CAPRAL LIMITED

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CAPRAL

ASX ANNOUNCEMENT

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25 February 2021

Capral delivers a strong earnings result, driven by a second half rebound in market conditions

Capral Limited (ASX: CAA) (“Capral” or the “Company”), Australia’s largest extruder and distributor of aluminium products, today released its financial results for the 12 months ending 31 December 2020 (FY20). Capral delivered a strong result well ahead of the prior year and 4% above the upgraded guidance provided in December 2020.

Key highlights:

Volume up 8% to 61,000 tonnes (FY19: 56,700 tonnes)
Trading EBITDA¹ up 79% to $19.7 million (FY19: $11.0m), driven by favourable market conditions in the second half of the year
EBITDA $47.2 million (FY19: $19.9m); includes JobKeeper of $11.9 million
NPAT $25.9 million (FY19: loss of $4.2m) includes deferred tax benefit of $3.0m
Normalised earnings per share at 66 cents
Strong balance sheet with net cash of $49.4 million
A fully franked final dividend of 45 cps declared, up on 2019 which was impacted by restructuring costs, and in line with 2018.
Market share gains driven by growing “Australian Made” sentiment, import disruptions, and a renewal of anti-dumping measures
Acquisition of additional 9000t extrusion capacity in NSW in February 2021
Best safety performance on record

As previously advised, market conditions rebounded strongly in the H2 FY20 resulting in Capral experiencing stronger than expected sales during the period. In response to the strong demand, Capral operated its manufacturing plants at close to capacity, leading to improved operating leverage further driving earnings.

Commenting on the FY20 results, Capral’s Managing Director, Tony Dragicevich, said:

“I am pleased with this result, particularly given the impact on demand during the lockdown periods and the other unique challenges presented by the global pandemic. This performance is not only a reflection of the improved market conditions we saw as the year unfolded, but importantly delivers on the significant investment and restructuring undertaken over the last few years”.

Investor and analyst conference call

Capral will be hosting an investor and analyst briefing on Friday, 26 February 2021 at 10:00am (AEST). Following the presentation, participants will have an opportunity to ask questions.

Please use the below link to pre-register for the call: https://s1.c-conf.com/DiamondPass/10012601-nd07i3.html

Capral Limited ABN 78 004 213 692 ASX: CAA

Level 4, 60 Phillip St Parramatta NSW 2150

PO Box 209, Parramatta CBD BC NSW 2124

T 02 8222 0112 F 02 8222 0130

Approved and authorised for release by Capral’s Board of Directors.

For further information please contact:

Corporate	Investors
Lyn McGee, Capral	Adrian Mulcahy, Market Eye
P: + 61 2 8222 0112	P: +61 438 630 422
E: [email protected]	E:[email protected]

¹ - For an explanation refer to the documents attached to this release.

www.capral.com.au

Capral Limited

THE PRELIMINARY REPORT GIVEN TO ASX UNDER LISTING RULE 4.3A

Appendix 4E - Preliminary Final Report

Appendix 4E - Preliminary Final Report	Appendix 4E - Preliminary Final Report	Appendix 4E - Preliminary Final Report	Appendix 4E - Preliminary Final Report
Name of Entity CAPRAL LIMITED A.B.N 78 004 213 692 Year Ended 31/12/2020 Reporting Period 1 January 2020 to 31 December 2020 Previous Period 1 January 2019 to 31 December 2019 Results for announcement to the market 31 December 2020 31 December 2019 $'000 $'000 2.1 Revenues from ordinary activities 432,009 418,956 2.2 Profit/(loss) from ordinary activities after tax attributable to members 25,920 (4,240) 2.3 Net profit/(loss) for the period attributable to members 25,920 (4,240) 2.4 Dividends 31 December 2020 Amount per security Imputed amount per security Special Dividend - - Final Dividend 45 cents 45 cents				Change Change $'000 %
	432,009		418,956	13,053	3.1

	25,920		(4,240)	30,160	711.3

	25,920		(4,240)	30,160	711.3

	31 December 2020			31 December 2019

	Amount per security		Imputed amount per security	Amount per security	Imputed amount per security

	-	-		-	-
	45 cents	45 cents		15 cents	15 cents

Results for announcement to the market

2.5 Record date for determining entitlements to and the date for payments of the dividends (if any)

11 March 2021

2.6 Explanation of 2.1 to 2.4

Please refer to the Managing Director's Operations and Financial Review (included with this Report) for explanation of the results.

3.0 Net Tangible Assets per security (Post-share consolidation)

	31 December 2020	31 December 2019
NTA ($ per share)	6.76	5.56
Number of shares	16,562,669	16,147,059

4.0 Entities over which control has been gained or lost

Not Applicable

5.0 Individual and total dividends

A final dividend in respect of the financial year ended 31 December 2019 was paid on 25 March 2020, at 15 cent per ordinary share fully franked. It is proposed that a final dividend of 45 cents per ordinary share, fully franked, be paid on 26 March 2021.

6.0 Dividend or dividend reinvestment plans

The dividend reinvestment plan (DRP) that commenced in 2020 will be available. The DRP election date is 16 March 2021 and DRP shares will be issued on 26 March 2021.

7.0 Associates and joint venture entities

Not Applicable

8.0 Basis of Preparation of Preliminary Final Report

This Report has been prepared in accordance with ASX Listing Rule 4.3A and has been audited.

Capral Limited

APPENDIX 4E	(Cover)
CHAIRMAN'S REPORT	1
MANAGING DIRECTOR'S OPERATIONS AND FINANCIAL REVIEW	3
BOARD OF DIRECTORS	6
SUSTAINABILITY REPORT	7
DIRECTORS’ REPORT	9
Remuneration Report (Audited)	12
AUDITOR'S INDEPENDENCE DECLARATION	25
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME	26
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	27
CONSOLIDATED STATEMENT OF CASH FLOWS	28
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	29
NOTES TO THE FINANCIAL STATEMENTS	30
DIRECTORS' DECLARATION	65
INDEPENDENT AUDITOR'S REPORT	66

Capral Limited

CHAIRMAN'S REPORT

Annual review

Covid-19 reached every corner of the world during 2020, directly impacting the health, economic well-being and way of life of hundreds of millions of people. Companies and their stakeholders did not escape the effects of the pandemic’s global spread.

Australia, for numerous reasons including positive governmental actions and programmes, has been one of the few lucky countries. Capral and its stakeholders have had the benefit of some of those programmes which have allowed us to navigate and survive the consequences of Covid-19 and emerge stronger to face new challenges and opportunities. Capral’s qualification for JobKeeper allowed the company to operate through the second quarter without drastically cutting surplus staffing levels caused by the steep drop in demand and the prevailing volatility and uncertainties. JobKeeper support then enabled the company to rapidly respond by increasing and leveraging its workforce to meet the unexpected surge in demand which unfolded over the remainder of the year.

Financial performance

During the second half of the year Capral benefited from a strong shift to import replacement as the effects of renewed antidumping measures took hold. In addition, disruptions to import supply chains as a result of the pandemic, shipping congestion and increasing sentiment towards local supply added to demand. We are hopeful that this opportunity to demonstrate Capral’s ability to add value through local supply will enable us to retain a significant portion of this increased volume. Governmental assistance targeted to the residential construction market through HomeBuilder and other incentives began to take hold in the latter part of the year and should flow into 2021. Revenues of $432 million were 3% higher than the $419 million reported in 2019 as a result of the increased demand in the second half of 2020. Volumes increased year on year by 8%. The sustainable operating efficiencies flowing from last year’s reorganisation at Bremer Park added significantly to this year’s profit and will continue to contribute going forward.

Higher productivity and operational leverage in all parts of the business delivered a Trading EBITDA¹ of $19.7 million, $8.7 million higher than the previous year’s $11.0 million. EBITDA of $47.2 million (2019: $19.9 million) included JobKeeper benefit of $11.9 million.

Reported Net Profit After Tax (NPAT) includes $3.0 million arising from recognition of deferred tax taken to account. Excluding this item and JobKeeper, NPAT was $11.0 million (66 cents per share). This compares to last year’s loss of $4.2 million after abnormal charges of $6.7 million (loss 26 cents per share).

Strong cash flows were a feature of the company’s performance throughout the year. A combination of excellent trading results and focused asset management delivered cash flows from operations, excluding JobKeeper, of $40.2 million compared to $10.7 million in 2019. Capral’s balance sheet at year-end reflected net cash of $49.4 million (2019: $17.9 million). This enables us to balance our utilisation of free cash between funding internal growth, investing in capital projects, and paying dividends to our shareholders.

We are committed to growing a sustainable business which is aligned with all of our stakeholders. Our strong balance sheet allows management to take advantage when opportunities present themselves. One such opportunity is the completion on 1[st] February 2021 of the acquisition of the GJames NSW extrusion facility. As we add additional people and enhance operational capability, this facility should become earnings accretive in the year ahead. Capral has set aside JobKeeper funds to invest in capital projects that will create new jobs.

CHAIRMAN’S REPORT

Capral Limited

Dividends

Capral’s performance, particularly in the second half of the year, supports the declaration of a fully franked dividend. This dividend, and all incentive payments to employees, is based upon and is paid out of earnings and cashflow which totally exclude the JobKeeper benefit.

The Company has declared a fully franked dividend of 45 cents per ordinary share. This is higher than 2019 which was adversely impacted by restructuring costs, and in line with 2018. It will be paid on 26 March 2021 in respect of the financial year ended 31 December 2020. The dividend will be paid to all shareholders on the register of members as at the Record Date of 11 March 2021. Our Dividend Reinvestment Plan will be active for this dividend with election to be made by 16 March 2020.

Safety

Capral’s management continues to re-energise safety and prioritise awareness thereof in our business. This focus on continued safety improvement through education, risk assessment, and monitoring of the workplace helped LTI/MTI frequency rates drop to a record low of 5.8 lost time injuries per 1 million hours worked in 2020.

Looking ahead

With 2020 behind us, we look forward with confidence to building on the opportunities facing us during 2021, despite the fact that second or third waves of the virus continue to wreak hardship and uncertainty across the globe. We can only hope that with knowledge, experience and the emergence of vaccines, the pandemic will be controlled and then eradicated. I direct you to the Outlook section of the Managing Director’s Report for details of the increased earnings guidance for 2021.

Board changes

During the year, Ian Blair retired after 14 years of service as an independent non-executive director. His sage advice and guidance, for which we are most grateful, will be missed. In his stead we welcomed Kathy Ostin to the board as well as chair of the Audit Committee.

I wish to extend the board’s appreciation to all of Capral’s stakeholders for their support during 2020 and we look forward to meeting their aspirations in 2021. Thank you to all of my Capral colleagues for their wisdom and assistance throughout an extraordinary year.

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Rex Wood-Ward Chairman 25 February 2021

* Trading EBITDA is EBITDA adjusted for significant items that are material items of revenue or expense that are unrelated to the underlying performance of the business. Capral believes that Trading EBITDA provides a better understanding of its financial performance and allows for a more relevant comparison of financial performance between financial periods. These items are JobKeeper benefit ($11.907 million), LME revaluation and unrealised foreign exchange differences ($0.839 million), other one-off costs that are non-recurring in nature and including the depreciation and interest on Right of Use assets as proxy for rent ($16.570 million). Trading EBITDA is presented with reference to the Australian Securities and Investment Commission Regulatory Guide 230 “Disclosing non-IFRS financial information” issued in December 2011.

MANAGING DIRECTOR’S OPERATIONS AND FINANCIAL REVIEW

Capral Limited

MANAGING DIRECTOR'S OPERATIONS AND FINANCIAL REVIEW

Overview

Full Year result ahead of guidance
Volume at 61,000 tonnes was 8% above 2019
Market conditions rebounded strongly in second half
Trading EBITDA¹ $19.7 million, up $8.7 million on 2019
EBITDA $47.2 million includes $11.9 million JobKeeper benefit, up $27.3 million on 2019
Net Profit After Tax $25.9 million includes $3.0 million deferred tax benefit, up $30.1 million on 2019
Normalised earnings per share at 66 cents
Balance sheet strong with net cash at $49.4 million
Fully franked final dividend of 45 cents per share
Market share gains driven by growing “Australian Made” sentiment, import disruptions and a renewal of antidumping measures
Acquisition of additional 9,000t extrusion capacity in NSW in February 2021
Best safety performance on record with TRIFR 5.8

Financial Review

Market conditions varied significantly throughout the year. After a solid start to 2020, demand for Capral’s products plummeted during the period of COVID lockdown restrictions. However, market conditions rebounded strongly in the second half resulting in higher-than-expected demand. In response, Capral operated its manufacturing plants at close to capacity leading to good operating leverage which drove increased earnings.

As COVID restrictions were imposed in April, demand fell sharply. With economists and other commentators forecasting dire conditions in key markets, Capral accordingly developed plans to reduce its workforce. Capral subsequently qualified for JobKeeper in May which allowed the business to maintain all 798 employee jobs. This enabled Capral to be well placed, when restrictions lifted, to respond to increased demand and fulfill customer’s requirements.

The residential market lifted in the second half on the back of government housing stimulus programs and is on track to record 175,000² starts in 2020, slightly above last year. Commercial construction was adversely impacted by COVID restrictions, as were our key industrial markets (manufacturing, transport and marine). These markets have also rebounded since restrictions were lifted.

The biggest impact on second half volume was a strong shift to local manufacture and away from imports. This growth was driven by; import supply chain disruption, enforcement and renewal of anti-dumping measures, and a growing “Australia Made” sentiment with the benefit of shorter and more reliable lead times.

The LME price of aluminium declined 14% in the first half of the year but strengthened at year end to finish slightly up on December 2019. The average LME for 2020 was 5% below last year.

In the second half of 2019 Capral completed a significant restructure of its largest manufacturing operation at Bremer Park in Queensland. This restructure successfully transformed Capral’s operations resulting in a permanent reduction of around $8 million in costs with $5 million of savings flowing in 2020.

Capral delivered an increased profit in 2020 with a Trading EBITDA¹ of $19.7 million (2019: $11.0 million) on 8% higher volumes. EBITDA of $47.2 million (2019: $19.9 million) included JobKeeper benefit of $11.9 million.

Capral ended 2020 with a net cash balance of $49.4 million. This was assisted by abnormally low working capital levels as a result of record debtors collection performance and reduced inventory levels due to high 4[th] quarter demand.

Capral will pay a fully franked final dividend of 45 cents per share, higher than 2019 which was reduced due to restructuring costs, and in line with 2018.

MANAGING DIRECTOR’S OPERATIONS AND FINANCIAL REVIEW

Capral Limited

Key Initiatives and Strategies

Key high-level strategies remain consistent;

Build on our strengths; product offer, scale, capability and our people
Optimise what we do; improve productivity in all aspects of our business
Grow for the future; develop new & innovative products solutions and services

During 2019 Capral completed the automation of the Bremer Park packing line and commissioned a new technology paint line at the Canning Vale plant.

In the 4[th] quarter of 2020 Capral negotiated the acquisition of the GJames extrusion operation in Smithfield, taking control on 1 February 2021. The plant produces both architectural and industrial grade extrusions, with an annual capacity of 9000 tonnes and is in excellent operating condition. This strategically important acquisition provides Capral with an expanded manufacturing presence in NSW, savings in freight costs, and improved quality and service to customers in the State. A 12month toll manufacturing agreement with GJames will allow a smooth transition and cover fixed plant operating costs during this period. The acquisition includes plant and equipment, spares, raw material inventory and 21 employees. The total acquisition price of approximately $9 million was fully funded by Capral’s cash reserves. The Smithfield plant is expected to provide incremental earnings in 2021. Capral is also planning to install a new paint line in NSW during 2022 at an approximate cost of $3 million. These two capital projects are expected to create around 70 new Capral jobs. Capral has expressly set aside JobKeeper funds to invest in capital projects that create new jobs.

During 2021 we will also focus on growing our aluminium distribution business with the long-term goal of increasing the volume and profitability of Capral’s direct distribution channel. We plan to launch new product ranges, customer support tools, and other marketing and service initiatives to assist this growth plan.

Fair Trade

Capral continues to lead the local industry in the pursuit of fair trade. During 2020 the key outcomes were:

Renewal of measures on Chinese imports for a further five years
Increased surveillance and prosecution by Australian Border Force against anti-circumvention activities by importers
Measures imposed on certain imports from Malaysia

While import volumes reduced in 2020, they continue to represent a substantial proportion of the total extrusion market and continue to suppress prices and injure local manufacturers.

Safety

Safety First is one of Capral’s key values and we continue to focus on risk assessment, training, systems and safety culture. Capral returned its best safety performance on record with a total reportable injury frequency rate of 5.8 (2019: 11.4).

Sustainability

Capral advanced its commitment to its environmental obligations by creating a National Sustainability Committee with employee representation across Capral’s various operations and regions. A sustainability audit and survey was completed during 2020 to identify improvement opportunities for consideration and action.

Risks

Capral is exposed to a range of risks that could impact the achievement of its strategies and financial prospects; further details are outlined in the Sustainability Report (pages 7 and 8).

MANAGING DIRECTOR’S OPERATIONS AND FINANCIAL REVIEW

Capral Limited

Outlook

External forecasts for the residential market have lifted as government housing stimulus takes effect, with starts now expected to reach 185,000² in 2021. The non-residential market is forecast to rebound in 2021 after a COVID disrupted year in 2020. The industrial markets are also expected to remain reasonably robust.

LME is unpredictable and subject to a number of international influences. Based on external forecasts, we do expect LME to be at higher levels throughout the year ahead.

The overall market for Capral’s aluminium extrusion and rolled products is forecast to grow modestly in 2021 and we expect to retain a good proportion of market share gained from imports. Trading EBITDA¹ is forecast, absent any unforeseen events, to be between $21 million and $23 million with EBITDA between $38 million and $40 million. On that basis Capral would be in a position to continue the payment of a franked dividend.

The focus in 2021 will be to derive benefits from the Smithfield acquisition and continue the progress made at Bremer Park and within our Distribution operations. We plan to enhance our market offer, service and quality to grow our customer base delivering higher revenue and profitability into the future.

I wish to thank all Capral employees for their flexibility, resilience and contribution to the 2020 result which was produced under unprecedented personal and working conditions.

