manage financial and operational risks;
Established organisational structures, procedures and policies dealing with the areas of health
and safety, environmental issues, industrial relations and legal and regulatory matters;
Comprehensive insurance and risk management programs;
Procedures requiring Board approval for all borrowings, guarantees and capital expenditure
beyond minor levels;
Where applicable, the utilisation of specialised staff and external advisors; and
Regular operational audits undertaken by major customers.
Management is responsible for the design and implementation of a risk management and internal
control system which manages the material business risks of the Company and reporting to the Board
on whether those risks are being managed efficiently. Management reported to the Board on an
ongoing basis during the current reporting period.
The Board of Directors regularly reviews the external risks to the Company. The Board reviews and
approves management’s plans to reduce the impact of potential risks and monitors progress against
these plans.
The Company does not have an internal audit function. Management is responsible for the design
and implementation of a risk management and internal control system which manages the material
business risks of the Company and reporting to the Board on whether those risks are being managed
efficiently. Management reported to the Board on an ongoing basis. The Board of Directors regularly
reviews the external risks of the Company. The Board reviews and approves management’s plans to
reduce the impact of potential risks and monitors progress against these plans.
The Company does not have any exposure to economic, environmental and social sustainability risks
to disclose during the reporting period.
The CEO and the Chief Financial Officer are required to state in writing to the Board, by submission
to the Audit Committee, that the risk management and internal control compliance systems are
operating efficiently and effectively. In their declaration under section 295A of the Corporations Act
the CEO and Chief Financial Officer have made this statement in respect of the current reporting
period.
Principle 8 – Remunerate fairly and responsibly
The Company has established a Remuneration Committee which currently consists of four
independent, non-executive Directors. The Committee makes recommendations to the full Board on
remuneration matters and other terms of employment for Executive Directors and Non-Executive
Directors.
Senior executive performance is continually monitored by the CEO and the CEO’s performance is
subject to continuous monitoring by the full Board.
The remuneration of the CEO is reviewed annually by the Remuneration Committee, which consists
of only Non-Executive Directors. The remuneration of the senior executive staff is reviewed annually
by the full Board after taking into consideration the recommendations of the Remuneration Committee
and the CEO.
The CEO and senior executive staff are remunerated by way of salary, performance incentive
payments, non monetary benefits, and superannuation contributions.
29
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CORPORATE GOVERNANCE (continued)
Principle 8 – Remunerate fairly and responsibly (continued)
the Company’s performance, market rates,
Non-Executive Director’s fees are reviewed periodically by the full Board after taking into
consideration
the
recommendations of the Remuneration Committee. Non-Executive Directors are remunerated by way
of fees in the form of cash and superannuation contributions and are not entitled to receive bonus
payments or any equity based remuneration.
level of responsibility and
Remuneration is set so as to attract and retain suitable personnel and to motivate them to pursue the
long term growth and success of the Company.
Further information of Directors’ and Executive remuneration is set out in the Remuneration Report.
For further information concerning the corporate governance practices of the Company refer to the
corporate governance section of the Company’s web site at www.clovercorp.com.au.
30
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Notes
2019
$'000
2018
$'000
2
2
3
4
76,682
62,961
732
665
(52,762)
(3,595)
(5,319)
(44,714)
(2,594)
(4,184)
(1,750)
(1,518)
(24)
-
13,964
(3,863)
10,616
(3,028)
10,101
7,588
Revenue
Other income
Raw materials, consumables & conversion costs
Marketing and sales expenses
Administration and corporate expenses
Research and development expenses
Share of net profit of investments accounted for
under the equity method
Profit before income tax
Income tax (expense)
Profit after tax for the period attributable to
members of the parent entity
Other comprehensive profit/(loss)
Items that may be reclassified subsequently to profit
or loss:
Foreign currency translation adjustments
Other comprehensive profit/(loss) for the year
(8)
(8)
46
46
Total comprehensive profit for the year
10,093
7,634
Earnings per share (EPS)
Basic earnings per share (cent per share)
Diluted earnings per share (cent per share)
20
20
6.12
6.07
4.59
4.59
This Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
31
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets - prepayments
Non-current assets
Available for sale listed investment
Property, plant and equipment
Investments in Associates
Deferred tax assets
Intangible assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Current tax liabilities
Short-term provisions
Non-current liabilities
Interest bearing liabilities
Long-term provisions
Total liabilities
Net assets
Equity
Issued capital
Foreign currency translation reserve
Retained profits
Total equity
Notes
6
7
8
9
10
11
4
12
13
14
15
14
15
16
17
2019
$'000
8,271
18,446
27,681
958
55,356
0
5,777
10,461
1,250
1,907
19,395
2018
$'000
7,894
15,257
19,768
656
43,575
4
6,062
0
502
1,907
8,475
74,751
52,050
12,517
1,473
2,970
603
17,563
11,986
61
12,047
7,821
450
1,278
599
10,148
3,737
20
3,757
29,610
13,905
45,141
38,145
32,920
(166)
12,387
45,141
32,920
(158)
5,383
38,145
This Statement of Financial Position should be read in conjunction with the accompanying notes.
32
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Retained
Profits/
(Accumulated
Losses)
$'000
Foreign
Currency
Translation
Reserve
$'000
Issued
Capital
$'000
Total
$'000
Balance at 1 August 2017
32,920
(140)
(204)
32,576
Profit attributable to members of the
entity
Dividend paid
Foreign currency translation reserve
-
-
-
7,588
(2,065)
-
-
7,588
(2,065)
-
46
46
Balance at 31 July 2018
32,920
5,383
(158)
38,145
Balance at 1 August 2018
32,920
5,383
(158)
38,145
Profit attributable to members of the
entity
Dividend paid
Foreign currency translation reserve
-
-
-
10,101
(3,097)
-
-
10,101
(3,097)
-
(8)
(8)
Balance at 31 July 2019
32,920
12,387
(166)
45,141
This Statement of Changes in Equity should be read in conjunction with the accompanying notes.
33
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest paid
Income tax paid
Notes
2019
$ '000
2018
$ '000
73,493
(65,464)
(318)
(2,920)
60,413
(54,475)
(189)
(1,668)
Net cash inflow from operating activities
19
4,791
4,081
Cash flows from investing activities
Acquisition of plant and equipment
Proceeds from sale of financial assets
Investment in Associates
(108)
4
(10,485)
(4,226)
0
0
Net cash outflow from investing activities
(10,589)
(4,226)
Cash flows from financing activities
Dividends paid
Repayment of interest bearing liabilities
Receipt of interest bearing liabilities
5 (a)
(3,097)
(5,058)
14,330
(2,065)
(312)
4,500
Net cash outflow from financing activities
6,175
2,123
Net increase in cash held
Cash and cash equivalents at the beginning of the
period
377
1,978
7,894
5,916
Cash and cash equivalents at the end of the period
6
8,271
7,894
This Statement of Cash Flows should be read in conjunction with the accompanying notes.
34
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report covers Clover Corporation Limited (“the Company”) and controlled entities (“the
consolidated entity“ or “the Group”). Clover Corporation Limited is a listed public company,
incorporated and domiciled in Australia.
Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with
Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001.
The financial report also complies with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board.
