2 0 1 6 C O D A N A N N U A L R E P O R T
I N N O V A T I O N W H E R E V E R Y O U A R E
INNOVATION
WHEREVER
YOU ARE
At Codan, our purpose is to create
long-term shareholder value through
the design, development and
manufacture of technology solutions.
We work with customers in over 150
countries, creating solutions that
solve communications, security and
productivity problems in some of the
harshest environments on earth.
ANNUAL REPORT
C O NTE NTS
2
6
8
10
14
15
2 8
32
3 5
_ F Y16 S U M MARY
_ C HAI R MAN’S LETTE R TO S HAR E H O LD E R S
_ C E O’S R E PO RT
_ O U R PE O PLE AN D VALU E S
_ G LO BAL LO CATI O N S
_ O PE R ATI O N S
_ B OAR D O F D I R E CTO R S
_ LEAD E R S H I P TEAM
_ FI NAN C IAL R E PO RT
102 _ ASX AD D ITI O NAL I N FO R MATI O N
104 _ C O R PO R ATE D I R E CTO RY
2 0 16
C O DAN
AN N UAL
R E PO RT
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 Thursday, 27 October 2016
at Codan Limited,
2 Second Avenue,
Mawson Lakes,
South Australia.
PAGE 1
TOTAL REVENUE
$XX
FY16 SUMMARY
TOTAL
REVENUE
$169.5M
UNDERLYING
NET PROFIT
AFTER TAX
$21.1M
ANNUAL
DIVIDEND
6.0c
• Metal Detection
contribution increased 55%,
assisted by the successful
release of the GPZ 7000®
gold detector in Africa
•
Strategy to improve
earnings stability
by broadening markets and
growing revenue base
•
•
•
•
•
•
CODAN LIMITED
Founded in 1959 and
headquartered in South
Australia, Codan Limited
(ASX:CDA) is an international
company that develops rugged
and reliable electronics
solutions for government,
corporate, NGO and consumer
markets across the globe.
Codan’s technologies include
radio communications, metal
detection and tracking
solutions.
We have approximately 360
employees located in Australia,
New Zealand, Canada, the USA,
Ireland, China, the UAE and
South Africa. Our marketing
reach embraces activity in over
150 countries, with exports
accounting for 85% of our sales.
Underlying net profit after
tax of $21.1 million, up 67%
on 18% higher sales
Statutory net profit after
tax of $15.5 million, up 24%
Increased annual dividend
to 6.0 cents, up 71%, fully
franked
Underlying earnings per
share of 11.9 cents, up 68%
Strong balance sheet – net
debt reduced to $12.6
million
Broader product offering
brings best Radio
Communications result in
seven years; contribution
increased 15%
ANNUAL REPORT
TOTAL REVENUE
$XX
2013
$244.3m
2012
$179.4m
2013
$76.3m
2013
$45.4m
2016
$169.5m
2012
$51.7m
2015
$143.9m
2014
$132.3m
2016
$41.9m
2012
$27.9m
2016
$21.1m
2015
$29.9m
2014
$22.6m
2015
$12.7m
2014
$9.0m
OPE RATI NG
REVE N U E
U N DE RLYI NG
E BITDA*
U N DE RLYI NG
N PAT*
Underlying results for
the year ended 30 June
2016 % of
sales
2015 % of
2015
sales
2014
2014 % of
sales
2013 % of
2013
sales
2012 % of
2012
sales
REVENUE
Note
Communications
- HF and LMR
- Discontinued Satcom
Metal detection
Tracking solutions
Other
Total revenue
EBITDA
EBIT
Interest
Net profit before tax
Taxation
Net profit after tax
Earnings per share
Dividend per share
Return on equity
1
$65.0m
38%
$63.8m
44%
$53.9m
41%
$47.5m
$10.5m
20%
4%
$47.7m
$18.7m
27%
10%
$99.2m
59%
$73.3m
51%
$69.9m
53% $166.3m
68%
$98.6m
55%
$5.3m
3%
$4.8m
$2.0m
3%
2%
$4.0m
$4.5m
3%
3%
$14.5m
$5.5m
6%
2%
$9.3m
$5.1m
5%
3%
$169.5m 100% $143.9m 100% $132.3m 100% $244.3m 100% $179.4m 100%
$41.9m 25% $29.9m 21% $22.6m 17% $76.3m 31% $51.7m 29%
$29.2m 17% $19.3m 13% $13.6m 10% $64.7m 26% $43.2m 24%
($1.7)m
($3.4)m
($2.8)m
($2.5)m
($1.7)m
$27.5m 16% $16.8m 12% $10.8m
($1.8)m
($4.1)m
($6.4)m
8% $63.0m 26% $39.8m 22%
($17.6)m
($11.9)m
$21.1m 12% $12.7m
7.1c
11.9c
9%
6.0c
16%
3.5c
10%
$9.0m
5.1c
3.0c
7%
28%
7% $45.4m 19% $27.9m 16%
25.8c
13.0c
41%
17%
17.0c
9.5c
37%
17%
2
Gearing
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
22%
8%
* 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 2016, non-recurring items related to restructuring costs and impairment of property and Minetec assets.
For the prior year, non-recurring items related to the closure of a non-core business.
PAGE 3
ANNUAL REPORT I N N O V A T I O N W H E R E V E R Y O U A R E
WITH UP TO 40% IMPROVEMENT
IN GOLD DETECTION CAPABILITY,
THE GPZ 7000® IS FAST BECOMING
THE DETECTOR OF CHOICE IN
AFRICA, WITH MANY SMALL-SCALE
GOLD MINERS UPGRADING TO THIS
WORLD-LEADING GOLD DETECTOR
PAGE 5
DAVID SIMMONS
CHAIRMAN
CHAIRMAN’S LETTER TO SHAREHOLDERS
WHEN I REFLECT ON THE RESULTS FOR 2015/2016, TWO THINGS REALLY STAND OUT. THE FIRST IS
THAT UNDERLYING NET PROFIT AFTER TAX IMPROVED FOR THE SECOND CONSECUTIVE YEAR, AND
THE SECOND IS THAT EVEN IN A YEAR WHEN WE SPENT AROUND $15 MILLION OR 9% OF SALES ON
PRODUCT DEVELOPMENT, WE GENERATED SIGNIFICANT CASH. THIS MEANT THAT OUR BORROWINGS
REDUCED FROM $35.3 MILLION AT THE START OF THE YEAR TO $12.6 MILLION AT YEAR-END. BOTH OF
THESE ACHIEVEMENTS WERE VERY PLEASING.
of the current financial year,
we expect that our results to
31st December 2016 will be
well ahead of the previous
year. Although it is too early to
forecast our full-year results,
we are very much focused on
consistent improvement
year-on-year.
David Simmons
Chairman
2015/2016 was a challenging
one for our company. Our
second-half results are
historically stronger than our
first half, but for a variety of
reasons our budgeting process
indicated an even greater
skewing to the second half in
the year just completed. This
turned out to be the case. Our
results for the first six months
were soft, but the results for the
second six months were very
strong, allowing us to post an
improvement in profit over the
previous year of 24%. Donald
has provided some commentary
explaining the reasons for these
improved results in his report.
At last year’s AGM, I spoke
about the difficulty that we
have in accurately forecasting
our results due to the project
nature of some of our business
and the volatility that we
experience in our gold-detecting
markets (particularly in Africa).
This year’s results have again
underlined this volatility. As we
entered this year, we were of
the view that the accelerated
new product development
programme would be largely
completed by year-end;
however, we have committed
to a further year of accelerated
development, as the imperative
to broaden our addressable
markets is our number-one
priority. This decision means
that we will spend around
$20 million this year on new
product development initiatives.
This is a large investment for
the future and has the potential
to significantly reshape our
business.
We have now completed the
process of board regeneration.
Kathy Gramp has joined the
board and is chairing the
Audit, Risk and Compliance
Committee. Peter Griffiths and
David Klingberg retired from the
board during the year. I will reflect
on their excellent contributions
as board members at the AGM.
This year we will hold our AGM
at our new facility at Mawson
Lakes in Adelaide. We are
very proud of this new facility.
The feedback from our staff
in relation to the workplace
environment has been very
positive. For the first time, we
have all of our Adelaide-based
staff on one site. After the AGM,
we will be delighted to show
interested shareholders through
our new facility. There will be
a few surprises on the day,
including the opportunity to “go
prospecting” on our test range.
We look forward to welcoming
you to the AGM.
We will provide an update
on our current-year trading
performance at the AGM. Due
to a number of major project
awards that are certain to
be delivered in the first half
ANNUAL REPORT
I N N O V A T I O N W H E R E V E R Y O U A R E
INVESTMENT IN NEW
PRODUCT DEVELOPMENT HAS THE
POTENTIAL TO SIGNIFICANTLY
RESHAPE OUR BUSINESS
PAGE 7
DONALD MCGURK
MANAGING DIRECTOR
AND CEO
CEO’S REPORT
I AM PLEASED TO REPORT THAT WE CONTINUE TO MAKE GOOD PROGRESS ACROSS THE BUSINESS AS
WE BEGIN TO SEE THE BENEFITS OF OUR SIGNIFICANT INVESTMENT IN NEW PRODUCT DEVELOPMENT
AND INCREASED PRESENCE IN THE MARKET.
Underlying net profit after tax
increased 67% to $21.1 million
for the year on group sales of
$169.5 million. The company
declared a fully franked final
dividend of 4.0 cents per share,
following on from the 2.0 cents
per share fully franked interim
dividend. This resulted in a total
dividend of 6.0 cents for the full
year, an increase of 71% over
FY15.
The balance sheet was
strengthened, with net debt
reduced by $22.8 million over
the year and the company’s
gearing ratio reduced from 22%
to 8%. Net debt remains well
within the company’s debt facility
of $85 million and gives us
flexibility to fund further
growth initiatives.
The company is focused on
maintaining the progress made
during the past two years by
exploring opportunities to
develop additional profitable
revenue streams. The recently
announced defence electronics
initiative is one example which is
expected to provide a growing
market opportunity in Australia
over the longer term.
Radio Communications
Radio Communications had
another excellent year, increasing
both sales and profitability.
Revenue increased 2% to $65.0
million and segment contribution
increased 15% to $17.4 million.
While FY16 delivered an
excellent result, we remain
focused on expanding our
current technology platforms
to create new products that
broaden our revenue base and
enable us to enter adjacent
markets.
In FY16, we released a series
of new LMR and HF products,
including the Patrol™ Manpack
radio and the Cyclone™ repeater.
More recently, in June 2016 the
division launched its Sentry-V™
handheld tactical VHF radio,
the first product to be launched
from Codan’s upcoming suite of
military products. We are looking
forward to launching further
products in FY17 as we expand
our product line.
Sales and marketing capability
has also been strengthened by
adding a number of key sales
resources into Africa and the
Middle East. This has given the
business better market reach
and brought it closer to its key
customers. In support of this
approach, the sales headquarters
for these regions has been
shifted from the United Kingdom
to Dubai.
LMR performed strongly in
FY16, delivering its highest ever
sales over the 66-year history of
the business. This was brought
about by focusing on systems
and solutions selling in the North
American first-responder market
(ie. police officers, firefighters,
paramedics, etc.).
As previously announced, the
board has approved an additional
engineering investment of
approximately $5 million to be
spent over FY17 to accelerate
the development of our expanded
LMR product range. We have
now recruited the majority of the
25 new engineers required to
deliver these products, which will
be released in FY18. These LMR
products are expected to drive
growth in Radio Communications
by enabling us to offer even
higher value-add solutions to
our customers.
FY16 was an excellent year for
Radio Communications, and we
expect to deliver a similar result
in FY17.
Metal Detection
Minelab revenue increased 35%
to $99.2 million and segment
contribution increased 55% to
$29.8 million. While all parts of
the Minelab business performed
well, the largest part of this
growth was driven by gold
detector sales.
The new GPZ 7000® has
proven to be the world’s best
gold detector, and while sales
were strong in the developed
world when the product was
released last year, the most
significant growth in our FY16
gold detector sales has come
from the successful launch of
this product into our African
markets. The GPZ 7000® was
launched in Africa in October
2015, and demand exceeded our
initial expectations as the market
quickly recognised the superior
performance of this technology.
We have evidence that the
adoption of this product is
being driven by its superior
performance rather than gold
surges in isolated markets,
which increases our confidence
for FY17.
Our FY16 result was also helped
by surges in demand from two
key regions. While the duration of
these surges can be uncertain,
Minelab continues to open
up new African markets and
maximise opportunities as and
when they arise.
ANNUAL REPORT
Sales of the entry level coin and
treasure GO-FIND® detector
strengthened during FY16 as
Minelab signed a number of
distribution agreements in the
US and Europe which greatly
improved market penetration. The
GO-FIND® now represents a
significant incremental revenue
stream for Minelab, and this
is expected to grow as we
continue to broaden the product’s
international distribution.
The Countermine business
also performed well during the
year as a result of increased
demining activities undertaken
by humanitarian and government
organisations. Our recently
announced $6.7 million contract
win to further develop a dual-
sensor metal detector for the
Australian Defence Force is a
further endorsement of Minelab’s
world-leading technology and
engineering capability.
In response to customer demand,
two new products are planned
for release in FY17. A larger coil
for the GPZ 7000® will give a
significant depth increase over
the standard coil. In addition to
this, an entry-level gold detector
will be released to the African
market at the end of 2016. This
product has been specifically
designed for the African market
to fill a gap in our product range,
and is expected to quickly take
market share from competitors.
Our strategy for Minelab is
to maintain our competitive
advantage across gold, consumer
and countermine markets
by continually innovating our
products while expanding our
critical routes to market.
The Minelab business is strong
due to the significant investment
we have made to expand our
product range and improve our
distribution structure. While
the African component of this
business is difficult to forecast,
these factors make us more
confident of continued success
in FY17.
