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arguably the best
raw fish in the world.
ANNUAL REPORT 2020
CLEAN SEAS SEAFOOD LIMITED
ABN 61 094 380 435
C O N T E N T S
WHO WE ARE
WHAT WE DO
CHAIRMAN’S REPORT
BOARD OF DIRECTORS
OUR STRATEGY
STRATEGIC OBJECTIVE
FINANCIAL STATEMENTS
02
04
10
12
14
16
18
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.
OUR VISION
“To be a global leader in aquaculture,
inspiring culinary experiences around
the world through our sustainable
premium seafood.”
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.
CLEAN SEAS
60%
PORT
LINCOLN S.A.
5% ASIA
14% NORTH AMERICA
17% EUROPE
our Business
ESTABLISHED IN
2000, LISTED ON
THE ASX IN 2005
PRODUCED
3,324 TONNES
FY20
HIGHLY AWARDED
& SUSTAINABLE
CREDENTIALS
20 YEAR
BREEDING
MANAGEMENT
PROGRAM
PREMIUM
BRANDS, SPENCER
GULF HIRAMASA
KINGFISH AND
SensoryFresh
BEST PRACTICE
FREEZING
TECHNOLOGY
* Outside Japan.
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CLEAN SEAS SEAFOOD LIMITED
3
ANNUAL REPORT 2020 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.
Marine Farms
Hatcheries
Harvesting
Processing
-95°c
SensoryFresh
Markets
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CLEAN SEAS SEAFOOD LIMITED
5
ANNUAL REPORT 2020
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
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
oversee this delicate process. each year the
hatchery produces over one million
fingerlings from our unique, selectively bred
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.
after approximately 3 months our fish are
ready to go to sea. the fingerlings, now
weighing up to 35 grams, can be moved by
helicopter into open sea pens in the pristine,
icy waters of South australia’s Spencer Gulf.
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CLEAN SEAS SEAFOOD LIMITED
7
ANNUAL REPORT 2020 WHAT WE DO
Processing
our Royal Park Processing Plant in
adelaide processes all our fish for
both the australian and international
markets.
fresh Spencer Gulf Kingfish is
delivered to customers around the
world twice per week and 52 weeks
per year where it arrives to
restaurants in europe, north america,
and asia within four days of harvest.
SensoryFresh (premium frozen)
product is shipped around the world
in a specialised -35ºC refrigerated
containers. our unique freezing and
cold storage capabilities give our
product a clear advantage versus all
other frozen Kingfish offerings.
this provides end-to-end quality
control from egg-to-customer, thus
increasing the Company’s market
oppor tunities 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 products.
another benefit of the nitrogen
freezing technology is that it also
suppor ts ‘smoothing 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.
markets
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 76% of Clean
Seas business, and 92% 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 Nitrogen frozen range 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.
Premiere’s Food & Beverage Industry Awards
2018 Primary Producer of the Year
Highly
awarded and
sustainable
Premiere’s Food & Beverage Industry Awards
2019 Business Excellence Award & Export Award
Delicious Produce Awards 2018
Gold Medal Winner “From the Sea”
Australian Food Awards
“Best Fish” 2016, 2017 & 2018
Gold Standard Accreditation
in Sustainable Aquaculture
South Australian Export Awards
“Overall Exporter of the Year” 2019
Australian Food Awards Gold
“Fresh Fish” 2018
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CLEAN SEAS SEAFOOD LIMITED
9
ANNUAL REPORT 2020 notwithstanding all the above, we recognise the need to
continue to reduce our cost of doing business across the entire
Company. We have several plans in place to reduce the cost of
growing and processing our Yellowtail Kingfish over the next
two years. these plans were already in the Company’s strategic
plan but are now being re-prioritised and pulled forward where
the most available savings can be made. again, our relationship
with the Hofseth Group brings with it access to their extensive
aquaculture experience and knowhow, adding to the skills
inherent in our management team.
We have already made a few moves within our organisation
structure to reduce remuneration and related costs, resulting in
the redundancies of two senior executives. this was not an easy
decision to make given, the effort both people had put into the
Company during their tenure, but we had to face the fact that
the “new normal” for Clean Seas requires a leaner and more agile
structure. there has been and continues to be a focus on
reducing or eliminating expenses that no longer align with the
Company’s future strategies. the most recent annual forecast
suggests a reduction in the vicinity of five million dollars of such
costs annually. these costs were appropriate for the strategic
setting of the business before CoVid but not so now.
the future is expected to involve greater volumes of our
wonderful Yellowtail Kingfish being sold to a broad and diverse
set of sales channels and global markets. We have plans in place
to ensure we have the required aquaculture lease hectarage and
both the offshore and on land infrastructure necessary to
accommodate those larger volumes. We have very capable
nursery staff and hatchery facilities that can provide the
numbers of fingerlings required and the best genetics available
to ensure the quality of our products. We are also developing a
wider range of products suitable for the alternative markets we
are targeting. So, whilst this year has been a major setback for
Clean Seas, we have ridden out challenges in the past and we
believe we will ride this one out, coming out the other side with
strong growth resumed.
We very recently announced the imminent retirement of our
managing director and Chief executive officer (Ceo), david
Head. david has led Clean Seas through the above described
challenges and has been the architect of the branded strategy
and the strong sales growth. david and the Company have
agreed to accelerate his retirement, compared with his previous
indications, reflecting an acknowledgement by both david and
the Company that the transition to a strategy which is less reliant
on branding and high end trade is not where his skills nor his
passion lie. david deserves a great deal of kudos for what he has
built over his five years at Clean Seas and we wish him well in
whatever he chooses to undertake.
former Chief financial officer (Cfo), Robert Gratton, has been
appointed acting Ceo while david’s tenure with the Company
is finalised and former Group financial Controller, david Brown
has accepted the position of acting Cfo and he continues as
joint Company Secretary. Both gentlemen have performed
outstandingly in their roles to date and we know they will
manage this step up in responsibilities admirably.
i would like to thank sincerely all the employees of Clean Seas,
many of whom have been with the Company through thick and
thin. the back end of this year has seen a doubling down of effort
and commitment and it is in no small measure a function of the
talent of these people that the Company is confident in its
aspirations for the future. on behalf of the Board, i also want to
acknowledge the professionalism and loyalty of the entire Clean
Seas team through this challenging period, we appreciate your
efforts greatly.
thank you also to the Board of directors who have stepped up
and taken on a far greater workload than would normally be
required. We said farewell to Helen Sawczak after a brief but
valuable period on the Board and we welcomed Gilbert Vergères,
who is the appointee of our major shareholder Bonafide ltd of
Switzerland. We now have a Board of five directors, three of
whom are independent, to guide and govern the Company
through its transitional strategy.
finally, may i thank the many shareholders of Clean Seas Seafood
limited, some of whom have been shareholders from the
beginning and others who have joined us subsequently. We
appreciate your support, your patience and hope we can repay
you for your continued presence on our register into the future.
Terry O’Brien
Chairman
i am pleased to present the 2020 annual
Report for Clean Seas Seafood limited
(aSX: CSS).
Chairman’s Repor t
the financial year ended June 30, 2020 was very much a year
of two parts, pre-CoVid, and post-CoVid. i am sure i will not
be the only Chairman proselytising on this situation, but i am
sure there will not be many other Chairmen whose businesses
were impacted more than Clean Seas.
the Company had been showing a clean set of heels to the
past sub-optimal performance, brought on largely by the
damage done, and flow on effects of, the provision of
substandard feed by our feed supplier. Solid annual sales
growth and increasing farmgate prices were being realised on
the back of a strong branding program and improved product
quality and service reliability. in fact, sales revenue in the first
half of the financial year was running at 14% ahead of the prior
year and that rate of growth was continuing into the early
months of 2020.
the Company was well advanced in executing many of the
strategies set down in our Vision 2025 when CoVid-19 hit,
severely impacting the hospitality industry across the globe.
our main customer base is in the mid to upper end of the
restaurant sector and it was in that sector that cessation of
trading was mandated for a number of months from march,
2020 thus reducing the Clean Seas product sales significantly
effectively, we lost two months of sales almost entirely and
whilst we have been able to build back the sales rate in the
past two months quite well, the rate is still behind the pre-
CoVid run rate.
While the loss of sales due to CoVid-19 has left Clean Seas
with stock to clear, we now have a strategic opportunity to
use the sale of surplus inventory to drive trials and target long-
term growth via new channels and under developed
foodservice markets, particularly in north america and asia.
With more flexibility on price we have an unprecedented
ability to target this market at a very competitive price point.
the planned entry into retail product distribution is expected
to deliver long-term growth from new channels that will
complement Clean Seas’ existing restaurant and premium
food service business as these channels recover post CoVid-19.
earlier in the year we announced that we were in discussion
with a significant seafood producer, processor and distributor,
Hofseth Group of norway, and had accepted a sizeable
investment in Clean Seas from them and a commitment to
assist us in diversifying our selling channels, especially into the
US and China. We continue to work with them in identifying
opportunities and are firmly expecting them to be a large part
of our global sales expansion.
10
CLEAN SEAS SEAFOOD LIMITED
11
ANNUAL REPORT 2020 meet our Board
of directors
Terry O’Brien
Independent Non-Executive Chairman
(Joined February 2017, appointed
Chairman May 2017)
in
finance
formerly managing director of Simplot
australia. active
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
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
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.
Marcus Stehr
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
and
tuna,
mulloway. marcus is managing director
of australian tuna fisheries Pty ltd
and holds leadership roles in a number
industry associations. member of
of
the Remuneration and nominations
Committee.
Kingfish
Helen Sawczak
Independent Non-Executive Director
(Joined July 2018 & retired June 2020)
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.
Gilbert Vergères
Non-Executive Director
(Joined March 2020)
Gilbert has more than 30 years of
experience
industry,
in the financial
worked for several Swiss private banks,
and was managing director and member
of the Board of an asset management
company before joining Bonafide as a
Partner in 2013. Bonafide is a boutique
asset management company focusing and
investing in the aquaculture and seafood
sectors globally.
Managing Director & CEO
(Joined January 2016, to retire on 16th
October 2020)
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
in public and privately
and europe
owned companies. this includes Chief
executive roles at Pepsi, lion nathan,
Callum
leigh
mardon Group.
textile Group
and
Rob Gratton
Chief Financial Officer & Joint Company
Secretary & acting CEO since 27th
August 2020
(Joined March 2019)
in
appointed as Chief financial officer
in march 2019 and
Joint Company
Secretary in June 2019. over 20 years’
Corporate
experience
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.
Banking,
David Brown
Group Financial Controller, Joint
Company Secretary & acting CFO since
27th August 2020
(Joined January 2018)
appointed as Group financial Controller
on 9 January 2018 and Joint Company
Secretary on 4 June 2019. over 10 years’
in Corporate finance and
experience
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.