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Tony Dragicevich

Managing Director 25 February 2021

1 Refer to Trading EBITDA explanation in footnote to Chairman’s Report on Page 2

2 BIS Oxford Economics December 2020 forecast

MANAGING DIRECTOR’S OPERATIONS AND FINANCIAL REVIEW

BOARD OF DIRECTORS

Directors in office during the financial year and up to the date of this report:

REX WOOD-WARD Chairman of Board (Independent) Appointed 6 November 2008

Chairman of the Board Member of the Audit & Risk Committee Member of the Remuneration & Nomination Committee.

Mr Wood-Ward has 45 years of experience in general management, mergers and acquisitions, corporate strategy and structuring, including in manufacturing and distribution. Over his career he has been a director of over 10 publicly listed companies in Australia, the United Kingdom and South Africa.

Directorships of other listed companies held in last 3 years before end of the Financial Year: None

TONY DRAGICEVICH B. Comm A.C.A Managing Director (Non-independent) Appointed 15 April 2013

Mr Dragicevich joined Capral in January 2013 and became the Managing Director and Chief Executive Officer on 15 April 2013. Mr Dragicevich is an experienced CEO and business leader who has been involved in the improvement of a number of businesses, having previously served as Managing Director of the Wattyl Group, and as Chief Executive of GWA Bathroom and Fittings, Managing Director of the Red Paper Group and General Manager of Tasman Insulation.

Directorships of other listed companies held in last 3 years before end of the Financial Year: None

PHILIP JOBE B. Comm Non-executive director (Independent) Appointed 24 April 2009

Member of the Audit & Risk Committee Member of the Remuneration & Nomination Committee.

Mr Jobe became a non-executive director following the expiry of his term as Capral’s Chief Executive Officer and Managing Director in April 2013. Before joining Capral, Mr Jobe was the Executive General Manager of Boral Limited's Cement Division, including Managing Director of Blue Circle Southern Cement Pty Limited. This also encompassed the role of Chairman of the Cement Industry Federation. He also had executive responsibility for Boral's expanding Asian construction materials businesses.

Mr Jobe was previously Managing Director of Stegbar Pty Limited from 1989 to 1994.

Directorships of other listed companies held in last 3 years before end of the Financial Year: None

IAN BLAIR M.mgt, FCA Non-executive director (Independent) Appointed 23 May 2006 Retired 17 June 2020

Chairman of the Audit & Risk Committee until 17 June 2020.

Member of the Remuneration & Nomination Committee until 17 June 2020.

Mr Blair is a Chartered Accountant and Company Director. He spent almost 20 years as a partner in major accounting firm Deloitte and retired after 5 years as CEO of that firm. Mr Blair is currently Chairman of Bisley & Co Pty Ltd.

Directorships of other listed companies held in last 3 years before end of the Financial Year: None

GRAEME PETTIGREW FIPA, FAIM, FAICD Non-executive director (Independent) Appointed 18 June 2010

Chairman of the Remuneration & Nomination Committee Member of the Audit & Risk Committee.

Mr Pettigrew has held chief executive roles at CSR Building Products Pty Ltd and Chubb Australia Ltd and he recently retired as a non-executive director of Adelaide Brighton Ltd. He has relevant experience in the construction and building materials industry, as well as manufacturing and distribution businesses.

Directorships of other listed companies held in last 3 years before end of the Financial Year:

Non-executive director of Adelaide Brighton Ltd: 27 August 2004 to 17 May 2018.

KATHERINE OSTIN B. Comm, GAICD, F FIN, CA Non-executive director (Independent) Appointed 17 June 2020

Chairman of the Audit & Risk Committee from 17 June 2020.

Member of the Remuneration & Nomination Committee from 17 June 2020.

Ms Ostin is a Chartered Accountant and Company Director. She has diverse experience in Audit & Risk management having previously been a KPMG Audit and Assurance Partner responsible for a wide range of listed and unlisted companies. Ms Ostin currently holds board positions at Dusk Group Ltd, Swift Media Ltd and Eftpos Payments Australia Ltd where she also chairs the Audit & Risk Committees. Ms Ostin has also previously been non-executive director of a number of not-for-profit organisations.

Directorships of other listed companies held in last 3 years before end of the Financial Year:

Non-executive director of Swift Media Ltd: 1 October 2019 to date of this report.
Non-executive director of dusk Group Ltd: 16 September 2020 to date of this report.

BOARD OF DIRECTORS

SUSTAINABILITY REPORT

Scope

Capral’s operations are affected by economic, environmental and social sustainability risks. These risks are managed within the internal control framework described in Capral’s Corporate Governance Statement (available on Capral’s website www.capral.com.au). This report should be read with other sections of the Annual Report. The exposure to economic factors is outlined below and further information can be found in the Managing Director’s Operations and Financial Review. Capral is committed to continuous improvements including programs that focus in the areas below:

Health and Safety

Capral’s Safety message is simple – Safety First. Safety is an integral part of our business at all levels, it's Capral’s way. Through the continued investment in our people, we have cultivated perceptions of risk and encouraged proactive behaviours to further enhance our already robust Safety Culture. At Capral, everyone is responsible to ensure we develop and improve our safety environment. A workplace that targets zero-injuries is a workplace where everyone cares enough to engage in driving the safety process. Creating this environment requires leadership at all levels. Capral’s Golden Safety Rules and the online Integrated Safety Management System, known as IMS Central supports this.

2020 presented many unprecedented challenges; however, Capral Aluminium met those challenges front on. Our team consistently pulled together at each hurdle without failure and ultimately delivered an industry leading safety result. Through IMS Central advancements, improved internal audit practices and training, enhanced employee involvement, and advancing our injury prevention and treatment strategies, every Capral member was a fundamental part of our 2020 success.

Below is a summary of the 2020 safety outcomes for the Capral Group:

There were 9 reportable injuries, consisting of 3 LTIs and 6 MTIs. LTI/MTI Frequency Rate was 5.8.
Capral further enhanced the Integrated Management System (IMS)
ISO 45001 Occupational Health & Safety standard was achieved and added to our Group IMS Certification.
Letter of Assurance continued across all sites in line with the IMS system advancements and site integrations resulting in a 4% improvement from 2019.
Several additional safety improvement programs and reviews were conducted.
Manufacturing plants that achieved LTI milestones: Canning Vale (11 years), Austex Dies (9 years), and Campbellfield (5 years), Bremer Park (1 year)
Distribution Centres that remained LTI/MTI free: Darwin (11 years), Townsville (3 years) Campbellfield and Wangara (2 years), Kilburn (1 year)
Aluminium Centres that achieved MTI/LTI milestones: Hobart (24 years), Cardiff, Kunda Park and Springwood (15 years), Cairns (13 years), Lynbrook (9 years,) and Gold Coast (7 years).

People

The Capral Group employs over 800 people at over 20 locations in Australia. Capral has a stable workforce and around half of our employees are covered by Enterprise Agreements. There are no material workplace issues.

Our Values underpin how our business is conducted and include:

Safety First: Everyone is responsible; Injuries can be prevented; All jobs can be done safely
Customer Success: Customers determine our success; Committed to service and quality; Be responsive to customer needs
Play Fair : Act with integrity; Do the right thing; Work as a team; Be honest and respectful
Better Every Day : Continuous improvement; Be innovative; Embrace change
Own It : Be accountable; Feel empowered; Take pride in our work; Act boldly.

Our Code of Conduct provides a set of guiding principles and our people receive regular Code of Conduct training.

Capral respects the benefits arising from workplace diversity. We strive to promote an environment conducive to the appointment of well qualified people so that there is appropriate diversity to maximise the achievement of our goals. Further details of Capral’s objectives are contained in Capral’s Corporate Governance Statement and Diversity Policy, both available on Capral’s website.

Training Commitment

Understanding that skills, knowledge, and the capabilities of our people are central to our business success; Capral has:

partnered with the Australian Institute of Management (AIM) to develop a continuous learning and development program where every experience adds to employee confidence and professional development. Through our AIM Online Program employees are given the opportunity – and the encouragement – to expand their knowledge and to receive additional support, where needed via a series of online and virtual learning workshops.
created new apprenticeship opportunities in Victoria, Western Australia and Queensland. Apprentices will undertake an indentured training program in their chosen field for approximately 4 years.

Capral are committed to increasing its support and development of its people; our training programs above are very much a product of that thinking.

SUSTAINABILITY REPORT

Community Interaction

Throughout 2020 Capral continued to work with numerous community organisations by making positive contributions across a broad spectrum of areas. Key initiatives included National awareness campaigns; grass roots and financial sponsorship opportunities such as:

R U Ok? Day
Movember
Goodna Street Life Kids Christmas Party
Newport Plus Board Riders Association
Local artists participating in Sculptures by the Sea; and the Bathers Beach Sculpture Festival
Disability Sport and Recreation Victoria
Brisbane City Football Club
Variety Bash
Love Your Sister.

Scholarship Fund

The inaugural recipient of the Richard Michael Leaders in Engineering Scholarship was Mark Vlasanovic of Deakin University.

The aim of the scholarship is to build a supported career pathway in relevant engineering disciplines; and to foster future leaders in the industry. Mark will receive up to $10,000 per year for 2 years; together with work placement opportunities at Capral’s Campbellfield site.

Environment

Capral's commitment to environmental obligations in 2020 advanced with the development of the National Sustainability Committee. All legislative environmental reporting requirements were met, including recertification against ISO 14001:2015, Environmental Management Standard.

Capral continues to align and adopt industry best practices, and our primary emissions remain as electricity and gas consumption. As part of Capral's ongoing commitment, a sustainability audit was developed as part of Capral's Integrated Management System. Initial results identified several improvement opportunities, all of which are being progressively considered and implemented with our operational capacity.

Capral continues to investigate and develop strategic alliances with suppliers and customers towards minimising Capral's environmental footprint, where possible.

Economic sustainability

In addition to the information in the Managing Director’s Operations and Financial Review, there are various risks that could impact the achievement of Capral’s financial performance and strategies. Capral has a risk management and internal control system to identify, and implement mitigation plans in relation to, the key risks. Set out below are some of these key risks, some of which can be mitigated where not beyond Capral's control:

Aluminium Price: The market price of aluminium fluctuates. LME and billet premium price increases place upward pressure on working capital. To the extent that price variations cannot be passed on to customers, Capral is exposed to movements in the price of aluminium. This exposure is mitigated where extrusions are sold to customers with pricing arrangements linked to changes in the market price of aluminium.
Exchange rate fluctuations: A strong Australian dollar makes imports less expensive to Australian customers, potentially impacting Capral’s volume and margins. The price paid by Capral for some raw materials is in US dollars and therefore a higher US dollar could make the products more expensive. The risk is mitigated to the extent Capral is able to pass the increase on to the market in a timely manner and currency hedging of raw material purchases.
Key customers: Capral's performance is impacted by the volume of sales to large customers. There is a risk to Capral that the requirements of one or more key customers may change.
Imports and local competitors: Capral is subject to pressures from import and domestic competition. Import extrusion market share is over 30% and there is excess domestic extrusion capacity.
Anti-dumping: To the extent duties are reduced or removed in relation to imports from China, this could have an adverse impact on Capral volume and margins.
Residential and Commercial markets: Capral is exposed to the cyclical nature of both residential and commercial building activity which is currently falling from the top of the cycle. As many of Capral’s costs are fixed, it may not be easy to reduce its costs relative to the economic downturn and therefore any material and/or extended downturn may negatively affect Capral.
Industrial markets: Capral is also exposed to industrial markets driven by transport, marine and the general manufacturing sectors.
Economic downturn: An economic downturn, like the global financial crisis in 2008, could have a material adverse effect on the demand for Capral’s products and financial performance.
Carry forward of historical tax losses: a change in business may cause Capral to lose the future benefit of some (but not all) of its historical tax losses.
Other: other risks include an inability to maintain a competitive cost base, a major operational failure or disruption to Capral’s facilities, and regulatory compliance and change.

SUSTAINABILITY REPORT

DIRECTORS’ REPORT

Your directors present their report on the consolidated entity consisting of Capral Limited ( Capral ) and the entities it controlled at the end of, or during, the financial year ended 31 December 2020 ( Financial Year ).

Directors

The following persons were directors of Capral during the Financial Year and up to the date of this report:

Name Period Office Held R. L. Wood-Ward 6 November 2008 - Date of this report A. M. Dragicevich 15 April 2013 - Date of this report P. J. Jobe 24 April 2009 - Date of this report I. B. Blair 23 May 2006 - 17 June 2020 K. Ostin 17 June 2020 - Date of this report G. F. Pettigrew 18 June 2010 - Date of this report

Details of directors, their qualifications, experience, special responsibilities (including committee memberships) and directorships of other listed companies held in the last three years before end of the Financial Year are set out on page 5.

Principal activities

During the Financial Year, the principal continuing activities of the consolidated entity consisted of the manufacturing, marketing and distribution of fabricated and semi-fabricated aluminium related products.

Dividends

The Directors recommend that a final dividend of 45 cents per ordinary share (fully franked) be declared. The record date for the final ordinary dividend will be 11 March 2021, with payment being made on 26 March 2021. Shareholders can choose to receive their dividends as cash or reinvest for an equivalent number of shares under the Dividend Reinvestment Plan (DRP). The DRP election date will be 16 March 2021. The Board has decided to issue new shares to satisfy the DRP for the 2020 final dividend. The DRP will be at a discount of 2.5% to the 5 days Volume Weighted Average Price (VWAP) calculated from 11 March 2020 to 16 March 2020, both days included. A final dividend of 15 cents per ordinary share (fully franked) was paid in March 2020, no other dividends or distributions have been paid during the Financial Year.

Review of operations and financial position

A review of operations and financial position of the consolidated entity are referred to in the Managing Director's Operations and Financial Review on pages 3 and 4.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the consolidated entity during the year.

Matters subsequent to the end of the Financial Year

No matter or circumstance other than those disclosed in Note 34 has arisen since the end of the Financial Year that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations or the consolidated entity’s state of affairs in future financial years.

Likely developments, business strategies, prospects and risks

Information on likely developments, business strategies, prospects and risks are detailed in the Managing Director’s Operations and Financial Review on pages 3 and 4 and the Sustainability Report on pages 6 and 7. Whilst Capral continues to meet its continuous disclosure obligations, this report omits information where it would be likely to result in unreasonable prejudice to Capral. This includes information that is commercially sensitive, is confidential or could provide a third party with a commercial advantage (such as internal budgets and forecasts).

Other information for members to make an informed assessment

Other than information set out in this report, there is no information that members would reasonably require to make an informed assessment of the operations, financial position, business strategies and prospects for future financial years of the consolidated entity.

DIRECTORS’ REPORT

Company Secretary

Ms K Bradley-Ware - Joint Company Secretary, B Comm, CPA, LLB

Ms Bradley-Ware has over 20 years of experience as a Company Secretary and CFO. Ms Bradley-Ware is an employee of Company Matters Pty Ltd, a company secretarial service provider. Prior to joining Company Matters, Ms Bradley-Ware was a Company Secretary and Chief Financial Officer at ASX listed Pan Pacific Petroleum Limited (ASX: PPP) and prior to that, held various roles in accounting across a variety of different industries including credit reporting, telecommunications and media.

Ms Bradley-Ware has provided support to a large number of ASX companies including Elixinol Global Limited (ASX: EXL), Energy Action Limited (ASX: EAX), People Infrastructure Ltd (ASX: PPE), as well as various Infrastructure Joint Ventures and Private Companies.

Ms Bradley-Ware was appointed as a Company Secretary on 11 December 2020.

Ms G Nairn - Joint Company Secretary, BA/LLB, FGIA

Ms Nairn has over 20 years legal and governance experience in various listed and public companies, as well as in private practice.

Ms Nairn is an employee of Company Matters Pty Ltd, a company secretarial service provider. Prior to joining Company Matters, Ms Nairn held various company secretarial roles, predominantly with listed entities, in a variety of sectors including manufacturing, oil and gas, professional services and education.

Ms Nairn holds a Bachelor of Laws and a Bachelor of Arts, a Graduate Diploma in Applied Corporate Governance and is a Fellow of the Governance Institute of Australia and a member of the Law Society of NSW.

Ms Nairn was appointed as a Company Secretary on 8 March 2019 and resigned on 11 December 2020.

Mr T Campbell – Chief Financial Officer and Joint Company Secretary, B.Com (Hons), CA Mr Campbell was appointed Chief Financial Officer on 1 June 2011.

Mr Campbell is a member of the Australia and New Zealand Institute of Chartered Accountants.

Prior to joining Capral, Mr Campbell held various executive positions at UXC, Macsteel and The South African Breweries. Mr Campbell was appointed as a Company Secretary on 8 March 2019.

Directors' meetings

The numbers of directors' meetings (including meetings of committees) held, and the number of meetings attended, by each director during the Financial Year, are as follows:

Director		Board	Audit & Risk Committee	Audit & Risk Committee	Remuneration & Nomination Committee	Remuneration & Nomination Committee
	Held	Attended	Held	Attended	Held	Attended
R.L. Wood-Ward	9	9	3	3	2	2
A.M. Dragicevich	9	9	3	3¹	2	2¹
P.J. Jobe	9	9	3	3	2	2
I.B. Blair	4	4	1	1	1	0
K. Ostin	6	6	2	2	1	1
G.F. Pettigrew	9	8	3	2	2	2

1 Attended meeting(s) in an ex-officio capacity

DIRECTORS’ REPORT

Directors' interests and benefits

Ordinary Shares

Details of holdings of ordinary shares in Capral for the directors (including former directors who held office during the Financial Year) at the beginning and end of the Financial Year and at the date of this report are as follows:

Name	Position	Ordinary shares fully paid in the	Ordinary shares fully paid in the	Company
		Balance at	Balance at	Balance at date of
		1.1.20201	31.12.2020	this report
	Director and
	Chairman of the
R.L .Wood-Ward	Board	-	-	-
A.M. Dragicevich	Managing Director	332,490	346,0662	346,066
P.J. Jobe	Director	236,684	270,0163	270,016
I.B. Blair	Director	7,579	7,579	7,579
K. Ostin	Director	-	-	-
G.F. Pettigrew	Director	-	-	-

1 Shown as post 3 November 2020 share consolidation quantity

2 Acquired 13,5761 as part of Dividend Reinvestment Plan on 25 March 2020

3 Purchased 33,332 on market on 7 May 2020

In addition to the interests shown above, indirect interests in Capral shares held by the Managing Director, Mr. Dragicevich are as follows:

e as follows:
Mr A. M. Dragicevich
	Balance at	Balance at	Balance at date
Nature of other interests	1.1.20201	31.12.2020	of this report
Performance rights	218,330	254,3302	254,330

1 Shown as post 3 November 2020 share consolidation quantity 2 66,670 performance rights lapsed on 1 March 2020; and 102,670 performance rights were issued on 29 April 2020

Unissued shares or interests under option

At the date of this report, there are 700,000 (2019: 616,670) unissued shares or interests under option. Refer to sections 1 to 3 of the Remuneration Report.