Tracking Solutions
Integration of Adelaide facilities
We have consolidated our
Adelaide operations in the
Technology Park precinct
at Mawson Lakes, moving
into a fit-for-purpose facility
during December 2015. The
newly renovated building
has enabled the company to
integrate its Minelab and Radio
Communications businesses on
one site and provides the right
environment for the business and
our staff into the future.
Our people
Our success is driven by our
people, and I cannot speak highly
enough about the way they have
risen to the challenges that have
faced the business in recent
times. The team has worked
tirelessly to design and develop
the new product platforms
required to stay ahead of the
game and drive our sales growth.
Whether a design engineer, part
of the operations team, a finance
professional or in a support or
customer-facing role, the future
depends on each one of us
working closely together as
one team to solve the
customer’s problem.
On behalf of the board, I would
like to take this opportunity to
acknowledge the significant
efforts of our people and to
formally thank them for their
contribution to the improved
result.
Donald McGurk
Managing Director and CEO
The journey toward autonomous
mining is a real opportunity for
Minetec’s unique, high-precision
tracking and integrated real-time
wireless communications, made
possible through the integration
of WASP™ technology and
SMARTS™.
This enabling technology
is expected to transform
underground mining in the same
way that Wi-Fi communications
and GPS positioning transformed
open-pit mining two decades
ago. Minetec now has a proven
capability that has been deployed
in six operating mines. These
deployments form critical
reference sites that demonstrate
the technology is proven and
delivers real operational benefits.
Minetec has recently secured a
multi-million dollar contract to
deploy its full range of high-
precision tracking, safety and
task-management systems in
an underground gold mine in
Western Australia.
Minetec is focused on capitalising
on these early successes and is
targeting underground hard-rock
gold, copper and diamond mines
in Australia and South Africa. The
division has unique intellectual
property which we strongly
believe is highly valued by
our customers.
Minetec incurred losses of $1.3
million in the first half of FY16
and, as forecast in our half-year
announcement, achieved a
break-even result in the second
half. We expect the business to
build on this success and deliver
a full-year profit in FY17.
The carrying value of Minetec’s
capitalised product development,
inventory and fixed assets has
been reviewed and, as a result,
the board has written down
the value by $2.8 million after
tax. This write-down relates to
Minetec assets which are not
based on the high-precision
tracking (WASP™) technology,
now the key focus of the
business.
PAGE 9
OUR PEOPLE AND VALUES
CODAN’S CORE VALUES ARE A SHARED SET OF VALUES THAT PROVIDE THE FRAMEWORK FOR
OUR ORGANISATION TO ENGAGE WITH EMPLOYEES AND STAKEHOLDERS AND SHAPE A STRONG
COMPANY CULTURE.
Our core values underpin our
behaviours and how we work
together, and guide our day-
to-day decisions. They are the
elements we use every day in
everything we do.
Our 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.
Codan has an awards
programme which recognises
those employees in particular
who have demonstrated that
they live and embrace the core
values within their daily work.
Our core values are:
Can-Do
High Performing
Customer Driven
Openness & Integrity
LIST OF RECIPIENTS
Can-Do
Matt Ashurst
Training and Customer Service
Manager, Radio Communications,
Australia
Leanne Bennett
Administrative Coordinator, Group
Operations, Australia
Steve Bentham
Process Improvement Coordinator,
Group Operations, Australia
Tina Bowen
Group Systems Manager, Group
Operations, Australia
Tom Bozek
Warehouse Manager, Minelab, USA
David Isles
Technical Support Officer, Minelab,
Australia
Christina Lake
Receptionist, Group Operations,
Australia
Michelle Lang
Receptionist, Group Operations,
Australia
Donny Simile
Senior Buyer, Group Operations,
Australia
Megan Slater
Administration Assistant, Radio
Communications, Australia
Peter Sommer
HF Technician, Radio
Communications, Australia
Customer Driven
Roy Bateman
Freight and Logistics Coordinator,
Group Operations, Australia
Ben Bayly
Human Resources Systems Manager,
Corporate Services, Australia
Anne Ocampo
Sales Administrator, Minelab, Dubai
Andrew Summers
ICT Operations Supervisor, Group
Operations, Australia
Zhen Yong
Helpdesk/Desktop Support, Group
Operations, Australia
Openness and Integrity
Nino Caporella
Manufacturing Product Manager,
Group Operations, Australia
Paul Hischausen
Team Supervisor Hardware, Radio
Communications, Australia
Ben Lai
Test Engineer, Group Operations,
Australia
TETRA Installation Team
Pawel Karnicki, Josh Kelly and
Andrew Walton, Minetec, Australia
High Performing
Adam Diggens
Creative Brand Manager, Radio
Communications, Australia
Martin Foran
Technical Sales Representative,
Minelab, Australia
Alan Keam
AMTC Technical Team Member,
Group Operations, Australia
PC1 Project Team
Greg Niedzwiadek-Sanecki,
Aleksandar Pechkov, Stephen
Pilkington, Evan Pryce, Sunil
Sanganbatte and Sashko Vuchkov,
Minetec, Australia
Nick Schultz
Mechanical Design Engineer,
Minelab, Australia
Ruzhdi Shkodra
CAD Engineer, Radio
Communications, Canada
Philip Wahrlich
Principal Technology Physicist,
Minelab, Australia
Kah Wai Yong
Product Manager, Minetec, Australia
ANNUAL REPORT
Can-Do
Award
Customer
Driven Award
Tom Bozek
Warehouse Manager, Minelab, USA
Anne Ocampo
Sales Administrator, Minelab, Dubai
High Performing
Award
Openness and
Integrity Award
Ruzhdi Shkodra
CAD Engineer, Radio Communications, Canada
Ben Lai
Test Engineer, Group Operations, Australia
PAGE 11
ANNUAL REPORT I N N O V A T I O N W H E R E V E R Y O U A R E
MINETEC HAS SUCCESSFULLY
IMPLEMENTED FULL-SCALE
OPERATIONAL DEPLOYMENTS
ACROSS A VARIETY OF
UNDERGROUND GOLD, COPPER
AND PLATINUM MINES
PAGE 13
GLOBAL LOCATIONS
SELLING INTO
150 COUNTRIES
WITH OPERATIONS
ACROSS THE GLOBE
Victoria
Cork
Beijing
Washington
Chicago
Penang
Johannesburg
Dubai
Perth
Adelaide
Christchurch
C O DAN O FFI C E S
MAN U FACTU R I N G O PE R ATI O N S
E N G I N E E R I N G TEAM S
ANNUAL REPORT
ANNUAL REPORT
OPERATIONS
R AD I O C O M M U N I CATI O N S
M ETAL D ETE CTI O N
TR AC KI N G S O LUTI O N S
E N G I N E E R I N G AN D O PE R ATI O N S
PAGE 15
RADIO COMMUNICATIONS
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 COMMUNICATIONS SOLUTIONS
THAT ENABLE OUR CUSTOMERS TO SAVE LIVES, CREATE SECURITY AND SUPPORT PEACEKEEPING
WORLDWIDE. WITH MORE THAN 50 YEARS IN THE BUSINESS, CODAN RADIO COMMUNICATIONS HAS
GARNERED A REPUTATION FOR RELIABILITY AND CUSTOMER SATISFACTION, PRODUCING INNOVATIVE
AND INDUSTRY-LEADING TECHNOLOGY SOLUTIONS.
FY16 SUMMARY
• Achieved best profit result in
seven years
• Delivered highest LMR sales in
the history of the company
•
Increased profit contribution
15% beyond FY15
• Launched Cyclone™ and Sentry™
product lines
• Embedded agile engineering
practices
FY17 OBJECTIVES
• Complete new LMR product
suite, delivering a full system
solution, for release in FY18
• Establish Cyclone™ as the “go-
to” legacy repeater replacement
• Launch military standard Sentry™
family of software-defined radios
(SDR) to include tactical HF and
Very High Frequency (VHF)
• Focus on providing higher-value
communications solutions
ANNUAL REPORT
ANNUAL REPORT
SUCCESS STORY
PAGE 17
Codan Radio Communications has increased market share in its major markets, including key North American accounts. FY16 results were further bolstered by one-off projects for the US Army in Afghanistan and the US Coast Guard in Alaska. Investment in the underlying technology and product portfolio continued throughout the year, with the Stratus™ tactical Long-Term Evolution (LTE) compatible repeater and the Cyclone™ drop-in Quantar replacement gaining much attention and success in the LMR marketplace. The digitally enhanced Patrol™ HF Manpack and the Military Standard Sentry-V™ tactical radio kept Codan at the forefront of our customers’ consideration and continued to improve brand recognition. Envoy® software release 3 enhanced and maintained Codan as the radio provider of choice in the humanitarian and NGO market. Offering an extended suite of Wi-Fi networking functions as part of an already easy-to-use radio has further cemented our reputation as the best infrastructure-free communications tool on the market. Voice quality, unparalleled reliability and an affordable price remain the hallmark rationale for governments and agencies using Codan radios worldwide.The HF Roadrunner and LMR Wombat agile engineering teams became an essential, embedded element of our technical core competency during the year. Responding to real-time customer input and rapidly shifting market demands, the teams generated major legacy-product improvements in a compressed time frame. Rapid response engineering has been a key element of the Stratus™, Cyclone™, Sentry™ and Patrol™ initiatives. Codan Radio Communications continues to enhance its world-class product design and development capability. Our focus is firmly fixed on delivery to our customers, as we 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 which overcome local or long-haul communications challenges anywhere in the world. To our customers, we are the “trusted platform”.Codan Stratus™ extends communications coverage for US intelligence and security agency.In August 2015, Codan Radio Communications announced the award of a $1.1 million order for its new Stratus™ network by an intelligence and security agency in the United States. The award marked the first significant sale of Stratus™ since its launch at the International Wireless Communications Expo (IWCE) in March 2015. Stratus™ is being trialled by multiple US agencies, with smaller Stratus™ sales already completed, demonstrating its wide-scale adoption within the public safety industry.Stratus™ is a hybrid P25 and LTE (3G/4G) deployable network that integrates the strengths of the two technologies to provide secure wide-area voice networks. A complete Stratus™ network consists of the Stratus™ repeater, power centre, tactical server and rapid antenna, and a complete network can be deployed by a single person within only five minutes.“Agencies are impressed by the ability of Stratus™ to be deployed instantaneously, without any technical training required. With its quick integration into an existing P25 network, Stratus™ enables communication within their networks from any location, from on the street to within buildings, eliminating black spots experienced so frequently,” said Paul Sangster, Director of Sales at Codan Radio Communications.The LTE link within the Stratus™ provides reliable P25 network connectivity anywhere with cellular coverage, while providing the highest level of encryption and a secure VPN connection into a local area network. Interoperable with all P25 subscriber units, Stratus™ is an investment in the safety and security of its users and the community. METAL DETECTION
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.
FY16 SUMMARY
• New top-of-range gold
detector – the GPZ 7000® –
released into Africa
• Sales into Africa delivered
a significantly stronger
second half
• Our Dubai base continues to
bring us closer to the African
market
• Continued to build the
treasure market with the
GO-FIND® series
•
Increased full-year profit
contribution by 55% over the
prior year
• Continued investment in new
product development
FY17 OBJECTIVES
• Release two exciting new
products – lower-priced
gold machine for Africa and
improved larger coil for
GPZ 7000®
• Business development in
Africa to entrench the
GPZ 7000® as the
detector of choice
• Convert more African
gold mining regions to use
Minelab gold detectors
• Grow retail distribution
channels for the GO-FIND®
detector series
• Continue investment in
product development to
create next wave of new
products in FY18
ANNUAL REPORT
ANNUAL REPORT
PAGE 19
Minelab is the world leader in metal detection technologies for hobbyists and prospectors, small-scale gold miners and for demining and military needs. Minelab’s profit contribution in FY16 increased 55% over the prior year from sales of $99.2 million. This improved result was delivered from a strong underlying base of metal detector sales into the developed world markets of Australia, Europe and America, supplemented by growth of gold detector sales into Africa.The increased African demand was driven by two factors. Firstly, the newly released GPZ 7000® is fast becoming the detector of choice in Africa, with many small-scale gold miners upgrading to this world-leading gold detector. Secondly, some regions in Africa experienced surges in demand for our gold detectors as a result of large gold finds. While these surges are not predictable and may not be sustainable, they do deliver significant sales and profitability to Minelab when they occur.Minelab employs the largest and world’s best metal detection engineering team, developing technology that is consistently superior to that of our competitors. Our new products, including the GPZ 7000® gold machine and the GO-FIND®, were a great success in FY16 and are a reflection of the world-leading engineering development that is undertaken at Minelab.Recreation – adventure, treasure and goldMinelab is built on the success of selling metal detectors into the major world economies of Australia, the USA, Europe and Russia. Our customers metal detect for the fun of it, with metal detecting being an interest, a hobby, a sport or, in some cases, a source of income. Our comprehensive range includes gold detectors and coin and treasure detectors used to find jewellery and artefacts. This part of the business represents a significant portion of the total Minelab business and is well placed for growth as Minelab continues to release new, improved products to this market.The key driver of our success in FY16 was the strength of demand for our new products.Minelab released its flagship gold detector, the GPZ 7000®, in February 2015 and, following the extraordinary success of its initial launch, sales settled to a strong and sustainable level in FY16. The GPZ 7000® uses new metal detection technology developed and patented by Minelab to find the deepest gold in mineralised ground. With up to a 40% improvement in gold detection capability, the GPZ 7000® continues to revolutionise the pursuit of searching for gold.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. Until recently, Minelab had not sold products at the lower price end of the market, leaving this market space to its competitors. This changed with the release of the GO-FIND® series of detectors in May 2015. While these detectors sell from only US$150, the Minelab engineering team has designed them using Minelab’s market-leading technology to produce a category-leading product. The GO-FIND® is now Minelab’s highest unit seller, and Minelab continues to expand its relationships with large retail chains in the USA, Europe, Russia and Australia, which are best suited to selling large volumes of this product.Minelab continues to invest in new product development for these markets and has a number of new, improved metal detectors in the pipeline.Small-scale gold mining – prospecting, community and environmentMinelab’s world-leading gold detection technology continues to revolutionise how small-scale gold miners 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 a 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 implemented a key strategic move in January 2015 by establishing a showroom and distribution centre in Dubai to service the large African market. We have taken control of our distribution channels, broadened our customer base and are now closer than ever to the end users of our detectors. The establishment of our facility in Dubai and the customer relationships we are developing are critical to ensuring that Minelab maximises its opportunities in the African region, and this has been a major contributor to our success.The release of the GPZ 7000® into the African goldfields in FY16 exceeded our expectations and was a key contributor to the increased sales result. The demand for this product is expected to continue into FY17 as African small-scale gold miners upgrade to own the world’s best handheld gold detector.We continue to invest in the development of small-scale gold mining markets inside and outside of Africa, and believe that, in time, good markets may develop in Central and Latin America and across Asia-Pacific. METAL DETECTION
Countermine – all mines, all soils,
all conditions
Minelab’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.