12
CLEAN SEAS SEAFOOD LIMITED
13
ANNUAL REPORT 2020 SUPPLY CHAIN
PEOPLE
& CULTURE
STAKEHOLDER
& COMMUNITIES
FUNDING
the feed litigation
settlement of $15m in
december, $5m in fresh
equity from Hofseth,
initiatives taken to
reduce costs and
conserve cash
funding headroom to
bridge the CoVid-19
disruptions, with cash
and undrawn facilities
of $42.4m (including
$22.2m in cash) at
30 June 2020
in house processing of
whole fresh and value
p r o d u c t s
a d d e d
provides end-to-end
control from egg to
customer
n i t r o g e n
l i q u i d
technology provides
scope for further new
product development
SensoryFresh allows
lower cost shipping
o p t i o n s w i t h o u t
impac ting produc t
quality
long standing and
positive social licence
with local Spencer Gulf
communities –
in
strong contrast to other
aquaculture operators
in other parts of the
world
Supportive regulatory
environment
l e v e l
H i g h
o f
e n g a g e m e n t an d
support from local,
state and national
governments
aUS-eU and aUS-UK
free trade agreements
expected to improve
competitive position
deeply committed and
loyal group of 7,000+
shareholders
S u p p o r t i v e
a n d
e ng ag e d b ank ing
partner
a restructured executive
team provides the
a n d
l e a d e r s h i p
experience to profitably
grow the business and
bring agilit y and
efficiency
Highly experienced
global sales and
marketing organisation
will be key to future
growth
Recent appointment of
n e w
P r o d u c t
development manager
to
the
fast-track
development of new
value-added and retail
ready formatsHighly
experienced and deeply
passionate farm and
t e a m s
b r e e d i n g
represent a strong
source of competitive
advantage
High calibre Board with
strong experience in
food
aquaculture,
i n d u s t r y
a n d
international business
BREEDING
& FARMING
Clean Seas is the global
leader in full life cycle
breeding and farming
20 years selec tive
breeding, established
infrastruc ture and
intellectual property is
a key competitive
adv antage 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 S eas sc ale
provides opportunity
for automation not
(economically) available
to o ther smaller
farmers
S e r i o l a
l a l a n d i
(Hiramasa) is native to
the Spencer Gulf and
t h r i v e s
t h i s
environment
i n
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
K i n g f i s h
f a r m i n g
experience. The market
for Kingfish, and indeed
for sustainably sourced
protein continues to
grow, 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.
PRODUCTS
MARKETS
fa r m e d K i n g f i s h
at trac t s premium
pricing versus wild
caught due to
its
consistent high quality
and reliable supply
Hiramasa is considered
the premium Kingfish
species
Spencer Gulf:
• only cold water
farmed Kingfish
outside Japan
•
•
leading full cycle
bred and farmed
Kingfish brand
S u s t a i n a b l e
proposition not
a v a i l a b l e
t o
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
G l o b a l
( f a r m e d )
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
m a r k e t
g r o w t h
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,
p ar t i c ular l y w i t h
SensoryFresh given 76%
of these markets are
frozen
Clean Seas has a long
established global
distributor network
Clean Seas continues to
p r o g r e s s
t h e
development of new
retail products, which it
aims to launch in Q2
fY21.
discussions with the
H o f s e t h G r o u p
progressed over the last
quarter of fY20 and
remain ongoing. Clean
Seas is confident that
Hofseth can assist the
Company in identifying
new sales opportunities
although potential
d i s t r i b u t i o n
arrangements are yet
to be finalised
14
CLEAN SEAS SEAFOOD LIMITED
15
ANNUAL REPORT 2020 STRATEGIC OBJECTIVE
Building scale
around a premium
and sustainable
farming operation
SCALE ACTIVATION
2020 – 2025
Clean Seas focus for the next 12-24
months (while export markets recover
from the impacts of CoVid) will be to
leverage the sale of excess inventory to
support working capital requirements
whilst working with new partners to
develop products and supply chains for
its strategic pivot into new retail and
meal kit channels
Growth (Markets & Products)
• Clean Seas has a strategic opportunity
to use the sale of surplus inventory to
drive trials and target long-term growth
via new channels and under developed
markets
• Key focus will be establishing market
entry into the circa 13,000t per annum
north american frozen Kingfish market
which is currently exclusively supplied
by traditionally frozen Japanese imports.
• the impairment of inventory will provide
a unique opportunity to target this
market at a very competitive price point.
Costs of Production
• Clean Seas has made significant
structural changes to reduce cost and
promote efficiency, including the
restructure of the executive team, a
reduction in the number Board
members and a consolidation of
activities into its South australian
base.
• the Company has identified a number
of projects to reduce farm and
processing costs of production, and
these projects, combined with
increased scale from planned sales
growth are expected to reduce costs
of production and improve Clean Seas
competitiveness in new and existing
markets.
Funding
• Release working capital into cash
16
CLEAN SEAS SEAFOOD LIMITED
17
ANNUAL REPORT 2020 Continued
Consolidated
Financial
Statements
For the year ended 30 June 2020
ABN 61 094 380 435
Consolidated Financial Statements
For the year ended 30 June 2020
C O N T E N T S
directors’ Report ............................................................................... 24
17
Intangible assets...............................................................................64
auditor’s independence declaration ........................................... 40
18 Right‑of‑use assets .......................................................................... 65
Corporate Governance Statement ................................................ 41
19 Trade and other payables .............................................................. 65
Consolidated Statement of Profit or loss
and other Comprehensive income ............................................... 42
Consolidated Statement of financial Position........................... 43
Consolidated Statement of Changes in equity .......................... 44
Consolidated Statement of Cash flows ....................................... 45
notes to the Consolidated financial Statements ..................... 46
1 Nature of operations ......................................................................46
2 General information and statement of compliance ..........46
3 Changes in accounting policies .................................................. 47
20 Borrowings ..........................................................................................66
21 Convertible notes .............................................................................66
22 Provisions ............................................................................................. 67
23 Employee remuneration ................................................................ 67
24 Equity ....................................................................................................68
25 Earnings per share and dividends .............................................. 69
26 Reconciliation of cash flows from operating activities .... 70
27 Auditor remuneration .................................................................... 70
28 Related party transactions and key management
4
Summary of accounting policies ............................................... 49
personnel disclosures ..................................................................... 70
5 Operating Segments ....................................................................... 57
29 Contingent assets and liabilities ................................................71
6
Revenue ................................................................................................ 58
30 Capital commitments ....................................................................71
7 Other income ..................................................................................... 58
31
Interests in subsidiaries .................................................................71
8
9
Finance income and finance costs ............................................ 59
32 Leases ....................................................................................................72
Income tax expense ........................................................................ 59
33 Financial instrument risk ............................................................... 73
10 Cash and cash equivalents ...........................................................60
34 Fair value measurement ................................................................ 76
11 Trade and other receivables .........................................................60
35 Capital management policies and procedures ....................77
12 Financial assets and liabilities ..................................................... 61
36 Parent entity information .............................................................77
13
Inventories .......................................................................................... 61
37 Post‑reporting date events ..........................................................77
14 Biological assets – current ............................................................ 62
directors’ declaration ...................................................................... 79
15 Property, plant and equipment .................................................. 63
independent auditor’s Report ....................................................... 80
16 Biological assets – non‑current ..................................................64
aSX additional information ........................................................... 84
18
Clean SeaS Seafood limited
AnnuAl RepoRt 2020
19
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 2020.
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;
• mr Gilbert Vergères (Appointed 3 march 2020);
• ms Helen Sawczak (Resigned 22 June 2020); and
• mr David Head* (managing Director & CEO).
(* On the 27 August 2020, the Company announced that the managing Director & CEO will be retiring from his full time role with the Company
in October 2020. Refer “Events arising since the end of the reporting period” for further commentary.)
COmPANY SECRETARY
The following persons were Company Secretary of Clean Seas during and since the end of the financial year:
• Rob Gratton (Joint Company Secretary); and
• David Brown (Joint Company Secretary).
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 loss after tax for the year of $14.454 million, which compares
to a statutory profit after tax of $1.446 million in FY19. Underlying operating earnings before interest, tax, depreciation and
amortisation (EBITDA) was a loss of $7.164 million, which compared to a loss of $1.032 million in FY19.
Clean Seas’ Vision 2025 Strategic Plan was on track entering Q3 FY20 with growing sales revenues (+14% vs H1 FY19), a strong
increase in Operating EBITDA (+220% vs H1 FY19) and positive cash flow from operations (+$3.2million H1 FY20). The worldwide
government lockdowns in response to COVID‑19 effectively closed in‑restaurant dining in most markets globally from the latter
part of Q3 FY20 and during most of Q4 FY20.
Total sales volumes in FY20 were 2,424 tonnes. After tracking 14% ahead of FY19 going into Q3 FY20, the impact of COVID‑19
resulted in lost sales during H2 FY20 and full year sales volumes 10% lower than FY19.
When in‑restaurant dining closed worldwide in late Q3 FY20 Clean Seas sales declined to around 20% of prior year. In Australia,
and in response, the Company focused on growing sales in non‑restaurant channels (historically less than 20% of sales)
particularly with smaller (1‑2kg) fish through Seafood retailers and small supermarkets. This initiative helped improve sales in
Australia to 49% of prior year in may and with restaurants starting to re‑open in June (albeit at limited capacity) sales returned
to 105% of prior year.
Globally, June FY20 sales were back to 77% of June FY19, and have further recovered in July to circa 92% of the prior year.
Ongoing disruptions due to COVID‑19 are likely to continue to affect Clean Seas sales for the foreseeable future.
In addition to the lost sales in H2 FY20, the Company expects FY21 sales will also be lower than previously planned – although
this will depend upon the rate of recovery in each market and the impact on international air freight services.
Sales volume (by market)
Q1 FY20 v
Q1 FY19
Q2 FY20 v
Q2 FY19
Q3 FY20 v
Q3 FY19
Q4 FY20 v
Q4 FY19
YTD FY20 v
YTD FY19
Tonnes (WWE)
Australia
Europe
North America
Asia/China
Total
16%
21%
42%
(38%)
17%
10%
(5%)
44%
31%
7%
(9%)
(16%)
8%
(83%)
(15%)
(43%)
(69%)
237%
(97%)
(43%)
(7%)
(20%)
93%
(56%)
(10%)
As a result of the sales volume decline, FY20 revenue reduced 13% to $40.3 million, and resulted in a reduced harvest and
additional processing and freezing of Kingfish in FY20. These increased production and processing costs led to a decline in
underlying operating EBITDA of $6.1 million versus FY19.
In December 2019, the Company’s legal action against Gibson’s Ltd in the Supreme Court of South Australia was settled and
accordingly did not proceed to the scheduled trial. The parties agreed to a final settlement of the action on the basis of a
payment to the Company of $15 million which was received by the Company in January 2020. Gibson’s Ltd and the Company
also agreed commercial terms for a Supply Contract for the manufacture of Clean Seas’ feeds to the Company’s own established
formulation.