The consolidated financial statements have been prepared on the basis of historical cost, except for
certain financial instruments that are measured at fair value at the end of each reporting period, as
explained in the accounting policies below. Historical cost is generally based on the fair values of the
consideration given in exchange for goods and services. All amounts are presented in Australian
dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique. In estimating the fair value of an
asset or a liability, the consolidated entity takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability
at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of AASB 2, leasing transactions that are within the scope of
AASB 117, and measurements that have some similarities to fair value but are not fair value, such as
net realisable value in AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The consolidated entity has applied the relief available to it in ASIC Corporations Instrument
(Rounding in Financial/ Directors’ Reports) 2016/191 and accordingly amounts in the financial report
and the directors’ report have been rounded off to the nearest thousand dollars, unless otherwise
stated.
The financial report was authorised for issue on 20 September 2019 by the Board of Directors.
(a) (i) Changes in accounting policy and disclosures, standards and interpretations
This Note 1 details the material accounting policies adopted by the consolidated entity in the
preparation of the financial report.
The consolidated entity has adopted all amendments to Australian Accounting Standards which
became applicable for the consolidated entity from 1 August 2018.
35
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) (i) Changes in accounting policy and disclosures, standards and interpretations
(continued)
AASB 15 Revenue from Contracts with Customers
The company has adopted AASB 15 from 1 August 2018. The standard provides a single
comprehensive model for revenue recognition. The core principle of the standard is that an entity shall
recognise revenue to depict the transfer of promised goods or services to customers at an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The standard introduced a new contract-based revenue recognition model with a
measurement approach that is based on an allocation of the transaction price. The group adopted
AASB 15 using the modified retrospective method of adoption. The change did not have a material
impact on the Group for the financial year. However, the policy changes relative to the application of
AASB 15 are described below in note 1(l).
AASB 9 Financial Instruments
AASB 9 replaces the provisions of AASB 139 that relate to the recognition, classification and
measurement of financial assets and financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting. Most of the changes are not relevant to the
Group, however there was a new impairment model introduced in AASB 9 which requires the
recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred
credit losses as is the case under AASB 139. It applies to financial assets classified at amortised cost,
debt instruments measured at fair value through other comprehensive income, contract assets under
AASB 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain
financial guarantee contracts. The adoption of AASB 9 Financial Instruments from 1 August 2018
resulted in changes to the Group’s accounting policies. No opening adjustment was necessary as a
result of the adoption of AASB 9.
(a) (ii) Early adoption of standards
The consolidated entity has not elected to apply any pronouncements before their operative date in
the annual reporting period beginning 1 August 2018.
(a) (iii) New accounting standards for application in future periods
The following Standards and Interpretations issued or amended are applicable to the consolidated
entity but are not yet effective and have not been adopted in preparation of the financial statements at
the reporting date. The consolidated entity’s assessment of the impact of these new standards and
interpretations is set out below.
AASB 16 Leases.
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The
standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating
leases and finance leases. Upon adoption of the standard with effect from 1 August 2019 the
Consolidated Entity will apply the modified retrospective approach (with the application of practical
expedients) equating the ‘right-of-use’ asset (ROUA) with the value of the lease liability, thus requiring
no restatement of accumulated losses or prior period comparatives.
36
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) (iii) New accounting standards for application in future periods (continued)
Subject to exceptions, a ROUA will be capitalised in the statement of financial position, measured at
the present value of the unavoidable future lease payments to be made over the lease term. The
exceptions relate to short-term leases of 12 months or less and leases of low-value assets where an
accounting policy choice exists whereby either a ROUA is recognised or lease payments are
expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be recognised. Straight-line operating lease
expense recognition will be replaced with a depreciation charge for the leased asset (included in
operating costs) and an interest expense on the recognised lease liability (included in finance costs).
In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be
higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is
replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within
the statement of cash flows, the lease payments will be separated into both a principal (financing
activities) and interest (either operating or financing activities) component.
Upon adoption of AASB 16 as of 1 August 2019 under the modified retrospective approach, the ROUA
and lease liability will be recognised in equal amount of $220,728. Inclusive of interest, note 26 reflects
the commitments relative to this liability, as at 31 July 2019.
(b) Principles of consolidation
The consolidated financial statements incorporate the financial statements of Clover Corporation
Limited and entities controlled by the Company and its subsidiaries. Control is achieved when the
Company is exposed or has rights to variable returns for its involvement with the subsidiary and has
the ability to affect those returns through its power over the subsidiary. All subsidiaries have a
reporting date of 31 July.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances in
assessing whether or not the Company's voting rights in an investee are sufficient to give it power,
including:
the size of the Company's holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
rights arising from other contractual arrangements; and
potential voting rights held by the Company, other vote holders or other parties;
any additional facts and circumstances that indicate that the Company has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders' meetings
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statement of profit
37
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Principles of consolidation (continued)
or loss and other comprehensive income from the date the Company gains control until the date when
the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the consolidated entity's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the consolidated entity are eliminated in full on consolidation.
(c) Income tax
The income tax expense (credit) for the period comprises current income tax expense (credit) and
deferred tax expense (credit).
Current income tax expense (credit) charged to the profit or loss is the tax payable on taxable income
calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the
reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be
paid to (recovered from) the relevant taxation authority. In determining the current tax position,
Research and Development incentive allowances are accounted as tax credits, reducing income tax
payable and current tax expense.
Deferred income tax expense (credit) reflects movements in deferred tax asset and deferred tax
liability balances during the period as well as unused tax losses.
Current and deferred income tax expense (credit) is charged or credited directly to equity instead of
the profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred
tax assets also result where amounts have been fully expensed but future tax deductions are
available. No deferred income tax will be recognised from the initial recognition of an asset or liability,
excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates enacted or substantively
enacted at the end of the reporting period. Their measurement also reflects the manner in which
management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to
the extent that it is probable that future taxable profit will be available against which the benefits of the
deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates,
and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the
reversal of the temporary difference can be controlled and it is not probable that the reversal will occur
in the foreseeable future.
38
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c)
Income tax (continued)
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and
liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-
off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur in
future periods in which significant amounts of deferred tax assets or liabilities are expected to be
recovered or settled.
Tax consolidation
Clover Corporation Limited and its wholly-owned Australian subsidiaries have not formed an income
tax consolidated group under tax consolidation legislation.
Inventories
(d)
Raw materials, work in progress and finished goods are measured at the lower of cost and net
realisable value. The cost of manufactured products includes direct materials, direct labour and an
appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal
operating capacity. Costs are assigned on the basis of weighted average costs.
(e) Property, plant and equipment
Each class of property, plant and equipment is carried at cost, less where applicable any accumulated
depreciation and impairment losses.
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it
is not in excess of the recoverable amount from these assets. The recoverable amount is assessed
on the basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to their present values in
determining recoverable amounts.
The cost of fixed assets constructed within the consolidated entity includes the cost of materials, direct
labour, borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the consolidated entity and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the statement of comprehensive income during the financial period in
which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets, are depreciated on a
straight-line basis over their useful lives to the consolidated entity commencing from the time the asset
is held ready for use. Leasehold improvements are depreciated over the shorter of either the
unexpired period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Asset
Depreciation Rates
Buildings, at cost
Plant and equipment, at cost
Furniture and equipment, at cost
4.00% - 15.00%
5.00% - 33.33%
4.80% - 40.00%
39
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Property, plant and equipment (continued)
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
If any indication of impairment exists and where the carrying values exceed the estimated recoverable
amount, the assets or cash-generating units are written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value
in use. 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.
