At Codan we believe technology
has the power to transform people’s
lives. People all over the world risk
their lives every day, working in harsh
and dangerous conditions to make
their communities safer and more
secure — from large-scale miners
to fire fighters, border security
patrols, famine-relief workers and
artisanal miners. We equip them with
innovative and robust technology
so they can get the job done safely
and efficiently.
We have been achieving this for more
than 50 years, since our founders
engineered leading-edge radios for
the School of the Air to help children
in the farthest reaches of outback
Australia gain access to education.
Today, Codan works with customers
in over 150 countries, and our
technology continues to transform
lives by creating solutions that solve
communications, safety, security and
productivity problems in some of the
harshest environments on earth.
2 _ FY15 SUMMARY
6 _ CHAIRMAN’S LETTER TO SHAREHOLDERS
8 _ CEO’S REPORT
10 _ OUR PEOPLE AND VALUES
14 _ GLOBAL LOCATIONS
15 _ OPERATIONS
28 _ BOARD OF DIRECTORS
32 _ LEADERSHIP TEAM
35 _ FINANCIAL REPORT
100 _ ASX ADDITIONAL INFORMATION
102 _ CORPORATE DIRECTORY
Codan Limited
ABN 77 007 590 605
Annual General Meeting
The Annual General Meeting of Codan Limited
will be held at 11:00 am on Wednesday,
28 October 2015 at the Hilton Adelaide hotel,
233 Victoria Square, Adelaide, South Australia.
1
• Net profit after tax of $12.5 million, up
36% on 9% higher sales
CODAN LIMITED
• Earnings per share of 7.1 cents
• Annual fully franked dividend of 3.5 cents
• Balance sheet strengthened with net debt
reduced by a further $18 million in the
second half, to $35.4 million
• Investment in new product development
maintained at historically high levels
• Radio Communications revenue
increased 18% and segment contribution
increased 33%
• Minelab revenue increased 70% over the
first half with release of the GPZ 7000®
gold detector in February and the
GO-FIND® metal detector series in May
• Mining technology start-up business,
Minetec, successfully completed pilot
projects for a number of global mining
companies
Founded in 1959, Codan Limited (ASX:CDA)
provides robust and leading-edge technology
solutions that solve customers’ communications,
safety, security and productivity problems.
Our success has been driven by our ability to
optimise the development and manufacture
of sophisticated electronics products and
associated software, enabling us to deliver
cost-effective solutions to a range of
customers in communications, metal detecting
and mining markets.
We work closely with our customers to seek
innovative ways to solve their problems and add
value to their operations.
The Codan brands are internationally established,
well regarded in the markets we serve, and have an
exceptional reputation for superior performance
in harsh and remote environments.
Our customers include leading aid and humanitarian
organisations, mining companies, security and
military groups, governments and major corporates,
as well as individual customers and artisanal miners.
Our plan for growth is based on developing unique
intellectual property, putting that know-how into
an expanding range of electronics-based product
solutions, and then leveraging our operational
excellence and marketing capability across the
world. We continue to seek out opportunities
to grow the business.
The business has approximately 375 employees
located in Australia, Canada, the USA, UK, Ireland,
China and the UAE. Our marketing reach, largely
through a long-established network of staff and
dealerships across the world, embraces activity
in over 150 countries.
2
2
2 0 1 5 C O D A N A N N U A L R E P O R T
2015 CODAN ANNUAL REPORT 2013
$244.3m
2013
$76.3m
2013
$45.4m
2012
$179.4m
2011
$169.6m
2012
$51.7m
2011
$44.0m
2015
$143.9m
2014
$132.3m
2012
$27.9m
2011
$23.4m
2015
$29.9m
2014
$22.6m
2015
$12.7m
2014
$9.0m
OPERATING
REVENUE
EBITDA
UNDERLYING
NPAT*
2015
2014
2013
2012
2011
For year ended
30 June
REVENUE
Communications
- HF and LMR
Metal detection
Mining technology
Other
Total revenue
EBITDA
EBIT
Interest
Net profit before tax
Tax
Net profit after tax
Earnings per share
Dividend per share
Return on equity
Gearing
- Discontinued Satcom
$10.5m
4%
$18.7m
$63.8m 44%
$53.9m
41%
$47.5m
20%
$47.7m
$73.3m
51%
$69.9m
53% $166.3m
68%
$98.6m
$4.8m
$2.0m
3%
2%
$4.0m
$4.5m
3%
3%
$14.5m
$5.5m
6%
2%
$9.3m
$5.1m
27%
10%
55%
5%
3%
$43.7m
$26.1m
$92.1m
26%
15%
54%
$7.7m
5%
$143.9m 100% $132.3m 100% $244.3m 100% $179.4m 100% $169.6m 100%
$29.9m
21% $22.6m
17% $76.3m
31% $51.7m
29% $44.0m
$19.3m
13% $13.6m
10% $64.7m
26% $43.2m
24% $35.0m
($2.5)m
$16.8m
($4.1)m
($2.8)m
($1.7)m
($3.4)m
($3.0)m
12% $10.8m
($1.8)m
8% $63.0m
($17.6)m
26% $39.8m
($11.9)m
22% $32.0m
($8.6)m
26%
21%
19%
$12.7m
9%
$9.0m
7% $45.4m
19% $27.9m
16% $23.4m
14%
7.1c
3.5c
10%
22%
1
2
5.1c
3.0c
7%
28%
25.8c
13.0c
41%
17%
17.0c
9.5c
37%
17%
14.3c
9.0c
34%
26%
Notes:
1. Return on equity is calculated as net profit after tax divided by average equity
2. Gearing is calculated as net debt divided by the sum of net debt and equity
* The financial information shown above reflects the underlying business performance. Non-underlying income/(expenses) are
considered to be outside of the normal business activities of the group. For 2015, non-recurring items related to the closure of
a non-core business. For the prior year, the net impact of non-recurring items on the profits of the company was immaterial.
3
You ne ve r know
i f or when you'll make
a li fe -c hanging disc ove ry.
One of t he most
valuable t hings I've found
is a hobby we c an
now enjoy as a family.
4
You ne ve r know
i f or when you'll make
a li fe -c hanging disc ove ry.
One of t he most
valuable t hings I've found
is a hobby we c an
now enjoy as a family.
5
In this, my first letter to shareholders, I am pleased to report improved results
for Codan in FY15. This improvement was both welcome and necessary given
the poor results achieved in FY14. The full details of the improvements in
sales, net profit, dividend and debt levels are set out in this report.
Peter Griffiths had also intended
to retire at this year’s AGM, but he
has kindly agreed to postpone his
retirement for six or so months to
give us time to find an appropriate
person to cover his considerable
skills and corporate knowledge,
particularly as chair of the Board
Audit, Risk and Compliance
Committee.
I would like to particularly draw
your attention to this year’s
Remuneration Report. I am pleased
that our policy of rewarding
performance and aligning our
executive team’s objectives with
those of the shareholders has been
clearly demonstrated this year.
I commend this report to you.
We will provide an update on our
trading performance at the AGM.
As mentioned, we are very much
focused on consistent improvement,
year on year.
Mr David Simmons
Chairman
We plan to spend a similar
amount this year as we fast-track
a number of key initiatives that
will underwrite medium-term
sales and profit growth. Donald
has provided further details on
the individual projects in his report.
We expect to return to somewhere
near the long-term average rate of
expenditure in the following year.
This accelerated spend has focused
the entire business on cash flow
management, particularly working
capital efficiency – a good thing.
Given the commitment to
accelerated new product
development and engineering,
which is a core capability across
the group, we have no current plans
to acquire further businesses. For
now it is our strategy to expand
our existing products and solutions
and position our start-up business,
Minetec, for success. As Donald
has explained, during FY16 Minetec
will become “product ready” for
the first time, which is a significant
milestone.
The process of board regeneration
continues. At the AGM it will be my
pleasure to introduce our newest
board member, Graeme Barclay.
You can read about Graeme’s
background and experience in this
report. David Klingberg will retire
at the upcoming AGM. David has
been an excellent director over a
number of years and it will be my
pleasure to reflect on his input and
that of David Klingner, our former
chairman, at the AGM.
Mr David Simmons
Chairman
The board and management team
are very aware that shareholders
will only reward consistent results
with “no surprises”. I can assure you
that we are all very focused on this
objective despite the challenges
brought about by the nature of
our business.
In June this year, I visited the
majority of Codan’s overseas
operations with our CEO, Donald
McGurk. I was impressed with the
depth of talent, the enthusiasm and
the commitment of every employee
I met. Our ability to transact
profitable business in some of the
most challenging countries and
markets around the world is a key
competitive advantage.
We spent in the order of $16.5m,
or 11.5% to sales, on new product
development and engineering
during the year, well above
our long-term average rate of
expenditure in this category.
6
2015 CODAN ANNUAL REPORT
“Our ability to transact
profitable business
in some of the most
challenging countries
and markets around
the world is a key
competitive advantage.”
77
I am pleased to report that significant progress across a number
of fronts was made during the last 12 months, with the release
to market of several new product platforms and improved
performance in both Radio Communications and Minelab.
from the new GPZ 7000® super
gold detector and stylish, low-cost
GO-FIND® metal detector series.
This has further reinforced the
benefits of continuing to invest in
new product development to create
unique and protectable intellectual
property.
Stratus™ is a hybrid communications
network solution which
provides secure mobile voice
communications anywhere with
public cellular coverage. The
product links the cellular network
into an established LMR network
to provide wide area coverage.
Codan has a proud history of
providing robust and leading-
edge technology solutions that
solve customers’ problems, and we
remain committed to exceeding
customer expectations in all aspects
of our business.
Radio Communications
Radio Communications had an
excellent year, increasing both
sales and profitability. Segment
contribution of $15.2 million
increased 33% over FY14 on
sales of $63.8 million, up 18%
on the prior year.
The Land Mobile Radio (LMR)
product group, based in Victoria,
Canada, increased sales for the
second consecutive year as the
North American economy showed
signs of recovery and new product
releases gained traction.
The decision taken last year to
invest in a new, refreshed suite of
LMR product solutions over a three-
year period, aimed at broadening
our offering to the market, has
proven to be a good one. The first
of these products, Stratus™, was
released in March and has been
very well received by government
organisations in the USA.
Demand for the software-defined
Envoy® High Frequency (HF) radio
continues to grow, and the business
is now able to bid into larger
communications projects on the
back of its improved voice clarity
and turnkey solutions incorporating
both HF and LMR.
We continue to see significant
opportunities to grow Radio
Communications over the next
two to three years by further
integrating LMR and HF radio
communications. The significant
investment in new LMR solutions
and extension of our Envoy® HF
platform are expected to provide
growth engines for this business.
Metal Detection
Over the past 20 years, Minelab
has introduced more innovative
technology to the metal detecting
market than any of its competitors
and has taken the industry to new
levels of technological excellence.
This tradition has continued with
the release of the GPZ 7000®,
a significant new gold detection
platform that has re-established
our technological advantage in
the lucrative gold detecting sector
of the market. The GPZ 7000® is
Mr Donald McGurk
Managing Director and CEO
Net profit after tax increased 36%
to $12.5 million for the year on
group sales of $143.9 million. The
company declared a fully franked
final dividend of 2.0 cents per share,
following on from the 1.5 cent per
share fully franked interim dividend.
This resulted in a total dividend
of 3.5 cents for the full year, an
increase of 17% over FY14.
The balance sheet was
strengthened, with net debt reduced
by $11.5 million over the year and the
company’s gearing ratio reduced
from 28% to 22%. Net debt remains
well within the company’s debt
facility of $85 million.
The decision to maintain an
increased level of engineering
spend on new product
development, despite the difficulties
faced by the business, has delivered
good returns during the year.
Minelab made almost $20 million
of sales in the second half of FY15
8
2015 CODAN ANNUAL REPORT
the world’s best metal detector
and utilises proprietary ZVT™
technology which detects gold
at greater depths and across all
ground types, including very
highly mineralised soils.
In order to maximise the success of
this product, we have established
a Minelab retail and distribution
centre in Dubai to enable us to
deal directly with the African
market and bring us closer to our
customers. This has also served
to help aggressively protect our
intellectual property and disrupt
the operations of those that seek
to imitate us.
The Minelab consumer business
remains very significant and more
predictable, with key markets
in Australia, the USA, Europe
and Russia. The new GO-FIND®
detector series was released in May
2015, taking us into a lower-priced
and higher-volume segment. This
is a significant new market for
Minelab, and its introduction means
there is now a premium quality
Minelab product at every metal
detecting price point.
Minelab’s countermine business has
always been strategically important
in maintaining our position as
the world’s number one provider
of metal detection technologies
and solutions. Our continual
development of leading-edge
technology to rid the world of land
mines and improvised explosive
devices carries over to the business’
other products and creates positive
brand recognition globally.
In 2013, the business began
working with a major US defence
company, NIITEK, to integrate
Minelab’s leading-edge metal
detection technology with their
ground penetrating radar to
produce the world’s best dual-
sensor handheld mine detector.
We are excited about the potential
that this joint venture brings.
Significant sales were also made
to the Australian Department
of Defence and the Canadian
Department of National Defence
(DND). DND’s selection of the
F3 Compact™ followed extensive
comparative field trials to ensure
compliance with their stringent
operational requirements.
Mining Technology
Our start-up technology business,
Minetec, continues to make good
progress, albeit at a slower rate
than originally hoped. Over the
past three years, Codan has
continued to invest in Minetec’s
technologies in order to transition
the company to a high-value-add
technology solutions provider to
the mining industry.
During FY15, Minetec successfully
completed a number of pilot
projects for global mining
companies, which demonstrated
its tracking, safety and productivity
technologies in operational
environments. From a technology
perspective, FY16 will see Minetec
transition from the product
development phase to systems
integration of solutions that have
been successfully demonstrated
in operating mines.
Having now proven the technology
and demonstrated our solutions,
the challenge is to secure market
acceptance and commitment to
full-scale operational deployments.
This task has been made more
difficult by low commodity
prices and cuts to miners’
capital expenditure budgets.
Notwithstanding this, the Minetec
value proposition is well aligned
to the challenges of sectors such
as underground hard-rock mining
where the industry is moving
toward increased mechanisation.
Minetec provides key technical
enablers for this strategy.
South Africa is a key target market
for Minetec, with a predominance
of underground hard-rock mines
and a regulatory environment that
has legislated safety systems for
operational mines. In FY15, Minetec
established a local presence in
South Africa in order to be closer
to our key customers.
While management remains of
the view that, in time, Minetec will
become a significant division of
Codan, it is still a start-up business
and may take some time to achieve
scale and acceptable levels of
profitability.
Integration of Adelaide
facilities
The company plans to consolidate
and integrate its Adelaide
operations in the Technology Park
precinct at Mawson Lakes and sell
its properties at Newton (Codan
Radio) and Torrensville (Minelab).
The Torrensville property was sold
during the second half of FY15.
The Newton property continues
to be utilised by the business and
will be sold after all operations
have been relocated to Mawson
Lakes in December 2015. The
redeveloped, leased premises
will provide great facilities for our
staff and represents a long-term
commitment to the electronics
industry in South Australia.
Our people
Lastly, but most importantly,
people and culture are at the heart
of every organisation’s success,
and I am proud and delighted to
say that our people have proven
themselves to be among the
best in the industry, and worked
tirelessly to rebuild our market
leadership position and propel us
through the difficulties faced by the
business during the past 24 months.
With great people and a “can-do”
culture, coupled with an appetite
from the board to support
management’s plans to drive profit
growth during the next three
years, the company is very well
positioned to prosper over the
medium to long term and increase
shareholder value.
On behalf of the board, I would like
to express our sincere thanks to all
of our people for their enthusiastic
support and valued contribution.
Mr Donald McGurk
Managing Director and CEO
9
Core values are what support Codan’s vision and culture, and reflect
what the business values. The Codan Core Values have been embraced
by employees globally as guiding principles to assist with forming the
foundation on which we perform work and conduct business.
The values underlie our work, how
we interact with each other, and
which strategies we employ to
fulfill our mission. They are the
practices we use every day in
everything we do.
For Codan, the company’s core
values underpin our core purpose
of delivering superior shareholder
value by growing a lasting and
innovative organisation that
consistently creates outstanding
customer experiences.
An awards programme has been
implemented to recognise those
employees who have demonstrated
that they embrace the core values
and apply them in their daily work.
The 4 Codan Core Values are:
Can-Do
High Performing
Customer Driven
Openness & Integrity
1 0
Customer Driven
Carlos Gonzalez
Communications Engineer, Minetec,
Australia
Richard Burley
Group Procurement Manager, Group
Operations, Australia
Graham Winston
Business Analyst, Group Operations,
Australia
Callum McEwen
HF Product Training and Customer
Service Manager, Radio
Communications, Australia
Tina Bowen
Business Systems Manager,
Group Operations, Australia
Openness and Integrity
Ken Parks
Director System Design Integration,
Radio Communications, Canada
Yuqing Chen
Graduate Test Engineer, Group
Operations, Australia
Darren Toy
GM Project Services, Minetec,
Australia
LIST OF RECIPIENTS
Can-Do
Lina Iuliano
Accounts Receivable and Credit Officer,
Corporate Services, Australia
Despatch Team, Group Operations,
Australia
Steve Hilton, Albert Mylan, Sheela Prasad,
Jimmy Wongcuarewan, Sam Robinson,
Sue Dodds and Kiki Pokad
Wayne Hingston
Facilities Coordinator, Group Operations,
Australia
Gloria Dubbioso
Accounts Payable Officer, Corporate
Services, Australia
Shaun Borgas
Group Credit Controller, Corporate
Services, Australia
Nino Caporrella
Radio Communications Product Manager,
Group Operations, Australia
Natalie Ksiazkiewicz
Commercial and Finance Officer,
Corporate Services, Australia
High Performing
Finbarr Lordan
EMEA Operations Support, Minelab,
Ireland
SMT Team
Richard Bernard, Sheela Prasad,
Aleli Santos and Priscilla Macalincag,
Group Operations, Australia
Mark Ellis
Sales Manager, Radio Communications,
UK
Dave Jarvis
Customer Service Manager, Minetec,
Australia
2015 CODAN ANNUAL REPORT
Can-Do
Award
Customer
Driven Award
Lina Iuliano
Accounts Receivable and Credit Officer,
Corporate Services, Australia
Carlos Gonzalez
Communications Engineer,
Minetec, Australia
Lina consistently demonstrates determination
to work with challenging customers to collect
payments on time. Lina always has a happy
disposition and great attitude towards her work.
Carlos has performed miracles with our customers.
His interaction with customers and drive to deliver a
quality solution tailored to their needs has now made
Minetec a preferred supplier with these customers.
High Performing
Award
Openness and
Integrity Award
Finbarr Lordan
EMEA Operations Support, Minelab, Ireland
Ken Parks
Director System Design Integration,
Radio Communications, Canada
Finbarr’s consistent high performing work ethic speaks
volumes about him as a Minelab employee. He has
been exemplary in his contribution to Minelab over the
past 12 years and sets the bar higher than anyone else.
Ken wears many hats and many of them at the
same time. He knows the company and the
products, and he cares deeply about the people.
He listens to others and encourages us all.
1 1
The advance s in
t e c hnology t hat int e grat e
produc tivi t y, t racking
and c ommunic ation are
stagge ring. But, most
important ly, t he y're
creating an e ven
safe r workplace
for my guys.
1 21 2
The advance s in
t e c hnology t hat int e grat e
produc tivi t y, t racking
and c ommunic ation are
stagge ring. But, most
important ly, t he y're
creating an e ven
safe r workplace
for my guys.
1 3
1 41 4
2015 CODAN ANNUAL REPORT _ RADIO COMMUNICATIONS
_ METAL DETECTION
_ MINING TECHNOLOGY
_ ENGINEERING AND OPERATIONS
1 5
Codan Radio Communications is a leading international designer and manufacturer of
premium High Frequency (HF) radio and Land Mobile Radio (LMR) communications systems.
We deliver our capability worldwide for the security, military, humanitarian and public safety
markets. Our mission is to provide communication solutions that enable our customers to
save lives, create security and support peacekeeping worldwide. With more than 50 years in
the business, Radio Communications has garnered a reputation for reliability and customer
satisfaction, producing innovative and industry-leading technology solutions.
F Y15 SUMM A R Y
• Achieved strong
turnaround in HF sales
• Delivered highest LMR sales since
the acquisition of Daniels in 2012
• Increased profit
contribution 33% on FY14
• Globally launched Stratus™
product and the Envoy®
Release 2 digital radio
F Y16 OB JE C T I V E S
• Embed Stratus™ as the leading
LMR interoperability solution
with key US customers
• Enhance Envoy® radio with
smartphone capability for
humanitarian and security
customers
• Continue development of
leading-edge LMR capabilities
to deliver a full system solution
• Expand into adjacent markets
and sectors with existing and
new intellectual property
1 6
2015 CODAN ANNUAL REPORT 1 7
We have increased market share in all of our addressable markets, including key customer accounts and global one-off projects. The FY15 result was bolstered by significant one-off projects from oil-rich economies, which enhanced what would have already been a good level of growth from the previous financial year. During the year we have continued to invest in the underlying technology and product portfolio. Stratus™, Envoy® Release 2 and Smartlink™ have made a significant improvement to our customers’ communications capability and interoperability. These product launches, undertaken around the world, have kept the Codan brand at the forefront of people’s minds. We have also made significant strides in brand recognition in the USA for Codan’s radio portfolio, including a significant US government HF contract. We are working with major corporations in the USA to deliver further large programmes for both HF and LMR equipment. The Envoy® Release 2 software cemented Codan as the radio provider of choice in the humanitarian and NGO market-place. After the release of SmartLink™, Envoy® now has an extended suite of Wi-Fi networking functions which have made an already easy-to-use radio the best infrastructure-free communications tool on the market. It is unparalleled in voice quality, delivering market- leading capability at an affordable price to governments and agencies that need to operate in areas of the world without reliable secure communications infrastructure. Stratus™ has made a big splash in the USA. It has been demonstrated live in front of large audiences, leaving potential customers in no doubt that this product can not only extend a local P25 network, but also create a worldwide network linked to any private or public network via 4G. We have delivered demonstration units to several key US agencies and potential customers around the world and we expect significant purchases during FY16. We are now fully engaged with the same customers to develop and extend the Stratus™ product further, which will diversify the offering and make it even more useful to the first-responder market. Codan Radio Communications continues to enhance its world-class product design and development capability. Our focus is firmly fixed on delivery to our customers, and Radio Communications will continue to provide leading-edge systems and radio solutions with a customer-oriented service platform. We have the ability to deliver quality, best-value, dependable, field-supported systems, overcoming local or long-haul communication challenges, almost anywhere in the world. Codan Radio Communications provides the trusted platform for our customers and partners. SUCCESS STORYLong Range Digital Radio: The evolution of HFHigh Frequency (HF) communications has the advantage of being able to cover vast distances without expensive infrastructure. However, traditional HF voice quality is quite variable, depending on a number of parameters, including time of day and solar activity. Today’s customers expect a high-quality, dependable, clear communications service, similar to that provided by cellular and satellite services. Codan has developed new HF Digital Voice technology, which brings a quantum leap to the quality of service provided over HF.Launched in July 2014, Codan’s new HF Digital Voice capability, codenamed “Long Range Digital Radio” (LRDR™), is set to revolutionise the industry. In order to verify this capability in the real world, Codan recently worked closely with a local government public safety department in South Australia to conduct a state-wide field trial of the technology. The field trials tested Codan’s Envoy® software-defined radio, equipped with LRDR™ capability, under a variety of challenging conditions. LRDR™ proved to be a modern, clear, secure and effective tool that complements the radio suite which the public safety department vehicles currently carry. The field trial also proved LRDR™ to be superior to satellite communications in terms of voice quality, cost and availability. The field trial results were an outstanding success, demonstrating reliable communications over 1,250 km, with voice clarity unparalleled in the HF market, dispelling previous concerns that HF radio communications systems are hard to operate, noisy and unsecure.Following the field trials, the department added Codan Envoys® to their future remote communications strategy, supported by a large purchase of Envoy® radios with LRDR™ capabilities, and are project scoping a gradual upgrade from analogue to LRDR™ across their entire fleet.The department’s progressive stance on LRDR™ technology is being echoed across the world by other government departments such as Police and Emergency Services. Notably, there have been recent sales, demonstrations and field trials in NSW into the Ambulance Service, SES and Queensland Rural Fire Service.The renewed interest in HF communications across our international markets can be attributed to the release of LRDR™ technology. The new product suite has proven to be the most reliable and cost-effective platform for long range, secure communications among our peer competitors. WHY we do what we do: We change people’s fortunes.