The expected clearance of inventory not sold during COVID‑19 shutdown, lower selling prices to support market entry into new
retail sales channels and lower farm gates from increases in air freight costs led to an impairment of $15.8 million of Clean Seas
Live Fish and Frozen Inventory.
With higher operating costs and the implementation of cash saving initiatives, AASB 141 Biological Asset entries were negative
$0.665 in FY20, versus a positive $6.995 million in FY19.
Financial Performance ($’000)
Revenue
Volume (t)
Revenue/kg
Operating Results1
Underlying Operating EBITDA
Operating EBITDA/kg
Gross Profit
Gross Profit %
Statutory Results
Underlying Operating Adjustments
Impairment
Litigation Settlement & Expense
Whyalla establishment
AASB 141 SGARA and cost allocation
Statutory EBITDA
Statutory NPAT
Cash Flow
Receipts
Investment in Future Biomass
Operating Cash Flow1
FY20
40,313
2,424
16.63
(7,164)
(2.96)
3,866
10%
(15,813)
14,007
–
(665)
(9,635)
(14,454)
42,657
12,114
(1,919)
FY19
46,149
2,698
17.10
(1,032)
(0.38)
8,674
19%
–
(535)
(607)
6,955
4,781
1,446
45,756
11,391
3,191
Change
–13%
–10%
–0.47
–6,132
–2.57
–4,808
–49%
–14,416
–15,900
–7%
+6%
–5,110
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CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
21
Directors’ Report
Continued
1. Operating 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.
In July 2020, Clean Seas reduced its Executive team from 6 to 4 and following the retirement of Helen Sawczak as a
Non‑Executive Director, the Board elected not to find a replacement, which reduced the number of Non‑Executive Directors
from 6 to 5. Additionally the Directors have agreed to a 20% reduction in their fees, effective from 1 August 2020 until further
notice. Savings in Corporate, Sales and marketing costs and feed optimisation on the farm will result in operating costs savings
in excess of $5 million in FY21.
The Company’s focus on cost reduction and timely collection of debtors during the COVID‑19 period (with no material write‑off
of receivables required) has led to better than expected cash conservation through this period. With the settlement of the long
standing litigation in January 2020 and capital raising initiatives, as at 30 June 2020 Clean Seas retains Cash and Undrawn
Facilities of $42.4m (including $22.2m in cash). This represents a significant increase from Cash and Undrawn Facilities at
30 June 2019 of $7.4m.
Current cash and undrawn facilities ($m)
Jun‑20
Jun‑19
Cash at bank
Undrawn working capital facility
Undrawn senior debt facility
Undrawn asset finance facility
Total cash and undrawn facilities
22.2
3.5
14.0
2.7
42.4
1.0
4.7
–
1.7
7.4
As a result of the loss of sales revenue in the COVID‑19 affected second half, full year FY20 Cash Flow from Operations declined
by $5.1 million versus FY19. Statutory net cash from operating activities for FY20 was close to break‑even, and includes the
Litigation Settlement of $14m (net of expenses) and an investment in Biomass Expansion of $12.1m.
Operating cash flows reconciliation
Statutory cash used in operating activities
Less:
Investment in Biomass Expansion
Cash flows from settlement (net of expenses)
Operating Cash Flow1
FY20
(26)
12,114
(14,007)
(1,919)
FY19
(9,342)
11,391
1,142
3,191
1. Operating cash flow 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.
Despite reduced live fish biomass growth in H2 FY20, the Company expects the impact of lower sales in Q4 FY20 and FY21
(as global markets continue to be impacted by COVID‑19) will lead to circa 1,600 tonnes of excess Live Fish and Frozen
Inventory. The Company’s Liquid Nitrogen Freezing technology will be used to process and freeze a large proportion of this
inventory into various products including formats that can be further processed or value added in‑market in Europe, North
America and Asia.
Clean Seas has a strategic opportunity to use the sale of surplus inventory to drive trials and target long‑term growth via new
channels and under developed foodservice markets, particularly in North America and Asia. A key focus will be establishing
market entry into the circa 13,000t per annum North American frozen Kingfish market which is currently exclusively supplied
by traditionally frozen Japanese imports. The impairment of inventory will provide a unique opportunity to target this market
at a very competitive price point.
A similar strategy was successfully used by Clean Seas in FY16 to clear excess inventory in order to develop the Italian market.
Sales volumes grew four fold (from 100t to 426t) at lower farm gates prices, but after establishing the market, Clean Seas
successfully increased prices over the next 3 years by circa +40% without loss of volume. This demonstrates the uniquely
high price elasticity and customer conversion once Clean Seas’ superior product is trialled.
Clean Seas continues to progress the development of new retail products, which it aims to launch in Q2 FY21. Also, discussions
with the Hofseth Group progressed over the last quarter of FY20. Clean Seas remains confident that Hofseth can assist the
Company in identifying new sales opportunities, although potential distribution arrangements are yet to be finalised.
As at 30 June 2020, Clean Seas has circa $58.4 million in Live Fish and Frozen Inventory. The Company’s focus for the next
12‑24 months will be to maximise conversion of excess inventory into cash, which will support operating cash flow until
markets return to normal. The strategic targeting of excess inventory to support the Company’s entry into new retail channels
is expected to help build a larger and more diverse revenue base from which to resume its Vision 2025 strategy once global
markets normalise post COVID‑19.
As part of its FY20 strategic plan the Company identified a number of projects to reduce farm and processing costs of
production. These programs include automation of farm feeding systems, further automation of the Royal Park processing
operations and investment in new, upgraded farm assets including a new heavy works vessel.
These projects, combined with increased scale from planned sales growth are expected to reduce costs of production by circa
$2‑$3 per kg over the next 3‑4 years and are expected to be funded by the Senior Debt Facility established to fund long term
assets as part of the new banking facilities put in place with the CBA in February 2020.
Fish health remains excellent with Live Fish Biomass at 30 June 2020 of 4,435 tonnes, 9% higher than 12 months earlier, reflecting
the Company’s expectations (pre COVID‑19) of strong sales growth across FY20 and FY21. The current Biomass positions the
Company well for future sales growth in both retail and food service channels as lockdowns ease and global markets recover.
It is the Company’s view that whilst the ongoing COVID‑19 disruptions may reshape the timing of achieving its growth strategy,
the planned entry into retail product distribution is expected to deliver long‑term growth from new channels that will
complement Clean Seas’ existing restaurant and premium food service business.
The Company has the advantage of an exceptional product and importantly enters FY21 with balance sheet strength and
the capacity to leverage inventory for both strategic growth and as a source of funding during this period of uncertainty.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
mr. Gilbert Vergères was appointed as a Non‑Executive Director with effect from 3 march 2020 and ms Helen Sawczak resigned
as an Independent Non‑Executive Director on the 22 June 2020. Further details are provided later in this report.
EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD
Retirement of managing Director and CEO:
On 27 August 2020, the Company announced to the market that the managing Director & CEO mr David Head will retire from
his full time role with the Company in October 2020, to seek a portfolio of Non‑Executive Directorship roles. mr Head flagged
retirement options with the Board earlier this year, but at the time had not settled on timing. The business impact of COVID‑19
and subsequent change in market focus for FY21 and FY22 led to discussions and subsequent agreement with the Board to
bring forward retirement plans to October 2020.
Consequent Key management Personnel Changes:
The Company’s Chief Financial Officer and Joint Company Secretary, mr Robert Gratton has been appointed Acting CEO, in the
interim. mr David Brown the Company’s Group Financial Controller and Joint Company Secretary will assume the role of Acting
CFO, a role he has previously held.
Other matters:
The Group is subject to financial covenants, including operating cash flows, EBITDA and current ratio, which are reviewed
quarterly. The Group was compliant with all its covenants as at 30 June 2020, however, the Bank has agreed to waive the
testing of all covenants for the period ending 30 September 2020 with the intent to reach agreement on revised covenants for
the period ending 31 December 2020.
The Bank has confirmed that no event of default is subsisting and the Group can continue to utilise each Facility as per the
terms outlined in the Facility Agreement. This will provide the Group with sufficient funding to navigate through the potential
uncertainty associated with the ongoing impact of COVID‑19 pandemic.
Subsequent to 30 June 2020 a further 1,456,365 convertible notes were converted to 2,913,321 shares.
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.
22
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
23
Directors’ Report
Continued
LIKELY DEVELOPmENTS, BUSINESS STRATEGIES AND PROSPECTS
The Company is continuing to implement its strategic plan, while working to diversify its markets and channels through
the ongoing disruption caused by COVID‑19. Key initiatives include:
• Use the sale of surplus inventory to drive trials and target long‑term growth via new channels and under developed
foodservice markets;
• Continue to progress the development of new retail products;
• maximise conversion of excess inventory into cash;
• Progress projects to reduce farm and processing costs of production and
• maintain focus on tight cost controls throughout all aspects of the business.
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.
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 Taxation Institute of Australia, 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 Genetic Technologies Ltd (ASX:GTG & NASDAQ: GENE);
• Non‑Executive Director of Tasmanian Water & Sewerage Corporation 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
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); and
• Ross House Investments Pty Ltd (Stillwell motor Group).
She was previously a Non‑Executive Director of Tassal Group Limited (ASX: TGR) and Service Stream Limited (ASX: SSm).
ms murphy is a Fellow of Chartered Accountants Australia and New Zealand and a graduate of the Australian Institute of
Company Directors.
mr Gilbert Vergères – Non‑Executive Director
mr Vergères was appointed to the Company Board on 3 march 2020.
mr Vergères is one of three Partners of Bonafide Wealth management AG, who, through their Global Fish Fund is Clean Seas’
largest shareholder. Based in Liechtenstein, Bonafide Wealth management AG was established in 2008 to focus exclusively
in the Fish & Seafood Sector and is today considered one of the pre‑eminent global investors in aquaculture.
mr Vergères had a long career in Finance in Switzerland, where he worked at several Swiss private banks. In 1998, he started
his own business operations and has been managing Director and member of the Board of Directors at an asset management
company until 2013 before establishing the Bonafide Global Fish Fund with his two partners in 2012. mr Vergères is located
in Asia reflecting the Bonafide Funds focus on aquaculture investments in the Asia Pacific region.
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CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
25
Directors’ Report
Continued
mr David Head – managing Director and Chief Executive Officer
mr Head was appointed as managing Director and Chief Executive Officer on 28 January 2016. On the 27 August 2020, the
Company announced that the managing Director & CEO will be retiring from his full time role with the Company in October 2020.
mr Head 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 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 Chartered Accountant.
Prior to commencing with Clean Seas, mr Brown held senior positions at KPmG and Grant Thornton specialising in Corporate
Finance.
Retired Director
ms Helen Sawczak – Independent Non‑Executive Director
ms Sawczak resigned as a Director of the Company Board on 22 June 2020.
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.