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED)

This report sets out Capral’s remuneration of its directors and executives. It also details the actual remuneration of its key management personnel (including the directors) during the Financial Year.

Section 1: The Remuneration Framework

(a) Key Principles

Capral’s remuneration framework and practices are based on the principles that remuneration is performance driven, aligns with shareholder interests, provides market competitive remuneration that attracts qualified and experienced candidates, and retains and motivates employees.

The variable components of remuneration (short and long term) are driven by challenging targets focused on both external and internal measures of financial and non-financial performance. Details of performances measures are set out in sections 1(g) and 1(h) below. Executive remuneration is aligned with shareholder interests via an emphasis on variable (incentive) remuneration, the award of which is linked to performance benchmarks that support business strategies and future success. A significant proportion of executive remuneration is at-risk. Details of the link between performance and remuneration is set out in section 4.

(b) Role of Remuneration & Nomination Committee

The Remuneration & Nomination Committee is responsible for reviewing and making recommendations to the Board of Directors ( the Board ) on remuneration policies for Capral including, in particular, those governing the directors (including the Managing Director) and executive managers. The Committee operates in accordance with its Charter.

Remuneration of the Managing Director and certain executive managers is reviewed at least annually by the Remuneration & Nomination Committee and recommendations are put to the Board for its approval. Short- and long-term incentives are linked to performance criteria. The Board can exercise its discretion in relation to approving bonuses and incentives. Changes must be justified by reference to measurable performance criteria and having regard to Capral’s overall financial performance and other special circumstances.

The Remuneration & Nomination Committee may seek independent advice as appropriate in setting the structure and levels of remuneration based on the principle that the elements of remuneration should be set at an appropriate level having regard to market practice for roles of similar scope and skill. No remuneration recommendations have been made by remuneration consultants in relation to the Financial Year. Capral has reviewed generally available market information regarding remuneration, as outlined further below.

(c) Performance Planning and Review

Capral has a Performance Planning and Review ( PPR ) process to evaluate and discuss performance and development plans at least annually with salaried employees. This PPR process covers:

An agreement of objectives for the year ahead and the setting of key performance measures against which the achievement of those objectives will be assessed. These are set by reference to financial targets and key business strategies.
A review of performance against the previously agreed objectives for the period under review.
Employee comment and feedback.
Short- and long-term training and development needs and career aspirations.

The PPR process ensures that there is better understanding of Capral's objectives thereby increasing the likelihood of their achievement. It also enables managers to evaluate and develop employee skills and performance and identify future development needs.

(d) Non-executive Directors

The structure of Capral's non-executive director remuneration is distinct from that applicable to the Managing Director and other senior executives.

Remuneration of non-executive directors is established at a level that enables Capral to attract and retain high quality directors at a reasonable cost. Remuneration of nonexecutive directors and their terms of office are governed by Capral's constitution and not by contract.

Remuneration of non-executive directors is allocated out of the pool of funds, the limit of which is approved by shareholders in general meeting; the fee pool limit is currently $500,000 per annum. Each non-executive director is entitled to the payment of an annual fee in cash and superannuation contributions for their services. Additional fees are not paid for sitting on Board committees; however, the extra responsibility of the Chairman of the Board and committees is recognised by the payment of a higher fee. The fees for the non-executive directors are regularly reviewed having regard to generally available market information and are currently considered to be similar to those paid at comparable listed companies. Non-executive directors do not receive any shares, options or other securities as part of their remuneration however they are eligible to participate in Capral's equity incentive plans, although none currently participate. There are no schemes for retirement benefits (other than statutory superannuation payments).

(e) Senior Management Remuneration

The remuneration policy for the Managing Director and executives seeks to attract and retain people with the required capabilities to lead Capral in the achievement of business objectives and focus on delivering financial and non-financial measures.

Remuneration is reviewed annually, and approved changes applied from 1 March.

The Remuneration & Nomination Committee reviews the remuneration arrangements of the Managing Director, his direct reports and certain other executive managers. The Managing Director reviews the remuneration arrangements of the other members of senior management, based on the recommendations of his direct reports.

For the Managing Director and other senior management, remuneration consists of a fixed annual salary and superannuation (refer to section 1(f) below) plus at-risk components comprised of a short term incentive plan ( STIP ) (refer to section 1(g) below) and a long term incentive plan ( LTIP ) (refer to section 1(h) below).

The proportions of fixed and at-risk remuneration are established for the Managing Director and other senior management relative to their position in Capral. As a general guide, at-risk remuneration is 50% for the Managing Director, 25% for executive management and 10%-20% for other senior managers, for the achievement of 'target' goals.

DIRECTORS’ REPORT

(f) Fixed remuneration

The level of the total employment cost (being base salary plus superannuation) ( TEC ) is determined having regard to job responsibilities, skills, experience and performance. Salaries are reviewed annually, with any changes applied from 1 March. Fixed remuneration of executives is generally targeted at market median.

The fixed remuneration of the Managing Director is determined by the Board having regard to other ASX listed companies in building product related industries, his particular skills and previous remuneration, experience and capability to lead Capral in delivering financial targets and executing key business strategies. It forms part of his executive employment contract and is subject to annual review. The fixed remuneration of the Managing Director has not increased since March 2019.

The Board has reviewed generally available market information regarding fixed remuneration of the key management personnel for over 10 ASX listed companies in either building product related industries or with comparable revenues and market capitalisation. The fixed remuneration of Capral’s key management personnel is generally in line with this group.

The fixed remuneration of Capral’s other key management personnel has not increased since March 2019.

(g) Short Term Incentives

Capral’s short-term incentive schemes are designed to encourage participants to assist Capral in achieving continuous improvement by aligning their interests with those of Capral and its stakeholders and rewarding them when key performance measures are achieved.

For the Financial Year, there were 3 short term incentive programs:

(1) Short Term Incentive Plan ( STIP ): The Managing Director and senior employees have the opportunity to earn a cash and deferred equity incentive, based on a specified percentage of TEC dependent on each individual's level of responsibility. The actual incentive earned is based on the achievement of financial and non-financial objectives.

(2) Bonus scheme: other salaried employees can earn fixed payments, as approved by the Managing Director, for achieving key performance measures set by their managers and outlined in the employee's individual PPR.

(3) Sales incentives: Sales employees participate in quarterly sales incentive programs in relation to revenue, gross margin, and debtor days targets.

STIP is weighted 70% to financial objectives and 30% nonfinancial objectives. A summary of STIP is set out in the table below:

Frequency Awards determined annually with payment made in the March following the end of the performance year.
Financial - Trading EBITDA for Capral and Measures (for relevant General/Divisional Managers) Business Units (30%). Key financial threshold measure as reflects underlying earnings after excluding the impact of external economic factors such as the volatility of global aluminium prices and the unrealised impact of foreign exchange rate fluctuations.
Net Profit After Tax for Capral (15%). Aligned to ability to pay dividends.
Free Cash Flow for Capral (15%). Selected to ensure effectiveness of cash management.
% Working Capital to Annualised Sales for Capral and (for relevant General/ Divisional Managers) Business Units (10%). Selected to ensure effectiveness of capital management.
Non-financial Specific individual objectives are set Measures to reflect measurable and numeric (where possible) strategic initiatives and profit and safety improvement objectives. The key individual objectives include performance to customers, sales targets/growth, productivity and operational improvements, key projects and cost improvements. The weightings are generally 5% however may be higher or lower depending on importance to company performance.
Assessment Performance against financial of measures is assessed after the end of performance each financial year based on Capral’s against financial results. The performance measures against non-financial measures is assessed as part of the PPR process. The Managing Director, in consultation with senior managers, is responsible for recommending to the Board the amount of STIP, if any, to be paid.
Payments are subject to the achievement of applicable Capral, Divisional or Regional minimum annual Trading EBITDA targets. Stretch payments are not made where target financial metrics are not met.
Discretionary The Board retains absolute discretion override regarding payments having regard to Capral’s overall financial position and other special circumstances that have arisen during the year (ie normalisation or clawback). The intent however is to minimise the exercise of discretionary adjustments to the planned outcomes set at the start of the year. Material adjustments would be disclosed.
Service The Managing Director is eligible to condition receive a pro-rata payment where his employment is terminated other than for cause. Other employees who leave Capral part way through a performance period are not eligible for a payment for that period.
Clawback of In the event of fraud, misstatement or awards misrepresentation of the financials, the Board may exercise its discretion to withhold some or all of a payment before it is made or recover some or all of payments already made.
Deferral Any ‘Stretch’ STIP payments (after tax and based on the 12-month Volume

DIRECTORS’ REPORT

Weighted Average Price (VWAP) as at the end of the performance period) to the Managing Director and Executive Team is satisfied by Capral Shares and held in escrow for 3 years. These shares can be issued or acquired on market as determined by the Board. There is no deferred cash / equity component for other STIP participants. The Board introduced deferred equity in 2018 to further strengthen alignment of Capral’s executive managers with shareholders.

Plan review The STIP design is reviewed at least annually by the Remuneration & Nomination Committee and approved by the Board. The Managing Director, in consultation with senior managers, is responsible for recommending to the Board the STIP financial targets. The non-financial objectives are approved by the Managing Director. The Managing Director’s non-financial targets are established and approved by the Board.

The Managing Director and key management personnel are eligible for the following awards of STIP relative to TEC:

Position		% of TEC
	Minimum	Target	Stretch
Managing Director	25%	50%	100%
Other KMP	12.5%	25%	50%

Where objectives can be financially measured, ‘Minimum’ is generally set around 15% below Board approved Budget. ‘Target’ is generally set around Board approved Budget and ‘Stretch’ is generally set 30% above Budget.

The Board has reviewed available market information regarding short term incentive schemes of the key management personnel for over 10 ASX listed companies in either building product related industries or with comparable revenues and market capitalisation. The Board considers that Capral’s short-term incentive scheme is generally in line with this group.

(h) Long Term Incentives

Capral’s long-term incentive plan ( LTIP ) was designed to strengthen the alignment of the interests of senior managers with shareholders and support a culture of share ownership and shareholder wealth. It also aims to provide competitive remuneration for the retention of specifically targeted members of senior management.

The Managing Director, Mr Dragicevich, was granted 73,330 performance rights following shareholder approval in April 2018 and 78,330 performance rights following shareholder approval in April 2019. During the Financial Year, an additional 102,670 performance rights were granted to Mr Dragicevich following shareholder approval in April 2020.

On the recommendation of the Managing Director to the Remuneration & Nomination Committee, selected senior executives participate in LTIP.

A summary of LTIP for the Managing Director and other senior executives is set out below:

Frequency Awards determined annually. Type of award Performance rights subject to service requirements and vesting criteria. If the conditions are met, shares will be issued around the vesting date.

Amount of The Managing Director is eligible to award receive additional annual issues of up to 50% of the value of TEC, subject to shareholder approval.

The value of individual awards for all other participating senior executives is generally less than 30% of TEC. As a matter of practice, the aggregate amount of each annual award to all Executives is about 1.5% of issued capital and the number of rights awarded is based on the 12 month Volume Weighted Average Price (VWAP) as at the start of the performance period.

Performance 3 years with 31 December testing period & dates. vesting dates 2018 award: vesting date of 1 March 2021.
2019 award: vesting date of 1 March 2022.
2020 award: vesting date of 1 March 2023.
Performance Performance rights granted under conditions LTIP are subject to the participant remaining employed by Capral at the vesting date and the achievement of the following performance conditions:
50% of rights are subject to an EPS performance condition. The actual EPS performance is measured over a 3-year period, must meet, in aggregate, the 3 annual targets combined. The EPS condition is calculated each year as follows: Net Profit After Tax Target as specified by the Board for that year (adjusted for any extraordinary items approved by the Board) divided by weighted average number of securities on issue during the year. The Net Profit After Tax Target used for this condition is set at least at minimum Budget level. The Board may adjust EPS to normalise results and exclude the effects of material business acquisitions/ divestments and certain one-off costs; any material adjustments would be disclosed. The number of rights that may vest is set out in Table B below.
50% of rights are subject to a TSR performance condition as against the entities with ordinary shares and units (as the case may be) included in the S&P/ASX All Ordinaries Index as at 1 January in the year of grant but excluding those companies who are classified in the Global Industry Classification Standard sector number 40. The number of rights

DIRECTORS’ REPORT

which may vest is set out in Table A below.

Refer to the explanation above (LTIPManaging Director) regarding the setting of the EPS condition and the use of EPS and TSR tests.

Assessment Performance against the EPS and of TSR conditions are assessed at the performance end of the 3-year period (31 against December testing date). measures There is no re-testing of EPS or TSR conditions. Vested rights convert on the relevant vesting date a one-forone basis to ordinary shares. Unvested rights lapse. Treatment of If employment ceases all unvested awards on rights will immediately lapse. cessation of However, if the cessation relates to employment the redundancy or permanent disability / death of the employee or other reason determined by the Board then the Board has absolute discretion to determine that some or all of the rights vest. Treatment of The Board has discretion to allow awards on awards to vest on a change of control. change of In exercising this discretion, the Board control is not bound to award all shares. Dividend/ There is no entitlement to dividends on participation performance rights during the vesting rights period or to participate in respect of issues of shares to shareholders. Clawback of In the event of fraud, misstatement or awards misrepresentation of the financials, the Board may exercise its discretion to forfeit some or all of the award prior to the issue of shares or recover some or all of the award already made. Plan review The LTIP design is reviewed at least annually by the Remuneration & Nomination Committee and approved by the Board. The Managing Director makes recommendations to the Remuneration & Nomination Committee regarding the proposed LTIP award participants and the amount of the entitlements.

Vesting of rights subject to the TSR and EPS performance conditions at each testing date is determined in accordance with Tables A and B respectively below:

Table A Percentile of TSR % Rights Vesting < 50th None 50th 50 > 50th and < 75th Between 50 and 100 (pro rata) > 75th 100

The Board has reviewed generally available market information regarding long term incentive schemes of the key management personnel (including the Managing Director) for over 10 ASX listed companies in either building product related industries or with comparable revenues and market capitalisation. The Board considers that Capral’s long-term incentive scheme is generally in line with this group.

(i) Anti-Hedging Policy

Capral’s personnel are not permitted to enter into transactions with securities (or any derivative thereof) which limit the economic risk of any unvested entitlements awarded under any Capral equity-based remuneration scheme currently in operation or which will be offered by Capral in the future. As part of Capral's due diligence undertaken at the time of the financial results, participants in any Capral equity plan are required to confirm that they have not entered into any such prohibited transactions.

Section 2: Actual Remuneration of key management personnel

During the Financial Year there were a number of remuneration outcomes. The expensed remuneration is set out in detail in the remuneration table below however in summary the key outcomes were as follows:

(a) Remuneration

No general pay increases were implemented for executives. Total expensed remuneration for the key management personnel (including the directors) remained largely unchanged as compared to the prior year. Capral directors had their remuneration reduced by 25% for 9 fortnights. The Managing Director had his hours reduced by 25% via a combination of annual leave reduction and leave without pay. All other key management personnel and executives had their hours reduced by 20% for 9 fortnights.

(b) STIP

STIP payments in respect of the 2020 year are above the prior year. No JobKeeper benefit had been taken into account in determining STIP payments.

(c) LTIP

102,670 performance rights were granted to the Managing Director in April 2020 following shareholder approval (2019: 78,330) and 180,650 rights were granted under the 2020 LTIP award to executives in March 2020 (2019: 141,660).

Performance rights granted to the Managing Director and executives under LTIP awards were tested after the year end with the outcomes detailed in section 3 below. No JobKeeper benefit had been taken into account in determining LTIP calculation.

For the financial year ending 31 December 2020, Capral intends to:

maintain the fixed remuneration of the Managing Director and executives at 2020 level, thus no increases: but
grant further performance rights under the LTIP to the Managing Director (subject to shareholder approval) and selected executives.

Table B

EPS Target % Rights Vesting

5% below target None 5% below target 50 < 5% below target to Between 50 and 100 (pro rata) 10% above target

10% above target 100

DIRECTORS’ REPORT

(d) Remuneration Table - key management personnel

The following table sets out the remuneration of the key management personnel (including the directors) during the Financial Year and the 2019 financial year.

The key management personnel of the consolidated entity are the non-executive directors, Managing Director, Chief Financial Officer, General Manager Operations and Company Secretary. These people have the authority and responsibility for planning, directing and controlling the day-to-day activities of Capral.