HOW we do it: By creating innovative technologies and products that allow
people to explore every surface of the planet and discover what lies beneath,
knowing our experts are supporting them every step of the way.
WHAT we do: We make the world’s best metal detectors.
F Y15 SUMM A R Y
• Released new top of range gold
detector – the GPZ 7000®
• Released new detectors for the
coin and treasure market
– the GO-FIND® series
• Sales of these new detectors
delivered a significantly
stronger second half
• Increased the full-year profit
contribution by 20% over FY14
• Opened new showroom and
distribution centre in Dubai
to better service the African
gold market
• Received significant external
funding to further develop
Countermine product technology
• Achieved successful first year
of the mid-priced SDC 2300®
gold detector
F Y16 OB JE C T I V E S
• Leverage our increased
connectivity with the African
small-scale gold mining market
• Grow retail distribution channels
to maximise sales of the GO-FIND®
detector series
• Continue to develop our product
range to compete strongly
against competitors
• Defend our intellectual
property rights
1 8
2015 CODAN ANNUAL REPORT 1 9
Minelab is the world leader in providing metal detection technologies to hobbyists and prospectors, small-scale gold miners and for demining and military needs. Minelab’s profit contribution in FY15 of $19.2 million was an increase of 20% over FY14 and was achieved based on sales of $73.3 million. This improved profit result was made possible by the release of two potentially game-changing new product platforms – the world’s best gold detector (GPZ 7000®) and a stylish new coin and treasure product series (GO-FIND®) targeted at the consumer market. These releases drove the improved performance in the second half.Minelab employs the largest and world’s best metal detection engineering team, developing technology that is consistently superior to Minelab’s competitors. The GPZ 7000® gold machine was delivered ahead of schedule and, along with the GO-FIND®, is a reflection of the world-leading engineering development that is undertaken at Minelab.Hobbyists and prospectorsThe foundation of the Minelab business has been built on the success of selling metal detectors into the developed world economies of Australia, the USA, Europe and Russia, to individuals who metal detect for the fun of it and for whom metal detecting is an interest, a hobby, a sport or indeed primary and secondary sources of income. These metal detectors include those aimed at finding gold and those that are for the detection of coin and treasure such as jewellery and artefacts. This part of the business represents a significant portion of the total Minelab business, and is well placed for growth as the hobby of metal detection becomes increasingly familiar and accepted across the world and Minelab continues to release new products to the market.A key driver of growth in this first- world market is the release of new products. FY15 has benefited from three major new product releases. The SDC 2300® All-Terrain Gold Detector was released at the start of FY15 and is the most powerful mid-priced gold detector on the market. This gold detector is built to a military grade, is collapsible, compact and fully waterproof. The detector is lightweight and easy to use, with a real strength in finding small nuggets and fine threaded gold in highly mineralised soils. Sales in its first year of release have exceeded our expectations.Minelab released its flagship gold detector in February 2015. The GPZ 7000® uses new metal detection technology developed by Minelab to find the deepest gold in mineralised ground. With up to a 40% improvement in gold detection capability against the previously best gold detector, Minelab’s GPX 5000™, the GPZ 7000® has revolutionised the gold detecting market. The demand for this product has been excellent and drove a much improved second half profit result which pleasingly resulted in significant cash collections.Minelab has for many years dominated the top-end price points of the metal detecting market and has fought hard against its competitors at mid-tier price points. Minelab has not sold products at the lower price end of the market, which has left this market space to Minelab’s competitors. This has now changed with the release of the GO-FIND® series of detectors in May 2015. While these detectors will sell for a price point from US$150, the Minelab engineering team has designed them using Minelab’s market-leading technology to produce a category-leading product. The GO-FIND® will become a higher volume consumer product, and Minelab has expanded its relationships with large retail chains in order to take this product to the large consumer markets of the USA, Europe, Russia and Australia.Minelab now has products at all price points of the metal detecting market and we will continue to compete hard with our competitors to maximise our market share. Small-scale gold mining Minelab’s world-leading gold detection technology continues to revolutionise how small-scale gold miners from around the world prospect for gold. The strongest demand for gold detectors comes from Africa, with the primary driver being the adoption of metal detection technology by the large number of small-scale gold miners, and the demonstrated success they have in finding gold with our detectors. These small-scale gold miners have previously used traditional and often environmentally damaging mining techniques to find gold. Minelab’s metal detectors are changing the way gold is found by these miners.Minelab undertook a number of key actions in FY15 in order to maximise the potential of the large but unpredictable African gold detecting market. A critical factor in being able to respond to and understand the African gold detecting market is to be as close to the market as possible. To meet this objective, Minelab established a retail and distribution centre in Dubai in January 2015 to enable us to deal directly with African dealers and retail customers who come to Dubai to trade for gold detecting equipment. This strategy is working, and we are very pleased with the development of key direct relationships with the African gold detecting market as direct sales build.The release of the GPZ 7000® top-end gold machine has been eagerly awaited in the African gold fields, and FY16 will see the introduction of this product into our African gold markets.We continue to invest in the development of small-scale gold mining markets outside of Africa, and believe that, in time, good markets will develop in Central and Latin America and Asia. CASE STUDY
Minelab’s commercial
detector solves HALO’s
mine-clearing challenge
in Mozambique
HALO Trust, a charity specialising in
destroying the debris of war, works
on some of the world’s most difficult
minefields. When they discovered
minimum metal anti-personnel
mines (M14s) under the Gumbane
power lines in Mozambique, HALO
began consultation with world-
leading metal detection company,
Minelab, to tackle the unique
technical challenge.
Background
The Gumbane power line feeds
Mozambique’s capital, Maputo, and
was mined during the Mozambican
civil war when government forces
used anti-personnel mines to
defend key pieces of infrastructure
from sabotage. After the war, the
mines inhibited reconstruction
and repairs by the national
electric company, Electricidade de
Moçambique (EDM). Accidents have
occurred involving EDM workers
trying to access the power lines,
as well as civilians and livestock.
As such, the clearance of the power
lines was a high priority for the
Government of Mozambique.
Challenges
During HALO’s clearance operation,
they encountered a new technical
challenge with the discovery of M14
mines along the northern end of the
Gumbane lines. These mines contain
a very small amount of metal, which
makes them difficult to detect with
conventional metal detectors. Adding
to the challenge, these mines were
laid in mineralised soil, and overhead
power lines created electromagnetic
interference. These factors made it
difficult for HALO’s existing detectors
to locate the M14 mines, and required
a new technical solution.
Solution
In July 2013, Minelab proposed its
GPX 5000™ commercial detector
due to its ability to be programmed
for a very broad range of conditions.
A test demonstration was carried
out at the Gumbane Power Line in
August 2013 using a rendered-safe
M14 mine as a target, and after a
good performance HALO continued
to test the unit until October 2013.
Outcomes
After purchasing and deploying three
Minelab detectors, a total of 220
M14 mines were detected by HALO
on six different tower locations by
February 2014. This marked the
first time globally that the GPX
5000™ detector had been used
for mine clearance. In March 2014,
the Government of Mozambique
declared Maputo Province free of
all known minefields.
Minelab’s Hugh Graham, General
Manager of Countermine, said,
“The combined experience and
cooperation between HALO and
Minelab enabled a timely solution
to a specific detection problem.
Minelab takes great pleasure in
its cooperation with HALO Trust
and is extremely proud to be able
to contribute to HALO’s vitally
important work.”
Silvio Gemo from EDM remarked on
the benefits of mine clearance from
the Gumbane power lines: “Now we
can conduct our maintenance free
from the fear of mines, and start the
installation of a new electricity line.”
2 0
2015 CODAN ANNUAL REPORTCountermineMinelab’s detectors are also considered to be the best in the world for locating landmines and the explosive remnants of war. Consequently, Minelab has become the detector of choice for many humanitarian demining organisations and government bodies.Minelab’s Countermine business has always been strategically important in maintaining our position as the world’s number one provider of metal detection technologies and solutions. Our continual development of leading-edge technology to rid the world of landmines and improvised explosive devices carries over to the business’ other products and creates positive brand recognition globally. The world-leading engineering capability of the Countermine team is highlighted by the fact that Minelab has received external funding from a number of parties to further develop metal detection technology in order to advance the detection of landmines and unexploded ordnance.As an example, the Countermine business has been working with a major US defence company, NIITEK, to integrate Minelab’s leading-edge metal detection technology with their ground penetrating radar to produce the world’s best dual-sensor handheld mine detector. We are excited about the potential that this joint venture brings. Minelab’s countermine detectors are manufactured in Adelaide and exported to more than 55 countries around the world where landmines remain a threat. These include Cambodia, Angola, Sri Lanka, Vietnam, Mozambique, Colombia, Lebanon and Afghanistan.
SUCCESS STORY
“With my new Minelab GPZ 7000®
in hand, I thought I would try out
some new areas.
“I’d already had a good morning
detecting, but by now it was getting
late and there wasn’t much daylight
left. I moved towards a large pile of
debris and the GPZ gave an unusual
sound. It was unlike any signal I’d
heard before. I scratched away the
leaf litter and swung again. The
signal was still there, but stronger.
“I scratched off a few inches of soil
and it got louder with an unusual
tone. I was now confident it was gold.
I dug down about eight inches and
the GPZ was starting to overload as
I brought it close to the target.
“I’d never experienced anything
like this detecting so I was unsure
of what would eventuate. Perhaps,
I thought, it may be a really thin
piece? Digging down even further,
the detector was going crazy. I dug
down just over a foot. I knelt down in
the dirt to see what I’d uncovered. It
felt heavy. I opened my fingers and
then I saw it.
“I couldn’t believe my eyes. It was
a monster! After some solitary
celebrations, I put it on the scales
and found it was nearly four ounces.
This far exceeded my expectations,
I was over the moon!
“My GPZ had nearly paid for itself
in one day.
“This was a day I’ll never forget.
I don’t think it would have been
possible without the GPZ 7000®.
Thank you Minelab for designing
such an amazing machine.”
J.M. – Victoria, Australia
“Minelab
has become
the detector
of choice
for many
humanitarian
demining
organisations
and
government
bodies.”
2 12 1
Minetec offers highly specialised safety and
productivity-based solutions to serve underground
and surface mining operations globally.
F Y15 SUMM A R Y
• Completed pilot projects to
demonstrate tracking, safety
and productivity solutions
• Commenced operational
deployments in Australia
and South Africa
• Worked with some of the
largest global miners
• Made major investment in product
and technology development
• Legislation drove demand for
safety products in South Africa
• Established office in key
South African market
• Difficult economic environment
for the global mining industry
– focused on niche hard-rock
underground mining
F Y16 OB JE C T I V E S
• Minetec’s baseline products
“mine-ready and miner-proof”
• Transition to full-scale
operational deployment
• Deliver on opportunities with
key global mining customers
• Stabilise the financial
performance of the business
• Continue to develop best-in-class
products and technologies
2 2
2015 CODAN ANNUAL REPORT CASE STUDY
Customer ALPHA
The Minetec value proposition is
being demonstrated and deployed
in a large underground gold mine
in Australia. Initially assessed as
a pilot programme, Minetec has
commissioned high-precision
machine and personnel tracking
with a mean accuracy of 32cm. On
the basis of this trial, the customer
has chosen to operationally deploy
this tracking capability.
Furthermore, the customer is in the
process of extending the capability
from productivity to safety using
the same high-precision sensors to
operate in a safety mode, providing
proximity detection between
vehicles, and between vehicles and
mining personnel.
2 3
Minetec was acquired by Codan in 2012 and is effectively a start-up technology business. The company has a history of providing communication services to the mining industry, however over the past three years Codan has invested in Minetec’s intellectual property in order to transition the company to a high-value-add technology solutions provider. Minetec’s technology offering comprises proximity detection and collision avoidance (SafeDetect™), world-class sub-metre tracking of underground assets (TRAX™) and a suite of software productivity tools (SMARTS™) that incorporates day to day operational mine management and a long-term simulation capability. Uniquely, Minetec offers this capability as part of a unified technology platform enabling mining companies to combine safety and productivity solutions to give a return on investment. Minetec has extended its product portfolio from applications in underground hard-rock mines to collision-avoidance and proximity-detection technologies for open-pit mining. During trials, Minetec’s collision avoidance systems have set a new benchmark in the marketplace, offering high levels of precision and performance that cannot be met with legacy GPS-based solutions. During FY15, Minetec successfully completed a number of pilot projects for global mining companies which demonstrated its tracking, safety and productivity technologies in operational environments. From a technology perspective, FY16 will see Minetec transition from the product development phase to the systems integration of solutions that have been successfully demonstrated in operating mines. For the first time, the business will become “product ready” during the course of this year.Globally, resource companies are focused on improving operational performance in an environment of low commodity prices. As mining companies transition to higher levels of operational automation, Minetec provides the underlying capability to enable this transition. The ability to monitor assets in real time and communicate task changes directly to the operator will drive fundamental improvement to operational efficiency. Minetec’s products assist mining companies in transitioning from conventional labour-intensive practices to safer and more efficient, mechanised mining. Having now proven the technology and demonstrated our solutions, the challenge is to secure market acceptance and commitment to full-scale operational deployments. South African market opportunity for mine safety solutionsThe Department of Mineral Resources in South Africa (DMR) has legislated that a collision avoidance system must be installed on all underground and open-pit machinery. Collision avoidance automatically retards and stops a machine when in close proximity to a miner or another machine. This legislation will protect against a primary source of injuries and fatalities in mining. Minetec has completed trials in South Africa and demonstrated compliance with the new legislation, which came into effect in May 2015. As a result, South Africa is a key target market for Minetec, and a local presence has now been established in Johannesburg. Minetec RSA (Pty) Ltd establishes a direct route to market and will build closer relationships with the South African customer base. A number of significant procurement programmes have commenced as a direct consequence of this legislation. This allows Minetec to leverage its wider value proposition by proposing not only a DMR-compliant safety solution (SafeDetect™), but a system that also leverages sub-metre tracking of assets and the productivity gains that this enables. The tracking information can be used by Minetec’s productivity solution (SMARTS™) to provide real-time information to the mine controller in order to improve the productivity of the mine and hence achieve a return on investment over and above the provision of a safer mine environment.
Engineering and Operations enhance Codan’s growth and
continuous improvement by driving technical excellence
across the company. We operate highly disciplined and
efficient engineering, advanced manufacturing and supply
chain management to ensure programme success.
2 4
2015 CODAN ANNUAL REPORTEngineeringCodan maintains a world-class team of research, engineering and technical staff, employing more than 100 engineers across the globe.With teams in Adelaide, Perth and Victoria, Canada, our capabilities span a cross section of engineering disciplines, including software, electronic and mechanical engineering. We have a number of PhD qualified physicists and software, electronics and signal processing engineers on staff, recruited from Australia and overseas. Our engineering teams ensure that technology is released to specification, on schedule and with appropriate intellectual property (IP) protection.We also utilise a number of field testers from around the world, as well as a network of service providers when required. This combination of core competencies allows us to continuously develop unique IP to solve our customers’ problems in communications, metal detection and mining. Advanced manufacturingThe ability to manufacture high-level, high-quality electronics products and associated software is a core competency of Codan’s, and remains a sustainable competitive advantage driving its future growth. The company is committed to pursuing ongoing efficiencies, flexibility and investment in its production capabilities.Codan’s Adelaide manufacturing facility remains an integral and strategic element of the company’s operations, serving as a technology hub, particularly for new product development and the manufacture of “IP-sensitive” and high-complexity products. Of particular note are Codan’s security-featured radios, Minelab’s landmine detectors and Minetec’s mine safety products, which retain local manufacture.Codan’s relationship with one of the world’s leading sub-contract electronics manufacturers, Plexus Corp, continues to remain a cornerstone in the company’s manufacturing strategy. The majority of manufacturing continues in Malaysia, while manufacture of land mobile radio products takes place in a Plexus facility in Chicago, Illinois, for supply into the US market. In FY16, we expect the next generation land mobile radio product to be introduced into the Chicago site.The partnership with Plexus, a US-owned company specialising in defence, aerospace and medical electronics manufacturing, will ensure that Codan’s well-proven manufacturing processes and exceptional performance, quality and delivery standards continue.Codan has adopted stringent testing and quality control procedures, and both Codan and Plexus maintain quality assurance systems approved to International Standard ISO9001.Supply chain managementCodan has an extensive global supply chain in place, sourcing product and material from most regions in the world. We work with suppliers who meet stringent quality standards, are innovative and work in safe and responsible ways. Our dealings with our suppliers reflect Codan’s core values, and as such we have built collaborative, honest and trusting relationships which have resulted in reliable supply over the long term. Our supply chain is responsive to the changing needs of our customers and markets. All Codan suppliers must provide agility, flexibility and speed to market. At the end of our supply chain are five third-party-logistics global distribution centres, located in Ireland, Dubai, Chicago, Penang and Australia, which ensure product is regionally distributed for the fastest route to market.Manufacturing and distributing our world-class products demands a strong, cohesive and responsible supply chain, and at Codan we have experienced professionals around the world dedicated to the delivery of supply chain excellence. Continuous improvement
Continuous improvement
remains core to the company’s
success and is a key strategy in
the company’s commitment to
supplying high-quality electronics
solutions, competitive pricing,
excellent customer service
and on-time delivery. Codan’s
continuous improvement ethos
has been underpinned by the
Codan Production System, our
own highly successful version
of lean manufacturing, which
harnesses the ideas and creativity
of all employees in order to
generate continuous improvement
in systems, processes and
culture. Thousands of individual
initiatives have been implemented,
enabling Codan to dramatically
lower production costs and
reduce delivery lead times.
Initiatives continue to this day,
including improvements to global
manufacturing sites run by Plexus
and other key suppliers.
Workplace health, safety
and environment
Codan is committed to a
philosophy of zero harm to all
persons in all areas of the business
and the environment during the
manufacture, distribution, use and
disposal of our products. We are
particularly conscious of exposing
employees to critical risk,
especially with respect to those
travelling to remote locations. As
such, Codan engages experts to
ensure the safety and welfare of
its travellers.
Codan is accredited to ISO14001
Environmental Management
Systems and is due to achieve
accreditation to ISO18001 Health
& Safety Management Systems in
early FY16.
Facilities
In December 2015, Codan
will centralise its Adelaide
operations at a new global head
office located in the Technology
Park precinct at Mawson
Lakes, South Australia. Codan
has entered into a long-term
lease and will co-locate more
than 250 Codan, Minelab and
Minetec staff at the facility.
The facility is being refurbished
and re-fitted to Codan’s exact
specifications with a focus
on bringing a campus-feel to
the workplace. It has been
designed to foster a culture of
collaboration and interaction
by being predominantly open-
plan, with minimal offices
and extensive break-out and
meeting spaces. The facility is
also home to the company’s
world-class advanced
manufacturing facilities
focusing on new product
development and manufacture
of its security-featured radios
and mine clearance products.
The facility allows capacity for
future growth and includes
extensive training and
demonstration facilities which
will be used to showcase our
products to a global customer
base.
Codan’s existing head office at
Newton will be divested after
the relocation. The Minelab
facility at Torrensville was sold
in June 2015.
External front view
Courtyard
Minelab test facility
Codan warehouse
2 5
When you're dealing in
cri tic al si tuations, having
t he powe r of t he lat e st
radio c ommunic ation
e quipment c an be a li fe
saving advantage.
That means
t he right information,
right when I ne ed i t.
2 6
When you're dealing in
cri tic al si tuations, having
t he powe r of t he lat e st
radio c ommunic ation
e quipment c an be a li fe
saving advantage.
That means
t he right information,
right when I ne ed i t.
2 72 7
Mr David Simmons
BA (Acc)
Chairman
Independent Non-Executive Director
Dr David Klingner
B.Sc (Hons), PhD, FAusIMM
Retired Chairman
Independent Non-Executive Director
Mr Simmons was appointed by the board as Chairman
in February 2015 and has been a director of Codan
since May 2008. He has worked in the manufacturing
industry throughout his career and has extensive
financial and general management experience.
Mr Simmons joined Hills Industries Limited in 1984,
where he was appointed Finance Director in 1987
and Managing Director in 1992. He retired from Hills
Industries Limited in June 2008. He is Chairman
of Commercial Motor Vehicles Group and a board
member of Lighting Investments Australia Holdings
Pty Ltd and the Detmold Group.
Dr Klingner retired from the board in February 2015.
He was appointed as Chairman in May 2007, having
been a director with Codan since December 2004.
Dr Klingner, a geologist, was previously employed
by Rio Tinto in a number of senior roles involving
business leadership, project development and
worldwide exploration activities, gaining extensive
experience in the establishment and management
of overseas operations. He is Chairman of Karoon
Gas Australia Limited, and a former chairman of
Coal & Allied Industries Ltd, Bougainville Copper
Limited, the World Coal Institute, Energy Resources
of Australia Limited and Turquoise Hill Resources Ltd
(formerly Ivanhoe Mines Ltd), Canada.
2 8
2015 CODAN ANNUAL REPORT Mr Donald McGurk
HNC (Mech Eng), MBA, FAICD, Harvard AMP
Managing Director and
Chief Executive Officer
Mr McGurk was appointed to the board as Director
in May 2010, and was appointed as Managing Director
in November 2010. Mr McGurk joined Codan in
December 2000 and had executive responsibility
for group-wide manufacturing until his transition
into the role of CEO. In addition to his manufacturing
role, from 2005 to 2007 Mr McGurk held
executive responsibility for sales of the company’s
communications products, and from 2007 to 2010,
executive responsibility for the business performance
of the company’s HF radio products. Mr McGurk came
to Codan with an extensive background in change
management applied to manufacturing operations,
and held senior manufacturing management positions
in several industries. Mr McGurk holds a Masters
Degree in Business Administration from Adelaide
University and completed the Advanced Management
Program at Harvard University in 2010. He is a board
member of Bedford Phoenix Incorporated.
Mr Peter Griffiths
B.Ec (Hons), CPA, FAICD
Independent Non-Executive Director
Mr Griffiths was appointed to the Codan board in July
2001. He is a former senior executive of Coca-Cola
Amatil Limited, with 10 years of experience working
in Central and Eastern Europe and South East Asia.
He had previously held the positions of Company
Secretary, Chief Financial Officer and Managing
Director of C-C Bottlers Limited, and held board
positions in Australia, New Zealand and the USA.
Mr Griffiths is a Certified Practising Accountant and
a former President of the South Australian branch
of the Financial Executives Institute, as well as State
and Federal President of the Australian Softdrink
Association Ltd. Mr Griffiths has also been a director
of several not-for-profit organisations.
2 9
Mr David Klingberg AO
FTSE, BTech (Civil), DUniSA, FIEAust, FAusIMM, FAICD
Lt-Gen Peter Leahy AC
BA (Military Studies), MMAS, GAICD
Independent Non-Executive Director
Independent Non-Executive Director
Mr Klingberg was appointed to the board in July
2005. He is an engineer with extensive national and
international experience, having been Managing
Director of Kinhill Limited from 1986 to 1998, where
he played a major role in developing the small,
Adelaide-based group into one of the largest and
most successful firms of professional engineers in
Australia and South East Asia. Mr Klingberg was
Chancellor of the University of South Australia for
10 years, retiring in 2008. He is Chairman of Centrex
Metals Limited and a director of E & A Limited. He has
previously held the positions of Chairman of Barossa
Infrastructure Limited and the South Australian
Premier’s Climate Change Council, and was a member
of the boards of Snowy Hydro Limited and Invest
in SA. He is a patron of the Cancer Council of South
Australia and the St Andrew’s Hospital Foundation.
In 2009 Mr Klingberg was made an Officer of
the Order of Australia for his contributions to
governance policy in the tertiary education sector
and to commercial and economic development
and infrastructure projects.
Lieutenant General Leahy was appointed to the board
in September 2008. He retired from the Army in July
2008 after a 37-year career and 6 years as Chief of
Army. His distinguished service was recognised with
his 2007 appointment as Companion of the Order
of Australia. Since leaving the Army he has been
appointed as Professor and Foundation Director
of the National Security Institute at the University
of Canberra. He is a member of the Defence South
Australia Advisory Board, a director of Citadel Group
Limited and a director of Electro Optic Systems
Holdings Limited. Lieutenant General Leahy holds
a Master of Military Arts and Science from the US
Army Command and General Staff College, where
he also served as an instructor, and is a graduate of
the Australian Institute of Company Directors.