DIRECTORS’ mEETINGS
UNISSUED SHARES UNDER OPTION
There are no share options issued at the date of this report.
The Company issued 1,037,521 share rights during the financial year as part of the FY20 LTI Equity Incentive Plan. The Company
had 2,650,988 share rights, which remain outstanding at 30 June 2020. 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 678,899 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 remuneration strategy and supporting incentive programs and frameworks are:
• to attract and retain high calibre senior executives;
• 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.
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:
Non‑Executive Director Remuneration
Director’s name
Terry O’Brien
Nick Burrows
marcus Stehr
Raelene murphy
Gilbert Vergères
Helen Sawczak
David Head
Board meetings
Audit and
Risk Committee
Remuneration and
Nominations Committee
A
26
26
26
26
13
26
26
B
25
26
23
25
13
24
26
A
11
11
–
11
–
–
–
B
10
11
4
11
1
3
11
A
3
3
3
–
–
–
–
B
3
3
3
3
–
2
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)
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.
Following Helen Sawczak retirement as a Non‑Executive Director in June 2020, the Board elected not to find a replacement,
which reduced the number of Non‑Executive Directors from 6 to 5. Additionally the Directors agreed to a 20% reduction in
their fees, effective from 1 August 2020 until further notice.
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CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
27
Directors’ Report
Continued
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.
Net Farmgate Revenue in each year. If Net Farmgate Revenue target is not achieved, vesting for that year lapses unless the
target for the following year is achieved.
Due to the ongoing uncertainty associated with the impact of COVID‑19, the Company has suspended its LTI scheme until FY21.
The fees payable to Non‑Executive Director and Committee fees are summarised below:
Performance Reviews
Changes in Non‑Executive Directors and Committee fees
20201
2019
Change
Chairman
Non‑Executive Director
Audit and Risk Committee Chair
Audit and Risk Committee member
Remuneration & Nomination Committee Chair
Remuneration & Nomination Committee member
$150,0002
$150,000
$70,000
$15,000
$7,500
$12,000
$6,000
$70,000
$15,000
$7,500
$12,000
$6,000
–
–
–
–
–
–
1. The above table reflects Non‑Executive Director and Committee fees prior to the 20% reduction, effective 1 August 2020.
2. Chairman’s fees are inclusive of all committee fees.
Executive Remuneration
The remuneration structure adopted by the Group for FY20 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 senior Executives.
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.
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 FY20 are summarised as follows:
• managing Director and CEO: NPAT in FY20, Workplace Health and Safety, Leadership & Culture, Funding and Biomass
Capacity; and
• CFO: NPAT in FY20, Funding, Cost of Production, and Capital Projects.
Due to the ongoing uncertainty associated with the impact of COVID‑19 consideration of activating the Company’s STI scheme
for FY21 has been deferred until December 2020.
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 2019 Annual General meeting. Details. The LTI is based on share rights being granted and further details
are provided in section (e) of this Remuneration Report.
The Company’s LTI Plan for the managing Director and CEO has primarily been linked to Net Farmgate Revenue delivery over a
two 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
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.
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.
At the 2019 AGm, the majority of shareholder votes cast (71.1%) were in favour of adopting the 2019 Remuneration Report.
However, 28.9% of the total votes received were against the remuneration report, constituting a ‘second strike’ under the
Corporations Act 2001.
As a result of the ‘second strike’ a conditional spill resolution was then put to shareholders at the 2019 AGm. This resolution
was not carried, with 80.5% of shareholder votes cast against.
The Board continues to be mindful of shareholder feedback with regard to remuneration, and has adopted a number of
initiatives to further improve the alignment of remuneration with the creation of value for shareholders, particularly in the
context of ongoing COVID‑19 disruptions and the impact on Company performance. These initiatives include:
• Following Helen Sawczak retirement as a Non‑Executive Director, the Board elected not to find a replacement, which
reduced the number of Board members from 6 to 5;
• Reducing Board fees by 20% until further notice;
• Restructuring and reducing the Executive Team;
• Implementing salary freezes for the Executive Team;
• Granting shares instead of cash payments for certain Executive Team entitlements to preserve cash;
• Suspending the Company’s LTI scheme until FY21; and
• Deferring consideration of activating the Company’s STI scheme for FY21 until December 2020.
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)1
2020
(15.57)
(14,454)
(14,454)
72,458
55.5
2019
1.73
1,446
1,446
73,542
90.5
20181
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
1. 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.
28
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
29
Directors’ Report
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c Service agreements
Remuneration and other terms of employment for the 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 $
$460,000
$327,620
motor Vehicle/
Allowance
Yes
No
Term of
agreement
Ongoing
Ongoing
Notice period
9 months
3 months
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
d Bonuses included in remuneration
Fixed
remuneration
maximum At
risk – STI
maximum At
risk – LTI
42%
61%
19%
17%
39%
22%
Details of the short‑term incentive cash bonuses awarded as remuneration to each Key management Personnel for FY20, 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 FY20 and it is proposed that the payment to some Executives will be settled by the issuance
of shares. The quantum of shares to be issued will be 58,079 to Rob Gratton at a strike price of $0.55 being the price on the date
the bonus was approved.
Other Key management Personnel
David Head
Rob Gratton
e Other information
Shares held by Key management Personnel
Included in
remuneration
($)
Percentage
vested
during the year
Percentage
forfeited
during the year
90,938
31,943
37.5%
32.5%
62.5%
67.5%
The number of ordinary shares in the Company during the 2020 reporting period held by each of the Group’s Key management
Personnel, including their related parties, is set out below:
Year ended 30 June 2020 – Ordinary Shares
Personnel
T O’Brien
N Burrows
m Stehr
R murphy
H Sawczak
G Vergeres3
D Head
R Gratton
Totals
Balance
at start
of year
155,000
48,358
64,794
25,000
5,000
–
510,598
48,695
857,445
Granted as
remuneration
Received on
exercise
Other changes
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
678,899
–
678,899
75,7811
–
–
–
(5,000)2
250,000
–
61,5521
382,333
Held at the
end of
reporting
period
230,781
48,358
64,794
25,000
–
250,000
1,189,497
110,247
1,918,677
1. Changes are on market purchases and conversion of Convertible Notes.
2. Ceased to be a KmP during FY20
3. Commenced as a KmP during FY20
.
1
.
2
.
3
.
4
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
31
Directors’ Report
Continued
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.
Other Transactions with Key management Personnel
The Group’s related parties comprise its key management and entities associated with key management.
Convertible notes held by Key management Personnel
The number of convertible notes in the Company during the 2020 reporting period held by each of the Group’s Key
management Personnel, including their related parties, is set out below:
Year ended 30 June 2020 – Convertible notes
Personnel
T O’Brien
N Burrows
m Stehr
R murphy
H Sawczak
G Vergeres2
D Head
R Gratton
Totals
Balance at
start
of year
Issue of
convertible
notes
–
–
–
–
–
–
–
–
–
25,834
8,060
10,213
4,167
834
–
136,574
100,000
285,682
Converted to
equity
(25,834)
–
–
–
–
–
–
–
Other changes
–
–
–
–
(834)1
–
–
–
(25,834)
(834)
1. Ceased to be a KmP during FY20
2. Commenced as a KmP during FY20
Share Rights held by Key management Personnel
Share rights granted under the LTI Equity Incentive Plan are set out below:
Year ended 30 June 2020 – Share Rights
Personnel
D Head
R Gratton
Totals
Balance at
start of year
1,934,407
–
1,934,407
Other changes
Granted as
remuneration
–
–
–
518,120
138,877
656,997
Exercised
(678,899)
–
Lapsed
(132,695)
–
(678,899)
(132,695)
Held at the
end of
reporting
period
–
8,060
10,213
4,167
–
–
136,574
100,000
259,014
Held at
the end of
reporting
period
1,640,933
138,877
1,779,810
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.
A major shareholder in Clean Seas Seafood Limited is Australian Tuna Fisheries Pty Ltd (ATF). ATF and its associated entities
controlled 6.15% of issued shares at 30 June 2020 (2019: 7.1%) and it is associated with Stehr Group Pty Ltd, H & A Stehr
Superannuation Fund and Sanchez Tuna Pty Ltd. 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
2020
$’000
2019
$’000
33
389
35
–
5
495
36
30
The following balances are outstanding as at the reporting date in relation to transactions with related parties:
Current payables
• Australian Tuna Fisheries Pty Ltd
• Stehr Group Pty Ltd
Current receivables
• Australian Tuna Fisheries Pty Ltd
End of audited Remuneration Report.
SUSTAINABILITY & SAFETY
2020
$’000
2019
$’000
61
2
–
22
–
–
22
Clean Seas’ vision is to be a global leader in sustainable and profitable Yellowtail Kingfish production. In FY20 the Company
progressed its Integrated management Systems approach working under its four core umbrella policies – WHS, Environment,
Quality, and Risk management – which have been framed against ISO requirements.
This systematic approach, including a continuous improvement plan, has enabled the Company to maintain certification
compliance with the independent auditing bodies of Aquaculture Stewardship Council (ASC), Friends of the Sea (FoS) and
HACCP (SGS).
As part of the commitment to achieving these goals the Company has again actively strived to meet its moral and legal
regulatory responsibilities.
Lost Time Injury Frequency (LTIF) measures the number of lost‑time injuries per million hours worked, and is a widely accepted
proxy for safety performance. Clean Seas safety performance in FY20 recorded a 20% improvement in total LTIF, with 9.9 in
FY20 compared to 12.4 in FY19. A total of 12 days were lost in FY20 due to two medically treated injuries.
Year Ended 30 June
Lost Time Injury Frequency (LTIF)
2020
9.9
2019
12.4
Clean Seas workplace health risks in the past year have primarily been attributed to slips, trips and falls, crushing, cuts,
musculoskeletal stressors and mental health impacts.
Focus from within the Company, however, continues to be on ‘high energy transfer’ controlling risks associated with plant
and chemical operations. This has resulted in Clean Seas adopting best practice standards for work in these areas performed.
For example: Crane Work – high risk work, both on land and sea can only be performed by personnel holding the appropriate
high‑risk licences of dogging and CV crane tickets.
32
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
33
Directors’ Report
Continued
To strengthen our safety leadership and culture, we have educated our employees in early mental health management,
encouraging them to ask the question ‘R U OK’? This initiative has already assisted several employees seek out appropriate
counselling and medical help.
Working with customers, suppliers and the community was a feature in FY20 whereby Clean Seas promoted mental health
awareness within the community through the sponsoring and support of a Tunarama entrant.
Since march 2020, Clean Seas has taken a proactive approach to the management of the Coronavirus pandemic in line with
State and Federal Government direction. To ensure our workforce continues to operate safely, strict rules and social distancing
measures have been applied. Separation of shift teams and administration staff, and regular targeted cleaning programs have
been designed to ensure employee safety and to avoid disruption to the Company’s supply chain.
