arguably the best
raw fish in the world.
ANNUAL REPORT 2019
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CLEAN SEAS SEAFOOD LIMITED
ABN 61 094 380 435
our Story:
ocean to Plate
Clean Seas is the global leader in
the full cycle breeding, production
and sale of Yellowtail Kingfish and
is renowned world-wide for its
exceptionally high quality fish.
Our company is recognised for
innovation in Yellowtail Kingfish
farming and has become the largest
producer of aquaculture Yellowtail
Kingfish outside Japan.
Our customers appreciate the
consistently high quality of our fish
and our reliability in supplying fresh
fish to markets all over the world
52 weeks of the year.
Contents
WHO
WE ARE
02
WHAT
WE DO
04
CHAIRMAN’S
REPORT
11
MANAGING
DIRECTOR &
CEO REPORT
12
20 YEAR
OVERVIEW
10
BOARD OF
DIRECTORS
15
OUR
STRATEGY
STRATEGIC
OBJECTIVE
FINANCIAL
STATEMENTS
16
18
22
OUR VISION
“To be a global
leader in aquaculture,
inspiring culinary
experiences around
the world through
our sustainable
premium seafood.”
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
1
farmed Yellowtail Kingfish Production*
5% ASIA
14% NORTH AMERICA
17% EUROPE
CLEAN SEAS
60%
PORT
LINCOLN S.A.
* Outside Japan.
2
WHO WE ARE
our location
our Hatchery and farms are located on
South australia’s Spencer Gulf. the location
is critical to the outcomes we have been
able to achieve for our fish, with the proximity
to the cold waters of the Southern ocean
there’s a constant movement of oceanic
water coming in to the Gulf. the Gulf is huge,
spanning more than 300km. this vast space
allows for constant flushing, through our
farming environment, into the Gulf and then
back out again. due to low rainfall in the
region, the Gulf has low amounts of organic
materials, herbicides, pesticides, and other
pollutants from land farming.
This unique location allows Clean Seas
to produce our mighty Spencer Gulf
Hiramasa Kingfish.
our Business
ESTABLISHED IN
2000, LISTED ON
THE ASX IN 2005
PRODUCED
3,500 TONNES
FY19
HIGHLY AWARDED
& SUSTAINABLE
CREDENTIALS (ASC)
PREMIUM
BRANDS, SPENCER
GULF HIRAMASA
KINGFISH AND
SensoryFresh
20 YEAR
BREEDING
MANAGEMENT
PROGRAM
BEST PRACTICE
FREEZING
TECHNOLOGY
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
3
WHAT WE DO
Clean Seas Yellowtail
Kingfish are indigenous
to the remote crystal
clear waters of the
Spencer Gulf
as the global leader in full cycle breeding
and farming of Yellowtail Kingfish, Clean Seas
is committed to continual innovation and
development in all aspects of aquaculture
and business process from Hatchery to farm
to Processing to our Customers. all with the
view to providing the highest quality fish
possible while improving sustainability
into the future.
Hatcheries
Marine Farms
Harvesting
Processing
-95°c
SensoryFresh
Markets
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CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
5
WHAT WE DO
Hatcheries
The mighty Spencer Gulf Hiramasa
Kingfish story starts in Arno Bay,
where life begins for all our fish.
Here, Breeding & Hatchery manager,
Adam Miller, and his team of dedicated
scientists tend to this delicate process.
Each year the hatchery produces over
one million fingerlings from the unique
broodstock that are indigenous to the
waters of the Spencer Gulf. The care,
time and effort that our team put in
at this vital stage, ensure these little
fish flourish and get the best possible
start in life.
At 75 days old our fish are ready to go
to sea. The fingerlings, now weighing
up to 35 grams, can be moved to the
pristine, icy waters off Port Lincoln and
are delivered by helicopter into open
sea pens.
6
WHAT WE DO
marine farms
While at sea our fish continue to
be fed scientifically formulated
feeds which are nutritionally balanced
for optimal health and growth.
Our practices are sustainable and
certified by the Aquaculture
Stewardship Council (ASC).
Safeguarded against predators and
encountering minimal stress along the
way, our fish remain at sea for around
24 months and are humanely harvested
once they reach the highly sought after
sashimi grade size 4+kg size.
Pristine Waters
Feeding
Fish Husbandry
& Bathing
Continual R&D
and compliance
with ASC
Certification
Predator Control
Net Management
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
7
WHAT WE DO
Processing
Our Royal Park Processing Plant in
Adelaide processes all fish for the
Australian and International markets.
Fresh Spencer Gulf Kingfish is delivered
to customers around the world twice
per week – 52 weeks per year and is in
restaurants in Europe, North America
and Asia within four days of harvest.
SensoryFresh (premium frozen)
product is shipped around the
world in specialist -35ºC refrigerated
containers and has achieved a clear
product advantage versus all other
frozen Kingfish offerings.
This provides end-to-end quality
control from egg – to-customer,
thus increasing the Company’s
market opportunities and delivering
significant cost savings. While
Clean Seas remains focussed on its
ability to deliver the highest quality
fresh Yellowtail Kingfish product
globally, the flexibility provided by
liquid nitrogen rapid freezing enables
Clean Seas to meet customer demand
for premium quality frozen product
and help smooth out any imbalances
between the rate of biomass growth
and the ongoing expansion of market
demand as the Company continues
to rapidly increase production with
double digit growth.
8
Highly
awarded and
sustainable
Australian Food Awards
“Best Fish” 2016, 2017 & 2018
Delicious Produce Awards 2018
Gold Medal Winner “From the Sea”
WHAT WE DO
markets
Food SA Industry Awards
2018 Primary Producer of the Year
Gold Standard Accreditation
in Sustainable Aquaculture
Our Spencer Gulf Hiramasa Kingfish brand
is featured on menus in many of the best
restaurants around the world including
Melbourne, Sydney, Milan, New York City,
London, Vienna, Barcelona, Hamburg, Lisbon,
Oslo, Zurich, Paris, Rome, Frankfurt, Munich,
Los Angeles, Toronto, Venice, Berlin, Geneva,
Shanghai, Hong Kong, Bangkok and many more.
Today, fresh product sales account for 80%
of Clean Seas business, and 91% of Clean Seas
sales are currently in Australia and Europe which
are themselves predominantly fresh markets.
North America is the largest Kingfish market,
around 10 times the size of Australia, and Asia
is the fastest growing, and both of these
markets are over 76% frozen.
Clean Seas SensoryFresh represents significant
product advantages over the current market
frozen offerings. Recent product testing with
a leading European distributor showed
SensoryFresh is vastly superior to the Japanese
Hamachi product. Our “Vision 2025” strategic
review has identified a major global market
opportunity with SensoryFresh that allows us
to maintain premium pricing of Spencer Gulf
Hiramasa Kingfish and extend our reach with
a range of product offerings including whole
fish, fillets, portions and value added products
for both Foodservice and Retail channels.
Utilisation of the frozen product supply chain
with SensoryFresh will enable Clean Seas to
reach new markets and exploit channels around
the world that are not easily accessible with
fresh fish. The cost advantages of sea freight
versus air freight allows for more competitive
pricing to enable profitable volume growth in
global markets.
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
9
20 Year
overview
IPO & Close
SBT Lifecycle
Feed Crisis sales drop from
2,800t to 600t as biomass
declines to 478t
Transformation &
foundation for growth
2005 — 2007
2010 — 2013
2016 — Present
2008 — 2010
2014 — 2016
Strong Growth
to 2,800t
Feed issues resolved
and market recovery
60,000
Market Cap $152m
Market Cap $70m
3000
Farm Gate
$7/kg
Farm Gate
$13/kg
2000
tonnes
(t)
1000
0
Market Cap $7m
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Biomass Asset ($)
Total Sales Volume (t)
$
40,000
20,000
0
10
Chairman’s
Report
i am pleased to present the 2019
annual Report for Clean Seas Seafood
limited (aSX: CSS). as i reflect on a year
that has seen us further improve our
position as one of the world’s leading
producers of premium Yellowtail
Kingfish, i am moved to comment
on the journey this Company has
undertaken and the significant progress
made despite considerable hardship.
Research Company
Clean Seas original market proposition
was to close the life cycle of the
Southern Bluefin tuna. my first shares
were acquired in fact in June 2007
for $1.40 each. i went on to convince
my then employer, Simplot australia,
to buy approximately 5 million shares
to become a substantial shareholder.
i mention this because i want to make
an important point; the Company both
you and i invested in then is not the
Company we are invested in today.
the share price in those days was
underwritten by the promise of a
technological breakthrough, it was
in fact a speculative share.
Feed Crisis
in parallel with the Southern Bluefin
tuna, the Company also invested
in Yellowtail Kingfish breeding and
farming which grew rapidly to 2,800
tonnes of sales in 2010. it was then the
company was supplied deficient feed,
the story about which i’m sure you are
familiar. at the culmination of these
events the Company had raised
$150 million and had a market
capitalisation of $7 million.
Recovery
When some of the current management
and Board began to be employed by the
Company, the sales volume was back
down to a disastrous 500 tonnes. So, in
fact this is where today’s manifestation
of the Company began and now with
sales volumes approaching 3,000 tonnes
again and achieving double digit growth
rates, we need to disconnect the
expectations of history and reset
our patience meters over again.
Rebuilding the Fundamentals
it is important to know that since the
current management began with the
Company, the market cap is now greater
than the cumulative capital raising over
this time. that is to say, none of those
recent funds have gone to support
losses but rather to grow the business.
Transformation
the scale we believe we need to
underwrite a sustainable profitable
business capable of paying dividends
is between 5,000 and 6,000 tonnes
of sales and to achieve this level of sales
we must invest considerable amounts
of money into the biomass of fish
we have in the water. in fact, it costs
about $7 million per annum for each
additional 500 tonnes of fish we produce.
over and above that, more fish in the
water means more equipment such as
boats and cages, etc. and to keep the
sales growing at double digit rates we
need to invest strongly in sales and
marketing resources both in australia
and globally. the success of this
investment is also being demonstrated
in significantly better prices being
achieved for the product globally.
Outlook
today the company is an established
and stable aquaculture farmer with
a proven product, Yellow tail Kingfish,
and a growing domestic and
international market. in fact its growth
prospects are significant albeit off a
small base. once the business moves
to a larger operational scale, it will be
a sustainably profitable enterprise.
i understand and acknowledge
shareholders requests for a dividend.
our decision recently to launch a
convertible note offer to current
shareholders which will carry an 8%
interest stream and an 8% discounted
conversion to shares, if so wished,
is a reflection of our recognition
that shareholders do want some
cash return. We were however very
conscious of limiting the potential
dilution of shareholdings and decided
this was a way to do this.
this Company has an exciting future,
the world is only now finding out about
our wonderful product and we now
have the talented people to deliver
and at the best quality possible.
i would like to sincerely thank the
shareholders for their support today and
over the years. i would also owe a debt of
gratitude to the employees of Clean Seas
who make this business great on a daily
basis and finally, thank you to the directors
for their wisdom and energies in guiding
the business throughout the year.
Terry O’Brian
Chairman
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
11
managing
director &
Ceo Report
Clean Seas results for fY19 were
encouraging as we continued to make
solid progress in transforming the
business fundamentals. the Company
again achieved double-digit sales and
revenue growth, higher farm gate prices,
improved underlying profitability and a
significant increase in the positive cash
flow from operations.
our Spencer Gulf Hiramasa Kingfish
remains the market leader in australia
and europe. We saw sales volumes
increase by 13% while sales revenue
grew 16%, supported by continued
improvement in selling prices. as a
demonstration of our progress and
substantiation of our strategic direction,
underlying profits increased 23% and
operating cash flows (excluding the
investment in future biomass) grew 73%.
the growth the Company continues to
achieve, fuelled by fresh funding secured
in early fY20, positions Clean Seas well
to implement its “Vision 2025” strategic
plan and deliver sustainable positive
cash flows.
during 2019 we continued to strengthen
our competitive position in both our
existing and growth markets through
the Company’s Chef activation Program,
and by promoting our SensoryFresh
products in europe, north america
and asia.
Improvement in Sales and Cash Flow
in the Company’s core australian market,
sales volumes increased by 17% for the
year. this reflects new customer growth
from Clean Seas’ ongoing chef activation
program (discussed below), and
recaptured market share from local
competitors. this result is especially
encouraging as we have achieved this
while also increasing farm Gate prices.
the Company continued its push into
international markets and achieved
significant year-on-year volume growth
across all target regions in fY19, with all
regions recording significant volume
growth in fY19. north america increased
by 30% and impressive gains were made
in asia, with volumes up 50% on fY18.
We achieved 4% growth in europe which
was achieved in the context of increased
competition from local land-based farms
who grew their collective sales volumes
to approximately 800 tonnes per annum
albeit with selling prices significantly
below Clean Seas. the Company has
driven this positive result through the
superior quality of its Spencer Gulf
Hiramasa product, its investment in the
Spencer Gulf brand marketing campaign,
the chef activation program and recent
visits to the Clean Seas operations in the
Spencer Gulf by major european
distributors and leading chefs. Clean Seas
is particularly encouraged by the growth
in the european Kingfish market, as it
demonstrates that investment in sales
and marketing is building an increased
awareness of the species and expanding
the Company’s market opportunity.
full year cash receipts increased by
$4.9 million, or 12%, to $45.7 million,
delivering positive cash from operations
of $1.8 million.1
Marketing Investment Yielding Results
the chef activation program continued
in fY19. over 2,200 chefs, who were not
previously using the product were visited
and presented with a whole large
Kingfish in a special presentation pack.
after trial, around 40% of chefs not
previously using Spencer Gulf Hiramasa
Kingfish indicated that they intend to
start buying our Kingfish. We are
beginning to see the impact of this
market education and acceptance in
our sales figures.
Investment in Sales, Marketing
& Leadership
Significant investment continues to be
made in Sales and marketing resources
and programs to support future growth
of the business, particularly in north
america and asia. We have continued
to build the Company’s leadership team
though the recruitment of new or
replacement roles during fY19.
SensoryFresh
Clean Seas introduced its SensoryFresh
product in april 2018, a frozen product
that uses the Company’s rapid-freezing
technology to freeze fish in just
22 minutes and reach the critical point
of -35°C in less than 50 minutes. this
process allows Clean Seas to capture
the colour, texture, aroma and flavour
of the fish that is traditionally affected
by the freezing process.
Production and shipping of SensoryFresh
products ramped up during the year, with
product launch events europe.
in fY19, premium frozen product sales
volumes increased by 38% at higher farm
Gate prices.
12
1 *(excluding investment in biomass to support growth in sales in future years)
fY19 Performance
Highlights
CASH FLOW FROM
OPERATIONS
73%
UNDERLYING
EBITDA
23%
SALES REVENUE
16%
SALES VOLUMES
13%
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
13
our SensoryFresh (premium frozen
product) positions us well for the north
america and asia markets where the
frozen Kingfish category represents
approximately 76% of the total market,
and validates the Company’s strategic
investment in its world’s best practice
freezing technology to achieve a clear
competitive advantage in these key
growth markets.
Farm Gate Price Growth
in fY19, the Company continued to
increase farm Gate price increases
in australia, north america and asia.
europe farm Gate prices remained
in line with fY18, despite the significant
increase in competitive pressure
from local land-based farms and the
recently introduced eU-Japan free
trade agreement.
Clean Seas’ large fresh farm Gate
prices in north america increased by
24% and asia by 16% while sales also
grew strongly.
the Company’s farm Gate price is
its selling price less processing costs,
freight and handling, sales commissions
and packaging materials, reported on a
whole weight equivalent (WWe) basis.
Growing and Healthy Biomass
net biomass growth of 3,513 tonnes in
fY19 was 6% higher than fY18. total
biomass at 30 June 2019 of 4,136 is 15%
higher than 12 months earlier, reflecting
the investment required to support
current and future sales growth.
the biomass growth positions the
Company well for further sales growth in
fY20 and beyond as Clean Seas continues
to expand sales of Spencer Gulf Hiramasa
Kingfish in global markets.