The Countermine business
has always been strategically
important to Minelab. 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 generates brand recognition
globally.
The world-leading engineering
capability of the Countermine
team is highlighted by the fact
that Minelab continues to receive
external funding from a number of
parties to develop metal detection
technology in order to advance
the detection of landmines and
unexploded ordnance.
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, to name
but a few.
SUCCESS STORIES
The future of gold detection
In early 2015, after dominating
the gold-detecting market for
more than 20 years with its
superior MPS Pulse Induction
technology, Minelab introduced
a breakthrough new technology
called ZVT™ with its latest
flagship gold detector, the
GPZ 7000®.
While many “hard-core”
detectorists were initially
sceptical that anything could
surpass the proven
performance of MPS, the
GPZ 7000® has gained a loyal
following from early adopters in
the western world. It is now
widely regarded as the best
detector available for finding
gold that all other detectors
miss, in locations that have too
much “ground noise” for other
detectors to operate in.
Eighteen months on from its
launch, the GPZ 7000® is
being taken up in Africa in large
numbers and changing people’s
fortunes in artisanal mining
communities across the
continent.
First find with GPZ 7000®
“First day out using my newly
purchased GPZ 7000,
couldn’t believe how sensitive
this machine was; picked up
25 grams of the best nuggets
in no time at all - luv the new
machine!”
Clint – Western Australia
“After you programmed the
GPZ 7000, the next day I
found a 30 gram gold piece in
soil more than a meter deep
– I’ve worked as a
maintenance technician and
programmer in Sudan since
2010.”
Mujahid - Sudan
In late 2016, Minelab will
release a large GPZ 19 coil for
the GPZ 7000®. Larger coils
detect deeper, and GPZ owners
are eagerly awaiting this new
coil with an expected 30%
depth improvement.
“Lots of prospectors who have
had success with the existing
GPZ 14 coil – like me – are
looking forward to trying out
the new coil when it becomes
available. I have a few places
in mind where I am sure some
deep gold is hiding. So the
future seems very bright for the
GPZ 7000® and its ZVT™
technology, and like last year
there will be some great new
gold coming to light here soon
– I’m looking forward to it!”
Chris – USA
ANNUAL REPORT
I N N O V A T I O N W H E R E V E R Y O U A R E
FINDING MORE GOLD REALLY
DOES DEPEND UPON HAVING
THE BEST TECHNOLOGY
AVAILABLE
PAGE 21
TRACKING SOLUTIONS
MINETEC OFFERS A SINGLE UNIFIED PLATFORM FOR TRACKING, PRODUCTIVITY AND SAFETY
SOLUTIONS IN UNDERGROUND HARD-ROCK MINES.
FY16 SUMMARY
• Deployed products in six
operating mines
• Commissioned traffic-
management system based
on high-precision tracking
• Delivered a productivity-
management system that
integrates voice and task
despatch
• Difficult economic
environment continued for
the global mining industry
• Focused on gold, copper
and diamond mines
• Break-even financial
position in the second half
FY17 OBJECTIVES
• Focus on underground
hard-rock gold, copper and
diamond mines in Australia
and South Africa
• Build scale by broadening
our customer base,
including mining contractors
• Commission more
applications of Minetec’s
proprietary solutions
• Deliver improved financial
performance
ANNUAL REPORT
ANNUAL REPORT
CASE STUDY
Minetec’s enabling technology
helps create a safer working
environment and boost
production at Rio Tinto’s
Argyle Diamond Mine.
The Argyle underground mine
and processing plant operates
24 hours a day, 365 days of
the year. Surface operations
moved underground, and
“block-cave” mining was
introduced in 2013. It is
expected to generate up to 20
million carats per year until at
least 2020.
With over 40km of tunnels,
the underground environment
is challenging. Actions taken
for granted on the surface,
like real-time physical visibility,
positional tracking and quality
communications, create a
multitude of challenges when
they take place “in the dark”.
Situation
A safety incident at a mine,
such as an unintended
vehicle interaction, will be
measured first in impact to
personnel, then to production.
An investigation into such an
incident will take time, with
day-to-day costs still being
incurred as normal.
Argyle was experiencing
bottlenecks at certain
congestion points in the mine.
The situation was affecting
safety and production. Heavy
equipment, laden with ore, was
being slowed and congested
in key zones while operations
were slowed to detect other
equipment in the vicinity. Then,
once another presence became
detected, more time was needed
to make qualified decisions
relating to the best course of
action and traffic flow.
Argyle had trialled traditional
technology solutions such as
“presence-detection devices”,
but none met the high safety
standard required from Rio
Tinto. All were augmented by
voice radio systems and none
could reliably solve the issue.
Task
Argyle required a reliable and
non-obtrusive system by which
to safely manage their traffic
in a more efficient manner.
Improved safety and efficiency
would then result in improved
output.
Action
Minetec worked on site at
Argyle to assess first hand
their requirements and better
comprehend the issue with
operators and management.
All too often, what works well
in concept does not migrate
easily to reality; Minetec
wanted to determine the best,
and therefore most reliable,
safety solution with the
lowest negative impact on the
operation.
Delivered within a Trax™ node,
Minetec implemented a pilot
of its enabling technology
platform.
• First WASP™, the world’s
most accurate, sub-metre,
real-time, 3D tracking
technology. This technology
was first conceived by the
inventors of commercial
grade Wi-Fi, the CSIRO.
• Then, housed in the same
compact, low-power
node, was the ability to
communicate this and
other data back and forth,
wirelessly in real time.
Trax™ nodes were placed
around the traffic zones as well
as on the vehicles. Minetec then
integrated it to a physical set of
traffic lights with logic provided
by Argyle. The pilot became an
operational deployment soon
afterwards.
Result
Deployed in just 12 days, a
working system was delivered
that could locate the heavy
equipment on the production
level, and met all baseline
requirements.
After embedding the system
across eight weeks, it
seamlessly allows Argyle to use
the loader tracking information
to safely control traffic on the
production level. To date there
have been no unintended
vehicle interactions, and traffic
congestion is a thing of the past.
Equally significantly, Argyle has
managed to attain something
really special; after just one
month’s use, production was up.
This is merely the beginning. The
platform underlying the Traffic
Management System is truly an
enabling technology. Think what
surface mining achieved with
the advent of accurate GPS and
reliable Wi-Fi; now think what
can be achieved when the same
“lights” get turned on in the dark
of an underground mine.
Minetec thanks Rio Tinto for its
foresight in investing in such a
platform and for continuing to
do so in an effort to make the
underground mining environment
a safer place to work.
PAGE 23
Minetec was acquired by Codan in 2012 and has effectively been a start-up technology business. The company has a long history of providing communications services to the mining industry; however, over recent years Codan has invested in Minetec’s intellectual property to transition the company to a high-value-add technology solutions provider. Minetec delivers high-precision tracking and integrated wireless communications in underground mines where GPS-based tracking systems do not work. The industry trend is toward autonomous mine operations, and this requires high-precision tracking. Minetec provides high-precision tracking data in real time to mine operators, along with fully integrated safety and task-management systems. With the right data available at the right time, underground miners can now resolve issues, eliminate bottlenecks and manage constraints as they arise, which in turn enables them to be much more productive.Minetec’s proprietary technology is based upon WASP™ (Wireless Ad Hoc System for Positioning), originally developed by CSIRO. WASP™ provides world-class sub-metre tracking accuracy in the harsh environments of an underground mine. WASP™ technology sits at the core of our tracking (TRAX™) and proximity detection (SafeDetect™) systems. These systems are complemented by Minetec’s software productivity tool (SMARTS™) and configuration management tool (MineOffice™) which seamlessly integrate to provide tracking, safety and productivity solutions based upon a single, unified platform. Globally, resource companies are focused on improving operational performance in an environment of lower commodity prices. Minetec’s solutions give customers the ability to monitor and track assets in real time and communicate task changes directly to the operator, delivering a step change in operational efficiency.The technology is now proven, and Minetec has successfully implemented full-scale operational deployments across a variety of underground gold, copper and platinum mines. The challenge now is to build scale in the business, and this will be the focus for FY17.
ENGINEERING AND OPERATIONS
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.
ANNUAL REPORTDefence capabilityCodan has a long history of supplying the defence sector, with the company’s HF radio systems and landmine detectors used by military organisations worldwide. We have a core technical competency in the area of RF subsystem design, which is the basis of our metal detection and HF radio technologies.These capabilities have the company well placed to provide further engineering solutions and manufacturing expertise to the Australian defence sector, which has announced numerous, multi-billion dollar defence projects for Australia. In May 2016, Codan established a new subsidiary, Codan Defence Electronics, which will explore opportunities to build on our defence experience and thereby generate future growth.EngineeringCodan maintains a world-class team of research, engineering and technical staff, employing more than 170 engineers across the globe. With teams in Adelaide, Perth, Christchurch and Victoria, Canada, our capabilities span a cross section of engineering disciplines, including software, electronics 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 underground tracking.Advanced manufacturingThe ability to manufacture precision electronics products and associated software is a core competency of Codan’s, and remains a sustainable competitive advantage driving our 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. The Adelaide manufacturing capability will be a critical element in our defence capability as we seek to capitalise on future defence spending by the Commonwealth government.Codan’s relationship with one of the world’s leading sub-contract electronics manufacturers, Plexus Corp, continues to remain a cornerstone of the company’s manufacturing strategy. The majority of manufacturing continues in Malaysia, while manufacture of land mobile radio products takes place at a Plexus facility in Chicago, Illinois, for supply into the US market. 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 ISO 9001.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
global distribution centres
located in Dubai, Chicago,
Penang and Adelaide, which
ensure product is regionally
distributed for the fastest route
to market.
Manufacturing and distributing
our world-class products
demands a strong, cohesive
and responsive supply chain,
and at Codan we have
experienced professionals
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.
We maintain an effective
Work Health, Safety and
Environmental Management
System that is integral to our
business processes and are
accredited to OHSAS 18001
Occupational Health and Safety
and ISO 14001 Environmental
Management Systems.
FACILITIES
In December 2015, Codan
centralised its Adelaide
operations at a new global
head office located in the
Technology Park precinct
at Mawson Lakes, South
Australia. Codan entered into
a long-term lease and
co-located around 200 Codan,
Minelab and Minetec staff at
the facility.
The facility is 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. It 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.
PAGE 25
ANNUAL REPORT I N N O V A T I O N W H E R E V E R Y O U A R E
PAGE 27
BOARD OF DIRECTORS
Mr Simmons is a former
director of Lighting
Investments Australia
Holdings Pty Ltd. He is
Chairman of Commercial
Motor Vehicles Group and
a board member of the
Detmold Group.
Mr David Simmons
BA (Acc)
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.
Mr Donald McGurk
HNC (Mech Eng), MBA, FAICD, Harvard AMP
Managing Director and Chief Executive Officer
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 McGurk was appointed to
the board as a 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.
ANNUAL REPORT Mr Peter Griffiths
B.Ec (Hons), CPA, FAICD
Independent Non-Executive Director
Mr Griffiths retired from the
board at the end of May
2016. He was appointed to
the 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 Soft Drink
Association Ltd. Mr Griffiths
has also been a director
of several not-for-profit
organisations.
Mr David Klingberg AO
FTSE, BTech (Civil), DUniSA, FIEAust,
FAusIMM, FAICD
Independent Non-Executive Director
Mr Klingberg retired from
the board in October 2015.
He 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.
PAGE 29
BOARD OF DIRECTORS
He is Chairman of Total
Construction Pty Ltd and a
director of Austal Limited. Mr
McDowell is Chancellor of the
University of South Australia.
Lt-Gen Peter Leahy AC
BA (Military Studies), MMAS, GAICD
Independent Non-Executive Director
Lt-Gen 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.
Lt-Gen 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.
Mr Jim McDowell
LLB (Hons)
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.
ANNUAL REPORT
Mr Graeme Barclay
MAICD, F Fin, CA, MA (Hons)
Independent Non-Executive Director
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 Axicom
Holdings Pty 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.
Ms Kathy Gramp
BA (Acc), CA, FAICA, FAICD
Independent Non-Executive Director
Ms Gramp was appointed
to the board in November
2015. She has had a long
and distinguished executive
career and over 17 years of
board experience across a
diverse range of Australian
organisations and industry
sectors. She has had
exposure to international
markets and has a wealth
of experience in corporate
finance at both strategic and
operational levels. In 1989,
Ms Gramp joined Austereo
Ltd, Australia’s largest
commercial radio network,
at a senior corporate level,
and her career with Austereo
spanned 22 years. As Chief
Financial Officer and a
member of the Executive
Committee, she was closely
involved in Austereo’s
national and international
expansion and its successful
move into digital and
online radio. Ms Gramp
was previously a director
and member of the Audit
& Risk and Remuneration
Committees of Southern
Cross Media Group Limited.