	Short-term employee benefits	Post - employment benefits	Other long- term benefits	Termination benefits2	Share-based payments	Total	Total performance related
Name Year Title Salary and fees Bonus1 Non - monetary benefits Super- annuation Deferred Equity1 Performance Rights3 $ $ $ $ $ $ $ $ $ %
Directors A.M. Dragicevich5 2020 Managing Director 684,688 357,500 - 24,808 - - 308,100 78,209 1,453,305 51 2019ManagingDirector 687,843 - - 26,675 - - - 113,426 827,944 14
R.L. Wood-Ward4 2020 Chairman 109,616 - - 10,414 - - - - 120,030 - 2019 Chairman 120,000 - - 11,400 - - - - 131,400 -
P.J. Jobe4 2020 Non-executive director 54,808 - - 5,207 - - - - 60,015 - 2019 Non-executive director 55,000 - - 5,225 - - - - 60,225 -
I.B. Blair6 2020 Non-executive director 28,834 - - 2,739 - - - - 31,573 - 2019 Non-executive director 70,000 - - 6,650 - - - - 76,650 -
K. Ostin7 2020 Non-executive director 35,714 - - 3,393 - - - - 39,107 - 2019 Non-executive director - - - - - - - - - -
G.F. Pettigrew4 2020 Non-executive director 63,942 - - 6,074 - - - - 70,016 - 2019 Non-executive director 70,000 - - 6,650 - - - - 76,650 -

DIRECTORS’ REPORT

							17
	Short-term employee benefits	Post - employment benefits	Other long- term benefits	Termination benefits2	Share-based payments	Total	Total performance related
Name Year Title Salary and fees Bonus1 Non - monetary benefits Super- annuation Deferred Equity1 Performance Rights3 $ $ $ $ $ $ $ $ $ %
Executives T. Campbell 2020 CFO/ Co. Sec. 401,000 106,250 - 24,000 - - 93,450 32,836 657,536 35 2019 CFO/Co. Sec.8 394,406 - - 20,144 - - -* 26,947 441,497 6
R. Michael 2020 GM Operations - - - - - - - - - - 2019 GM Operations9 51,113 - - 4,856 - 42,210 -* (57,343) 40,836 -
R. Rolfe 2020 Gen. Counsel10 - - - - - - - - - - 2019 Gen. Counsel/ Co. Sec10 36,102 - - 4,449 - - -* 6,020 46,571 13
Total 2020 1,378,602 463,750 - 76,635 - - 401,550 111,045 2,431,582
Total 2019 1,484,464 - - 86,049 - 42,210 - 89,050 1,701,773

1 All bonus amounts are on an accrual basis.
2 Termination benefits include leave accrued and payments made in lieu of notice at the end of employment with Capral.
3 All LTIP performance rights listed are securities that have not yet vested. In relation to the performance rights of the key management personnel refer to Note 37 of the financial statements.
4 Due to COVID-19 pandemic crisis, Capral directors had their remuneration reduced by 25% for 9 fortnights.
5 Due to COVID-19 pandemic crisis, Mr Dragicevich had his hours reduced by 25% via a combination of annual leave reduction and leave without pay. 6 Mr Blair resigned as director on 17 June 2020 and due to COVID-19 pandemic crisis, Mr Blair had his remuneration reduced by 25% for 9 fortnights pro-rata. 7 Mrs Ostin was appointed as a director on 17 June 2020 and due to COVID-19 pandemic crisis, Mrs Ostin had her remuneration reduced by 25% for 9 fortnights pro-rata. 8 Mr Campbell was appointed as a Company Secretary on 8 March 2019. Due to COVID-19 pandemic crisis, Mr Campbell has had his hours reduced by 20% via annual leave reduction. 9 Mr Michael passed away on 15 February 2019.
10 Mr Rolfe resigned as Company Secretary and ceased to be a key management personnel on 8 March 2019. However, he remained as General Counsel on a part-time basis and left employment with Capral on 17 January 2020.
Capral's key management personnel (other than directors).

DIRECTORS’ REPORT

Section 3: Performance rights, Options and bonuses provided as compensation

Performance rights - Managing Director

During the Financial Year and the financial year ended 31 December 2019, performance rights were granted as equity compensation benefits under the LTIP, to the Managing Director as disclosed as at balance date below. The performance rights were granted at no cost to him.

102,670 performance rights were granted to the Managing Director in April 2020 following shareholder approval. These rights have a vesting date of March 2023.

78,330 performance rights were granted to the Managing Director in April 2019 following shareholder approval. These rights have a vesting date of March 2022.

73,330 performance rights were granted to the Managing Director in April 2018 following shareholder approval. These rights have a vesting date of March 2021. The EPS condition (36,665 rights) was tested as at 31 December 2020. Capral did not achieve the EPS condition and consequently 36,665 rights will lapse in March 2021. The TSR condition (36,665 rights) was also tested as at 31 December 2020. Capral’s relative TSR performance over the period from January 2018 to December 2020 was in the 72nd percentile and consequently 93.98% of the rights subject to the TSR condition will vest, and thus 2,207 of the rights will lapse in March 2021. Consequently, a total of 34,458 rights will vest and convert into Capral shares on a 1 for 1 basis, and 2,207 rights will lapse, as at 1 March 2021.

66,666 performance rights were granted to the Managing Director in May 2017 following shareholder approval. A total of 66,666 rights lapsed, as at 1 March 2020.

				Fair value
				per right at
		Grant		grant date	Test
	Tranche	No.	Grant date	($)	date	Lapsed No.	Vested No.
2020 Offer
A. Dragicevich			29/04/2020
	EPS 50%	51,335		$1.56	31/12/2022	-	-
	TSR 50%	51,335		$2.04	31/12/2022	-	-
Total 2020 Offer		102,670				-	-
2019 Offer
A. Dragicevich			16/04/2019
	EPS 50%	39,165		$3.00	31/12/2021	-	-
	TSR 50%	39,165		$2.10	31/12/2021	-	-
Total 2019 Offer		78,330				-	-
2018 Offer
A. Dragicevich			19/4/2018
	EPS 50%	36,665		$3.60	31/12/2020	-	-
	TSR 50%	36,665		$3.00	31/12/2020	-	-
Total 2018 Offer		73,330				-	-
2017 Offer
A. Dragicevich			11/05/2017
	EPS 50%	33,333		$3.30	31/12/2019	(33,333)	-
	TSR 50%	33,333		$2.10	31/12/2019	(33,333)	-
Total 2017 Offer		66,666				(66,666)	-

DIRECTORS’ REPORT

Performance rights – other key management personnel

During the Financial Year and the financial year ended 31 December 2019, performance rights were granted as equity compensation benefits under the LTIP, to certain executives including key management personnel as disclosed as at balance date below. The performance rights were granted at no cost to the participants.

180,650 performance rights were granted under the 2020 LTIP award to executives in March 2020. These rights have a vesting date of March 2023.

141,660 performance rights were granted under the 2019 LTIP award to executives in March 2019. These rights have a vesting date of March 2022.

123,360 performance rights were granted under the 2018 LTIP award to executives in March 2018. These rights have a vesting date of March 2021. The EPS condition (61,680 rights) was tested as at 31 December 2020. Capral did not achieve the EPS condition and consequently 61,680 of these rights will lapse in March 2021. The TSR condition (61,680 rights) was also tested as at 31 December 2020. Capral’s relative TSR performance over the period from January 2018 to December 2020 was in the 72nd percentile and consequently 93.98% of the rights subject to the TSR condition will vest, and thus (3,713 rights) will lapse in March 2021. Consequently, a total of 57,967 rights will vest and convert into Capral shares on a 1 for 1 basis, and 65,393 rights will lapse, as at 1 March 2021.

161,667 performance rights were granted under the 2017 LTIP award to executives in March 2017. A total of 121,667 rights lapsed, as at 1 March 2020.

				Fair value
				per right at
		Grant		grant date	Test
Executives/ Offer	Tranche	No.	Grant date	($)	date	Lapsed No.	Vested No.
2020 Offer
T. Campbell		30,670	03/03/2020			-	-
	EPS 50%	15,335		$2.82	31/12/2022	-	-
	TSR 50%	15,335		$2.10	31/12/2022	-	-
Total 2020		30,670				-	-
2019 Offer
T. Campbell		21,670	22/03/2019			-	-
	EPS 50%	10,835		$3.15	31/12/2021	-	-
	TSR 50%	10,835		$2.25	31/12/2021	-	-
Total 2019		21,670				-	-
2018 Offer
T. Campbell		16,670	06/03/2018			-	-
	EPS 50%	8,335		$3.90	31/12/2020	-	-
	TSR 50%	8,335		$3.60	31/12/2020	-	-
Total 2018		16,670				-	-
2017 Offer
T. Campbell		16,670	10/03/2017			(16,670)	-
	EPS 50%	8,335		$4.50	31/12/2019	(8,335)	-
	TSR 50%	8,335		$3.90	31/12/2019	(8,335)	-
Total 2017		16,670				(16,670)	-

Options

No options were issued under the LTIP during the Financial Year and the financial year ended 31 December 2019.

DIRECTORS’ REPORT

Equity grants and during the Financial Year

Details of the performance rights granted, as well as the movement during the Financial Year in rights previously granted, to Key Management Personnel are as follows:

2020 - Performance share rights	Held at start ofyear	Granted as compensation Lapsed Vested / Forfeited Other Changes	Held at end of year
A Dragicevich T Campbell	218,326 55,010	102,670 (66,666) - - 30,670 (16,670) - -	254,330 69,010
	273,336	133,340 (83,336) - -	323,340

The non-executive directors hold no performance rights.

Bonuses

During the Financial Year, STIP bonus payments were made to the Managing Director and key management personnel. The Managing Director’s STIP payments for 2020 equated to 93% of his TEC (above the Capral Trading EBITDA[2] ‘target’ level detailed in section 1 above) and the Board considers it appropriate having regard to the achievement of certain key financial measures as well as critical non-financial measures regarding customers, capital projects, anti-dumping activities and other strategic plans. The other key management personnel’s STIP payments were 47% of TEC (above the Capral Trading EBITDA[2] ‘target’ level detailed in section 1 above).

During the financial year ended 31 December 2019, no STIP bonus payments were made to the Managing Director and key management personnel as Capral Trading EBITDA[2] was below ‘minimum’ level.

The percentages of bonus accrued and forfeited (as a result of not meeting the performance criteria at ‘target’ level) during the Financial Year and the financial year ended 31 December 2019 are disclosed below:

				% of compensation for the
	% of bonus			year consisting of STIP
2020	accrued		% of bonus forfeited	bonus1
Executives
A. Dragicevich		186	-	48
T. Campbell		188	-	32
				% of compensation for the
	% of bonus			year consisting of STIP
2019	accrued		% of bonus forfeited	bonus1
Executives
A. Dragicevich		-	100	-
T. Campbell		-	100	-

Note :

1 Total compensation used for calculating % purposes excludes equity compensation benefits under the LTIP and termination benefits.

2 Trading EBITDA (non-IFRS measure) is EBITDA adjusted for items assessed as unrelated to the underlying performance of the business and allows for a more relevant comparison between financial periods. Any JobKeeper related benefit have been excluded in full and not taken into account for any financial measure.

3 Bonuses relating to a financial year are payable in the following financial year.

DIRECTORS’ REPORT

Shareholdings of Key Management Personnel - fully paid ordinary shares of the Company

Details of the holdings of Capral’s ordinary shares of key management personnel during the Financial Year are as follows:

ws:
2020 Held at start of year Granted as compensation Received on vesting of performance rights/ exercise of options Other changes during the year	Held at end of year
Directors R.L. Wood-Ward - - - - A.M. Dragicevich 332,490 - - 13,576 P.J. Jobe 236,684 - - 33,332 I.B. Blair 7,579 - - - K. Ostin - - - - G.F. Pettigrew - - - - Executives T. Campbell 24,953 - - -	- 346,066 270,016 7,579 - - 24,953
601,706 - - 46,908	648,614

Section 4: Relationship between remuneration and company performance

There is a link between company performance and executive reward. For the Financial Year and the previous 4 financial years, Capral has made STIP payments based upon the achievement of performance (financial and nonfinancial) measures.

Whilst continuing to ensure that Capral attracts and retains qualified, experienced and motivated employees in accordance with the remuneration policy by remunerating employees at a competitive level, Capral has placed more emphasis on at-risk remuneration in order to align remuneration of the employees to the performance of Capral and encourage shareholder wealth.

During the Financial Year and the previous 4 financial years (2016-2019), Capral's financial performance was as follows, with the minimum targets (M) that were set for the 2020 STIP financial measures also shown:

Year Ended 31 Dec	2020 (A)	2020 (M)	2019 (A)	2018 (A)	2017 (A)	2016 (A)
Trading EBITDA $’0001	19,668	13,175	11,021	14,268	18,409	20,265
Free Cash Flow $’000	20,752_2_	5,300	4753	1,573	8,883	11,266
Net (Loss)/Profit $’000	11,464_2_	7,000	3,105_3_	6,415	12,085	14,350
% Working Capital to	13.21	15.65	14.68	13.92	13.89	13.87
Annualised Sales
Dividend - cents per share	45.0	-	15.0	45.0	37.5	37.5
Basic earnings / (loss) - cents	69.51	42.44	19.26	40.11	76.20	90.60
per share
Share price (closing) $	5.95	n/a	3.45	3.60	4.50	5.10

Note:

1 Trading EBITDA (non-IFRS measure) is Statutory EBITDA adjusted for items assessed as unrelated to the underlying performance of the business and allows for a more relevant comparison between financial periods. Any JobKeeper related benefit have been excluded in full and not taken into account.

2 Free Cash Flow, Net Profit and Basic Earnings per share adjusted to exclude any JobKeeper benefit of $11.907 million, Deferred Tax Benefit of $3.048 million and other one-off items of $0.499 million.

3 Free Cash Flow, Net Profit and Basic Earnings per share adjusted to exclude Restructuring Cost and other one-off items of $7.345 million.

In the Financial Year, Capral’s Trading EBITDA, Free Cash Flow and Net Profit After Tax were all significantly above 2019 levels. The minimum targets were surpassed in all instances (excluding any JobKeeper benefit) and as a result, STIP will be payable to Capral key management and other senior personnel. Discretionary Bonusses will also be payable to other qualifying employees. At a Divisional and Regional level minimum Trading EBITDA measures were achieved in all business units, and there were mixed results relating to Working Capital and sales volume measures.

DIRECTORS’ REPORT

Section 4: Relationship between remuneration and company performance (Cont’d)

The following provides examples of other key measures (that are not commercially sensitive) used to assess executive performance:

xecutive performance:
Performance Area	Measure			Outcome
Safety	Reduction in total	reportable injury		Rate improved significantly on
	frequency rate			2019 and Group Stretch targets
				were met
	Hours lost & return to work hours			Stretch performance targets met
	lost from injuries
Customers	Volume retention/	growth		Sales areas met most of the
				specific growth and revenue targets
				as well as margin measures.
				Performance varied by region/
				division
Production	Operational efficiency			Manufacturing plants met most of
				their operational efficiency/
				improvement targets
Supply Chain	Supply chain	and	inventory	Initiatives were generally achieved
	reduction programs
People	AL & LSL balance	reduction		Overall leave balance reduction
				initiatives were not achieved.
				Performance varied by region/
				division
Anti-dumping	Pursue anti-dumping campaign			Overall the outcomes were
				successful.
Costs	Cost reduction initiatives			Many of the specific cost and
				expense reduction initiatives were
				achieved. Performance varied by
				region/ division

The 2020 STIP payments are higher than those paid in 2019, aligned to financial performance. There is a clear link between financial performance and the level of STIP awarded.

LTIP is linked to Capral’s performance as the value of the performance rights awarded depends on Capral’s share price and dividend payments, and whether the awards vest relate to earnings growth and Capral’s relative TSR performance. There is a link between Capral’s performance and the vesting of rights under LTIP awards. In this regard:

In 2020:
➢ Capral’s relative TSR performance over the period from January 2018 to December 2020 achieved the 72[nd] percentile, above the minimum 50[th] percentile. Consequently, 93.98% or 92,425 of the rights subject to the TSR condition that were awarded in 2018 to executives vested.
➢ Given earnings in, 2018, 2019 and 2020, the aggregate EPS result for the 3 year period to 2020 was 128.92 cents per share against an aggregate target of 147.13 cents per share and therefore the EPS condition of the 2018 award was not achieved. Consequently, no rights subject to the EPS condition of the 2018 award will vest and convert into Capral shares.
In 2019:
➢ Capral’s relative TSR performance over the period from January 2017 to December 2019 achieved the 34[th] percentile, below the minimum 50[th] percentile. Consequently, none of the rights subject to the TSR condition that were awarded in 2017 to executives vested.
➢ Given earnings in, 2017, 2018 and 2019, the aggregate EPS result for the 3-year period to 2019 was 131.4 cents per share against an aggregate target of 184.5 cents per share and therefore the EPS condition of the 2017 award was not achieved. Consequently, no rights subject to the EPS condition of the 2017 award will vest and convert into Capral shares.

DIRECTORS’ REPORT

Section 5: Summary of Key Employment Contracts

Details of the key contract terms for the Managing Director and other key management personnel as at the end of the Financial Year are as follows:

Contract Details Expiry date

A. Dragicevich T. Campbell No fixed end date No fixed end date

Notice of termination by Capral

6 months

Notice of termination by employee Termination payments (in lieu of notice)

6 months 6 months

6 months salary plus accrued but 6 months salary. STIP entitlement unpaid STIP (pro rata for for incomplete financial years is incomplete financial year). subject to Board discretion In addition, unvested LTIP rights may vest if employment is terminated by Capral other than for cause.6 weeks annual leave per annum.

DIRECTORS’ REPORT

Environmental regulations

Manufacturing licences and consents required by laws and regulations are held by the consolidated entity at each relevant site as advised by consulting with relevant environmental authorities. All applications for and renewals of licences have been granted and all consents have been given by all relevant authorities.

Directors' and officers' indemnities and insurance

Under Capral's constitution, Capral is required to indemnify, to the extent permitted by law, each director and secretary of Capral against any liability incurred by that person as an officer of Capral. The directors listed on page 5 and the secretary listed on page 9 have the benefit of this indemnity. During the Financial Year, Capral paid a premium for directors’ and officers’ liability insurance policies which cover current and former directors, company secretaries and officers of the consolidated entity. Details of the nature of the liabilities covered and the amount of the premium paid in respect of the directors' and officers' insurance policies are not disclosed, as such disclosure is prohibited under the terms of the contracts.

Indemnities to auditors

In respect of non-audit services provided in relation to reviews of consulting and compliance advice during the Financial Year, Deloitte Touche Tohmatsu, Capral's auditor, has the benefit of an indemnity (including in respect of legal costs) for any third party claim in connection with the use, distribution or reliance on their work (except to the extent caused by the wilful misconduct or fraud of Deloitte Touche Tohmatsu, or where it has agreed that the third party may rely on the work or it may be used in a public document).

Proceedings on behalf of Capral

No person has applied to the Court under section 237 of the Corporations Act for leave to bring proceedings on behalf of Capral, or to intervene in any proceedings to which Capral is party, for the purpose of taking responsibility on behalf of Capral for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of Capral with leave of the Court under section 237 of the Corporations Act.

Non-audit services

Capral may decide to employ the auditor on assignments additional to their statutory audit services where the auditor's expertise and experience with the consolidated entity are important.