Farming Expansion – Return to
Fitzgerald Bay
the Company continued to
progress plans to return to farming
at its fitzgerald Bay leases, at the top
of the Spencer Gulf near Whyalla in
South australia.
this move will facilitate further
expansion of the Company’s Spencer
Gulf Hiramasa Kingfish production
with an additional 4,250 tonnes of farm
capacity. importantly, it will also further
improve sustainability practices,
including fallowing of farm sites and
help mitigate and reduce biosecurity
risk through further geographic
14
diversification. the federal Government
has supported this expansion through
a $2.5 million Regional Jobs and
investment Packages grant.
the Company has completed its
initial recruitment of marine operations
employees, secured the necessary
aquaculture leases and licences and
was planning on resuming operations
in mid-2019. a delay has arisen while
the Company engages with the State
Government and local Council to
progress options for the use of the
Point lowly marina. once this has
been finalised the Company will be
in a position to complete its investment,
recruitment of additional staff, and to
commence farming in the next
operational window, which
would be mid-2020.
in the meantime, the Company will
continue to operate at its farm sites
in Port lincoln and arno Bay, and has
offered to redeploy the Whyalla based
employees recruited earlier this year
to these existing sites.
the Company appreciates the support
of all levels of government on this project
and looks forward to securing a licence to
operate out of the Point lowly marina as
soon as possible.
ASC certification
Clean Seas formally received certification
from the aquaculture Stewardship
Council (aSC) in July 2019.
the aquaculture Stewardship Council
is an independent, international non-
profit organisation that manages the
world’s leading certification program
for environmentally responsible and
sustainable aquaculture practices.
Clean Seas was delighted to receive this
important certification which recognises
that customers around the world are
increasingly looking for sustainable and
responsibly farmed seafood products.
this certification has attracted new
distributor contacts to Clean Seas,
particularly in europe and north america,
and further underpins the Company’s
strategy to penetrate these markets.
Feed litigation update
the Company’s action against Gibson’s
ltd in the Supreme Court of South
australia over feed supplied to the
Company and fed to its Yellowtail
Kingfish between december 2008
and July 2012, continued in fY19.
the interlocutory steps in the litigation
have been completed. Both parties
completed discovery and the exchange
of initial and responding experts reports
on liability and quantum.
Gibson’s limited, trading as Skretting
australia, is defending the proceedings
and has denied all liability to the Group.
in february 2019, the Company
announced that the mediation with
Gibson’s ltd was unsuccessful.
in august 2019, the Supreme Court of
South australia granted the Company
leave to file an amended claim in light
of documents disclosed by Gibson’s ltd
in the litigation. By that amended claim,
the Company now alleges that Gibson’s
ltd substituted a proportion of the prime
fish meal required to be included in the
feed with a cheaper meal which the
Company alleges prejudiced the taurine
content of the feeds. the commencement
of the trial has been deferred from
30 September 2019 to 24 february 2020.
Outlook
Clean Seas’ continued pursuit of the
scale required to deliver sustainable
shareholder returns remains on track.
the Company reiterates its confidence
and positive outlook that it is on the right
trajectory to achieve the scale required
to deliver on its “Vision 2025”
i would like to take this opportunity to
thank our all of the Clean Seas team for
their efforts and hard work over this past
year, as well as my fellow Board members
for their guidance and support. the
Company’s operational and financial
achievements are a direct result of their
significant effort and contribution.
i would also like to recognise and thank
our loyal shareholders for their continued
support of our vision to transform Clean
Seas into a global leader in aquaculture,
inspiring culinary experiences around the
world through our sustainable, premium
seafood. i look forward with a sense of
optimism as we continue on this exciting
journey together.
David J Head
managing director & Ceo
Board of
directors
Terry O’Brien(A)
Independent Non-Executive Chairman
(Joined February 2017, appointed
Chairman May 2017)
formerly managing director of
Simplot australia. active in finance
and management roles in the textile
industry for ten years and in the food
industry for over thirty years. Chairs and
directorships in food, Beverage and
Sporting Goods sectors. Chairs the Rem
nom Committee and member of the
audit & Risk Committee.
Nick Burrows(B)
Independent Non-Executive Director
(Joined April 2012)
21 years (1988 – 2009) as Cfo and
Company Secretary of tassal Group
limited, australia’s largest aquaculture
company. Holds a diverse range of
non-executive director and advisory
roles. Chairs the Clean Seas audit
and Risk Committee with substantial
experience in similar roles.
Raelene Murphy(C)
Independent Non-Executive Director
(Joined July 2018)
over 35 years’ in strategic, financial and
operational leadership in both industry
and professional advisory. Specialised in
operational and financial restructuring
including m&a integration. formerly a
managing director at Kordamentha and
Partner in a national accounting firm.
member of the audit & Risk Committee.
Helen Sawczak(D)
Independent Non-Executive Director
(Joined July 2018)
national Ceo of the australia China
Business Council and an advisory Board
member of both the monash migration
and inclusion Centre, and the University
of melbourne Centre for Contemporary
Chinese Studies. over 25 years’ experience
in international commercial law.
Marcus Stehr(E)
Non-Executive Director
(Joined September 2000)
marcus is a founding director and has
over 30 years of hands on experience
in marine finfish aquaculture operations
encompassing tuna, Kingfish and
mulloway. marcus is managing director
of australian tuna fisheries Pty ltd
and holds leadership roles in a number
of industry associations. member
of the Remuneration and nominations
Committee.
David J Head(F)
Managing Director & CEO
(Joined January 2016)
over 30 years experience as a Ceo,
non-executive director and Corporate
advisor in a wide range of industry
sectors in australia, new Zealand, asia
and europe in public and privately
owned companies. this includes Chief
executive roles at Pepsi, lion nathan,
Callum textile Group and leigh
mardon Group.
Rob Gratton(G)
Chief Financial Officer & Joint Company
Secretary (Joined March 2019)
appointed as Chief financial officer
in march 2019 and Joint Company
Secretary in June 2019. over 20 years’
experience in Banking, Corporate
finance and accounting in australia, the
USa and UK , including Cfo & Co Sec
roles at Jurlique and kikki.K, and senior
finance at JP morgan investment Bank
in london and new York.
David Brown(H)
Group Financial Controller
& Joint Company Secretary
(Joined January 2018)
appointed as Group financial Controller
on 9 January 2018 and Joint Company
Secretary on 4 June 2019. over 10 years’
experience in Corporate finance and
accounting roles across breadth of
industries and is a Chartered accountant.
Prior to Clean Seas, held senior positions
at KPmG and Grant thornton specialising
in Corporate finance.
A
B
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CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
15
PRODUCTS
MARKETS
• Global (farmed)
Kingfish market
has grown at an
average of over
10% per annum over
the last 10 years,
yet the species is still
relatively unknown
compared to other
premium seafoods
• Clean Seas has
market leadership in
australia and europe
with strong market
growth potential in
europe where per
capita consumption
rates are less than
10% of australia
• Clean Seas has
very low share in
the largest market
(north america)
and fastest growing
market (asia) and has
recently established
sales and marketing
capability in both,
particularly with
SensoryFresh given
76% of these markets
are frozen
• Clean Seas has a long
established global
distributor network
• farmed Kingfish
is one of the few
seafood species to
sell at a premium
to wild caught
• Hiramasa is
considered the
premium Kingfish
species
• Spencer Gulf
Hiramasa:
– only cold water
farmed Kingfish
outside Japan
– leading full cycle
bred and farmed
Kingfish brand
– Sustainable
proposition not
available to ranched
and wild caught
production
– unique provenance
story
– sensory research
in australia judged
as Best in Class
– “arguably the best
raw fish in the
world”
• SensoryFresh
– liquid nitrogen
freezing technology
provides strong
product advantage
over traditional
frozen processing
• farmed finfish has
the highest efficiency
of any animal protein
except eggs, which
converts feed into
body mass 7 times
more efficiently than
cattle and sheep
OUR STRATEGY
our competitive
advantage and
opportunities
Clean Seas competitive advantage
begins with its unsurpassed cold water
farmed product, the outcome of 20
years of Kingfish farming experience.
The market for Kingfish, and indeed
for sustainably sourced protein is
growing fast, and Spencer Gulf
Hiramasa Kingfish is the leading full
cycle bred and farmed Kingfish brand.
Clean Seas holds market leadership
positions in Australia and Europe, with
access to the largest (North America)
and fastest growing (Asia) Kingfish
markets in the world.
16
BREEDING
& FARMING
SUPPLY CHAIN
PEOPLE
& CULTURE
STAKEHOLDER
& COMMUNITIES
FUNDING
• in house processing
of whole fresh and
value added products
provides end-to-end
control from egg to
customer
• liquid nitrogen
technology provides
scope for further new
product development
• SensoryFresh allows
lower cost shipping
options without
impacting product
quality
• investment in
new executive
team over the past
3 years has provided
the leadership to
profitably grow the
business to achieve
the “Vision 2025”
objectives
• long standing
and positive social
licence with local
Spencer Gulf
communities –
in strong contrast
to other aquaculture
operators in other
parts of the world
• Recent capacity
• Supportive regulatory
building in the global
sales and marketing
organisation will be
key to future growth
• Highly experienced
and deeply passionate
farm and breeding
teams represent a
strong source of
competitive advantage
• High calibre Board
with strong experience
in aquaculture,
food industry and
international business
environment
• High level of
engagement and
support from local,
state and national
governments
• aUS-eU free trade
agreement expected
in the next 24 months
• deeply committed
and loyal group of
7,000+ shareholders
• Supportive and
engaged banking
partner
• Business expected
to be self funding
including investment
required to fund
future biomass
growth from fY22
• Clean Seas expects
to have sufficient
funding after the
current placement
and entitlement issue
to fully implement
its “Vision 2025”
objectives
• “Vision 2025”
financial metrics
at 4,000 and 6,000
tonnes expected to
deliver sustainable
and profitable
returns
• Significant tax
losses will maximise
any funds from
litigation settlement
and future profits
• Clean Seas is the
global leader in full
life cycle breeding
and farming
• 20 years selective
breeding , established
infrastructure and
intellectual property
is a key competitive
advantage and a
significant, sustainable
and economic barrier
to entry
• the cold waters
of the Spencer Gulf
provide a unique truly
pristine environment
for the ocean farming
of Kingfish
• Clean Seas scale
provides opportunity
for automation not
(economically)
available to other
smaller farmers
• Seriola lalandi
(Hiramasa) is native
to the Spencer Gulf
and thrives in this
environment
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
17
STRATEGIC OBJECTIVE
Building scale
around a premium
and sustainable
farming operation
18
SCALE ACTIVATION
2020 – 2025
for the next three years, Clean Seas
will be focused on further increasing
the scale of its operations to become
cash flow sustainable and globally
competitive.
Growth (Markets & Products)
• expand annual sales of ocean farmed
Kingfish by circa 50% to 4,000 tonnes
by fY22, primarily via market share
growth in north america and asia
leveraging SensoryFresh
• Continue Chef activation Programs
(CaP) in selected markets, and
implement a Global trade activation
Program (taP) to support market
expansion and enhance customer
understanding and best utilisation
of Spencer Gulf Hiramasa Kingfish
• adopt a “Whole of fish” approach to
new product development, and leverage
SensoryFresh product capability to
explore in-market reprocessing
Costs of Production
• achieve a sustainable reduction
in the cost of production through
scale, investment in automation
and selective breeding
Funding
• minimise working capital to fund
biomass growth, and the sales and
marketing investment (cash) required
to achieve the targeted levels of
sales growth
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
19
LEVERAGING
SCALE ACTIVATION
2022 – 2025
leveraging the benefits of scale to
be in a position to deliver substantial
returns to its stakeholders.
Growth
• expand annual sales of ocean
farmed Kingfish to 5,000 –
6,000t by 2025
Production Efficiencies
• Realise the scale advantages of
multiple 4,000t farms through
automation and more efficient
operating practices not available
to smaller scale farms
• establish new processing facilities
capable of higher volumes through
large scale automation
Shareholder Value
• delivering growth in shareholder
value, including sustainable
dividend returns
20
CLEAN SEAS SEAFOOD LIMITED
AnnuAl RepoRt 2019
21
Consolidated
financial
Statements
For the year ended 30 June 2019
ABN 61 094 380 435
22
Consolidated Financial Statements
For the year ended 30 June 2019
CONTENTS
Directors’ Report ...................................................................... 24
19 Provisions ..............................................................................................64
Auditor’s Independence Declaration ...................................... 41
20 Employee remuneration .................................................................64
Corporate Governance Statement .......................................... 42
21 Equity ...................................................................................................... 65
Consolidated Statement of Profit or Loss
and Other Comprehensive Income ......................................... 43
Consolidated Statement of Financial Position ...................... 44
Consolidated Statement of Changes in Equity ...................... 45
22 Earnings per share and dividends ...............................................66
23 Reconciliation of cash flows from operating activities ..... 67
24 Auditor remuneration ...................................................................... 67
25 Related party transactions and key management
Consolidated Statement of Cash Flows ................................. 46
personnel disclosures ....................................................................68
Notes to the Consolidated Financial Statements .................. 47
26 Contingent assets and liabilities .................................................69
1 Nature of operations .......................................................................... 47
27 Capital commitments ......................................................................69
2 General information and statement of compliance .............. 47
28 Interests in subsidiaries ..................................................................69
3 Changes in accounting policies ...................................................... 47
29 Leases ..................................................................................................... 70
4 Summary of accounting policies ...................................................48
30 Financial instrument risk ............................................................... 70
5 Operating Segments ...........................................................................56
31 Fair value measurement ................................................................. 74
6 Revenue .................................................................................................... 57
32 Capital management policies and procedures ..................... 74
7 Finance income and finance costs ................................................ 57
33 Parent entity information .............................................................. 75
8 Income tax expense ............................................................................58
34 Post-reporting date events ............................................................ 75
9 Cash and cash equivalents ...............................................................58
Directors’ Declaration ............................................................. 76
10 Trade and other receivables .......................................................... 59
Independent Auditor’s Report ................................................ 77
11 Financial assets and liabilities ......................................................60
ASX Additional Information .................................................... 81
12 Inventories ........................................................................................... 61
13 Biological assets – current ............................................................. 61
14 Property, plant and equipment .................................................... 62
15 Biological assets – non-current.................................................... 62
16 Intangible assets ................................................................................ 63
17 Trade and other payables ............................................................... 63
18 Borrowings ........................................................................................... 63
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
23
Directors’ Report
The Directors of Clean Seas Seafood Limited (‘Clean Seas’) present their Report together with the financial statements of
the Consolidated Entity, being Clean Seas Seafood Limited (‘the Company’) and its Controlled Entities (‘the Group’) for the
for the year ended 30 June 2019.
DIRECTORS
The following persons held office as Directors of Clean Seas during and since the end of the financial year:
• Mr Terry O’Brien – Chairman;
• Mr Nick Burrows;
• Mr Marcus Stehr;
• Ms Raelene Murphy (Appointed 1 July 2018);
• Ms Helen Sawczak (Appointed 1 July 2018); and
• Mr David Head (Managing Director & CEO).
COmPANY SECRETARY
The following persons were Company Secretary of Clean Seas during and since the end of the financial year:
• Mr Wayne Materne (retired 26 February 2019);
• Helga Linacre (appointed 26 February 2019 and retired 4 June 2019);
• Rob Gratton (Joint Company Secretary) (appointed 4 June 2019); and
• David Brown (Joint Company Secretary) (appointed 4 June 2019).
PRINCIPAL ACTIVITIES
The principal activities of the consolidated Group during the financial year were:
• The propagation of Spencer Gulf Hiramasa Yellowtail Kingfish, producing fingerlings for sale and growout;
• The growout of Spencer Gulf Hiramasa Yellowtail Kingfish for harvest and sale; and
• Research and development activities for the future aquaculture production of Southern Bluefin Tuna.
The Group continues to enhance its operations through new research and the application of world’s best practice techniques
to deliver Spencer Gulf Hiramasa Kingfish of premium quality.
There have been no significant changes in the nature of these activities during the year.
REVIEW OF OPERATIONS AND FINANCIAL RESULTS
The Board and Management of Clean Seas report a statutory profit after tax for the year of $1.446 million, which compares
to a $3.380 million statutory profit after tax in FY18. Underlying profit after tax for the year of $2.588 million, which compares
to a $2.279 million in FY18.
The financial results from FY19 are summarised below:
• FY19 underlying EBITDA improved 23% to $5.9 million;
• FY19 Revenue increased by 16% (excluding frozen clearance) to $46.1 million;
• Total sales volumes in FY19 was 2,698 tonnes;
• Sales volumes increased 13% in FY19, excluding the impact of clearance sales in both years;
• As the Company continues to scale for future growth, significant investment in Sales and Marketing was made during FY19,
which included:
– Recruitment of sales executives in US, Asia, Europe and Australia;
– Targeted brand awareness campaigns focusing on strategic priorities; and
– Continued evaluation of potential geographic expansion.