She is a director on a number
of corporate and not-for-profit
boards and has significant
audit committee experience.
Ms Gramp is a chartered
accountant and a Fellow
of the Australian Institute
of Company Directors and
Chartered Accountants
Australia and New Zealand.
PAGE 31
LEADERSHIP TEAM
Mr Donald McGurk
HNC (Mech Eng), MBA,
FAICD, Harvard AMP
Managing Director and
Chief Executive Officer
Donald was appointed to the
board as a 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 28.
Mr Michael Barton
BA (Acc), CA
Chief Financial Officer and
Company Secretary
Mr Peter Charlesworth
BEEEng (Hons), MBA,
GAICD, Harvard AMP
Executive General Manager, Minelab
Michael joined Codan in May
2004 as Group Finance Manager
and was appointed Company
Secretary in May 2008. In
September 2009, Michael
was promoted to the position
of Chief Financial Officer and
Company Secretary and is
responsible for financial control
and reporting across the Codan
group. He holds a Bachelor of
Arts in Accountancy from the
University of South Australia
and is a member of Chartered
Accountants Australia and New
Zealand. Prior to joining Codan,
Michael worked with KPMG for
13 years.
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 Vision Systems. He
was Chairman of the Technology
Industry Association and has
worked in the electronics
industry for more than 25 years.
ANNUAL REPORT
Mr Rory Linehan
BSc (Hons), MSc, PhD
Executive General Manager, Minetec &
Codan Defence Electronics
Mr Charlie Stuff
MBA, BSc
Executive General Manager, Radio
Communications
Rory joined Codan in 2014,
working across the group to
leverage technology and innovation
to develop strategies for growth.
He has a technical background
with degrees in Physics and
Engineering and a PhD in
Mathematics; this is coupled
with a range of commercial skills
spanning strategy, marketing,
business development, systems
engineering and programme
management. In addition to this
group role, Rory is Executive
General Manager of Minetec and
Codan Defence Electronics.
Minetec develops the underlying
technology for mechanised and
autonomous mining, providing
high-precision tracking, safety
and task-management systems
that unleash the benefits of a
data-driven mining operation.
Codan Defence Electronics is a
newly created division that offers
radio frequency, communications
and electronics expertise to the
Australian Defence market.
Prior to Codan, Rory held a
number of positions with blue-chip
firms in the UK, including McLaren
Formula One, Cobham and
Goodrich. He lived for five years
in Seattle working on the product
development of the Boeing 787
flight control system.
Charlie holds an MBA from
Central Michigan University and
a Bachelor of Science Degree in
Business from Auburn University.
He is a retired US Army Officer
and has held senior management
positions with Rockwell Collins
and Cobham PLC.
Charlie is based in Victoria,
British Columbia and has led
the turnaround in Codan’s Land
Mobile Radio business following
the acquisition of Daniels
Electronics in 2013. With his
wide range of experience and
success in numerous senior
executive roles, he was appointed
to the role of Executive General
Manager, Radio Communications
in 2015.
PAGE 33
ANNUAL REPORT
ANNUAL REPORT FINANCIAL
REPORT FOR THE YEAR ENDED
30 JUNE 2016
3 6
_ D I R E CTO R S’ R E PO RT
57
_ LEAD AU D ITO R’S I N D E PE N D E N C E D E C LAR ATI O N
5 8
_ C O N S O LI DATE D I N C O M E STATE M E NT
5 9
6 0
_ C O N S O LI DATE D STATE M E NT O F C O M PR E H E N S IVE I N C O M E
_ C O N S O LI DATE D BALAN C E S H E ET
6 1
_ C O N S O LI DATE D STATE M E NT O F C HAN G E S I N E Q U ITY
62
63
_ C O N S O LI DATE D STATE M E NT O F CAS H FLOWS
_ N OTE S TO AN D FO R M I N G PART O F TH E FI NAN C IAL STATE M E NTS
9 9
_ D I R E CTO R S’ D E C LAR ATI O N
100 _ I N D E PE N D E NT AU D ITO R’S R E PO RT
102 _ ASX AD D ITI O NAL I N FO R MATI O N
104 _ C O R PO R ATE D I R E CTO RY
I N N O V A T I O N W H E R E V E R Y O U A R E
PAGE 35
PAGE 37
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
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 2016 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
Donald McGurk
Peter Griffiths
David Klingberg AO
Peter Leahy AC
Jim McDowell
Graeme Barclay
Kathy Gramp
Details of directors and their
qualifications and experience
are set out on pages 28 to 31.
COMPANY SECRETARY
Mr Michael Barton BA (Acc), CA
Michael joined Codan in May
2004 as Group Finance Manager
and was appointed Company
Secretary in May 2008. In
September 2009, Michael
was promoted to the position
of Chief Financial Officer and
Company Secretary and is
responsible for financial control
and reporting across the Codan
group. He holds a Bachelor of
Arts in Accountancy from the
University of South Australia
and is a member of Chartered
Accountants Australia and New
Zealand. Prior to joining Codan,
Michael worked with KPMG for
13 years.
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 the integrity
Board
meetings
Board Audit, Risk
and Compliance
Committee
meetings
B
A
B
10
10
9
3
10
10
10
7
2
3
1
2
2
3
2
3
1
2
2
3
DIRECTOR
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
Ms K J Gramp
A
10
10
8
3
10
10
10
7
Remuneration
Committee
meetings
Nomination
Committee
meetings
Remuneration
& Nomination
Committee
meetings
A
1
1
B
A
B
1
1
1
1
1
1
1
1
A
1
1
1
B
1
1
1
A - Number of meetings attended B – Number of meetings held during the time the director held office during the year
The Remuneration and Nomination Committees were consolidated into one committee on 18 May 2016.
ANNUAL REPORT
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. During the year,
the board consolidated the
Nomination Committee and
Remuneration Committee and
formed a combined Remuneration
and Nomination Committee.
The 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 Remuneration and
Nomination Committee is
responsible for developing the
board evaluation process. A
performance evaluation took
place during the year ended 30
June 2016.
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
PAGE 37
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 mirror
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
A - Number of meetings attended B – Number of meetings held during the time the director held office during the year
The Remuneration and Nomination Committees were consolidated into one committee on 18 May 2016.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
BOARD OF DIRECTORS (continued)
Composition of the board (continued)
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.
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.
REMUNERATION AND
NOMINATION COMMITTEE
The Remuneration and
Nomination Committee
assists the board in reviewing
remuneration structures, 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 remuneration
strategies for directors and
executives;
• approving remuneration
structures and payments for
directors and executives;
• 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 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; and
• making recommendations to
the board on the appointment
and performance of directors.
The members of the Nomination
Committee were Mr D J
Klingberg (Chair), Mr P R
Griffiths and Mr D J Simmons,
all independent non-executive
directors.
The members of the
Remuneration Committee
were Mr D J Simmons (Chair)
and Lt-Gen P F Leahy, both
independent non-executive
directors.
The members appointed to
the new Remuneration and
Nomination Committee on 18
May 2016 were:
• Mr D J Simmons (Chair)
Independent Non-Executive
Director
• Lt-Gen P F Leahy
Independent Non-Executive
Director
• Mr J W McDowell
Independent Non-Executive
Director
The managing director is
invited to Remuneration
and Nomination Committee
meetings, as required, to discuss
executives’ performance and
remuneration packages.
The Remuneration and
Nomination Committee’s charter
is available on the company’s
website.
REMUNERATION REPORT
- AUDITED
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 and
Nomination Committee may
obtain independent advice
on the appropriateness of
remuneration packages, given
ANNUAL REPORT
trends in comparative companies
both locally and internationally.
Remuneration packages
can include a mix of fixed
remuneration and performance-
based remuneration.
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:
• 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 salaries inclusive of
superannuation, but can exceed
this level if performance hurdles
are exceeded.
These performance conditions
have been established to
encourage the profitable
growth of the group. The board
considered that for the year
ended 30 June 2016 the above
performance-linked remuneration
structure was appropriate.
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 three 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:
The performance rights granted on 25 November 2015 and 25 May 2016 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 2015 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.
PAGE 39
Number of performance rights granted during yearGrant dateFair value per right at grant date (cents)Exercise price per right (cents)Expiry dateNumber of rights vested during yearDIRECTORSMr D S McGurk 236,94825 November 201564.0-30 June 2019- EXECUTIVESMr M Barton120,70925 May 201691.0-30 June 2019-Mr P D Charlesworth154,24025 May 201691.0-30 June 2019-Mr R D Linehan154,24025 May 201691.0-30 June 2019- CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
Performance rights (continued)
Details of vesting profiles of performance rights granted to executives are detailed below:
Performance rights
granted
Number
Date
Percentage
vested in
year
Percentage
Percentage
forfeited
forfeited
in year
in year
Financial years
Financial years
in which shares
in which shares will be
will be issued if
issued if
vesting achieved
vesting achieved
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
111,655
296,877
236,948
22 November 2013
26 November 2014
25 November 2015
52,813
22 November 2013
145,638
120,709
26 November 2014
25 May 2016
-
-
-
-
-
-
100%
-
-
100%
-
-
n/a
2018
2019
n/a
2018
2019
Mr P D Charlesworth
72,575
193,250
154,240
187,998
22 November 2013
26 November 2014
25 May 2016
n/a
2018
2019
Mr R D Linehan
26 November 2014 - - 2018
154,240 25 May 2016 - - 2019
Mr P McCarter
n/a
n/a
22 November 2013
26 November 2014
100%
-
-
89,919
259,952
100%
100%
-
-
-
-
-
The performance rights granted on 22 November 2013 lapsed on 30 June 2016, as the three-year
aggregate performance target was not reached.
ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
Number
Date
Percentage
vested in
year
Percentage
forfeited
in year
Financial years
in which shares will be
issued if
vesting achieved
DIRECTORS
EXECUTIVES
Mr M Barton
Mr D S McGurk
111,655
22 November 2013
100%
52,813
22 November 2013
100%
296,877
236,948
26 November 2014
25 November 2015
145,638
120,709
26 November 2014
25 May 2016
193,250
154,240
26 November 2014
25 May 2016
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
2018
2019
n/a
2018
2019
n/a
2018
2019
n/a
n/a
Mr R D Linehan
187,998
26 November 2014 - - 2018
154,240 25 May 2016 - - 2019
Mr P McCarter
89,919
22 November 2013
259,952
26 November 2014
100%
100%
Mr P D Charlesworth
72,575
22 November 2013
100%
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 2015
Issued
Vested
Lapsed
Held at
30 June 2016
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr R D Linehan
Mr P McCarter
408,532
236,948
198,451
265,825
187,998
349,871
120,709
154,240
154,240
-
-
-
-
-
-
111,655
533,825
52,813
72,575
-
349,871
266,347
347,490
342,238
-
Mr McCarter’s performance rights lapsed on 7 September 2015 upon his cessation as Executive
General Manager, Codan Radio Communications.
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 2015
Received on
exercise of rights
Other changes*
Held at
30 June 2016
DIRECTORS
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
Ms K J Gramp
61,532
312,517
199,416
120,908
57,708
-
-
n/a
SPECIFIED EXECUTIVES
Mr M Barton
5,000
Mr P D Charlesworth
312,790
Mr R D Linehan
Mr P McCarter
Mr C P Stuff
-
-
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,052
21,052
-
-
-
135,825
-
-
61,532
312,517
n/a
n/a
57,708
-
21,052
-
5,000
312,790
135,825
n/a
-
* Other changes represent shares that were purchased or sold during the year
Mr D J Klingberg retired as a director on 28 October 2015, Ms K J Gramp was appointed as a director
on 18 November 2015 and Mr P R Griffiths retired as a director on 31 May 2016. Mr C P Stuff was
appointed to the position of Executive General Manager, Radio Communications on 1 September 2015
and Mr P McCarter ceased in the position of Executive General Manager, Codan Radio Communications
on 7 September 2015.
PAGE 41
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
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
Other long
term
Termination
benefits
rights
Performance
Total
Proportion of
remuneration
performance related
NON-EXECUTIVE
Mr D J Simmons
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
Ms K J Gramp
Total non-executives’
renumeration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
$
162,974
106,612
81,487
84,662
26,640
77,606
81,487
77,606
81,487
64,672
81,487
32,336
50,972
-
566,534
443,494
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
$
15,483
10,128
7,741
8,043
2,531
7,373
7,741
7,373
7,741
6,144
7,741
3,072
4,842
-
53,820
42,133
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
178,457
116,740
89,228
92,705
29,171
84,979
89,228
84,979
89,228
70,816
89,228
35,408
55,814
-
620,354
485,627
$
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
ANNUAL REPORTEXECUTIVEMr D S McGurk2016516,203410,088-18,33716,933-165,5031,127,06451.12015509,274135,153-20,34813,669-68,592747,03627.3Total directors’remuneration20161,082,737410,088-72,15716,933-165,5031,747,418-2015952,768135,153-62,48113,669-68,5921,232,663-
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
Directors
Year
Salary & fees
Short-term
incentives
Other
short term
Post-employment
and superannuation
contributions
Other long
term
Termination
benefits
Performance
rights
Total
Proportion of
remuneration
performance related
NON-EXECUTIVE
Mr D J Simmons
Mr P R Griffiths
Mr D J Klingberg
Lt-Gen P F Leahy
Mr J W McDowell
Mr G R C Barclay
Ms K J Gramp
Total non-executives’
renumeration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
$
162,974
106,612
81,487
84,662
26,640
77,606
81,487
77,606
81,487
64,672
81,487
32,336
50,972
-
566,534
443,494
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
15,483
10,128
7,741
8,043
2,531
7,373
7,741
7,373
7,741
6,144
7,741
3,072
4,842
-
53,820
42,133
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
178,457
116,740
89,228
92,705
29,171
84,979
89,228
84,979
89,228
70,816
89,228
35,408
55,814
-
620,354
485,627
$
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
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. Mr D J Simmons was appointed as chairman of the board
on 18 February 2015, Mr D J Klingberg retired as a director on 28 October 2015, Ms K J Gramp was
appointed as a director on 18 November 2015 and Mr P R Griffiths retired as a director on 31 May 2016.