The Board has considered this position and in accordance with the advice received from the Audit & Risk Committee, it is satisfied that the provision of these services during the Financial Year by the auditor is compatible with, and did not compromise, the general standard of auditor independence imposed by the Corporations Act for the following reasons:

(1) the non-audit services provided do not involve reviewing or auditing the auditor’s own work and have not involved partners or staff acting in a management or decisionmaking capacity for Capral or in the processing or originating of transactions;
(2) all non-audit services and the related fees have been reviewed by the Audit & Risk Committee to ensure complete transparency and that they do not affect the integrity and objectivity of Deloitte Touche Tohmatsu; and
(3) the declaration required by section 307C of the Corporations Act 2001 confirming independence has been received from Deloitte Touche Tohmatsu.

Details of the amounts paid or payable to Capral's auditor (Deloitte Touche Tohmatsu) for audit and non-audit services provided during the Financial Year are set out in Note 32 of the financial statements.

Auditor's independence declaration

The auditors' independence declaration as required under section 307C of the Corporations Act is set out on page 25.

Rounding of amounts

Capral is a company of the kind referred to in ASIC Corporations Instrument 2016/191, dated 24 March 2016, and in accordance with that ASIC Corporations Instrument amounts in the Directors' Report and the Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of directors made pursuant to section 298(2) of the Corporations Act 2001.

On behalf of the directors

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R. L. Wood-Ward Chairman

A. M. Dragicevich Managing Director

Sydney 25 February 2021

DIRECTORS’ REPORT

==> picture [149 x 28] intentionally omitted <==

Deloitte Touche Tohmatsu ABN 74 490 121 060

Eclipse Tower Level 19 60 Station Street Parramatta NSW 2150 PO Box 38 Parramatta NSW 2124 Australia

DX 28485 Tel: +61 (0) 2 9840 7000 Fax: +61 (0) 2 9840 7001 www.deloitte.com.au

The Board of Directors Capral Limited Level 4 60 Philip Street Parramatta NSW 2150

Dear Directors,

In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of Capral Limited.

As lead audit partner for the audit of the financial statements of Capral Limited for the financial year ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

==> picture [244 x 26] intentionally omitted <==

DELOITTE TOUCHE TOHMATSU

==> picture [130 x 31] intentionally omitted <==

David White Partner Chartered Accountants Parramatta, 25 February 2021

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the financial year ended 31 December 2020

COMPREHENSIVE INCOME for the financial year ended 31 December 2020
Continuing operations Note	2020 $’000 2019 $’000
Sales revenue Scrap and other revenue Revenue 3 Other income 3 Raw materials and consumables used Employee benefits expense 2 Depreciation and amortisation expense 2 Finance costs 2 Freight expense Occupancy costs 2 Repairs and maintenance expense Restructuring costs 2 Other expenses Profit/(loss) before tax Income tax benefit 4 Profit/(loss) for the year Other comprehensive income Items that will not be reclassified subsequently to profit or loss Gain on revaluation of properties Other comprehensive income for the year Total comprehensive income/(loss) for the year Earnings per share Basic earnings per share Diluted earnings per share 25 25	406,721 391,634 25,288 27,322 432,009 418,956 305 212 (266,419) (260,587) (75,402) (86,088) (18,352) (18,439) (6,030) (5,762) (12,038) (12,237) (569) (810) (5,642) (6,516) 173 (6,095) (25,163) (26,874) 22,872 (4,240) 3,048 - 25,920 (4,240) - -
	- - 25,920 (4,240) ($ pershare) ($ pershare)
	1.57 1.51 (0.26) (0.26)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2020

as at 31 December 2020
Note	2020 $’000 2019 $’000
ASSETS Current assets Cash and cash equivalents 7 Trade and other receivables 8 Inventories 9 Other financial assets 30 (c) Prepayments 10	49,396 17,938 66,250 62,564 79,130 78,907 - 10 2,517 1,625
Total current assets	197,293 161,044
Non-current assets Deferred tax assets 11 Property, plant and equipment 14 Right-of-use assets 16 Other intangible assets 15	5,905 2,857 38,814 40,431 70,776 76,860 321 452
Total non-current assets	115,816 120,600
Total assets	313,109 281,644
LIABILITIES Current liabilities Trade and other payables 18 Lease liabilities 19 Provisions 20 Other financial liabilities 30 (c) Deferred income 21	77,242 65,409 13,528 13,877 14,820 13,385 1,615 1,086 127 103
Total current liabilities	107,332 93,860
Non-current liabilities Lease liabilities 19 Provisions 20	82,948 90,654 4,639 4,104
Total non-current liabilities	87,587 94,758
Total liabilities	194,919 188,618
Net assets	118,190 93,026
EQUITY Issued capital 22 Reserves 23 Accumulated losses 23 (b)	426,965 425,744 44,006 35,018 (352,781) (367,736)
Total equity	118,190 93,026

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS

for the financial year ended 31 December 2020

for the financial year ended 31 December 2020
Note	2020 $’000 2019 $’000
Cash flows from operating activities Receipts from customers Payments to suppliers and employees	471,524 463,691 (413,864) (447,388)
Interest and other costs of finance paid	57,660 16,303 (5,511) (5,581)
Net cashprovided by operating activities 35(ii)	52,149 10,722
Cash flows from investing activities Payments for property, plant and equipment Payments for intangible assets Interest received Proceeds from sale of property, plant and equipment	(3,986) (5,045) - (240) 2 8 29 4,691
Net cash flows used in investing activities	(3,955) (586)
Cash flows from financing activities Payments of dividends 24 Proceeds from dividend reinvestment plan Payment of lease liabilities excluding financing component	(2,422) (4,803) 1,221 - (15,092) (15,103)
Net cash flows used in financing activities	(16,293) (19,906)
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of foreign exchange rate changes	31,901 (9,770) 17,938 27,566 (443) 142
Cash and cash equivalents at the end of the financialyear 35(i)	49,396 17,938

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2020

Note Balance as at 1 January 2019 Loss for the year Share-based payments expense Shares acquired on conversion of vested rights Initial adoption of AASB 16 Leases Dividends paid Balance as at 31 December 2019 Balance as at 1 January 2020 Profit for the year Share-based payments expense Dividends paid Dividends reinvestment plan Balance as at 31 December 2020	Fully paid ordinary shares Equity-settled compensation reserve Asset revaluation reserve Dividend Reserve Accumulated losses Total $'000 $'000 $'000 $'000 $'000 $'000* 425,744 10,999 1,014 27,933 (334,162) 131,528
	- - - - (4,240) (4,240) - 190 - - - 190 - (315) - - - (315) - - - - (29,334) (29,334) - - - (4,803) - (4,803)
	425,744 10,874 1,014 23,130 (367,736) 93,026
	425,744 10,874 1,014 23,130 (367,736) 93,026
	- - - 10,965 14,955^ 25,920 - 445 - - - 445 - - - (2,422) - (2,422) 1,221 - - - - 1,221
	426,965 11,319 1,014 31,673 (352,781) 118,190

*Dividend reserve represents undistributed profits since the financial year 2010.

^JobKeeper benefit ($11.907 million) and income tax benefit ($3.048 million) in relation to deferred tax assets on tax losses are excluded from dividend reserve. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

for the financial year ended 31 December 2020

1a. General Information

Capral Limited ( the Company ) is a public listed company incorporated and operating in Australia. The Company's shares are quoted on the Australian Securities Exchange (ASX Code: CAA).

The Company's registered office and its principal place of business is as follows:

Registered office & principal place of business

71 Ashburn Road Bundamba QLD 4304 Tel: (07) 3816 7000

The principal continuing activities of the consolidated entity consist of the manufacturing, marketing and distribution of fabricated and semi-fabricated aluminium related products.

1b. Adoption of new and revised Accounting Standards

In the current year, the Group has applied the below amendments to AASB Standards and Interpretations issued by the Board that are effective for an annual period that begins on or after 1 January 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

Amendments to References to the Conceptual Framework in AASB Standards Amendments to AASB 3 Definition of a business Amendments to AASB 101 and AASB10 8 Definition of material

At the date of authorisation of these financial statements, the Group has not applied the following new and revised AASB Standards that have been issued but are not yet effective:

Amendments to AASB 101 Classification of Liabilities as Current or Non-current Amendments to AASB 3 Reference to the Conceptual Framework Amendments to AASB 16 Property, Plant and Equipment—Proceeds before Intended Use Amendments to AASB 137 Onerous Contracts – Cost of Fulfilling a Contract

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies

Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

The financial report includes the financial statements of the Company and the financial statements of the Group. For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity.

Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards ('IFRS').

The financial statements were authorised for issue by the directors on 25 February 2021.

Basis of Preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain noncurrent assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The Company is of a kind referred to in ASIC Corporations Instrument 2016/191, dated 24 March 2016, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that ASIC Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar as indicated.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Basis of Consolidation

The financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (and its subsidiaries) (referred to as 'the Group' in these financial statements).

Control is based on whether an investor has:

power over the investee

(b) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(c) Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisitiondate fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant Standards. Changes in the fair value of contingent consideration classified as equity are not recognised.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 are recognised at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefits respectively;

• liabilities or equity instruments related to the replacement by the Group of an acquiree’s share based payment awards are measured in accordance with AASB 2 Share-based Payment; and

• assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-Current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

exposure, or rights, to variable returns from its involvement with the investee, and
the ability to use its power over the investee to affect the amount of the returns.

The results of the subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(d) Cash and Cash Equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and have a maturity of three months or less at the date of acquisition. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

(e) Derivative Financial Instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts.

Further details of derivative financial instruments are disclosed in Note 30 to the financial statements. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date.

The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition of profit or loss depends on the nature of the hedge relationship. The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months, and as a current asset or current liability if the remaining maturity of the hedge relationship is less than 12 months. The Group's derivatives do not qualify for hedge accounting and are not designated into an effective hedge relationship and are classified as a current asset and current liability.

Embedded Derivatives

Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of AASB 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

(f) Employee Benefits

(i) Salaries, wages and leave benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, including non-monetary benefits, annual leave and long service leave, when it is probable that settlement will be required, and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(ii) Share-based payments

Equity-settled share-based payments with employees are measured at the fair value of the equity instrument at the grant date.

The fair value of the performance rights is estimated at grant date using a Monte-Carlo Simulation analysis taking into account the terms and conditions upon which the securities are granted.

The fair value of the options is estimated at grant date using a binomial tree model taking into account the terms and conditions upon which the securities are granted.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equitysettled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.

Further details on how the fair value of equity-settled share-based transactions have been determined can be found in Note 37.

(iii) Defined contribution plan

Contributions to defined contribution superannuation plans are expensed when incurred.

(g) Financial Assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through the profit or loss which are initially measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company's financial statements. Other financial assets are classified into the following specified categories: financial assets at amortised cost; financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss account. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than financial assets 'at fair value through profit or loss'.

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(g) Financial Assets (cont'd)

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss to the extent they are not part of a designated hedging relationship.

The net gain or loss recognised in profit or loss on the financial assets is included in the other income or other expenses. Fair value is determined in the manner described in Note 30.

Trade and other receivables

Trade other receivables that were measured at amortised cost under AASB 139 continue to be measured at amortised cost under AASB 9 as they are held within a business model to collect contractual cash flows. Trade and other receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Impairment of financial assets is based on an expected credit loss (“ECL”) model under AASB 9 rather than incurred loss model. ECLs are a probability-weighted estimate of credit losses. The group calculated ECLs based on consideration of customer-specific factors and actual credit loss experience over the past 3 years. As a percentage of revenue, the Group’s actual credit loss experience has not been material.

In accordance with AASB 9 paragraph 7.2.20 the group will recognise a loss allowance at an amount equal to lifetime expected credit losses at each reporting date. The group calculated ECLs based on consideration of customer-specific factors and actual credit loss experience over the past 3 years.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

asset and an associated liability for the amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

(h) Financial Instruments Issued by the Group

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Compound instruments

The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument.

This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or upon the instruments reaching maturity. The equity component initially brought to account is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects and is not subsequently remeasured.

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less cumulative amortisation.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note 30.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(h) Financial Instruments Issued by the Group (cont’d)

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. Refer note 1c (o).

(i) Foreign Currency

In preparing the financial statements, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings.

(j) Government Grant

Grants are recognised where there is a reasonable assurance that the grant will be received and all attached conditions will be complied with.

The Government grants towards staff are recognised as a deduction from the related Employee benefits expenses. The Group received salaries subsidies from government during COVID-19, as disclosed in Note 2 & 33.

(k) Impairment of Other Tangible and Intangible Assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit ( CGU ) to which that asset belongs.

using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised in the profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(l) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The Company and its wholly owned Australian entities have implemented the tax consolidation legislation.

The current and deferred tax amounts for the taxconsolidated group are allocated to the members of the tax-consolidated group (including the Company as the head entity) using the ‘separate taxpayer within group’ approach, with deferred taxes being allocated by reference to the carrying amounts in the financial statements of each member entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits arising from this allocation process are then accounted for as immediately assumed by the head entity, as under Australian taxation law the head entity has the legal obligation (or right) to these amounts.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(m) Intangible Assets

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably.

Patents, trademarks and licences

Patents, trademarks and licences are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives, which vary from 5 to 16 years.

The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes being recognised as a change in accounting estimate.

Software

Software assets including system development costs have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost over the assets estimated useful lives, which vary from 3 to 5 years.

(n) Inventories

Inventories representing aluminium log, other supplies and finished goods are valued at the lower of cost and net realisable value.

Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

Aluminium log is valued at moving average of direct purchase cost. Cost of rolled product has been determined principally on moving average of direct purchase costs. Costs for finished and partly finished includes moving average metal cost, direct labour, and appropriate proportion of fixed and variable factory overhead.

(o) 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 copiers). 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; 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 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.

The depreciation starts at the commencement date of the lease.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

For comparatives, leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(o) Leases (cont’d)

Operating lease payments are recognised as an expense on a straight-line basis over the lease team, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(p) Property, Plant and Equipment

Land and buildings are measured at fair value less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Fair value is determined on the basis of a periodic, independent valuation by external valuation experts, based on discounted cash flows or capitalisation of net income, as appropriate.

Periodic reviews are conducted every three to five years. The fair values are recognised in the financial statements of the Group and are reviewed at the end of each reporting period to ensure that the carrying value of land and buildings is not materially different from their fair values. Any revaluation increase arising on revaluation of land and buildings are credited to the asset revaluation reserve except to the extent that the increase reverses a revaluation decrease for the same asset previously recognised as an expense in profit or loss, in which case the increase is credited to the profit and loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of land and buildings is charged as an expense in profit or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of revalued property, the attributable revaluation surplus remaining in the revaluation reserve, net of any related taxes, is transferred directly to retained earnings.

Plant and equipment, and leasehold improvements are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item.

In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight-line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value.

useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.

(q) Provisions

Provisions are recognised when the Group has a present, legal or constructive obligation as a result of past events, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that the reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Restructuring

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.

The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

Provision for restoration and rehabilitation (provision for make good on leased assets)

A provision for restoration and rehabilitation (provision for make good on leased assets) is recognised when there is a present obligation as a result of production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing the facilities and restoring the affecting areas.

Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is shorter, using the straight-line method. The estimated

NOTES TO THE FINANCIAL STATEMENTS

1c. Significant accounting policies (cont'd)

(r) Revenue Recognition

Revenue is recognised when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customers.

The Group recognises revenue from the sale of products and when it transfers control of a product to a customer, which is the point in time that the customer obtains control of the goods being on acceptance of the goods by the customer.

Revenue is measured at the fair value of the consideration received or receivable. Sales revenue comprises sales of goods and services at net invoice values less returns, trade allowances and applicable rebates.

(s) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Royalties

Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Royalties are recognised on the subsequent sale or usage, and the performance obligation to which the royalty has been allocated has been satisfied.

Rental income

The Group's policy for recognition of income from operating leases is described in note 1c (n).

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

(s) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax ( GST ) except:

(i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

(ii) for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority, is classified as operating cash flows.

NOTES TO THE FINANCIAL STATEMENTS

1d. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 1, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group's accounting policies

The following are the critical judgements (apart from those involving estimations which are dealt with above), that management has made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Inventories

Note 9 sets out the categories of inventory carried. The net realisable value of inventories is the estimated selling price in the ordinary course of business less estimated costs to sell which approximates fair value less cost to sell. The key assumptions require the use of management judgement and are reviewed annually.

These key assumptions are the variables affecting the estimated costs to sell and the expected selling price. Any reassessment of cost to sell or selling price in a particular year will affect the cost of goods sold.

Indicators of impairment and reversal of impairment

Note 14 sets out the categories of property, plant and equipment held. In assessing whether there is any indication that property, plant and equipment may be impaired, or whether a reversal of previous impairment losses should be recognised, management has used, among others, the following key assumptions:

(i) the cyclical nature of both residential and commercial building activity,
(ii) aluminium prices which impact margins to the extent that price variations are passed on to customers or not, and
(iii) anti-dumping outcomes in relation to import duties imposed on overseas suppliers.

The key assumptions required the use of management judgement and are reviewed biannually.

Employee benefits

Key assumptions used in the calculation of leave benefit provisions at balance date:

(i) future on-cost rates,

(ii) experience of employee departures and period of service, and
(iii) future increase in wages and salaries.

Useful lives of property, plant and equipment

The Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. During the financial year, the directors determined that there were no revisions to the useful lives of property, plant and equipment.

Lease renewal

The Group reassess whether it is reasonably certain to exercise an extension option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant change in circumstances that:

is within the control of the Group; and
affects whether the Group is reasonably certain to exercise an option not previously included in its determination of the lease term, or not to exercise an option previously included in its determination of the lease term.

Incremental borrowing rate (AASB 16)

The rate is defined as the rate of interest that the lessee would have to pay to borrow over a similar term and with a similar security the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Deferred taxation

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Recognition of deferred tax assets therefore involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.

1e. Comparative information

Where necessary, comparative amounts have been reclassified and repositioned for consistency with current period disclosures.