24
• Significant progress building the Company’s leadership team though the recruitment of new or replacement roles during
FY19, including:
– New Chief Financial Officer
– New Joint Company Secretaries
– New General Manager Sales
– New Group Human Resources Manager
– New Market Manager Americas
– New Sales Manager Asia
– New Marketing Activation Manager
– New Processing Manager
• Positive underlying cash flow from operations of $3.2 million, a 73% increase on the prior year, excluding the investment
in future biomass
• Continued excellent Yellowtail Kingfish survival rates, health and growth;
• Yellowtail Kingfish biomass at year end increased 15% to 4,136 tonnes;
• Further development of the Spencer Gulf Hiramasa Kingfish branding which reflects strong and unique provenance;
• Significant penetration of the premium frozen market in Europe through SensoryFresh products, utilising Clean Seas Liquid
Nitrogen Rapid Freezing technology
• Completion of Aquaculture Stewardship Council (ASC) accreditation, which has strengthened Clean Seas’ environmental
and social credentials particularly in key export markets.
Underlying Earnings
$’000
Statutory Profit after tax
Add back: Net interest
Statutory EBIT
Add back: Depreciation & amortisation
Statutory EBITDA
Non-Recurring items
Deduct: Frozen clearance stock
Add back: Litigation
Add back: Whyalla establishment
Underlying EBITDA
Underlying Profit after tax
FY19
1,446
256
1,702
3,079
4,781
(5)
535
612
5,923
2,588
FY18
3,380
11
3,391
2,539
5,930
(1,312)
211
–
4,829
2,279
1. Underlying earnings in this report are categorised as non-IFRS financial information provided to assist readers to better understand the
financial performance of the underlying operating business. They have not been subject to audit or review by the Company’s external auditors.
Adjustments to statutory EBITDA include the following:
• Frozen clearance stock: Eliminates earnings associated with the sale of frozen clearance stock, which was written down
in FY16, but sold during FY18 and FY19.
• Litigation: The Company continued its legal action against Gibson’s Ltd (trading as Skretting Australia), in respect of what
the Company maintains were defective feeds supplied to the Company and fed to the Company’s Yellowtail Kingfish between
December 2008 and July 2012.
• Whyalla farm establishment: During FY19 the Company progressed its plans to re-establish farming at its Fitzgerald Bay
leases in Whyalla, which resulted in a number of non-recurring costs, including the training of new Whyalla based employees
at our Arno Bay farm.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
25
Directors’ Report
Continued
Sales Growth (by market, excluding frozen clearance sales)
Tonnes (WWE)
Australia
Europe
North America
Asia/China
Total
Q1
FY19 v FY18
Q2
FY19 v FY18
Q3
FY19 v FY18
Q4
FY19 v FY18
Full Year
FY19 v FY18
2%
(16%)
13%
(8%)
(6%)
19%
32%
24%
64%
24%
20%
19%
30%
152%
23%
27%
(5%)
50%
41%
12%
17%
4%
30%
50%
13%
Global Sales Revenue and Volume (excluding frozen clearance) for FY19 exceeded FY18 by 16% and 13% respectively.
Sales Volume in the core Australian market was up 17% for the full year. This reflects new customer growth from the Company’s
ongoing chef activation program, and recaptured market share from competitors. This result is especially encouraging as this
has been achieved while Farm Gate prices have also been increased, discussion of which follows below.
The Company continues to pursue international expansion, with all regions recording significant volume growth in FY19. Europe
is up 4%, North America is up 30% and Asia is up 50% versus FY18.
The Company has achieved growth in Europe despite increased competition from local European land-based farms with selling
prices significantly below Clean Seas. The Company has driven this positive result through the superior quality of its Spencer
Gulf Hiramasa product, its investment in the Spencer Gulf brand marketing campaign, the chef activation program and recent
visits to the Clean Seas operations in the Spencer Gulf by major European distributors and leading chefs.
During FY19, competitors operating European land-based farms increased their Sales Volumes to approximately 800 tonnes
per annum; encouragingly, this has not impeded the Company’s ability to grow its Sales Volumes in this market. The Company
is encouraged by the growth in the European Kingfish market as it demonstrates that investment in sales and marketing is
building an increased awareness of the species and expanding the market opportunity for Clean Seas.
In FY19, the Company continued to achieve Farm Gate price increases in Australia, North America and Asia. Europe Farm Gate
prices remained in line with FY18 despite the significant increase in competitive pressure from local land-based farms and the
recently introduced EU-Japan Free Trade Agreement.
Clean Seas achieved strong growth in both North America and Asia while increasing Farm Gate selling prices. Over the course
of FY19, Clean Seas’ Large Fresh Farm Gate prices increased by 24% in North America and 16% in Asia.
The Company’s Farm Gate price is its selling price less processing costs, freight and handling, sales commissions and packaging
materials, reported on a whole weight equivalent (WWE) basis.
Fish husbandry costs increased 25% to $30.1 million due in part to Whyalla establishment costs and a more normalised biomass
profile (FY18 had an unusually young age profile). Biomass increased 15% to 4,136 tonnes and live fish net growth increased
6% to 3,513 tonnes. The biomass growth positions the Company well for further sales growth in FY20 and beyond as Clean Seas
continues to expand sales of Spencer Gulf Hiramasa Kingfish in global markets.
The Company continues to progress plans to return to farming at its Fitzgerald Bay leases, at the top of the Spencer Gulf near
Whyalla in South Australia. This will facilitate further expansion of the Company’s Spencer Gulf Hiramasa Kingfish production
with an additional 4,250 tonnes of farm capacity. Importantly, it will also further improve sustainability practices, including
fallowing of farm sites and help mitigate and reduce biosecurity risk through further geographic diversification.
The Royal Park processing plant has given Clean Seas full control of processing, delivering opportunities to improve the freshness
and quality of product delivered to customers, explore new product development and reduce processing costs. Production of
SensoryFresh using Clean Seas’ Liquid Nitrogen Rapid Freezing technology re-commenced in Q1 FY19, following the previously
advised flood incident in Q4 FY18.
The launch of SensoryFresh has seen the premium frozen category increase by 38% on a volume basis for FY19 compared to
FY18. This is particularly significant for North America and Asia where the frozen category represents circa 75% of the total
Kingfish market, and validates the Company’s strategic investment in its world’s best practice freezing technology to achieve
a clear competitive advantage in these key growth markets. Consistent with this, growth in frozen inventory reflects building
volumes to support the ongoing growth of SensoryFresh products into our current markets and underpinning market
penetration into the targeted North American and Asian growth markets.
Research and development activities into Southern Bluefin Tuna continued during the year on a scaled back basis, with the
broodstock being maintained and options for future development continuing to be under review.
26
Clean Seas formally received ASC certification in July 2019.
The Aquaculture Stewardship Council is an independent, international non-profit organisation that manages the world’s leading
certification and labelling programme for responsible aquaculture.
Clean Seas is delighted to achieve this important certification and recognises that customers around the world are increasingly
looking for sustainable and responsibly farmed seafood products.
Review of Cash Flow from Operations and Investment in Future Growth
In FY19, the Company achieved positive underlying cash from operations of $3.2 million excluding investment in biomass to
support growth in sales in future years. Full year FY19 cash receipts increased by $4.9 million or 12% to $45.7 million in comparison
to FY18, and there was a $1.6 million increase in the investment in biomass growth versus the prior year. Progress in the
Company’s key cash flow metrics is outlined in the chart below.
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Underlying Operating Cash Flows
3,191
1,845
FY18
FY19
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
Cash Receipts & Biomass Investment
45,756
40,787
(9,761)
(11,391)
FY18
FY19
Operating cash flows
Cash receipts
Investment in Biomass
The Company has achieved this ongoing improvement in its cash flow dynamics, net of investment in biomass growth, despite
significant additional investment in sales and marketing to support future growth.
Total statutory cash used in operating activities was down on FY18 by $2.6 million, primarily driven by:
• reduced receipts from frozen clearance sales of $1.3 million
• incremental investment in sales and marketing of circa $1.0 million
• additional $0.3 million on feed litigation costs.
Investment in biomass increased by 17% year-on-year in FY19, which is essential to support future sales growth and achieve the
scale required to efficiently leverage overheads and deliver sustainably growing profitability.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
27
Directors’ Report
Continued
The Company retains flexibility to vary its cash commitment to biomass, and the source of its funding for this investment,
as part of its growth planning to align biomass levels with sales objectives.
Operating cash flows reconciliation
Cash Flow from Operations
Investment in Biomass Growth
Cash flows for Litigation costs, Whyalla establishment costs & frozen clearance
Statutory cash used in operating activities
FY18
1,845
(9,761)
1,101
(6,815)
FY19
3,191
(11,391)
(1,142)
(9,342)
1. Underlying cash flows in this report are categorised as non-IFRS financial information provided to assist readers to better understand the
financial performance of the underlying operating business. They have not been subject to audit or review by the Company’s external auditors.
Feed litigation Update
The Company’s legal action against Gibson’s Ltd in the Supreme Court of South Australia, in respect of what the Company
maintains were defective feeds supplied to the Company and the Company’s Yellowtail Kingfish between December 2008 and
July 2012, continues. Gibson’s Ltd, trading as Skretting Australia, is defending the proceedings and has denied all liability to the
Group. In its 21st August 2019 announcement to the ASX, the Company made reference to an application by the Company in the
proceedings to amend the Company’s claim and the potential for the trial to be deferred.
On Friday 23 August 2019, the Supreme Court of South Australia granted the Company leave to file an amended claim in light
of documents recently disclosed in the litigation by Gibson’s Ltd. By that amended claim the Company now alleges that Gibson’s
Ltd substituted a proportion of the Prime Fish Meal required to be included in the feed, and by reference to which the feed prices
were calculated, with a cheaper Tuna by-product meal which the Company alleges further prejudiced the Taurine content of the
feeds. Gibson’s Ltd have until 13 September 2019 to respond to the amended claim. The commencement of the trial has been
deferred from 30 September 2019 to 24 February 2020.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Ms Raelene Murphy and Ms Helen Sawczak were appointed as Independent Non-Executive Directors with effect from
1 July 2018. Further details are provided later in this report.
Consolidation of the Group’s share capital on a 1:20 basis was submitted to and approved by shareholders at the 2018 Annual
General Meeting. Details were set out in the Notice of Meeting.
EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD
On 21st August 2019, the Company announced a two-stage funding program: an equity Placement to its major shareholder
Bonafide Asset Management AG raising $6.6 million and a proposed convertible note Entitlement Offer to qualifying existing
shareholders to raise a further $15.3 million. With this funding in place the Company expects to be able to fund and implement
its “Vision 2025” Strategic Plan. Details of the strategic plan, which is in the final stages of completion, will be released as part of
an Investor Roadshow in September 2019. The key elements of the funding encompass:
• The Company’s major shareholder, Bonafide and its related entities took up a placement of shares (“Placement”) which
increased its combined shareholding from 9.5% to 17.7%. Under the Placement announced on 21 August 2019, Clean Seas
issued 8,241,506 shares at $0.8008 per share raising $6.6 million, with all shares issued under the Company’s existing
placement capacity pursuant to ASX Listing Rule 7.1.
• The Company will undertake a non-renounceable entitlement offer of Convertible Notes to be made to existing shareholders
to raise up to approximately $15.3 million (“Entitlement Offer”). The convertible notes will be offered on a pro-rata basis to
all qualifying shareholders, with key terms including interest payable at an annual rate of 8%, an 8% conversion discount and
three-year term to maturity (“Convertible Notes”).
The full details of the Entitlement Offer (including terms and conditions of the Convertible Notes) will be disclosed in a prospectus
for the offer. The Company is targeting lodgement in September 2019 with offer closure expected by the end of October 2019.
The actual timetable will be set out in the prospectus and is subject to ASX approval.
Following Board approval, on the 30 August 2019, 678,898 Share Rights vested and 132,696 lapsed.
28
There are no other matters or circumstances that have arisen since the end of the year that have significantly affected
or may significantly affect either:
• the entity’s operations in future financial years;
• the results of those operations in future financial years; or
• the entity’s state of affairs in future financial years.
LIKELY DEVELOPmENTS, BUSINESS STRATEGIES AND PROSPECTS
The Company is continuing to implement its strategic plan, with significant growth and profit improvement initiatives
identified. These initiatives include:
• Continued international roll out of the Spencer Gulf Hiramasa Kingfish branding and associated marketing campaign;
• Continuing an international activation program targeting leading dining establishments and their chefs;
• Continue to build SensoryFresh inventory volumes to support the ongoing growth of SensoryFresh products into our current
markets and underpinning market penetration into the targeted North American and Asian growth markets.
• Further increases in farm gate revenue, with price increases supported by the new marketing campaign and cost reductions
across the supply chain;
• Progressing new product development initiatives;
• Improved farming efficiencies from scale, technology and ongoing research and development;
• Leveraging in-house infrastructure at Arno Bay for targeted research to underpin improving feed conversion ratios (FCR)
and diet formulations for inclusion in contractual arrangements with feed suppliers.
INFORmATION ON DIRECTORS AND KEY mANAGEmENT
mr Terrence (Terry) O’Brien – Chairman, Independent Non-Executive Director
Mr O’Brien was appointed to the Company Board on 3 February 2017 and was elected Chairman by the Board on 10 May 2017.
He is also Chairman of the Remuneration and Nominations Committee and a member of the Audit and Risk Committee.
Mr O’Brien was, from 2001 until 2017, the Managing Director of Simplot Australia Pty Limited, the US owned, but Australian
centric, food processor and marketer. Amongst Simplot’s stable of brands are John West, Birdseye, Leggo’s, Edgell and Lean
Cuisine. He was also the Chairman of the Australian Food and Grocery Council for five years to August 2017.
An accountant by training, Mr O’Brien was active in finance and management roles in the textile industry for ten years and
in the food industry for over thirty years having spent approximately nine years at Cadbury Schweppes and twenty-four years
at Simplot. At Simplot he was responsible for a number of divestments and acquisitions, which alongside organic growth saw
Simplot sales increase nearly threefold during his tenure as Managing Director to become approximately 25% of the global
JR Simplot agribusiness company.
Mr O’Brien also holds the following positions;
• Chairman of Bundaberg Brewed Drinks Pty Ltd
• Chairman of Kookaburra Sport Pty Ltd
• Non-Executive Director of Bega Cheese Ltd (ASX: BGA)
• Non-Executive Director of Foodbank Australia
• Member of East Asia Review Commission (Advisory Board) of Societe d’Oxygene et d’Acetylene d’Extreme-Orient, a member
of the Air Liquide Group
Mr O’Brien is a Fellow of CPA Australia and a Fellow of the Australian Institute of Company Directors.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
29
Directors’ Report
Continued
mr Nick Burrows – Independent Non-Executive Director
Mr Burrows was appointed to the Company Board on 18 April 2012. He is also Chairman of the Audit and Risk Committee and
a member of the Remuneration and Nominations Committee.
Mr Burrows is a respective Fellow of the Australian Institute of Company Directors, Chartered Accountants Australia and
New Zealand, Governance Institute of Australia Ltd and the Financial Services Institute of Australasia and is a Chartered
Accountant and Registered Company Auditor.
Mr Burrows was Chief Financial Officer and Company Secretary of Tassal Group Limited for 21 years from 1988 to 2009 and
accordingly brings to the Board the benefits of an extensive and contemporary senior executive ASX200 aquaculture listed
entity background.
Mr Burrows’ Directorship background encompasses a multi-sector portfolio of Chair, Non-Executive Directorship, Board
Committee and Advisory Board positions spanning local and state government, not-for-profit and major private companies.
He currently is:
• Non-Executive Director of Tasmanian Water & Sewerage Corporation Pty Ltd;
• Non-Executive Director of Metro Tasmania Pty Ltd;
• Non-Executive Director of Australian Seafood Industries Pty Ltd; and
• Non-Executive Director of PFG Group Pty Ltd & and MIC Pty Ltd.
He also has significant experience as an Audit and Risk Committee Chair across his multi-sector Board portfolio.
Mr Burrows has had a long involvement with Governance Institute of Australia including serving as National President
and serving on the Tasmanian Branch Council
mr marcus Stehr – Non-Executive Director
Mr Stehr was appointed to the Company Board on incorporation in September 2000. He is also a member of the Remuneration
and Nominations Committee.
Mr Stehr’s technical qualifications include Master Class 4 Fishing/Trading Skippers certificates, MED 1 and Dive Master
certificates. Commercial qualifications include business management courses spanning post graduate studies in Business
and completion of the Company Director’s Course. He is a Fellow of the Australian Institute of Company Directors.
Mr. Stehr has more than 25 years hands on experience in marine finfish aquaculture operations encompassing Tuna,
Kingfish and Mulloway.
