Clover Corporation Limited

Thank you for standing by and welcome to the Global Corporation Limited 1H 2025 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Peter Davey, Managing Director and CEO. Please go ahead.

Good morning. Thank you, Harmony. Welcome to the Clover Corporation first half FY25 results presentation. My name is Peter Davey, the CEO of the company, and with me is Andrew Allibon, the CFO and Company Secretary. Andrew will take you through the financial components. If we go to the next slide. This is an addition for people that haven't known much about us in the past, a bit about the corporation. We develop and produce encapsulated bioactive ingredients specialising in high-value nutritional oils for infant formula, for medical foods and for functional foods. Effectively, what we have is encapsulation technology. We take highly valued bioactives and we turn them into powders, emulsions and oils that And then those products enable our customers to turn them into a finished product. So we really support our customers in creating a finished product and developing a solution for them. And I think as I walk through this presentation, you'll see that that's what stood us in very good stead in the marketplace over the last six months. In the first half of 2025, We had 60 employees in the company. We have seven offices around the world. We have 21 products that we sold in that first half. So different products. We have four manufacturing sites. We sold to 165 different customers across 40 different countries. That may vary in the second half, and you might sell more products to more customers in different countries. It's just a bit of a snapshot to give you an overview of Really it's pretty tight in terms of cost base and employees, but we have a really broad marketplace of different products and different markets and customers that we sell to. It helps us weather the storms at times. If I move through onto the half-year financial highlights of the business, it's been a very good first half, certainly a turnaround for the business on what was previous. 37.6 million, effectively up 10 million on the same period last year. Revenue was in line with guidance, overall up 38% against the 27.3 and 200 basis points improvement in our gross margins overall. Our EBITDA position up 4 million, 4.3 overall. EBITDA was growth driven by just improvement in sales, improvement in margin. We've got a better customer mix and product mix into those customers. And the drive of that, the performance has helped in our manufacturing. So more volume helps our manufacturing base, and that's really improved. In terms of our working capital position, it's been reduced by a further $4.9 million. We've been driving our inventory down another 12.9%, 13% on the quarter before 2020. And so that leaves us with a really strong balance sheet. We've converted debtors and inventory into more cash in the business, and that's sitting at the moment at $15.4 million. NPAT was up $3 million on a very poor first quarter last year to $2.4 million, so a real turnaround and improvement in terms of delivering some profitability there. For the business, and that allows our directors to declare a dividend of three-quarters of a cent, so an incrementally frank dividend per share of three-quarters of a cent that will be paid to shareholders. It's nice to be able to deliver back to the people that own the company, and that's what we exist for. I'll move on to the half-year operational highlights. We've seen a recovery in both the infant formula sales in our business and our other business as well, so overall our markets. has improved whilst the market still is in a bit of decline. Europe and ANZ has really been the highlights of that. The new product sales, which I'll talk to a bit more, has continued to diversify and allowed us to help customers with solutions and grow the business. And we've really focused on engaging with our customers to diversify the business. So we're selling still into infant formula and the infant formula base is quite strong. But we've certainly seen growth in other segments of the business, into the food and other parts of the market. And our operational performance is aligned to that, and I'll talk to some of those areas in a bit more detail. Across the quarter, I think we talked last year about adding to our distribution network. We've traditionally gone to marketplace in our own right. Over the quarter, over the half, we've added a number of distributors across North America, Asia and Europe. Some of them are in their infancy, but some of them have actually delivered in terms of sales already, and I'll discuss that a bit further. Ecuador has been a good improvement. So we launched Ecuador last year, and we received our first crude delivery in November 2024, and we're continuing that on a monthly basis. And we've seen a real good turnaround in the malady dairies business, which was a bit of a drain on us previously, but it's certainly turned around and improved, and we'll talk to that I think the next slide will tell a fairly good story for you, and we started doing this last year to give you an indication of what's happened with the business. It certainly shows, if you look at that graph, a return to the business of growth, and that's why we exist. If you go back to FY23 at the start, there was an enormous stock build, especially by the infant formula customers in the world that didn't understand what was going to happen with the new Chinese product. GV licensing situation, so they built inventory into that. That build was too high at the start and therefore we then saw a significant decline and into FY24, the first half, we had very poor birth rates globally. It wasn't just China, it was across the entire world, low birth rates. In China, our Chinese customers moved away from us because fears around tuna oil, which I've gone through in the past. But then it started to improve in the second half of 24. We saw customers exiting a lot of the inventory build and we started to see the market return for us. And then that's gone into FY25. So the first half of FY25 is a good story. We've divided this graph into two parts. One is our base infant formula business. We've traditionally sold two major products into that business and that shows that that's continued and achieved growth and when you consider that the entire infant formula market in the world is absolutely in decline, we've been able to hold and grow our position and a big part of that is the secondary part. The other products that we've introduced and I've talked to many of you about over the last four to five years, we're starting to see some real traction with those products And that's going both into infant formula, but also into the other markets. So food, nutraceuticals, sports, drinks, a whole range of different products that we are now servicing. And that's that whole range of customers we've been supplying. So now 50% of our business is in other products. Those products are very unique to our business. They're unique in that we have patents around them. No one else has got them. They provide solutions to customers that no one else can do. So we allow customers, we solve their problems with unique products that have allowed us to get now 50% of our business. And that's a lot of the margin story as well. They're differentiated products that allow us to earn a bit more. So that's a good slide and it shows a positive continued growth and that's an expectation that we have for the future as well. I'm going to hand it over to Andrew now to take you through the financial results. Thank you, Andrew.