PAGE 43
EXECUTIVEMr D S McGurk2016516,203410,088-18,33716,933-165,5031,127,06451.12015509,274135,153-20,34813,669-68,592747,03627.3Total directors’remuneration20161,082,737410,088-72,15716,933-165,5031,747,418-2015952,768135,153-62,48113,669-68,5921,232,663-
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
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
Other long
Termination
term
benefits
Performance
rights
Total
Proportion of
remuneration
performance related
Mr M Barton (Chief Financial Officer
and Company Secretary)
Mr P D Charlesworth
(Executive General Manager, Minelab)
Mr R D Linehan *
(Executive General Manager,
Mr P McCarter ** (Executive General
Manager, Codan Radio Communications)
Mr C P Stuff (Executive General Manager,
Radio Communications)
Total executive officers’ remuneration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
$
$
256,802
241,489
335,496
328,709
402,137
329,318
75,612
443,391
208,913
73,668
322,920
100,534
240,250
85,423
-
222,186
287,518
221,783
-
-
1,357,565
1,342,907
993,866
481,811
$
-
-
-
-
46,694
1,297
272
1,229
673
-
47,639
2,526
* Mr R D Linehan relocated from the UK to Australia in January 2016. Until that time, he was paid in UK pounds, with the
Australian dollar equivalents calculated using an average exchange rate.
** Mr P McCarter was paid in UK pounds, with the Australian dollar equivalents calculated using an
average exchange rate.
$
$
$
$
$
23,362
22,478
19,308
18,783
15,652
24,119
8,195
37,701
-
-
11,711
8,484
12,665
8,947
4,002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
82,046
95,167
33,649
124,112
44,650
135,014
43,436
85,513
60,061
-
-
595,955
379,768
814,501
501,623
843,749
483,593
251,638
764,568
509,974
-
%
51.0
28.3
54.9
28.9
44.5
26.6
34.0
36.9
43.5
-
66,517
103,081
28,378
17,431
82,046
439,806
181,796
3,015,817
2,129,552
ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
Mr M Barton (Chief Financial Officer
and Company Secretary)
Mr P D Charlesworth
(Executive General Manager, Minelab)
Mr R D Linehan *
(Executive General Manager,
Mr P McCarter ** (Executive General
Manager, Codan Radio Communications)
Mr C P Stuff (Executive General Manager,
Radio Communications)
Total executive officers’ remuneration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
256,802
241,489
335,496
328,709
402,137
329,318
75,612
443,391
-
208,913
73,668
322,920
100,534
240,250
85,423
222,186
-
-
287,518
221,783
1,357,565
1,342,907
993,866
481,811
$
-
-
-
-
46,694
1,297
272
1,229
673
-
47,639
2,526
Year
Salary & fees
Short-term
incentives
Post-employment
and superannuation
contributions
Other long
term
Termination
Termination
benefits
benefits
Performance
rights
Total
Proportion of
remuneration
performance related
$
$
$
$
$
$
$
23,362
22,478
19,308
18,783
15,652
24,119
8,195
37,701
-
-
11,711
8,484
12,665
8,947
4,002
-
-
-
-
-
-
-
-
-
-
-
82,046
-
-
-
95,167
33,649
124,112
44,650
135,014
43,436
85,513
60,061
-
-
595,955
379,768
814,501
501,623
843,749
483,593
251,638
764,568
509,974
-
66,517
103,081
28,378
17,431
82,046
-
439,806
181,796
3,015,817
2,129,552
%
51.0
28.3
54.9
28.9
44.5
26.6
34.0
36.9
43.5
-
Mr C P Stuff was appointed to the position of Executive General Manager, Radio Communications on 1
September 2015 and Mr P McCarter ceased in the position of Executive General Manager, Codan Radio
Communications on 7 September 2015.
Short-term incentives which vested during the year are as follows: Mr D S McGurk 83% (17% forfeited), Mr
M Barton 83% (17% forfeited), Mr P D Charlesworth 100%, Mr R D Linehan 74% (26% forfeited) and Mr C
P Stuff 79% (21% 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.
As no performance rights vested during FY16 or during the prior year, the amounts disclosed above as
“Performance rights” do not represent take-home pay.
Other than performance rights, no options or shares were issued during the year as compensation for any
key management personnel.
PAGE 45
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
Corporate performance
As required by the Corporations Act 2001, the following information is presented:
2016
$
2015
$
2014
$
2013
$
2012
$
15,494,607
12,507,609
9,196,580
45,416,716
23,146,736
7,082,530
5,310,509
15,039,383
20,343,012
14,773,138
1.18
0.03
1.15
0.40
0.75
(0.77)
1.52
0.12
1.40
0.20
Profit attributable
to shareholders
Dividends paid
Share price at 30 June
Change in share
price at 30 June
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:
• Ms K J Gramp
(Chair from 1 June 2016)
Independent Non-Executive
Director
(appointed 19 November 2015)
• Mr P R Griffiths
(Chair until 31 May 2016)
Independent Non-Executive
Director
(retired 31 May 2016)
• Mr G R C Barclay
Independent Non-Executive
Director
(appointed 29 January 2016)
• Mr D J Klingberg
Independent Non-Executive
Director
(retired 28 October 2015)
• Mr J W McDowell
Independent Non-Executive
Director
(resigned 19 November 2015)
• Mr D J Simmons
Independent Non-Executive
Director
(appointed 29 January 2016)
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
ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION REPORT - AUDITED (continued)
2016
$
2015
$
2014
$
2013
$
$
15,494,607
12,507,609
9,196,580
45,416,716
23,146,736
7,082,530
5,310,509
15,039,383
20,343,012
14,773,138
1.18
0.03
1.15
0.40
0.75
(0.77)
1.52
0.12
1.40
0.20
Profit attributable
to shareholders
Dividends paid
Share price at 30 June
Change in share
price at 30 June
• 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;
• 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 2016, 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
PAGE 47
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 2016.
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
ISO 14001, Environmental
Management Systems, was
achieved in FY15. 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
a process whereby internal
control reviews are completed
on the high-risk areas of the
business as identified on the
company’s risk register.
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.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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 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 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;
• employment practices such as
occupational health and safety
and anti-discrimination;
• 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:
• 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; 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;
• prohibiting short-term or
speculative trading in the
company’s shares;
• 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.
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,
ANNUAL REPORT notifying them to the ASX,
posting them on the company’s
website and issuing media
releases.
In summary, the Continuous
Disclosure Policy operates 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.
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 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.
DIVERSITY
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 diversity objectives
and performance against
objectives.
The group’s performance against the Diversity and Equity Policy objectives is as follows:
* Senior executives are defined as those executives who report directly to the CEO.
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; and
• a target of at least 30% female candidates interviewed for all salaried positions
in the group.
The board assesses the performance against its objectives on an annual basis.
PAGE 49
30 June 201630 June 2015Gender representationFemale (%)Male (%)Female (%)Male (%)Board representation17%83%0%100%Senior executive representation *0%100%0%100%Senior management representation26%74%22%78%Group representation26%74%25%75%
Steps have been taken to
get even closer to customers
by establishing a significant
presence in Dubai in order to
maximize sales and margins in
the high-growth African and
Middle East markets.
DIVIDEND
The company announced a final
dividend of 4.0 cents per share,
fully franked, bringing the full
year dividend to 6.0 cents. The
dividend has a record date of
15 September 2016 and will be
paid on 4 October 2016.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
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
360 people, located in Australia,
USA, Ireland, Canada, China,
United Arab Emirates, South
Africa and New Zealand, 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.
FY16 HIGHLIGHTS:
• Underlying profit after tax of
$21.1 million, up 67% on 18%
higher sales
• Statutory net profit after tax of
$15.5 million, up 24%
• Increased annual dividend
to 6.0 cents, up 71%, fully
franked
• Underlying earnings per share
of 11.9 cents, up 68%
• Strong balance sheet - net
debt reduced to $12.6 million
• Broader product offering
brings best Radio
Communications result in
seven years; contribution
increased 15%
• Metal Detection contribution
increased 55%, assisted by
successful release of the
GPZ 7000® gold detector in
Africa
• Strategy to improve earnings
stability by broadening
markets and growing revenue
base
The net profit after tax
attributable to shareholders
increased by 24% to $15.5
million for the year ended
30 June 2016. Group sales of
$169.5 million were 18% higher
than in the prior year. Underlying
net profit after tax for the year
ended 30 June 2016 was
$21.1 million, a 67% increase
over FY15.
Codan is beginning to see
the benefits of its significant
investment in new product
development across the Minelab,
LMR and HF product platforms.
ANNUAL REPORT
FINANCIAL PERFORMANCE AND OTHER MATTERS
FY16
% of sales
$m
FY15
% of sales
$m
REVENUE
Communications
Metal detection
Tracking solutions
Other
Total revenue
UNDERLYING BUSINESS PERFORMANCE
EBITDA
EBIT
Interest
Net profit before tax
Taxation
Underlying net profit after tax
Non-recurring (expenses) after tax:*
Loss on closure of business
Restructuring expenses
Newton building impairment
Minetec asset impairment
Net profit after tax
65.0
99.2
5.3
-
38%
59%
3%
-
169.5
100%
44%
51%
3%
2%
100%
21%
13%
12%
9%
63.8
73.3
4.8
2.0
143.9
29.9
19.3
(2.5)
16.8
(4.1)
25%
17%
16%
12%
12.7
(0.3)
-
-
-
41.9
29.2
(1.7)
27.5
(6.4)
21.1
-
(1.8)
(1.0)
(2.8)
15.5
Underlying earnings per share, fully diluted
Statutory earnings per share, fully diluted
11.9 cents
8.7 cents
-
12.4
7.1 cents
7.0 cents
Dividend per share
wwwww
* 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.
3.5 cents
6.0 cents
The board completed its
succession planning during
the year with the appointment
of Kathy Gramp in November
2015. Ms Gramp now chairs the
Board Audit, Risk and
Compliance Committee. Mr
David Klingberg and Mr Peter
Griffiths retired from the board
during the year.
EBITDA and EBIT margins
increased as a result of
stronger gross margins in
Communications and improved
expense ratios on higher FY16
sales.
The company has successfully
negotiated the renewal of
its $85 million debt facility
for a further three years. Net
borrowings decreased by $28.2
million to $12.6 million since
31 December 2015 due to our
strong performance and good
working capital management.
In December 2015, Codan
completed the move of all
Adelaide operations to its new
global headquarters in the
Technology Park precinct at
Mawson Lakes, South Australia.
This world-class facility is now
home to around 200 staff.
The company continues to
pursue the sale of its vacant
property at Newton, South
Australia. It has been on the
market since mid-2015 and,
in light of current market
conditions, the carrying value
has been reassessed and
written down by $1.0 million.
While the timing of this sale
is uncertain, management
anticipates that a transaction
will be completed in FY17.
PAGE 51
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
OPERATING AND FINANCIAL REVIEW (continued)
FINANCIAL PERFORMANCE AND OTHER MATTERS (continued)
Performance by
business unit:
Radio Communications – High
Frequency (HF) Radios and
Land Mobile Radios (LMR)
Radio Communications
is a leading designer and
manufacturer of premium
communications equipment
for High Frequency (HF) and
Land Mobile Radio (LMR)
applications. It provides
communications solutions
that allow customers to
save lives, enhance security
and support peacekeeping
activities worldwide.
Radio Communications
revenue increased 2% to
$65.0 million, and segment
contribution increased 15%
to $17.4 million.
While FY16 delivered an
excellent result, we are
focused on our strategy
to continually broaden our
revenue base by expanding
our current technology
platforms to create new
products that enable us to
enter adjacent markets.
In FY16, we released a
series of new LMR and
HF products, including the
Patrol® Manpack radio
and the Cyclone® repeater,
both of which enabled us to
broaden our revenue base.
More recently, in June 2016
the division launched its
Sentry-V™ handheld tactical
VHF radio, the first to launch
from Codan’s upcoming suite
of military products.
Sales and marketing
capability has also been
strengthened by adding
a number of key sales
resources into Africa and
the Middle East. This has
given the business better
market reach and brought it
closer to its key customers
and end users. In support
of this approach, the sales
headquarters for these
regions has shifted from the
United Kingdom to Dubai.
LMR performed strongly in
FY16, delivering its highest
ever sales over the 66 year
history of the business,
brought about by moving
our focus to systems and
solutions selling in the North
American first responder
market (ie police officers,
firefighters, paramedics, etc).
As previously announced,
the board has approved
an additional engineering
investment of approximately
$5 million to be spent over
FY17 to accelerate the
development of our expanded
LMR product range. We have
now recruited the majority
of the 25 new engineers
required to deliver these
products, which will be
released early in FY18. These
LMR products are expected
to drive growth in Radio
Communications by enabling
us to offer even higher
value-add solutions to our
customers.
FY16 was an excellent year
for Radio Communications
and, given the level of
instability and conflict in
some of our key markets, we
expect to deliver a similar
result in FY17 as we support
our customers’ ongoing
efforts to promote security
and peacekeeping in those
regions. We have had a
strong start to the year given
the favourable timing of some
large projects.