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 for Agriculture, Food and Fisheries 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 for Agriculture, Food and
Fisheries 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.
• 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 Joint 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 27 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 36 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
28 August 2020
34
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
35
Auditor’s Independence Declaration
Corporate Governance Statement
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
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 2020 is dated as at 30 June 2020 and
was approved by the Board on 28 August 2020. The Corporate Governance Statement is available on Clean Seas’ website
at http://www.cleanseas.com.au/investors/corporate‑governance/
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 2020, 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, 28 August 2020
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.
36
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
37
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2020
Consolidated Statement of Financial Position
As at 30 June 2020
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
Impairment – frozen inventory and biological assets
Depreciation and amortisation expense
Other expenses
(Loss)/Profit before finance items and tax
Finance costs
Finance income
(Loss)/Profit before tax
Income tax benefit/(expense)
(Loss)/Profit for the year after tax
Other comprehensive income for the year, net of tax
Total comprehensive loss/profit 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
7
14
23.1
13/14
15/18
8
8
9
25.1
25.1
2020
$’000
40,313
16,375
18,511
(31,708)
(12,370)
(10,197)
(10,598)
(15,813)
(3,441)
(4,148)
(13,076)
(1,389)
11
(14,454)
–
(14,454)
–
(14,454)
(15.57)
(15.57)
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
1.73
1.69
Note: This statement should be read in conjunction with the notes to the financial statements.
ASSETS
Current
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Biological assets
Current assets
Non‑current
Property, plant and equipment
Right‑of‑use assets
Biological assets
Intangible assets
Non‑current assets
TOTAL ASSETS
LIABILITIES
Current
Trade and other payables
Bank overdraft
Borrowings
Provisions
Current liabilities
Non‑current
Convertible notes
Borrowings
Provisions
Non‑current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Notes
2020
$’000
2019
$’000
10
11
13
14
15
18
16
17
19
10
20
22
21
20
22
22,169
2,973
10,891
1,072
49,783
86,888
1,004
5,764
9,465
1,047
56,585
73,865
16,092
16,869
539
244
2,957
19,832
106,720
6,423
–
10,925
1,175
18,523
13,075
2,340
324
15,739
34,262
72,458
–
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
Equity attributable to owners of the Parent:
• share capital
• share rights reserve
• accumulated losses
TOTAL EQUITY
24.1
24.2
195,937
766
(124,245)
72,458
182,436
897
(109,791)
73,542
Note: This statement should be read in conjunction with the notes to the financial statements.
38
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
39
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
Balance at 1 July 2018
Profit for the year
Share purchase plan and placement
Share rights reserve movement
Balance at 30 June 2019
Loss for the year
Share placement
Convertible note conversions
Share rights reserve movement
Balance at 30 June 2020
Notes
24.1
24.2
24.1
24.1
24.2
Share
capital
$’000
182,345
–
91
–
182,436
–
11,393
1,633
475
195,937
Share rights
reserve
$’000
Accumulated
Losses
$’000
661
–
–
236
897
–
–
–
(131)
766
(111,237)
1,446
–
–
(109,791)
(14,454)
–
–
–
(124,245)
Total
equity
$’000
71,769
1,446
91
236
73,542
(14,454)
11,393
1,633
344
72,458
Note: This statement should be read in conjunction with the notes to the financial statements.
Operating activities
Receipts from customers
Payments to suppliers excluding feed
Payments for feed
Payments to employees
Litigation and insurance proceeds
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
Gross proceeds from issue of convertible notes
Convertible note 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
26
10
2020
$’000
42,657
(24,972)
(23,803)
(10,126)
15,618
600
(26)
(2,422)
11
(2,411)
11,600
(194)
15,403
(840)
8,489
(2,969)
(612)
30,877
28,440
(6,271)
22,169
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)
Note: This statement should be read in conjunction with the notes to the financial statements.
40
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
41
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.
The material economic uncertainty associated with the COVID‑19 pandemic has been considered by the Board in assessing the
potential financial impact on the Group’s ability to generate positive cash flows, to comply with financial covenants and to
meet debts as and when they fall due. At the date of this report, the Board are of the opinion that the Group will be successful
in managing the impacts of COVID‑19 and will continue to realise its assets and discharge its liabilities in the normal course of
business and at the amounts stated in the financial report.
3 CHANGES IN ACCOUNTING POLICIES
2 GENERAL INFORmATION AND STATEmENT OF COmPLIANCE
3.1 New and revised standards that are effective for these financial statements
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 2020 were approved and authorised for issue by the Board
of Directors on 28 August 2020.
COVID‑19 Pandemic
The consolidated financial statements for the year end 30 June 2020 have been prepared on a going concern basis which
contemplates the realisation of assets and settlement of liabilities in the normal course of business at they fall due.
Since spread on the global COVID‑19 pandemic in 2020, there has been a significant adverse impact on the Global economy.
The slowing of the global economy and travel restrictions have reduced demand for goods and services generally and
Clean Seas food services business has been significantly impacted.
In the interest of preserving cash, management and the Board have taken action to respond to the pandemic by implement
the following:
• Reduced the Executive team from 6 to 4;
• Following Helen Sawczak retirement as a Non‑Executive Director, the Board elected not to find a replacement, which
reduced the number of Non‑Executive Directors from 6 to 5;
• The Directors have agreed to a 20% reduction in fees, effective 1 August 2020; and
• Implemented savings in Corporate, Sales and marketing costs and feed optimisation on the farm which is expected to result
in operating costs savings in excess of $5 million in FY21.
From April 2020, the Group qualified for Jobkeeper for certain qualifying employees. At 30 June 2020 the Group had 92 qualifying
employees and the Group had recognised other income of $0.8 million.
It is anticipated that the COVID‑19 pandemic will have an adverse impact on Group’s business, profitability and cash flows in
FY21. The Group has therefore impaired its Live Fish and Frozen by $15.8 million at 30 June 2020.
As at 30 June 2020, the Group had cash reserves of $22.2 million, undrawn facilities of $20.2 million and net current assets of
$68.4 million. In February 2020, the Group secured a $14 million increase to the Finance Facility with Commonwealth Bank of
Australia, which increased the facility limit to $32.15 million. The Finance Facility comprises $12 million Trade Finance Facility,
$14 million market Rate Loan Facility, $6 million Equipment Finance Facility and $150,000 Corporate Card Facility.
The Group is subject to financial covenants, including operating cash flows, EBITDA and current ratio, which are reviewed
quarterly. The Group was compliant with all its covenants as at 30 June 2020, however, the Bank has agreed to waive the
testing of all covenants for the period ending 30 September 2020 with the intent to reach agreement on revised covenants for
the period ending 31 December 2020.
The Bank has confirmed that no event of default is subsisting and the Group can continue to utilise each Facility as per the
terms outlined in the Facility Agreement. This will provide the Group with sufficient funding to navigate through the potential
uncertainty associated with the ongoing impact of COVID‑19 pandemic.
A number of new and revised standards became effective for the first time to annual periods beginning on or after 1 July 2019.
Information on the more significant standard, AASB 16 Leases is presented below.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right‑of‑use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short‑term
leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an
operating expense on a straight‑line basis over the term of the lease unless another systematic basis is more representative
of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in‑substance fixed payments), less any lease incentives receivable;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement
date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented with Borrowings in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right‑of‑use asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment
of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments
using a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged
discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised
discount rate
is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right‑of‑use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right‑of‑use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right‑of‑use asset reflects that the Group expects to exercise
a purchase option, the related right‑of‑use asset is depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
42
CLEAN SEAS SEAFOOD LImITED
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43
Notes to the Consolidated Financial Statements
Continued
The right‑of‑use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies AASB 136 to determine whether a right‑of‑use asset is impaired and accounts for any identified impairment
loss as described in the ‘Property, Plant and Equipment’ policy.
The Group has elected to use the cumulative catch‑up approach on transition to AASB 16.
Adjustment recognised on adoption of AASB 16
Operating lease commitments disclosed as per note 29.2 of the 30 June 2019 Consolidated Financial
Statements
Discounted using the incremental borrowing rate at the date of initial application
Lease liability recognised as at 1 July 2019
Of which are:
Current lease liabilities
Non‑current lease liabilities
Total lease liabilities
The Group used an incremental borrowing rate of 4.5%.
$’000
584
(24)
560
283
277
560
The associated right‑of‑use assets for property leases were measured at the amount equal to the lease liability. There were no
onerous lease contracts that would have required an adjustment to the right‑of‑use assets at the date of initial application.
The recognised right‑of‑use assets relate to the following types of assets:
Properties
Total right‑of‑use assets
30 June 2019
$’000
1 July 2019
$’000
–
–
560
560
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
• Right‑of‑use assets – increase by $560,000; and
• Lease liabilities – increase by $560,000.
The net impact on retained earnings on 1 July 2019 was nil.
4 SUmmARY OF ACCOUNTING POLICIES
4.1 Overall considerations
The consolidated financial statements have been prepared using the significant accounting policies and measurement bases
summarised below.
4.2 Basis of consolidation
The Group financial statements consolidate those of the Parent Company and its subsidiaries as of 30 June 2020. The Parent
controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the
ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on intra‑group asset sales are reversed on consolidation,
the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable.
4.3 Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian Dollars (‘$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.
3.2 Accounting Standards issued but not yet effective and not being adopted early by the Group
4.4 Segment reporting
The accounting standards that have not been early adopted for the year ended 30 June 2020, 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.
Other standards and amendments that are not yet effective and have not been adopted early by the Group include:
• IFRS 7 Insurance Contracts;
• Definition of a Business (Amendments to IFRS 3);
• Definition of material (Amendments to IAS 1 and IAS 8); and
• Conceptual Framework for Financial 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.
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.
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Notes to the Consolidated Financial Statements
Continued
4.5 Revenue
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies
the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which
takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand‑alone selling price of each distinct good or service to be
delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer
to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration
is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject
to the constraining principle are recognised as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which
is generally at the time of delivery.
Interest income
Interest income and expenses are reported on an accrual basis using the effective interest method.
Government Grants
The Group applies AASB 120 Accounting for Government Grants and Disclosure of Government Assistance in accounting for
the Jobkeeper wage subsidy, whereby a credit is recognised in other income over the period necessary to match the benefit
of the credit with the costs for which they are intended to compensate.
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 8).
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
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right‑of‑use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short‑term
leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an
operating expense on a straight‑line basis over the term of the lease unless another systematic basis is more representative
of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in‑substance fixed payments), less any lease incentives receivable;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement
date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as Borrowings in the consolidated statement of financial position.
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Notes to the Consolidated Financial Statements
Continued
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right‑of‑use asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment
of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments
using a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged
discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised
discount rate
is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right‑of‑use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right‑of‑use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right‑of‑use asset reflects that the Group expects to exercise
a purchase option, the related right‑of‑use asset is depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right‑of‑use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies AASB 136 to determine whether a right‑of‑use asset is impaired and accounts for any identified impairment
loss as described in the ‘Property, Plant and Equipment’ note 4.9.
