about this report

Setting the Scene 

In the 2017 SA RepTrak Pulse reputation survey, conducted by Reputation House, seven of the top 10 companies with the best reputations were in the fast-moving consumer goods (“FMCG”) and retail category. 

This makes Clover’s recognition as the most reputable company in South Africa for the second year running even more noteworthy. 

This integrated report is a concise account of the operational and financial affairs of Clover Industries Limited (“Clover” or the “Company” or the “Group”) for the financial period 1 July 2016 to 30 June 2017.

It deals with how Clover delivered against stated objectives and the way it executed its strategies. Throughout this integrated report we address Clover’s challenges, opportunities and the external factors that impact our operations and the broader communities we serve.

This report also covers the processes through which Clover interacts and communicates with its stakeholders, as well as how the Group has adopted and applied the principles and practice of sound corporate governance to safeguard the interests of all our stakeholders.

Only matters considered by the Board and executive management as material to the business and its sustainability have been included in this integrated report. More information on the Company, its operations and impact on the environment and communities it serves is available at www.clover.co.za.  

Materiality considerations are discussed in more detail on page 12 of this integrated report. 

Scope and boundary

This integrated report contains sustainability statements, including statements regarding Clover’s intent, belief or current expectations with respect to the Group’s business operations, market conditions, results, capital adequacy, provisions and risk management practices. 

Readers are cautioned not to place undue reliance on these sustainability statements as forecasts are subject to uncertainty and contingencies outside Clover’s control. 

While due care has been applied in the preparation of sustainability information, actual results may vary in a materially positive or negative manner. 

Clover is under no obligation to publicly release the results of any revisions or updates to these forward-looking statements post the publication date of this report. 

The scope of this report covers all operations of Clover and its subsidiaries. On 5 December 2016 Clover advised that it is in the process of restructuring its business to give effect to its stated objective of developing higher margin, value added products in dairy and other related food categories to eliminate its exposure to the cyclicality of its non-value added dairy business. The non-value added dairy business comprises inter alia the procurement of raw milk, the selling, marketing and distribution of non-value added fresh milk, ultra-high temperature milk, ultra pasteurised milk, skim milk powder, whole milk and bulk cream, where profits are mainly driven by volumes. 

Clover transferred the non-value added dairy business to its wholly owned subsidiary, Dairy Farmers of South Africa (Pty) Ltd (“DFSA”) under a written transfer of business agreement with effect from 1 April 2017. Clover now holds all the A shares in DFSA, which constitute 26% of the voting rights of DFSA and the milk producers hold all the B shares, constituting 74% of the voting rights in DFSA. The issue of B shares to milk producers took place on 1 July 2017.

The Board anticipates that the restructure will allow the Group to have a complete focus on its value-added business, which is aligned to its objectives of:

• Promoting and developing value added products in dairy and other related food categories;
• Expanding its non-alcoholic beverages portfolio; and
• Developing and enhancing its key competencies in brand development, production, distribution and merchandising. 

Clover looks forward to a mutually beneficial relationship with DFSA as the restructure will enable milk producers to leverage from the entire value chain associated with the non-value added dairy business.

The information provided in this integrated report has been guided by local and international requirements.

Compliance

The Board has satisfied itself that Clover has conformed throughout the reporting period to all the principles of the King III Code of Governance 2009 (King III) and the JSE listing Requirements, with limited exceptions. Where the Group has partially complied or not complied with these provisions, motivations and reasons were provided as indicated in the King III index which appears on page 72 of this integrated report.

King IV was released in November 2016 and builds on the current principles contained in King III, aligning the approach to integrated thinking across all six capitals, new governance structures, emerging risks and opportunities from new technologies and new reporting and disclosure requirements. 

Complying with King IV is a JSE Listings Requirement and effective for financial years commencing from 1 April 2017, and only with regard to integrated reports published on or after 1 October 2017. Clover’s Board has concluded a gap analysis and no material concerns or insufficiencies were identified regarding the Group’s current disclosure and application of principles. The new reporting requirements will be adopted during the current reporting period and disclosed in the integrated report for the period ending 30 June 2018. 

Legal compliance to Regulation 43 of the Companies Act pertaining to the Social and Ethics Committee and the management of Clover’s performance against ethics guidelines are described fully in the Report on Six Capitals. Compliance with Clover’s regulatory universe is described under Compliance in the Governance section, on page 64.

Integrated Combined Assurance

All disclosures included in this report are intended to provide meaningful, accurate, complete, transparent and balanced information to stakeholders. The Board, its Committees and management were involved in finalising disclosures made in this Integrated Annual Report and assume responsibility for the information contained therein. Page 142 elaborates on the combined assurance on the six capitals.

Together with the horizontal and vertical relationships with assurance providers, this integrated, combined assurance model assists the Board in assessing the adequacy of the internal control environment and assessing the integrity of information used for decision-making and reporting. Clover understands that insightful reporting for our shareholders is an important consideration for establishing this assurance model.

Considering the sustainability of Clover’s business model and in complying with Regulation 43 of the Companies Act, as well as King III, all material risks are incorporated into Clover’s risk universe. These are monitored under Clover’s risk management process, as described more comprehensively under the Governance Section of this report.

Statement of Board responsibility

Clover’s Board of Directors (the Board) acknowledges its responsibility for ensuring the accuracy of this 2017 Integrated Annual Report. The Board has applied its collective expertise to this report and, in its opinion, this report addresses all material issues and presents an integrated and accurate view of Clover’s performance in the year under review.

Based on the recommendations of the Board Committees, the Board approved this integrated report for release on 12 September 2017.

Contact information

We welcome your feedback on this integrated report. 

For more information regarding the contents of this report, kindly contact:

Mr Jacques van Heerden, Executive: Legal, Secretarial and Human Resources at telephone +27 (0) 11 471 1445.