In August 2014, he was appointed to the Australian
Federal Government’s First Principles Review Team,
an initiative designed to ensure that the Australian
Department of Defence is fit for purpose and able
to promptly respond to future challenges.
3 0
2015 CODAN ANNUAL REPORT Mr Jim McDowell
LLB (Hons)
Mr Graeme Barclay
MAICD, F Fin, CA, MA (Hons)
Independent Non-Executive Director
Independent Non-Executive Director
Mr McDowell was appointed to the board in
September 2014. He joined British Aerospace in
Singapore in August 1996 and, during his time with
British Aerospace, served as the Managing Director
– Asia and Chief Executive Officer of BAE Systems
Australia Limited. He was Chief Executive Officer of
BAE Systems Saudi Arabia from September 2011 until
December 2013. Mr McDowell is Chair of Australian
Nuclear Science & Technology Organisation and,
in August 2014, was appointed to the Australian
Federal Government’s First Principles Review Team,
an initiative designed to ensure that the Australian
Department of Defence is fit for purpose and able
to promptly respond to future challenges. He is
Chairman of Total Construction and a director of
Austal Limited. Mr McDowell is Chancellor-elect of
the University of South Australia.
Mr Barclay was appointed to the board in February
2015. He has 30 years of international business
experience in professional services, broadcast and
telecommunications, and extensive knowledge of
business in the communications services, technology
and infrastructure markets. He was Group Chief
Executive Officer of the Broadcast Australia group
for 11 years, following three years as Chief Financial
Officer and Chief Operating Officer, retiring in April
2013. In his time with Broadcast Australia, the business
grew domestically and expanded internationally and
diversified into private networks, transit location
communications and data centre operation and
managed hosting services. From July 2010 until
September 2013, he was Chairman of Transit Wireless
LLP, which has the exclusive rights to install and
operate cellular and Wi-Fi systems in the New York
subway. From 2002 to 2009, he was an executive
director in Macquarie Group’s infrastructure team
and was involved in several acquisitions and capital
raising transactions for the then listed Macquarie
Communications Infrastructure Group. He is currently
Non-Executive Chairman and Director of Nextgen
Group Holdings Pty Ltd, a Non-Executive Director
of BSA Limited and the founder and Executive
Director of First Horizon Advisory. Mr Barclay is a
chartered accountant, holding membership of the
Institute of Chartered Accountants of Scotland and
of Chartered Accountants Australia and NZ.
3 1
Mr Donald McGurk
HNC (Mech Eng), MBA, FAICD,
Harvard AMP
Managing Director and
Chief Executive Officer
Donald was appointed to the board
as Director in May 2010, and was
appointed as Managing Director in
November 2010. Mr McGurk joined
Codan in December 2000 and
had executive responsibility for
group-wide manufacturing until his
transition into the role of CEO.
For more details of Mr McGurk’s
qualifications and experience,
please see page 29
Mr Michael Barton
BA (Acc), CA
Chief Financial Officer and
Company Secretary
Michael holds a Bachelor of Arts in
Accountancy from the University
of South Australia and is a member
of the Institute of Chartered
Accountants in Australia. He
was appointed to the position of
Company Secretary in May 2008.
Reporting to the Chief Financial
Officer, Mr Barton had responsibility
for the areas of Finance and Business
Systems across the Codan group.
In September 2009, Mr Barton was
appointed to the position of Chief
Financial Officer and Company
Secretary, and has responsibility for
financial control and reporting across
the Codan group. Prior to joining
Codan in May 2004, he was a senior
manager with KPMG Chartered
Accountants.
Mr Peter Charlesworth
BEEEng (Hons), MBA, GAICD,
Harvard AMP
Executive General Manager,
Minelab
Peter holds a Degree in Electrical
and Electronic Engineering with
First Class Honours and a Masters
Degree in Business Administration,
both from Adelaide University, is a
Graduate Member of the Australian
Institute of Company Directors and
completed the Harvard University
Advanced Management Program in
Boston in 2014. Peter was appointed
General Manager of the subsidiary,
Minelab Electronics Pty Limited, in
2008 following the Codan acquisition
of Minelab that same year. He joined
Codan in 2003 as General Manager
of Engineering, and subsequently
held various roles such as New
Business Manager and HF Radio
Business Development Manager.
Prior to Codan, he was a business
unit manager at Tenix Defence —
Electronic Systems Division and
he has worked in the electronics
industry for more than 25 years.
3 2
2015 CODAN ANNUAL REPORT
Mr Rory Linehan
BSc (Hons), MSc, PhD
Executive General Manager,
Minetec
Mr Paul McCarter
BEng (Hons), MBA, CEng, MIET
Executive General Manager,
Codan Radio Communications
Rory joined Codan in 2014, working
across the group to leverage
technology and market strategies.
He has a technical background, with
qualifications in physics, engineering
and mathematics, coupled with a
range of commercial skills including
strategy, sales, marketing and
business development. Prior to
Codan, Rory held a number of
business development positions
for blue-chip companies, including
McLaren, Cobham and Goodrich.
He lived for five years in Seattle,
working for Boeing on the product
development for Sonic Cruiser and
787 flight control systems.
Paul has over 26 years of
experience in the technology and
communications sectors. He served
12 years in the military as a Royal
Signals Officer, and has since held
executive positions in operations,
strategy, marketing and general
management with several large
multinational companies, including
British Telecom, Racal, Thales and
Cobham. He has a Bachelor Degree
in Software Engineering, a Masters
Degree/MBA from London Business
School, and is a Chartered Engineer
with the IET. Prior to Codan, Paul
was Managing Director of the
Technology Group, and the Group
Managing Director of Tactical
Communications and Surveillance
business at Cobham.
Mr Matthew Csortan
BEng (Mech Eng) (Hons),
MEng (Mfg Mgmt)
General Manager,
Group Operations
Matthew holds a Degree in
Mechanical Engineering with
Honours and a Masters Degree
in Manufacturing Management,
both from the University of
South Australia. In 2009, he
was appointed Codan’s General
Manager for Group Operations.
In 2013, his responsibilities were
extended to include information
technology, business systems and
security. Matthew joined Codan
in 1999 and held various roles in
manufacturing and production,
until his appointment as Production
Manager of Communications
Products in 2004. In 2006, Matthew
became Manufacturing Manager of
Codan, and was appointed General
Manager of Parketronics in 2008.
Prior to joining Codan, Matthew
gained experience in manufacturing
and project engineering through his
employment at Gerard Industries
and ASC Engineering.
3 3
3 43 4
36 _ DIRECTORS’ REPORT
57 _ LEAD AUDITOR’S INDEPENDENCE DECLARATION
58 _ CONSOLIDATED INCOME STATEMENT
59 _ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
60 _ CONSOLIDATED BALANCE SHEET
61 _ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
62 _ CONSOLIDATED STATEMENT OF CASH FLOWS
63 _ NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
97 _ DIRECTORS’ DECLARATION
98 _ INDEPENDENT AUDITOR’S REPORT
100 _ ASX ADDITIONAL INFORMATION
102 _ CORPORATE DIRECTORY
3 5
The directors present their
report together with the financial
statements of the group comprising
Codan Limited (“the company”)
and its subsidiaries for the financial
year ended 30 June 2015 and the
auditor’s report thereon.
DIRECTORS
The directors of the company at any
time during or since the end of the
financial year are:
David Simmons
Dr David Klingner
Donald McGurk
Peter Griffiths
David Klingberg AO
Lt-Gen Peter Leahy AC
Jim McDowell
Graeme Barclay
Details of directors and their
qualifications and experience are set
out on pages 28 to 31.
COMPANY SECRETARY
Mr Michael Barton BA (Acc), CA
Mr Barton was appointed to the
position of Company Secretary
in May 2008. Reporting to the
Chief Financial Officer, Mr Barton
had responsibility for the areas
of Finance and Business Systems
across the Codan group. In
September 2009, Mr Barton was
appointed to the position of Chief
Financial Officer and Company
Secretary, and has responsibility for
the financial control and reporting
across the Codan group. Prior to
joining Codan in May 2004, he
was a senior manager with KPMG
Chartered Accountants.
DIRECTORS' MEETINGS
The number of directors’ meetings
(including meetings of committees
of directors) and number of
meetings attended by each of the
directors of the company during the
financial year are set out below.
CORPORATE GOVERNANCE
STATEMENT
This statement outlines the main
corporate governance practices
in place throughout the financial
year, which comply with the ASX
Corporate Governance Council
recommendations, unless
otherwise stated.
Board of directors
Role of the board
The board’s primary role is the
protection and enhancement of
long-term shareholder value.
To fulfil this role, the board is
responsible for the overall corporate
governance of the group, including
formulating its strategic direction,
approving and monitoring the annual
plan, budget and capital expenditure,
setting senior executive and director
remuneration, establishing and
monitoring the achievement of
management’s goals and ensuring
Board meetings
Board Audit, Risk
and Compliance
Committee meetings
Remuneration
Committee
meetings
Nomination
Committee
meetings
DIRECTOR
A
B
Mr D J Simmons
Dr G D Klingner
Mr D S McGurk
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
10
6
10
10
10
10
9
5
10
6
10
10
10
10
9
5
A
-
-
-
4
4
-
3
-
B
-
-
-
4
4
-
3
-
A
2
2
-
-
-
2
-
-
B
2
2
-
-
-
2
-
-
A
3
-
-
3
3
-
-
-
B
3
-
-
3
3
-
-
-
A - Number of meetings attended B – Number of meetings held during the time the director held office during the year
3 6
2015 CODAN ANNUAL REPORT
the integrity of risk management,
internal control, legal compliance
and management information
systems. It is also responsible for
approving and monitoring financial
and other reporting.
The board has delegated
responsibility for operation and
administration of the company
to the managing director.
Board processes
To assist in the execution of its
responsibilities, the board has
established a Nomination Committee,
a Remuneration Committee and a
Board Audit, Risk and Compliance
Committee. These committees have
written mandates and operating
procedures, which are reviewed on
a regular basis. The board has also
established a framework for the
management of the group, including
a system of internal control, a
business risk management process
and the establishment of appropriate
ethical standards.
The full board currently holds ten
scheduled meetings each year,
plus strategy meetings and any
extraordinary meetings at such other
times as may be necessary to address
any specific significant matters that
may arise.
The agenda for meetings is prepared
in conjunction with the chairman,
managing director and company
secretary. Standing items include
the managing director’s report,
occupational health and safety
report, financial reports, strategic
matters, governance and compliance.
Submissions are circulated in
advance. Executives are regularly
involved in board discussions, and
directors have other opportunities,
including visits to business
operations, for contact with a
wider group of employees.
Director and executive
education
The group has a process to
educate new directors about the
nature of the business, current
issues, the corporate strategy
and the expectations of the
group concerning performance of
directors. Directors also have the
opportunity to visit group facilities
and meet with management to gain
a better understanding of business
operations. Directors are given
access to continuing education
opportunities to update and enhance
their skills and knowledge.
The group also has a process to
educate new executives upon taking
such positions. This process includes
reviewing the group’s structure,
strategy, operations, financial
position and risk management
policies. It also familiarises the
individual with the respective rights,
duties, responsibilities and roles of
the individual and the board.
Director performance
evaluation
The Nomination Committee is
responsible for developing the board
evaluation process. A performance
evaluation took place during the year
ended 30 June 2015.
Independent professional
advice and access to company
information
Each director has the right of access
to all relevant company information
and to the company’s executives
and, subject to prior consultation
with the chairman, may seek
independent professional advice
from a suitably qualified adviser at
the group’s expense. The director
must consult with an adviser suitably
qualified in the relevant field. A
copy of the advice received by the
director is made available to all other
members of the board.
Composition of the board
The composition of the board is
determined using the following
principles:
• a broad range of expertise both
nationally and internationally;
• a majority of independent
directors;
• directors having extensive
knowledge of the group’s
industries and/or extensive
expertise in significant aspects
of financial management
or general management;
• an independent director as
chairman;
• enough directors to serve on
various committees without
overburdening the directors or
making it difficult for them to fully
discharge their responsibilities; and
• at each annual general meeting,
one-third of the directors,
including any director who has
held office for three years or
more since last being elected,
must stand for re-election (except
for the managing director).
The board’s policy is to seek a
diverse range of directors who
have a range of ages and genders
which mirrors the environment
in which the group operates. The
board uses a skills matrix to ensure
that the directors collectively
have a combination of skills
and experience in the areas of
leadership, general management,
listed company, finance, accounting,
risk management, international
business, equity markets and major
transactions, as well as relevant
industry and business knowledge
in the areas of technology and
engineering, communications,
military and security, mining and
government. The board considers
that collectively the directors have
the range of skills, knowledge,
personal attributes and experience
necessary to direct the company.
An independent director is a
director who is not a member of
management (a non-executive
director) and who:
• holds less than five percent of
the voting shares of the company
and is not an officer of, or
otherwise associated, directly
or indirectly, with a shareholder
of more than five percent of the
voting shares of the company;
• has not within the last three years
been employed in an executive
capacity by the company or
another group member, or been
a director after ceasing to hold
any such employment;
• within the last three years has not
been a principal or employee of a
material professional adviser or a
material consultant to the company
or another group member;
• is not a material supplier or
customer of the company or
another group member, or an
officer of or otherwise associated,
directly or indirectly, with a
material supplier or customer;
• has no material contractual
relationship with the company
or another group member
other than as a director of
the company; and
• is free from any interest and any
business or other relationship that
could, or could reasonably be
perceived to, materially interfere
with the director’s ability to act in
the best interests of the company.
The board is regularly addressing
succession in order to ensure that
its composition going forward is
appropriate.
3 7
Board meetings
Board Audit, Risk
and Compliance
Committee meetings
Remuneration
Committee
meetings
Nomination
Committee
meetings
DIRECTOR
A
B
Mr D J Simmons
Dr G D Klingner
Mr D S McGurk
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
10
6
10
10
10
10
9
5
10
6
10
10
10
10
9
5
A
-
-
-
4
4
-
3
-
B
-
-
-
4
4
-
3
-
A
2
2
-
-
-
-
-
2
B
2
2
-
-
-
-
-
2
A
3
-
-
3
3
-
-
-
B
3
-
-
3
3
-
-
-
A - Number of meetings attended B – Number of meetings held during the time the director held office during the year
CORPORATE GOVERNANCE
STATEMENT (continued)
Board of directors
(Continued)
Company secretary
The board is responsible for the
appointment of the company
secretary, who is accountable
directly to the board, through the
Chairman, on all matters to do with
the proper functioning of the board.
Nomination Committee
The Nomination Committee
assists the board in reviewing
board composition, performance
and succession planning. This
includes identifying, evaluating
and recommending candidates
for appointment to the board. The
duties of the committee include:
• reviewing the size and
composition of the board, and
succession plans, to enable
an appropriate mix of skills,
experience, expertise and
diversity to be maintained;
• identifying, interviewing and
evaluating board candidates,
and recommending to the board
individuals for board appointment;
• ensuring that there is an
appropriate induction process
in place for new directors, and
reviewing its effectiveness;
• developing and carrying out the
appropriate process for evaluation
of the performance of the board
and its committees, each non-
executive director, the chairman
and the chief executive officer;
• making recommendations to the
board on the appointment and
performance of directors; and
3 8
• ensuring that there is appropriate
succession planning for the
chief executive officer and the
executive positions reporting to
the chief executive officer.
The members of the Nomination
Committee during the year were:
• Mr D J Klingberg (Chairman)
Independent Non-Executive
Director
• Mr P R Griffiths
Independent Non-Executive
Director
• Mr D J Simmons
Independent Non-Executive
Director
The Nomination Committee’s charter
is available on the company’s
website.
Remuneration report
- audited
Response to shareholder
comments
The Corporations Act requires that
where comments were made on
a remuneration report at an AGM
and the resolution adopting that
remuneration report at the annual
general meeting received a “no”
vote of 25% or more, the board
must provide an explanation in
the directors’ report of the board’s
proposed action in response to
those comments, or if the board
does not propose any action, the
board’s reasons for the inaction. At
last year’s annual general meeting,
the resolution for the adoption of the
remuneration report received 29.32%
of votes against the resolution, but
no comments were received on the
remuneration report. As such, there
were no comments to which the
board is required to respond.
Remuneration Committee
The Remuneration Committee
reviews and makes recommendations
to the board on remuneration
packages and policies applicable
to the managing director, senior
executives and directors themselves.
It is also responsible for share
schemes, incentive performance
packages, superannuation
entitlements, retirement and
termination entitlements and
fringe benefits policies.
The members of the Remuneration
Committee during the year were:
• Mr D J Simmons (Chairman)
Independent Non-Executive
Director
• Dr G D Klingner
Independent Non-Executive
Director
• Lt-Gen P F Leahy
Independent Non-Executive
Director
The managing director is invited to
Remuneration Committee meetings,
as required, to discuss executives’
performance and remuneration
packages.
The Remuneration Committee’s
charter is available on the company’s
website.
Principles of remuneration
Key management personnel comprise
the directors and executives of the
group. Key management personnel
have authority and responsibility for
planning, directing and controlling the
activities of the group.
Remuneration levels are competitively
set to attract and retain appropriately
qualified and experienced executives.
The Remuneration Committee may
obtain independent advice on the
appropriateness of remuneration
packages, given trends in
comparative companies both locally
and internationally. Remuneration
packages can include a mix of fixed
remuneration and performance-based
remuneration.
2015 CODAN ANNUAL REPORT
The remuneration structures
explained below are designed to
attract suitably qualified candidates,
and to achieve the broader outcome
of increasing the group’s net profit.
The remuneration structures take
into account:
These performance conditions have
been established to encourage the
profitable growth of the group.
The board considered that for the
year ended 30 June 2015 the above
performance-linked remuneration
structure was appropriate.
• the overall level of remuneration
for each director and executive;
• the executive’s ability to
control the relevant segment’s
performance; and
• the amount of incentives within
each key management person’s
remuneration.
Certain executives may receive
incentive payments based on the
achievement of performance hurdles.
The performance hurdles relate to
measures of profitability. The bonus
payable to certain executives may
relate to the qualitative performance
of the executive against objectives
agreed as part of the budget and
strategic planning processes. The
potential incentive payable to certain
executives is based on up to 60% of
the executives’ fixed salary inclusive
of superannuation, but can exceed
this level if performance hurdles are
exceeded.
Total remuneration for all non-
executive directors, last voted upon
by shareholders at the 2010 AGM, is
not to exceed $850,000 per annum.
Non-executive directors do not
receive any performance-related
remuneration nor are they issued
options on securities. Directors’ fees
cover all main board activities and
membership of committees.
Service contracts
It is the group’s policy that service
contracts for key management
personnel are unlimited in term but
capable of termination on one to six
months’ notice, and that the group
retains the right to terminate the
contract immediately by making
payment in lieu of notice. The group
has entered into a service contract
with each key management person.
The key management personnel are
also entitled to receive on termination
of employment their statutory
entitlements of accrued annual and
long service leave, as well as any
entitlement to incentive payments
and superannuation benefits.
Performance rights
At the 2004 AGM, shareholders
approved the establishment of
a Performance Rights Plan (Plan).
The Plan is designed to provide
nominated executives with an
incentive to maximise the return
to shareholders over the long term,
and to assist in the attraction and
retention of key executives.
The number of performance rights
issued represents 40% of the
nominated executives’ fixed pay
divided by the volume weighted
average of the company’s share
price in the five days after the
release of the group’s annual results.
Details of performance rights
granted to executives during
the year are as follows:
Number of
performance
rights granted
during year
Grant
date
Fair value
per right at
grant date
(cents)
Exercise
price
per right
(cents)
Expiry
date
Number
of rights
vested
during
year
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
296,877
26 November 2014
64.0
145,638
193,250
187,998
259,952
26 November 2014
26 November 2014
26 November 2014
26 November 2014
64.0
64.0
64.0
64.0
-
-
-
-
-
30 June 2018
30 June 2018
30 June 2018
30 June 2018
30 June 2018
-
-
-
-
-
The performance rights granted
on 26 November 2014 become
exercisable if certain performance
requirements are achieved. The
performance requirements are based
on growth of the group’s earnings
per share over a three-year period
using the group’s earnings per share
for the year ended 30 June 2014 as
the base. For the maximum available
number of performance rights to
vest, the group’s earnings per share
must increase in aggregate by at
least 15% per annum over the three-
year period from the base earnings
per share. The threshold level of the
group’s earnings per share before
vesting is an increase in aggregate of
10% per annum over the three-year
period from the base earnings per
share. A pro-rata vesting will occur
between the 10% and 15% levels of
earnings per share for the three-year
period.
If achieved, performance rights are
exercisable into the same number
of ordinary shares in the company.
3 9
CORPORATE GOVERNANCE STATEMENT (continued)
Remuneration report - audited (Continued)
Performance rights (continued)
Details of vesting profiles of performance rights granted to executives are detailed below:
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
Number
Date
139,981
111,655
296,877
5 November 2012
22 November 2013
26 November 2014
66,211
52,813
5 November 2012
22 November 2013
145,638
26 November 2014
90,988
72,575
193,250
187,998
89,919
259,952
5 November 2012
22 November 2013
26 November 2014
26 November 2014
22 November 2013
26 November 2014
Percentage
vested in
year
Percentage
forfeited in
year
Financial years in
which shares will
be issued if vesting
achieved
-
-
-
-
-
-
-
-
-
-
-
-
100%
-
-
100%
-
-
100%
-
-
-
-
-
n/a
2017
2018
n/a
2017
2018
n/a
2017
2018
2018
2017
2018
The performance rights granted on 5 November 2012 lapsed on 30 June 2015, as the three-year aggregate performance
target was not reached.
The movements during the reporting period in the number of performance rights over ordinary shares in Codan Limited,
held directly, indirectly or beneficially by each key management person, including their related parties, is as follows:
Held at
1 July 2014
Issued
Vested
Lapsed
Held at
30 June 2015
251,636
296,877
119,024
163,563
-
89,919
145,638
193,250
187,998
259,952
-
-
-
-
-
139,981
408,532
66,211
90,988
-
-
198,451
265,825
187,998
349,871
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
4 0
2015 CODAN ANNUAL REPORT
Percentage
vested in
Percentage
forfeited in
year
year
Financial years in
which shares will
be issued if vesting
achieved
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
Number
Date
139,981
5 November 2012
111,655
22 November 2013
296,877
26 November 2014
66,211
52,813
5 November 2012
22 November 2013
145,638
26 November 2014
90,988
72,575
5 November 2012
22 November 2013
193,250
26 November 2014
187,998
26 November 2014
89,919
22 November 2013
259,952
26 November 2014
100%
100%
100%
-
-
-
-
-
-
-
-
-
n/a
2017
2018
n/a
2017
2018
n/a
2017
2018
2018
2017
2018
Held at
1 July 2014
Issued
Vested
Lapsed
Held at
30 June 2015
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
251,636
296,877
139,981
408,532
119,024
163,563
-
89,919
145,638
193,250
187,998
259,952
66,211
90,988
-
-
198,451
265,825
187,998
349,871
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other transactions with key
management personnel
There have been no loans to
key management personnel or
their related parties during the
financial year.
From time to time, directors and
specified executives, or their
personally related entities, may
purchase goods from the group.
These purchases occur within a
normal employee relationship and
are considered to be trivial in nature.
Movements in shares
The movement during the reporting
period in the number of ordinary
shares in Codan Limited, held
directly, indirectly or beneficially
by each key management person,
including their related parties, is
as follows:
Held at
1 July 2014
Received on
exercise of rights
Other changes*
Held at
30 June 2015
DIRECTORS
Mr D J Simmons
Dr G D Klingner
Mr D S McGurk
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
SPECIFIED EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
-
534,983
312,517
199,416
120,908
57,708
n/a
n/a
5,000
312,790
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61,532
-
-
-
-
-
-
-
-
-
-
-
61,532
n/a
312,517
199,416
120,908
57,708
-
-
5,000
312,790
-
-
* Other changes represent shares that were purchased or sold during the year
Dr G D Klingner retired as chairman of the board on 18 February 2015. Mr J W McDowell was appointed as a director
on 1 September 2014 and Mr G R C Barclay was appointed as a director on 1 February 2015.