NOTES TO THE FINANCIAL STATEMENTS

2 Profit for the year

2 Profit for the year
Note	Consolidated
	2020 $’000 2019 $’000
(a) Other expenses Profit before tax includes the following specific net expenses: Inventory: Write-down of inventory to net realisable value 9 Reversal of write-down of inventory Amortisation of intangibles assets	1,089 1,778 (71) (1,450) 131 106
Total amortisation	131 106
Depreciation – owned assets Buildings Leasehold improvements Plant and equipment	175 170 323 253 5,093 5,019
Total depreciation–owned assets	5,591 5,442
Depreciation – right of use assets Buildings Plant and equipment	10,360 10,904 2,270 1,987
Total depreciation–right of use assets	12,630 12,891
Total depreciation and amortisation	18,352 18,439
Occupancy costs Sublease income received Site costs	(2,680) (2,159) 3,249 2,969
	569 810
Expenserelating toleases of low value assets	89 82
Other charges against assets (Decrease)/increase in impairment of trade receivables	(51) 103
Employee benefit expense Post-employment benefits: - defined contribution plans Equity-settled share-based payments Termination benefits Other employee benefits 33	6,148 6,364 445 190 20 36 68,789 79,498
	75,402 86,088
Restructuring costs Machinery and equipment dismantling and relocation Redundancy costs Othersite closure costs	- 2,342 (173) 3,248 - 505
	(173) 6,095
Finance costs Interest and finance charges paid/payable -third party financier	5,512 5,581
Net finance costs are comprised of: Interest and fees on bank overdrafts and loans Interest component of lease liabilities Impact ofdiscounting on long-termprovisions	908 1,122 4,604 4,459 518 181
Total interest expense	6,030 5,762
(b) Gains and Losses Net gain on foreign exchange Net gain on disposal of property, plant and equipment	1,035 403 17 12

NOTES TO THE FINANCIAL STATEMENTS

	40
	Consolidated
	2020 $’000 2019 $’000
3 Revenue and other income Revenue from continuing operations Sales revenue - sale of goods (i) Other revenue Scrap revenue (i) Interest - other Total other revenue Other income Royalties Other miscellaneous income (i) Recognised at a point in time. 4 Income tax expense (a) Reconciliation of income tax benefit/(expense) to prima facie tax benefit/(expense) Profit/(loss) from continuing operations before income tax benefit/(expense) Income tax calculated @ 30% (2019:30%) Tax effect of non-assessable / non-deductible items: Effect of items that are temporary differences for which deferred tax assets have not been previously recognised Effect of items that are not deductible or taxable in determining taxable profit Effect of tax losses utilised Effect of tax losses not recognised as deferred tax assets Previously unrecognised and unused tax losses now recognised as deferred tax assets Income tax benefit (b) Tax losses Accumulated unused gross tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 30% (2019:30%) All unused tax losses were incurred by Australian entities.	406,721 391,634
	25,286 27,314 2 8
	25,288 27,322
	303 212 2 -
	305 212
	22,872 (4,240)
	6,862 (1,272) 1,064 (3,966) 154 106 (8,080) - - 5,132 3,048 -
	3,048 -
	258,1351 295,2261 77,441 88,568

1 Subject to income tax recoupment rules in subsequent years

5 Changes in accounting estimates

There were no significant changes in accounting estimates other than the recovery of deferred tax assets during the Financial Year (2019: none). Deferred tax assets are recognised for deductible temporary differences and tax losses as management considers that it is probable that future taxable profits will be available in the foreseeable future. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.

NOTES TO THE FINANCIAL STATEMENTS

6 Segment information

The information reported to the Managing Director, as the Group’s chief operating decision maker, for the purposes of resource allocation and assessment of performance is focused on the type of goods supplied, being aluminium products. As such, in 2019 and 2020, the Group operated in one reportable segment under AASB 8 Operating Segment .

Major Products and Services

The Group produces a wide range of extruded aluminium products and systems. It distributes those manufactured products in addition to a small number of bought-in products through two distribution channels.

The Group supplies to three market segments through each of its distribution channels:

Residential - supply of aluminium and other components for windows and doors, showers and wardrobes and security products,
Commercial - supply of aluminium and other components for windows and doors, internal fit outs and other commercial building related products, and
Industrial - supply of aluminium extrusions and rolled products for industrial uses.

Management does not report on the revenues from external customers for each of the market segments.

Geographic Information

The Group operates in one geographical area, Australia.

Information About Major Customers

There are no individual major customers who contributed more than 10% of the Group’s revenue in either the Financial Year or in 2019.

	Consolidated	Consolidated
	2020 $’000 2019 $’000
7 Current assets - cash and cash equivalents Cash at bank and cash in hand	49,396 17,938

	Consolidated
	2020 $’000	2019 $’000
8 Current assets - trade and other receivables Trade receivables - at amortised cost Loss allowance (i)		62,508 (311)


	63,815
	(145)
Other receivables	63,670	62,197 367

	2,580
	66,250	62,564
Disclosed in the financial statements as: Current trade and other receivables Non-current other receivables		62,564 -
	66,250
	-
	66,250	62,564

The average credit period on sales of goods is approximately 49 days (2019: 49 days). No interest is charged on trade receivables.

NOTES TO THE FINANCIAL STATEMENTS

8 Current assets - trade and other receivables (Cont'd)

	Consolidated
	2020	2019
	$’000	$’000
(i) Movement in the loss allowance.
Balance at beginning of the financial year	(311)	(620)
Amounts written off during the financial year	115	412
Decrease/(increase) in allowance recognised in profit
or loss	51	(103)
Balance at end of the financial year	(145)	(311)

The Group always measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Allowances are made for known doubtful debts at the time of appointment of administrators, liquidators, or other formal insolvency events.

Included in the Group's trade receivables are debtors with balances in 61 days and over of $560,000 (2019: $580,000), refer to note 30(h). The Group has not provided all of these balances as the Group believes that these past due balances are still recoverable. In relation to some of the balances the Group holds personal property securities registrations and/or personal guarantees and/or trade indemnity insurance for 90% of the amount outstanding (after applying the deductible). The average age of these receivables is 82 days (2019: 75 days). Aging past due but not impaired was calculated based on agreed customers individual terms.

Aging past due but not impaired:

	Consolidated
	2020 $’000 2019 $’000
1-30 days past due 31- 60 days past due 61+days past due	10,327 14,838 1,483 1,621 548 461
Total	12,358 16,920

Included in the loss allowance is the expected credit loss for individually impaired trade receivables with a balance of $80,000 (2019: $235,000). The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected proceeds.

	Consolidated
	2020 $’000 2019 $’000
1-30 days past due 31- 60 days past due 61+days past due	- 11 68 105 12 119
Total	80 235

Major concentrations of credit risk are in the construction, transport, consumer durable and electrical industries in Australia. Furthermore, the Company has credit insurance cover which requires ongoing management of credit accounts with monthly reports provided to the Insurer. Accordingly, there is no further credit provision required in excess of the loss allowance. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.

	Consolidated
	2020 $’000 2019 $’000
9 Current assets - inventories Raw materials and stores Work in progress Finished goods	16,010 18,071 2,136 1,930 60,984 58,906
	79,130 78,907

All inventories are net of allowance for obsolescence and are expected to be recovered within 12 months. Included in the inventories balance is inventories in transit of $11.231 million (2019: $7.076 million).

NOTES TO THE FINANCIAL STATEMENTS

	Consolidated
	2020 $’000 2019 $’000
10 Current assets - prepayments Prepayments	2,517 1,625
11 Deferred tax assets
	Consolidated
	2020 $’000 2019 $’000
Balance at beginning of the financial year Amountsrecognised during thefinancialyear	2,857 2,857 3,048 -
Balance at end of the financial year	5,905 2,857

The Group has recognised deferred tax assets with respect to tax losses carry forward of $5,905,000 (2019: $2,857,000) (the Company $5,698,000 - 2019: $2,650,000) based upon the forecasted operational performance the recovery of these prior year losses in the short term is probable.

12 Non-current assets - investments

Details of subsidiaries

The financial statements incorporate the assets, liabilities and results of the following subsidiaries:

Entity name	Equity Holding	Country of incorporation
	2020 2019 % %
Austex Dies Pty Limited	100 100	Australia

13 Related parties

Parent entities

The ultimate parent entity within the Group is Capral Limited.

Equity interests in controlled entities

Interests in controlled entities are set out in Note 12.

Transactions with key management personnel

Refer to Note 37 in relation to securities granted and forfeited during the Financial Year under the Long Term Incentive Plan that include rights granted and shares issued, to Capral's Managing Director and Chief Financial Officer (who are key management personnel).

Details of the compensation of, and transactions with, each Director of the Company and key management personnel of the Group are set out in the Directors' Report and in particular, the Remuneration Report.

Transactions with other related parties

In 2020, the parent entity has settled a non-interest-bearing loan of $5,150,000 (2019: $4,750,000) advanced from a controlled entity, Austex Dies Pty Limited. The loan was payable on demand. The Company has entered into the following transactions with controlled entities:

• Purchase of dies of $4,097,473 (2019: $3,585,280) – Austex Dies Pty Limited

These transactions were conducted on arm’s length commercial terms and conditions at market rates.

During the Financial Year, the Company received a dividend of $5,150,000 (2019: $nil) from Austex Dies Pty Limited.

NOTES TO THE FINANCIAL STATEMENTS

	44
	Consolidated
	2020 $’000 2019 $’000
14 Property, plant and equipment Freehold land At valuation(i) Accumulated depreciation	1,200 1,200 - -
Net book amount	1,200 1,200
Buildings At valuation(i) Accumulated depreciation	3,520 3,520 (727) (572)
Net book amount	2,793 2,948
Leasehold improvements At cost Accumulated depreciation Accumulated impairment	12,321 12,091 (7,760) (7,440) (1,970) (1,970)
Net book amount	2,591 2,681
Total land and buildings	6,584 6,829
Plant, machinery and equipment At cost Accumulated depreciation Accumulated impairment	210,141 214,469 (147,641) (149,934) (32,099) (32,099)
Net bookamount	30,401 32,436
Capital work in progress at cost	1,829 1,166
Net plant,machinery and equipment	32,230 33,602
Total property, plant and equipment-net book value	38,814 40,431

The following useful lives are used in the calculation of depreciation: Buildings 20-33 Years Leasehold improvements 5-25 Years Plant and equipment 3-25 Years

(i) Valuations of land and building:

An independent valuation of the Group’s land and buildings was performed in November 2017 using Capitalisation and Direct Comparison approaches to determine the fair value of the land and buildings. The valuations, which conform to International Valuation Standards, were determined by reference to recent market transactions on arm’s length terms at the time. The fair value of the Land and Buildings is $1,200,000 and $2,950,000 respectively.

NOTES TO THE FINANCIAL STATEMENTS

14 Property, plant and equipment (cont’d)

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and prior financial year are set out below:

of the current and prior financial year are set out below:
Freehold land at fair value $’000 Buildings at fair value $’000 Leasehold improvements at cost $’000 Plant and equipment at cost $’000	Capital work in progress at cost $’000	Total $’000
Consolidated 2020 Opening net book amount 1,200 2,948 2,681 32,436 Additions - - 31 2,338 Disposals - - - (2) Transfers - 20 202 722 Depreciation charge (Note 2(a)) - (175) (323) (5,093)	1,166 1,617 (10) (944) -


		40,431
		3,986
		(12)
		-
		(5,591)
Net book amount at 31 December 2020 1,200 2,793 2,591 30,401	1,829	38,814
2019 Opening net book amount 1,200 3,013 2,108 29,805 Additions - 110 805 3,721 Disposals - (5) (9) (666) Transfers - - 30 4,595 Depreciation charge (Note 2(a)) - (170) (253) (5,019)	8,805 1,144 (4,000) (4,783) -

		44,931
		5,780
		(4,680)
		(158)
		(5,442)
Net book amount at 31 December 2019 1,200 2,948 2,681 32,436	1,166	40,431

Impairment of non-current assets

If there is an indication of impairment, the recoverable amount of property, plant & equipment and intangible assets will be determined by reference to a value in use discounted cash flow valuation of the Group, utilising financial forecasts and projections.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Cash flows that may result from prior period tax losses are not taken into account. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

The result of Impairment assessment as at 31 December 2020

As a result of the non-current assets recoverable amount assessment performed, Capral has determined that no impairment write-down of non-current assets as at 31 December 2020 was necessary. The recoverable amount of the CGU estimated by management exceeded the carrying amount of assets by $4,026,000.

NOTES TO THE FINANCIAL STATEMENTS

14 Property, plant and equipment (cont’d)

The key assumptions used in preparing the value in use cash flow valuation as at 31 December 2020 are as follows:

The table below shows key assumptions in the value in use calculation as at 31 December 2020 and value of the input to which the key assumption must change in isolation for the estimated recoverable amount to be equal to its carrying value.

arrying value.
	Input to the model	Breakeven input
WACC (Post-tax)	9.00%	9.21%
Average volumes increase 2022-25p.a.	1.00%	0.92%
Long-termgrowth rate	1.00%	0.55%

The valuation is based on forecast and projected cash flows for a 5-year period commencing January 2021 with a terminal value being applied at the end of this period. The cash flow assumptions are based on management approved budgets for the period from January 2021 to December 2021. Beyond this date cash flow projections until 31 December 2025 are based on projected volume growth and expected improvements in EBITDA per tonne (refer below). Sales volumes are projected to grow at 1.0% per annum. This growth rate corresponds with the average long-term growth rate based on external economic sources.

Volumes

In determining assumptions in relation to sales volumes into the commercial and residential/domestic market, Capral have based these on reputable third-party long term economic forecast reports with reference to historical performance and seasonal trends. The volume projections estimate the sales volumes at around 67,000 tonnes at the end of the 5-year period.

Margins

In setting price and margin assumptions, historical performance trends and the impact of previous price increases were reviewed in assessing the timing and quantum of future price increases.

Recent history in relation to direct costs and the impact of changing volumes on manufacturing variances were assessed in setting assumptions on absorbed conversion costs.

In forecasting the margin, Management has considered the production capacity of Capral compared to current volumes and concluded that increase in production volumes to satisfy demand expected by independent market predictions can be attained by predominately increasing variable cost with very limited additional fixed cost expenditure. This is reflected in the resultant average EBITDA per tonne increase of 1.0% per annum from 2022 to 2025.

Working Capital and Capital Expenditure

These assumptions were set in light of strategic initiatives and approved maintenance and safety capital expenditure of an average around $3,500,000 per annum, with working capital flexed in relation to the assumed production capacity for volumes throughout the forecast period and historical performance and considering revisions to trading terms with key suppliers and customers.

Discount rate

A discount rate of 9.0%, representing the Company's post-tax weighted average cost of capital has been applied to the cash flow projections.

Economic Factors

Assumptions including Gross Domestic Production ( GDP ), the Consumer Price Index ( CPI ), expected wage and salary increases, foreign exchange and the future impact of aluminium prices have been made with reference to third party economic forecasts and the Company's strategic plans and budgets.

Prior Period Tax Losses

Cash flows that may result from prior period tax losses are not taken into account in determining the recoverable amount of assets.

NOTES TO THE FINANCIAL STATEMENTS

		47
Other intellectual property $’000	Software $’000	Total $’000
15 Other intangibles assets Consolidated 2020 Cost 15,927 Accumulated amortisation (8,367) Accumulated impairment (7,560)	24,364 (21,577) (2,466)




		40,291
		(29,944)
		(10,026)
Net book value -	321	321
2019 Cost 15,927 Accumulated amortisation (8,356) Accumulated impairment (7,560)	24,364 (21,457) (2,466)

		40,291
		(29,813)
		(10,026)
Net book value 11	441	452

Reconciliations

Reconciliations of the carrying amounts of each class of intangibles at the beginning and end of the current Financial Year are set out below:

Financial Year are set out below:
Other intellectual property $’000 Software $’000	Total $’000
Consolidated 2020 Opening net book amount 11 441 Additions - - Disposals - - Transfers - - Amortisation (11) (120)

	452
	-
	-
	-
	(131)
Net book amount at 31 December 2020 - 321	321
2019 Opening net book amount - 308 Additions 12 228 Transfers - 10 Amortisation (1) (105)
	308
	240
	10
	(106)
Net bookamount at 31 December 2019 11 441	452

NOTES TO THE FINANCIAL STATEMENTS

16 Right-of-use assets

16 Right-of-use assets
Buildings $’000 Plant & Equipment $’000	Total $’000
Consolidated Cost At 31 December 2019 77,838 11,913 Additions 5,754 792 Disposals - -


	89,751
	6,546
	-
At 31 December 2020 83,592 12,705	96,297
Accumulated depreciation At 31 December 2019 (10,904) (1,987) Disposals - - Depreciationcharge (10,360) (2,270)

	(12,891)
	-
	(12,630)
At 31 December 2020 (21,264) (4,257)	(25,521)
Net Book Value At 31 December 2020 62,328 8,448 At 31 December 2019 66,934 9,926

	70,776
	76,860

17 Assets pledged as security

In accordance with the security arrangements of liabilities disclosed in Note 26, all assets of the Group have been pledged as security. The holder of the security does not have the right to sell or repledge the assets other than in the event of default under the principal finance agreement where the security is enforced.

18 Current liabilities – trade and other payables

	Consolidated
	2020 $’000 2019 $’000
Trade payables (i) Goods and services tax payable Other payables	63,017 56,246 1,500 1,478 12,725 7,685
	77,242 65,409

(i) The average credit period on purchases is 74 days from the end of the month (2019: 73 days). No interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

19 Lease liabilities

19 Lease liabilities
	Consolidated
	2020 $’000 2019 $’000
Current Non-current	13,528 13,877 82,948 90,654
	96,476 104,531
Maturity analysis
Within one year Later than one year but not later than five years Laterthan five years	13,528 13,877 43,743 41,580 39,205 49,074
	96,476 104,531

NOTES TO THE FINANCIAL STATEMENTS

20 Provisions

20 Provisions
	Consolidated
	2020 $’000 2019 $’000
Current Employee benefits Make good on leased assets1 Restructuring3 Other2	13,609 11,431 555 445 - 1,126 656 383
	14,820 13,385
Non-current Employee benefits Make good on leased assets1 Other	1,580 1,483 3,059 2,621 - -
	4,639 4,104

1 Provision for make good on leased assets comprises obligations relating to site closure and other costs associated with operating lease rental properties.

2 Other current provisions include provisions for insurance claims and provisions for customer claims including metal returns net of scrap and pricing adjustments.

3The restructuring process was finalised successfully in the first half of 2020. The remaining $173,440 was released to the profit or loss in June 2020.

