Clover Corporation Limited

Thank you for standing by and welcome to the COVID Corporation Limited HY26 results briefing. 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 all. Welcome to the first half FY26 investor presentation. I'm delighted to be with you and present some good results. I'm Peter Davy and he is Andrew Elegon. Andrew is the Company Secretary and CFO. He will take us through the financial part of the results and following the presentation we're happy to take questions from you. So if I move to the highlights of the first half financial year, revenue was up $6.5 million to $44.1 million. That's a record result for the company, so an outstanding revenue result, which has driven our gross margins up to 35.6% as well. The revenue has really been generated with new customers and some of our other customers really improving their results as well. So a mixture of the two, which is driving an improved revenue result. EBITDA, $6.9 million up $2.6 million on the prior period by half has been outstanding. That's really underpinned by... The new product mix of products that we've got, so that's delivering better margins, delivering with new customers, and an improved manufacturing performance across the entire business. Cash on the balance sheet is sitting at $10.3 million. That's offset a little bit by we've had to increase our inventory position by $10.2 million, and that's really just in response to the improved customer demand. We've tried to flex our inventory position relative to the demand that we've forecast in the business, and so you can see we've had to increase that volume in response to the increased demand we're seeing. NPAT for the period up $1.8 million to $4.2 million, so it's nice to see it washing through to the bottom line as well MPAT is really a reflection of that mixture of growth and the new customers that we've added into the business. The more new products that we get to sell to customers, the improved gross margin and ultimate MPAT position. And of course, the increased sales of each month helps wash through to a higher profit in the business. And I'm really pleased to say that the board has approved a one cent per share interim fully franked dividend per share. So that's wonderful to see that we're giving a continued return to our shareholders and investors. And thank you to them for sticking with us through some tougher periods before. As I move to some of the highlights, the operational highlights of the business, it's really a story of we're starting to see the benefits of long-term collaboration with our customers. We have developed a portfolio of products over a period of time that gives customers solutions they can't get somewhere else. And so it takes time for those customers to go through qualification and shelf life testing those products, but it's really now starting to deliver a more diversified mix of customers, of product applications, and that gives us a better mix that delivers an improved margin position as well. We're providing a solution that nobody else can. We've seen some really good opportunities come through the seniors nutrition market and powdered nutrition. Powdered drinks is really growing in the marketplace for growing up toddlers and adults into things like sports nutrition, and that's really diversifying our product base. You would all be aware that for a long time we've been extremely strong in the infant formula market. We're now seeing much more diverse customer base for the business. And we've added a lot of distributors. So we started to talk about this at the end of last year, that we were moving away from our sold service in the marketplace to a distribution model. And so over the six months, we've appointed many distributors country by country that is helping us access customers that we've never had opportunities with before in segments that we haven't been able to service. We've seen some benefit to that, and we expect that will continue in the future. More operational side of the business, Ecuador has provided us with consistent supply of our crude oil which is helping deliver improved profitability. Melody Dairies is a business in its own right that we are an owner of and that it's delivering real operational benefits and they've resolved their non-compliance issues over their banking covenants on their loan. Colleen Excel's product we spoke about last year. It's still in its development stages. We are working on different packaging formats for the product. So customers will want it in different sizes to what they buy our traditional products. So we're looking at implementing new equipment to be able to do that. Customers are doing trials of the product and going through shelf life trials. And that'll take some time to get through where customers understand the product and will use it. I've got some more detail I'll cover later. And pleasingly, we've paid all bank debt as well in the half. So the balance sheet's looking quite clean with no bank debt, opening some opportunities for further investment in the future. This slide we talked about last year, and I think it's a really strong slide, and it shows the continued improvement with new products that is driving both the growth of the business, but also improving and growing the margin of the business. And if I just talk to the graph part, You can see over the period that the base products of the business, which have been with the business some 20 years, they're the ones that we make less margin of. They're not differentiated from a lot of the competitors' offers, and so they represent a couple of products in the business. We now have a portfolio of about 22 products in the business. So that 20 other products is what's representing a diversified product base where we're giving solutions that other people don't have. We're not a one-size-fits-all business. We try to provide a solution to a customer's problem so they can get an answer and therefore use our products. And that's really opened up opportunities you can see in terms of, one, revenue growth, but also really driving our margin positioning. And we are selling that into human nutrition, into food, into nutraceuticals and into new infant formula applications as well. And it's really where the story of the business is driving now and we expect that will continue in the future. I'll now turn to the financials and ask Andrew to take you through the post.

Thank you, Peter. And given the financial highlights, Peter has made commentary around revenue and gross margins Just in terms of on this slide, I think it's worthwhile. Previously, we haven't called out the gross profit as an individual line item. And just for clarity for those on the call, the number effectively represents what's displayed on the appendix 4D from the profit and loss statement, which is revenue less the raw materials and consumables. And we've been consistent in how that's been determined. So as Peter said, gross profit at 35.6, a pleasing increase which is aligned with the customer and product mix that's happened through the first half. And again, for those on the call that would have listened to our full year results, we finished last year and our published accounts show our gross margin at 30.4%. So again, the message around continuing to diversify our product range, meeting our customers' needs and expectations for their own their own purposes that has delivered the higher gross margin, which is very pleasing. Across our operating costs, they have increased. We continue to support growth through headcount, fundamentally looking to source up in our R&D department quality and through our sales teams. In terms of the bottom line, NPAT at 4.2, return on sales at 9.6, so we're getting back to where the business was some four years ago. which is really pleasing as well. So it's coming through. The hard work that's been undertaken over the last few years is really starting to pay off. I just might make a call out there and someone has highlighted that the ROI is not annualised. It's actually a period number. So the 5.8% is for the half year. So in rough terms, the annualised position would be 11.6%. I'll turn to the next page. Before I do that, I have called out the unfavourable impact there of 1.7. This is around the restatement of our consolidated accounts and equity positions, which again you'll note on the Appendix 4D for those that have had an opportunity to look at it. Multitasking, turning to the next page, in terms of cash flow. Our operating cash flows have been solid but in comparison to the prior year, it is down. That's fundamentally that we've now got cash tied up in the inventory position. That has grown for the first half of this year and certainly from the first half of FY25 and I'll talk to that on the next page when I get to it. The rest of the information is presented. Plant and expenditure, minimal through the period. It's residual capex relating to Ecuador and we've now invested in a packaging line for oil pouches again to meet our customers' growing needs. And with the Ecuador investment complete and as Peter said earlier, those borrow funds now have been fully repaid so Ecuador is starting to perform to the levels we want it to and we'll touch on that a little bit later as well. In terms of the Next page on the balance sheet, we continue to hold a strong cash position, sort of an average of around $10 million historically and that's really to address any fluctuations in our working capital which has come through in this reporting period. The higher level of inventory fundamentally is all in raw materials. The current year's raw is 24 million of that 35 million as displayed in first half 26, so it's close to 70% of our inventory is based in raw materials, which is oils, both refined and crude. And then as a comparative in the prior period, raw materials were at 12.7 million, so around 50%. So you can see that the growth from half on half is principally all in raw materials in readiness to meet future needs of our customers as we move forward. The Ecuador investment is complete. Bank debt fully repaid, as Peter said earlier. And we just called out there that whilst we don't have debt on our books, our ownership interest in Melody Dairies at 43.9%. We do have associated debt related to that investment. I'm sure you'll have questions at the end of the call, so I will hand back to Peter now to take you through the operational highlights.