Impairment losses are recognised in the statement of comprehensive income.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount.
These are included in the statement of comprehensive income.
De-recognition
An item of plant and equipment is de-recognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
(f) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the
asset, but not the legal ownership that is transferred to entities in the consolidated entity, are classified
as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal
to the fair value of the leased property or the present value of the minimum lease payments, including
any guaranteed residual values. Lease payments are allocated between the reduction of the lease
liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives
or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are charged as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line
basis over the life of the lease term.
(g) Financial instruments
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are
included as part of the initial measurement, except for financial assets at fair value through profit or
loss. Such assets are subsequently measured at either amortised cost or fair value depending on their
classification. Classification is determined based on both the business model within which such assets
are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
40
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Financial instruments (continued)
Financial assets are derecognised when the rights to receive cash flows have expired or have been
transferred and the consolidated entity has transferred substantially all the risks and rewards of
ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it's
carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive
income are classified as financial assets at fair value through profit or loss. Typically, such financial
assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the
short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial
recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which
the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to
classify them as such upon initial recognition.
Allowance for expected credit losses (ECL)
For trade receivables and contract assets, the Group applies a simplified approach in caluclation of
ECL’s.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECL’s at each reporting date. The Group’s current impairment allowance has been
based on historical credit loss experience, adjusted for forward looking factors specific to the
debtors and the economic environment.
For financial assets measured at fair value through other comprehensive income, the loss allowance
is recognised within other comprehensive income. In all other cases, the loss allowance is
recognised in profit or loss.
Financial liabilities
The Group measures all financial liabilities initially at fair value less transaction costs, subsequently
financial liabilities are measured at amortised cost using the effective interest rate method.
The financial liabilities of the Group comprise trade payables, bank and other loans and finance
lease liabilities.
(h) Impairment of assets
At each reporting date, the consolidated entity reviews the carrying values of its tangible and intangible
assets to determine whether there is any indication that those assets have been impaired. If such an
indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less
costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s
carrying value over its recoverable amount is expensed to the statement of comprehensive income.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated
entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
41
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
Intangibles
Goodwill
Goodwill is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess
of the sum of the consideration transferred and the acquisition date fair value of any previously held
equity interest, over the acquisition date fair value of net identifiable assets acquired. Goodwill on
acquisitions of subsidiaries is included in intangible assets.
Goodwill is tested for impairment annually and is allocated to the consolidated entity’s cash generating
units or groups of cash generating units, which represent the lowest level at which goodwill is
monitored but where such level is not larger than an operating segment. Gains and losses on the
disposal of an entity include the carrying amount of goodwill related to the entity sold.
Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do
not affect the carrying values of goodwill.
(j) Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each of the consolidated entity’s entities is measured using the currency of
the primary economic environment in which that entity operates. The consolidated financial
statements are presented in Australian dollars which is the Company’s functional and presentation
currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates
prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-
end exchange rate. Non-monetary items measured at historical cost continue to be carried at the
exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported
at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the statement of
comprehensive income, except where deferred in equity as a qualifying cash flow or net investment
hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in
equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange
difference is recognised in the statement of comprehensive income.
(k) Cash and cash equivalents
For the purpose of the cash flow statement, cash includes cash on hand and in at-call deposits with
banks or financial institutions, net of bank overdrafts, and investments in money market instruments
with less than 14 days to maturity.
(l) Revenue
Revenue is recognised and measured at the fair value of the consideration received or receivable,
after taking into account any trade discounts and volume rebates allowed, to the extent that it is
probable that economic benefit will flow to the Group and the revenue can be reliably measured.
42
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Revenue (continued)
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to
be entitled in exchange for transferring goods or services to a customer. For each contract with a
customer, the Group: identifies the contract with a customer; identifies the performance obligations in
the contract; and determines the transaction price; and recognises revenue when or as each
performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods
or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the
customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer
and any other contingent events. Such estimates are determined using either the 'expected value' or
'most likely amount' method. The measurement of variable consideration is subject to a constraining
principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently
resolved. Amounts received that are subject to the constraining principle are recognised as a refund
liability.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable
to the financial assets.
Dividend revenue is recognised when the right to receive a dividend has been established. Dividends
received from associates are accounted for in accordance with the equity method of accounting.
All revenue is stated net of the amount of goods and services tax (GST).
Contract assets
A contract asset is the right to consideration in exchange for goods transferred to the customer. If the
Group performs by transferring goods to a customer before the customer pays consideration or before
payment is due, a contract asset is recognised for the earned consideration that is conditional.
Contract liabilities
A contract liability is the obligation to transfer goods to a customer for which the Group has received
consideration (or an amount of consideration is due) from the customer. If a customer pays
consideration before the Group transfers goods to the customer, a contract liability is recognised when
the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised
as revenue when the Group performs under the contract.
(m) Trade and other payables
Trade and other payables represent liabilities outstanding at the end of the reporting period for goods
and services received by the Company during the reporting period, which remain unpaid. Amounts
are unsecured and are presented as current liabilities. They are normally settled in accordance with
the terms agreed with the respective creditors.
43
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Employee benefits
Provision is made for the consolidated entity’s liability for employee benefits arising from services
rendered by employees to reporting date. Employee benefits expected to be settled within one year
together with entitlements arising from wages, salaries and annual leave which will be settled after
one year, have been measured at the amounts expected to be paid when the liability is settled, plus
related on-costs. Other employee benefits payable later than one year have been measured at the
present value of the estimated future cash outflows to be made for those benefits.
Contributions are made by the consolidated entity to employee superannuation funds and are charged
as expenses when incurred.
(o) Provisions
Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a
result of past events, from which it is probable that an outflow of economic benefits will result and that
outflow can be reliably measured.
(p) Goods & services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount
of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component
of investing and financing activities, which are disclosed as operating cash flows.
(q) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Company, excluding any costs of servicing equity other than dividends, by the weighted average
number of ordinary shares, adjusted for any bonus elements.
Diluted earnings per share
Diluted earnings per share is calculated as net profit attributable to members of the Company,
adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive
potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the
period that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares,
adjusted for any bonus elements.
44
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r) Operating segments
An operating segment is a component of an entity that engages in business activities from which it
may earn revenues and incur expenses (including revenues and expenses relating to transactions
with other components of the same entity), whose operating results are regularly reviewed by the
entity's chief operating decision maker to make decisions about resources to be allocated to the
segment and assess its performance and for which discrete financial information is available. This
includes start up operations which are yet to earn revenues.
Operating segments have been identified based on the information provided to the chief operating
decision makers.
(s) Comparative figures
Where required by the Accounting Standards comparative figures have been adjusted to conform with
changes in presentation in the current financial period.
(t) Critical accounting estimates and judgements
The directors evaluate estimates and judgements incorporated into the financial report based on
historical knowledge and best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and economic data; obtained both
externally and within the consolidated entity.
Key estimate
Impairment
The consolidated entity assesses impairment at each reporting date by evaluating conditions and
events specific to the consolidated entity that may be indicative of impairment triggers. Recoverable
amounts of relevant assets are reassessed using value-in-use calculations performed. In assessing
recoverable amounts a number of key estimates are made.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and
judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and
makes assumptions to allocate an overall expected credit loss rate for each group. These
assumptions include recent sales experience and historical collection rates.