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.
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.
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.
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Notes to the Consolidated Financial Statements
Continued
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.
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.
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 AASB 141 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 AASB 141.
Broodstock are valued at their fair value less costs to sell in accordance with AASB 141 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.
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51
Notes to the Consolidated Financial Statements
Continued
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.
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.
Coronavirus COVID‑19 Pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID‑19) pandemic has had, or may have,
on the consolidated entity based on known information. This consideration extends to the nature of the products and services
offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as
addressed in specific notes and the Director’s Report, there does not currently appear to be either any significant impact upon
the financial statements or any significant uncertainties with respect to events or conditions which may impact the
consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID‑19) pandemic.
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 AASB 141 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 AASB 141. 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.
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 Executive Officer 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
Impairment – frozen inventory and biological
assets
Depreciation and amortisation
Other expenses
Finance costs and income
Segment operating loss before tax
Segment assets 2020
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
Finfish Sales
2020
$’000
40,313
40,313
16,375
18,511
(31,708)
(12,370)
(10,197)
(10,598)
(15,813)
(3,417)
(3,874)
–
(12,778)
84,096
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
Tuna
Operations
2020
$’000
Unallocated
2020
$’000
–
–
–
–
–
–
–
–
–
(24)
(274)
–
(298)
455
–
–
–
–
–
–
–
–
–
–
–
(1,378)
(1,378)
22,169
Tuna
Operations
2019
$’000
Unallocated
2019
$’000
–
–
–
–
–
–
–
–
(34)
(275)
–
(309)
–
–
–
–
–
–
–
–
–
–
(256)
(256)
Total
2020
$’000
40,313
40,313
16,375
18,511
(31,708)
(12,370)
(10,197)
(10,598)
(15,813)
(3,441)
(4,148)
(1,378)
(14,454)
106,720
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
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53
Notes to the Consolidated Financial Statements
Continued
Segment assets 2019
92,476
455
1,004
93,935
No segment liabilities are disclosed because there is no measure of segment liabilities regularly reported to the Group’s Chief
Executive Officer. 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.
The Group’s revenues from external customers and its non‑current assets are divided into the following geographical areas:
Australia
Europe
Other countries
Total
Revenue
2020
$’000
22,438
14,680
3,195
40,313
Non‑current
assets
2020
$’000
19,832
–
–
19,832
Revenue
2019
$’000
23,732
18,390
4,027
46,149
Non‑current
assets
2019
$’000
20,070
–
–
20,070
During 2020 $3.9 million or 10% (2019: $5.7 million or 12%) of the Group’s revenues depended on a single customer in the
finfish sales segment.
8 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:
• Convertible note
• Leases
• Other borrowings
Total
9 INCOmE TAX EXPENSE
2020
$’000
11
11
2020
$’000
878
208
303
1,389
2019
$’000
6
6
2019
$’000
–
114
148
262
6 REVENUE
Revenue for the reporting periods consist of the following:
The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective tax
rate of 27.5% (2019: 27.5%) and the reported tax expense in profit or loss are as follows:
Sale of fresh fish products
Sale of frozen fish products
Total
7 OTHER INCOmE
Litigation settlement
Government Stimulus (Jobkeeper)
Other income
Total other income
2020
$’000
31,807
8,506
40,313
2020
$’000
15,000
843
532
16,375
2019
$’000
37,124
9,025
46,149
2019
$’000
–
–
287
287
On the 23 December 2019, the Group’s legal action against Gibson’s Ltd in respect of what the Company alleged, and Gibson’s
Ltd denied, were defective feed supplied to the Company and fed to the Company’s Yellowtail Kingfish between
December 2008 and July 2012 was settled for a payment to the Company for $15 million inclusive of costs. The payment was
received in full on 16 January 2020.
From April 2020, the Group qualified for Jobkeeper for certain qualifying employees. At 30 June 2020 the Group had 92 qualifying
employees and the Group had recognised other income of $0.8 million.
Profit/(Loss) before tax
Domestic tax rate for Clean Seas Seafood Limited
Expected tax expense/(income)
Adjustment for R&D tax incentive refund – 27.5% corporate tax rate component
Current year tax expense added to/(offset against) prior year tax losses
Adjustment for derecognition of tax losses
Adjustment for tax‑exempt income
Actual tax expense/(income)
Tax expense comprises:
• R&D tax incentive refund – 27.5% corporate tax rate component
• Deferred tax expense
Tax expense/(income)
2020
$’000
(14,454)
27.5%
(3,975)
–
–
3,975
–
–
–
–
–
2019
$’000
1,446
27.5%
398
–
(398)
–
–
–
–
–
–
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 2020, carried forward tax losses are estimated to be $73 million (2019: $60.3 million) and non‑refundable R&D tax
offsets are estimated to be $10.5 million (2019: $10.0 million).
54
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
55
Notes to the Consolidated Financial Statements
Continued
10 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
11 TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following:
Trade receivables, gross
Allowance for credit losses
Trade receivables
Other receivables
Total
2020
$’000
22,169
22,169
–
22,169
2020
$’000
2,803
(76)
2,727
246
2,973
2019
$’000
1,004
1,004
(7,275)
(6,271)
2019
$’000
5,260
(50)
5,210
554
5,764
All amounts are short‑term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Total
Expected credit loss rate
Carrying Amount
2020
%
1%
6%
10%
0%
2019
%
0%
1%
5%
17%
2020
$’000
1,815
960
28
–
2,803
2019
$’000
3,222
1,786
102
150
5,260
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
Allowance for
expected losses
2020
$’000
2019
$’000
20
53
3
–
76
2020
$’000
50
(138)
164
–
76
–
20
5
25
50
2019
$’000
50
(22)
22
–
50
12 FINANCIAL ASSETS AND LIABILITIES
12.1 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.
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Totals
Other liabilities
Convertible note
Borrowings
Bank Overdraft
Trade and other payables
Totals
Notes
10
11
Notes
21
20
10
19
2020
$’000
22,169
2,973
25,142
2020
$’000
13,075
13,265
–
6,423
32,763
2019
$’000
1,004
5,764
6,768
2019
$’000
–
4,941
7,275
6,982
19,198
No financial assets or liabilities are recognised at Fair Value through Other Comprehensive Income or Fair Value through
Profit or loss.
A description of the Group’s financial instrument risks, including risk management objectives and policies is given in Note 33.
12.2 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.
13 INVENTORIES
Inventories consist of the following:
Frozen fish products
(Less) impairment
Frozen fish products (at NRV)
Fish feed (at cost)
Other (at cost)
Total
2020
$’000
15,352
(6,713)
8,639
1,665
587
10,891
2019
$’000
7,202
–
7,202
1,776
487
9,465
An analysis of unimpaired trade receivables that are past due is given in Note 33.3.
At 30 June 2020, the Group recognised an impairment of $6.7 million to ensure that inventory is stated at the lower of cost and
net realisable value (NRV). management estimates the net realisable values of inventories, taking into account the most reliable
evidence available at each reporting date.
56
CLEAN SEAS SEAFOOD LImITED
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57
Notes to the Consolidated Financial Statements
Continued
14 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 impairment
Decrease due to harvest for processing to frozen inventory
Carrying amount at end of period
2020
$’000
56,585
44,312
(25,801)
18,511
(9,100)
(16,213)
49,783
2019
$’000
45,229
52,268
(28,943)
23,325
–
(11,969)
56,585
The closing biomass comprised 4,435 tonnes at an average weight of 2.43kg. This comprised 321 tonnes of 2018 year class
(YC18) at an average weight of 4.9kg, 2,963 tonnes of YC19 at an average weight of 3.7 kg and 1,151 tonnes YC20 at an average
weight of 1.2 kg (2019: 4,136 tonnes at an average weight of 2.57kg comprising 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). During FY20 harvests totalled 3,235 tonnes
(FY19: 3,010 tonnes).
At 30 June 2020, the Group recognised an impairment of $9.1 million to ensure that Live fish inventory is stated at fair value
in accordance with AASB 141 Agriculture.
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.
15 PROPERTY, PLANT AND EQUIPmENT
Details of the Group’s property, plant and equipment and their carrying amount are as follows:
Land &
Buildings
$’000
Plant &
Equipment
$’000
Gross carrying amount
Balance 1 July 2019
Additions
Disposals
Balance 30 June 2020
Depreciation and impairment
Balance 1 July 2019
Disposals
Depreciation
Balance 30 June 2020
Carrying amount 30 June 2020
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
(22,649)
(24,153)
Total
$’000
41,022
2,374
–
43,396
–
(3,151)
(27,304)
16,092
Total
$’000
37,574
3,448
–
41,022
36,836
2,316
–
39,152
–
(2,988)
(25,637)
13,515
33,546
3,290
–
36,836
(19,671)
(21,074)
–
(2,978)
(22,649)
14,187
–
(3,079)
(24,153)
16,869
4,186
58
–
4,244
(1,504)
–
(163)
(1,667)
2,577
4,028
158
–
4,186
(1,403)
–
(101)
(1,504)
2,682
Land &
Buildings
$’000
Plant &
Equipment
$’000
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 20).
58
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
59
Notes to the Consolidated Financial Statements
Continued
16 BIOLOGICAL ASSETS – NON‑CURRENT
Finfish Broodstock
Carrying amount at beginning of period
Purchases
Sales
Carrying amount at end of period
2020
$’000
244
–
–
244
17 INTANGIBLE ASSETS
Details of the Group’s intangible assets and their carrying amounts are as follows:
Net carrying amount
Balance at 1 July 2019
Amortisation and impairment
Net carrying amount 30 June 2020
Balance at 1 July 2018
Amortisation and impairment
Net carrying amount 30 June 2019
PIRSA Leases
and Licences
Southern
Bluefin Tuna
Quota
$’000
$’000
2,827
–
2,827
2,827
–
2,827
130
–
130
130
–
130
At each reporting date, the Directors review intangible assets for impairment.
Impairment assessment
The group operates two cash generating units comprising fin‑fish and tuna operations.
2019
$’000
244
–
–
244
Total
$’000
2,957
–
2,957
2,957
–
2,957
18 RIGHT‑OF‑USE ASSETS
The following table shows the movements in right‑of‑use assets
Gross carrying amount
Balance at 1 July 2019 – Restated
Additions
Remeasure lease
Disposals
Balance at 30 June 2020
Amortisation and impairment
Balance at 1 July 2019
Disposals
Amortisation
Balance at 30 June 2020
Carrying amount 30 June 2020
Total
$’000
560
–
269
–
829
–
–
(290)
(290)
539
The main leased site is the Royal Park processing plant in Adelaide, South Australia. The 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.
During FY20, the Group remeasured the Royal Park lease to include the renewal option of 2 years and gave notice of
termination for its melbourne office.