4 1
CORPORATE GOVERNANCE STATEMENT (continued)
Remuneration report - audited (Continued)
Directors’ and senior executives’ remuneration
Details of the nature and amount of each major element of the remuneration paid or payable to each director of the
company and other key management personnel of the group are:
Directors
Year
Salary & fees
Short-term
incentives
Other short
term
Post-employment
and superannuation
contributions
NON-EXECUTIVE
Mr D J Simmons
Dr G D Klingner
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
Total non-executives’ remuneration
EXECUTIVE
Mr D S McGurk
Total directors’ remuneration
$
$
106,612
87,082
98,302
164,211
84,662
89,570
77,606
82,106
77,606
82,106
64,672
-
32,336
-
541,796
505,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
509,274
497,281
1,051,070
1,002,356
135,153
-
135,153
-
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
$
-
-
3,943
-
-
-
-
-
-
-
-
-
-
-
3,943
-
$
-
-
3,943
-
$
10,128
8,055
9,339
15,190
8,043
8,285
7,373
7,595
7,373
7,595
6,144
-
3,072
-
51,472
46,720
$
20,348
17,775
71,820
64,495
4 2
2015 CODAN ANNUAL REPORT
Directors
Year
Salary & fees
Short-term
Other short
Post-employment
incentives
term
and superannuation
contributions
Other long
term
Termination
benefits
Performance
rights
Total
Proportion of
remuneration
performance related
NON-EXECUTIVE
Mr D J Simmons
Dr G D Klingner
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
Total non-executives’ remuneration
EXECUTIVE
Mr D S McGurk
Total directors’ remuneration
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
106,612
87,082
98,302
164,211
84,662
89,570
77,606
82,106
77,606
82,106
64,672
32,336
541,796
505,075
-
-
$
509,274
497,281
1,051,070
1,002,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,943
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,943
$
$
135,153
135,153
3,943
$
10,128
8,055
9,339
15,190
8,043
8,285
7,373
7,595
7,373
7,595
6,144
3,072
-
-
$
51,472
46,720
20,348
17,775
71,820
64,495
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
13,669
12,422
13,669
12,422
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
68,592
(219,234)*
68,592
(219,234)
$
116,740
95,137
111,584
179,401
92,705
97,855
84,979
89,701
84,979
89,701
70,816
-
35,408
-
597,211
551,795
$
747,036
308,244
1,344,247
860,039
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
27.3
(71.1)
-
-
* The expense relating to unvested performance rights granted to key management personnel was reversed
in the prior year, as the rights were not expected to vest.
Dr G D Klingner retired as chairman of the board and Mr D J Simmons was appointed as
chairman of the board on 18 February 2015. Mr J W McDowell was appointed as a director
on 1 September 2014 and Mr G R C Barclay was appointed as a director on 1 February 2015.
4 3
CORPORATE GOVERNANCE STATEMENT (continued)
Remuneration report - audited (Continued)
Directors’ and senior executives’ remuneration (continued)
Executive officers
Year
Salary &
fees
Short-term
incentives
Other short
term
Post-employment
and superannuation
contributions
Mr M Barton (Chief Financial
Officer and Company Secretary)
Mr P D Charlesworth (Executive
General Manager, Minelab)
Mr R D Linehan ** (Executive
General Manager, Business
Development and Minetec)
Mr P McCarter ** (Executive
General Manager, Codan Radio
Communications)
Total executive officers’
remuneration
$
$
$
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
241,489
73,668
219,398
-
328,709
100,534
310,842
-
329,318
85,423
81,043
42,425
443,391
222,186
426,183
305,789
1,342,907
481,811
1,037,466
348,214
-
-
-
-
1,297
400
1,229
2,129
2,526
2,529
$
22,478
20,958
18,783
17,775
24,119
1,886
37,701
35,368
103,081
75,987
4 4
2015 CODAN ANNUAL REPORT
Executive officers
Year
Salary &
Short-term
Other short
Post-employment
fees
incentives
term
and superannuation
contributions
$
$
$
Mr M Barton (Chief Financial
Officer and Company Secretary)
Mr P D Charlesworth (Executive
General Manager, Minelab)
Mr R D Linehan ** (Executive
General Manager, Business
Development and Minetec)
Mr P McCarter ** (Executive
General Manager, Codan Radio
Communications)
Total executive officers’
remuneration
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
241,489
73,668
219,398
310,842
328,709
100,534
-
-
329,318
85,423
81,043
42,425
443,391
222,186
426,183
305,789
1,342,907
481,811
1,037,466
348,214
-
-
-
-
1,297
400
1,229
2,129
2,526
2,529
$
22,478
20,958
18,783
17,775
24,119
1,886
37,701
35,368
103,081
75,987
Other long
term
Termination
benefits
Performance
rights
Total
Proportion of
remuneration
performance related
$
8,484
5,545
8,947
7,741
-
-
-
-
17,431
13,286
$
$
$
-
-
-
-
-
-
-
-
-
-
33,649
379,768
(103,698)*
142,203
44,650
501,623
(142,503)*
193,855
43,436
483,593
-
125,754
60,061
764,568
-
769,469
181,796
2,129,552
(246,201)
1,231,281
%
28.3
(72.9)
28.9
(73.5)
26.6
33.7
36.9
39.7
-
-
* The expense relating to unvested performance rights granted to key management personnel was
reversed in the prior year, as the rights were not expected to vest.
** Mr R D Linehan and Mr P McCarter are paid in UK pounds with the above Australian dollar
equivalents calculated using an average exchange rate.
Mr R D Linehan was appointed to the position of Executive General Manager, Business
Development on 31 March 2014.
Short-term incentives which vested during the year are as follows: Mr D S McGurk 43% (57%
forfeited), Mr M Barton 47% (53% forfeited), Mr P D Charlesworth 49% (51% forfeited), Mr R
D Linehan 47% (53% forfeited) and Mr P McCarter 94% (6% forfeited).
The remuneration amounts disclosed above have been calculated based on the expense to
the company for the financial year. Therefore items such as performance rights, annual leave
and long service leave taken and provided for, have been included in the calculations. As
a result, the remuneration disclosed may not equal the salary package as agreed with the
executive in any one year.
Other than performance rights, no options or shares were issued during the year as
compensation for any key management personnel.
4 5
CORPORATE GOVERNANCE STATEMENT (continued)
Remuneration report - audited (Continued)
Corporate performance
As required by the Corporations Act 2001, the following information is presented:
Profit attributable to
shareholders
Dividends paid
Share price at 30 June
Change in share price
at 30 June
2015
$
2014
$
2013
$
2012
$
2011
$
12,507,609
9,196,580
45,416,716
23,146,736
21,792,328
5,310,509
15,039,383
20,343,012
14,773,138
13,952,408
1.15
0.40
0.75
(0.77)
1.52
0.12
1.40
0.20
1.20
(0.26)
Board Audit, Risk and
Compliance Committee
The Board Audit, Risk and
Compliance Committee has a
documented charter, approved by
the board. All members must be non-
executive directors. The chairman
may not be the chairman of the
board. The committee advises on the
establishment and maintenance of
a framework of internal control and
appropriate ethical standards for the
management of the group.
The members of the Board Audit,
Risk and Compliance Committee
during the year were:
• Mr P R Griffiths (Chairman)
Independent Non-Executive
Director
• Mr D J Klingberg
Independent Non-Executive
Director
• Mr J W McDowell
Independent Non-Executive
Director
(appointed on 29 October 2014)
The external auditors, the managing
director and the chief financial officer
are invited to Board Audit, Risk and
Compliance Committee meetings at
the discretion of the committee.
The responsibilities of the Board,
Audit, Risk and Compliance
Committee include reporting to the
board on:
• reviewing the annual and half-
year financial reports and other
financial information distributed
externally; this includes approving
new accounting policies to ensure
compliance with Australian
Accounting Standards and
generally accepted accounting
principles, and assessing whether
the financial information is
adequate for shareholder needs;
• assessing management processes
supporting external reporting;
• assessing corporate risk
assessment processes;
• assessing and establishing an
appropriate internal audit function;
• establishing procedures for
selecting, appointing and, if
necessary, removing the external
auditor;
• assessing whether non-audit
services provided by the external
auditor are consistent with
maintaining the external auditor’s
independence; the external auditor
provides an annual independence
declaration in relation to the audit;
• assessing the adequacy of the
internal control framework and
the company’s code of ethical
standards;
• monitoring the procedures to
ensure compliance with the
Corporations Act 2001 and the
ASX Listing Rules and all other
regulatory requirements; and
• addressing any matters
outstanding with auditors,
Australian Taxation Office,
Australian Securities and
Investments Commission,
ASX and financial institutions.
The Board Audit, Risk and
Compliance Committee reviews the
performance of the external auditors
on an annual basis and meets with
them during the year to:
• discuss the external audit plan,
identifying any significant changes
in structure, operations, internal
controls or accounting policies
likely to affect the financial
statements, and to review the fees
proposed for the audit work to be
performed;
4 6
2015 CODAN ANNUAL REPORT
• review the half-year and
preliminary final report prior to
lodgement with the ASX, and
any significant adjustments
required as a result of the
auditor’s findings, and to
recommend board approval
of these documents prior to
announcement of results;
• review the results and findings
of the auditor, the adequacy of
accounting and financial controls,
and monitor the implementation
of any recommendations made;
and
• as required, organise, review and
report on any special reviews or
investigations deemed necessary
by the board.
The Board Audit, Risk and
Compliance Committee’s charter is
available on the company’s website.
Risk management
Material business risks arise
from such matters as actions by
competitors, government policy
changes, the impact of exchange
rate movements on the price of
raw materials and sales, difficulties
in sourcing raw materials,
environment, occupational health
and safety, property, product
quality, interruptions to production,
changes in international quality
standards, financial reporting and
the purchase, development and use
of information systems.
Oversight of the risk
management system
The board has in place a number of
arrangements and internal controls
intended to identify and manage
areas of significant business risk.
These include the establishment
of committees, regular budget,
financial and management
reporting, established organisational
structures, procedures, manuals and
policies, external financial and safety
audits, insurance programmes and
the retention of specialised staff and
external advisers.
The Board Audit, Risk and
Compliance Committee considers
risk management in order to
ensure risks are identified, assessed
and appropriately managed. The
committee reports to the board
on these matters on an ongoing
basis. During the year ended 30
June 2015, the committee reviewed
the company’s risk management
framework in order to ensure
the effective management of the
group’s material business risks.
Risk management and
compliance and control
The group strives to ensure that
its products are of the highest
standard. Towards this aim it has
certification to AS/NZS ISO 9001.
The board is responsible for the
overall internal control framework,
but recognises that no cost-
effective internal control system will
preclude all errors and irregularities.
Comprehensive practices have
been established to ensure:
• capital expenditure and revenue
commitments above a certain
size obtain prior board approval;
• financial exposures are
controlled, including the use
of derivatives;
• occupational health and safety
standards and management
systems are monitored and
reviewed to achieve high
standards of performance and
compliance with regulations;
• business transactions are
properly authorised and
executed;
• the quality and integrity of
personnel;
• financial reporting accuracy and
compliance with the financial
reporting regulatory framework;
and
• environmental regulation
compliance.
Quality and integrity of
personnel
Appraisals are conducted at least
annually for all senior employees.
Training and development and
appropriate remuneration and
incentives with regular performance
reviews create an environment
of co-operation and constructive
dialogue with employees and senior
management. A performance
evaluation of all executives and
senior employees took place during
the year ended 30 June 2015.
Financial reporting
The managing director and the
chief financial officer have provided
assurance in writing to the board
that the company’s financial
records have been properly
maintained and that the financial
reports are founded on a sound
system of internal compliance and
control, and risk management
practices, which implements the
policies adopted by the board.
This declaration includes stating
that the financial reports present
a true and fair view, in all material
respects, of the company’s
financial condition and operational
results and are in accordance with
relevant accounting standards. This
statement is required annually.
Monthly actual results are reported
against budgets approved by the
directors, and revised forecasts for
the year are prepared regularly.
Economic, environmental and
social sustainability risks
The group is exposed to material
economic risks associated with
global economic conditions,
developing countries, government
spending and exchange rate
movements. The Board Audit,
Risk and Compliance Committee
regularly reviews all material
business risks and is satisfied
that appropriate risk treatment
strategies and controls have been
developed and implemented.
The company is not exposed to
material environmental or social
sustainability risks.
Environmental regulation
The group’s operations are not
subject to significant environmental
regulation under either
Commonwealth or State legislation.
However, formal accreditation
to ISO14001, Environmental
Management Systems, was
achieved in the 2014-15 financial
year. The board believes that the
group has adequate systems in
place for the management of its
environmental requirements and
is not aware of any breach of
those environmental requirements
as they apply to the group.
Internal audit
The Board Audit, Risk and
Compliance Committee is
responsible for determining the
need for an internal audit function
for the group. The committee has
implemented an internal audit
function whereby internal control
reviews are completed on the
high risk areas of the business as
identified on the company’s risk
register.
4 7
CORPORATE GOVERNANCE
STATEMENT (continued)
Risk management
(Continued)
Assessment of effectiveness of
risk management
The managing director and the
chief financial officer have declared,
in writing to the board, that the
financial reporting risk management
and associated compliance and
controls have been assessed and
found to be operating efficiently
and effectively. Operational and
other compliance risk management
processes have also been assessed
and found to be operating efficiently
and effectively. All risk assessments
covered the whole financial year and
the period up to the signing of the
annual financial report for all material
operations in the group.
Ethical standards
All directors, managers and
employees are expected to act with
the utmost integrity and objectivity,
striving at all times to enhance the
reputation and performance of
the group. Every employee has a
nominated supervisor to whom they
may refer any issues arising from their
employment. The company continues
to review and confirm its processes
for seeking to ensure that it does not
trade with parties proscribed due to
illegal or undesirable activities.
Conflict of interest
Directors must keep the board advised,
on an ongoing basis, of any interest
that could potentially conflict with
those of the company. The board
has developed procedures to assist
directors to disclose potential conflicts
of interest.
Where the board believes that
a significant conflict exists for a
4 8
director on a board matter, the
director concerned does not receive
the relevant board papers and is not
present at the meeting whilst the
item is considered.
Code of conduct
The group has advised each director,
manager and employee that they
must comply with the company’s
code of conduct. The code of conduct
is available on the company’s website
and covers the following:
• aligning the behaviour of the
board and management with the
code of conduct by maintaining
appropriate core company values
and objectives;
• fulfilling responsibilities to
shareholders by delivering
shareholder value;
• fulfilling responsibilities to clients,
customers and consumers by
maintaining high standards of
professionalism, product quality
and service;
• acting at all times with fairness,
honesty, consistency and integrity;
•
identification of those restricted
from trading – directors, officers,
executives and senior managers,
and their closely related parties,
may acquire shares in the
company, but are prohibited
from dealing in company shares:
- between 1 January and the
close of trading on the next
ASX trading day after the half-
year results are released to the
ASX;
- between 1 July and the close
of trading on the next ASX
trading day after the full-year
results are released to the ASX;
- during any additional blackout
periods imposed by the board
from time to time; or
- whilst in possession of price-
sensitive information not yet
released to the market;
•
•
an additional approval process for
directors, officers and executives;
raising the awareness of legal
prohibitions in respect of insider
trading;
• employment practices such as
occupational health and safety and
anti-discrimination;
• prohibiting short-term or
speculative trading in the
company’s shares;
• responsibilities to the community,
such as environmental protection;
• responsibilities to the individual in
respect of the use of confidential
information;
• compliance with legislation
including compliance in countries
where the legal systems and
protocols are significantly different
from Australia’s;
• conflicts of interest;
• responsible and proper use of
company property and funds; and
• reporting of unlawful behaviour.
Trading in general company
securities by directors and
employees
The key elements of the company’s
Share Trading Policy are:
• prohibiting employees from
entering into transactions which
would have the effect of limiting
their exposure to risk relating
to unvested Codan securities or
vested Codan securities which
are subject to holding locks; and
•
identification of processes for
unusual circumstances where
discretion may be exercised in
cases such as financial hardship.
The policy also details the
insider trading provisions of the
Corporations Act 2001 and is
reproduced in full on the company’s
website and in the announcements
provided to the ASX.
2015 CODAN ANNUAL REPORT
Communication with
shareholders
The board provides shareholders
with information in accordance with
Continuous Disclosure requirements,
which include identifying matters
that may have a material effect on
the price of the company’s securities,
notifying them to the ASX, posting
them on the company’s website and
issuing media releases.
auditor is requested to attend the
annual general meetings to answer
any questions concerning the audit
and the content of the auditor’s
report.
The shareholders are requested
to vote on the appointment and
aggregate remuneration of directors,
the granting of performance
rights to directors and changes
to the Constitution. A copy of the
Constitution is available to any
shareholder who requests it.
In summary, the Continuous
Disclosure policy operates as follows:
Diversity
The board has the following
initiatives in place to progress
the objectives of its Diversity
and Equity Policy:
• qualified candidates considered
for any new board, executive or
senior management positions will
include both genders;
• a target of at least 30% female
candidates interviewed for all
salaried positions in the group;
and
• a female candidate considered for
the Group Graduate Programme.
As a result of the introduction of a
number of cost-cutting initiatives
during the prior year, the group
did not run a Graduate Programme
during the year ended 30 June
2015, but intends to commence this
programme again in 2016.
The board will report on progress in
achieving its objectives on an annual
basis.
The board is strongly committed
to the principles of diversity and to
promoting a culture that supports
the development of a diverse mix
of employees throughout all levels
of the organisation. It is considered
that this will ensure the achievement
of an appropriate blend of diversity
at board, executive and senior
management levels within the group.
The board has established a group
Diversity and Equity Policy, which is
available on the company’s website.
The key elements of the policy
include:
• ensuring all positions are filled
by the best candidates with no
discrimination by way of gender,
age, ethnicity and cultural
background; and
• annual assessment by the board of
board gender diversity objectives
and performance against
objectives.
The group’s performance against
the Diversity and Equity Policy
objectives is as follows:
• the managing director and
the chief financial officer
and company secretary are
responsible for interpreting the
company’s policy and where
necessary informing the board;
the chief financial officer and
company secretary is responsible
for all communications with the
ASX; reportable matters are
promptly advised to the ASX;
• the annual report is provided
via the company’s website and
distributed to all shareholders who
request a copy; it includes relevant
information about the operations
of the group during the year,
changes in the state of affairs and
details of future developments;
• the half-yearly report contains
summarised financial information
and a review of the operations
of the group during the period;
the half-year reviewed financial
report is lodged with the ASX
and is available on the company’s
website;
• all announcements made to the
market, and related information
(including information provided
to analysts or the media during
briefings), are placed on the
company’s website after they are
released to the ASX; and
• the full texts of notices of
meetings and associated
explanatory material are placed on
the company’s website.
All of the above information,
including that of the previous years,
is made available on the company’s
website.
The board encourages full
participation of shareholders at the
annual general meeting to ensure
a high level of accountability and
identification with the group’s
strategy and goals. The external
Gender
representation
Board representation
Senior executive
representation *
Senior management
representation
Group representation
Group graduate
programme
30 June 2015
30 June 2014
Female
(%)
Male
(%)
Female
(%)
Male
(%)
0%
0%
22%
25%
0%
100%
17%
83%
100%
0%
100%
78%
75%
28%
24%
72%
76%
0%
0%
0%
* Senior executives are defined as
those executives who report directly
to the CEO.
4 9
OPERATING AND
FINANCIAL REVIEW
Codan is a group of electronics-
based businesses that capitalise
on their fundamental design and
manufacturing skills to provide
best-in-class electronics solutions
to global markets. Codan employs
approximately 375 people, located in
Australia, USA, UK, Ireland, Canada,
China and United Arab Emirates, and
has a network of dealerships across
the world.
Our marketing reach embraces over
150 countries and our customers
include gold prospectors, metal
detection hobbyists, aid agencies,
miners, businesses and governments,
including public safety, military
and security organisations. We
work closely with our customers to
seek innovative ways to solve their
problems and add value to their
operations.
5 0
FY15 highlights:
Dividend
• Net profit after tax of $12.5 million,
up 36% on 9% higher sales
• Earnings per share of 7.1 cents
• Annual fully franked dividend of
3.5 cents
• Balance sheet strengthened with
net debt reduced by a further
$18 million in the second half,
to $35.4 million
• Investment in new product
development maintained at
historically high levels
• Radio Communications revenue
increased 18% and segment
contribution increased 33%
• Minelab revenue increased 70%
over the first half with release of
the GPZ 7000® gold detector in
February and the GO-FIND® metal
detector series in May
• Mining technology start-up
business, Minetec, successfully
completed pilot projects for a
number of global mining companies
The net profit after tax attributable
to shareholders increased by
36% to $12.5 million for the year
ended 30 June 2015. Group sales
of $143.9 million were 9% higher than
in the prior year. Underlying net profit
after tax for the year ended 30 June
2015 was $12.7 million, a 41% increase
over FY14.
In an uncertain global economy,
Codan has delivered on its
commitment to build a stronger,
more profitable international
company with leading positions
in its chosen markets. The result
reflects increased productivity,
significant debt reduction and strong
ongoing cost control, while at the
same time maintaining high levels
of investment to create unique and
protectable intellectual property. The
company achieved a significantly
better performance from the Radio
Communications business and a much
stronger second half in Minelab.
The company announced a final
dividend of 2.0 cents per share, fully
franked, bringing the full year dividend
to 3.5 cents. The dividend has a record
date of 15 September 2015 and will be
paid on 1 October 2015.
Financial performance
and other matters
Codan generated $25.1 million cash
from operations in the second half
and reduced net borrowings by a
further $18 million. As at 30 June
2015, net debt was $35.4 million, well
inside the company’s debt facility of
$85 million. The company’s gearing
ratio has reduced from 30% in
December 2014 to 22%.
As previously announced, Codan
closed its printed circuit board
manufacturing operations resulting in
a one-off loss of $0.3 million. This non-
core business contributed $2.0 million
in sales during FY15 but no profit.
The company has announced plans to
consolidate and integrate its Adelaide
operations in the Technology Park
precinct at Mawson Lakes and sell
its properties at Newton (Codan
Radio) and Torrensville (Minelab).
The Torrensville property was sold
during the second half of FY15, with
net proceeds of approximately
$4 million applied to debt reduction.
The Newton property continues to
be utilised by the business and will
be sold after all operations have
been relocated to Mawson Lakes
in December 2015.
The Board has embarked on a
regeneration process which has
resulted in a new Chairman and the
appointment of two new directors
with highly relevant industry
experience and a track record of
success in their respective fields. The
management team has been further
strengthened and now has a greater
depth of knowledge and experience
in relevant international technology
markets.
2015 CODAN ANNUAL REPORT
REVENUE
Communications
Metal detection
Mining technology
Other
Total revenue
UNDERLYING BUSINESS PERFORMANCE
EBITDA
EBIT
Interest
Net profit before tax
Taxation
Underlying net profit after tax
Non-recurring income/(expenses) after tax:*
Loss on closure of business
Other
Net profit after tax
FY15
$m % of sales
FY14
$m % of sales
63.8
73.3
4.8
2.0
143.9
29.9
19.3
(2.5)
16.8
(4.1)
12.7
(0.3)
-
12.4
44%
51%
3%
2%
53.9
69.9
4.0
4.5
100%
132.3
21%
13%
-
12%
-
9%
22.6
13.6
(2.8)
10.8
(1.8)
9.0
41%
53%
3%
3%
100%
17%
10%
-
8%
-
7%
-
-
-
-
0.2
-
-
9.2
-
Underlying earnings per share, fully diluted
Dividend per share
7.1 cents -
5.1 cents
-
3.5 cents -
3.0 cents
-
* Non-underlying income/(expenses) are considered to be outside of normal business activities of the group and for
comparability reasons have been separately identified. The methodology of identifying and quantifying these items is consistently
applied from year to year. Underlying profit is a non-IFRS measure used by management of the company to assess the operating
performance of the business. The non-IFRS measures have not been subject to audit.
Performance by
business unit:
Radio Communications – High
Frequency (HF) Radios and
Land Mobile Radios (LMR)
Radio Communications is a
leading designer of premium
communications equipment for HF
and LMR applications. It provides
communications solutions that
allow customers to save lives,
enhance security and support
peacekeeping worldwide.
Radio Communications had an
excellent year, increasing both
sales and profitability. Segment
contribution of $15.2 million
increased 33% over FY14 on sales
of $63.8 million, up 18% on the prior
year. While the second half didn’t
benefit from as many new projects,
the sales pipeline remains strong.
Communications projects can be
lumpy in nature and often have
long lead times, resulting in sales
variability from half to half.
We continued to invest in the High
Frequency (HF) software defined
Envoy® radio platform by adding
a suite of improved functions,
including digital voice and multiple
language capability. Demand for the
Envoy® has continued to grow and
the business is now able to bid into
larger communications projects on
the back of improved voice clarity
and turnkey solutions incorporating
both HF and LMR.