Key judgements
Impairment of goodwill:
Goodwill is allocated to the tuna oil cash-generation units which are based on the controlled entity’s’
principal activities. The Company assessed the recoverable amount of goodwill and determined that
no impairment was required at reporting date. Recoverable amounts of relevant assets are
reassessed using value-in-use calculations that incorporate various key assumptions.
Refer to Note 12 for further details on the assumptions used in these calculations.
45
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Inventory realisation:
The measurement of inventory at the lower of cost and net realisable value requires judgements to
be made in respect of the forecast demand for the consolidated entity’s products and the matching
of raw material purchasing and the manufacturing process to meet forecasts. The possibility that
inventory lines may exceed optimum levels or be obsolete is factored into adjustments necessary
to measure inventory at net realisable value, should it be determined to be lower than cost.
Certain lines of inventory are carried at net realisable value, that being lower than cost (refer to
Note 8). The impact of net realisable value adjustments on the financial result for the year is
disclosed in Note 3.
Income tax:
Deferred tax assets are recognised for unused tax losses and tax offsets to the extent that it is
probable that taxable profit will be available against which the losses and offsets can be utilised.
Management judgement is required to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and the level of future taxable profits together with future tax
planning strategies.
46
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
2. Revenue and other income
Operating activities:
Sales of goods
Other income:
Net exchange gains
Proceeds on sale of investments
Interest revenue
Consolidated
2019
$'000
2018
$'000
76,682
76,682
62,961
62,961
716
4
12
732
645
-
20
665
Total revenue
77,414
63,626
The disaggregation of revenue from
contracts with customers is as follows:
Timing of revenue:
Goods transferred at a point in time
76,682
62,961
Geographical location:
Australia / New Zealand
Asia
Europe
Americas
3. Expenses
Profit before income tax includes
the following items:
Employee benefits expense:
Inventory impairment
(recoveries)/charge:
Depreciation and amortisation:
- leasehold improvements
- buildings
- plant and equipment
- office furniture and equipment
Loss on asset disposal
Interest expense
Minimum lease payments:
-
operating lease
38,713
28,101
5,944
3,924
76,682
37,650
18,485
4,111
2,715
62,961
7,334
(417)
5,752
62
-
194
195
20
409
-
330
40
216
438
7
701
60
209
127
206
47
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
4. Income tax expense:
(a) The components of tax expense comprise:
Current tax
Deferred tax liability
Deferred tax asset
(b) Reconciliation of income tax
expense/(credit):
The aggregated amount of income tax expense
attributable to the period differs from the
amounts prima facie payable on profits from
ordinary activities. The difference is reconciled
as follows:
Prima facie tax payable on profit before income
tax at 30%
Tax effect amounts:
- Research and development
claim
- Sundry other
Income tax expense/(credit) attributable
to profit
(c) Deferred tax assets
Consolidated
2019
$'000
2018
$'000
4,611
-
(748)
3,863
2,798
(120)
350
3,028
4,189
3,184
(148)
(178)
(107)
(49)
3,863
3.028
Deferred tax asset
1,250
502
The deferred tax assets balance comprises the
following temporary differences:
Impairment of inventory
Provisions
Unrealised foreign exchange
Other temporary differences
Reconciliation:
Opening balance
(Charges) / credits to income statement
Closing balance
236
331
(122)
805
1,250
502
748
1,250
378
312
(198)
10
502
852
(350)
502
48
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
4. Income tax expense/(credit) (continued)
(d) Deferred tax liabilities
The deferred tax liability balance comprises
the following timing differences:
Depreciating assets
Reconciliation:
Opening balance
Charge / (benefit) to income statement
Closing balance
5.Dividends
(a) Dividend paid during the period
Final dividend for the year ended 31 July 2018 of 1.25
cent per share (2017FY: 0.75 cent per share) fully
franked at the tax rate of 30%, paid 20 November 2018
Interim dividend for the year ended 31 July 2019 of
0.625 cent per share (2018FY: 0.50 cent per share)
fully franked at the tax rate of 30%, paid 30 April 2019
Franking account balance
Franking credits available for subsequent financial
years
Consolidated
2019
$'000
2018
$'000
0
0
0
0
0
0
0
120
(120)
0
2,065
1,239
1,032
3,097
826
2,065
6,614
5,274
The above available amounts are based on the balance of the dividend franking account at the
period end adjusted for franking credits that will arise from the payment of the current tax liability;
franking debits that will arise from payment of dividends recognised as a liability at period end; and
franking credits that will arise from dividends recognised as a receivable at period end.
There were no dividend or distribution reinvestment plans operating during the financial period.
(b) Dividends declared after reporting date
The Directors have declared a final dividend for the financial year ended 31 July 2019 of 1.75 cent
per share (2018: final 1.25 cent per share) fully franked at 30%, payable on 20 November 2019,
but not recognised as a liability at the end of the financial period. The record date for this dividend
will be 30 October 2019.
49
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
6. Cash and cash equivalents
Cash at bank
7. Trade and other receivables
Current
Trade debtors
Less allowance for expected credit losses
Other debtors
Total current trade and other receivables
Provision for impairment of receivables
Consolidated
2019
$'000
2018
$'000
8,271
8,271
7,894
7,894
17,428
(9)
1,027
18,446
13,910
-
1,347
15,257
Trade receivables are amounts due from customers for goods sold in the ordinary course of
business. They are generally due for settlement between 30 and 120 days and therefore are
classified as current. Other receivables generally arise from transactions outside the usual
operating activities of the consolidated entity. Settlement timeframes may vary, though their
classification is current.
Refer to Note 24 for more information on credit risk of trade and other receivables.
8. Inventories
Raw materials
Goods in transit
Finished goods
Total inventories
9. Other current assets
Prepayments
Total other current assets
13,127
1,310
13,244
27,681
10,167
1,717
7,884
19,768
958
958
656
656
50
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
10. Property, plant and equipment
Land, at cost
2,000
2,000
Consolidated
2019
$'000
2018
$'000
Buildings, at cost
Less: accumulated depreciation
Total Buildings
Plant and equipment, at cost
Less: accumulated depreciation
Total plant and equipment
Furniture and equipment, at cost
Less: accumulated depreciation
Total furniture and equipment
3,845
(1,128)
2,717
4,229
(3,239)
990
294
(224)
70
3,845
(934)
2,911
4,161
(3,037)
1,124
231
(204)
27
Total property, plant and equipment
5,777
6,062
Reconciliation of the carrying amounts of each class of asset at the beginning and the
end of the current financial period:
Land
Balance at beginning of the period
Additions
Carrying amount at the end of the period
Buildings
Balance at beginning of the period
Additions
Transfer, from leasehold improvements
Transfer, from other assets
Depreciation expense
Carrying amount at the end of the period
Leasehold improvements
Balance at beginning of the period
Transfer, to Buildings
Transfer, to Equipment
Depreciation expense
Carrying amount at the end of the period
-
2,000
2,000
-
2,390
387
350
(216)
2,911
789
(737)
(12)
(40)
-
2,000
-
2,000
2,911
-
-
-
(194)
2,717
-
-
-
-
-
51
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Plant and equipment
Balance at beginning of the period
Additions, net of disposals
Transfers, from leasehold improvements
Foreign Currency Translation
Depreciation expense
Carrying amount at the end of the period
Furniture and equipment
Balance at the beginning of the period
Additions, net of disposals
Foreign Currency Translation
Depreciation expense
Carrying amount at the end of the period
11. Investment in Associates
Investment in Melody Dairies, at cost
Total Investment in Associates assets
Consolidated
2019
$'000
2018
$'000
1,124
1,463
46
-
15
(195)
990
27
62
1
(20)
70
10,461
10,461
99
12
(12)
(438)
1,124
10
24
-
(7)
27
0
0
Through an agreement with three other investing parties on 5 November 2018 the Group has a 35%
interest in Melody Dairies, a limited partnership established for the purpose of undertaking
construction and operation of a manufacturing facility in New Zealand. The objective of the project is
to enable expansion of the Group’s capacity to deliver its products to the market, through its equity
interest in the project.