In addition to being Managing Director of Australian Tuna Fisheries Pty Ltd (a major shareholder in Clean Seas), Stehr Group
Pty Ltd and Sanchez Tuna Pty Ltd, Mr Stehr makes a strong contribution to the Australian fishing and aquaculture industries as:
• Board member of the Australian Southern Bluefin Tuna Industry Association Ltd;
• Director of the Australian Maritime and Fisheries Academy (Australian Fisheries Academy Ltd);
• Industry member of Southern Bluefin Tuna Fishery Management Advisory Committee;
• Industry representative on the Southern Bluefin Tuna Management Advisory Committee; and
• Director of Seafood Industry Australia
30
ms Raelene murphy – Independent Non-Executive Director
Ms Murphy was appointed to the Company Board on 1 July 2018. She is also a member of the Audit and Risk Committee
from 1 July 2018.
Ms Murphy has over 35 years’ experience in strategic, financial and operational leadership in both industry and professional
advisory. Raelene specialised in operational and financial restructuring including merger and acquisition integration and was
formerly a Managing Director at KordaMentha and a Partner in a national accounting firm. Her industry experience includes
CEO of the Delta Group and senior executive roles in the Mars Group.
Ms Murphy is currently a Non-Executive Director of:
• Altium Limited (ASX: ALU)
• Bega Cheese Limited (ASX: BGA)
• Integral Diagnostics Limited (ASX: IDX)
• Service Stream Limited (ASX: SSM) and
• Ross House Investments Pty Ltd (Stillwell Motor Group).
She was previously a Non-Executive Director of Tassal Group Limited (ASX: TGR).
Ms Murphy is a Fellow of Chartered Accountants Australia and New Zealand and a graduate of the Australian Institute of
Company Directors.
ms Helen Sawczak – Independent Non-Executive Director
Ms Sawczak was appointed to the Company Board on 1 July 2018.
Ms Sawczak is the National CEO of the Australia China Business Council and an Advisory Board member of both the Monash
Migration and Inclusion Centre, and the University of Melbourne Centre for Contemporary Chinese Studies.
Ms Sawczak has over 25 years’ experience in international commercial law. Ms Sawczak started her career as a corporate lawyer
at international law firms both in Australia and overseas. In Australia, Ms Sawczak worked in the China practice of MinterEllison
and then moved to Moscow and Kazakhstan to work for Clifford Chance acting for US and European clients investing in the
privatisation of former Soviet industries. After returning to Australia, Ms Sawczak worked as in-house counsel with Alcoa and
Telstra and then moved into senior management roles at Australia Post and ANZ Bank.
Ms Sawczak is a graduate of the Australian Institute of Company Directors and holds a BA/LLB from Monash University and
a Grad.DipArts (Chinese Language) First Class Honours from the University of Melbourne.
mr David Head – managing Director and Chief Executive Officer
Mr Head was appointed as Managing Director and Chief Executive Officer on 28 January 2016. He has over 30 years’ experience
as a CEO, Non-Executive Director and Corporate Advisor in a wide range of industry sectors in Australia, New Zealand, Asia and
Europe in public and privately owned companies. This includes Chief Executive roles at Pepsi, Lion Nathan, Calum Textile Group
and Leigh Mardon Group.
Mr Head has extensive Board experience as both Non-Executive and Executive Director including previously as Non-Executive
Director of ASX listed Snack Brands Limited. He is currently a Non-Executive Director of Fairtrade Australia and New Zealand Limited.
mr Rob Gratton – Chief Financial Officer and Joint Company Secretary
Mr Gratton was appointed as Chief Financial Officer on 19 March 2019 and Joint Company Secretary on 4 June 2019.
He has over 20 years’ experience in Banking, Corporate Finance and Accounting roles in Australia, the United Kingdom
and United States. Mr Gratton was CFO and Company Secretary at Jurlique and kikki.K, and has also held senior positions
at JP Morgan Investment Bank in London and New York, after starting his career at Westpac in Australia.
mr David Brown – Group Financial Controller and Joint Company Secretary
Mr Brown was appointed as Group Financial Controller on 9 January 2018 and Joint Company Secretary on 4 June 2019.
He has over 10 years’ experience in Corporate Finance and Accounting roles across breadth of industries and is a Charted
Accountant. Prior to commencing with Clean Seas, Mr Brown held senior positions at KPMG and Grant Thornton specialising
in Corporate Finance.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
31
Directors’ Report
Continued
DIRECTORS’ mEETINGS
The number of Board meetings and meetings of Board Committees held during the year, and the number of meetings attended
by each Director is as follows:
Director’s name
Terry O’Brien
Nick Burrows
Marcus Stehr
Raelene Murphy
Helen Sawczak
David Head
Board meetings
Audit and
Risk Committee
Remuneration and
Nominations Committee
A
14
14
14
14
14
14
B
14
14
11
14
13
14
A
6
6
–
6
–
–
B
6
6
3
6
3
6
A
4
4
4
–
–
–
B
4
4
3
2
1
3
Where:
column A is the number of meetings the Director was entitled to attend as a member
column B is the number of meetings the Director attended (all Directors are entitled to attend Committee meetings)
UNISSUED SHARES UNDER OPTION
There are no unissued ordinary shares of Clean Seas under option at the date of this report. The Company issued 684,099 share
rights during the financial year as part of the FY19 LTI Equity Incentive Plan. Further details are provided in the Remuneration
Report. None of these share rights have vested as at the date of this report.
SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT OF EXERCISE
The Company issued 130,766 shares during or since the end of the financial year as a result of the exercise of options or
share rights.
REmUNERATION REPORT (AUDITED)
The Directors of Clean Seas Seafood Limited (‘the Group’) present the Remuneration Report for Non-Executive Directors
and other Key Management Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations
Regulations 2001.
The Remuneration Report is set out under the following main headings:
a
Principles used to determine the nature and amount of remuneration
b Details of remuneration
c
Service agreements
d Bonuses included in remuneration; and
e Other information.
a Principles used to determine the nature and amount of remuneration
The principles of the Group’s executive strategy and supporting incentive programs and frameworks are:
• to attract and retain high calibre senior executives to deliver the Group’s ambitious Vision 2025 Strategic Plan;
• to align rewards to business outcomes that deliver value to shareholders;
• to drive a high performance culture by setting challenging objectives and rewarding high performing individuals; and
• to ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation
and retention of executive talent.
The Board has established a Remuneration and Nominations Committee which operates in accordance with its charter as
approved by the Board and is responsible for determining and reviewing compensation arrangements for the Directors and
the Executive Team.
32
Non-Executive Director Remuneration
In accordance with best practice corporate governance, the remuneration of Non-Executive Directors is structured separately
from that of Executive Directors and Senior Executives.
The Company’s Non-Executive Directors receive only fees (including statutory superannuation where applicable) for their
services and the reimbursement of reasonable expenses. The Board reviews its fees to ensure the Company’s Non-Executive
Directors are fairly remunerated for their services, recognising the level of skill and experience required to conduct the role and
to have in place a fee scale which enables the Company to attract and retain talented Non-Executive Directors.
The advice of independent remuneration consultants is taken from time to time so as to establish that Directors’ fees are in line
with market standards.
Non-Executive Directors do not receive any shares, options or other securities in addition to their remuneration and are not
eligible to participate in any Company share plans or any other incentive plans that may be in operation. They do not receive
any retirement benefits other than compulsory superannuation where applicable.
The aggregate remuneration paid to all the Non-Executive Directors (inclusive of statutory superannuation) may not exceed
the current “fee pool” limit of $600,000, which was set at the 2018 AGM on 13 November 2018. This ‘fee pool’ is only available
to Non-Executive Directors, as Board membership is taken into account in determining the remuneration paid to Executive
Directors as part of their normal employment conditions.
During the Financial Year, the Company sought an independent assessment and comparison of the Company’s Director and
Committee fees structure in comparison of current remuneration arrangements with the market. Following the review the
following structure was put in place:
• Increasing the Chairman fee to $150,000 (and removing Committee fees of approximately of $21,000) approximating the
75th percentile of the peer group, and acknowledging the Chairman’s incremental workload, which includes Chair of
Remuneration and Nomination Committee and member of the Audit and Risk Committee.
• Increasing the Non-Executive Director fee to $70,000 to bring the main Board fee more in line with the median of the
peer group.
• Increasing the Remuneration and Nomination committee chair fee to $12,000 (if a chair other than the board chairman)
and the member fee to $6,000.
• Increasing the Audit and Risk committee chair fee to $15,000 and the member fee to $7,500.
• This brings the committee fees approximately in line with the median of the peer group.
The changes in Non-Executive Director and Committee fees are summarised below:
Changes in Non-Executive Directors and Committee fees
Chairman
Non-Executive Director
Audit and Risk Committee Chair
Audit and Risk Committee member
Remuneration & Nomination Committee Chair
Remuneration & Nomination Committee member
2018
$120,0001
$60,000
$7,500
$5,000
$7,500
$5,000
2019
$150,0002
$70,000
$15,000
$7,500
$12,000
$6,000
Change
$30,0003
$10,000
$7,500
$2,500
$4,500
$1,000
Notes:
1. In 2018, the Chairman received committee fees on top of the base fee.
2. In 2019, the Chairman’s base fees is inclusive of committee fees.
3. The net change in Chairman’s fees in FY19, including committee fees was $9,000.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
33
Directors’ Report
Continued
The remuneration structure adopted by the Group for FY19 consists of the following components:
• fixed remuneration being annual salary and benefits;
• short term incentives, being cash bonuses; and
• long term incentives, being share based remuneration, in the case of the Managing Director & CEO and the CFO &
Company Secretary.
The Remuneration and Nominations Committee assess the appropriateness of the nature and amount of remuneration on
a periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality Executive Team.
The payment of bonuses is reviewed by the Remuneration and Nominations Committee annually as part of the review of
executive remuneration and a recommendation is put to the Board for approval. All bonuses must be linked to pre-determined
performance criteria.
During the Financial Year the Company sought independent advice relating to an appropriate target and maximum remuneration
opportunity for the Managing Director and CEO, which incorporated comparison with a peer group of 16 ASX-listed companies
primarily from the consumer staples sector. In conjunction with this advice, seeking to achieve a broad 40% fixed and 60% at
risk/incentive component split, and to position the Managing Director and CEOs Total Remuneration Package broadly in line
with the peer group median, the Directors re-based the incentive components as follows:
• STI – Maximum set at 50% of base salary (Previously 40%)
• LTI – Maximums set at 100% of base salary (Previously 140%)
A consequent uplift in the base, incorporating a CPI adjustment, was then made.
Short Term Incentive (STI)
The Group’s performance measures involve the use of annual performance objectives, metrics and performance appraisals.
Financial targets are based on net profit after tax (NPAT). Non-financial targets are based on strategic goals set in relation to
the main priorities for the position.
The performance measures are set annually after consultation with the Directors and executives and are specifically tailored to
the areas where each executive has a level of control. The measures target areas the Board believes hold the greatest potential
for business improvement, expansion and profit and cover financial and non-financial measures.
The Key Performance Indicators (‘KPI’s’) for the Executive Team in FY19 are summarised as follows:
• Managing Director and CEO: NPAT in FY19, statutory cash flow, growth of SensoryFresh and key Executive appointments.
Long Term Incentive (LTI)
A share based LTI Equity Incentive Plan for the Managing Director and CEO (Mr David Head) was submitted to and approved by
shareholders at the 2018 Annual General Meeting. Details were set out in the Notice of Meeting. The LTI is based on share rights
being granted and further details are provided in section (e) of the Remuneration Report.
The Company’s LTI Plan for the Managing Director and CEO has primarily been linked to Net Profit After Tax (“NPAT”) delivery over
a three year performance period and is underpinned by the Company’s longer term vision. Given the significant targeted growth
trajectory and in recognition of the volatility and inherent operational risks in aquaculture and their impact on future results, the
Company has elected to include annual vesting assessments. The annual vesting is weighted towards the delivery of NPAT each
year (For example, the FY2019 Offer was weighted as follows – year 1 at 45%, year 2 at 30% and year 3 at 25%). If a year NPAT
target is not achieved, vesting for that year lapses and is not “trued up” at the end of the three-year performance period.
At the date of this report, the Company is reviewing the structure of the Managing Director and CEO’s future LTI offer in
conjunction with the finalisation of the Company’s “Vision 2025” Strategic Plan.
Performance Reviews
Management have regular annual performance reviews in accordance with established procedures.
Pursuant to the Board’s and Board Committee’s respective Charters, the Board conducts annual evaluations of its performance,
the performance of its Committees, the Chairman, individual Directors and the key governance processes that support the
Board’s work. The respective Board Committee Charters also require the Committees to evaluate their performance and
composition at least annually to determine whether they are functioning effectively by reference to current best practice.
This evaluation is presented to the Board for review.
34
Voting and comments made at the Company’s last Annual General meeting
At the 2018 Annual General Meeting (AGM), the majority of shareholder votes cast (74.1%) were in favour of adopting the 2018
Remuneration Report. However, 25.9% of the total votes received were against the remuneration report, constituting a ‘first
strike’ under the Corporations Act 2001.
Following the AGM we made a number of immediate changes to address the concerns raised, implementing a number of
initiatives including those designed to further improve the alignment of remuneration with the creation of value for
shareholders. These changes were:
• Engaged with Shareholders of various sizes to elicit feedback;
• Engaged Investor Relations to discuss with Shareholders concerns;
• Engaged Independent Advisors to provide benchmark analysis on the Board Remuneration and Senior Management; and
• Sought feedback from Proxy Advisors as to their view on Remuneration policies and Executive incentive structuring trends.
The Directors consider that the relevant remuneration packages of the Board and Senior Executives are appropriate.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following measures
in respect of the current financial year and the previous five financial years:
Item
Basic EPS (cents)
Profit/(loss) before tax ($’000)
Profit/(loss) after tax ($’000)
Net Assets ($’000)
Share price at 30 June (cents) 2
2019
1.73
1,446
1,446
73,542
90.5
20182
4.33
3,380
3,380
71,769
5.0
2017
0.02
202
202
51,553
4.6
2016
(0.81)
(9,928)
(8,982)
42,917
3.4
2015
0.37
1,033
4,108
51,899
5.9
20141
0.94
6,597
9,156
47,791
4.9
1 Restated to reflect change in R&D tax incentive refund accounting.
2 Earnings per share for the period ended 30 June 2018 was restated in order for the calculation to incorporate the 20:1 share consolidation,
which was completed on 3 December 2018.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
35
Directors’ Report
Continued
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t
c
e
r
i
D
d
e
t
n
o
p
p
A
i
1
3
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Other Key management Personnel
David Head
Rob Gratton
c Service agreements
Fixed
remuneration
At risk – STI
At risk – LTI
40%
N/A
20%
N/A
40%
N/A
Remuneration and other terms of employment for the Other Key Management Personnel are formalised in a Service Agreement.
The major provisions of the agreements relating to remuneration are set out below:
Name
David Head (CEO)
Rob Gratton (CFO)
Base salary $
$453,000
$325,000
motor Vehicle/
Allowance
Yes
No
Term of
agreement
Ongoing
Ongoing
Notice
period
9 months
3 months
d Bonuses included in remuneration
Details of the short-term incentive cash bonuses awarded as remuneration to each Key Management Personnel for FY19,
the percentage of the available bonus that was awarded in the financial year and the percentage that was forfeited because
the performance criteria were not achieved is set out below. No part of the bonus carries forward to future years. The awarded
bonuses have been recognised in FY19 and will be paid in FY20.
Other Key management Personnel
David Head
Rob Gratton
Included in
remuneration
($)
Percentage
vested during
the year
Percentage
forfeited
during the
year
203,150
–
85%
0%
15%
0%
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
37
Directors’ Report
Continued
e Other information
Shares held by Key management Personnel
The number of ordinary shares in the Company during the 2019 reporting period held by each of the Group’s Key Management
Personnel, including their related parties, is set out below:
Year ended 30 June 2019 – Ordinary Shares
Personnel
T O’Brien1
N Burrows
M Stehr
R Murphy2
H Sawczak2
D Head1
R Gratton2
W Materne4
Totals
Balance
at start
of year
Share
consolidation
1:20 (3)
3,000,000
(2,850,000)
967,149
(918,791)
1,295,879
(1,231,085)
–
–
–
–
10,127,213
(9,620,852)
–
–
–
–
15,390,241
(14,620,728)
Granted as
remuneration
Received on
exercise
Other
changes
Held at
the end of
reporting
period
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,000
155,000
–
–
25,000
5,000
4,237
48,695
–
48,358
64,794
25,000
5,000
510,598
48,695
–
87,932
857,445
1 Changes are on market purchases.
2 Commenced as a KMP during FY19.
3 On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
4 Ceased to be a KMP on the 19 September 2018.
None of the shares included in the table above are held nominally by Key Management Personnel. No options to acquire shares
are held by Key Management Personnel.