The LMR product group, based in
Victoria, Canada, increased sales for
the second consecutive year as the
North American economy showed
signs of recovery and new product
releases gained traction.
During FY15, the company made
the decision to invest in a new,
refreshed suite of LMR product
solutions aimed at broadening
our offering to the market. This
programme is also well advanced,
with the first of these category-
leading products, Stratus™,
launched in the second half of FY15.
Further product releases are
planned during the coming year
in order to enter new markets and
further increase profitability over
the next two to three years.
Stratus™ is a hybrid
communications network solution
which provides secure mobile voice
communications anywhere with
public cellular network coverage.
The product links the cellular
network into an established land
mobile radio network to provide
wide area coverage.
We continue to see significant
opportunities to grow Radio
Communications over the next two
to three years by more completely
integrating the LMR and HF radio
communications platforms. The
significant investment in new LMR
solutions is expected to provide a
growth engine for this division.
5 1
OPERATING AND
FINANCIAL REVIEW
(continued)
Financial performance
and other matters
(Continued)
Metal Detection – Consumer,
Gold Mining and Countermine
Minelab is the world leader
in handheld metal detecting
technologies for consumer, gold
mining, demining and military
needs. Over the past 20 years,
Minelab has introduced more
innovative technology than any of
its competitors and taken the metal
detection industry to new levels of
technological excellence.
Minelab released two significant new
product platforms with the potential
to be game changers in metal
detecting, the world’s best gold
detector (GPZ 7000®) and a stylish
new coin and treasure product
(GO-FIND®) targeted at the
consumer market. This drove the
improved performance in the
second half.
The release of the GPZ 7000® and
GO-FIND® in Australia, USA and
Europe in the second half helped
generate a segment contribution of
$19.2 million for the year, an increase
of 20% over the previous year on
relatively flat sales.
Minelab has undertaken a number
of initiatives to grow gold detector
sales into Africa, including:
• establishing a Minelab retail and
distribution centre in Dubai in
January 2015 to enable us to
deal directly with the African
market and bring us closer to our
customers,
• re-establishing our technological
advantage by releasing the GPZ
7000® gold detector in February
2015, utilising proprietary ZVT™
5 2
technology which detects gold
at greater depth and across all
ground types including very
highly mineralised soil, and
• continuing to aggressively protect
our intellectual property.
These initiatives have improved
our positioning in the African
gold detecting market and work
continues to ensure that Minelab
maximises the potential of this large
but unpredictable market.
The Minelab consumer business
remains very significant and more
predictable, with key markets in
Australia, the USA, Europe and
Russia. The new GO-FIND® detector
series was released in May 2015,
taking us into a lower price and
higher volume market segment.
This is a significant new market for
Minelab and its introduction means
there is now a premium quality
Minelab product at every metal
detecting price point.
We continue to develop our global
retail network by partnering with
some of the biggest names in the
industry, a critical success factor in
maximising GO-FIND® distribution
and sales.
Minelab’s Countermine business
has always been strategically
important in maintaining our
position as the world’s number
one provider of metal detection
technologies and solutions. Our
continual development of leading
edge technology to rid the world of
land mines and improvised explosive
devices carries over to the division’s
other products and creates positive
brand recognition globally.
In 2013, the Countermine business
began working with a major US
defence company, NIITEK, to
integrate Minelab’s metal detection
technology with their ground
penetrating radar to produce the
world’s best dual-sensor handheld
mine detector. We are excited
about the potential that this
joint venture brings.
Significant sales also occurred to the
Australian Department of Defence
and the Canadian Department of
National Defence (DND). DND’s
selection of the F3 Compact™
followed extensive comparative field
trials to ensure compliance with their
stringent operational requirements.
As a result of the new product
releases and initiatives described
above, we expect Minelab sales and
profitability to strengthen.
Mining Technology
Minetec offers highly specialised
safety and productivity-based
solutions to serve underground and
surface mining operations globally.
With all resource companies
focusing on improving operational
performance in a low commodity
price environment, our products
will assist mining companies in
transitioning from conventional
labour-intensive practices to safer
and more efficient mechanised
mining.
Minetec was acquired by Codan
in 2012 and is effectively a start-
up technology business. It had a
history of providing relatively basic
communication services to the
mining industry. However, over the
past three years Codan has invested
in the best of Minetec’s IP in order to
transition the company to a high-
value-add technology solutions
provider. We have also developed
completely new product platforms
such as the Wasp SafeDetect™
product that utilises CSIRO’s world
leading tracking technology.
During FY15, Minetec progressed the
technical maturity of its products
and made significant progress with
blue-chip mining customers by
successfully completing a number of
pilot projects which demonstrated
its tracking, safety and productivity
technologies in operational
environments. From a technology
perspective, FY16 will see Minetec
transition from the product
2015 CODAN ANNUAL REPORT
Outlook
Throughout its 55-year history,
Codan has demonstrated an ability
to successfully develop technology
which solves our customers’
problems. We have compelling value
propositions in all of our markets,
excellent people across the business
and a product roadmap that will
ensure significant opportunities for
growth over the coming years.
The board and management are
confident that they can continue
to deliver new products and
technologies on time and on
budget in order to maintain market
leadership and create a sustainable
foundation for growth over the next
two to three years.
development phase to the systems
integration of solutions that have
been successfully demonstrated in
operating mines. For the first time,
the business will become “product
ready” during the course of this year.
Having now proven the technology
and demonstrated our solutions,
the challenge is to secure market
acceptance and commitment to full-
scale operational deployments. This
task has been made more difficult by
low commodity prices and cuts to
miners’ capital expenditure budgets.
Notwithstanding this, the Minetec
value proposition is well aligned
to the challenges of sectors such
as underground hard-rock mining,
which is moving toward increased
mechanisation. Minetec provides key
technical enablers for this strategy.
South Africa is a key target market
for Minetec, with a predominance of
underground hard-rock mines and
a regulatory environment that has
recently legislated safety systems for
operational mines. In FY15, Minetec
established a local presence in South
Africa in order to be closer to our
key customers.
While the board and management
remain of the view that in time
Minetec will become a significant
division of Codan, it is still a start-up
business and will take some time to
achieve scale and acceptable levels
of profitability.
5 3
DIVIDENDS
Dividends paid or declared by the company to members since the end of the previous financial year were:
Cents per
share
Total amount
$000
Franked Date of payment
DECLARED AND PAID DURING THE
YEAR ENDED 30 JUNE 2015:
Final 2014 ordinary
Interim 2015 ordinary
DECLARED AFTER THE END OF THE
YEAR:
Final 2015 ordinary
1.5
1.5
2,655
2,656
100%
100%
1 October 2014
1 April 2015
2.0
3,541
100%
1 October 2015
All dividends paid or declared by the company since the end of the previous financial year were fully franked.
EVENTS SUBSEQUENT TO
REPORTING DATE
There has not arisen in the interval
between the end of the financial year
and the date of this report any item,
transaction or event of a material and
unusual nature likely, in the opinion
of the directors of the company, to
affect significantly the operations
of the group, the results of those
operations, or the state of affairs of
the group, in future financial years.
LIKELY DEVELOPMENTS
The group will continue with its
strategy of continuing to invest
in new product development
and to seek opportunities to
further strengthen profitability by
expanding into related businesses
offering complementary products
and technologies.
Further information about likely
developments in the operations
of the group and the expected
results of those operations in
future financial years has not been
included in this report because
disclosure of the information would
be likely to result in unreasonable
prejudice to the group.
5 4
DIRECTORS’ INTERESTS
The relevant interest of each director
in the shares issued by the company
as notified by the directors to the
Australian Securities Exchange in
accordance with S205G(1) of the
Corporations Act 2001, at the date
of this report is as follows:
Mr D J Simmons
Mr D S McGurk
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
Ordinary
shares
61,532
312,517
199,416
120,908
57,708
-
-
INDEMNIFICATION AND
INSURANCE OF OFFICERS
Indemnification
The company has agreed to
indemnify the current and former
directors and officers of the company
and certain controlled entities against
all liabilities to another person (other
than the company or a related body
corporate) that may arise from their
position as directors and secretaries
of the company and its controlled
entities, except where the liability
arises out of conduct involving a
lack of good faith. The Deed of
Access, Indemnity and Insurance
stipulates that the company and
certain controlled entities will meet
the full amount of any such liabilities,
including costs and expenses.
Insurance premiums
The directors have not included
details of the nature of the liabilities
covered or the amount of the
premium paid in respect of the
directors’ and officers’ liability and
legal expenses insurance contracts,
as such disclosure is prohibited under
the terms of the contract.
2015 CODAN ANNUAL REPORT
Cents per
Total amount
Franked Date of payment
share
$000
1.5
1.5
2,655
2,656
100%
100%
1 October 2014
1 April 2015
DECLARED AND PAID DURING THE
YEAR ENDED 30 JUNE 2015:
Final 2014 ordinary
Interim 2015 ordinary
YEAR:
Final 2015 ordinary
DECLARED AFTER THE END OF THE
All dividends paid or declared by the company since the end of the previous financial year were fully franked.
2.0
3,541
100%
1 October 2015
NON-AUDIT SERVICES
During the year KPMG, the
company’s auditor, has performed
certain other services in addition to
their statutory duties.
The board has considered the non-
audit services provided during the
year by the auditor and is satisfied
that the provision of those non-
audit services during the year by
the auditor is compatible with, and
did not compromise, the auditor
independence requirements of
the Corporations Act 2001 for the
following reasons:
• all non-audit services were subject
to the corporate governance
procedures adopted by the
company and have been reviewed
by the Board Audit, Risk and
Compliance Committee to ensure
that they do not have an impact
on the integrity and objectivity of
the auditor; and
• the non-audit services provided
do not undermine the general
principles relating to auditor
independence as set out in APES
110 Code of Ethics for Professional
Accountants, as they did not
involve reviewing or auditing the
auditor’s own work, acting in a
management or decision-making
capacity for the company, acting
as an advocate for the company
or jointly sharing risks and
rewards.
Refer page 57 for a copy of the
auditor’s independence declaration
as required under Section 307C of
the Corporations Act.
Details of the amounts paid or
payable to the auditor of the
company, KPMG, and its related
practices for audit and non-audit
services provided during the year
are as follows.
Consolidated
STATUTORY AUDIT
Audit and review of financial reports (KPMG Australia)
Audit of financial reports (overseas KPMG firms)
SERVICES OTHER THAN STATUTORY AUDIT
Other assurance services
Due diligence and corporate finance services
Other
Other services
Taxation compliance services (KPMG Australia)
Taxation compliance services (overseas KPMG firms)
2015
$
185,000
15,293
200,293
-
-
123,563
101,367
224,930
2014
$
185,000
39,604
224,604
-
-
231,650
164,818
396,468
5 5
ROUNDING OFF
The company is of a kind referred to in
ASIC Class Order 98/100 dated 10 July
1998 and, in accordance with that Class
Order, amounts in the financial report
and directors’ report have been rounded
off to the nearest thousand dollars,
unless otherwise stated.
This report is made with a resolution of
the directors:
D J Simmons
Director
D S McGurk
Director
Dated at Newton this
21st day of August 2015.
5 6
2015 CODAN ANNUAL REPORT
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Codan Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2015 there have
been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit;
and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Scott Fleming
Partner
Adelaide
21 August 2015
5 7
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Administrative expenses
Sales and marketing expenses
Engineering expenses
Net financing costs
Other (expenses)/income
Profit before tax
Income tax expense
Profit for the period
Attributable to:
Equity holders of the company
Non-controlling interests
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE
TO THE ORDINARY EQUITY HOLDERS OF THE
COMPANY
Basic earnings per share
Diluted earnings per share
Note
2
3
4
7
6
6
Consolidated
2015
$000
2014
$000
143,863
(65,519)
78,344
(15,043)
(35,258)
(11,088)
(1,386)
615
16,184
(3,775)
12,409
12,508
(99)
12,409
132,268
(67,792)
64,476
(14,464)
(29,646)
(9,327)
(3,291)
2,522
10,270
(1,073)
9,197
9,197
-
9,197
7.1 cents
7.0 cents
5.2 cents
5.2 cents
The consolidated income statement is to be read in conjunction with the notes to and forming part of the financial statements set
out on pages 63 to 96.
5 8
2015 CODAN ANNUAL REPORT CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Administrative expenses
Sales and marketing expenses
Engineering expenses
Net financing costs
Other (expenses)/income
Profit before tax
Income tax expense
Profit for the period
Attributable to:
Equity holders of the company
Non-controlling interests
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE
TO THE ORDINARY EQUITY HOLDERS OF THE
COMPANY
Basic earnings per share
Diluted earnings per share
Note
Consolidated
2015
$000
2014
$000
2
3
4
7
6
6
143,863
(65,519)
78,344
(15,043)
(35,258)
(11,088)
(1,386)
615
16,184
(3,775)
12,409
12,508
(99)
12,409
132,268
(67,792)
64,476
(14,464)
(29,646)
(9,327)
(3,291)
2,522
10,270
(1,073)
9,197
9,197
-
9,197
7.1 cents
7.0 cents
5.2 cents
5.2 cents
Note
20
20
Profit for the period
Items that may be reclassified subsequently to
profit or loss
Changes in fair value of cash flow hedges
less tax effect
Changes in fair value of cash flow hedges, net of
income tax
Exchange differences on translation of foreign
operations
Other comprehensive income for the period, net of
income tax
Total comprehensive income for the period
Attributable to:
Equity holders of the company
Non-controlling interests
Consolidated
2015
$000
2014
$000
12,409
9,197
(97)
29
(68)
738
670
13,079
13,178
(99)
13,079
1,607
(482)
1,125
589
1,714
10,911
10,911
-
10,911
The consolidated statement of comprehensive income is to be read in conjunction with the notes to and forming part of
the financial statements set out on pages 63 to 96.
5 9
Note
Consolidated
2015
$000
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Current tax assets
Other assets
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Product development
Intangible assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Current tax payable
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
Total equity attributable to the equity
holders of the company
Non-controlling interests
8
11
12
7
13
14
15
16
17
9
7
18
9
7
18
19
20
7,156
20,437
31,309
472
1,593
60,967
16,019
42,429
89,254
147,702
208,669
25,195
36
54
6,684
31,969
42,505
5,198
642
48,345
80,314
128,354
41,856
61,645
24,853
128,354
128,453
(99)
128,354
2014
$000
13,031
22,141
31,298
1,112
1,847
69,429
20,128
34,879
87,993
143,000
212,429
23,391
33
57
6,426
29,907
59,947
1,601
683
62,231
92,138
120,291
41,560
50,475
28,256
120,291
120,291
-
120,291
The consolidated balance sheet is to be read in conjunction with the notes to and forming part of the financial statements set out
on pages 63 to 96.
6 0
2015 CODAN ANNUAL REPORT Note
8
11
12
7
13
14
15
16
17
9
7
18
9
7
18
19
20
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Current tax assets
Other assets
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Product development
Intangible assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Current tax payable
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
Total equity attributable to the equity
holders of the company
Non-controlling interests
2015
$000
7,156
20,437
31,309
472
1,593
60,967
16,019
42,429
89,254
147,702
208,669
25,195
36
54
6,684
31,969
42,505
5,198
642
48,345
80,314
128,354
41,856
61,645
24,853
128,354
128,453
(99)
128,354
2014
$000
13,031
22,141
31,298
1,112
1,847
69,429
20,128
34,879
87,993
143,000
212,429
23,391
33
57
6,426
29,907
59,947
1,601
683
62,231
92,138
120,291
41,560
50,475
28,256
120,291
120,291
-
120,291
Consolidated
2015
Balance as at 1 July 2014
Profit for the period attributable to:
Equity holders of the company
Non-controlling interests
Performance rights expensed
Change in fair value of cash flow hedges
Exchange differences on translation
of foreign operations
Transfers to and from reserves
Transactions with owners of the company
Dividends recognised during the period
Employee share plan, net of issue costs
Consolidated
Share
capital
$000
Translation
reserve
$000
Hedging
reserve
$000
Profit
reserve
$000
Retained
earnings
$000
Total
$000
41,560
1,994
-
48,481
28,256
120,291
12,508
12,508
-
-
296
-
-
-
-
-
-
-
738
-
-
-
-
(68)
-
-
-
-
-
-
-
(99)
-
-
-
10,500
(10,500)
(99)
296
(68)
738
-
41,856
2,732
(68)
58,981
30,164
133,665
-
-
-
-
-
-
-
-
-
-
-
-
(5,311)
(5,311)
-
-
(5,311)
(5,311)
Balance at 30 June 2015
41,856
2,732
(68)
58,981
24,853
128,354
2014
Balance as at 1 July 2013
Profit for the period
Performance rights expense reversed
Change in fair value of cash flow hedges
Exchange differences on translation
of foreign operations
Transfers to and from reserves
Transactions with owners of the company
Dividends recognised during the period
Employee share plan, net of issue costs
Balance at 30 June 2014
Consolidated
Share
capital
$000
Translation
reserve
$000
Hedging
reserve
$000
Profit
reserve
$000
Retained
earnings
$000
Total
$000
41,873
1,405
(1,125)
34,673
47,906
124,732
-
(391)
-
-
-
-
-
-
589
-
41,482
1,994
-
78
-
-
41,560
1,994
-
-
1,125
-
-
-
-
-
-
-
-
-
-
9,197
-
-
-
13,808
(13,808)
9,197
(391)
1,125
589
-
48,481
43,295
135,252
-
-
(15,039)
(15,039)
-
78
48,481
28,256
120,291
The consolidated statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial
statements set out on pages 63 to 96.
6 1
Consolidated
2015
2014
Note
$000
$000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash from operating activities
10
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment
Payments for capitalised product development
Payments for intellectual property
Acquisition of property, plant and equipment
Acquisition of intangibles (computer software and licences)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdowns/(repayments) of borrowings
Dividends paid
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial year
8
157,366
(123,677)
86
(2,470)
(633)
30,672
5,369
(12,890)
(1,138)
(3,493)
(1,281)
(13,433)
(17,929)
(5,311)
(23,240)
(6,001)
13,031
126
7,156
142,037
(115,524)
67
(2,832)
(12,326)
11,422
27
(12,467)
(2,251)
(3,112)
(1,014)
(18,817)
26,800
(15,039)
11,761
4,366
8,638
27
13,031
The consolidated statement of cash flows is to be read in conjunction with the notes to and forming part of the financial
statements set out on pages 63 to 96.
6 2
2015 CODAN ANNUAL REPORT 1. SIGNIFICANT
ACCOUNTING POLICIES
Codan Limited (the “company”) is
a company domiciled in Australia
and is a for-profit entity. The
consolidated financial report of
the company as at and for the year
ended 30 June 2015 comprises
the company and its subsidiaries
(together referred to as the “group”
and individually as “group entities”).
The financial report was authorised
for issue by the directors on
21 August 2015.
(a) Statement of
compliance
The financial report is a general
purpose financial report which
has been prepared in accordance
with Australian Accounting
Standards (AASBs) (including
Australian Interpretations) adopted
by the Australian Accounting
Standards Board (“AASB”) and the
Corporations Act 2001.
The consolidated financial
report of the group complies
with International Financial
Reporting Standards (IFRSs) and
interpretations adopted by the
International Accounting Standards
Board (IASB).
(b) Basis of preparation
The consolidated financial report
is prepared in Australian dollars
(the company’s functional currency
and the functional currency of
the majority of the group) on the
historical costs basis except that
derivative financial instruments are
stated at their fair value.
A number of new standards,
amendments to standards and
interpretations, effective for annual
periods beginning after 1 July 2015,
were available for early adoption,
and have not been applied in
preparing these consolidated
financial statements. None of these
standards is expected to have a
significant effect on the consolidated
financial statements of the group.
The group is of a kind referred to in
ASIC Class Order 98/100 dated 10
July 1998 and, in accordance with
the Class Order, amounts in the
financial report have been rounded
off to the nearest thousand dollars,
unless otherwise stated.
Use of estimates and
judgements
The preparation of a financial
report in conformity with Australian
Accounting Standards requires
management to make judgements,
estimates and assumptions that
affect the application of policies
and reported amounts of assets,
liabilities, income and expenses.
These 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 about carrying
values of assets and liabilities that
are not readily apparent from other
sources. Actual results may differ
from these estimates. 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 and in any future
periods affected. The estimates and
judgments that have a significant
risk of causing a material adjustment
to the carrying amounts of assets
within the next financial year relate
to impairment assessments of non-
current assets, including product
development and goodwill (refer
note 16).
Changes in accounting policies
For the year ended 30 June 2015,
the group has not changed any of its
significant accounting policies.
The accounting policies set out
below have been applied
consistently to all periods presented
in these consolidated financial
statements, and have been applied
consistently by group entities.
(c) Basis of consolidation
Subsidiaries are entities controlled
by the group. Control exists when
the group has the power, directly or
indirectly, to govern the financial and
operating policies of an entity so as
to obtain benefits from its activities.
In assessing control, potential voting
rights that currently are exercisable
are taken into account. The financial
statements of subsidiaries are
included in the consolidated financial
statements from the date control
commences until the date control
ceases. The accounting policies of
subsidiaries have been changed
when necessary to align them with
the policies adopted by the group.
Unrealised gains and losses and
inter-entity balances resulting
from transactions with or between
subsidiaries are eliminated in full on
consolidation.
Business combinations are accounted
for using the acquisition method as
at the acquisition date, which is the
date on which control is transferred
to the group. Transaction costs, other
than those associated with the issue
of debt or equity securities, that the
group incurs in connection with a
business combination are expensed
as incurred.
Upon the loss of control, the
group derecognises the assets and
liabilities of the subsidiary, and non-
controlling interests and the other
components of equity related to the
subsidiary. Any surplus or deficit
arising on the loss of control is
recognised in the income statement.
Non-controlling interests are
measured at their proportionate
share of the subsidiaries’ net assets.
6 3
1. SIGNIFICANT
ACCOUNTING POLICIES
(continued)
(d) Revenue recognition
Revenues are recognised at the fair
value of the consideration received
or receivable, net of the amount
of goods and services tax (GST)
payable to taxation authorities.
Sale of goods
Revenue from the sale of goods is
measured at the fair value of the
consideration received or receivable
(net of rebates, returns, discounts
and other allowances). Revenue is
recognised when the significant
risks and rewards of ownership
pass to the customer, recovery of
the consideration is probable, the
associated costs and possible return
of goods can be estimated reliably,
there is no continuing management
involvement with the goods and the
amount of revenue can be measured
reliably. Control usually passes
when the goods are shipped to the
customer.
Construction contracts
Contract revenue includes the initial
amount agreed in the contract, plus
any variations in contract work,
claims and incentive payments, to
the extent that it is probable that
they will result in revenue and can
be measured reliably. As soon as the
outcome of a construction contract
can be estimated reliably, contract
revenue is recognised in the income
statement in proportion to the
stage of completion of the contract.
Contract expenses are recognised as
incurred unless they create an asset
related to future contract activity.
The stage of completion is assessed
by reference to professional
judgement of work performed.
When the outcome of a construction
contract cannot be estimated
reliably, contract revenue is
recognised only to the extent of
contract costs incurred that are
likely to be recoverable. An expected
6 4
loss on a contract is recognised
immediately in the income
statement.
Rendering of services
Revenue from rendering services is
recognised in the period in which
the service is provided.
(e) Expenses
Operating lease payments
Payments made under operating
leases are recognised in the income
statement on a straight-line basis
over the term of the lease. Lease
incentives received are recognised in
the income statement as an integral
part of the total lease expense, and
are spread over the lease term.
Finance lease payments
Minimum lease payments are
apportioned between the finance
charge and the reduction of the
outstanding liability. The finance
charge is allocated to each period
during the lease term so as to
produce a constant periodic rate of
interest on the remaining balance of
the liability.
Net financing costs
Net financing costs include interest
paid relating to borrowings, interest
received on funds invested, unwinding
of discounts, foreign exchange gains
and losses, and gains and losses
on hedging instruments that are
recognised in the income statement.
Qualifying assets are assets that
take more than 12 months to get
ready for their intended use or sale.
In these circumstances, borrowing
costs are capitalised to the cost of
the qualifying assets. Interest income
and borrowing costs are recognised in
the income statement on an accruals
basis, using the effective-interest
method. Foreign currency gains and
losses are reported on a net basis.