19 TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
The recoverable amount of the consolidated entity’s non‑current assets has been determined by value‑in‑use cash flow projections
from financial budgets for FY21 as reviewed by the Board. In establishing the cash flow projections, due consideration was
given to the material economic uncertainty associated with COVID‑19. The discounted cash flow model is based on a 3‑year
projection period and extrapolated for a further 2 years, together with a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash‑generating units is most sensitive. The
following key assumptions were used in the discounted cash flow model for the finfish operation:
Current:
• Trade payables
• Related party payables
• Other payables
Total trade and other payables
• 12.5% discount rate; and
• 2.5% long term revenue and operating cost growth rate.
The discount rate of 12.5% reflects management’s estimate of the time value of money and the consolidated entity’s weighted
average cost of capital adjusted for the finfish operation, the risk free rate and the volatility of the share price relative to market
movements. Sensitivity analysis indicates that headroom continues to be present if the discount rate is increased to 14.2%.
management believes the projected 2.5% revenue growth rate is prudent and justified, based on the general slowing in the
market. Sensitivity analysis on the long‑term growth rate indicates that headroom continues to be present if growth rate is
reduced to 1%.
The Group believes that the assumptions adopted in the value value‑in‑use calculation reflects an appropriate balance
between the Group’s experience to date and the material uncertainty associated with the COVID‑19 pandemic.
Accordingly, the Group has concluded that no impairment is required based on current market and economic conditions and
expected future performance.
All amounts are short‑term. The carrying values of trade payables and other payables are considered to be a reasonable
approximation of fair value.
60
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
61
2020
$’000
4,196
63
2,164
6,423
2019
$’000
5,407
22
1,553
6,982
Notes to the Consolidated Financial Statements
Continued
20 BORROWINGS
Borrowings consist of the following:
Current:
• Trade Finance Facility
• Lease liabilities – bank (note 32.1)
• Lease liabilities – other (note 32.2)
• Insurance premium funding
Total borrowings – current
Non‑current:
• Lease liabilities – bank (note 32.1)
• Lease liabilities – other (note 32.2)
Total borrowings – non‑current
2020
$’000
8,496
1,304
249
876
10,925
2,029
311
2,340
2019
$’000
–
1,018
–
567
1,585
3,356
–
3,356
In February 2020, the Group secured a $14 million increase to the Finance Facility with Commonwealth Bank of Australia, which
increased the facility limit to $32.15 million. The Finance Facility comprises $12 million Trade Finance Facility, $14 million market
Rate Loan Facility, $6 million Equipment Finance Facility and $150,000 Corporate Card Facility. This is an ongoing facility subject
to annual review and is secured against all Group assets.
The Group has a $6.0 million (2019: $6.0 million) secured Lease Finance and Project Specific Asset Finance Facility with
Commonwealth Bank of Australia, of which $3.3 million was utilised at 30 June 2020.
As at 30 June 2020, the Group had utilised $8.5 million of the $12 million Trade Finance Facility.
The Group is subject to financial covenants, including operating cash flows, EBITDA and current ratio, which are reviewed
quarterly. The Group was compliant with all its covenants as at 30 June 2020, however, the Bank has agreed to waive the
testing of all covenants for the period ending 30 September 2020 with the intent to reach agreement on revised covenants for
the period ending 31 December 2020.
The Bank has confirmed that no event of default is subsisting and the Group can continue to utilise each Facility as per the
terms outlined in the Facility Agreement.
21 CONVERTIBLE NOTES
Non‑current:
• Convertible notes
• Note costs capitalised
• Costs amortised
Total convertible notes
2020
$’000
13,770
(854)
159
13,075
2019
$’000
–
–
–
–
The Company issued 15,403,097 convertible notes with a face value of $1.00 each. The interest rate payable to Noteholders
is 8% per annum payable half yearly in arrears. The convertible notes are due to mature on 22 November 2022. Noteholders
have the right to convert some or all of their Notes to Shares on a quarterly basis before the maturity date. Notes are issued
in accordance with the prospectus dated 15 October 2019. The Notes are unsecured, but rank ahead of shares in a wind up.
During FY20 1,633,457 notes were converted into shares. Subsequent to 30 June 2020 a further 1,456,365 convertible notes
were converted to 2,913,321 shares.
The costs associated with the notes are amortised to the profit and loss over the term of the notes.
22 PROVISIONS
The carrying amounts and movements in the provisions account are as follows:
Annual Leave
Long Service
Leave
$’000
$’000
Carrying amount 1 July 2019
Additional provisions
Amount utilised
Carrying amount 30 June 2020
Current employee benefit provision
Non‑current employee benefit provision
720
541
(376)
885
885
–
23 EmPLOYEE REmUNERATION
23.1 Employee benefits expense
Expenses recognised for employee benefits are analysed below:
Salaries and wages
Superannuation – Defined contribution plans
Leave entitlement accrual adjustment
Short term incentive
Long term incentive – Share rights
Other on‑costs
Total
23.2 Share‑based employee remuneration
Total
$’000
1,195
693
(389)
1,499
1,175
324
2019
$’000
8,997
781
720
412
327
929
475
152
(13)
614
290
324
2020
$’000
9,333
833
879
261
344
720
12,370
12,166
The Company granted a total of 1,037,521 FY20 LTI Share Rights to senior executives during the year (2019: 684,099). 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 FY20
678,899 fully paid ordinary shares (FY19 130,766) were issued on the exercise of vested Share Rights and 132,695 Share Rights
lapsed (FY19 243 193).
The FY20 LTI Share Rights were valued by the Directors on a basis consistent with prior issues. 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 FY20 LTI Share
Rights this includes the Clean Seas share price on 1 July 2019 being $0.89 and on 29 November 2019 (AGm date) being $0.76
with no adjustment being required for future dividends, achievement of one of the three performance targets in FY20 and
assessment of the probability of achievement of the second and third (NPAT) performance targets in FY21 and FY22.
62
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
63
Notes to the Consolidated Financial Statements
Continued
24 EQUITY
24.1 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)(i)
• share placements(ii)
• convertible notes
• share rights
Total contributed equity at 30 June
2020
Shares
2019
Shares
2020
$’000
2019
$’000
83,498,060
1,667,314,190
182,436
182,345
–
(1,583,946,896)
18,241,506
3,558,905
678,899
–
–
130,766
–
11,393
1,633
475
–
–
91
105,977,370
83,498,060
195,937
182,436
Notes:
(i) On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
(ii) Share Placement with Hofseth & Nevera LLC and Bonafide Wealth management.
24.2 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)(i)
• granted during the year
• exercised during the year
• lapsed during the year
Total share rights at 30 June
2020
Share rights
2019
Share rights
2,425,061
42,298,373
–
(40,183,453)
1,037,521
(678,899)
(132,695)
684,099
(130,766)
(243,192)
2,650,988
2,425,061
2020
$’000
897
–
344
(475)
–
766
2019
$’000
661
–
373
(91)
(46)
897
Notes:
(i) On 3 December 2018, the Group’s shares were consolidated on a 1:20 basis.
Details of these Share Rights are provided at note 23.2.
25 EARNINGS PER SHARE AND DIVIDENDS
25.1 Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit/(loss) attributable to shareholders of
Clean Seas Seafood Limited as the numerator (i.e. no adjustments to profit were necessary in 2020 or 2019).
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
and convertible notes
Weighted average number of shares used in diluted earnings per share
2020
’000
2019
’000
92,838
83,370
–
92,838
2,426
85,796
The potential exercise of share rights and convertible notes has been excluded from the diluted earnings per share calculation
for the period ending 30 June 2020 due to being antidilutive, in accordance with AASB 133 Earnings Per Share, paragraph 43.
25.2 Dividends
Dividends Paid and Proposed
Dividends declared during the year
25.3 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
2020
$’000
–
2019
$’000
–
Parent
2020
$’000
2019
$’000
–
–
–
–
–
–
–
–
–
–
64
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
65
Notes to the Consolidated Financial Statements
Continued
26 RECONCILIATION OF CASH FLOWS FROm OPERATING ACTIVITIES
The following balances are outstanding as at the reporting date in relation to transactions with related parties:
(Loss)/Profit for the year
Adjustments for:
• Depreciation and amortisation
• LTI share rights expense
• net interest expense included in investing and financing
• non‑cash insurance expense
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
27 AUDITOR REmUNERATION
Audit and review of financial statements
Other services
• taxation compliance
• other tax services
Total other service remuneration
Total auditor’s remuneration
2020
$’000
(14,454)
3,441
344
1,378
1,392
(1,426)
2,791
(25)
6,802
(559)
304
(14)
(26)
2020
$
89,571
12,000
8,000
20,000
109,571
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
28 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 6.15% of issued shares at 30 June 2020 (2019: 7.1%) and it is associated with Stehr Group Pty Ltd, H & A Stehr
Superannuation Fund and Sanchez Tuna Pty Ltd. 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
2020
$’000
2019
$’000
33
389
35
–
5
495
36
30
Current payables
• Australian Tuna Fisheries Pty Ltd
• Stehr Group Pty Ltd
2020
$’000
61
2
2019
$’000
22
–
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
Total Remuneration
2020
$
2019
$
1,429,713
1,260,641
62,532
215,048
54,931
318,840
1,707,293
1,634,412
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 2020.
29 CONTINGENT ASSETS AND LIABILITIES
The Group has unrecognised carry forward tax losses. This contingent asset is discussed in Note 9.
At 30 June 2020, the Group has bank guarantees of $112,229 (2019: $112,229).
There are no other material contingent assets or liabilities.
30 CAPITAL COmmITmENTS
Property, plant and equipment
2020
$’000
797
2019
$’000
262
Capital commitments relate to items of plant and equipment and site works where funds have been committed but the assets
not yet received. The amounts are expected to be paid to suppliers in FY21.
31 INTERESTS IN SUBSIDIARIES
Set out below are details of the subsidy held directly by the Group:
Name of the Subsidiary
Country of incorporation
and principal place of
business
Principal activity
Group proportion of
ownership interests
Clean Seas Aquaculture
Growout Pty Ltd
Clean Seas Seafood
International Pty Ltd
Australia
Australia
Growout and sale of
Yellowtail Kingfish
Sale of Yellowtail Kingfish
30 June 2020
30 June 2019
100%
100%
100%
100%
66
CLEAN SEAS SEAFOOD LImITED
AnnuAl RepoRt 2020
67
Notes to the Consolidated Financial Statements
Continued
32 LEASES
32.1 Lease liabilities – Bank
The Group holds a number of motor vehicles and plant & equipment under lease arrangements with the Commonwealth Bank
of Australia. The net carrying amount of these assets is $3,438 (2019: $4,479k).