Consolidated Make good on leased assets Restructuring Movements in carrying amounts $’000 $’000	Other Total $’000 $’000
Carrying value at the beginning of the financial year 3,066 1,126 Provision utilised/released in the year (71) (1,126) Additional amounts provided 619 -	383 4,575 (383) (1,580) 656 1,275
Carrying value at the end of the financial year 3,614 -	656 4,270

	Consolidated	Consolidated
	2020 $’000 2019 $’000
21 Deferred income - current Deferredincome–other	127 103
	127 103
	2020 No. 000 2019 No. 000	2020 $’000 2019 $’000 426,965 425,744

22 Issued capital (a) Share capital



Ordinaryshares: fully paid	16,563 484,391

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

NOTES TO THE FINANCIAL STATEMENTS

22 Issued capital (Cont’d)

(b) Movement in ordinary share capital

		Number of	Issue
Date	Details	shares	Price	$'000
January 2019	Balance at the beginning of the financial year	480,289,334	-	425,744
	Shares issued against performance rights	4,101,561	-	-
December 2019	Balance at the end of the financial year	484,390,895	-	425,744
January 2020	Balance at the beginning of the financial year	484,390,895	-	425,744
March 2020	Shares issued pursuant to a dividend reinvestment
	plan	12,468,294	$0.0979	1,221
November 2020	Shares consolidation 30:1	(480,296,520)	-	-
December 2020	Balance at the end ofthefinancialyear	16,562,669	-	426,965
On 3 November	2020, Capral consolidated its shares at a ratio of 30:1. The share consolidation does not impact
the value of the total issued capital and was undertaken to establisha more appropriate and effective capital
structure.

23 Reserves and accumulated losses

	Consolidated
	2020 $’000 2019 $’000
Asset revaluation reserve Equity-settled compensation reserve Dividend reserve	1,014 1,014 11,319 10,874 31,673 23,130
Accumulated losses	44,006 35,018 (352,781) (367,736)
	(308,775) (332,718)
23 (a) Movements in reserves were: Equity-settled compensation reserve Balance at the beginning of the financial year Expense recognised Shares acquired on conversion of vested rights	10,874 10,999 445 190 - (315)
Balance at the end ofthefinancialyear	11,319 10,874
Asset revaluation reserve Balance at the beginning of the financial year Revaluation increase	1,014 1,014 - -
Balance at the end of the financial year	1,014 1,014
Dividend reserve Balance at the beginning of the financial year Net profit attributable to members of Capral Dividends paid	23,130 27,933 10,965 - (2,422) (4,803)
Balance at the end of the financial year	31,673 23,130
23 (b) Accumulated losses Balance at the beginning of the financial year Net profit/(loss) for the year Initial adoption of AASB 16 Leases	(367,736) (334,162) 14,955 (4,240) - (29,334)
Balance at the end of the financial year	(352,781) (367,736)
24 Dividends Ordinary shares:	2,422 4,803
Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% (2019:30%)	17,952 18,990

NOTES TO THE FINANCIAL STATEMENTS

	Consolidated
	2020 $ 2019 $
25 Earnings per share Basic earnings per share Diluted earnings per share	1.57 (0.26) 1.51 (0.26)

Net profit after tax used in the calculation of basic and diluted profit per share for 2020 was $25,920,000 (2019: Loss $4,240,000). The weighted average numbers of ordinary shares on issue used in the calculation of basic and diluted earnings per share were 16,458,199 and 17,138,897 (2019: 16,116,772) respectively.

EPS calculations in both current year and prior year were based on post 3 November 2020 share consolidation, 30 shares to 1 share.

	Consolidated
	2020 $’000 2019 $’000
26 Stand by arrangement and credit facilities Secured facilities Facilities used: Trade loan Cash loan Bank guarantees Trade finance – letters of credits Asset finance – in the form of finance lease Total facilities used	41,128 50,000 - - - - 3,833 3,888 23,290 23,881 1,128 3,563 28,251 31,332
Totalavailablefacilities	12,877 18,668

The original expiry of the facilities is 31 January 2021. Subsequent to 30 June 2020, the facilities have been restructured to align more closely to Capral’s requirements and renewed for another term to 30 April 2022.

The ANZ facilities are fully secured against the Capral group consisting of:

$40 million Multi-option Facility which includes a Trade Loan Facility, Trade Instruments and Trade Finance; and

• $1.128 million reducing Asset Finance Facility, reducing to $nil during 2021.

During the year, the following facilities with ANZ has been cancelled:

$5 million Cash Loan Facility;
$3.872 million reducing Asset Finance Facility.

	Consolidated
	2020 $’000 2019 $’000
27 Commitments for expenditure - capital Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities payable: Within one year	866 620

NOTES TO THE FINANCIAL STATEMENTS

28 Commitments for expenditure - operating leases

The recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. Refer to note 19 for maturity analysis of lease liabilities at 31 December 2020.

At 31 December 2020, the Group is committed to $27,154 (2019: $117,398) for low value leases and has no short term lease commitments.

At 31 December 2020, the Group is committed to $27,154 term lease commitments.	(2019: $117,398) for low value leases and has no short
	Consolidated
	2020 $’000 2019 $’000
Non-cancellable operating lease receivable Within one year Later than one year but not later than five years Later than five years	2,778 2,697 11,972 11,623 12,301 15,428
	27,051 29,748

Operating lease receivables relate to the sublease of office and plant premises with a lease term of 10 years, with an option to extend for a further term of 5 years.

29 Fair value measurement

Some of the Group’s assets and liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these assets and liabilities are determined (in particular, valuation technique(s) and input(s) used).

Assets / liabilities	Fair value as at	Fair value as at	Fair value hierarchy	Valuation technique(s) and key input(s)	Significant unobservable input(s)	Relationship of unobservable input(s)
	31/12/20	31/12/19
Foreign currency forward contracts (see note 30(f))	Assets – nil Liabilities – $1,575,1371	Assets – nil Liabilities – $1,086,584	Level 2	Discounted cash flow. Future cash flows are estimated based on forward exchange rate (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risks of various counterparties.	n/a	n/a
Land and buildings	Land – $1,200,000 Buildings – $2,793,000	Land – $1,200,000 Buildings – $2,948,000	Level 3	Capitalisation and Direct Comparison approaches.	Comparable market net rental and comparable market sales transactions.	The higher/(lower) the comparable market net rental amount and the higher/(lower) the comparable market sales transactions, the higher the fair value.

NOTES TO THE FINANCIAL STATEMENTS

30 Financial instruments

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The Group's overall strategy remains unchanged from 2019.

The capital structure of the Group consists of debt, as disclosed in Note 26, cash and cash equivalents, and equity holders of the parent, comprising issued capital, reserves and accumulated losses, as disclosed in Notes 7, 22 and 23 respectively. The Directors review the capital structure on a regular basis, and at least annually. As a part of this review the Directors consider the cost of capital and the risks associated with each class of capital. Based on the determinations of the Directors, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

The Group prepares monthly management accounts, comprising Balance Sheet, Profit and Loss Statement and Cash Flow Statement updates for the current financial year and the current year forecast. The forecast is used to monitor the Group's capital structure and future capital requirements, taking into account future capital requirements and market conditions.

The Group complied with its borrowing financial covenants under its current facility detailed in Note 26 as at 31 December 2020 and 31 December 2019 as follows:

Financial covenant description	Required Value	2020 Actual Value	2019 Actual Value
EBITDA Interest Cover Ratio (A ratio of EBITDA to Interest Expense)	> 3.00:1	33.56:1	7.95:1
Minimum Tangible Net Worth (Tangible Net Worth – Total Tangible Assets Less Total Liabilities)	AUD 50.0m	AUD 139.4m	AUD 119.0m
Borrowing Base Ratio (A ratio of Aggregate Facility Amount Owing to Eligible Debtors owingupto 90 days)	< 0.80:1	0.47:1	0.46:1
Distributions (Any payment or distribution of money or other assets to shareholders)	Variable*	AUD 1.2M	AUD 4.8M
Security Cover Ratio (A ratio of Facility Amount Owing to Security Cover Property Value specified by the Financial Institution)	< 1.00:1	0.46:1	0.45:1

*lower than the lowest of profit or free cash flow of prior year

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1(c).

NOTES TO THE FINANCIAL STATEMENTS

30 Financial instruments (cont'd)

(c) Categories of financial instruments

30 Financial instruments (cont'd) (c) Categories of financial instruments
	Consolidated
	2020 $’000 2019 $’000
Financial Assets Trade and other receivables Cash and cash equivalents Other financial assets1	66,250 62,564 49,396 17,938 - 10
Financial Liabilities Trade and other payables Lease liabilities Other financial liabilities2	77,242 65,409 96,476 104,531 1,615 1,086

1 capitalised borrowing costs $nil (2019: capitalised borrowing costs $10,000).

2 foreign exchange contract mark-to-market $1,575,000 and capitalised borrowing costs $40,000 (2019: foreign exchange contract mark-to-market $1,086,000).

(d) Financial risk management objectives

The Group’s treasury function monitors and manages the financial risks relating to the operations of the Group through internal risk reports. These risks include market risk (including currency risk, interest rate risk and equity price risk), credit risk and liquidity risk. These risks are analysed below.

(e) Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer note 30(f)) and interest rates (refer note 30(g)). From time to time, the Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including foreign exchange forward contracts to hedge the exchange rate risk arising on the purchase of aluminium log and rolled product from overseas in US dollars.

At a Group and Company level, market risk exposures are measured using a sensitivity analysis. There has been no material change to the Group’s exposure to market risks or the manner in which it manages and measures the risk during the Financial Year.

(f) Foreign currency risk management

The Group undertakes certain transactions in foreign currencies, resulting in exposures to exchange rate fluctuations. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. It is the policy of the Group to enter into forward foreign exchange contracts from time to time to manage any material risk associated with anticipated foreign currency sales and purchase transactions.

The carrying amount of the Group’s and Company’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

liabilities at the reporting date is as follows:
	Consolidated
	2020 $’000 2019 $’000
USD (cash) EURO (cash) USD (trade payables) EURO (trade payables) JPY (trade payables) USD (trade receivables)	10,388 671 209 86 (10,684) (13,086) 355 (242) (24) (26) 1,182 1,799

Foreign currency sensitivity

The Group is exposed to EUR, JPY and USD (2019: EUR, JPY and USD).

To mitigate foreign currency risk at reporting date, the Group entered into foreign exchange forward contracts. The Group's exposure to foreign exchange rate fluctuations was primarily limited to trade payables and trade receivables outstanding at reporting date denominated in currencies other than Australian dollar ( AUD ). The total value of trade payables denominated in currencies other than the AUD at reporting date was $10,353,000 (2019: $13,354,000). The total value of trade receivables denominated in currencies other than the AUD at reporting date was $1,182,000 (2019: $1,799,000).

NOTES TO THE FINANCIAL STATEMENTS

30 Financial instruments (cont'd)

The following table details the Group’s sensitivity to a 10% increase and decrease in the AUD against the relevant unhedged foreign currency. 10% represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only foreign currency denominated monetary items outstanding at 31 December 2020 and 31 December 2019 and adjusts their translation at the period end for a 10% change in9foreign currency rates. A positive number indicates an increase in profit.

	Consolidated
	2020 $’000 2019 $’000
Profit or loss (after tax) - AUD strengthens by 10% against USD - AUD weakens by 10% against USD - AUD strengthens by 10% against EUR - AUD weakens by 10% against EUR - AUD strengthens by 10% against JPY - AUD weakens by 10% against JPY	864 1,026 (1,056) (1,254) (32) 22 39 (27) 2 2 (3) (3)

Forward foreign exchange contracts

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific material foreign currency payments and receipts.

The following table details the forward foreign currency (FC) contracts outstanding at the end of the reporting period:

period:
Outstanding contracts	Foreign currency		Fair value
	31/12/20	31/12/19	31/12/20	31/12/19
	FC$’000	FC$’000	$’000	$’000
			Gain/(Loss)	Gain/(Loss)

Buy EUR	716	1,540	(43)	(90)
BuyJPY	3,900	1,950	(2)	(1)
BuyGBP	-	33	-	1
BuyCNH	240	240	(3)	(1)
BuyUSD	16,164	23,172	(1,527)	(996)

(g) Interest rate risk management

The Group interest rate risk arises from borrowings, cash and derivatives.

The Group is exposed to interest rate risk as the Group borrows funds at floating interest rates. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles. The Group’s exposure to interest rate risk at the reporting date was considered insignificant and as a result the Group did not enter into interest rate options.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed below.

Interest rate sensitivity

The sensitivity analysis below shows the effect on profit or loss after tax for the Financial Year if there is a change in interest rates with all other variables held constant. This is determined by applying the change in interest rates to both derivative and non-derivative instruments at the reporting date that have an exposure to interest rate changes. A 6-basis point (0.06%) increase and a 6 basis point (0.06%) decrease represents Management’s assessment of the possible change in interest rates (2019: 5bp or 0.05% increase and 5bp or 0.05% decrease). A positive number indicates an increase in profit.

NOTES TO THE FINANCIAL STATEMENTS

30 Financial instruments (cont'd)

30 Financial instruments (cont'd)
	Consolidated
	2020 $’000 2019 $’000
Profit or loss (after tax) Impact of a 6bp (2019: 5bp) increase in AUD interest rates -Cash and cash equivalents	21 6
Impact of a 6bp (2019: 5bp) decrease in AUD interest rates - Cash and cash equivalents	(21) (6)

(h) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has exposures to credit risk on cash and cash equivalents, receivables and derivative financial assets. The credit risk on financial assets of the Group which have been recognised on the statement of financial position, other than investments in shares, is generally the carrying amount, net of any allowances for doubtful debts.

The Group does not have any significant exposure to any individual customer or counterparty. Major concentrations of credit risk are in the construction, transport, consumer durable and electrical industries in Australia. The Company has credit insurance cover which requires ongoing management of credit accounts with monthly reports provided to the Insurer. Experienced credit management and associated internal policies ensure constant monitoring of the credit risk for the Company.

There is no concentration of credit risk with respect to receivables as the Group has a large number of customers.

The ageing of trade receivables is detailed below:

The ageing of trade receivables is detailed below:
	Consolidated
	2020 $’000 2019 $’000
Current 1-30 days 31-60 days 60+days	51,377 45,353 10,327 14,849 1,551 1,726 560 580
	63,815 62,508

(i) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who ensure there is an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate banking facilities and reserve borrowing facilities, complying with covenants, monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities. Included in Note 26 is a list of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.

Liquidity and interest risk tables

Financial assets are made up of cash of $49,396,000 (2019: $17,938,000) and trade and other receivables of $66,250,000 (2019: $62,564,000). Cash is liquid and trade and other receivables are expected to be realised on average within 49 days (2019: 49 days). Cash balances earn 0.00% interest per annum (2019: 0.03%). Trade and other receivables are interest-free.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The contractual maturity is a fair representation of management's expectations of actual repayments.

NOTES TO THE FINANCIAL STATEMENTS

30 Financial instruments (cont'd)

Weighted average effective interest rate % Less than 1 year $'000 1-3 years $'000	3 - 5 years $'000 Greater than 5 years $'000
Consolidated 2020 Trade and other payables - 77,242 - Floatingrate debt 1.58% - -	- - - -
77,242 -	- -
2019 Trade and other payables - 65,409 - Floating rate debt 2.83% - -	- - - -
65,409 -	- -

(j) Fair value of financial instruments

The fair values of financial assets, financial liabilities and derivative instruments are determined as follows:

(i) the fair value of financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on the discounted cash flow analysis using prices from observable market data; and
(ii) the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, the discounted cash flow analysis is employed using observable market data for non-option derivatives. For option derivatives, option pricing models are used with key inputs sourced from observable market data.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

31 Contingent liabilities

Claims and possible claims, indeterminable in amount, have arisen in the ordinary course of business against entities in the consolidated entity. The Company has fully provided for all known and determinable claims. Based on legal advice obtained, the Directors believe that any resulting liability will not materially affect the financial position of the consolidated entity.

The Company's bankers have granted guarantees in respect of rental obligations on lease commitments, use of utilities infrastructure and international trade facilities. At 31 December 2020 these guarantees totalled $3,833,087 (2019: $3,888,087).

32 Remuneration of auditors

	Consolidated
	2020 $ 2019 $
During the year the auditor of the parent entity and its related practices earned the following remuneration: Auditor of the parent entity Audit or review of financial reports of the entity or any entity in the consolidated entity Other services: - government grant audit - tax compliance - tax consulting - ATO combined assurance review	285,400 287,700 - 5,000 31,500 47,250 39,945 - 166,588 -
Total remuneration	523,433 339,950

It is the Group's policy to employ the Company's auditors, Deloitte Touche Tohmatsu, on assignments additional to their statutory duties where their expertise and experience is considered invaluable to the assignment.

NOTES TO THE FINANCIAL STATEMENTS

33 JobKeeper Payment Scheme

In response to the economic impact from the COVID-19 pandemic crisis, the Australian Government introduced the JobKeeper payment scheme to assist eligible employers with payroll subsidy. As trade and travel restrictions were imposed in Australia, Capral self-assessed the eligibility criteria and enrolled in the JobKeeper payment scheme on 14 May 2020. Capral nominated around 730 eligible employees under the scheme. JobKeeper benefit of $11.9 million was included in profit and was received by 31 December 2020. The receipts have been accounted as a reduction to the employee benefits expense in the statement of profit or loss and other comprehensive income.

The impact on the financial position, financial performance and cash flows of the entity have been described below:

	Excluding JobKeeper $’000	JobKeeper Benefit $’000	Including JobKeeper $’000
Employee Benefits expense	(87,343)	11,941	(75,402)
Profit before income tax	10,965	11,907	22,872
Total current assets	185,386	11,907	197,293
Net assets	106,283	11,907	118,190
Cash flows from operating activities	40,242	11,907	52,149
Net increase/(decrease) in cash and cash equivalents	19,994	11,907	31,901
Cash and cash equivalents at end of the financial year	37,489	11,907	49,396

Whilst Capral has recognised $11.9 million in JobKeeper benefit in the financial year ended 31 December 2020, this amount does not represent the net benefit to the Company. Had Capral not been eligible for JobKeeper payments, a proportion of its workforce was planned to be stood down during the first half-year.

The JobKeeper benefit comprises of receipts of $12,069,000, less TopUp payments of $128,000 and advice cost of $34,000.

Capral has expressly set aside JobKeeper funds to invest in capital projects that will create jobs. In 2020 Capral negotiated the acquisition of the GJames extrusion operation in Smithfield, taking control in February 2021. Capral is also planning to install a new paint line in NSW during 2022. These two capital projects are expected to create around 70 new Capral jobs.