Metal Detection –
Consumer, Gold Mining and
Countermine
Minelab is the world
leader in handheld metal
detecting technologies for
the consumer, gold mining,
demining and military
markets. Over the past 30
years, Minelab has introduced
more innovative technology
than any of its competitors
and has taken the metal
detection industry to new
levels of technological
excellence.
Minelab revenue increased
35% to $99.2 million,
and segment contribution
increased 55% to $29.8
million. While all parts of the
Minelab business performed
well, the largest part of this
growth was driven by gold
detector sales.
While sales of our newly
released top of the range
gold detector, the
GPZ 7000®, were strong
in the developed world, the
most significant growth in
our gold detector sales has
come from the successful
launch of this product into
our African markets. The
GPZ 7000® was launched
in Africa in October 2015,
and demand exceeded our
initial expectations as the
market quickly recognised
the superior performance of
this technology.
We have evidence that the
adoption of this product is
being driven by its superior
performance rather than
gold surges in isolated
markets, which increases
our confidence that sales will
remain strong as we enter
FY17.
Our improved result in
FY16 was also helped by
surges in demand from
two key regions. While the
duration of these surges
can be uncertain, Minelab
will continue to open up
new African markets and
maximise opportunities as
and when they arise.
Sales of the entry level coin &
treasure GO-FIND® detector
strengthened during FY16
as Minelab signed a number
of distribution agreements
in the US and Europe
which greatly improved
market penetration. The
GO-FIND® now represents
a significant incremental
revenue stream for Minelab,
and this is expected to grow
as we continue to broaden
the product’s international
distribution.
The Countermine business
also performed well
during the year as a result
of increased demining
activities undertaken by
humanitarian and government
organisations.
Our strategy for Minelab is
to maintain our competitive
advantage across gold,
consumer and countermine
markets by continually
innovating our products while
expanding our critical routes
to market.
In response to customer
demand, two new products
are planned for release in
FY17. A larger coil for the
ANNUAL REPORT OUTLOOK
The board and management
remain committed to
delivering more stable results
for shareholders with profit
improvement over the long
term. This will be achieved
by continuing to develop new
innovative product platforms,
broadening our customer
base and seeking further
investment opportunities
aligned with our core
business.
Due to a number of major
project awards that are
certain to be delivered in the
first half of FY17, the board
expects the company to have
a stronger first half in FY17
compared to last year.
The board intends to provide
a further business update at
the Annual General Meeting
in October.
The carrying value of
Minetec’s capitalised product
development, inventory
and fixed assets has been
reviewed and, as a result, the
board has written down the
value by $2.8 million after
tax. This write-down relates
to Minetec’s assets which
are not based on the high-
precision tracking (WASP™)
technology which is now the
key focus of the business.
Leveraging our Defence
capability
Codan has a long history
of supplying the defence
sector, with the company’s
HF radio systems and
landmine detectors being
used by military organisations
worldwide. We have a core
technical competency in the
area of RF subsystem design,
which is the basis of our
metal detection and HF radio
technologies.
These core design,
manufacturing and support
capabilities mean the
company is well placed to
provide further engineering
solutions and manufacturing
expertise to the Australian
Defence sector, which has
announced numerous, multi-
billion dollar defence projects
for Australia over the next
10+ years.
Defence contracts have
long sales cycles and, as
a consequence, we do not
expect this new initiative to
generate sales in FY17.
GPZ 7000® will give a
significant depth increase
over the standard coil. In
addition to this, an entry
level gold detector will be
released to the African
market at the end of 2016.
This product has been
specifically designed for
the African market to fill a
gap in our product range
and is expected to quickly
take market share from
competitors.
The Minelab business is
strong due to the significant
investment we have made to
expand our product range
and improve our distribution
structure. While the African
component of this business
is difficult to forecast, these
factors make us more
confident of continued
success in FY17.
Tracking Solutions –
Minetec
Minetec offers tracking,
productivity and safety
solutions, predominantly
for underground hard-rock
mines. These solutions are
based upon CSIRO’s leading-
edge WASP™ technology
(Wireless Ad hoc System for
Positioning) and Minetec’s
SMARTS™ proprietary
software application suite
which provides the core
tracking and communication
capability to enable real-time
monitoring and control of
mine operations. For the first
time, underground miners
can “see” the whole mine and
manage issues, bottlenecks
and constraints as they arise.
The journey toward
autonomous mining is
a real opportunity for
Minetec’s unique, high-
precision tracking and
integrated real-time wireless
communications, made
possible by the integration
of WASP™ technology and
SMARTS™.
This enabling technology
is expected to transform
underground mining in the
same way that Wi-Fi and
GPS transformed open-pit
mining two decades ago.
Minetec now has a mine-
ready, miner-proof suite of
products that have been
deployed in six operating
mines.
These deployments form
critical reference sites that
demonstrate the technology
is proven and delivers real
operational benefits. Further
to these successes, as
announced in August 2016,
Minetec has recently secured
a multi-million dollar contract
to deploy its full range of
high-precision tracking,
safety and task-management
systems for an underground
gold mine in Western
Australia.
Minetec is focused on
capitalising on its early
successes and is targeting
underground hard-rock gold,
copper and diamond mines
in Australia and South Africa.
The division has unique
intellectual property which
we strongly believe is highly
valued by these customers.
Minetec incurred losses
of $1.3 million in the first
half and, as forecast in our
half-year announcement,
achieved a break-even result
in the second half. We expect
the business to build on this
result and deliver a full year
profit in FY17.
PAGE 53
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
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 2016:
FY15 final
FY16 interim
DECLARED AFTER THE END OF THE YEAR:
2.0
2.0
3,541
3,541
100%
100%
1 October 2015
1 April 2016
FY16 final
4.0
7,088
100%
4 October 2016
All dividends paid or declared by the company since the end of the previous financial year were fully franked.
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.
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.
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
Lt-Gen P F Leahy
Mr J W McDowell
Ordinary
shares
61,532
312,517
57,708
-
Mr G R C Barclay
21,052
Ms K J Gramp
-
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
ANNUAL REPORT
DIVIDENDS
Dividends paid or declared by the company to members since the end of the previous financial year were:
Cents per
share
$000
Total amount
Franked
Date of payment
DECLARED AND PAID DURING THE
YEAR ENDED 30 JUNE 2016:
FY15 final
FY16 interim
DECLARED AFTER THE END OF THE YEAR:
2.0
2.0
3,541
3,541
100%
100%
1 October 2015
1 April 2016
FY16 final
4.0
7,088
100%
4 October 2016
All dividends paid or declared by the company since the end of the previous financial year were fully franked.
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 2001.
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
2016
$
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
Other
Other services
Taxation compliance services (KPMG Australia)
Taxation compliance services (overseas KPMG firms)
w
192,667
15,077
207,744
2,430
87,111
135,683
225,224
2015
$
185,000
15,293
200,293
-
123,563
101,367
224,930
PAGE 55
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
REPORT
ROUNDING OFF
The company is of a kind referred to in
ASIC Legislative Instrument 2016/191
dated 1 April 2016 and, in accordance with
that Legislative Instrument, 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 Mawson Lakes
this 23rd day of August 2016.
ANNUAL REPORT
CODAN LIMITED AND ITS CONTROLLED ENTITIES
LEAD AUDITOR’S
INDEPENDENCE
DECLARATION
FOR THE YEAR ENDED 30 JUNE 2016
PAGE 57
CODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2016
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
2016
$000
2015
$000
169,540
(74,609)
94,931
(19,457)
(34,167)
(13,750)
(2,187)
(5,944)
19,426
(3,923)
15,503
15,495
8
15,503
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
8.8 cents
8.7 cents
7.1 cents
7.0 cents
www
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 98.
ANNUAL REPORT
CODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated
Consolidated
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
Note
21
21
Attributable to:
Equity holders of the company
Non-controlling interests
2016
$000
15,503
(66)
20
(46)
1,444
1,398
16,901
16,893
8
16,901
2015
$000
12,409
(97)
29
(68)
738
670
13,079
13,178
(99)
13,079
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 98.
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
2016
$000
169,540
(74,609)
94,931
(19,457)
(34,167)
(13,750)
(2,187)
(5,944)
19,426
(3,923)
15,503
15,495
8
15,503
2015
$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
Note
2
3
4
7
6
6
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO
THE ORDINARY EQUITY HOLDERS OF THE COMPANY
Basic earnings per share
Diluted earnings per share
www
8.8 cents
8.7 cents
7.1 cents
7.0 cents
PAGE 59
CODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED
BALANCE SHEET
AS AT 30 JUNE 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Current tax assets
Assets held for sale
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
Note
8
11
12
7
14
13
15
16
17
18
9
7
19
9
7
19
20
21
Consolidated
2016
$000
2015
$000
14,333
19,099
28,478
279
5,003
1,500
68,692
10,799
45,336
87,639
143,774
212,466
30,438
13
2,177
6,577
39,205
26,922
6,808
609
34,339
73,544
138,922
42,605
63,043
33,274
138,922
139,012
(90)
138,922
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
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 98.
ANNUAL REPORT CODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated
2016
Balance as at 1 July 2015
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
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
41,856
2,732
Hedging
reserve
$000
(68)
Profit
reserve
$000
Retained
earnings
$000
Total
$000
58,981
24,853
128,354
-
-
567
-
-
42,423
-
182
182
-
-
-
-
1,444
4,176
-
-
-
-
-
-
(46)
-
-
-
-
-
-
15,495
15,495
8
-
-
-
8
567
(46)
1,444
(114)
58,981
40,356
145,822
-
-
-
-
-
-
(7,082)
(7,082)
-
182
(7,082)
(6,900)
Balance at 30 June 2016
42,605
4,176
(114)
58,981
33,274
138,922
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
Share
capital
$000
41,560
Translation
reserve
$000
1,994
-
-
296
-
-
-
-
-
-
-
738
-
-
-
-
-
(68)
-
-
Consolidated
Hedging
reserve
$000
Profit
reserve
$000
Retained
earnings
$000
Total
$000
48,481
28,256
120,291
12,508
12,508
-
-
-
-
-
(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
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 98.
PAGE 61
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Current tax assets
Assets held for sale
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
Note
8
11
12
7
14
13
15
16
17
18
9
7
19
9
7
19
20
21
2016
$000
14,333
19,099
28,478
279
5,003
1,500
68,692
10,799
45,336
87,639
143,774
212,466
30,438
13
2,177
6,577
39,205
26,922
6,808
609
34,339
73,544
138,922
42,605
63,043
33,274
138,922
139,012
(90)
138,922
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
CODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Income taxes paid (net)
Net cash from operating activities
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
Consolidated
2016
Note
$000
2015
$000
175,299
(125,369)
44
(2,013)
(50)
157,366
(123,677)
86
(2,470)
(633)
10
47,911
30,672
275
(11,971)
(1,569)
(4,658)
(222)
(18,145)
(15,536)
(7,082)
(22,618)
7,148
7,156
29
14,333
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
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
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 98.
ANNUAL REPORT
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
2016 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 23 August 2016.
(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 2016, were available
for early adoption, but have
not been applied in preparing
these consolidated financial
statements. The company has
not yet decided when to adopt
AASB 9 Financial Instruments,
AASB 15 Revenue from
Contracts with Customers or
AASB 16 Leases and has not
yet determined the potential
effect of these standards.
The company is of a kind
referred to in ASIC Legislative
Instrument 2016/191 dated 1
April 2016 and, in accordance
with that Legislative Instrument,
amounts in the financial report
and directors’ 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 judgements
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 17).
Changes in accounting
policies
For the year ended 30 June
2016, 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
PAGE 63
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(C) BASIS OF CONSOLIDATION (continued)
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.
(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 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
ANNUAL REPORT 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 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.
(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
PAGE 65
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
forecast 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
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.
(H) TAXATION (continued)
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(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
a 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 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 the 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.
ANNUAL REPORT
(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 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
PAGE 67
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.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(N) INTANGIBLE ASSETS (continued)
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.
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) ASSETS HELD FOR SALE
Non-current assets, or disposal
groups comprising assets and
liabilities, are classified as held-
for-sale if it is highly probable
that they will be recovered
primarily through sale rather than
through continuing use.
Such assets are generally
measured at the lower of their
carrying amount and fair value
less costs to sell. Once classified
as held-for-sale, intangible
assets and property, plant
and equipment are no longer
amortised or depreciated.
(P) 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 where 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
ANNUAL REPORT are not recognised in the
balance sheet.
for use, the recoverable amount
is estimated annually.
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
Leasehold property
4%
10%
Plant and equipment 5% to 40%
Depreciation methods, useful
lives and residual values are
reviewed at each reporting date.
(Q) 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
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
PAGE 69
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 not
exceed the carrying amount that
would have been determined, net
of depreciation or amortisation,
if no impairment loss had been
recognised.
(R) 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.
(S) 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.
(T) 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.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(T) EMPLOYEE BENEFITS (continued)
Long service leave
The provision for employee
benefits for long service leave
represents the present value
of the estimated future cash
outflows resulting from 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.
(U) 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.
(V) 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.
(W) 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.
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.
ANNUAL REPORT
GROUP PERFORMANCE
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 tracking
solutions segment includes
the design, manufacture,
maintenance and support of a
range of electronic products
and associated software for
the mining sector. The “other”
business segment includes
the manufacture and marketing
of printed circuit boards. This
business was sold in the prior
financial year.
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, China,
United Arab Emirates, South
Africa and Ireland.