The Group’s interest in Melody Dairies is accounted using the equity method in the consolidated
financial statements. As of the reporting date, the Group’s investment is represented by its share of
assets under construction, cash and related working capital amounts to an equity accounted total of
$10,485,000, net of $24,000 in equity accounted operating losses. The Group’s contribution to capital
commitments relating to the continuing construction of the facility is disclosed in Note 26
Associates are entities over which the Group has significant influence but not control or joint control.
Investments in associates are accounted for using the equity method. Under the equity method, the
share of the profits or losses of the associate is recognised in profit or loss and the share of the
movements in equity is recognised in other comprehensive income. Investments in associates are
carried in the statement of financial position at cost plus post acquisition changes in the Group’s
share of net assets of the associate. Goodwill relating to the associate is included in the carrying
amount of the investment and is neither amortised nor individually tested for impairment. Dividends
received or receivable from associates reduce the carrying amount of the investment.
The Group discontinues the use of the equity method upon the loss of significant influence over the
associate and recognises any retained investment at its fair value. Any difference between the
associate's carrying amount, fair value of the retained investment and proceeds from disposal is
recognised in profit or loss.
52
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
12. Intangible assets
Goodwill on acquisition, at cost
Total intangible assets
Consolidated
2019
$'000
2018
$'000
1,907
1,907
1,907
1,907
There were no acquisitions of controlled entities in 2019 (2018: None).
Impairment assessment
Goodwill is allocated to the tuna oil cash-generating unit which is based on the controlled entities’
principal activities.
During the 31 July 2019 financial year, the Company assessed the recoverable amount of goodwill
relating to the tuna oil segment and determined that goodwill is not impaired. The recoverable amount
of the cash-generating unit, being the assets of the cash-generating unit and goodwill, was assessed
by reference to the cash-generating unit’s value-in-use. Value-in-use is calculated based on the
present value of cash flow projections over a 5 year period approved by the Board of Directors. The
cash flows are discounted using a rate of 12% and 2% annual growth rates. Management believes
that any reasonable possible change in key assumptions on which recoverable amount is based would
not cause the aggregate carrying amount of the cash generating unit to exceed its recoverable
amount.
13. Trade and other payables
Current
Trade creditors
Sundry creditors and other accruals
14. Interest Bearing Liabilities
Current interest bearing liabilities
Non-current interest bearing liabilities
Assets pledged as security
7,967
4,550
12,517
1,473
11,986
13,459
5,984
1,837
7,821
450
3,737
4,187
The interest bearing liabilities are secured by a first mortgage over the investment in Melody Dairies
(with a carrying value of $10.461m), land and buildings (with a carrying value of $4.717m), as well as
a general charge over Group assets.
53
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
15. Provisions
Aggregate employee entitlements:
Current
Non-current
Total employee entitlements
16. Issued capital
(a) Issued and paid up capital
Consolidated
2019
$'000
2018
$'000
603
61
664
599
20
619
165,181,696 (2018:165,181,696) fully paid ordinary
shares
Total contributed equity
32,920
32,920
32,920
32,920
The Company has issued share capital amounting to 165,181,696 ordinary shares of no par value.
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in
proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to
one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.
(a) Movement in ordinary shares
There were no movements in issued capital during the financial period.
Rights to capital
At the reporting date there were 911,536 performance rights offers whose conditions had been
met, entitling recipients to one share per right, which vest in 2019, 2020 or 2021, and an
additional 405,740 performance rights available, subject to meeting relevant conditions
(b) Capital management
The Company’s objective in managing capital is to continue to provide shareholders with attractive
investment returns and ensure that the Company can fund its operations and continue as a going
concern.
The Company’s capital consists of shareholders’ equity plus net debt. The movement in equity is
shown in the Consolidated Statement of Changes in Equity. At 31 July 2019 gross debt was
$13,459,000 (2018: $4,187,000).
There are no externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or raise debt.
54
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Consolidated
2019
$'000
2018
$'000
17. Reserves
The foreign currency translation reserve records exchange differences arising on translation of the
financial statements of foreign subsidiaries.
Foreign currency translation
Total
(166)
(166)
(158)
(158)
18. Parent company information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Total equity
Net profit for the period (principally transactions
with subsidiaries) before other comprehensive
income
Total comprehensive income for the period
2019
$'000
2018
$'000
5,899
22,063
71
22,065
27,962
22,136
189
-
189
1,176
-
1,176
27,773
20,960
32,920
(5,147)
27,773
32,920
(11,960)
20,960
9,910
9,910
236
236
Earnings per share (cents per share)
6.0c
0.14c
55
Country of
Incorporation
Percentage Owned
2018
2019
%
%
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Controlled entities:
Clover Corporation Ltd Employee
Incentive Plans Trust
Nu-Mega Lipids Pty Limited
Nu-Mega Ingredients Pty Limited
Subsidiaries:
- Nu-Mega Ingredients Limited
- Nu-Mega Ingredients Limited
- Nu-Mega Ingredients (NZ)
Limited
Australia
Australia
Australia
United
Kingdom
United States
of America
New Zealand
- Nu-Mega Ingredients NL B.V.
Netherlands
Contingent liabilities
There are no contingent liabilities at the reporting date.
19. Reconciliation of cash flow
Reconciliation of cash flow from operating
activities to operating profit
Profit for the period
Non cash items :
- Amortisation and depreciation
Change in assets and liabilities, net of the effects of
purchase of subsidiaries
(Increase)/Decrease in receivables
(Increase)/Decrease in other assets
(Increase)/Decrease in inventories
(Decrease)/Increase in payables
(Decrease)/Increase in deferred tax liabilities
Decrease/(Increase) in deferred tax assets
(Decrease)/Increase in current tax liabilities
(Decrease)/Increase in employee entitlements
Net cash inflow/(outflow) from operating activities
100
0
100
100
100
100
100
0
100
100
100
100
100
0
Consolidated
2019
$ '000
2018
$ '000
10,101
7,588
409
701
(3,082)
(242)
(958)
(1,350)
(120)
350
1,130
64
4,081
(3,189)
(302)
(7,913)
4,689
0
(748)
1,699
45
4,791
56
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
20. Earnings per share
The following reflects the income and share data used in the calculation of basic and diluted earnings per
share:
2019
2018
$ 000
$ 000
(a) Reconciliation of earnings to net profit or loss
Profit attributable to members of the parent entity
10,101
7,588
Earnings used to calculate basic and diluted EPS
10,101
7,588
(b) Weighted average number of ordinary shares outstanding
during the period used in the calculation of basic earnings per
share
165,181,696
165,181,696
(c) Weighted average number of ordinary shares outstanding
during the period used in the calculation diluted earnings per
share
166,498,972 165,181,696
(d) Basic earnings per share (cents per share)
6.12c
4.59c
(e) Diluted earnings per share (cents per share)
6.07c
4.59c
21. Auditor's remuneration
Remuneration of the auditor of the parent
entity in respect of:
- Auditing and reviewing the financial
reports of the Company and the
controlled entities
- Taxation structuring and compliance services
22. Related party transactions
(a) Ultimate parent entity:
$
$
93,000
29,975
122,975
92,000
8,853
100,853
Clover Corporation Limited is the ultimate parent entity of the consolidated entity.