(f) Foreign currency
Foreign currency transactions are
translated to Australian dollars at the
rates of exchange ruling at the dates
of the transactions. Monetary assets
and liabilities denominated in foreign
currencies at the reporting date are
translated to Australian dollars at the
foreign exchange rate ruling at that
date. Foreign exchange differences
arising on translation are recognised
in the income statement, except for
differences arising on the retranslation
of a financial liability designated as a
hedge of a net investment in a foreign
operation, or qualifying cash flow
hedges, which are recognised in other
comprehensive income and presented
within equity, to the extent that the
hedge is effective.
Foreign operations
The assets and liabilities of foreign
operations, including goodwill
and fair-value adjustments arising
on acquisition, are translated to
Australian dollars at the foreign
exchange rates ruling at the reporting
date. Equity items are translated
at historical rates. The income and
expenses of foreign operations are
translated to Australian dollars at the
foreign exchange rates ruling at the
dates of the transactions. Foreign
exchange differences arising on
translation are taken directly to the
foreign currency translation reserve
until the disposal, or partial disposal,
of the foreign operations.
Foreign exchange gains and losses
arising from a monetary item
receivable or payable to a foreign
operation, the settlement of which
is neither planned nor likely in the
foreseeable future, are considered
to form part of a net investment
in a foreign operation and on
consolidation they are recognised in
other comprehensive income, and are
presented within equity in the foreign
currency translation reserve.
Foreign currency differences arising
on the retranslation of a financial
liability designated as a hedge
of a net investment in a foreign
operation are recognised directly in
other comprehensive income to the
extent that the hedge is effective,
and are presented within equity in
the hedging reserve. To the extent
that the hedge is ineffective, such
2015 CODAN ANNUAL REPORT differences are recognised in the
income statement. When the hedged
part of a net investment is disposed
of, the associated cumulative amount
in equity is transferred to the income
statement as an adjustment to the
income statement on disposal.
is recognised in accordance with the
above policy when the transaction
occurs. If the hedged transaction is
no longer expected to take place,
then the unrealised gain or loss
recognised in equity is recognised
immediately in the income statement.
(g) Derivative financial
instruments
The group has used derivative
financial instruments to hedge
its exposure to foreign exchange
and interest rate movements. In
accordance with its policy, the group
does not hold derivative financial
instruments for trading purposes.
However, derivatives that do not
qualify for hedge accounting are
accounted for as trading instruments.
Derivative financial instruments are
recognised initially at fair value.
Attributable transaction costs are
recognised in the income statement
when incurred. Subsequent to initial
recognition, derivative financial
instruments are stated at fair value.
The gain or loss on re-measurement
to fair value is recognised
immediately in the income statement
unless the derivative qualifies for
hedge accounting.
Hedging
On initial designation of the hedge,
the group formally documents the
relationship between the hedging
instrument and hedged item,
including the risk management
objectives and strategy in
undertaking the hedge transaction,
together with the methods that will
be used to assess the effectiveness
of the hedging relationship.
Where a derivative financial
instrument is designated as a hedge
of the variability in cash flows
of a highly probable forecasted
transaction, the effective part of
any gain or loss on the derivative
financial instrument is recognised
directly in comprehensive income
and presented within equity.
When the forecast transaction
subsequently results in the
recognition of a financial asset or
liability, then the associated gains
and losses that were recognised
directly in equity are reclassified
into the income statement.
When a hedging instrument expires
or is sold, terminated or exercised, or
the entity revokes designation of the
hedge relationship but the hedged
forecast transaction is still expected
to occur, the cumulative gain or loss
at that point remains in equity and
(h) Taxation
Income tax expense on the income
statement comprises a current and
deferred tax expense. Income tax
expense is recognised in the income
statement except to the extent that
it relates to items recognised directly
in equity, or in other comprehensive
income.
Current tax expense is the expected
tax payable on the taxable income
for the year using tax rates enacted
or substantially enacted at the
reporting date, adjusted for any
prior year under or over provision.
The movement in deferred tax
assets and liabilities results in the
deferred tax expense, unless the
movement results from a business
combination, in which case the tax
entry is recognised in goodwill, or
a transaction has impacted equity,
in which case the tax entry is also
reflected in equity.
Deferred tax assets and liabilities
arise from temporary differences
between the carrying amount of
assets and liabilities for financial
reporting purposes and the amounts
used for taxation purposes.
Deferred tax assets and liabilities are
offset if there is a legally enforceable
right to offset current tax liabilities
and assets, and they relate to
income taxes levied by the same
tax authority on the same taxable
entity, or on different tax entities,
but they intend to settle current tax
liabilities and assets on a net basis,
or their tax assets and liabilities will
be realised simultaneously.
A deferred tax asset is recognised
for unused tax losses, tax credits
and deductible temporary
differences to the extent that it is
probable that future taxable profits
will be available against which
the temporary difference can be
utilised. Deferred tax assets are
reviewed at each reporting date and
are reduced to the extent that it is
no longer probable that the related
tax benefit will be realised.
Tax consolidation
The company is the head entity
in the tax consolidated group
comprising all the Australian wholly
owned subsidiaries. The company
recognises the current tax liability of
the tax consolidated group. The tax
consolidated group has determined
that subsidiaries will account for
deferred tax balances and will
make contributions to the head
entity for the current tax liabilities
as if the subsidiary prepared its tax
calculation on a stand-alone basis.
The company recognises deferred tax
assets arising from unused tax losses
of the tax consolidated group to the
extent that it is probable that future
taxable profits of the tax consolidated
group will be available against which
the asset can be utilised.
Any subsequent period adjustments
to deferred tax assets arising
from unused tax losses as a result
of revised assessments of the
probability of recoverability, are
recognised by the head entity only.
(i) Goods and services tax
Revenues, expenses and assets are
recognised net of the amount of
GST, except where the amount of
GST incurred is not recoverable from
the Australian Taxation Office (ATO).
In these circumstances the GST is
recognised as part of the cost of
acquisition of the asset
or is expensed.
Receivables and payables are
stated with the amount of GST
included. The net amount of GST
recoverable from, or payable to, the
ATO is included as a current asset
or liability in the balance sheet.
Cash flows are included in the
Statement of Cash Flows on a
gross basis. The GST components
of cash flows arising from investing
and financing activities which are
recovered from, or payable to, the
ATO are classified as operating
cash flows.
(j) Cash and cash
equivalents
Cash and cash equivalents comprise
cash balances and call deposits
with an original maturity of three
months or less. Bank overdrafts
form an integral part of the group’s
cash management and are included
as a component of cash and cash
equivalents for the purpose of the
Statement of Cash Flows.
6 5
1. SIGNIFICANT
ACCOUNTING POLICIES
(continued)
(k) Trade and other
receivables
Trade debtors are to be settled
within agreed trading terms, typically
less than 60 days, and are initially
recognised at fair value and then
subsequently at amortised cost, less
any impairment losses. Impairment
of receivables is not recognised until
objective evidence is available that
a loss event may occur. Significant
receivables are individually assessed
for impairment. Non-significant
receivables are not individually
assessed; instead impairment testing
is performed by considering the risk
profile of that group of receivables.
All impairment losses are recognised
in the income statement.
(l) Inventories
Raw materials and stores, work
in progress and finished goods
are measured at the lower of cost
(determined on a first-in first-out
basis) and net realisable value. Net
realisable value is the estimated
selling price in the ordinary course of
business, less the estimated costs of
completion and selling expenses. In
the case of manufactured inventories
and work in progress, costs comprise
direct materials, direct labour, other
direct variable costs and allocated
factory overheads necessary to
bring the inventories to their present
location and condition.
(m) Project work in
progress
Project work in progress represents
the gross unbilled amount expected
to be collected from customers for
project work performed to date.
It is measured at cost, plus profit
recognised to date, less progress
billings and recognised losses. Cost
includes all expenditure related
directly to specific projects. Project
work in progress is presented as
6 6
part of other assets in the balance
sheet for all projects in which costs
incurred, plus recognised profits
exceed progress billings.
(n) Intangible assets
Product development costs
Expenditure on research activities,
undertaken with the prospect of
gaining new scientific or technical
knowledge and understanding, is
recognised in the income statement
as an expense when incurred.
Expenditure on development
activities, whereby research findings
are applied to a plan or design for the
production of new or substantially
improved products, is capitalised
only if development costs can be
measured reliably, the product
is technically and commercially
feasible, future economic benefits
are probable and the group intends
to and has sufficient resources to
complete development and to use
or sell the asset.
The expenditure capitalised has a
finite useful life and includes the cost
of materials, direct labour and an
appropriate proportion of overheads
that are directly attributable to
preparing the asset for its intended
use, less accumulated amortisation
and accumulated impairment losses.
Other development expenditure is
recognised in the income statement
when incurred.
Goodwill
All business combinations are
accounted for by applying the
acquisition method and goodwill
may arise upon the acquisition of
subsidiaries. Goodwill is stated
at cost, less any accumulated
impairment losses, and has an
indefinite useful life. It is allocated
to cash-generating units and is not
amortised but is tested annually
for impairment.
Measuring goodwill
The group measures goodwill as
the fair value of the consideration
transferred including the recognised
amount of any non-controlling
interest in the acquiree, less the
net recognised amount (generally
fair value) of the identifiable assets
acquired (including intangible
assets) and liabilities assumed, all
measured as of the acquisition date.
Consideration transferred includes
the fair values of the assets
transferred, liabilities incurred by
the group to the previous owners
of the acquiree, and equity interests
issued by the group. Consideration
transferred also includes the
fair value of any contingent
consideration and share-based
payment awards of the company.
Contingent liabilities
A contingent liability of the
acquiree is assumed in a business
combination only if such a liability
represents a present obligation and
arises from a past event, and its fair
value can be measured reliably.
Non-controlling interest
The group measures any non-
controlling interest at its
proportionate interest in the
identifiable net assets of the acquiree.
Transaction costs
Transaction costs that the group
incurs in connection with a business
combination, such as finder’s fees,
legal fees, due diligence fees, and
other professional and consulting
fees, are expensed as incurred.
Licences and other intangible
assets
Licences and other intangible assets
that are acquired by the group,
which have finite useful lives, are
stated at cost, less accumulated
amortisation and accumulated
impairment losses. Expenditure on
internally generated goodwill and
brands is recognised in the income
statement as incurred.
Subsequent expenditure
Subsequent expenditure is capitalised
only when it increases the future
economic benefits embodied in the
specific asset to which it relates.
2015 CODAN ANNUAL REPORT All other expenditure, including
expenditure on internally generated
goodwill and brands, is recognised in
the income statement as incurred.
Amortisation
Amortisation is calculated on the
cost of the asset, less its residual
value.
Amortisation is charged to the
income statement on a straight-
line basis over the estimated useful
lives of intangible assets, other than
goodwill, from the date that they
are available for use. The estimated
useful lives in the current and
comparative periods are as follows:
Product development,
licences and intellectual
property:
2 - 15 years
Computer software:
3 - 7 years
Amortisation methods, useful lives
and residual values are reviewed at
each reporting date.
(o) Property, plant and
equipment
Owned assets
Items of property, plant and
equipment are measured at cost,
less accumulated depreciation and
impairment losses. Cost includes
expenditures that are directly
attributable to the acquisition of the
asset. The cost of self-constructed
assets includes the cost of materials,
direct labour and any other costs
directly attributable to bringing
the asset to a working condition
for its intended use, the costs of
dismantling and removing the items
and restoring the site on which
they are located and capitalised
borrowing costs. Purchased software
that is integral to the functionality of
the related equipment is capitalised
as part of that equipment.
Land and buildings that had been
revalued to fair value prior to
the transition to AIFRS, being 1
July 2004, are measured on the
basis of deemed cost, being the
revalued amount at the date of that
revaluation.
Gains and losses on disposal of
an item of property, plant and
equipment are determined by
comparing the proceeds from
disposal with the carrying amount
of property, plant and equipment
and are recognised net within
“other income” or “other expenses”
in the income statement.
Subsequent costs
The cost of replacing part of an item
of property, plant and equipment is
recognised in the carrying amount
of the item if it is probable that the
future economic benefits embodied
within the part will flow to the group
and its cost can be measured reliably.
The carrying amount of the replaced
part is derecognised. The costs of
the day-to-day servicing of property,
plant and equipment are recognised
in the income statement as incurred.
Leased assets
Leases in terms of which the group
assumes substantially all the risks
and rewards of ownership are
classified as finance leases. Upon
initial recognition, the leased asset
is measured at an amount equal to
the lower of its fair value and the
present value of the minimum lease
payments. Subsequent to initial
recognition, the asset is accounted
for in accordance with the accounting
policy applicable to that asset.
Other leases are operating leases and
the leased assets are not recognised
in the balance sheet.
Depreciation
Depreciation is calculated on the
depreciable amount, which is the
cost of an asset, less its residual
value.
Depreciation is charged to the
income statement on property,
plant and equipment on a straight-
line basis over the estimated useful
life of the assets. Capitalised leased
assets are amortised on a straight-
line basis over the term of the
relevant lease, or where it is likely
the group will obtain ownership
of the asset, the life of the asset.
Land is not depreciated. The main
depreciation rates used for each
class of asset for current and
comparative periods are as follows:
Buildings
4%
Leasehold property
10%
Plant and equipment
5% to 40%
Depreciation methods, useful lives
and residual values are reviewed at
each reporting date.
(p) Impairment
The carrying amounts of the group’s
assets, other than inventories and
deferred tax assets, are reviewed at
each reporting date to determine
whether there is any indication
of impairment. A financial asset
is considered to be impaired if
objective evidence indicates that
one or more events have had a
negative effect on the estimated
future cash flows of that asset. If any
such impairment exists, the asset’s
recoverable amount is estimated.
For goodwill and intangible assets
that have an indefinite useful life
or are not yet available for use, the
recoverable amount is estimated
annually.
The recoverable amount of assets
is the greater of their fair value, less
costs to sell pre-tax, or their value-
in-use. In assessing value-in-use,
the estimated future cash flows are
discounted to their present value
using a pre-tax discount rate that
reflects current market assessments
of the time value of money and the
risks specific to the asset. For an
asset that does not generate largely
independent cash inflows, the
recoverable amount is determined
for the cash-generating unit to
which the asset belongs.
The group’s corporate assets do
not generate separate cash inflows.
If there is an indication that a
corporate asset may be impaired,
then the recoverable amount is
determined for the cash-generating
units to which the corporate asset
belongs.
An impairment loss is recognised
whenever the carrying amount of
an asset exceeds its recoverable
amount. A cash-generating unit
is the smallest identifiable asset
group that generates cash inflows
that are largely independent from
other assets or groups of assets.
Impairment losses are recognised in
the income statement. Impairment
losses recognised in respect of
cash-generating units are allocated
first to reduce the carrying amount
of any goodwill and then to reduce
the carrying amount of the other
assets in the cash-generating unit
on a pro-rata basis.
An impairment loss in respect of
goodwill is not reversed. In respect
of other assets, impairment losses
recognised in prior periods are
assessed at each reporting date for
any indications that the loss has
decreased or no longer exists. An
impairment loss is reversed if there
has been a change in the estimate
used to determine the recoverable
amount. An impairment loss is
reversed only to the extent that the
asset’s carrying amount does
6 7
1. SIGNIFICANT
ACCOUNTING POLICIES
(continued)
(p) Impairment (continued)
not exceed the carrying amount
that would have been determined,
net of depreciation or amortisation,
if no impairment loss had been
recognised.
(q) Payables
Liabilities are recognised for
amounts to be paid in the future for
goods or services received. Trade
accounts payable are normally
settled within 60 days.
(r) Interest bearing
borrowings
Interest bearing borrowings are
recognised initially at their fair value,
less attributable transaction costs.
Subsequent to initial recognition,
interest bearing borrowings are
stated at amortised cost, with
any difference between cost and
redemption value being recognised
in the income statement over the
period of the borrowings on an
effective-interest basis.
(s) Employee benefits
Wages, salaries and annual
leave
Liabilities for employee benefits for
wages, salaries, incentives and annual
leave represent present obligations
resulting from employees’ services
provided to the reporting date,
calculated at undiscounted amounts
based on remuneration rates that
the group expects to pay as at the
reporting date, including related on-
costs such as workers’ compensation
insurance and payroll tax.
Long service leave
The provision for employee benefits
for long service leave represents
the present value of the estimated
future cash outflows resulting from
6 8
the employees’ services provided
to the reporting date. The provision
is calculated using expected future
increases in wage and salary rates,
including related on-costs, and
expected settlement dates based on
turnover history, and is discounted
using high quality corporate bond
rates at the reporting date which
most closely match the terms of
maturity of the related liabilities.
Defined contribution
superannuation plans
A defined contribution plan is a
post-employment benefit plan
under which an entity pays fixed
contributions into a separate
entity and will have no legal or
constructive obligation to pay
further amounts. The group
contributes to defined contribution
superannuation plans and these
contributions are expensed in the
income statement as incurred.
(t) Provisions
A provision is recognised when there
is a present legal or constructive
obligation as a result of a past event,
it can be estimated reliably, and it
is probable that a future sacrifice of
economic benefits will be required
to settle the obligation. Provisions
are determined by discounting the
expected future cash flows required
to settle the obligation at a pre-tax
rate that reflects the current market
assessments of the time value of
money and the risks specific to the
liability. The unwinding of the discount
is recognised as a finance cost.
Dividends
A provision for dividends payable is
recognised in the reporting period in
which the dividends are declared.
Restructuring and employee
termination benefits
A provision for restructuring is
recognised when the group has
approved a detailed and formal
restructuring plan, and the
restructuring either has commenced
or has been announced publicly.
Future operating costs are not
provided for.
Warranty
A provision is made for the group’s
estimated liability on all products
sold and still under warranty, and
includes claims already received.
The estimate is based on the group’s
warranty cost experience over
previous years.
Onerous contracts
A provision for onerous contracts
is recognised when the expected
benefits to be derived by the group
from a contract are lower than the
unavoidable cost of meeting its
obligations under the contract. The
provision is measured at the present
value of the lower of the expected
cost of terminating the contract and
the expected net cost of continuing
with the contract.
(u) Share capital
Ordinary shares
Ordinary shares are classified as
equity. Incremental costs directly
attributable to the issue of ordinary
shares and share options are
recognised as a deduction from
equity, net of any tax effects.
(v) Share-based payment
transactions
Share-based payments in which the
group receives goods or services
as consideration for its own equity
instruments are accounted for as
equity-settled share-based payment
transactions, regardless of how the
equity instruments are obtained
from the group.
The grant-date fair value of share-
based payment awards granted
to employees is recognised as
an employee expense, with a
corresponding increase in equity,
over the period that the employees
unconditionally become entitled to
the awards. The amount recognised
as an expense is adjusted to reflect
the number of awards which vest.
2015 CODAN ANNUAL REPORT
GROUP
PERFORMANCE
for the mining sector. The “other”
business segment includes the
manufacture and marketing of
printed circuit boards.
Geographical segments
In presenting information on the
basis of geographical segments,
segment revenue has been based
on the geographic location of
the invoiced customer. Segment
assets are based on the geographic
location of the assets. The group
has manufacturing and corporate
offices in Australia and Canada, with
overseas representative offices in the
United States of America, England,
China, United Arab Emirates, South
Africa and Ireland.
2. SEGMENT ACTIVITIES
The group determines and presents
operating segments based on
the information that is internally
provided to the CEO, who is the
group’s chief operating decision-
maker.
An operating segment is a
component of the group that
engages in business activities
from which it may earn revenues
and incur expenses. All operating
segments’ results are regularly
reviewed by the group’s CEO to
make decisions about resources to
be allocated to the segments and
assess their performance.
Segment results relate to the
underlying operations of a segment
and are as reported to the CEO and
include the expense from functions
that are directly attributable to
a segment as well as those that
can be allocated on a reasonable
basis. Unallocated items comprise
mainly corporate assets (primarily
the company’s headquarters and
cash balances), corporate expenses,
non-underlying other income and
expense, and income tax assets and
liabilities.
Segment capital expenditure is
the total cost incurred during the
period to acquire property, plant and
equipment, and intangible assets
other than goodwill.
The group’s primary format for
segment reporting is based on
business segments.
Business segments
Two or more operating segments
may be aggregated into a single
operating segment if they are similar
in nature. The group comprises
four business segments. The
communications equipment segment
includes the design, development,
manufacture and marketing of
communications equipment.
The metal detection segment
includes the design, development,
manufacture and marketing of metal
detection equipment. The mining
technology segment includes the
design, manufacture, maintenance
and support of a range of electronic
products and associated software
6 9
GROUP PERFORMANCE (continued)
2. SEGMENT ACTIVITIES (continued)
Information about reportable segments
REVENUE
External segment revenue
Inter-segment revenue
Total segment revenue
RESULT
Segment result
Unallocated income and expenses
Profit from operating activities
Income tax expense
Net Profit
NON-CASH ITEMS INCLUDED ABOVE
Depreciation and amortisation
Unallocated depreciation and amortisation
Total depreciation and amortisation
ASSETS
Segment assets
Unallocated corporate assets
Consolidated total assets
Communications
2014
$000
2015
$000
Metal detection
2014
$000
2015
$000
63,841
-
63,841
53,875
716
54,591
73,262
-
73,262
69,895
-
69,895
15,212
11,474
19,204
16,029
4,296
3,200
4,923
4,374
60,832
52,828
107,863
109,382
The group derived its revenues from a number of countries. The three significant countries where revenue was
10% or more of total revenue were Australia totalling $30,078,925 (2014: $15,334,118), the United States of America
totalling $29,268,017 (2014: $31,087,193) and United Arab Emirates totalling $15,933,018 (2014: $3,153,021).
The group’s non-current assets, excluding financial instruments and deferred tax assets, were located as follows:
Australia $121,421,258 (2014: $120,244,534), the United States of America $185,084 (2014: $178,892), Ireland
$210,495 (2014: $528,480), England $99,045 (2014: $76,061), Canada $25,811,482 (2014: $22,102,419) and United
Arab Emirates $222,203 (2014: $141,440).
During the year the company ceased to manufacture printed circuit boards and sold its printed circuit board import
business. The total loss incurred on the business after tax was $0.3 million, which is included in the “other” segment.
7 0
2015 CODAN ANNUAL REPORT
REVENUE
External segment revenue
Inter-segment revenue
Total segment revenue
RESULT
Segment result
Unallocated income and expenses
Profit from operating activities
Income tax expense
Net Profit
NON-CASH ITEMS INCLUDED ABOVE
Depreciation and amortisation
Unallocated depreciation and amortisation
Total depreciation and amortisation
ASSETS
Segment assets
Unallocated corporate assets
Consolidated total assets
Communications
Metal detection
2015
$000
2014
$000
2015
$000
Mining technology
2014
$000
2015
$000
Other
2015
$000
2014
$000
Elimination
Consolidated
2015
$000
2014
$000
2015
$000
2014
$000
63,841
-
63,841
53,875
716
54,591
73,262
-
73,262
4,751
-
4,751
4,007
-
4,007
2,009
103
2,112
4,491
267
4,758
-
(103)
(103)
-
(983)
(983)
143,863
-
143,863
132,268
-
132,268
2014
$000
69,895
-
69,895
15,212
11,474
19,204
16,029
(3,320)
(2,917)
(564)
(122)
-
-
4,296
3,200
4,923
4,374
209
239
48
146
60,832
52,828
107,863
109,382
17,420
14,170
20
2,296
-
-
-
-
30,531
(14,347)
16,184
(3,775)
12,409
9,476
1,091
10,567
24,464
(14,194)
10,270
(1,073)
9,197
7,959
1,072
9,031
186,135
22,534
208,669
178,676
33,753
212,429
7 1
GROUP PERFORMANCE (continued)
3. EXPENSES
Net financing costs:
Interest income
Net foreign exchange (gain)/loss
Interest expense
Depreciation of:
Buildings
Leasehold property
Plant and equipment
Amortisation of:
Product development
Intellectual property
Computer software
Licences
Personnel expenses:
Wages and salaries
Other associated personnel expenses
Contributions to defined contribution superannuation plans
Increase in liability for long service leave
Increase in liability for annual leave
Additional expenses disclosed:
Impairment of trade receivables
Operating lease rental expense
(Gain)/loss on sale of property, plant and equipment
Acquisition, integration and restructuring
7 2
Consolidated
2015
$000
2014
$000
(86)
(1,120)
2,592
1,386
473
29
2,176
2,678
5,340
1,175
761
613
7,889
35,479
2,499
2,877
377
1,659
42,891
(57)
2,717
(299)
197
(67)
511
2,847
3,291
543
36
2,042
2,621
4,312
1,170
498
430
6,410
33,163
2,578
2,660
117
1,604
40,122
(294)
2,634
(10)
2,701
2015 CODAN ANNUAL REPORT 4. OTHER EXPENSES / (INCOME)
Insurance recoveries
Mining technology earn-out liability no longer required
Communications acquisition retention recovery
Impairment of building
Provision for onerous contract no longer required
Provision for legal dispute no longer required
Impairment of mining technology product development
Product development income
(Gain)/loss on sale of property, plant and equipment
Other expenses/(income)
5. DIVIDENDS
i. An ordinary final dividend of 1.5 cents per share, franked to 100% with
30% franking credits, was paid on 1 October 2014
ii. An ordinary interim dividend of 1.5 cents per share, franked to 100% with
30% franking credits, was paid on 1 April 2015
iii. An ordinary final dividend of 7.0 cents per share, franked to 100% with
30% franking credits, was paid on 1 October 2013
iv. An ordinary interim dividend of 1.5 cents per share, franked to 100% with
30% franking credits, was paid on 1 April 2014
Consolidated
2015
$000
2014
$000
-
-
-
-
-
-
-
-
(299)
(316)
(615)
2,655
2,656
-
-
5,311
(38)
(600)
(328)
272
(990)
(1,284)
774
(255)
(10)
(63)
(2,522)
-
-
12,385
2,654
15,039
Subsequent events
Since the end of the financial year, the directors declared an ordinary final dividend of 2.0 cents per share, franked
to 100% with 30% franking credits. Based upon the shares on issue at 30 June 2015, the dividend would be
$3,541,265 and is expected to be paid on 1 October 2015. The financial effect of this dividend has not been brought
to account in the financial statements for the year ended 30 June 2015 and will be recognised in subsequent
financial reports.