Share Rights held by Key management Personnel
Share rights granted under the LTI Equity Incentive Plan are set out below:
Year ended 30 June 2019 – Share Rights
Personnel
D Head
R Gratton
Balance
at start
of year
Share
consolidation
1:201
29,265,897
(27,802,603)
–
–
W Materne
4,764,137
(4,525,930)
(238,207)
Totals
34,030,034
(32,328,533)
(238,207)
471,113
1 On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
2 Subsequent to 30 June 2019, 678,898 Share Rights were exercised and 132,696 lapsed.
3 Ceased to be a KMP on the 19 September 2018.
Other
changes3
Granted as
remuneration
Exercised2
Lapsed2
–
–
471,113
–
–
–
–
–
–
–
–
–
–
Held at
the end of
reporting
period
1,934,407
–
–
1,934,407
The share rights will vest if specified performance targets are achieved and the executive remains employed by the Company for
three years including the year for which the share rights were granted, or in other circumstances agreed with the executive or at
the discretion of the Board. Each share right on exercise converts to one ordinary share, subject to adjustment in specified
circumstances. No amount is payable on vesting or exercise.
Other Transactions with Key management Personnel
The Group’s related parties comprise its key management and entities associated with key management.
A major shareholder in Clean Seas Seafood Limited is Australian Tuna Fisheries Pty Ltd (ATF). ATF and its associated entities
controlled 7.1% of issued shares at 30 June 2019 (2018: 7.1%) and it is associated with Stehr Group Pty Ltd, H & A Stehr
Superannuation Fund and Sanchez Tuna Pty Ltd.
38
All transactions with related parties are negotiated on a commercial arms-length basis. These transactions were as follows:
Australian Tuna Fisheries Pty Ltd:
• Receipts for ice, expenses, SBT quota lease and contract labour
• Payments for towing, contract labour, fish feed, marina and net shed rent and electricity
Stehr Group Pty Ltd
• Payments for office rent
• Other payments
PSMMR Pty Ltd (associated with Paul Robinson – Alternate Director)1
• Payments for consulting services and associated expenses
2019
$’000
2018
$’000
5
495
36
30
–
9
486
32
–
137
1 Paul Robinson Retired as an Alternate Director and related party on 30 June 2018.
The following balances are outstanding as at the reporting date in relation to transactions with related parties:
Current payables
• Australian Tuna Fisheries Pty Ltd
• PSMMR Pty Ltd1
Current receivables
• Australian Tuna Fisheries Pty Ltd
2019
$’000
2018
$’000
22
–
–
21
18
17
1 Paul Robinson Retired as an Alternate Director and related party on 30 June 2018.
End of audited Remuneration Report.
ENVIRONmENTAL LEGISLATION
The Group’s operations are subject to Commonwealth and State regulations governing marine and hatchery operations,
processing, land tenure and use, environmental requirements including site specific environmental licences, permits and
statutory authorisations, workplace health and safety and trade and export.
The Group’s management regularly and routinely monitor compliance with the relevant environmental regulations and
compliance is regularly reported to the Board.
The Group has well established procedures to monitor and manage compliance with existing environmental regulations and
new regulations as they come into force.
The Directors believe that all regulations have been met during the period covered by this Annual Financial Report and are not
aware of any significant environmental incidents arising from the operations of the consolidated entity during the financial year.
Further information in relation to specific regulated areas of the operation is as follows:
• The Arno Bay and Port Augusta Hatcheries are licensed to operate under an Aquaculture Land based Category C License issued
by the South Australian Minister of Primary Industries and Regional Development under the Aquaculture Act 2001. The licensee
is required to comply with the requirements of all statutes, regulations, by-laws, ordinances, rules, notices or orders lawfully
given pursuant to the Aquaculture Act 2001, Aquaculture Regulations 2016, Environment Protection (Water Quality) Policy
2015 and the Livestock Act 1997. Clean Seas has not recorded any breaches of the license requirements.
• The Group operates 28 marine aquaculture licences issued by The South Australian Minister of Primary Industries and Regional
Development under the Aquaculture Act 2001. The licensee is required to comply with the requirements of all statutes,
regulations, by-laws, ordinances, rules, notices or orders lawfully given pursuant to the Aquaculture Act 2001, Aquaculture
Regulations 2016, Environment Protection (Water Quality) Policy 2015 and the Livestock Act 1997. There have been no material
recorded breaches of the license requirements.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
39
Directors’ Report
Continued
• The Royal Park processing plant is licensed by the South Australian Environment Protection Authority under Part 6 of the
Environment Protection Act 1993 to operate as a fish processing works. The Licensee must be aware of and comply with their
obligations under the Environment Protection Act 1993, the Environment Protection Regulations 2009, the Environment
Protection Policies made under the Environment Protection Act 1993 and the requirements of any National Environment
Protection Measure which operates as an Environment Protection Policy under the Environment Protection Act 1993.
Clean Seas has not recorded any breaches of the licence requirements.
INDEmNITIES GIVEN TO AND INSURANCE PREmIUmS PAID FOR DIRECTORS AND OFFICERS
Under rules 50 and 51 of the Company’s Constitution, each of the Company’s Directors, the Company Secretary and every other
person who is an officer is indemnified to the extent permitted by law and Directors and Officers Liability Insurance has been
implemented. The terms of the insurance contract prohibit the Company from disclosing the level of premium paid.
Each Director and the Company Secretary has entered into a Deed of Indemnity and Access which indemnifies a Director or
officer against liabilities arising as a result of acting as a Director or officer subject to certain exclusions and provides for related
legal costs to be paid by the Company. The Deed requires the Company to maintain an insurance policy against any liability
incurred by a Director or officer in his or her capacity as a Director or officer during that person’s term of office and seven years
thereafter. It also provides a Director or officer with a right of access to Board papers and other documentation while in office
and for seven years thereafter.
NON-AUDIT SERVICES
During the year, Grant Thornton, the Company’s auditors, performed certain other services in addition to their statutory audit duties.
The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice
provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the
year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the
following reasons:
• all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed
by the Audit and Risk Committee to ensure they do not impact upon the impartiality and objectivity of the auditor; and
• the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Details of the amounts paid to the auditors of the Company, Grant Thornton, and its related practices for audit and non-audit
services provided during the year are set out in Note 24 to the Financial Statements.
A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act 2001 is included on
page 41 of this financial report and forms part of this Directors’ Report.
PROCEEDINGS OF BEHALF OF THE COmPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave 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 part of those proceedings.
ROUNDING OF AmOUNTS
Clean Seas is a type of Company referred to in ASIC Class Order 2016/191 and therefore the amounts contained in this report
and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable), or in certain cases, to the
nearest dollar under the option permitted in the Class Order.
Signed in accordance with a resolution of the Directors.
Terry O’Brien
Chairman
30 August 2019
40
Auditor’s Independence Declaration
Grant Thornton Audit
Grant Thornton House
Level 3
170 Frome Street
Adelaide SA 5000
GPO Box 1270
Adelaide SA 5001
T +61 88372 6666
Auditor’s Independence Declaration
To the Directors of Clean Seas Seafood Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Clean Seas
Seafood Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been:
a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
J L Humphrey
Partner – Audit & Assurance
Adelaide, 30 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
41
Corporate Governance Statement
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Clean Seas
Seafood Limited and its Controlled Entity (‘the Group’) have adopted the third edition of the Corporate Governance Principles and
Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective for
financial years beginning on or after 1 July 2014.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2019 is dated as at 30 June 2019 and
was approved by the Board on 30 August 2019. The Corporate Governance Statement is available on Clean Seas’ website
at http://www.cleanseas.com.au/investors/corporate-governance/
42
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2019
Revenue
Other income
Net gain arising from changes in fair value of biological assets
Fish husbandry expense
Employee benefits expense
Fish processing and selling expense
Cost of goods sold – frozen inventory
Depreciation and amortisation expense
Other expenses
Profit before finance items and tax
Finance costs
Finance income
Profit before tax
Income tax benefit/(expense)
Profit for the year after tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Earnings per share from continuing operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
6
13
20.1
14
7
7
8
2019
$’000
46,149
287
23,325
(30,194)
(12,166)
(12,136)
(8,553)
(3,079)
(1,931)
1,702
(262)
6
1,446
–
1,446
–
1,446
2018
$’000
41,650
86
18,183
(24,210)
(10,218)
(10,959)
(5,977)
(2,539)
(2,625)
3,391
(75)
64
3,380
–
3,380
–
3,380
22.1
22.1
1.73
1.69
4.33
4.22
Note: This statement should be read in conjunction with the notes to the financial statements.
Earnings per share for the period ended 30 June 2018 was restated in order for the calculation to incorporate the 20:1 share
consolidation, which was completed on 3 December 2018.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
43
Consolidated Statement of Financial Position
As at 30 June 2019
ASSETS
Current
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Biological assets
Current assets
Non-current
Property, plant and equipment
Biological assets
Intangible assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current
Trade and other payables
Bank overdraft
Borrowings
Provisions
Current liabilities
Non-current
Borrowings
Provisions
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to owners of the Parent:
• share capital
• share rights reserve
• accumulated losses
TOTAL EQUITY
Notes
2019
$’000
2018
$’000
9
10
12
13
14
15
16
17
9
18
19
18
19
21
21
1,004
5,764
9,465
1,047
56,585
73,865
16,869
244
2,957
20,070
93,935
6,982
7,275
1,585
977
16,819
3,356
218
3,574
20,393
73,542
5,534
5,133
5,484
581
45,229
61,961
16,500
244
2,957
19,701
81,662
6,504
–
622
862
7,988
1,727
178
1,905
9,893
71,769
182,436
897
(109,791)
73,542
182,345
661
(111,237)
71,769
Note: This statement should be read in conjunction with the notes to the financial statements.
44
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2017
Profit for the year
Share purchase plan and placement
Share rights reserve movement
Balance at 30 June 2018
Profit for the year
Share issue
Share rights reserve movement
Balance at 30 June 2019
Notes
21.1
21.2
21.1
21.2
Share
capital
$’000
165,998
–
16,347
–
182,345
–
91
–
182,436
Share rights
reserve
Accumulated
Losses
$’000
172
–
–
489
661
–
–
236
897
$’000
(114,617)
3,380
–
–
(111,237)
1,446
–
–
Total
equity
$’000
51,553
3,380
16,347
489
71,769
1,446
91
236
(109,791)
73,542
Note: This statement should be read in conjunction with the notes to the financial statements.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
45
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Operating activities
Receipts from customers
Payments to suppliers excluding feed
Payments for feed
Payments to employees
Government grants received
Net cash used in operating activities
Investing activities
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Gross proceeds from issue of shares
Share issue expenses
Proceeds from borrowings
Repayment of borrowings
Interest paid
Net cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
23
9
2019
$’000
45,756
(23,645)
(21,317)
(10,136)
–
(9,342)
(3,226)
6
(3,220)
–
–
2,480
(1,474)
(249)
757
(11,805)
5,534
(6,271)
2018
$’000
40,787
(22,172)
(17,141)
(8,318)
29
(6,815)
(4,917)
63
(4,854)
17,656
(1,309)
1,220
(818)
(70)
16,679
5,010
524
5,534
Note: This statement should be read in conjunction with the notes to the financial statements.
46
Notes to the Consolidated Financial Statements
1 NATURE OF OPERATIONS
Clean Seas Seafood Limited and its subsidiaries (‘the Group’) principal activities include finfish sales and tuna operations.
These activities comprise the following:
• Finfish sales – The propagation, growout and sale of Yellowtail Kingfish; and
• Tuna operations – Research and development activities relating to Southern Bluefin Tuna.
2 GENERAL INFORmATION AND STATEmENT OF COmPLIANCE
The consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements
of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board (‘AASB’). Compliance with Australian Accounting Standards results in full compliance with the
International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’). Clean
Seas Seafood Limited is a for-profit entity for the purpose of preparing the financial statements.
Clean Seas Seafood Limited is the Group’s Ultimate Parent Company and is an ASX listed Public Company (ASX: CSS) incorporated
and domiciled in Australia. The address of its registered office and its principal place of business is 7 Frederick Road, Royal Park,
SA, Australia, 5014.
The consolidated financial statements for the year ended 30 June 2019 were approved and authorised for issue by the Board
of Directors on 30 August 2019.
3 CHANGES IN ACCOUNTING POLICIES
3.1 New and revised standards that are effective for these financial statements
A number of new and revised standards became effective for the first time to annual periods beginning on or after 1 July 2018.
Information on the more significant standard(s) is presented below.
The Group has adopted AASB 9 and AASB 15 at 1 July 2018. AASB 15 contains a single model that applies to contracts with
customers and two approaches to recognising revenue: at a point in time and over time. AASB 9 addresses the classification,
measurement and de-recognition of financial assets and financial liabilities.
There have been no significant changes to the Group’s financial performance and position as a result of the adoption of the
new and amended accounting standards and interpretations.
AASB 9 Financial Instruments (2014)
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement requirements. AASB 9 addresses the classification,
measurement and derecognition of financial assets, financial liabilities and hedging and a new impairment model for financial
assets. The Group adopted AASB 9 from 1 July 2018 and the standard has been applied retrospectively.
AASB 15 Revenue from Contracts with Customers.
AASB 15 provides new guidance for determining when the Group should recognise revenue. The new revenue recognition model
is based on the principle that revenue is recognised when control of a good or service is transferred to a customer – either at a
point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, or how
much revenue is recognised.
The Group’s revenue is largely comprised of contracts with customers for the sale of fresh and frozen fish products. The Group
has concluded that revenue from the sale should be recognised at the point in time when a customer obtain control of goods.
Revenue is measured be reference to the fair value of consideration received or receivable, excluding sales taxes, rebates and
trade discounts.
There has been no impact on the Group’s previously reported financial performance or financial position following the adoption
of AASB 15.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
47
Notes to the Consolidated Financial Statements
Continued
3.2 Accounting Standards issued but not yet effective and not being adopted early by the Group
The accounting standards that have not been early adopted for the year ended 30 June 2019, but will be applicable to the Group
in future reporting periods, are detailed below. Apart from these standards, other accounting standards that will be applicable
in future periods have been reviewed, however they have been considered to be insignificant to the Group.
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have not been adopted early by the Group. Management anticipates
that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the
effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be
relevant to the group’s financial statements is provided below.
AASB 16 Leases
AASB 16:
• replaces AASB 117 Leases and some lease-related Interpretations
• requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases
• provides new guidance on the application of the definition of lease and on sale and lease back accounting
• largely retains the existing lessor accounting requirements in AASB 117
• requires new and different disclosures about leases
Based on the entity’s assessment, it is expected that the first-time adoption of AASB 16 for the year ending 30 June 2020 will
have a material impact on the transactions and balances recognised in the financial statements, in particular:
• lease assets and financial liabilities on the balance sheet will increase by $0.27 million and $0.28 million respectively (based
on the facts at the date of the assessment)
• there will be a reduction in the reported equity as the carrying amount of lease assets will reduce more quickly than the
carrying amount of lease liabilities
• EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in lease
payments for former off balance sheet leases will be presented as part of finance costs rather than being included in
operating expenses
• operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal
repayments on all lease liabilities will now be included in financing activities rather than operating activities.
4 SUmmARY OF ACCOUNTING POLICIES
4.1 Overall considerations
The consolidated financial statements have been prepared using the significant accounting policies and measurement bases
summarised below.
4.2 Basis of consolidation
The Group financial statements consolidate those of the Parent Company and its subsidiaries as of 30 June 2019. The Parent
controls a subsidiary if it is exposed, or has rights, to variable returns from 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 30 June.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation,
the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable.
48
4.3 Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian Dollars (‘$AUD’), which is also the functional currency
of the Parent Company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange
rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are recognised
in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates
at the date of the transaction), except for non-monetary items measured at fair value which are translated using the exchange
rates at the date when fair value was determined.
4.4 Segment reporting
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of
Directors in assessing performance and determining the allocation of resources. The Group’s two operating segments are:
• Finfish Sales: All finfish grow out and sales other than propagated Southern Bluefin Tuna (“SBT”). Currently the segment
includes Yellowtail Kingfish, Mulloway and some wild caught Tuna. All fish produced are aggregated as one reportable
segment as the fish are similar in nature, they are grown and distributed to similar types of customers and they are subject
to a similar regulatory environment.