(b) Ownership interests:
Information in relation to ownership interest in controlled entities is provided in Note 18.
57
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
23. Key management personnel compensation
(a) Names and positions held in the consolidated entity of key management personnel in office at any
time during the period were:
Name
Directors
R A Harrington
G A Billings
P J Davey
I D Glasson
C L Hayman
Dr M J Sleigh
Executive KMP
P A Sherman
Position
Non-Executive Chairman
Non-Executive Director
Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Financial Officer and Company Secretary
Key management personnel remuneration has been included in the Remuneration Report section
of the Directors’ Report. The table below summarises the total compensation:
Short-term benefits
Long-term benefits
(b) Performance rights:
2019
$
1,299,313
1,127,574
2,426,887
2018
$
1,283,202
571,120
1,854,322
There were 732,196 Performance Rights offers available to key management personnel whose
conditions have been met as at 31 July 2019, which vest during 2019, 2020 or 2021. There were an
additional 325,320 Performance Rights offers available to key management personnel, subject to
meeting relevant conditions.
(c) Shareholding:
Directors
R A Harrington
G A Billings
P J Davey
I D Glasson
C L Hayman
Dr M J Sleigh
Balance
31 July
2018
Shares
Purchased
& (Sold)
Balance
31 July
2019
322,748
50,000
23,454
40,000
200,000
312,397
111,003
-
-
20,000
-
-
433,751
50,000
23,454
60,000
200,000
312,397
948,599
131,003
1,079,602
58
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
24. Management of financial risk
The consolidated entity's principal financial instruments consist of cash, deposits with bank, accounts
receivable, payables and borrowings.
Financial risk management policies
The consolidated entity manages its exposure to key financial risks, including interest rate and
currency risk in accordance with the consolidated entity's financial risk management policies. The
majority of sales are transacted in US dollars and Australian dollars. The objective of the policies is to
support the delivery of the consolidated entity's financial targets whilst protecting future financial
security.
Primary responsibility for identification and control of financial risks rests with the audit and risk
committee under the authority of the board. The board reviews and agrees policies for managing each
of the risks identified below, including the review of credit risk policies and future cash flow
requirements.
Specific financial risk exposures and management
The main risks arising from the consolidated entity's financial instruments are interest rate risk, foreign
currency risk, price risk, credit risk and liquidity risk. Interest rate risk is not significant given the
consolidated entity has minimal borrowings. The consolidated entity uses different methods to
measure and manage different types of risks to which it is exposed. These include monitoring levels
of exposure to foreign exchange risk and assessments of market forecasts for foreign exchange rates.
Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk
and liquidity risk is monitored through the development of future rolling cash flow forecasts.
(a) Foreign currency risk
As a result of the consolidated entity having cash balances, trade receivables and trade payables
denoted in foreign currency, the consolidated entity's statement of financial position can be affected
by movements in the relevant exchange rates relative to the Australian dollar. The consolidated entity
utilises foreign exchange hedges to manage its exposure to currency fluctuations arising from the
purchase of goods and services in foreign currency.
At 31 July 2019, the consolidated entity had the following financial assets and liabilities denominated
in foreign currency.
Financial assets
Cash and cash equivalents
Trade and other receivable
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
2019
$'000
2018
$'000
3,414
15,165
18,579
818
11,597
12,415
(2,797)
(2,797)
(1,761)
(1,761)
At 31 July 2019, had the Australian Dollar moved as illustrated in the table below with all other
variables held constant, profit after tax and equity would have been affected as follows:
59
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
24. Management of financial risk (continued)
Foreign exchange movement
Change in Profit
USD/AUD + 5%
USD/AUD - 5%
EURO/AUD + 5%
EURO/AUD - 5%
GBP/AUD + 5%
GBP/AUD - 5%
NZD/AUD + 5%
NZD/AUD - 5%
Post Tax Profit
Higher/(Lower)
2019
$'000
2018
$'000
Change in Equity
Higher/(Lower)
2019
$'000
2018
$'000
(607)
671
(499)
548
(607)
671
(499)
548
(47)
52
0
0
(85)
94
(5)
5
(1)
1
(5)
6
(47)
52
0
0
(85)
94
(5)
5
(1)
1
5
6
Significant assumptions used in the foreign currency exposure sensitivity analysis include:
Reasonable estimates of movements in foreign exchange rates were determined based on a
review of the last two years’ historical movements and economic forecasters’ expectations.
The reasonable movement of 5% was calculated by taking the spot rates for each currency
as at reporting date, moving this spot rate by 5% and then re-converting the foreign currency
into Australian dollars at the revised spot rate.
The net exposure at reporting date is representative of what the consolidated entity was, and
is expecting, to be exposed to in the next twelve months from reporting date.
(b) Price risk
The consolidated entity's exposure to commodity and price risk is considered minimal. There are
annual fixed price purchase contracts in place for forecast raw material requirements. From time to
time it may be necessary to purchase raw materials from outside of the agreements.
(c) Credit risk
Credit risk arises from the financial assets of the consolidated entity, which comprise cash and cash
equivalents, trade and other receivables. The consolidated entity's exposure to credit risk arises from
potential default of the counter party, with a maximum exposure equal to the carrying amount of the
financial assets.
The consolidated entity trades only with recognised, creditworthy third parties, and as such collateral
is not requested nor is it the consolidated entity's policy to securitize its trade and other receivables.
60
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
24. Management of financial risk (continued)
It is the consolidated entity's policy that all customers who wish to trade on credit terms are subject to
credit verification procedures including an assessment of their independent credit rating, financial
position, past experience and industry reputation. Risk limits are set for each individual customer in
accordance with parameters monitored by the CEO.
These risk limits are regularly monitored. A breakdown of receivables showing those within/out of
terms is shown below. Receivable balances are monitored on an ongoing basis to minimize the
occurrence of bad debts.
Trade receivables as at 31 July 2019
Trade receivables:
Within terms
Over terms
Total
Consolidated
2019
$'000
2018
$'000
17,410
18
17,428
13,543
367
13,910
For the remaining financial assets there are no significant concentrations of credit risk within the
consolidated entity and financial instruments are spread amongst a number of AAA rated financial
institutions.
(d) Liquidity risk
Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s
subsequent ability to meet these obligations to repay their financial liabilities and other obligations as
and when they fall due.
The consolidated entity's objective is to maintain a balance between continuity of funding and flexibility
through the use of cash balances, borrowings, working capital and leasing.