Dividend franking account
Franking credits available to shareholders for subsequent financial years (30%)
12,864
14,052
The franking credits available are based on the balance of the dividend franking account at year-end, adjusted for
the franking credits that will arise from the payment of the current tax liability. The ability to utilise the franking
account credits is dependent upon there being sufficient available profits to declare dividends. Based upon the above
declared dividend, the impact on the dividend franking account of dividends proposed after the balance sheet date
but not recognised as a liability is to reduce it by $1,517,685 (2014: $1,137,664).
7 3
GROUP PERFORMANCE (continued)
6. EARNINGS PER SHARE
The group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares, which comprise performance rights granted to employees.
Consolidated
2015
$000
2014
$000
Net profit used for the purpose of calculating basic and diluted earnings
per share
12,508
9,197
The weighted average number of shares used as the denominator number for basic earnings per share was 177,014,155
(2014: 176,955,157).
The calculation of diluted earnings per share at 30 June 2015 was based on profit attributable to shareholders of
$12.5 million and a weighted average number of ordinary shares outstanding after adjustment for the effects of all
dilutive potential ordinary shares of 177,985,408 (2014: 177,886,599).
TAXATION
7. INCOME TAX
A. INCOME TAX EXPENSE
Current tax expense:
Current tax paid or payable for the financial year
Adjustments for prior years
Deferred tax expense:
Origination and reversal of temporary differences
Total income tax expense in income statement
Reconciliation between tax expense and pre-tax net profit:
The prima facie income tax expense calculated at 30% on the profit from
ordinary activities (including discontinued operations)
Decrease in income tax expense due to:
Additional deduction for research and development expenditure
Over/(under) provision for taxation in previous years
Effect of tax rates in foreign jurisdictions
Non-assessable income
Sundry items
7 4
346
(458)
(112)
3,887
3,775
4,855
930
458
5
-
-
3,462
701
(587)
114
959
1,073
3,081
964
587
-
635
29
866
2015 CODAN ANNUAL REPORT Consolidated
2015
$000
2014
$000
Increase in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Sundry items
Income tax expense
B. CURRENT TAX LIABILITIES / ASSETS
Balance at the beginning of the year
Net foreign currency differences on translation of foreign entities
Income tax paid
Adjustments from prior year
Current year's income tax paid or payable on operating profit
Disclosed in balance sheet as:
Current tax asset
Current tax payable
C. DEFERRED TAX LIABILITIES
Provision for deferred income tax comprises the estimated expense
at the applicable rate of 30% on the following items:
Expenditure currently tax deductible but deferred and amortised
for accounting
Sundry items
Set-off of tax in relation to deferred tax assets:
Difference in depreciation of property, plant and equipment
Payments for intellectual property not currently deductible
Provisions for employee benefits not currently deductible
Provisions and accruals not currently deductible
Sundry items
Carry forward tax losses
CASH MANAGEMENT
8. CASH AND CASH EQUIVALENTS
Petty cash
Cash at bank
289
-
24
3,775
1,055
102
(633)
240
(346)
418
472
(54)
418
12,204
153
(79)
(2,293)
(1,761)
(1,721)
-
(1,305)
5,198
127
80
-
1,073
(11,144)
(13)
12,326
587
(701)
1,055
1,112
(57)
1,055
9,899
-
(119)
(2,969)
(1,641)
(1,922)
(131)
(1,516)
1,601
52
7,104
7,156
27
13,004
13,031
7 5
CASH MANAGEMENT (continued)
9. LOANS AND BORROWINGS
CURRENT
Finance lease liabilities
NON-CURRENT
Cash advance
Finance lease liabilities
The group has access to the following lines of credit:
Total facilities available at balance date:
Multi-option facility
Commercial credit card
Facilities utilised at balance date:
Multi-option facility - cash advance
Multi-option facility - other
Commercial credit card
Facilities not utilised at balance date:
Multi-option facility
Commercial credit card
Consolidated
2015
$000
2014
$000
36
36
42,492
13
42,505
85,000
200
85,200
42,492
2,410
26
44,928
40,098
174
40,272
33
33
59,898
49
59,947
85,000
200
85,200
59,898
2,686
15
62,599
22,416
185
22,601
In addition to these facilities, the group has cash at bank and short-term deposits of $7,156,000 as set out in note 8.
Bank Facilities
Facilities are supported by interlocking guarantees between the company and its subsidiaries. The facilities have a term
of three years expiring in October 2016, and are subject to compliance with certain financial covenants over that term.
WEIGHTED AVERAGE INTEREST RATES:
Cash at bank
Cash advance
7 6
Consolidated
2015
%
1.12
3.00
2014
%
1.59
3.55
2015 CODAN ANNUAL REPORT
10. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of profit after income tax to net cash provided by operating activities
Consolidated
2015
$000
2014
$000
CURRENT
Finance lease liabilities
NON-CURRENT
Cash advance
Finance lease liabilities
The group has access to the following lines of credit:
Total facilities available at balance date:
Multi-option facility
Commercial credit card
Facilities utilised at balance date:
Multi-option facility - cash advance
Multi-option facility - other
Commercial credit card
Facilities not utilised at balance date:
Multi-option facility
Commercial credit card
WEIGHTED AVERAGE INTEREST RATES:
Cash at bank
Cash advance
Consolidated
2015
$000
36
36
42,492
13
42,505
85,000
200
85,200
42,492
2,410
26
44,928
40,098
174
40,272
2015
%
1.12
3.00
2014
$000
33
33
59,898
49
59,947
85,000
200
85,200
59,898
2,686
15
62,599
22,416
185
22,601
2014
%
1.59
3.55
Profit after income tax
Add/(less) items classified as investing or financing activities:
(Gain)/loss on sale of non-current assets
Add/(less) non-cash items:
Depreciation of:
Buildings
Leasehold property
Plant and equipment
Impairment of building
Amortisation
Performance rights and employee share plan expensed/(reversed)
Impairment of mining technology product development
Increase/(decrease) in income taxes
Increase/(decrease) in net assets affected by translation
12,409
9,197
(299)
(10)
473
29
2,176
-
7,889
295
-
4,264
(239)
543
36
2,042
273
6,410
(312)
774
(11,530)
705
Net cash from operating activities before changes in assets and
liabilities
26,997
8,128
Change in assets and liabilities during the financial year:
Reduction/(increase) in receivables
Reduction/(increase) in inventories
Reduction/(increase) in other assets
Increase/(reduction) in trade and other payables
Increase/(reduction) in provisions
Net cash from operating activities
OPERATING ASSETS AND LIABILITIES
11. TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Less: Provision for impairment losses
Consolidated
Other debtors
1,704
(11)
255
1,510
217
30,672
20,808
(600)
20,208
229
20,437
(1,004)
12,037
397
(3,940)
(4,196)
11,422
22,326
(741)
21,585
556
22,141
7 7
OPERATING ASSETS AND LIABILITIES (continued)
12. INVENTORY
Raw materials
Work in progress
Finished goods
13. OTHER ASSETS
Prepayments
Project work in progress
Other
14. PROPERTY, PLANT AND EQUIPMENT
Freehold land and buildings at cost
Accumulated depreciation
Leasehold property at cost
Accumulated amortisation
Plant and equipment at cost
Accumulated depreciation
Capital work in progress at cost
Total property, plant and equipment
7 8
Consolidated
2015
$000
2014
$000
2,680
12,202
16,427
31,309
1,214
27
352
1,593
9,462
(3,374)
6,088
599
(289)
310
28,972
(20,057)
8,915
706
16,019
2,678
10,859
17,761
31,298
1,327
267
253
1,847
16,263
(5,837)
10,426
675
(423)
252
30,486
(22,403)
8,083
1,367
20,128
2015 CODAN ANNUAL REPORT
Consolidated
2015
$000
2014
$000
Raw materials
Work in progress
Finished goods
Prepayments
Project work in progress
Other
2015
$000
2,680
12,202
16,427
31,309
1,214
27
352
1,593
2014
$000
2,678
10,859
17,761
31,298
1,327
267
253
1,847
Reconciliations
Reconciliations of the carrying amounts for each class of
property, plant and equipment are set out below:
Freehold land and buildings
Carrying amount at beginning of year
Additions
Transfers
Impairment of building
Disposals
Depreciation
Consolidated
Carrying amount at end of year
Leasehold property improvements
Carrying amount at beginning of year
Additions
Transfers
Disposals
Depreciation
Net foreign currency differences on translation of foreign entities
Carrying amount at end of year
Plant and equipment
Carrying amount at beginning of year
Additions
Transfers
Disposals
Depreciation
Net foreign currency differences on translation of foreign entities
Carrying amount at end of year
Capital work in progress at cost
Carrying amount at beginning of year
Additions, net of transfers
Carrying amount at end of year
Total carrying amount at end of year
15. PRODUCT DEVELOPMENT
Product development at cost
Accumulated amortisation
Reconciliation
Carrying amount at beginning of year
Capitalised in current period
Impairment of mining technology product development
Amortisation
10,426
2
546
-
(4,413)
(473)
6,088
252
140
-
(74)
(29)
21
310
8,083
3,330
137
(584)
(2,176)
125
8,915
1,367
(661)
706
16,019
85,864
(43,435)
42,429
34,879
12,890
-
(5,340)
42,429
9,315
1,438
488
(272)
-
(543)
10,426
146
132
7
-
(36)
3
252
8,931
857
371
(17)
(2,042)
(17)
8,083
1,548
(181)
1,367
20,128
72,974
(38,095)
34,879
27,498
12,467
(774)
(4,312)
34,879
7 9
OPERATING ASSETS AND LIABILITIES (continued)
16. INTANGIBLE ASSETS
Consolidated
2015
$000
2014
$000
Goodwill
Intellectual property at cost
Accumulated amortisation
Computer software at cost
Accumulated amortisation
Licences at cost
Accumulated amortisation
Total intangible assets
Reconciliations
Goodwill
Carrying amount at beginning of year
Net foreign currency differences on translation of foreign entities
Intellectual property
Carrying amount at beginning of year
Additions
Amortisation
Net foreign currency differences on translation of foreign entities
Computer software
Carrying amount at beginning of year
Additions
Transfers from capital work in progress
Amortisation
Disposals
8 0
83,525
14,277
(12,552)
1,725
12,894
(12,047)
847
5,003
(1,846)
3,157
89,254
82,396
1,129
83,525
1,495
1,335
(1,175)
70
1,725
816
92
705
(761)
(5)
847
82,396
12,872
(11,377)
1,495
12,474
(11,658)
816
4,503
(1,217)
3,286
87,993
83,130
(734)
82,396
1,373
1,348
(1,170)
(56)
1,495
824
199
291
(498)
-
816
2015 CODAN ANNUAL REPORT
Consolidated
2015
$000
2014
$000
Goodwill
Intellectual property at cost
Accumulated amortisation
Computer software at cost
Accumulated amortisation
Licences at cost
Accumulated amortisation
Total intangible assets
Reconciliations
Goodwill
Carrying amount at beginning of year
Net foreign currency differences on translation of foreign entities
Net foreign currency differences on translation of foreign entities
Intellectual property
Carrying amount at beginning of year
Additions
Amortisation
Computer software
Carrying amount at beginning of year
Transfers from capital work in progress
Additions
Amortisation
Disposals
Consolidated
2015
$000
83,525
14,277
(12,552)
1,725
12,894
(12,047)
847
5,003
(1,846)
3,157
89,254
82,396
1,129
83,525
1,495
1,335
(1,175)
70
1,725
816
92
705
(761)
(5)
847
2014
$000
82,396
12,872
(11,377)
1,495
12,474
(11,658)
816
4,503
(1,217)
3,286
87,993
83,130
(734)
82,396
1,373
1,348
(1,170)
(56)
1,495
824
199
291
(498)
-
816
Licences
Carrying amount at beginning of year
Acquisitions
Transfers
Amortisation
The following segments have significant carrying amounts of goodwill:
Mining technology
Metal detection
Communications
3,286
412
72
(613)
3,157
8,538
53,957
21,030
83,525
3,192
524
-
(430)
3,286
8,538
53,957
19,901
82,396
Goodwill
The recoverable amount of cash
generating units has been determined
using value-in-use calculations.
The Communications and Metal
Detection cash generating units
are well established businesses,
and the approach to the value-
in-use calculations for these units
is consistent. The first year of the
cash flow forecasts is based on
the oncoming year’s budget, and
cash flows are forecasted for a
5-year period. The key assumption
driving the cash flow forecast is
the level of sales, which is based on
management assessments, having
regard to the demand expected
from customers, the global economy
and the units’ competitive position.
Other assumptions relate to the level
of gross margins achieved on sales
and the level of expense to run the
business. These assumptions reflect
past experience. A terminal value has
been determined at the conclusion
of five years assuming a long term
growth rate of 3%. A pre-tax discount
rate of 12% has been applied to the
forecast cash flows.
The Mining Technology cash
generating unit was acquired by
Codan in 2012 and is in the early
stages of developing a mining
technology business. It had a
history of providing relatively basic
communication services to the
mining industry. However, over the
past three years Codan has invested
in the best of Minetec’s intellectual
property in order to transition
the company to a high-value-add
technology solutions provider.
During FY15, Minetec progressed the
technical maturity of its products
and made significant progress
with blue-chip mining customers
by successfully completing a
number of pilot projects which
demonstrated its tracking, safety
and productivity technologies in
operational environments. From a
technology perspective, FY16 will see
Minetec transition from the product
development phase to the systems
integration of solutions that have
been successfully demonstrated in
operating mines. For the first time,
the business will become “product
ready” during the course of this year.
Having now proven the technology
and demonstrated our solutions,
the challenge is to secure market
acceptance and commitment to full-
scale operational deployments. This
task has been made more difficult
by low commodity prices and cuts
to miners’ capital expenditure
budgets. Notwithstanding this, the
Minetec value proposition is well
aligned to the challenges of sectors
such as underground hard-rock
mining, which is moving toward
increased mechanisation.
In performing the value-in-
use calculations for the mining
technology unit, the first year of the
cash flow forecasts is based on the
oncoming year’s budget, and cash
flows are forecasted for a 5-year
period. As the business is in the early
stage of its development, historical
data is not reflective of the possible
future outcomes of this business.
A number of valuation scenarios
have been prepared in order to
understand a range of valuation
outcomes which have then been
assessed to determine a weighted
average recoverable amount. The
key assumption to the valuation
scenarios is the level of sales
achieved by this unit. To prepare
the sales forecasts, management
have determined the number of
mines that will adopt productivity
and safety technology, the average
sales value expected per mine and
the market share that will be won
by Minetec. Other assumptions
relate to the level of gross margins
achieved on sales, the level of
expense to run the business and
working capital requirements, and
these assumptions are reflective
of Codan’s past experience with
technology-based businesses. A
terminal value has been determined
at the conclusion of five years
assuming a long term growth rate of
3%. A pre-tax discount rate of 16%
has been applied to the forecast
cash flows.
The key risk to the value-in-use
calculations is that the mining
industry does not adopt the
productivity and safety solutions
that are being developed and sold
by Minetec, and this possibility
has been included as one of the
valuation scenarios.
The valuation scenarios identify the
number of mines in the three most
prospective countries for Minetec’s
safety and productivity solutions.
Over the five year forecast period,
the weighted average valuation
has Minetec achieving 11% of that
market. If that share were to reduce
to 5%, the recoverable amount of
the Minetec cash generating unit
would be approximately equal to
its carrying amount.
8 1
OPERATING ASSETS AND LIABILITIES (continued)
16. INTANGIBLE ASSETS (continued)
Intellectual Property
Subsequent to the acquisition of Minelab Electronics Pty Ltd by Codan Limited in 2008, Minelab Electronics Pty Ltd
acquired ownership of the intellectual property that forms the basis for its metal detection products. The consideration
payable under the agreement is based on the sales of metal detection products over a ten-year period. An asset in
relation to the acquired intellectual property will be recognised as Minelab Electronics Pty Ltd becomes liable for the
payments under the contract.
Licences
The company entered into a licence agreement on 30 June 2011 with a leading provider of advanced technology for
high frequency radio communication products. Licence payments are being made as technology is delivered to the
company. The licenced technology allows the company access to next-generation radio waveforms for high-speed data
transmission, automatic link establishment and digital voice.
17. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Other payables and accruals
Net foreign currency hedge payable
18. PROVISIONS
CURRENT
Employee benefits
Warranty repairs
Other
NON-CURRENT
Employee benefits
Reconciliation of warranty provision
Carrying amount at beginning of year
Provisions made/(released)
Payments made
8 2
Consolidated
2015
$000
2014
$000
11,935
13,163
97
25,195
5,287
1,077
320
6,684
642
1,101
637
(671)
1,067
11,670
11,721
-
23,391
5,005
1,101
320
6,426
683
2,842
(596)
(1,145)
1,101
2015 CODAN ANNUAL REPORT
Consolidated
2015
$000
2014
$000
Reconciliation of other provision
Carrying amount at beginning of year
Provisions made/(reversed) during the year
CAPITAL MANAGEMENT
19. SHARE CAPITAL
SHARE CAPITAL
Opening balance (176,969,924 ordinary shares fully paid)
Performance rights expensed/(reversed)
Issue of share capital through employee share plan
Closing balance (177,063,244 ordinary shares fully paid)
320
-
320
1,310
(990)
320
41,560
296
-
41,856
41,873
(391)
78
41,560
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at shareholders’ meetings. In the winding up of the company, ordinary shareholders rank after all
creditors and are fully entitled to any proceeds on liquidation.
Consolidated
20. RESERVES
Foreign currency translation
Hedging reserve
Profit reserve
2,732
(68)
58,981
61,645
1,994
-
48,481
50,475
Foreign currency translation
The foreign currency translation reserve records the foreign currency differences arising from the translation of
foreign operations.
Balance at beginning of year
Net translation adjustment
Balance at end of year
Hedging reserve
1,994
738
2,732
1,405
589
1,994
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging
instruments (net of tax) related to hedged transactions that have not yet occurred.
Balance at beginning of year
Gains/(losses) on cash flow hedges taken to/from hedging reserve
Balance at end of year
Profit reserve
The profit reserve comprises Codan Limited’s accumulated profits.
Balance at beginning of year
Transfer of current year profit after tax attributed to the parent entity
Balance at end of year
-
(68)
(68)
48,481
10,500
58,981
(1,125)
1,125
-
34,673
13,808
48,481
8 3
2015
$000
11,935
13,163
97
25,195
5,287
1,077
320
6,684
642
1,101
637
(671)
1,067
2014
$000
11,670
11,721
-
23,391
5,005
1,101
320
6,426
683
2,842
(596)
(1,145)
1,101
CURRENT
Trade payables
Other payables and accruals
Net foreign currency hedge payable
CURRENT
Employee benefits
Warranty repairs
Other
NON-CURRENT
Employee benefits
Reconciliation of warranty provision
Carrying amount at beginning of year
Provisions made/(released)
Payments made
CAPITAL MANAGEMENT (continued)
21. CAPITAL MANAGEMENT
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. The board of directors monitors the level of dividends paid to
ordinary shareholders and the overall return on capital.
The board seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings, and the advantages and security afforded by a sound capital position. This approach has not changed
from previous years.
Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.
GROUP STRUCTURE
22. GROUP ENTITIES
Name
PARENT ENTITY
Codan Limited
CONTROLLED ENTITIES
Codan (Qld) Pty Ltd
Codan (UK) Limited
Codan Executive Share Plan Pty Ltd
Codan US Inc
Codan Radio Communications ME JLT
Codan Radio Communications Pty Ltd
Codan Holdings US Inc
Daniels Electronics Ltd
IMP Printed Circuits Pty Ltd
Minelab Americas Inc
Minelab Electronics Pty Limited
Minelab International Limited
Minelab MEA General Trading LLC*
Minetec Pty Ltd
Minetec RSA (Pty) Ltd*
Minetec Wireless Technologies Pty Ltd
Parketronics Pty Ltd
Country of
incorporation
Class of
share
Interest
held
2015
Interest
held
2014
%
%
Australia
Ordinary
Australia
England
Australia
USA
UAE
Australia
USA
Canada
Australia
USA
Australia
Ireland
UAE
Australia
South Africa
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
-
100
100
* Minelab MEA General Trading LLC was incorporated on 24 September 2014, and Minetec RSA (Pty) Ltd was incorporated on 24 June 2015.
8 4
2015 CODAN ANNUAL REPORT
23. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly owned subsidiary listed below
is relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and
directors’ report.
It is a condition of the Class Order that the company and its subsidiary enter into a Deed of Cross Guarantee. The
effect of the Deed is that the company guarantees to each creditor payment in full of any debt in the event of the
winding up of the subsidiary under certain provisions of the Corporations Act 2001. If a winding up occurs under the
provisions of the Act, the company will only be liable in the event that after six months any creditor has not been paid
in full. The subsidiary has also given similar guarantees in the event that the company is wound up.
Minelab Electronics Pty Limited is the only subsidiary subject to the Deed. Minelab Electronics Pty Limited became a
party to the Deed on 22 June 2009, by virtue of a Deed of Assumption.
A summarised consolidated income statement and a consolidated balance sheet, comprising the company and
controlled entity which is a party to the Deed, after eliminating all transactions between the parties to the Deed of
Cross Guarantee, is set out as follows:
Summarised income statement and retained earnings
Consolidated
Profit before tax
Income tax expense
Profit after tax
Retained earnings at beginning of the year
Retained earnings at end of the year
Balance sheet
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
NON-CURRENT ASSETS
Investments
Property, plant and equipment
Product development
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Other liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
2015
$000
15,163
(4,379)
10,784
6,069
1,043
2,612
48,988
17,000
1,467
70,067
26,458
14,357
35,973
56,722
5,732
139,242
209,309
18,071
45,922
5,015
69,008
24,104
11,327
549
35,980
104,988
104,321
42,970
60,308
1,043
104,321
2014
$000
7,920
(64)
7,856
27,062
6,069
10,757
36,854
13,031
2,120
62,762
26,388
18,256
32,951
57,019
7,542
142,156
204,918
15,849
32,776
4,894
53,519
42,000
9,897
596
52,493
106,012
98,906
42,674
50,163
6,069
98,906
8 5
Name
PARENT ENTITY
Codan Limited
CONTROLLED ENTITIES
Codan (Qld) Pty Ltd
Codan (UK) Limited
Codan Executive Share Plan Pty Ltd
Codan US Inc
Codan Radio Communications ME JLT
Codan Radio Communications Pty Ltd
Codan Holdings US Inc
Daniels Electronics Ltd
IMP Printed Circuits Pty Ltd
Minelab Americas Inc
Minelab Electronics Pty Limited
Minelab International Limited
Minelab MEA General Trading LLC*
Minetec Pty Ltd
Minetec RSA (Pty) Ltd*
Minetec Wireless Technologies Pty Ltd
Parketronics Pty Ltd
Country of
incorporation
Class of
share
Interest
Interest
held
2015
%
held
2014
%
Australia
Ordinary
Australia
England
Australia
USA
UAE
Australia
USA
Canada
Australia
USA
Australia
Ireland
UAE
Australia
South Africa
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
GROUP STRUCTURE (continued)
24. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2015 the parent company of the group was Codan Limited.