• Tuna Operations: Propagated Southern Bluefin Tuna operations are treated as a separate segment. All costs associated with
the breeding, grow out and sales of SBT are aggregated into one reportable segment. This segment is currently scaled back
apart from some strategic research projects.
Each of these operating segments is managed separately as they require different technologies, resources and capabilities
and are at a different stage of development. All inter-segment transfers are carried out at arm’s length prices.
The measurement policies the Group uses for segment reporting under AASB 8 are the same as those used in its financial statements.
Corporate assets which are not directly attributable to the business activities of any operating segment are not allocated
to a segment.
There have been no changes from prior periods in the measurement methods used to determine reported segment profit
or loss.
4.5 Revenue
Revenue arises from the sale of goods and recognised at the point in time when a customer obtains control of goods
(satisfaction of the performance obligation). Revenue is measured be reference to the fair value of consideration received
or receivable, excluding sales taxes, rebates and trade discounts.
Interest income
Interest income and expenses are reported on an accrual basis using the effective interest method.
4.6 Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
4.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during
the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are
expensed in the period in which they are incurred and reported in finance costs (see Note 7).
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
49
Notes to the Consolidated Financial Statements
Continued
4.8 Intangible assets
Recognition of intangible assets
Acquired intangible assets
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific
software. Acquired fish quotas and water leases and licences are capitalised on the basis of costs incurred to acquire.
Subsequent measurement
All intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis
over their estimated useful lives, where these assets are considered finite. Residual values and useful lives are reviewed at each
reporting date. In addition, they are subject to impairment testing as described in Note 4.11.
The following useful lives are applied:
• Primary Industries and Regions South Australia (PIRSA) water leases and licences: indefinite
• Southern Bluefin Tuna quota: indefinite
When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds
and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses.
4.9 Property, plant and equipment
Land and buildings
Freehold land and buildings are recognised at their cost less accumulated depreciation and impairment losses.
As no finite useful life for land can be determined, related carrying amounts are not depreciated.
Plant and equipment
Plant and equipment is initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable
to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by
the Group’s management. Plant and equipment also includes leasehold property held under a finance lease (see Note 4.10).
These assets are subsequently measured using the cost model, being cost less subsequent depreciation and impairment losses.
Depreciation is recognised on a straight-line basis to write down the cost less estimated residual value of buildings, plant and
equipment. The following depreciation rates are applied:
• buildings: 2.5% – 13%
• vessels: 5% – 7.5%
• cages and nets: 10% – 33%
• motor vehicles: 12.5% – 15%
• computers: 25% – 33%
• other plant and equipment: 5% – 33%
In the case of leasehold property, expected useful lives are determined by reference to comparable owned assets or over the
term of the lease, if shorter.
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal
proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses.
4.10 Leased assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards
of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the
inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental
payments, if any. A corresponding amount is recognised as a finance lease liability. Leases of land and buildings are classified
separately and are split into a land and a building element, in accordance with the relative fair values of the leasehold interests
at the date the asset is recognised initially.
50
See Note 4.9 for the depreciation methods and useful lives for assets held under finance lease. The corresponding finance lease
liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant
proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are
recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
4.11 Impairment testing of other intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash
inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-
generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the
related business combination and represent the lowest level within the Group at which management monitors goodwill.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use,
management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate
in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked
to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s
assessment of respective risk profiles, such as market and asset-specific risks factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer
exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount.
4.12 Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Financial assets are classified according to their business model and the characteristics of their contractual cash flows. Except
for those trade receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging
instruments, are classified into the following four categories:
• Financial assets at amortised cost
• Financial assets at fair value through profit or loss (FVTPL)
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Equity instruments at FVTOCI
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
51
Notes to the Consolidated Financial Statements
Continued
Financial assets at amortised cost
Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business
model of ‘hold to collect’ contractual cash flows are accounted for at amortised cost using the effective interest method.
The Group’s trade and most other receivables fall into this category. The change in classification has not impacted the carrying
value of the Group’s financial assets.
Impairment of financial assets
The Group uses a simplified approach in accounting for trade and other receivables and records the loss allowance at the
amount equal to the expected lifetime credit losses. The Group uses its historical experience, external indicators and forward-
looking information to calculate the expected credit losses using a provision matrix. The Group have assessed the impact of the
impairment model and no adjustment was required in Group’s financial statements.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial
liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognised in
profit or loss. All derivative financial instruments that are not designated and effective as hedging instruments are accounted
for at FVTPL.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included
within finance costs or finance income.
4.13 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the
manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity.
Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the
estimated selling price in the ordinary course of business less any applicable selling expenses.
4.14 Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other
comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (‘ATO’)
and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax
is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on
tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of
assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the
initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided
if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the
foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective
period of realisation, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable
income, based on the Group’s forecast of future operating results which is adjusted for significant non-taxable income and
expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full.
The Group does not currently recognise deferred tax assets and liabilities due to uncertainty regarding the utilisation of prior
year losses in future years.
Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and
liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except
where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in
equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.
52
Clean Seas Seafood Limited and its wholly-owned Australian controlled entity have implemented the tax consolidation
legislation from 1 July 2007. As a consequence, these entities are taxed as a single entity and the deferred tax assets and
liabilities of these entities are set off in the consolidated financial statements.
4.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
4.16 Equity and reserves
Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of
shares are deducted from share capital, net of any related income tax benefits.
Share rights reserve represents, in accordance with AASB 2 Share-based Payment, the allocated fair value at grant date of share
rights that have been granted and remain outstanding at the reporting date. The value determined is recognised evenly over the
financial years in which services are provided as specified by the performance period for each grant of share rights, subject to
subsequent revision of the number of share rights expected to vest and the number that ultimately vest. The recognised value
of share rights that vest and are exercised is transferred to share capital on the issue of shares.
Retained earnings/accumulated losses include all current and prior period retained profits and losses.
All transactions with owners of the Parent are recorded separately within equity.
4.17 Employee benefits
Short-term employee benefits
Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within
twelve (12) months after the end of the period in which the employees render the related service. Examples of such benefits
include wages and salaries, non-monetary benefits and annual leave. Short-term employee benefits are measured at the
undiscounted amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The Group’s liabilities for long service leave are included in other long term benefits as they are not expected to be settled
wholly within twelve (12) months after the end of the period in which the employees render the related service. They are
measured at the present value of the expected future payments to be made to employees. The expected future payments
incorporate anticipated future wage and salary levels, experience of employee departures and periods of service, and are
discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds
that have maturity dates that approximate the timing of the estimated future cash outflows. Any re-measurements arising from
experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur.
The Group presents employee benefit obligations as current liabilities in the statement of financial position if the Group does
not have an unconditional right to defer settlement for at least twelve (12) months after the reporting period, irrespective of
when the actual settlement is expected to take place.
Post-employment Benefit Plans
The Group provides post-employment benefits through various defined contribution plans.
Defined Contribution Plans
The Group pays fixed contributions into independent entities in relation to various plans for individual employees. The Group
has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an
expense in the period that relevant employee services are received.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
53
Notes to the Consolidated Financial Statements
Continued
4.18 Share-based employee remuneration
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by
reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions (for example profitability and earnings per share growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share rights
reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best
available estimate of the number of share rights expected to vest.
Non-market vesting conditions are included in assumptions about the number of share rights that are expected to become
exercisable. Estimates are subsequently revised if there is any indication that the number of share rights expected to vest differs
from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made
to any expense recognised in prior periods if share rights ultimately exercised are different to that estimated on vesting.
Upon exercise of share rights, the proceeds received and the accumulated amount in the share rights reserve applicable to
those share rights, net of any directly attributable transaction costs, are allocated to share capital.
4.19 Provisions, contingent liabilities and contingent assets
Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present
legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required
from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and
implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not
recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number
of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations
as a whole. Provisions are discounted to their present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is
recognised as a separate asset. However, this asset may not exceed the amount of the related provision.
No liability is recognised if an outflow of economic resources as a result of present obligation is not probable. Such situations
are disclosed as contingent liabilities, unless the outflow of resources is remote in which case no liability is recognised.
4.20 Biological assets
Biological assets comprise live fish held for sale and broodstock.
Live fish held for sale are valued at their fair value less costs to sell in accordance with AASB141 Agriculture. Estimated fair values
are based on the number and size of fish held at the reporting date, actual selling prices achieved in the three weeks following
the reporting date and other relevant factors, including allowance for future mortality, assessed as impacting fair value in
accordance with AASB141.
Broodstock are valued at their fair value less costs to sell in accordance with AASB141 Agriculture. Estimated fair values take into
account the valuation of live fish held for sale and estimated value as broodstock. As the tuna research program is currently scaled
back, the Board has adopted a conservative approach by valuing southern bluefin tuna broodstock at estimated market value.
In the Directors’ opinion, insurance cover is currently not available at commercially acceptable rates for the live Yellowtail
Kingfish held for sale or the broodstock. The Directors have therefore chosen to actively manage the risks as the preferred
alternative and review this on an annual basis.
4.21 Goods and 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 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 statement of cash flows on a gross basis, except for the GST components of investing and
financing activities, which are disclosed as operating cash flows.
54
4.22 Rounding of amounts
The Parent Entity has applied the relief available to it under ASIC Class Order 2016/191 and accordingly, amounts in the financial
statements and directors’ report have been rounded off to the nearest $1,000, or in certain cases, the nearest dollar.
4.23 Significant management judgement in applying accounting policies
When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions
about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgement
The following are significant management judgements in applying the accounting policies of the Group that have the most
significant effect on the financial statements.
Fair value of live fish held for sale and broodstock
Management values live fish held for sale at their fair value less costs to sell in accordance with AASB141 Agriculture. Estimated
fair values are based on the number and size of fish held at the reporting date, actual selling prices achieved in the three weeks
following the reporting date and other relevant factors, including allowance for future mortality, assessed as impacting fair
value in accordance with AASB141. These estimates may vary from net sale proceeds ultimately achieved.
Broodstock has been held at the same value as the prior year as Directors believe it is representative of its fair value as at the
reporting date.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future
taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required in assessing
the impact of any legal or economic limits or uncertainties in relevant tax jurisdictions in relation to the value of accessible
carried forward losses into future years (see Note 4.14).
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets,
liabilities, income and expenses is provided below. Actual results may be substantially different.
Impairment
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on
expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about
future operating results and the determination of a suitable discount rate (see Note 4.11).
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility
of the assets. Uncertainties in these estimates relate to technical and other forms of obsolescence.
Inventories
Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each
reporting date. The future realisation of these inventories may be affected by market-driven changes that may reduce future
selling prices.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
55
Notes to the Consolidated Financial Statements
Continued
5 OPERATING SEGmENTS
Management currently identifies the Group’s two segments as finfish sales and tuna operations as detailed in Note 1.
These operating segments are monitored by the Group’s chief operating decision maker and strategic decisions are made
on the basis of adjusted segment operating results.
Segment information for the reporting period is as follows:
Revenue
From external customers
Segment revenues
Other income
Net gain from changes in value of fish
Fish husbandry expense
Employee benefits expense
Fish processing and selling expense
Frozen Inventory COGS
Depreciation and amortisation
Other expenses
Finance costs and income
Segment operating profit/(loss) before tax
Segment assets 2019
Revenue
From external customers
Segment revenues
Other income
Net gain from changes in value of fish
Fish husbandry expense
Employee benefits expense
Fish processing and selling expense
Frozen Inventory COGS
Depreciation and amortisation
Other expenses
Finance costs and income
Segment operating profit/(loss) before tax
Segment assets 2018
Finfish Sales
2019
$’000
46,149
46,149
287
23,325
(30,194)
(12,166)
(12,136)
(8,553)
(3,045)
(1,656)
–
2,011
92,476
Finfish Sales
2018
$’000
41,650
41,650
86
18,183
(24,210)
(10,218)
(10,959)
(5,977)
(2,509)
(2,195)
–
3,851
75,673
Tuna
Operations
2019
$’000
Unallocated
2019
$’000
–
–
–
–
–
–
–
–
(34)
(275)
–
(309)
455
–
–
–
–
–
–
–
–
–
–
(256)
(256)
1,004
Total
2019
$’000
46,149
46,149
287
23,325
(30,194)
(12,166)
(12,136)
(8,553)
(3,079)
(1,931)
(256)
1,446
93,935
Tuna
Operations
2018
$’000
Unallocated
2018
$’000
Total
2 2018
018 $’000
–
–
–
–
–
–
–
–
(30)
(430)
–
(460)
455
–
–
–
–
–
–
–
–
–
–
(11)
(11)
5,534
41,650
41,650
86
18,183
(24,210)
(10,218)
(10,959)
(5,977)
(2,539)
(2,625)
(11)
3,380
81,662
No segment liabilities are disclosed because there is no measure of segment liabilities regularly reported to the chief operating
decision maker. Unallocated operating income and expense consists of net interest and unallocated assets consist of cash and
cash equivalents.
Revenues from external customers in the Group’s domicile, Australia, as well as its major other markets have been identified
on the basis of the customer’s geographical location. Non-current assets are allocated based on their physical location.
56
The Group’s revenues from external customers and its non-current assets are divided into the following geographical areas:
Australia
Other countries
Total
Revenue
2019
$’000
23,732
22,417
46,149
Non-current
assets
2019
$’000
20,070
–
20,070
Revenue
2018
$’000
20,970
20,680
41,650
Non-current
assets
2018
$’000
19,701
–
19,701
During 2019 $5.7 million or 12% (2018: $5.7 million or 14%) of the Group’s revenues depended on a single customer in the
finfish sales segment.
6 REVENUE
Revenue for the reporting periods consist of the following:
Sale of fresh fish products
Sale of frozen fish products
Other revenue
Total
7 FINANCE INCOmE AND FINANCE COSTS
Finance income for the reporting periods consist of the following:
Interest income from cash and cash equivalents
Total
Finance costs for the reporting periods consist of the following:
Interest expenses for borrowings at amortised cost:
• finance leases
• other borrowings
Total
2019
$’000
37,124
9,025
–
46,149
2019
$’000
6
6
2019
$’000
114
148
262
2018
$’000
33,619
8,031
–
41,650
2018
$’000
64
64
2018
$’000
64
11
75
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
57
Notes to the Consolidated Financial Statements
Continued
8 INCOmE TAX EXPENSE
The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective
tax rate of 27.5% (2018: 30%) and the reported tax expense in profit or loss are as follows:
Profit/(Loss) before tax
Domestic tax rate for Clean Seas Seafood Limited
Expected tax expense/(income)
Adjustment for R&D tax incentive refund – 30% corporate tax rate component
Current year tax expense added to/(offset against) prior year tax losses
Adjustment for tax-exempt income
Actual tax expense/(income)
Tax expense comprises:
R&D tax incentive refund – 30% corporate tax rate component
Deferred tax expense
Tax expense/(income)
Note:
2019
$’000
1,446
27.5%1
398
–
(398)
–
–
–
–
–
2018
$’000
3,380
30%
1,014
–
(1,014)
–
–
–
–
–
1. Domestic tax rate reduced to 27.5% in FY19, as aggregated turnover is less than $50 million.
Due to uncertainty regarding the utilisation of prior year tax losses in future years, the tax losses are not recognised as an asset.
At 30 June 2019, carried forward tax losses are estimated to be $60.3 million (2018: $68.3 million) and non-refundable R&D tax
offsets are estimated to be $10 million (2018: $7.4 million).
9 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include the following components:
Cash at bank
Cash and cash equivalents in the statement of financial position
Bank overdraft used for cash management purposes
Cash and cash equivalents in the statement of cash flow
2019
$’000
1,004
1,004
(7,275)
(6,271)
2018
$’000
5,534
5,534
–
5,534
In January 2019, the Group secured a $2 million increase to the Trade Finance Facility with Commonwealth Bank of Australia,
which increased the facility limit to $12 million. This is an ongoing facility subject to annual review and is secured against all
Group assets. At 30 June 2019 this facility was drawn down by $7.28 million.
58
10 TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following:
Trade receivables, gross
Allowance for credit losses
Trade receivables
Other receivables
Total
2019
$’000
5,260
(50)
5,210
554
5,764
2018
$’000
4,939
(50)
4,889
244
5,133
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.
The movement in the allowance for credit losses can be reconciled as follows:
Reconciliation of allowance for credit losses
Balance at 1 July
Amounts written off/(uncollectable)
Additional provision recognised
Impairment loss reversed
Balance 30 June
An analysis of unimpaired trade receivables that are past due is given in Note 30.3.