PAGE 71
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
GROUP PERFORMANCE (continued)
2. SEGMENT ACTIVITIES (continued)
Information about reportable segments
REVENUE
External segment revenue
Inter-segment revenue
Total segment revenue
RESULT
Segment result
Impairment
Net financing costs
Restructuring expenses
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
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
Segment assets
Unallocated corporate assets
Consolidated total assets
Communications
Metal detection
Tracking solutions
Other
Elimination
Consolidated
2016
$000
64,996
-
64,996
2015
$000
63,841
-
63,841
2016
$000
99,203
-
99,203
2015
$000
73,262
-
73,262
2016
$000
5,341
-
5,341
2015
$000
4,751
-
4,751
17,428
15,212
29,819
19,204
(1,229)
(3,320)
4,380
4,296
7,290
4,923
209
209
1,183
651
987
2,394
150
219
72,098
60,832
98,099
107,863
15,343
17,420
2016
$000
2015
$000
2016
$000
2016
$000
2015
$000
-
-
-
-
-
-
-
2,009
103
2,112
(565)
48
-
20
2015
$000
-
(103)
(103)
-
-
-
-
-
-
-
-
-
-
-
169,540
143,863
-
-
169,540
143,863
46,018
(5,535)
(2,187)
(2,512)
(16,358)
19,426
(3,923)
15,503
11,879
830
12,709
2,320
2,338
4,658
185,540
26,926
212,466
30,531
-
(1,386)
(197)
(12,764)
16,184
(3,775)
12,409
9,476
1,091
10,567
3,264
300
3,564
186,135
22,534
208,669
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 $26,239,966 (2015: $30,078,925), the United States of America
totalling $42,397,860 (2015: $29,268,017) and United Arab Emirates totalling $40,536,369 (2015: $15,933,018).
The group’s non-current assets, excluding financial instruments and deferred tax assets, were located as follows:
Australia $113,894,137 (2015: $121,421,258), the United States of America $175,780 (2015: $185,084), Ireland
$13,078 (2015: $210,495), England $30,113 (2015: $99,045), Canada $29,511,819 (2015: $25,811,482) and
United Arab Emirates $148,764 (2015: $222,203).
ANNUAL REPORT
ty
Information about reportable segments
REVENUE
External segment revenue
Inter-segment revenue
Total segment revenue
RESULT
Segment result
Impairment
Net financing costs
Restructuring expenses
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
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
Segment assets
Unallocated corporate assets
Consolidated total assets
Communications
Metal detection
Tracking solutions
Other
2016
$000
64,996
-
64,996
2015
$000
63,841
-
63,841
2016
$000
99,203
-
99,203
2015
$000
73,262
-
73,262
2016
$000
5,341
-
5,341
2015
$000
4,751
-
4,751
17,428
15,212
29,819
19,204
(1,229)
(3,320)
4,380
4,296
7,290
4,923
209
209
1,183
651
987
2,394
150
219
72,098
60,832
98,099
107,863
15,343
17,420
2016
$000
-
-
-
-
-
-
-
PAGE 73
2015
$000
2,009
103
2,112
(565)
48
-
20
Elimination
2016
$000
2015
$000
Consolidated
2016
$000
2015
$000
-
-
-
-
-
-
-
-
(103)
(103)
-
-
-
-
169,540
-
143,863
-
169,540
143,863
46,018
(5,535)
(2,187)
(2,512)
(16,358)
19,426
(3,923)
15,503
11,879
830
12,709
2,320
2,338
4,658
185,540
26,926
212,466
30,531
-
(1,386)
(197)
(12,764)
16,184
(3,775)
12,409
9,476
1,091
10,567
3,264
300
3,564
186,135
22,534
208,669
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
GROUP PERFORMANCE (continued)
3. EXPENSES
Consolidated
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
Increase in liability for long service leave
Increase in liability for annual leave
Additional expenses disclosed:
Impairment of trade receivables
Operating lease rental expense
Restructuring expenses
2016
$000
(44)
459
1,772
2,187
3
131
2,164
2,298
7,311
1,849
588
663
10,411
36,355
3,090
2,982
438
1,293
44,158
272
4,056
2,512
2015
$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
197
ANNUAL REPORT 4. OTHER EXPENSES / (INCOME)
Impairment of building
Impairment of Minetec property, plant and equipment
Impairment of Minetec inventory
Impairment of Minetec product development
Impairment of Minetec product intellectual property
(Gain)/loss on sale of property, plant and equipment
Other expenses/(income)
5. DIVIDENDS
i. An ordinary final dividend of 2.0 cents per share, franked to 100% with
30% franking credits, was paid on 1 October 2015
ii. An ordinary interim dividend of 2.0 cents per share, franked to 100% with
30% franking credits, was paid on 1 April 2016
iii. An ordinary final dividend of 1.5 cents per share, franked to 100% with
30% franking credits, was paid on 1 October 2014
iv. An ordinary interim dividend of 1.5 cents per share, franked to 100% with
30% franking credits, was paid on 1 April 2015
Consolidated
2016
$000
1,379
524
1,287
1,753
592
364
45
5,944
3,541
3,541
-
-
7,082
2015
$000
-
-
-
-
-
(299)
(316)
(615)
-
-
2,655
2,656
5,311
Subsequent events
Since the end of the financial year, the directors declared an ordinary final dividend of 4.0 cents per share, fully franked. Based
upon the shares on issue at 30 June 2016, the dividend would be $7,088,492 and is expected to be paid on 4 October 2016.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June
2016 and will be recognised in subsequent financial reports.
Dividend franking account
Franking credits available to shareholders for subsequent
financial years (30%)
11,954
12,864
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
$3,037,925 (2015: $1,517,685).
PAGE 75
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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.
Net profit used for the purpose of calculating basic
and diluted earnings per share
Consolidated
2016
$000
2015
$000
15,495
12,508
The weighted average number of shares used as the denominator number for basic earnings per share
was 177,066,095 (2015: 177,014,155).
The calculation of diluted earnings per share at 30 June 2016 was based on profit attributable to
shareholders of $15.5 million and a weighted average number of ordinary shares outstanding after
adjustment for the effects of all dilutive potential ordinary shares of 178,134,784 (2015: 177,985,408).
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
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
Utilisation of overseas carried forward R&D tax credits
2,286
(1,067)
1,219
2,704
3,923
346
(458)
(112)
3,887
3,775
5,828
4,855
845
1,067
319
323
3,274
930
458
5
-
3,462
ANNUAL REPORT
Consolidated
2016
$000
2015
$000
Increase in income tax expense due to:
Non-deductible expenses
Non-deductible capital loss
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 (net)
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
86
413
150
3,923
418
10
(50)
10
(2,286)
(1,898)
279
(2,177)
(1,898)
13,658
-
(412)
(2,430)
(1,652)
(2,147)
(209)
-
6,808
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
W
CASH MANAGEMENT
8. CASH AND CASH EQUIVALENTS
Petty cash
Cash at bank
W
PAGE 77
52
14,281
14,333
52
7,104
7,156
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
2016
$000
2015
$000
13
13
26,922
-
26,922
85,000
200
85,200
26,922
3,528
78
30,528
54,550
122
54,672
36
36
42,492
13
42,505
85,000
200
85,200
42,492
2,410
26
44,928
40,098
174
40,272
In addition to these facilities, the group has cash at bank and short-term deposits of $14,333,000 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 December 2018, and are subject to compliance with
certain financial covenants over that term.
WEIGHTED AVERAGE INTEREST RATES:
Cash at bank
Cash advance
Consolidated
2016
%
0.49
3.04
2015
%
1.12
3.00
ANNUAL REPORT
10. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of profit after income tax to net cash provided by operating activities
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
Impairment of Minetec assets
Increase/(decrease) in income taxes
Increase/(decrease) in net assets affected by translation
Net cash from operating activities before changes in assets and liabilities
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
Other debtors
Consolidated
2016
$000
15,503
2015
$000
12,409
364
(299)
3
131
2,164
1,379
10,411
749
4,156
3,925
1,575
40,360
1,338
1,544
93
4,716
(140)
47,911
19,859
(808)
19,051
48
19,099
473
29
2,176
-
7,889
295
-
4,264
(239)
26,997
1,704
(11)
255
1,510
217
30,672
20,808
(600)
20,208
229
20,437
WEIGHTED AVERAGE INTEREST RATES:
Cash at bank
Cash advance
Consolidated
2016
%
0.49
3.04
2015
%
1.12
3.00
PAGE 79
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OPERATING ASSETS AND LIABILITIES (continued)
12. INVENTORY
Consolidated
2016
$000
2015
$000
Raw materials
Work in progress
Finished goods
13. OTHER ASSETS
Prepayments
Project work in progress
Other
14. ASSETS HELD FOR SALE
Freehold land and buildings
Reconciliation
Carrying amount at beginning of the year
Transfer
Impairment
Carrying amount at end of the year
15. 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
4,546
12,156
11,776
28,478
1,301
-
199
1,500
5,003
-
6,382
(1,379)
5,003
-
-
-
1,190
(358)
832
27,552
(18,218)
9,334
633
10,799
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
ANNUAL REPORT
12. INVENTORY
Raw materials
Work in progress
Finished goods
Prepayments
Project work in progress
Other
Carrying amount at beginning of the year
Freehold land and buildings
Reconciliation
Transfer
Impairment
Carrying amount at end of the year
2016
$000
4,546
12,156
11,776
28,478
1,301
-
199
1,500
5,003
-
6,382
(1,379)
5,003
2015
$000
2,680
12,202
16,427
31,309
1,214
27
352
1,593
-
-
-
-
-
OPERATING ASSETS AND LIABILITIES (continued)
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
Asset held for sale transfer
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
Impairment
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
16. PRODUCT DEVELOPMENT
Product development at cost
Accumulated amortisation
Reconciliation
Carrying amount at beginning of year
Capitalised in current period
Impairment
Amortisation
PAGE 81
Consolidated
2016
$000
2015
$000
6,088
141
156
(6,382)
-
(3)
-
310
278
404
(34)
(131)
5
832
8,915
3,579
123
(524)
(595)
(2,164)
-
9,334
706
(73)
633
10,799
97,835
(52,499)
45,336
42,429
11,971
(1,753)
(7,311)
45,336
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
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OPERATING ASSETS AND LIABILITIES (continued)
17. INTANGIBLE ASSETS
Consolidated
2016
$000
2015
$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
83,274
16,328
(14,390)
1,938
10,273
(9,851)
422
5,106
(3,101)
2,005
87,639
83,525
(251)
83,274
1,725
2,096
(1,849)
(34)
1,938
847
169
4
(588)
(10)
422
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
ANNUAL REPORT
OPERATING ASSETS AND LIABILITIES (continued)
17. INTANGIBLE ASSETS
Consolidated
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
Transfers from capital work in progress
Additions
Amortisation
Disposals
2016
$000
83,274
16,328
(14,390)
1,938
10,273
(9,851)
422
5,106
(3,101)
2,005
87,639
83,525
(251)
83,274
1,725
2,096
(1,849)
(34)
1,938
847
169
4
(588)
(10)
422
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
Licences
Carrying amount at beginning of year
Acquisitions
Transfers
Impairment
Amortisation
The following segments have significant
carrying amounts of goodwill:
Tracking solutions
Metal detection
Communications
Consolidated
2016
$000
3,157
53
50
(592)
(663)
2,005
8,538
53,957
20,779
83,274
2015
$000
3,286
412
72
-
(613)
3,157
8,538
53,957
21,030
83,525
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 similar. The first year
of the cash flow forecasts is
based on the oncoming year’s
budget, and cash flows are
forecast for a 5-year period.
The key assumption driving
the value-in-use valuation
is the level of sales, which
is based on management
assessments having regard
to the demand expected
from customers, the global
economy and the businesses’
competitive position. Other
assumptions relate to the level
of gross margins achieved on
sales and the level of expense
required 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.
Minetec was acquired by
Codan in 2012 and is in the
early stages of developing a
mining technology business,
which forms the basis of the
tracking solutions segment.
It had a history of providing
relatively basic communication
services to the mining industry.
However, over the past four
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.
Over FY16, Minetec has
continued to progress the
technical maturity of its
products and made significant
progress with mining
customers to successfully
transition from delivery of
pilot demonstration projects
to full-scale implementation
of tracking, safety and
productivity technologies in
operational environments.
From a technology
perspective, FY16 has seen
Minetec transition from the
product development phase
to the systems integration
of solutions that have been
successfully demonstrated in
operating mines. The business
is now “product ready”.
Having now proven the
technology and demonstrated
our solutions, the challenge
is to secure further
market acceptance and
commitment to full-scale
operational deployments.
While the task has been
made more difficult by low
commodity prices and cuts
to miners’ capital expenditure
budgets, the Minetec value
proposition is well aligned to
the challenges of sectors such
as underground hard-rock
mining, which is moving toward
increased mechanisation.
PAGE 83
During FY16, the transition
from the development to
implementation phase and
the ongoing volatile nature of
commodity markets resulted
in management critically
assessing the carrying value
of all capitalised product
development, fixed assets and
inventory for this business unit.
This process identified assets
that are no longer considered
to be core to Minetec’s value
proposition and therefore a
write-down of $4.2 million was
recorded against these assets.
In performing the value-in-use
calculations for the Minetec
business, the first year of the
cash flow forecasts is based
on the oncoming year’s budget.
Cash flows are forecast 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. A number of
scenarios have been prepared
in order to understand the
range of valuation outcomes,
and these alternatives 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 business. To
prepare the sales forecasts,
management has determined
the number of mines that are
expected to 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 two most prospective
countries for Minetec’s safety
and productivity solutions. Over
the five-year forecast period,
the weighted average valuation
has Minetec achieving 7%
of that market. If that share
were to reduce to 4%, the
recoverable amount of the
Minetec cash generating unit
would be approximately equal
to its carrying amount.
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OPERATING ASSETS AND LIABILITIES (continued)
17. 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 communications 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.