The Group’s lease liabilities, which are secured by the related assets held under leases, are classified as follows:
Lease liabilities – Bank
Current:
Lease liabilities – bank
Non‑current:
Lease liabilities – bank
2020
$’000
1,304
2,029
Future minimum lease payments at the end of each reporting period under review were as follows:
30 June 2020
Lease payments
Finance charges
Net present values
30 June 2019
Lease payments
Finance charges
Net present values
minimum lease payments due
Within 1 year
$’000
1‑5 years
$’000
After 5 years
$’000
1,446
(142)
1,304
1,212
(194)
1,018
2,143
(114)
2,029
3,612
(256)
3,356
–
–
–
–
–
–
2019
$’000
1,018
3,356
Total
$’000
3,589
(256)
3,333
4,824
(450)
4,374
32.2 Lease liabilities – Other
On adoption of AASB 16, the Group recognised leases liabilities in relation to leases which had previously been classified as
“operating leases” under AASB 117 Leases. These liabilities were measured at the present value of remaining lease payments,
discounted using the lease incremental borrowing rate as of 1 July 2019. The weighted average incremental borrowing rate
applied to the lease liabilities on 1 July 2019 was 4.5%.
Current:
Lease liabilities
Non‑current:
Lease liabilities
2020
$’000
249
311
2019
$’000
–
–
30 June 2020
Lease payments
Finance charges
Net present values
30 June 2019
Lease payments
Finance charges
Net present values
minimum lease payments due
Within 1 year
$’000
1‑5 years
$’000
After 5 years
$’000
270
(21)
249
–
–
–
324
(13)
311
–
–
–
–
–
–
–
–
–
Total
$’000
594
(34)
560
–
–
–
33 FINANCIAL INSTRUmENT RISK
33.1 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 12.1. 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.
33.2 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.
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Notes to the Consolidated Financial Statements
Continued
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:
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:
30 June 2020
Financial assets
Financial liabilities
Total exposure
30 June 2019
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$’000
1,108
(882)
226
2,997
(1,435)
1,562
582
(28)
554
29
(18)
11
22
–
22
14
(51)
(37)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial
liabilities and the AUD/EUR exchange rate ‘all other things being equal’. It assumes a +/‑ 5% change in this exchange rate for
the year ended at 30 June 2020 (2019: +/–5%). The sensitivity analysis is based on the impact on the Group’s valuation of
live fish held for sale.
Profit and Equity
Increase/(Decrease)
30 June 2020
30 June 2019
Increase 5%
A$’000
Decrease 5%
A$’000
(1,092)
(1,171)
1,207
1,294
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.
33.3 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
2020
$’000
22,169
2,973
25,142
2019
$’000
1,004
5,764
6,768
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.
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
2020
$’000
960
28
–
–
988
2019
$’000
1,786
77
25
150
2,038
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 2020 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 2020 and recognised a provision for $76k.
The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
33.4 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 2020, the Group’s non‑derivative financial liabilities have contractual maturities (including interest payments
where applicable) as summarised below:
30 June 2020
Convertible notes
Trade Finance Facility
Trade and other payables
Finance lease obligations
Lease obligations
Other borrowings
Total
Current
Non‑current
Within
6 months
$’000
–
8,496
6,423
526
131
750
16,326
6 – 12 months
$’000
1 – 5 years
$’000
5+ years
$’000
–
–
–
778
118
126
1,022
13,075
–
–
2,029
311
–
15,415
–
–
–
–
–
–
–
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Notes to the Consolidated Financial Statements
Continued
This compares to the maturity of the Group’s non‑derivative financial liabilities in the previous reporting periods as follows:
Current
Non‑current
30 June 2019
Trade and other payables
Finance lease obligations
Bank overdraft
Other borrowings
Total
Within
6 months
$’000
6,982
524
7,275
567
15,348
6 – 12 months
$’000
1 – 5 years
$’000
5+ years
$’000
–
494
–
–
494
–
3,356
–
–
3,356
–
–
–
–
–
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities
at the reporting date.
34 FAIR VALUE mEASUREmENT
34.1 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 2020:
30 June 2020
Biological assets – current
Biological assets – non‑current
Southern bluefin tuna quota
Total
30 June 2019
Biological assets – current
Biological assets – non‑current
Southern bluefin tuna quota
Total
Level 1
$’000
–
–
–
–
Level 1
$’000
–
–
–
–
Level 2
$’000
49,783
244
130
50,157
Level 2
$’000
56,585
244
130
56,959
Level 3
$’000
–
–
–
–
Level 3
$’000
–
–
–
–
Total
$’000
49,783
244
130
50,157
Total
$’000
56,585
244
130
56,959
The fair values of the biological assets are determined in accordance with Note 4.20.
35 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 Finance Facility Commonwealth Bank of Australia at 30 June 2020.
36 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
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income
2020
$’000
883
93,535
12,443
28,037
65,498
195,939
766
(131,207)
65,498
8,001
–
8,001
2019
$’000
610
57,968
10,438
13,842
44,126
182,437
897
(139,208)
44,126
(6,495)
–
(6,495)
The Parent Entity has no capital commitments to purchase plant and equipment (2019: Nil). Refer Note 30 for further details
of the commitment.
The Parent Entity has not entered into a Deed of Cross Guarantee. Refer Note 29 in relation to contingent assets and liabilities.
37 POST‑REPORTING DATE EVENTS
Retirement of managing Director and CEO:
On 27 August 2020, the Company announced to the market that the managing Director & CEO mr David Head will retire from
his full time role with the Company in October 2020, to seek a portfolio of Non‑Executive Directorship roles. mr Head flagged
retirement options with the Board earlier this year, but at the time had not settled on timing. The business impact of COVID‑19
and subsequent change in market focus for FY21 and FY22 led to discussions and subsequent agreement with the Board to
bring forward retirement plans to October 2020.
Consequent Key management Personnel Changes:
The Company’s Chief Financial Officer and Joint Company Secretary, mr Robert Gratton has been appointed Acting CEO, in the
interim. mr David Brown the Company’s Group Financial Controller and Joint Company Secretary will assume the role of Acting
CFO, a role he has previously held.
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Notes to the Consolidated Financial Statements
Continued
Directors’ Declaration
Other matters:
The Group is subject to financial covenants, including operating cash flows, EBITDA and current ratio, which are reviewed
quarterly. The Group was compliant with all its covenants as at 30 June 2020, however, the Bank has agreed to waive the
testing of all covenants for the period ending 30 September 2020 with the intent to reach agreement on revised covenants for
the period ending 31 December 2020.
The Bank has confirmed that no event of default is subsisting and the Group can continue to utilise each Facility as per the
terms outlined in the Facility Agreement. This will provide the Group with sufficient funding to navigate through the potential
uncertainty associated with the ongoing impact of COVID‑19 pandemic.
Subsequent to 30 June 2020 a further 1,456,365 convertible notes were converted to 2,913,321 shares.
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.
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 2020 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 2020.
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 28th day of August 2020
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Independent Auditor’s Report
Independent Auditor’s Report
Continued
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
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 2020, 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 2020 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.
Emphasis of matter – COVID-19
We draw attention to Note 2 and Note 4.23 of the financial report, which describes the circumstances relating to COVID-19
and the uncertainty surrounding any potential financial impact on the financials. Our opinion is not modified in respect of this
matter.
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.
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.
We have determined the matters described below to be the key audit matters to be communicated in our report.
Key audit matter
Intangible assets
Note 17
As at 30 June 2020, the Group’s intangible assets of
$2,957,000 comprise of PIRSA Leases and Licences, and
Southern Bluefin Tuna Quota.
The Group is required to perform an annual impairment test of
intangible assets with an indefinite useful life in accordance
with AASB 136 Impairment of Assets.
Management has tested the intangibles for impairment by
comparing the carrying amount with the recoverable amount.
The recoverable amount was determined on a value-in-use
basis.
The Group’s computations require a number of estimates and
assumptions and therefore there is an inherent risk involved in
the determination of the value of a material asset.
We have determined this is a key audit matter due to the
judgements and estimates required in calculating the
recoverable amount on a value-in-use basis.
How our audit addressed the key audit matter
Our procedures included, amongst others:
enquiring with management to obtain and document an
understanding of management’s process and controls
related to the assessment of impairment, including
management’s calculation of the recoverable amount;
reviewing the model against the requirements of AASB
136 with consultation of our valuations experts;
reviewing management’s value-in-use calculations to
assess for reasonableness of:
mathematical accuracy of the calculations;
management’s ability to perform accurate estimates;
forecast cash inflows and outflows to be derived by the
intangible assets;
other inputs applied to the value-in-use calculations,
including discount rates, expected terminal value, and
cash flow adjustments;
performed sensitivity analysis on the significant inputs
and assumptions made by management in preparing
its calculation;
engaging Grant Thornton's Corporate Finance team to
review the management models for appropriateness; and
assessing the adequacy of the Group’s disclosures within
the financial statements regarding the judgements and
estimates used by management in their assessment of
recoverable value of the intangible assets.
Revenue recognition
Note 4 and 6
Revenue is the key driver of the Group.
Our procedures included, amongst others:
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.
documenting the processes and assessing the internal
controls relating to revenue processing and recognition;
testing the operating effectiveness of key controls relating
to revenue recognition;
reviewing the revenue recognition policy to assess its
compliance with AASB 15 Revenue from Contracts with
Customers;
performing analytical procedures to understand the
movements and trends in revenue for comparison against
audit expectations;
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Independent Auditor’s Report
Continued
Independent Auditor’s Report
Continued
How our audit addressed the key audit matter
Auditor’s responsibilities for the audit of the financial report
Key audit matter
Revenue recognition
Note 4 and 6
Biological assets
Note 4, 14 and 16
The Group’s biological assets include Kingfish, which is
measured at fair value less costs of 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.
tracing a sample revenue transactions to supporting
documentation to evaluate whether or not revenue is being
recognised in line with the revenue recognition policy and
accounting standards; and
assessing the adequacy of the related disclosures within
the financial statements.
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;
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.
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 2020, 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.
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: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.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 2020.
In our opinion, the Remuneration Report of Clean Seas Seafood Limited, for the year ended 30 June 2020 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
J L Humphrey
Partner – Audit & Assurance
Adelaide, 28 August 2020
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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 24 August 2020.
ORDINARY SHARE CAPITAL (QUOTED)
108,890,691 fully paid ordinary shares are held by 5,501 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
GCI CSS (Hofseth & Nevera) LLC2
Australian Tuna Fisheries Pty Ltd3
1. Notice released to ASX on 27 August 2019.
2. Notice released to ASX on 15 June 2020.
3. Notice released to ASX on 21 April 2020.
VOTING RIGHTS
Number of
Shares
16,200,139
10,000,000
6,026,690
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
There were 1,590 holders of less than a marketable parcel of ordinary shares (less than $500).
Number of
holders
1,980
1,926
608
887
100
5,501
Twenty (20) largest shareholders
Citicorp Nominees Pty Limited
HSBC Custody Nominees
J P morgan Nominees Australia Pty Limited
Australian Tuna Fisheries Pty Ltd
BNP Paribas Nominees Pty Ltd
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