2019
$’000
50
(22)
22
–
50
2018
$’000
50
(24)
24
–
50
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
59
Notes to the Consolidated Financial Statements
Continued
11 FINANCIAL ASSETS AND LIABILITIES
11.1 Categories of financial assets and liabilities
Note 4.12 provides a description of each category of financial assets and financial liabilities and the related accounting policies.
The carrying amounts of financial assets and financial liabilities in each category are as follows:
30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Totals
Notes
9
10
Assets at
FVTOCI
$’000
Assets
at FVTPL
$’000
Derivatives
used for
hedging
Financial
assets at
amortised cost
$’000
$’000
–
–
–
–
–
–
–
–
–
1,004
5,764
6,768
*Derivatives
used for
hedging
*Designated
at FVTPL
Notes
$’000
$’000
*Other
liabilities
at FVTPL
$’000
30 June 2019
Financial liabilities
Trade and other payables
Bank overdraft
Borrowings
Totals
17
9
18
–
–
–
–
–
–
–
–
–
–
–
–
#Other
liabilities
$’000
6,982
7,275
4,941
19,198
* Carried at fair value
# Carried at amortised cost
Assets at
FVTOCI
$’000
Assets
at FVTPL
$’000
Derivatives
used for
hedging
Financial
assets at
amortised cost
$’000
$’000
30 June 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Totals
Notes
9
10
–
–
–
–
–
–
*Derivatives
used for
hedging
*Designated
at FVTPL
Notes
$’000
$’000
–
–
–
*Other
liabilities
at FVTPL
$’000
5,534
5,133
10,667
#Other
liabilities
$’000
30 June 2018
Financial liabilities
Trade and other payables
Borrowings
Totals
17
18
–
–
–
–
–
–
–
–
–
6,504
2,349
8,853
* Carried at fair value
# Carried at amortised cost
A description of the Group’s financial instrument risks, including risk management objectives and policies is given in Note 30.
60
Total
$’000
1,004
5,764
6,768
Total
$’000
6,982
7,275
4,941
19,198
Total
$’000
5,534
5,133
10,667
Total
$’000
6,504
2,349
8,853
11.2 Other financial assets and liabilities
The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value:
• cash and cash equivalents;
• trade and other receivables;
• trade and other payables; and
• borrowings.
12 INVENTORIES
Inventories consist of the following:
Frozen fish products
Fish feed
Other
Total
13 BIOLOGICAL ASSETS – CURRENT
Live Yellowtail Kingfish – Held for Sale
Carrying amount at beginning of period
Adjusted for:
Gain from physical changes at fair value less costs to sell
Decrease due to harvest for sale as fresh
Net gain recognised in profit and loss
Decrease due to harvest for processing to frozen inventory
Carrying amount at end of period
2019
$’000
7,202
1,776
487
9,465
2019
$’000
45,229
52,268
(28,943)
23,325
(11,969)
56,585
2018
$’000
2,518
2,839
127
5,484
2018
$’000
32,105
43,915
(25,732)
18,183
(5,059)
45,229
The closing biomass comprised 4,136 tonnes at an average weight of 2.57kg. This comprised 2,783 tonnes of 2018 year class
(YC18) at an average weight of 4.3kg and 1,353 tonnes of YC19 at an average weight of 1.4 kg (2018: 3,606 tonnes at an average
weight of 2.1kg comprising 2,133 tonnes of YC17 at 3.9kg and 1,473 tonnes of YC18 at 1.5 kg). During FY19 harvests totalled
3,010 tonnes (FY18: 2,454 tonnes).
There is inherent uncertainty in the biomass estimate and resultant live fish valuation. This is common to all such valuations
and best practice methodology is used to facilitate reliable estimates. Biomass is estimated using a model that simulates fish
growth. Actual growth will invariably differ to some extent, which is monitored and stock records adjusted via harvest counts
and weights, periodic sample weight checks, physical counts on transfer to sea cages and subsequent splitting of cages,
mortality counts and reconciliation of the perpetual records after physical counts and on cage closeout.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
61
Notes to the Consolidated Financial Statements
Continued
14 PROPERTY, PLANT AND EQUIPmENT
Details of the Group’s property, plant and equipment and their carrying amount are as follows:
Gross carrying amount
Balance 1 July 2018
Additions
Disposals
Balance 30 June 2019
Depreciation and impairment
Balance 1 July 2018
Disposals
Depreciation
Balance 30 June 2019
Carrying amount 30 June 2019
Gross carrying amount
Balance 1 July 2017
Additions
Disposals
Balance 30 June 2018
Depreciation and impairment
Balance 1 July 2017
Disposals
Depreciation
Balance 30 June 2018
Carrying amount 30 June 2018
Land &
Buildings
$’000
Plant &
Equipment
$’000
4,028
158
–
4,186
33,546
3,290
–
36,836
Total
$’000
37,574
3,448
–
41,022
(1,403)
(19,671)
(21,074)
–
(101)
(1,504)
2,682
–
(2,978)
(22,649)
14,187
Land &
Buildings
$’000
Plant &
Equipment
$’000
3,913
115
–
4,028
28,607
4,939
–
33,546
–
(3,079)
(24,153)
16,869
Total
$’000
32,520
5,054
–
37,574
(1,313)
(17,222)
(18,535)
–
(90)
(1,403)
2,625
–
(2,449)
(19,671)
13,875
–
(2,539)
(21,074)
16,500
All depreciation and impairment charges are included within depreciation, amortisation and impairment of non-financial assets.
The Property, Plant and Equipment has been pledged as security for the Group’s bank borrowings (see Note 9 and 18).
15 BIOLOGICAL ASSETS – NON-CURRENT
Finfish Broodstock
Carrying amount at beginning of period
Purchases
Sales
Carrying amount at end of period
62
2019
$’000
244
–
–
244
2018
$’000
244
–
–
244
16 INTANGIBLE ASSETS
Details of the Group’s intangible assets and their carrying amounts are as follows:
Net carrying amount
Balance at 1 July 2018
Amortisation and impairment
Net carrying amount 30 June 2019
Balance at 1 July 2017
Amortisation and impairment
Net carrying amount 30 June 2018
PIRSA Leases
and Licences
Southern
Bluefin Tuna
Quota
$’000
$’000
2,827
–
2,827
2,827
–
2,827
130
–
130
200
(70)
130
At each reporting date the Directors review intangible assets for impairment. No impairment was necessary in 2019
(2018: $70,000).
17 TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
Current:
• trade payables
• related party payables
• other payables
Total trade and other payables
2019
$’000
5,407
22
1,553
6,982
All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable
approximation of fair value.
18 BORROWINGS
Borrowings consist of the following:
Current:
• Finance lease (Note 29)
• Other – insurance premium funding
Total borrowings – current
Non-current:
• Finance lease (Note 29)
Total borrowings – non-current
2019
$’000
1,018
567
1,585
3,356
3,356
Total
$’000
2,957
–
2,957
3,027
(70)
2,957
2018
$’000
4,243
40
2,221
6,504
2018
$’000
475
147
622
1,727
1,727
The Group also has a $6.0 million secured Lease Finance Facility with Commonwealth Bank of Australia, of which $4.3 million
was utilised at 30 June 2019.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
63
Notes to the Consolidated Financial Statements
Continued
19 PROVISIONS
The carrying amounts and movements in the provisions account are as follows:
Annual Leave
Long Service
Leave
$’000
$’000
Carrying amount 1 July 2018
Additional provisions
Amount utilised
Carrying amount 30 June 2019
Current employee benefit provision
Non-current employee benefit provision
20 EmPLOYEE REmUNERATION
20.1 Employee benefits expense
Expenses recognised for employee benefits are analysed below:
634
525
(439)
720
720
–
Salaries and wages
Superannuation – Defined contribution plans
Leave entitlement accrual adjustment
Short term incentive
Long term incentive – Share rights
Other on-costs
Total
406
95
(26)
475
257
218
2019
$’000
8,997
781
720
412
327
929
Total
$’000
1,040
620
(465)
1,195
977
218
2018
$’000
7,354
632
639
315
489
789
12,166
10,218
20.2 Share-based employee remuneration
The Company granted a total of 684,099 FY19 LTI Share Rights to senior executives during the year (2018: 1,172,559). The share
rights will vest if specified performance targets are achieved and the executive remains employed by the Company for three
years including the year for which the share rights were granted, or in other circumstances agreed with the executive or at
the discretion of the Board. Each share right on exercise converts to one ordinary share, subject to adjustment in specified
circumstances. On exercise of share rights, a dividend equivalent issue of additional shares replicates the benefit of any
dividends paid on ordinary shares during the performance period. No amount is payable on vesting or exercise. During FY19
130,766 fully paid ordinary shares were issued on the exercise of vested Share Rights and 243,192 Share Rights lapsed.
The FY19 LTI Share Rights were valued by the Directors on a basis consistent with the FY18 and FY17 LTI Share Rights, which
were independently valued by Value Adviser Associates Pty Ltd on 16 August 2017. One-third of the valuation at the end of the
first year is expensed in the first year. Two-thirds of the valuation in the second year, less the amount expensed in the first year,
is expensed in the second year. The final valuation at the end of the third year, less amounts expensed in the previous two years,
is expensed or written back in the third year. Each year is subject to further review of the number of Share Rights expected to
vest, in accordance with AASB 2 Share Based Payment.
The Share Rights valuation is based on the fair value at grant date of the equity instruments granted. For the FY19 LTI Share Rights
this includes the Clean Seas share price on 29 June 2018 being 5.0 cents and on 13 November 2018 (AGM date) being 5.6 cents
with no adjustment being required for future dividends, achievement of one of the three performance targets in FY19 and
assessment of the probability of achievement of the second and third (NPAT) performance targets in FY20 and FY21.
64
21 EQUITY
21.1 Share capital
The share capital of Clean Seas Seafood Limited consists only of fully paid ordinary shares; the shares do not have a par value.
All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at a shareholders’ meeting.
Shares issued and fully paid:
• at beginning of the year
• consolidation of share capital (1:20) 1
• share issue2
Total contributed equity at 30 June
Notes:
2019
Shares
2018
Shares
2019
$’000
2018
$’000
1,667,314,190
1,373,043,448
182,345
165,998
(1,584,012,279)
–
130,766
294,270,742
–
91
83,432,677
1,667,314,190
182,436
–
16,347
182,345
1 On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
2 On 21 December 2018, the Group issued 130,766 fully paid ordinary shares on the exercise of vested Share Rights.
21.2 Share rights reserve
The Company has granted share rights to certain executives as part of their remuneration arrangements as a Long Term
Incentive (LTI). Share rights outstanding are as follows:
Share rights outstanding:
• at beginning of the year
• consolidation of share capital (1:20) 1
• granted during the year
• exercised during the year
• lapsed during the year
Total share rights at 30 June
2019
Share rights
2018
Share rights
2019
$’000
2018
$’000
42,298,373
18,847,188
(40,183,453)
684,099
(130,766)
(243,192)
–
23,451,185
–
–
2,425,061
42,298,373
661
–
373
(91)
(46)
897
172
–
489
–
–
661
Notes:
1 On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
Details of these Share Rights are provided at Note 20.2.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
65
Notes to the Consolidated Financial Statements
Continued
22 EARNINGS PER SHARE AND DIVIDENDS
22.1 Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of Clean Seas
Seafood Limited as the numerator (i.e. no adjustments to profit were necessary in 2019 or 2018).
The reconciliation of the weighted average number of shares for the purposes of diluted earnings per share to the weighted
average number of ordinary shares used in the calculation of basic earnings per share is as follows:
Amounts in thousand shares:
• weighted average number of shares used in basic earnings per share
• shares deemed to be issued for no consideration in respect of share based payments
Weighted average number of shares used in diluted earnings per share
2019
‘000
83,370
2,426
85,796
2018
‘000
78,020
1,848
79,868
The weighted average number of shares used in basic and diluted earnings for the period ended 30 June 2018 has been restated
in order for the calculation to incorporate the 20:1 share consolidation, which was completed on the 3 December 2018.
22.2 Dividends
Dividends Paid and Proposed
Dividends declared during the year
22.3 Franking credits
The amount of the franking credits available for subsequent reporting periods are:
• balance at the end of the reporting period
• franking credits that will arise from the payment of the amount of provision
for income tax
• franking debits that will arise from the payment of dividends recognised
as a liability at the end of the reporting period
• franking credits that will arise from the receipt of dividends recognised
as receivables at the end of reporting period
2019
$’000
–
2018
$’000
–
Parent
2019
$’000
2018
$’000
–
–
–
–
–
–
–
–
–
–
66
23 RECONCILIATION OF CASH FLOWS FROm OPERATING ACTIVITIES
Profit for the year
Adjustments for:
• Depreciation and amortisation
• LTI share rights expense
• net interest expense included in investing and financing
• impairment of non-current assets
• write back of non-cash provision
Net changes in working capital:
• change in inventories
• change in trade and other receivables
• change in prepayments
• change in biological assets
• change in trade and other payables
• change in other employee obligations
• changes offset in investing
Net cash used in operating activities
24 AUDITOR REmUNERATION
Audit and review of financial statements
Other services
• taxation compliance
• other tax services
Total other service remuneration
Total auditor’s remuneration
2019
$’000
1,446
3,079
327
256
–
667
(3,981)
(631)
(466)
(11,356)
478
155
684
(9,342)
2019
$
96,679
11,900
15,004
26,904
123,583
2018
$’000
3,380
2,539
489
11
70
–
(1,963)
(1,301)
(162)
(13,124)
2,421
182
643
(6,815)
2018
$
97,131
9,500
20,750
30,250
127,381
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
67
Notes to the Consolidated Financial Statements
Continued
25 RELATED PARTY TRANSACTIONS AND KEY mANAGEmENT PERSONNEL DISCLOSURES
The Group’s related parties comprise its key management and entities associated with key management. The Remuneration
Report in the Directors’ Report sets out the remuneration of directors and specified executives.
A major shareholder in Clean Seas Seafood Limited is Australian Tuna Fisheries Pty Ltd (ATF). ATF and its associated entities
controlled 7.1% of issued shares at 30 June 2019 (2018: 7.1%) and it is associated with Stehr Group Pty Ltd, H & A Stehr
Superannuation Fund and Sanchez Tuna Pty Ltd.
All transactions with related parties are negotiated on a commercial arms-length basis. These transactions were as follows:
Australian Tuna Fisheries Pty Ltd:
• Receipts for ice, expenses, SBT quota lease and contract labour
• Payments for towing, contract labour, fish feed, marina and net shed rent and electricity
Stehr Group Pty Ltd
• Payments for office rent
• Other payments
PSMMR Pty Ltd (associated with Paul Robinson – Alternate Director)1
• Payments for consulting services and associated expenses
2019
$’000
2018
$’000
5
495
36
30
–
9
486
32
–
137
1 Paul Robinson Retired as an Alternate Director and related party on 30 June 2018.
The following balances are outstanding as at the reporting date in relation to transactions with related parties:
Current payables
• Australian Tuna Fisheries Pty Ltd
• PSMMR Pty Ltd1
Current receivables
• Australian Tuna Fisheries Pty Ltd
2019
$’000
2018
$’000
22
–
–
21
18
17
1 Paul Robinson Retired as an Alternate Director and related party on 30 June 2018.
The totals of remuneration paid or payable to the key management personnel of the Group during the year are as follows:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Total Remuneration
2019
$
2018
$
1,260,641
1,254,684
54,931
318,840
–
56,763
406,265
–
1,634,412
1,717,712
The Remuneration Report contained in the Directors’ Report contains details of the remuneration paid or payable to each
member of the Group’s key management personnel for the year ended 30 June 2019.
68
26 CONTINGENT ASSETS AND LIABILITIES
The Company’s legal action against Gibson’s Ltd in the Supreme Court of South Australia, in respect of what the Company
maintains were defective feeds supplied to the Company and the Company’s Yellowtail Kingfish between December 2008 and
July 2012, continues. Gibson’s Ltd, trading as Skretting Australia, is defending the proceedings and has denied all liability to the
Group. In its 21st August 2019 announcement to the ASX, the Company made reference to an application by the Company in
the proceedings to amend the Company’s claim and the potential for the trial to be deferred.
On Friday 23 August 2019, the Supreme Court of South Australia granted the Company leave to file an amended claim in light
of documents recently disclosed in the litigation by Gibson’s Ltd. By that amended claim the Company now alleges that Gibson’s
Ltd substituted a proportion of the Prime Fish Meal required to be included in the feed, and by reference to which the feed prices
were calculated, with a cheaper Tuna by-product meal which the Company alleges further prejudiced the Taurine content of the
feeds. Gibson’s Ltd have until 13 September 2019 to respond to the amended claim. The commencement of the trial has been
deferred from 30 September 2019 to 24 February 2020.