NOTES TO THE FINANCIAL STATEMENTS

34 Events after reporting date

The directors consider that prolonged general economic impacts arising from COVID-19 may have a negative impact on Capral’s operations. In the unlikely event of an extended general shutdown of the economy throughout the Australian States and Territories, it may impact the recoverability of Capral’s carrying value of assets going forward.

On 17 December 2020, Capral announced that it had entered into an agreement to acquire the NSW Aluminium Extrusion assets of GJames Extrusion Co. Pty Ltd (GJames), located in Smithfield. Capral has acquired the assets of NSW Aluminium Extrusion from GJames on 1 February 2021 for a price of $7,100,000. Capral is in the process of finalising the price for spare parts, raw material inventory and employee benefits liabilities. Capral is in the process of determining the provisional fair value of the assets and liabilities acquired.

Capral has received two formal customer claims relating to third-party supply of non-conforming marine grade plate. The plate has been replaced where required and Capral is working with the supplier and its insurers to resolve the issue. The cost of replacement plate and the anticipated insurance excess have been fully provided in the financial year ended 31 December 2020 accounts.

No other matter or circumstance has arisen since the end of the Financial Year that has significantly affected, or may significantly affect the Group's operations, the results of those operations or the Group’s state of affairs in future financial years.

NOTES TO THE FINANCIAL STATEMENTS

35 Notes to the cash flow statement

(i) Reconciliation of cash and cash equivalents

(i) Reconciliation of cash and cash equivalents
	Consolidated
	2020 $’000 2019 $’000
Reconciliation of cash and cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank and short term deposits at call net of bank overdrafts. Cash as at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: Cash at bank and on hand	49,396 17,938
	49,396 17,938
(ii) Reconciliation of profit/(loss) for the year to net cash flows from operating activities Profit/(loss) for the year 25,920 (4,240) Non-cash items: Depreciation and amortisation - owned assets 5,722 5,548 Depreciation and amortisation – right of use assets 12,630 12,891 Gain on sale of property, plant and equipment (17) (12) Income tax benefit (3,048) - Share-based payments expense 445 190 Interest income reclassified to investing activities (2) (8) Change in assets and liabilities: (Increase)/decrease in current receivables (3,686) 2,839 Decrease in financial assets 10 551 (Increase)/decrease in inventories (179) 6,080 Increase in prepayments (893) (428) Increase/(decrease) in trade and other payables 12,707 (13,712) Increase/(decrease) in employee benefit provisions 965 (3,388) Increase in other provisions 1,022 3,538 Increase/(decrease) in deferred income 24 (44) Increase in other financial liabilities 529 917
Net cash provided by operating activities 52,149 10,722

(iii) Details of finance facilities are included in note 26 to the financial statements.

(iv) Non-cash financing activities

There were no non-cash financing activities during the Financial Year or the 2019 year.

NOTES TO THE FINANCIAL STATEMENTS

36 Parent entity disclosures

36 Parent entity disclosures
	Company
	2020 $’000 2019 $’000
Financial Position Assets Current assets - third parties Total assets Liabilities Current liabilities - third parties Total liabilities Equity Issued capital Accumulated losses Equity-settled compensation reserve Dividend reserve	197,962 161,815 312,687 281,528 107,844 94,281 195,304 193,670 426,965 (352,574) 425,744 (371,890) 11,319 10,874 31,673 23,130
Total Equity	117,383 87,858
Financial Performance Profit/(loss) for the year Other comprehensive income	30,280 (4,813) - -
Total comprehensive profit/(loss) for the year	30,280 (4,813)
Contingent liabilities of the parent entity
Refer note 31
Commitments for the acquisition of property, plant and equipment by the parent entity
Commitments for the acquisition of property, plant and equipment by the parent entity Within one year	866 620

NOTES TO THE FINANCIAL STATEMENTS

37 Share-based payments

Performance Share Rights

Executive and Senior Management

Refer to section 2 of the Remuneration Report for details of rights issued under the Long Term Incentive Plan.

The following share-based payment arrangements were in existence during the current reporting period:

Performance right series (LTIP) Number as at 31 Dec 20 Grant date Last Testing Date Exercise price $	Fair value at grant date $4
Issued 6 March 20181 61,680 6/03/2018 31/12/2020 - Issued 6 March 20181 61,680 6/03/2018 31/12/2020 - Issued 22 March 20192 70,830 22/03/2019 31/12/2021 - Issued 22 March 20192 70,830 22/03/2019 31/12/2021 - Issued 3 March 20203 90,325 3/03/2020 31/12/2022 - Issued 3 March 20203 90,325 3/03/2020 31/12/2022 -	3.600 3.900 2.250 3.150 2.100 2.820

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2018 have an average vesting date of 1 March 2021.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2019 have an average vesting date of 1 March 2022.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2020 have an average vesting date of 1 March 2023.

4 Shown as post 3 November 2020 share consolidation equivalent fair value.

The following share-based payment arrangements were in existence during the comparative reporting period:

Number as at 31 Dec 19 Grant date Last Testing Date Exercise price $	Fair value at grant date $
Issued 10 March 20171 1,825,000 10/03/2017 31/12/2019 - Issued 10 March 20171 1,825,000 10/03/2017 31/12/2019 - Issued 6 March 20182 2,025,000 6/03/2018 31/12/2020 - Issued 6 March 20182 2,025,000 6/03/2018 31/12/2020 - Issued 22 March 20193 2,125,000 22/03/2019 31/12/2021 - Issued 22 March 20193 2,125,000 22/03/2019 31/12/2021 -	0.130 0.150 0.120 0.130 0.075 0.105

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2017 have an average vesting date of 1 March 2020.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2018 have an average vesting date of 1 March 2021.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2019 have an average vesting date of 1 March 2022.

Inputs into the model	Performance Rights (LTIP) 03 March 2020 22 March 2019 06 March 2018	10 March 2017
Grant date Dividend yield Risk free yield Expected volatility Last testing date Exercise price Share price at grant date^ Performance right life	3/03/2020 22/03/2019 6/03/2018 9.5% 7.7% 6.3% 0.5% 1.4% 2.15% 47.5% 45% 55% 31/12/2022 31/12/2021 31/12/2020 n.a n.a n.a $3.750 $3.900 $4.800 3 years 3 years 3 years	10/03/2017 5.7% 2.14% 60% 31/12/2019 n.a $5.400 3 years

^ Shown as post 3 November 2020 share consolidation equivalent share price.

NOTES TO THE FINANCIAL STATEMENTS

37 Share-based payments (cont'd)

Managing Director

During the Financial Year, 102,670 rights were issued to Mr A. Dragicevich.

During the comparative financial year, 78,330 rights were issued to Mr A. Dragicevich.

The following rights were in existence during the current reporting period, subject to the achievement of performance conditions and have been independently valued as follows:

Share rights Number as at 31 Dec 20 Grant date Last Testing Date Exercise price $	Fair value at grant date $4
Issued 19 April 20181 36,665 19/04/2018 31/12/2020 - Issued 19 April 20181 36,665 19/04/2018 31/12/2020 - Issued 16 April 20192 39,165 16/04/2019 31/12/2021 - Issued 16 April 20192 39,165 16/04/2019 31/12/2021 - Issued 29 April 20203 51,335 29/04/2020 31/12/2022 - Issued 29 April 20203 51,335 29/04/2020 31/12/2022 -	$3.000 $3.600 $2.100 $3.000 $1.560 $2.040

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2018 have an average vesting date of 1 March 2021.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2019 have an average vesting date of 1 March 2022.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2020 have an average vesting date of 1 March 2023.

4 Shown as post 3 November 2020 share consolidation equivalent fair value.

The following rights were in existence during the comparative reporting period, subject to the achievement of performance conditions and have been independently valued as follows:

Share rights Number as at 31 Dec 19 Grant date Last Testing Date Exercise price $	Fair value at grant date $
Issued 11 May 20171 1,000,000 11/05/2017 31/12/2019 - Issued 11 May 20171 1,000,000 11/05/2017 31/12/2019 - Issued 19 April 20182 1,100,000 19/04/2018 31/12/2020 - Issued 19 April 20182 1,100,000 19/04/2018 31/12/2020 - Issued 16 April 20193 1,175,000 16/04/2019 31/12/2021 - Issued 16 April 20193 1,175,000 16/04/2019 31/12/2021 -	$0.070 $0.110 $0.100 $0.120 $0.070 $0.100

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2017 have an average vesting date of 1 March 2020.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2018 have an average vesting date of 1 March 2021.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2019 have an average vesting date of 1 March 2022.

NOTES TO THE FINANCIAL STATEMENTS

37 Share-based payments (cont'd)

Inputs into the model	29 April 2020 16 April 2019 19 April 2018	11 May 2017
Grant date Dividend yield Risk free yield Expected volatility Last testing date Share price at grant date^ Performance right life	29/4/2020 16/4/2019 19/4/2018 12.2% 8.0% 6.7% 0.2% 1.5% 2.25% 47.5% 45% 55% 31/12/2022 31/12/2021 31/12/2020 $2.880 $3.750 $4.500 3 years 3 years 3 years	11/5/2017 7.4% 1.83% 60% 31/12/2019 $4.200 3 years

^ Shown as post 3 November 2020 share consolidation equivalent share price.

The following table reconciles the outstanding securities granted to the Managing Director and senior management at the beginning and end of the Financial Year:

Performance rights	2020 2019
Number of share performance rights: Balance at the beginning of the financial year Granted during the financial year Forfeited during the financial year Vested during the financial year Lapsed during the financial year Share consolidation 30:1 Balance at the end of the financial year	18,500,000 20,350,000 8,500,000 7,000,000 (350,000) (2,100,000) - (6,620,202) (5,650,000) (129,798) (20,300,000) -
	700,000 18,500,000

The performance rights outstanding at the end of the Financial Year were 700,000 (2019: 18,500,000), with a weighted average remaining contractual life of 1.1 years.

38 Key management personnel compensation

The aggregate compensation made to directors and other members of key management personnel of the Company and the Group is set out below:

	Consolidated/Company
	2020 $ 2019 $
Short-term benefits Post-employment benefits Other long-term benefits Termination benefits Share-basedpayments	1,842,352 1,484,464 76,635 86,049 - - - 42,210 512,595 89,050
	2,431,582 1,701,773

NOTES TO THE FINANCIAL STATEMENTS

DIRECTORS' DECLARATION

The directors declare that:

(a) in the directors' opinion, there are reasonable grounds to believe that Capral will be able to pay its debts as and when they become due and payable;
(b) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of Capral and the consolidated entity;
(c) in the directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and
(d) the directors have been given declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the directors

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R.L. Wood-Ward Chairman

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A. Dragicevich Managing Director

Sydney 25 February 2021

DIRECTORS’ DECLARATION

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Deloitte Touche Tohmatsu ABN: 74 490 121 060

Eclipse Tower Level 19 60 Station Street Parramatta NSW 2150 PO Box 38 Parramatta NSW 2124 Australia

Tel: +61 (0) 2 9840 7000 Fax: +61 (0) 2 9840 7001 www.deloitte.com.au

Independent Auditor’s Report to the Members of Capral Limited

Report on the Audit of the Financial Report

We have audited the financial report of Capral Limited (the “Company” ) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001 , including:

(i) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year then ended; and
(ii) 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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 confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 for 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.

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation.

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Key Audit Matter

Carrying value of property, plant and equipment and right of use

As disclosed in Note 14, the Group has property, plant and equipment held at a written down value of $38,814,000 as at 31 December 2020, net of impairment losses of $34,069,000 recognised up to and including FY2013. As disclosed in Note 16, right of use amounts to $70,776,000 as at 31 December 2020.

Management has assessed the recoverable amount of property plant and equipment by initially assessing for any indicators of impairment. A potential indicator of impairment was identified. Accordingly, management prepared a value-in-use discounted cash flow model (“impairment model”) to assess whether the carrying value of property, plant and equipment exceeded their recoverable value.

Note 1c(k) outlines the determination of the carrying value of the property, plant and equipment and right of use which requires significant judgement by management in assessing for any indicators of impairment and preparing a value-in-use discounted cash flow model, including;

estimating future growth rates,
discount rates, and

▪ the expected cash flows and capital expenditure.

How the scope of our audit responded to the Key Audit Matter

Our procedures included, but were not limited to:

Assessing the process undertaken and conclusions reached by management in determining indicators of impairment
Reviewing the FY21 budget, the basis on which it has been prepared, and assessing the historical accuracy of forecasting by management
Assessing other key assumptions in the impairment model including:
discount rate;
forecasted cash flows and capital expenditure;
lease payments and sustaining capital expenditures on leases
growth rates, in particular with reference to historic growth rates and forecast macro-economic conditions impacting demand in the industry; and
terminal growth rate.
Engaging our valuation specialists to assist with evaluating the appropriateness of the discount rate used
Recalculating the mathematical accuracy and integrity of the impairment model
Performing a sensitivity analysis on the key assumptions and inputs in the impairment model, to assess the extent of change in those assumptions that either individually or collectively would result in impairment or reversal of impairment, and
Assessing the headroom in the impairment model and whether it is indicative of a need to reverse previously recorded impairment charges.

We also assessed the appropriateness of the disclosures in Notes 1c(k), 14 and 16 to the financial statements.

Deferred tax asset (DTA) in relation to Carry Forward Tax Losses

As disclosed in Note 11, the Group has deferred tax assets recognised of $5.905m and has potential deferred tax assets of $77.441m not recognised as at 31 December 2020.

Deferred tax assets in respect of tax losses are recognised where it is probable that the Group will have future taxable profits against which such losses will be used.

The Group’s ability to recognise deferred tax assets in relation to tax losses is assessed

Our procedures included but were not limited to:

Engaging our tax specialists to assist us in assessing the availability of tax losses to the Group
▪ Reviewing management’s forecasts in respect of the Group’s taxable income
▪ Assessing the key assumptions in management’s calculations including:
Comparing the consistency of the assumptions used to the inputs and assumptions in management’s impairment model

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by management at each reporting period. Significant judgement is required by management in their assessment of the quantity of tax losses available and whether it is probable that some or all of these tax losses can be utilised in the foreseeable future. This assessment includes estimating the Group’s future short-term taxable profits and the probability of those forecasts being met.

o Assessing whether the period used to forecast taxable profits is appropriate o Assessing the likelihood of the Group achieving these forecasts

We also assessed the appropriateness of the Group’s disclosure in respect of the deferred tax assets and unutilised tax losses in the notes to the financial statements.

Management’s assessment resulted in an additional $3.048m of tax losses being recognised in the year ended 31 December 2020.

Other Information

The directors are responsible for the other information. The other information comprises the Chairman’s Report, Managing Director’s Operations and Financial Review, Sustainability Report and Directors’ Report, which we obtained prior to the date of this auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): Members Details and Corporate Directory, which is expected to be made available to us after that date.

Our opinion on the financial report does not cover the other information and we do not and will 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 identified above 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 on the other information that we obtained prior to the date of this auditor’s report, 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.

When we read the Members Details and Corporate Directory, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action.

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 ability of the Group 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 has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered

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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.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 12 to 23 of the Directors’ Report for the year ended 31 December 2020.

In our opinion, the Remuneration Report of Capral Limited, for the year ended 31 December 2020, complies with section 300A of the Corporations Act 2001 .

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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.

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DELOITTE TOUCHE TOHMATSU

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David White Partner Chartered Accountants Parramatta, 25 February 2021

AI assistant

CAPRAL LIMITED — Annual Report 2021

64599_rns_2021-02-24_805312c8-9c09-4c32-b8e1-0665f3307499.pdf

CAPRAL

ASX ANNOUNCEMENT

Key highlights:

Investor and analyst conference call

THE PRELIMINARY REPORT GIVEN TO ASX UNDER LISTING RULE 4.3A

Appendix 4E - Preliminary Final Report

Results for announcement to the market

2.5 Record date for determining entitlements to and the date for payments of the dividends (if any)

2.6

Explanation of 2.1 to 2.4

3.0 Net Tangible Assets per security (Post-share consolidation)

4.0 Entities over which control has been gained or lost

5.0 Individual and total dividends

6.0 Dividend or dividend reinvestment plans

7.0 Associates and joint venture entities

8.0 Basis of Preparation of Preliminary Final Report

CONTENTS

CHAIRMAN'S REPORT

Annual review

Financial performance

Dividends

Safety

Looking ahead

Board changes

MANAGING DIRECTOR'S OPERATIONS AND FINANCIAL REVIEW

Overview

Financial Review

Key Initiatives and Strategies

Fair Trade

Safety

Sustainability

Risks

Outlook

Tony Dragicevich

BOARD OF DIRECTORS

REX WOOD-WARD Chairman of Board (Independent) Appointed 6 November 2008

TONY DRAGICEVICH B. Comm A.C.A Managing Director (Non-independent) Appointed 15 April 2013

PHILIP JOBE B. Comm Non-executive director (Independent) Appointed 24 April 2009

GRAEME PETTIGREW FIPA, FAIM, FAICD Non-executive director (Independent) Appointed 18 June 2010

SUSTAINABILITY REPORT

Scope

Health and Safety

People

Training Commitment

Community Interaction

Scholarship Fund

Environment

Economic sustainability

DIRECTORS’ REPORT

Directors

Principal activities

Dividends

Review of operations and financial position

Significant changes in the state of affairs

Matters subsequent to the end of the Financial Year

Likely developments, business strategies, prospects and risks

Other information for members to make an informed assessment

Company Secretary

Ms K Bradley-Ware - Joint Company Secretary, B Comm, CPA, LLB

Ms G Nairn - Joint Company Secretary, BA/LLB, FGIA

Directors' meetings

Directors' interests and benefits

Ordinary Shares

Unissued shares or interests under option

REMUNERATION REPORT (AUDITED)

Section 1: The Remuneration Framework

(a) Key Principles

(b) Role of Remuneration & Nomination Committee

(c) Performance Planning and Review

(d) Non-executive Directors

(e) Senior Management Remuneration

(f) Fixed remuneration

(g) Short Term Incentives

(h) Long Term Incentives

(i) Anti-Hedging Policy

Section 2: Actual Remuneration of key management personnel

(a) Remuneration

CAPRAL LIMITED Annual Report 2021