Maturity analysis of financial assets and liability based on management's expectations
The risk implied from the values shown in the tables below, reflects a balanced view of cash inflows
and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from
the financing of assets used in the consolidated entity’s ongoing operations such as property, plant,
equipment and investments in working capital.
61
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
24. Management of financial risk (continued)
Consolidated
Realisable cash flows from
financial assets
Cash and cash equivalents
Trade and other receivables
Anticipated cash inflows
Financial liabilities and
obligations due for payment
Trade and other payables
Interest bearing liabilities
Leasing commitments
Anticipated cash outflows
Net inflow/(outflow)
(e) Interest Rate Risk
Balance as at
31 July 2019
Less
than 1
year
1-5
years
$'000
$'000
$'000
Over 5
years
$'000
8,271
18,446
26,717
8,271
18,446
26,717
-
-
-
-
-
-
(12,517)
(13,459)
(251)
(26,227)
490
(12,517)
(1,473)
(131)
(14,121)
12,596
-
(6,341)
(120)
(6,461)
(6,461)
-
(5,645)
-
(5,645)
(5,645)
The consolidated entity’s primary interest rate risk arises from long-term borrowings. The consolidated
entity’s bank loans outstanding, totalling $13,459,000 (2018: $4,187,000) are principal and interest
payment loans, bearing interest at a weighted average current annual rate of 4.33%.
(f) Fair value
All assets and liabilities recognised in the statement of financial position, whether they are carried at
cost or at fair value, are recognised at amounts that represent a reasonable approximation of fair
value, unless otherwise stated in the applicable notes.
The carrying amounts of cash and bank balances, other receivables and other payables approximate
their fair values due to their short term nature.
62
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
25. Operating segments
Identification of reportable segments
The consolidated entity operates in the industry of manufacturing tuna oil and encapsulated products
in Australia. Whereas in the previous financial year, a treasury segment was separately disclosed, the
Chief Executive Officer and the Board of Directors consider that there is no true separation of the
treasury function from the primary business and operating segment of the Group, nutritional oil and
microencapsulated powders. Financial information about the business as a whole is reported to and
reviewed by the Chief Executive Officer and Board of Directors on a monthly basis, in order to assess
performance and determine the allocation of resources.
Geographical information
Revenues from external customers by domestic and export location of operations and information
about its non-current assets by location of assets is shown in the following table.
Revenue from
external customers
2018
$'000
2019
$'000
Non-current assets
2018
$'000
2019
$'000
Australia / New Zealand
Asia
Europe
Americas
Total
38,713
28,101
5,944
3,924
37,650
18,485
4,111
2,715
76,682
62,961
18,145
-
-
-
18,145
7,970
-
-
-
7,970
During the financial year there were 2 customers who represented 41% and 20% of total sales
respectively (2018: 38% and 19% respectively).
Greater than 90% of total sales revenue is generated by the export market.
63
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 JULY 2019
Consolidated
2019
$’000
2018
$’000
26. Capital and leasing commitments
(a) Operating lease commitments
Operating leases primarily related to premises, contracted for but not
capitalised in the financial statements:
Payable:
Not later than 1 year
Later than 1 year but not later than 5 years
Total operating leases
131
120
251
127
234
361
(b) Capital commitment
Melody Dairy capital commitment
Payable not later than 1 year
3,654
3,654
0
0
26. Events subsequent to reporting date
Subsequent to the Reporting Date, 1,128,408 shares were issued by the consolidated entity to the
Clover Corporation Ltd Employee Incentive Plans Trust under the terms of the Long Term Incentive
(LTI).
Apart from the above, no matter or circumstance has arisen since 31 July 2019 that has significantly
affected, or may significantly affect the consolidated entity's operations, the results of those
operations, or the consolidated entity's state of affairs in future financial years.
27. Contingent liabilities
There are no contingent liabilities at the reporting date.
64
CLOVER CORPORATION LIMITED
ABN 85 003 622 866
DIRECTORS’ DECLARATION
The Directors of Clover Corporation Limited declare that in their opinion:
(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 consolidated entity’s financial position as at 31 July 2098
and of its performance for the period ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards
as disclosed in note 1; and
(c) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts
as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the directors
in accordance with section 295A of the Corporations Act 2001 for the financial year ending 31 July
2019.
This declaration is made in accordance with a resolution of the Board of Directors.
Rupert Harrington
Chairman
Melbourne
Date: 20 September 2019
65
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLOVER CORPORATION LIMITED
REPORT ON THE FINANCIAL REPORT
Opinion
We have audited the accompanying financial report of Clover Corporation Limited (the Company), which comprises
the consolidated statement of financial position as at 31 July 2019, and the consolidated statements of profit or loss
and other comprehensive income, changes in equity, and cash flows for the year then ended, notes comprising a
summary of significant accounting policies and other explanatory information, and the Directors’ Declaration of the
Company and the consolidated entity (the Group) comprising the Company and the entities it controlled at the year’s
end or from time to time during the financial year.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s consolidated financial position as at 31 July 2019 and of its consolidated
financial performance for the year ended on that date; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance about whether the financial report is free from material misstatement. Our responsibilities under those
standards are further described in the Auditor’s Responsibility section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current year. These matters were addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
Key audit matter – Inventory existence and
valuation
As at 31 July 2019, the carrying value of inventory
was $27,681,000 (2018: $19,768,000) as disclosed in
note 8 of the financial report.
The Group’s manufacturing planning processes
consider forecast customer demand and access to
materials from a range of suppliers. These factors
impact on the quantity of raw material and finished
goods inventory on hand, and necessitate minimum
inventory levels to ensure that the Group’s sales
objectives continue to be met.
How our audit addressed this matter
Our procedures included but were not limited to:
attending and observing year-end inventory counts
performed by Management at locations of significance;
testing the accuracy of inventory records for a sample of
products to check descriptions, quantities and the
recording of inventory movements;
evaluating the design of processes to capture the costs of
purchase and conversion and those other costs incurred
in bringing inventories to their present location and
condition;
66
PKF Melbourne
Audit & Assurance Pty Ltd
ABN 75 600 749 184
Liability limited by a scheme
approved under Professional
Standards Legislation
Melbourne
Level 12, 440 Collins Street
Melbourne VIC 3000 Australia
p
f
+61 3 9679 2222
+61 3 9679 2288
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and
does not accept any responsibility or liability for the actions or inactions of any individual member of correspondent firm or firms.
For office locations visit www.pkf.com.au
Key audit matter – Inventory existence and
valuation (continued)
How our audit addressed this matter (continued)
A standard cost system is used to account for inputs
to inventory. Management conducts regular analysis
to determine the cost of inventory, and whether
adjustment to the carrying amount is required to
reflect net realisable value, if that is lower than cost.
Inventory is the most significant of the Group’s
assets, and accordingly we considered it a Key Audit
Matter.
testing on a sample basis the reasonableness of standard
costs compared to actual costs of purchase and
production;
considering the turnover cycle of inventory, assessing the
allocation of purchase price and efficiency variances; and
challenging the adequacy of adjustments made to
inventory for it to be measured at the lower of cost and
net realisable value on the basis of actual and forecast
sales activity, and Management’s assessment of
qualitative factors.