The Group also has unrecognised carry forward tax losses. This contingent asset is discussed in Note 8.
There are no other material contingent assets or liabilities.
27 CAPITAL COmmITmENTS
Property, plant and equipment
2019
$’000
262
2018
$’000
56
Capital commitments relate to items of plant and equipment and site works where funds have been committed but the assets
not yet received
28 INTERESTS IN SUBSIDIARIES
28.1 Composition of the Group
Set out below are details of the subsidy held directly by the Group:
Name of the Subsidiary
Clean Seas Aquaculture
Growout Pty Ltd
Clean Seas Seafood
International Pty Ltd
Country of incorporation
and principal place of
business
Australia
Australia
Group proportion
of ownership interests
Principal activity
30 June 2019
30 June 2018
Growout and sale
of Yellowtail Kingfish
Sale of Yellowtail Kingfish
100%
100%
100%
–
Clean Seas Seafood International Pty Ltd was incorporated on 15th of May 2019.
28.2 Interests in unconsolidated structured entities
The Group has no interests in unconsolidated structured entities.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
69
Notes to the Consolidated Financial Statements
Continued
29 LEASES
29.1 Finance leases as lessee
The Group holds a number of motor vehicles and plant & equipment under finance lease arrangements. The net carrying
amount of these assets is $4,479k (2018: $2,296k).
The Group’s finance lease liabilities, which are secured by the related assets held under finance leases, are classified as follows:
Finance lease liabilities
Current:
• finance lease liabilities
Non-current:
• finance lease liabilities
2019
$’000
1,018
3,356
Future minimum finance lease payments at the end of each reporting period under review were as follows:
30 June 2019
Lease payments
Finance charges
Net present values
30 June 2018
Lease payments
Finance charges
Net present values
minimum lease payments due
Within 1 year
$’000
1-5 years
$’000
After 5 years
$’000
1,212
(194)
1,018
581
(106)
475
3,612
(256)
3,356
1,896
(169)
1,727
–
–
–
–
–
–
29.2 Operating leases as lessee
The Group leases a number of sites under operating lease arrangements. Future minimum lease payments are as follows:
minimum lease payments – 30 June 2019
Minimum lease payments – 30 June 2018
minimum lease payments due
Within 1 year
$’000
1-5 years
$’000
After 5 years
$’000
299
255
285
482
–
–
2018
$’000
475
1,727
Total
$’000
4,824
(450)
4,374
2,477
(275)
2,202
Total
$’000
584
737
The operating lease expense in 2019 was $295k (2018: $315k).
The main leased site is the Royal Park processing plant in Adelaide, South Australia. This lease has a minimum term of 4 years
to March 2021 with subsequent renewal options of 2 years, 3 years and 3 years and includes a right of first refusal to purchase.
30 FINANCIAL INSTRUmENT RISK
30.1 Risk management objectives and policies
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category
are summarised in Note 11.1. The main types of risks are market risk, credit risk and liquidity risk.
The Group’s risk management is coordinated at its head office, in close cooperation with the Board of Directors, and focuses
on actively managing those risks to secure the Group’s short to medium-term cash flows.
The Group does not engage in the trading of financial assets for speculative purposes nor does it write options. The most
significant financial risks to which the Group is exposed are described below.
70
30.2 market risk analysis
The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk
and certain other price risks, which result from both its operating and investing activities.
Foreign currency sensitivity
Most of the Group’s transactions are carried out in Australian dollars (AUD). Exposures to currency exchange rates mainly arise
from the Group’s overseas sales, which are currently primarily denominated in Euro (EUR).
To mitigate the Group’s exposure to foreign currency risk, non-AUD cash flows are monitored, customer payments are credited
to foreign currency bank accounts and converted to AUD on a managed basis and forward exchange contracts may be entered
into in accordance with the Group’s risk management policies. Where the amounts to be paid and received in a specific currency
are expected to largely offset one another, no further hedging activity is undertaken.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below.
The amounts shown are those reported to key management translated into AUD at the closing rate:
30 June 2019
• financial assets
• financial liabilities
Total exposure
30 June 2018
• financial assets
• financial liabilities
Total exposure
Short term exposure
Long term exposure
EUR
A$’000
USD
A$’000
Other
A$’000
EUR
A$’000
USD
A$’000
Other
A$’000
2,997
(1,435)
1,562
1,803
(614)
1,189
29
(18)
11
172
(49)
123
14
(51)
(37)
2
(105)
(103)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities
and the AUD/EUR exchange rate ‘all other things being equal’. It assumes a +/- 5% change in this exchange rate for the year
ended at 30 June 2019 (2018: +/- 5%). The sensitivity analysis is based on the impact on the Group’s valuation of live fish held
for sale.
Profit and Equity
Increase/(Decrease)
30 June 2019
30 June 2018
Increase 5%
A$’000
Decrease 5%
A$’000
(1,171)
(1,250)
1,294
1,380
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the
analysis above is considered to be representative of the Group’s exposure to currency risk.
Interest rate sensitivity
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
71
Notes to the Consolidated Financial Statements
Continued
30.3 Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for
various financial instruments, for example by granting trade credit to customers and investing surplus funds. The Group’s
maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date,
as summarised below:
Classes of financial assets
Carrying amounts:
• cash and cash equivalents
• trade and other receivables
Total
2019
$’000
2018
$’000
1,004
5,764
6,768
5,534
5,133
10,667
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group and
incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports
on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties.
The Group’s management considers that all of the above financial assets that are not impaired or past due for each of the 30 June
reporting dates under review are of good credit quality.
At 30 June, the Group has certain trade receivables that have not been settled by the contractual due date but are not
considered to be impaired. The amounts at 30 June analysed by the length of time past due, are:
Not more three (3) months
More than three (3) months but not more than six (6) months
More than six (6) months but not more than one (1) year
More than one (1) year
Total
2019
$’000
1,786
77
25
150
2,038
2018
$’000
1,082
92
51
80
1,305
The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these
items do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared
credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location
of customers.
The expected loss rates are based on the payment profile for sales over the past 24 months before 30 June 2019 and 1 July
respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect
current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding.
The Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having
similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas.
Based on historical information about customer default rates management consider the credit quality of trade receivables that
are not past due or impaired to be good.
On the above basis the expected credit loss for trade receivables as at 30 June 2019 and recognised a provision for $50k.
The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
72
30.4 Liquidity risk analysis
Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by
monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows
due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity
analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the
basis of a rolling monthly projection. Net cash requirements are compared to available cash and borrowing facilities in order to
determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over
the lookout period.
As at 30 June 2019, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments
where applicable) as summarised below:
30 June 2019
Trade and other payables
Finance lease obligations
Bank overdraft
Other borrowings
Total
Current
Non-current
Within 6
months
$’000
6 – 12
months
$’000
6,982
524
7,275
567
15,348
–
494
–
–
494
1 – 5
years
$’000
–
3,356
–
–
3,356
5+
years
$’000
–
–
–
–
–
This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows:
30 June 2018
Trade and other payables
Finance lease obligations
Other borrowings
Total
Current
Non-current
Within 6
months
$’000
6 – 12
months
$’000
6,504
242
147
6,893
–
233
–
233
1 – 5
years
$’000
–
1,727
–
1,727
5+
years
$’000
–
–
–
–
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at
the reporting date.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
73
Notes to the Consolidated Financial Statements
Continued
31 FAIR VALUE mEASUREmENT
31.1 Fair value measurement of non-financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three
levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement,
as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
• Level 3: unobservable inputs for the asset or liability
The following table shows the Levels within the hierarchy of non-financial assets measured at fair value on a recurring basis
at 30 June 2019:
30 June 2019
Biological assets – current
Biological assets – non-current
Southern bluefin tuna quota
Total
30 June 2018
Biological assets – current
Biological assets – non-current
Southern bluefin tuna quota
Total
Level 1
$’000
–
–
–
–
Level 1
$’000
–
–
–
–
Level 2
$’000
56,585
244
130
56,959
Level 2
$’000
45,229
244
130
45,603
Level 3
$’000
–
–
–
–
Level 3
$’000
–
–
–
–
Total
$’000
56,585
244
130
56,959
Total
$’000
45,229
244
130
45,603
The fair values of the biological assets are determined in accordance with Note 4.20.
32 CAPITAL mANAGEmENT POLICIES AND PROCEDURES
The Group’s capital management objectives are:
• to ensure the Group’s ability to continue as a going concern; and
• to provide an adequate return to shareholders
Management assesses the Group’s capital requirements in order to maintain an efficient overall financing structure while
avoiding excessive leverage. The Group manages the capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure,
the Group considers the issue of new shares, dividends, return of capital to shareholders and sale of assets to reduce debt.
The Group has satisfied its covenant obligations for the Commonwealth Bank of Australia $12 million Trade Finance Facility
at 30 June 2019.
74
33 PARENT ENTITY INFORmATION
Information relating to Clean Seas Seafood Limited (‘the Parent Entity’):
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Share rights reserve
Accumulated losses
Total equity
Statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
2019
$’000
610
57,968
10,438
13,842
44,126
182,437
897
(139,208)
44,126
(6,495)
–
(6,495)
2018
$’000
5,591
53,824
1,749
3,531
50,293
182,345
661
(132,713)
50,293
(5,421)
–
(5,421)
The Parent Entity has no capital commitments to purchase plant and equipment
(2018: Nil). Refer Note 27 for further details of the commitment.
The Parent Entity has not entered into a Deed of Cross Guarantee. Refer Note 26 in relation to contingent assets and liabilities.
34 POST-REPORTING DATE EVENTS
On 21st August 2019, the Company announced a two-stage funding program deliver sufficient funding to fully implement its
“Vision 2025” Strategic Plan. Details of the strategic plan, which is in the final stages of completion, will be announced as part
of an Investor Roadshow in September 2019. The key elements of the funding encompass:
• The Company’s major shareholder, Bonafide and its related entities took up a placement of shares (“Placement”) which
increased its combined shareholding from 9.5% to 17.7%. Under the Placement announced on 21 August 2019, Clean Seas
issued 8,241,506 shares at $0.8008 per share raising $6.6 million, with all shares issued under the Company’s existing
placement capacity pursuant to ASX Listing Rule 7.1.
• The Company will undertake a non-renounceable entitlement offer of Convertible Notes to be made to existing shareholders
to raise up to approximately $15.3 million (“Entitlement Offer”). The convertible notes will be offered on a pro-rata basis to
all qualifying shareholders, with key terms including interest payable at an annual rate of 8%, an 8% conversion discount and
three-year term to maturity (“Convertible Notes”).
The full details of the Entitlement Offer (including terms and conditions of the Convertible Notes) will be disclosed in a prospectus
for the offer. The Company is targeting lodgement in September 2019 with offer closure expected by the end of October 2019.
The actual timetable will be set out in the prospectus and is subject to ASX approval.
Following Board approval, on the 30 August 2019, 678,898 Share Rights vested and 132,696 lapsed.
There are no other matters or circumstances that have arisen since the end of the year that have significantly affected or may
significantly affect either:
• the entity’s operations in future financial years;
• the results of those operations in future financial years; or
• the entity’s state of affairs in future financial years.
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
75
Directors’ Declaration
In the opinion of the Directors of Clean Seas Seafood Limited:
• The consolidated financial statements and notes of Clean Seas Seafood Limited are in accordance with the Corporations
Act 2001, including:
– Giving a true and fair view of its financial position as at 30 June 2019 and of its performance for the financial year
ended on that date; and
– Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
• There are reasonable grounds to believe that Clean Seas Seafood Limited will be able to pay its debts as and when they
become due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer for the financial year ended 30 June 2019.
Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Terry O’Brien
Chairman
Dated the 30th day of August 2019
76
Independent Auditor’s Report
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
77
Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. www.grantthornton.com.au Level 3, 170 Frome Street Adelaide SA 5000 Correspondence to: GPO Box 1270 Adelaide SA 5001 T +61 8 8372 6666 F +61 8 8372 6677 E info.sa@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Clean Seas Seafood Limited Report on the audit of the financial report Opinion We have audited the financial report of Clean Seas Seafood Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independent Auditor’s Report
Continued
78
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 period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue recognition Note 4.5 & 6 Revenue is the key driver of the Group. The Group focuses on revenue as a key performance measure and revenue is also a key driver by which the performance of the Group is measured. This area is a key audit matter due to the volume of transactions and the total balance of revenue. Our procedures included, amongst others: Documenting the processes and assessing the internal controls relating to revenue processing and recognition; Reviewing the revenue recognition policy to ensure it is in line with AASB 15 Revenue from Contracts with Customers; Performing analytical procedures to understand the movements and trends in revenue for comparison against audit expectations; Tracing a sample revenue transactions to supporting documentation to ensure revenue is being recognised in line with the revenue recognition policy and accounting standards; Performing cut-off testing to ensure that revenue transactions at or around year end have been recorded in the correct period; and Assessing the adequacy of the related disclosures within the financial statements. Biological asset existence and valuation Note 4.20, 13 & 15 The Group’s biological assets include Kingfish, which is measured at fair value less costs to disposal. Estimating the fair value is a complex process involving a number of judgements and estimates regarding various inputs. Due to the nature of the asset, the valuation technique includes a model that uses a number of inputs from internal sources. This area is a key audit matter due to the complex nature involving a number of judgements and estimates. Our procedures included, amongst others: Documenting the processes and assessing the internal controls relating to the valuation methodology applied to biological assets; Reviewing the inputs used in the valuation model by comparing to actual performance subsequent to reporting date and comparing with historical performance of the Group; Attending a physical fin fish count and grading; Reviewing the historical accuracy of the Group's assessment of the fair value of Kingfish by comparing to actual outcomes; and Assessing the adequacy of the related disclosures within the financial statements. CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
79
Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. 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 this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors 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 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 to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report 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 the 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Clean Seas Seafood Limited, for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Independent Auditor’s Report
Continued
80
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. GRANT THORNTON AUDIT PTY LTD Chartered Accountants J L Humphrey Partner – Audit & Assurance Adelaide, 30 August 2019 ASX Additional Information
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below.
The information is effective as at 26 August 2019.
ORDINARY SHARE CAPITAL (QUOTED)
91,739,566 fully paid ordinary shares are held by 6,528 shareholders.
SUBSTANTIAL SHAREHOLDERS
The number of shares held by substantial shareholders and their associates, as stated on their most recent Substantial
Shareholder notice, are set out below:
Shareholder
Bonafide Wealth Management AG1
Australian Tuna Fisheries Pty Ltd2
1 Notice released to ASX on 26 August 2019.
2 Notice released to ASX on 28 November 2016.
VOTING RIGHTS
Number
of Shares
16,200,139
5,940,624
Ordinary Shares: On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon
a poll each fully paid share shall have one vote.
Distribution of equity security holders – Ordinary shares
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001+
Total
Number
of holders
2,276
2,559
675
927
91
6,528
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2019
81
ASX Additional Information
Continued
Twenty (20) largest shareholders
J P Morgan Nominees Australia Pty Limited
Australian Tuna Fisheries Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Neweconomy Com AU Nominees Pty Limited <900 Account>
UBS Nominees Pty Ltd
3rd Wave Investors Ltd
Mr Hagen Heinz Stehr & Mrs Anna Stehr
Demeta Pty Ltd
Fernbow Pty Ltd
Lidova Pty Ltd
BNP Paribas Noms PTY LTD
Morgan Stanley Australia Securities (Nominee) Pty Ltd
DHC International Pty Limited
Mr Michael John O’Neill & Mrs Rebecca Joan O’Neill
Mr Ermanno Feliciani
DMSF Pty Ltd
Rdlk Pty Ltd
Hans and Delwyn Pty Limited
Total Securities of Top 20 Holdings
SECURITIES EXCHANGE
The Company is listed on the Australian Securities Exchange.
ON mARKET BUY BACK
There is no current on market buy back.
Ordinary shares
Number of
shares held
Percentage of
issued shares
22,021,214
24.00%
5,162,837
1,750,041
1,519,449
1,253,653
1,127,675
1,126,054
1,000,005
699,573
655,000
538,880
530,000
525,775
485,621
461,344
440,000
361,361
347,005
323,389
317,474
5.63%
1.91%
1.66%
1.37%
1.23%
1.23%
1.09%
0.76%
0.71%
0.59%
0.58%
0.57%
0.53%
0.50%
0.48%
0.39%
0.38%
0.35%
0.35%
40,646,350
44.31%
82
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