Thank you, Peter. Peter certainly commented on the top line and the improvement in revenue. I'll probably make a couple of call-outs in relation to second half FY24, which was 34.9. So we continued that momentum as previously stated. So a really good first half on the top line, which Peter's indicated has flown through the business into gross margin and then through to MPAT. A couple of items to gross margin. We've certainly talked about the basis point improvements there. Yes, it's underpinned by a change in customer and product mix throughout the course of the period. good operational performance where we've been running our refining facility in Eltona and also through Melody Dairies. So those two manufacturing sites have contributed. Peter did mention Ecuador and oil. We really haven't seen the benefits of that in the first half of FY25. We will see those benefits flow through in the second half of this financial year once we've got that oil into powder products and sold to our customers. A couple of items again that's not on this sheet that I thought might be worth mentioning and for those who have had an opportunity to look at the actual accounts, a couple of normalised items that is worth identifying. So currency movements certainly over the six months have benefited the business partly in gross margin but also in relation to our Euro and USD cash positions where we've seen a reported FX gain of 0.7 million. and you'll pick that up in the notes to the accounts. Offsetting that is good performance, which is resulting in a requirement to make sure we're appropriately provisioned for possible bonuses for staff as we go through the rest of the year, and that's about 0.4 variance from the same time last year. So those two items are worth recognising. So an overall net profit result of 2.4, fantastic position. No doubt questions will be answered at the end of the presentation. Moving to the cash flow statement, really good position in terms of our operating activities, which, as highlighted, has come through good practice around our management of inventory, which we've driven down. A couple of call-outs there. around Ecuador. The 445 as reported is fundamentally the residual capex spend in getting the plant operational in first half 2025. And as noted, Ecuador was originally debt-funded, where we took down that loan-drawn facility. And over the course of the period, we have been paying that back, which is reflected in the lower interest costs as shown on the statement. One other point that's probably worth noting there is the income tax paid, quite a large differential on a low result last year with high income tax expenditure. That was a result of the business pre-paying its taxes in 2024, which was rebalanced in the second half of 2024. So we're more aligned to where we should be in first half 2025, but last year we had embarked on a payment program and the results that were flowing through resulted in a correction in the second half of the year. And finally, turning to the balance sheet, again, as mentioned, really strong position, cash, which Peter mentioned, inventory down, receivables. We've had good collections throughout the course of the year, a lot more focus and follow-up with our customers. ensuring they're adhering to terms and over the course of the year we've continued to pay down debt. So a strong balance sheet which puts us in good stead as we roll forward into the second half of the financial year. Just in terms of inventory positions and management of stocks there, that's really around our management of both algal and our tuna stocks of oils. We've got good positions, but it's also making sure that we're timing deliveries aligned to customer forecasts so that we've got product not... Probably just a...