Key audit matter – Revenue recognition
How our audit addressed this matter
The Group’s sales revenue amounted to $76,682,000
during the year (2018: $62,961,000). Note 1(l)
Revenue describes the accounting policies applicable
to distinct revenue streams, noting that revenue
from the sale of goods, after adjusting for discounts
or allowances, is recognised upon the delivery of
goods to customers. Shipments dispatched but not
yet delivered to customers are classified as goods in
transit inventories.
On the basis of the significance of the account and
the processes used to determine the recognition
point, we have considered revenue recognition as a
Key Audit Matter.
Key audit matter – Investment in associate (Melody
Dairies)
During the year a controlled entity entered into a
limited partnership with three other parties for the
purpose of undertaking construction and operation
of a manufacturing facility in New Zealand. The
objective of the project is to enable expansion of the
Group’s capacity to deliver its products to the
market, through its 35% equity interest in the
project.
The Group’s investment is initially recognised at cost
under the equity method, and the carrying amount is
thereafter adjusted for the Group’s share of the
profit or loss of the investee, as described in note 11.
The equity accounted carrying amount of the
investment is also disclosed in note 11 as
$10,461,000 and note 14 includes related amortised
bank borrowings secured by the Group’s investment.
On the basis of the significance of the investment and
its related borrowings we have considered this a Key
Audit Matter.
Our procedures included but were not limited to:
evaluating a sample of contracts, identifying contracted
performance obligations, and agreeing revenue amounts
to the records accumulated as inputs to the financial
statements, including supporting billing systems and bank
records; these procedures enabled our assessment of the
values recorded and the timing of revenue recognition
aligned to fulfilment of the Group’s performance
obligations, transferred at a point in time;
evaluating the cut-off process and its reliability to fairly
account for dispatches not yet transferred to customers
at the reporting date and the recognition of revenue in
accordance with the Group’s accounting policies; and
assessing the consistency of the Group’s accounting
policies in respect of revenue recognition with the criteria
prescribed by the applicable standard, AASB 15 Revenue
from contracts with customers.
How our audit addressed this matter
Our procedures included but were not limited to:
obtaining a detailed understanding of the terms and
conditions of the partnership arrangement, and
evaluating the appropriateness of Management’s
assessment that the nature of the Group’s participation
in the project is that characterised as an investor of
significant influence;
validating the accounting treatment of the investment
under the equity method in accordance with AASB 128
Investment in Associates and Joint Ventures;
inquiring of Management and assessing whether there
are any impairment indicators obligating the Group to
perform an impairment analysis under AASB 136
Impairment of Assets; and
assessing the appropriateness of the disclosures included
in note 11 and the validity of classifying borrowings
between current and non-current liabilities as disclosed
in note 14.
67
Other Information
Other information is financial and non-financial information in the annual report of the Group which is provided in
addition to the financial report and our Auditor’s Report thereon. The directors are responsible for the other
Information in the annual report.
Our opinion on the financial report does not cover the other Information and, accordingly, we do not express any
form of assurance conclusion thereon, with the exception of our opinion on the Remuneration Report.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained
in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the other information
we obtained prior the date of the Auditor’s Report, we are required to report that fact. We have nothing to report in
this regard.
Directors’ responsibility for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error. In Note 1, the Directors also state, in accordance with
Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with
International Financial Reporting Standards.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do
so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors.
We conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events and conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our opinion on the financial report. Our conclusions are based on the audit
68
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those that were of most significance in the audit of
the financial report of the current year and are therefore key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
REPORT ON THE REMUNERATION REPORT
Opinion
We have audited the Remuneration Report included in pages 13 to 20 of the Directors’ Report for the year ended 31
July 2019. In our opinion, the Remuneration Report of Clover Corporation Limited for the year then ended complies
with Section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
PKF
Melbourne, 20 September 2019
Steven Bradby
Partner
69
AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF CLOVER CORPORATION LIMITED
In relation to our audit of the financial report of Clover Corporation Limited for the year ended 31 July 2019, to the best
of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the
Corporations Act 2001 or any applicable code of professional conduct.
PKF
Melbourne, 20 September 2019
Steven Bradby
Partner
PKF Melbourne
Audit & Assurance Pty Ltd
ABN 75 600 749 184
Liability limited by a scheme
approved under Professional
Standards Legislation
Melbourne
Level 12, 440 Collins Street
Melbourne VIC 3000 Australia
p
f
+61 3 9679 2222
+61 3 9679 2288
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and
does not accept any responsibility or liability for the actions or inactions of any individual member of correspondent firm or firms.
For office locations visit www.pkf.com.au
70
CLOVER CORPORATION LIMITED
ABN: 85 003 622 866
Additional ASX Information
Additional information required by the Australian Securities Exchange Listing Rules and not disclosed
elsewhere in this report.
Shareholdings as at 31 August 2019
Substantial shareholders
The number of shares held by substantial shareholders and their associates is set out below:
Washington H. Soul Pattinson and Company Limited
Brickworks Limited1
35,787,743 ordinary shares
35,787,743 ordinary shares
1 Details included on substantial shareholder notice dated 18 November 2013. Shares held by Brickworks Limited represent
a technical relevant interest as a result of Brickworks Limited’s shareholding in Washington H. Soul Pattinson & Company
Limited.
Distribution of shareholders as at 31 July 2019
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total Number of Holders
Total number of holders of less than a marketable parcel, being 216
shares @ 2.32
608
1,154
713
816
105
3,396
88
Voting rights
On a show of hands every Shareholder present in person or by proxy at a general meeting shall have
one vote.
Where a poll is demanded, every Shareholder present in person or by proxy at a general meeting
shall have one vote for every ordinary share held.
71
CLOVER CORPORATION LIMITED
ABN: 85 003 622 866
ASX Additional Information - Continued
Twenty largest shareholders as at 31 July 2019*
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Washington H Soul Pattinson & Company
UBS Nominees Pty Ltd
JP Morgan Nominees Australia Ltd
Citicorp Nominees Pty Ltd
Evelin Investments Pty Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Ltd
National Nominees Ltd
HSBC Custody Nominees (Australia) Ltd A/C 2
BNP Paribas Noms Pty Ltd
Incani & Papadoppoulos Super Pty Ltd
Mr Peter Howells
BNP Paribas Noms Pty Ltd
Mr Garrie Ellice
Mr Pei Yin Foo
Connaught Consultants (Finance) Pty Ltd
Sandhurst Trustees Ltd
Ms Nina Tschernykow
Ganesh Super Fund A/C
Bellite Pty Ltd
Total top 20 shareholders
Total number of shares on issue
* As shown on the register, beneficial holdings may differ.
Securities quoted by the ASX
Number of
Fully Paid
Ordinary
Shares
Percentage
of Issued
Ordinary
Shares (%)
35,787,743
16,335,966
10,621,059
8,828,289
7,550,000
6,864,487
5,361,166
5,026,613
3,026,789
2,563,528
2,017,500
1,500,000
1,167,723
1,045,738
1,018,000
1,000,000
958,652
858,881
850,816
719,600
21,67
9.89
6.43
5.34
4.57
4.16
3.25
3.04
1.83
1.55
1.22
0.91
0.71
0.63
0.62
0.61
0.58
0.52
0.52
0.44
113,102,550
165,181,696
68.47%
All of the Company’s issued ordinary shares are quoted by the ASX under the code CLV.
Register of securities
New South Wales
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone: 1300 850 505
72