Company
2015
$000
Result of parent entity
Profit after tax for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of parent entity at year-end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Share capital
Reserves
Retained earnings
Total equity
10,968
(2,830)
8,138
74,270
190,953
60,918
92,126
42,970
56,431
(574)
98,827
2014
$000
13,808
280
14,088
71,718
189,738
45,966
94,421
42,674
48,374
4,269
95,317
During the year Codan Limited entered into contracts to purchase plant and equipment for $340,799 (2014:$446,427).
OTHER NOTES
25. AUDITOR’S REMUNERATION
Audit services:
KPMG Australia - audit and review of financial reports
Overseas KPMG firms - audit of financial reports
Other services:
KPMG Australia - taxation services
Overseas KPMG firms - taxation services
8 6
Consolidated
2015
$
2014
$
185,000
15,293
123,563
101,367
425,223
185,000
39,604
231,650
164,818
621,072
2015 CODAN ANNUAL REPORT
26. COMMITMENTS
I. CAPITAL EXPENDITURE COMMITMENTS
Aggregate amount of contracts for capital expenditure on property,
plant and equipment and intangibles:
Within one year
One year or later and no later than five years
II. NON-CANCELLABLE OPERATING LEASE EXPENSE AND
OTHER COMMITMENTS
Future operating lease commitments not provided for in the financial
statements which are payable:
Within one year
One year or later and no later than five years
Later than five years
Consolidated
2015
$000
2014
$000
805
349
1,154
2,748
10,854
24,962
38,564
988
1,216
2,204
2,588
4,893
552
8,033
During the year the company announced plans to consolidate and integrate its Adelaide operations in the
Technology Park precinct at Mawson Lakes. A contractual commitment to lease premises at Mawson Lakes has
been entered into and is included in the operating lease expense commitments.
The group leases property under non-cancellable operating leases expiring from one to fifteen years. Leases
generally provide the group with a right of renewal, at which time all terms are renegotiated. Lease payments
normally comprise a base amount and an adjustment for the consumer price index.
III. FINANCE LEASE AND HIRE PURCHASE PAYMENT
COMMITMENTS
Within one year
One year or later and no later than five years
Later than five years
Less: future finance charges
Finance lease and hire purchase liabilities provided for in the
financial statements:
Current
Non-current
39
13
-
52
(3)
49
36
13
49
39
52
-
91
(9)
82
33
49
82
Finance leases and hire purchase agreements are entered into as a means of funding the acquisition of plant and
equipment. Repayments are generally fixed and no leases have escalation clauses other than in the event of payment
default. No lease arrangements create restrictions on other financing transactions.
8 7
Audit services:
KPMG Australia - audit and review of financial reports
Overseas KPMG firms - audit of financial reports
Other services:
KPMG Australia - taxation services
Overseas KPMG firms - taxation services
Consolidated
2015
$
2014
$
185,000
15,293
123,563
101,367
425,223
185,000
39,604
231,650
164,818
621,072
a secured claim. The group does not
normally require collateral in respect
of trade and other receivables.
The group has established an
allowance for impairment that
represents its estimate of incurred
losses in respect of trade and other
receivables. The main components
of this allowance are a specific
loss component that relates to
individually significant exposures,
and a collective loss component
established for groups of similar
assets in respect of losses that have
been incurred but not yet identified.
Guarantees
Group policy is to provide financial
guarantees only to wholly owned
subsidiaries.
OTHER NOTES
(continued)
to develop a disciplined and
constructive control environment in
which all employees understand their
roles and obligations.
27. ADDITIONAL
FINANCIAL INSTRUMENTS
DISCLOSURE
Financial risk management
Overview
The group has exposure to the
following risks from its use of
financial instruments:
• credit risk
•
liquidity risk
• market risk
• operational risk
This note presents information about
the group’s exposure to each of the
above risks, its objectives, policies
and processes for measuring and
managing risk, and its management
of capital. Further quantitative
disclosures are included throughout
these consolidated financial
statements.
The board of directors has
overall responsibility for the
establishment and oversight of the
risk management framework. The
Board Audit, Risk and Compliance
Committee is responsible for
developing and monitoring risk
management policies. The committee
reports regularly to the board on its
activities.
Risk management policies are
established to identify and analyse
the risks faced by the group, to set
appropriate risk limits and controls,
and to monitor risk and adherence to
limits. Risk management policies and
systems are reviewed regularly to
reflect changes in market conditions
and the group’s activities. The group,
through its training and management
standards and procedures, aims
The Board Audit, Risk and
Compliance Committee oversees
how management monitors
compliance with the group’s risk
management policies and procedures
and reviews the adequacy of the risk
management framework in relation
to the risks faced by the group.
(a) Credit risk
Credit risk is the risk of financial
loss to the group if a customer
or counterparty to a financial
instrument fails to meet its
contractual obligations, and
arises principally from the group’s
receivables from customers.
The credit risk on the financial assets
of the consolidated entity is the
carrying amount of the asset, net of
any impairment losses recognised.
The group minimises concentration
of credit risk by undertaking
transactions with a large number of
customers in various countries. For
the year ended 30 June 2015, the
group did not have any customers
that represented greater than 10%
of sales.
Trade and other receivables
The group’s exposure to credit risk is
influenced mainly by the individual
characteristics of each customer.
The demographics of the group’s
customer base, including the default
risk of the industry and country in
which customers operate, has less of
an influence on credit risk.
The group has established a credit
policy under which each new
customer is analysed individually for
credit worthiness before the group’s
standard payment and delivery terms
and conditions are offered.
Goods are sold subject to retention
of title clauses, so that in the event
of non-payment the group may have
8 8
2015 CODAN ANNUAL REPORT (a) Credit risk (continued)
The carrying amount of the group’s financial assets represents the maximum credit exposure. The group’s
maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Trade and other receivables
Carrying amount
Consolidated
Note
8
11
2015
$000
7,156
20,437
2014
$000
13,031
22,141
The group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Australia/Oceania
Europe
Americas
Asia
Africa/Middle East
Impairment losses
5,600
3,888
6,272
1,142
3,906
20,808
3,962
2,753
7,322
1,212
7,077
22,326
The aging of the group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-120 days
More than 120 days
Consolidated
Gross
2015
$000
10,725
7,498
1,622
963
20,808
Impairment
2015
$000
(40)
(8)
-
(552)
(600)
Gross
2014
$000
13,564
6,145
1,024
1,593
22,326
Impairment
2014
$000
(38)
(23)
(4)
(676)
(741)
Trade receivables have been reviewed, taking into consideration letters of credit held and the credit assessment
of the individual customers. The impairment recognised is considered appropriate for the credit risk remaining.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Consolidated
2015
$000
2014
$000
Balance at 1 July
Provision for legal dispute
Impairment loss/(reversal) recognised
Trade receivables written off to the allowance for impairment
Balance at 30 June
741
-
(57)
(84)
600
2,424
(1,284)
(294)
(105)
741
8 9
OTHER NOTES (continued)
27. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(b) Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s
approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions and without incurring unacceptable losses or risking damage to the
group’s reputation. Refer to note 9 for a summary of banking facilities available.
The following are the contractual maturities of financial liabilities:
30 June 2015
Non-derivative financial liabilities
Trade and other payables
Finance leases
Cash advance
Derivative financial liabilities
Net foreign currency hedge payable
30 June 2014
Non-derivative financial liabilities
Trade and other payables
Finance leases
Cash advance
(c) Market risk
Carrying
amount
Contractual
cash flows
12 months
or less
1-5 years
More than
5 years
$000
$000
$000
$000
$000
25,098
49
42,492
67,639
97
97
23,391
82
59,898
83,371
(25,098)
(52)
(43,657)
(68,807)
(97)
(97)
(25,098)
(39)
(1,165)
(26,302)
(97)
(97)
-
(13)
(42,492)
(42,505)
-
-
(23,391)
(91)
(62,192)
(85,674)
(23,391)
(39)
(2,294)
(25,724)
-
(52)
(59,898)
(59,950)
-
-
-
-
-
-
-
-
-
-
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices,
will affect the group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the
return.
The group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All such
transactions are carried out within the policy set by the board. Generally the group seeks to apply hedge accounting
in order to manage volatility in the income statement.
The net fair values of monetary financial assets and financial liabilities not readily traded in an organised financial
market are determined by valuing them at the present value of the contractual future cash flows on amounts due
from customers (reduced for expected credit losses), or due to suppliers. The carrying amount of financial assets
and financial liabilities approximates their net fair values.
9 0
2015 CODAN ANNUAL REPORT
Profile
At the reporting date, the interest rate profile of the group’s interest-bearing financial instruments was:
Carrying amount
Consolidated
FIXED RATE INSTRUMENTS
Financial assets
Financial liabilities
VARIABLE RATE INSTRUMENTS
Financial assets
Financial liabilities
2015
$000
-
(52)
(52)
7,156
(42,492)
(35,336)
2014
$000
-
(91)
(91)
13,031
(59,898)
(46,867)
Cash flow sensitivity
If interest rates varied by 100 basis points for the full financial year, then based on the balance of variable rate
instruments held at the reporting date, profit and equity would have been affected as shown below. This analysis
assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed
on the same basis for 2014.
30 JUNE 2015
Variable rate instruments
30 JUNE 2014
Variable rate instruments
Profit/(loss) before tax
Reserve
100 bp
increase
$000
100 bp
decrease
$000
100 bp
increase
$000
100 bp
decrease
$000
(353)
(469)
353
469
-
-
-
-
Currency risk
The group is exposed to currency risk on sales, purchases and balance sheet accounts that are denominated in a
currency other than the respective functional currencies of group entities, primarily the Australian dollar (AUD). The
currencies in which these transactions are denominated are primarily USD, EUR, CAD and GBP.
The group enters into foreign currency hedging instruments or borrowings denominated in a foreign currency to
hedge certain anticipated highly probable sales denominated in foreign currency (principally USD). The terms of these
commitments are usually less than 12 months. As at the reporting date, the group has entered into an effective collar
hedge instrument structure which will limit the foreign exchange risk on USD $20,000,000 of FY16 cashflows. The
collars give protection above 80 cents and participation down to 71 cents.
9 1
OTHER NOTES (continued)
27. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(c) Market risk (continued)
Currency risk (continued)
The group’s exposure to foreign currency risk (in AUD equivalent) after taking into account hedge transactions
at reporting date was as follows:
30 JUNE 2015
Cash and cash equivalents
Trade receivables
Trade payables
Gross balance sheet exposure
Hedge transactions relating to balance sheet exposure
Net exposure at the reporting date
30 JUNE 2014
Cash and cash equivalents
Trade receivables
Trade payables
Gross balance sheet exposure
Hedge transactions relating to balance sheet exposure
Net exposure at the reporting date
Consolidated
EUR
$000
GBP
$000
USD
$000
CAD
$000
290
111
(21)
380
-
380
464
78
(5)
537
-
537
-
-
(18)
(18)
-
(18)
5
(1)
(18)
(14)
-
(14)
2,341
8,830
(6,112)
5,059
(2,170)
2,889
7,601
16,377
(6,328)
17,650
-
17,650
-
-
(15)
(15)
-
(15)
-
9
(37)
(28)
-
(28)
9 2
2015 CODAN ANNUAL REPORT
Sensitivity analysis
Given the foreign currency balances included in the balance sheet as at reporting date, if the Australian dollar at
that date strengthened by 10%, then the impact on profit and equity arising from the balance sheet exposure
would be as follows:
Consolidated
Reserve credit/(debit)
Profit/(loss) before tax
2015
EUR
GBP
USD
CAD
2014
EUR
GBP
USD
CAD
$000
-
-
(6)
-
(6)
-
-
-
-
-
$000
(35)
2
(262)
1
(294)
(49)
1
(1,605)
3
(1,650)
A 10% weakening of the Australian dollar against the above currencies at 30 June would have had the equal but
opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain
constant.
(d) Fair value hierarchy
The group’s financial instruments carried at fair value have been valued by using a “level 2” valuation method.
Level 2 valuations are obtained from inputs, other than quoted prices, that are observable for the asset or liability
either directly or indirectly. At the end of the current year, financial instruments valued at fair value were limited
to net foreign currency hedge payables of $97,000, for which an independent valuation was obtained from the
relevant banking institution.
28. EMPLOYEE BENEFITS
Consolidated
2015
$000
2014
$000
Aggregate liability for employee benefits, including on-costs:
Current - other creditors and accruals
Current - employee entitlements
Non-current - employee entitlements
The present values of employee entitlements not expected to be settled
within 12 months of the reporting date have been calculated using the
following weighted averages:
3,848
5,287
642
9,777
1,971
5,005
683
7,659
Assumed rate of increase in wage and salary rates
Discount rate
Settlement term
3.50%
4.20%
10 years
3.50%
3.47%
10 years
Recent research has concluded that a deep market for high quality corporate bond rates now exists in Australia.
Where such a market exists, AASB 119 Employee Benefits requires that the rate used to discount employee benefit
liabilities shall reflect those market yields. In prior years, the group has used a government bond rate on the basis
that a deep market for corporate bonds did not exist, however now that it does exist, a corporate bond rate has
been used for the current reporting period.
9 3
OTHER NOTES
(continued)
28. EMPLOYEE BENEFITS
(continued)
Employee Share Plan
On 19 December 2012, the directors
approved the establishment of an
Employee Share Plan (ESP). The
ESP is designed to recognise the
contribution made by employees
to the group, and provides eligible
employees with an opportunity
to share in the future growth and
profitability of the company by
offering them the opportunity to
acquire shares in the company.
ESP shares issued in
financial year 2013
The company issued 63,531 shares
to eligible employees in February
2013. The fair value of the shares
was $2.75 per share, based on the
volume weighted average price at
which Codan shares were traded on
the ASX for the five days immediately
preceding the date of issue of the
shares. The exercise price was nil.
The shares are restricted from sale
until the earlier of three years from
the acquisition date, or upon the date
on which an employee is no longer
employed by the group.
ESP shares issued in
financial year 2014
The company issued 43,820 shares
to eligible employees in November
2013. The fair value of the shares
was $1.78 per share, based on the
volume weighted average price at
which Codan shares were traded on
the ASX for the five days immediately
preceding the date of issue of the
shares. The exercise price was nil.
The shares are restricted from sale
until the earlier of three years from
the acquisition date, or upon the date
on which an employee is no longer
employed by the group.
ESP shares issued in
financial year 2015
There were no ESP shares issued in
financial year 2015.
Performance Rights Plan
At the 2004 AGM, shareholders
approved the establishment of a
Performance Rights Plan (Plan).
The Plan is designed to provide
executives with an incentive to
maximise the return to shareholders
over the long term, and to assist in
the attraction and retention of key
executives.
Performance rights issued
in financial year 2013
The company issued 369,970
performance rights in November 2012
to certain executives. The fair value of
the rights was on average $1.77 based
on the Black-Scholes formula. The
model inputs were: the share price
of $2.25, no exercise price, expected
volatility 37%, dividend yield 4.2%,
a term of three years and a risk-free
rate of 3.1%. Due to the departure
of an executive in FY13, 72,790
performance rights were cancelled.
The total expense recognised as
employee costs in 2015 in relation to
the performance rights issued was nil
(2014: $197,643 recovery).
The group’s earnings per share over
the three-year period to 30 June 2015
have not met the performance target
and therefore these performance
rights have lapsed and no shares will
be issued.
9 4
2015 CODAN ANNUAL REPORT
Additional performance
rights issued in financial
year 2013
The company issued 93,320
performance rights in December
2012 to an employee. The fair
value of the rights was on average
$1.95 based on the Black-Scholes
formula. The model inputs were:
the share price of $2.37, no exercise
price, expected volatility 38.3%,
dividend yield 4.01%, a term of two
years and a risk-free rate of 3.3%.
The total expense recognised as
employee costs in 2015 in relation to
the performance rights issued was
$45,411 (2014: $75,686 expense).
The performance rights were
exercised and converted to shares
during 2015.
Performance rights issued
in financial year 2014
Performance rights issued
in financial year 2015
The company issued 326,962
performance rights in November
2013 to certain executives. The fair
value of the rights was on average
$1.11 based on the Black-Scholes
formula. The model inputs were:
the share price of $1.51, no exercise
price, expected volatility 86%,
dividend yield 8.6%, a term of three
years and a risk-free rate of 4.2%.
The total expense recognised as
employee costs in 2015 in relation to
the performance rights issued was
nil (2014: nil).
The company issued 1,083,715
performance rights in November
2014 to certain executives. The fair
value of the rights was on average
$0.64 based on the Black-Scholes
formula. The model inputs were: the
share price of $0.80, no exercise
price, expected volatility 77%,
dividend yield 3.75%, a term of three
years and a risk-free rate of 3.1%.
The total expense recognised as
employee costs in 2015 in relation
to the performance rights issued
was $250,389.
The performance rights become
exercisable if certain performance
thresholds are achieved. The
performance threshold is based
on growth of the group’s earnings
per share over a three-year period.
For executives to receive the total
number of performance rights, the
group’s earnings per share must
increase by at least 15% per annum
over the three-year period.
The performance rights become
exercisable if certain performance
thresholds are achieved. The
performance threshold is based
on growth of the group’s earnings
per share over a three-year period.
For executives to receive the total
number of performance rights, the
group’s earnings per share must
increase by at least 15% per annum
over the three-year period.
If achieved, performance rights are
exercisable into the same number of
ordinary shares in the company. No
performance rights have been issued
since the end of the financial year.
9 5
OTHER NOTES (continued)
29. KEY MANAGEMENT PERSONNEL DISCLOSURES
Transactions with key management personnel
(a) Loans to directors
There have been no loans to directors during the financial year.
(b) Key management personnel compensation
The key management personnel compensation included in “personnel expenses” (refer note 3) is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long term
Consolidated
2015
$
2014
$
3,017,410
174,901
250,388
31,100
3,473,799
2,515,885
152,074
(465,435)
25,708
2,228,232
(c) Key management personnel transactions
From time to time, directors and specified executives, or their related parties, may purchase goods from the group. These
purchases occur within a normal employee relationship and are considered to be trivial in nature.
30. OTHER RELATED PARTIES
All transactions with non-key management personnel related parties are on normal terms and conditions.
Companies within the group purchase materials from other group companies. These transactions are on normal
commercial terms.
Loans between entities in the wholly owned group are repayable at call and no interest is charged.
31. NET TANGIBLE ASSET / LIABILITY PER SHARE
Net tangible asset/(liability) per share
2015
1.0 cents
2014
(0.6 cents)
9 6
2015 CODAN ANNUAL REPORT
In the opinion of the directors of Codan Limited (“the company”):
(a) the consolidated financial statements and notes, set out on pages 58-96, are in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the financial position of the consolidated entity as at 30 June 2015 and its
performance, as represented by the results of its operations and its cash flows, for the financial year ended on
that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a);
(c) the remuneration disclosures that are contained in the Remuneration report in the Directors’ report comply
with Australian Accounting Standards AASB 124 Related Party Disclosures, the Corporations Act 2001 and the
Corporations Regulations 2001;
(d) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable;
(e) there are reasonable grounds to believe that the company and the group entity identified in Note 23 will be able
to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross
Guarantee between the company and the group entity pursuant to ASIC Class Order 98/1418; and
(f) the directors have been given the declaration required by Section 295A of the Corporations Act 2001 by the chief
executive officer and the chief financial officer for the financial year ended 30 June 2015.
Dated at Newton this 21st day of August 2015.
Signed in accordance with a resolution of the directors:
D J Simmons
Director
D S McGurk
Director
9 7
Independent auditor’s report to the members of Codan Limited
Report on the financial report
We have audited the accompanying financial report of Codan Limited (the company), which comprises the consolidated balance
sheet as at 30 June 2015, and consolidated income statement and consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 31 comprising
a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group
comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility 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 is free from material misstatement whether due to
fraud or error. In note 1(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to
audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of
the Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
9 8
2015 CODAN ANNUAL REPORT Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the 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 30 June 2015 and of its performance for the
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(a).
Report on the remuneration report
We have audited the Remuneration Report included in page 38-46 of the directors’ report for the year ended 30 June
2015. 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Codan Limited for the year ended 30 June 2015, complies with Section 300A
of the Corporations Act 2001.
KPMG
Scott Fleming
Partner
Adelaide
21 August 2015
9 9
Additional information required by the Australian Stock Exchange Limited Listing Rules not disclosed elsewhere in this
report is set out below.
Shareholdings as at 19 August 2015
Substantial shareholders
The numbers of shares held by substantial shareholders and their associates are set out below:
Shareholder
I B Wall and P M Wall
Interests associated with Starform Pty Ltd, Dareel Pty Ltd and Pinara Group Pty Ltd
Interests associated with Kynola Pty Ltd and Warren Glen Pty Ltd
Distribution of equity security holders
Number of
shares held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - over
Total
Number of
ordinary shares
34,808,151
24,089,386
12,320,566
Number of equity
security holders
Ordinary shares
1,234
1,585
783
911
115
4,628
The number of shareholders holding less than a marketable parcel of ordinary shares is 740.
Securities exchange
Other information
On-market buy-back
The company is listed on the
Australian Securities Exchange.
The home exchange is Sydney.
Codan Limited, incorporated and
domiciled in Australia, is a publicly
listed company limited by shares.
There is no current on-market buy-
back.
1 0 0
2015 CODAN ANNUAL REPORT
Twenty largest shareholders
Name
I B Wall and P M Wall
Starform Pty Ltd
Kynola Pty Ltd
Dareel Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Griffinna Pty Ltd
National Nominees Limited
M K and M C Heard
J P Morgan Nominees Australia Limited
G Bettison
A Bettison
Warren Glen Pty Ltd
Fruehling Pty Ltd
Citicorp Nominees Pty Limited
Mitranikitan Pty Ltd
Pinara Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Bond Street Custodians Limited
Equitas Nominees Pty Limited
Cedara Pty Ltd
Total
Offices and officers
Number of ordinary
shares held
34,808,151
11,404,224
9,118,356
8,854,251
6,511,689
6,000,000
5,308,161
4,764,585
3,858,878
3,562,125
3,562,124
3,202,210
2,999,050
2,722,142
2,522,458
2,067,687
1,931,805
1,815,746
1,783,947
1,314,508
Percentage of
capital held
19.7%
6.5%
5.1%
5.0%
3.7%
3.4%
3.0%
2.7%
2.2%
2.0%
2.0%
1.8%
1.7%
1.5%
1.4%
1.2%
1.1%
1.0%
1.0%
0.7%
118,112,097
66.7%
Company Secretary
Principal registered office
Location of share registry
Mr Michael Barton BA (ACC), CA
81 Graves Street
Newton South Australia 5074
Telephone: (08) 8305 0311
Facsimile: (08) 8305 0411
Internet address: www.codan.com.au
Computershare Investor Services
Pty Limited
GPO Box 1903
Adelaide South Australia 5001
1 0 1
Directors
Mr David Simmons (Chairman)
Mr Donald McGurk (Managing Director and Chief Executive Officer)
Mr Peter Griffiths
Mr David Klingberg AO
Lt-Gen Peter Leahy AC
Mr Jim McDowell
Mr Graeme Barclay
Company Secretary
Mr Michael Barton
Principal registered office
81 Graves Street
Newton South Australia 5074
Auditor
KPMG
151 Pirie Street
Adelaide South Australia 5000
Location of share registry
Computershare Investor Services Pty Limited
GPO Box 1903
Adelaide South Australia 5001
1 0 2
2015 CODAN ANNUAL REPORT 1 0 3
We don' t simply pro t e c t
borde rs, we pro t e c t
individuals. Our re sponse
time s depend on hearing
t hat me ssage as soon
and as c learly
as possible.
1 0 4
We don' t simply pro t e c t
borde rs, we pro t e c t
individuals. Our re sponse
time s depend on hearing
t hat me ssage as soon
and as c learly
as possible.
1 0 5
AT CODAN
WE BELIEVE
TECHNOLOGY
HAS THE POWER
TO TRANSFORM
PEOPLE’S LIVES.
PEOPLE FROM
ALL OVER THE
WORLD RISK THEIR
LIVES EVERY DAY,
WORKING IN HARSH
AND DANGEROUS
CONDITIONS
TO MAKE THEIR
COMMUNITIES SAFER
AND MORE SECURE.