18. TRADE AND OTHER PAYABLES
Consolidated
2016
$000
2015
$000
CURRENT
Trade payables
Other payables and accruals
Net foreign currency hedge payable
19. 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
w
9,655
20,620
163
30,438
5,097
1,160
320
6,577
609
1,077
1,437
(1,354)
1,160
11,935
13,163
97
25,195
5,287
1,077
320
6,684
642
1,101
637
(661)
1,077
ANNUAL REPORT
OPERATING ASSETS AND LIABILITIES (continued)
17. INTANGIBLE ASSETS (continued)
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
w
Consolidated
2016
$000
9,655
20,620
163
30,438
5,097
1,160
320
6,577
609
1,077
1,437
(1,354)
1,160
2015
$000
11,935
13,163
97
25,195
5,287
1,077
320
6,684
642
1,101
637
(661)
1,077
Consolidated
2016
$000
320
-
320
2015
$000
320
-
320
Reconciliation of other provision
Carrying amount at beginning of year
Provisions made/(reversed) during the year
w
CAPITAL MANAGEMENT
20. SHARE CAPITAL
Share capital
Opening balance (177,063,244 ordinary shares fully paid)
Performance rights expensed
Issue of share capital through employee share plan
Closing balance (177,212,302 ordinary shares fully paid)
41,856
567
182
42,605
41,560
296
-
41,856
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.
21. RESERVES
Foreign currency translation
Hedging reserve
Profit reserve
4,176
(114)
58,981
63,043
2,732
(68)
58,981
61,645
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
w
Hedging reserve
2,732
1,444
4,176
1,994
738
2,732
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
(68)
(46)
(114)
Profit reserve
The profit reserve comprises Codan Limited’s accumulated profits.
Balance at beginning of year
Transfer of profit after tax attributed to the parent entity
Balance at end of year
58,981
-
58,981
-
(68)
(68)
48,481
10,500
58,981
PAGE 85
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
CAPITAL MANAGEMENT (continued)
22. 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
23. GROUP ENTITIES
Name
PARENT ENTITY
Codan Limited
CONTROLLED ENTITIES
Codan (Qld) Pty Ltd *
Codan (UK) Limited
Codan Defence Electronics Pty Ltd **
Codan Executive Share Plan Pty Ltd
Codan US Inc
Codan Radio Communications ME DMCC
Codan Radio Communications Pty Ltd
Codan Holdings US Inc
Daniels Electronics Ltd
A.C.N. 007 912 558 Pty Ltd
(previously 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
2016
Interest held
2015
%
%
Australia
Ordinary
Australia
England
Australia
Australia
USA
UAE
Australia
USA
Canada
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Ordinary
USA
Australia
Ireland
UAE
Australia
South Africa
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
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
49
100
100
100
100
* A.C.N. 007 912 558 Pty Ltd, Codan (Qld) Pty Ltd, Minetec Wireless Technologies Pty Ltd and Parketronics Pty Ltd are inactive entities
and are in the process of being liquidated.
** Codan Defence Electronics Pty Ltd was incorporated on 10 May 2016.
ANNUAL REPORT
CAPITAL MANAGEMENT (continued)
22. CAPITAL MANAGEMENT
GROUP STRUCTURE
23. GROUP ENTITIES
Name
PARENT ENTITY
Codan Limited
CONTROLLED ENTITIES
Codan (Qld) Pty Ltd *
Codan (UK) Limited
Codan Defence Electronics Pty Ltd **
Codan Executive Share Plan Pty Ltd
Codan US Inc
Codan Radio Communications ME DMCC
Codan Radio Communications Pty Ltd
Codan Holdings US Inc
Daniels Electronics 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
Interest held
2016
%
2015
%
Australia
Ordinary
Australia
England
Australia
Australia
USA
UAE
Australia
USA
Canada
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
100
49
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
49
100
100
100
100
A.C.N. 007 912 558 Pty Ltd
(previously IMP Printed Circuits Pty Ltd) *
Australia
Ordinary
24. 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
Assets held for sale
Other assets
Total current assets
NON-CURRENT ASSETS
Investments
Property, plant and equipment
Product development
Intangible 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
PAGE 87
2016
$000
27,862
(3,632)
24,230
1,043
18,191
8,636
69,091
22,429
5,003
1,103
106,262
26,458
9,185
36,036
56,046
127,725
233,987
19,901
69,914
5,103
94,918
8,753
7,092
531
16,376
111,294
122,693
43,718
60,784
18,191
122,693
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
133,510
203,577
18,071
45,922
5,015
69,008
24,104
5,595
549
30,248
99,256
104,321
42,970
60,308
1,043
104,321
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
GROUP STRUCTURE (continued)
25. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2016, the parent company of the group
was Codan Limited.
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
Company
2016
$000
2015
$000
24,661
(305)
24,356
98,200
214,205
81,621
97,635
43,718
55,846
17,005
116,569
10,968
(2,830)
8,138
74,270
190,953
60,918
92,126
42,970
56,431
(574)
98,827
During the year, Codan Limited entered into contracts to purchase plant and equipment for $597,146
(2015:$340,799).
OTHER NOTES
26. 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
KPMG Australia - other assurance services
Overseas KPMG firms - taxation services
Consolidated
2016
$
2015
$
192,667
15,077
87,111
2,430
135,683
432,968
185,000
15,293
123,563
-
101,367
425,223
ANNUAL REPORT
GROUP STRUCTURE (continued)
25. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2016, the parent company of the group
was Codan Limited.
27. 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
2016
$000
2015
$000
1,353
-
1,353
805
349
1,154
3,149
12,850
22,252
38,251
2,748
10,854
24,962
38,564
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
13
-
-
13
-
13
13
-
13
39
13
-
52
(3)
49
36
13
49
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.
KPMG Australia - audit and review of financial reports
Overseas KPMG firms - audit of financial reports
Audit services:
Other services:
KPMG Australia - taxation services
KPMG Australia - other assurance services
Overseas KPMG firms - taxation services
Consolidated
2016
$
192,667
15,077
87,111
2,430
135,683
432,968
2015
$
185,000
15,293
123,563
-
101,367
425,223
PAGE 89
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
FOR THE YEAR ENDED 30 JUNE 2016
OTHER NOTES (continued)
28. 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 to develop
a disciplined and constructive
control environment in which
all employees understand their
roles and obligations.
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 2016, the group
had one customer in the Metal
Detection segment with sales
of $20.5 million.
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 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.
ANNUAL REPORT OTHER NOTES (continued)
28. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE
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
2016
$000
14,333
19,099
2015
$000
7,156
20,437
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
4,403
4,012
7,484
1,471
2,489
5,600
3,888
6,272
1,142
3,906
19,859
20,808
The aging of the group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-120 days
More than 120 days
Gross
2016
$000
11,683
4,231
2,341
623
981
19,859
Consolidated
Impairment
2016
$000
(49)
(150)
-
(27)
(582)
(808)
Gross
2015
$000
10,725
7,498
1,397
225
963
20,808
Impairment
2015
$000
(40)
(8)
-
-
(552)
(600)
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:
Balance at 1 July
Impairment loss/(reversal) recognised
Trade receivables written off to the allowance for impairment
Balance at 30 June
Consolidated
2016
$000
600
272
(64)
808
2015
$000
741
(57)
(84)
600
PAGE 91
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OTHER NOTES (continued)
28. 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 2016
Non-derivative financial liabilities
Trade and other payables
Finance leases
Cash advance
Derivative financial liabilities
Net foreign currency hedge payable
30 June 2015
Non-derivative financial liabilities
Trade and other payables
Finance leases
Cash advance
Carrying
amount
$000
Contractual
cash flows
12 months
or less
1-5 years More than
5 years
$000
$000
$000
$000
30,275
13
26,922
(30,275)
(13)
(27,439)
(30,275)
(13)
(518)
-
-
(26,922)
57,210
(57,727)
(30,806)
(26,922)
163
163
(163)
(163)
(163)
(163)
-
-
25,098
49
42,492
67,639
(25,098)
(52)
(43,657)
(25,098)
(39)
(1,165)
-
(13)
(42,492)
(68,807)
(26,302)
(42,505)
-
-
-
-
-
-
-
-
-
-
(C) MARKET RISK
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.
ANNUAL REPORT
OTHER NOTES (continued)
28. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
Profile
At the reporting date, the interest rate profile of the group’s interest-bearing financial instruments was:
FIXED RATE INSTRUMENTS
Financial assets
Financial liabilities
VARIABLE RATE INSTRUMENTS
Financial assets
Financial liabilities
Carrying amount
Consolidated
2016
$000
-
(13)
(13)
2015
$000
-
(52)
(52)
14,333
(26,922)
(12,589)
7,156
(42,492)
(35,336)
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 2015.
Profit/(loss) before tax
Reserve
100 bp
increase
$000
100 bp
decrease
$000
100 bp
increase
$000
100 bp
decrease
$000
30 JUNE 2016
Variable rate instruments
30 JUNE 2015
(126)
126
Variable rate instruments
(353)
353
-
-
-
-
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 and CAD.
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
in USD). The terms of these commitments are usually less than 12 months. As at the reporting date,
the group has entered into a mix of forward exchange contracts and collar hedge instruments which will
limit the foreign exchange risk on USD $25,580,000 of FY17 cash flows. On average, the collars give
protection above 77 cents and enable participation down to 71 cents, and the average forward exchange
contract rate is 74 cents.
PAGE 93
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OTHER NOTES (continued)
28. 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 2016
Cash and cash equivalents
Trade receivables
Trade payables
Loans and borrowings
Gross balance sheet exposure
Hedge transactions relating to balance
sheet exposure
Net exposure at the reporting date
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
EUR
$000
542
643
(22)
-
1,163
-
1,163
290
111
(21)
380
-
380
Consolidated
USD
$000
4,998
12,656
(5,118)
(8,753)
3,783
(1,038)
2,745
2,341
8,830
(6,112)
5,059
(2,170)
2,889
CAD
$000
-
-
3
-
3
-
3
-
-
(15)
(15)
-
(15)
ANNUAL REPORT
OTHER NOTES (continued)
28. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
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
$000
$000
2016
EUR
USD
CAD
2015
EUR
USD
CAD
-
15
-
15
-
(6)
-
(6)
(106)
(250)
-
(356)
(35)
(262)
1
(296)
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 $162,530, for which an independent
valuation was obtained from the relevant banking institution.
29. EMPLOYEE BENEFITS
Consolidated
2016
$000
5,248
5,097
609
10,954
2015
$000
3,848
5,287
642
9,777
3.00%
3.54%
10 years
3.50%
4.20%
10 years
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:
Assumed rate of increase in wage and salary rates
Discount rate
Settlement term
w
PAGE 95
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OTHER NOTES (continued)
29. 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 2016
The company issued 149,058
shares to eligible employees
in June 2016. The fair value
of the shares was $1.22 per
share, based on the volume
weighted average price at
which Codan shares were
traded on the ASX for the
five trading days immediately
preceding the date of issue of
the shares. The exercise price
was nil. The total expense
recognised as employee costs
in 2016 in relation to the ESP
shares issued was $181,851.
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.
Performance Rights Plan
At the 2004 AGM, shareholders
approved the establishment
of a Performance Rights Plan
(Plan). The Plan is designed
to provide employees with
an incentive to maximise the
return to shareholders over the
long term, and to assist in the
attraction and retention of key
employees.
Performance rights issued in
financial year 2014
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 2016 in
relation to the performance
rights issued was nil (2015:nil).
The group’s earnings per share
over the three-year period
to 30 June have not met
the performance target, and
therefore these performance
rights have lapsed and no
shares will be issued.
Performance rights issued in
financial year 2015
The company issued 1,083,715
performance rights in
November 2014 to certain
executives. The fair value of the
rights was on average $0.67
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%.
Due to the departure of an
executive in FY16, 259,952
performance rights were
cancelled. The total expense
recognised as employee costs
in 2016 in relation to the
performance rights issued was
$241,605 (2015: $250,389).
The performance rights
become exercisable if certain
performance thresholds are
achieved. The performance
threshold is based on growth of
ANNUAL REPORT
OTHER NOTES (continued)
29. EMPLOYEE BENEFITS (continued)
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.
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.
Performance rights issued in
financial year 2016
The company issued 236,948
performance rights in November
2015 to the chief executive
officer. The fair value of the
rights was $0.64 based on the
Black-Scholes formula. The
model inputs were: the share
price of $0.80, no exercise
price, expected volatility 43%,
dividend yield 4.38%, a term of
three years and a risk-free rate
of 2.9%.
The company issued 312,447
performance rights in April
2016 and 429,189 performance
rights in May 2016 to certain
employees. The fair value of
the rights was on average
$0.89 based on the Black-
Scholes formula. The average
model inputs were: the share
price of $1.08, no exercise
price, expected volatility 53%,
dividend yield 3.72%, a term of
three years and a risk-free rate
of 2.6%.
The total expense recognised
as employee costs in
2016 in relation to the
performance rights issued was
$325,210.
PAGE 97
CODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART
OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
OTHER NOTES (continued)
30. 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
Termination benefits
Consolidated
2016
$
2015
$
3,891,895
138,674
605,309
45,311
82,046
4,763,235
3,017,410
174,901
250,388
31,100
-
3,473,799
(C) KEY MANAGEMENT PERSONNEL TRANSACTIONS
From time to time, directors and specified executives, or their related parties, purchase goods from the
group. These purchases occur within a normal employee relationship and are considered to be trivial in
nature.
31. 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.
32. NET TANGIBLE ASSET / LIABILITY PER SHARE
Net tangible asset/(liability) per share
2016
7.2 cents
2015
1.0 cents
ANNUAL REPORT
OTHER NOTES (continued)
30. KEY MANAGEMENT PERSONNEL DISCLOSURES
CODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS’
DECLARATION
In the opinion of the directors of Codan Limited (“the company”):
(a) the consolidated financial statements and notes, set out on pages 58 to 98, 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 2016
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;
(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 24
will be able to meet any obligations or liabilities to which they are, or may become, subject 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 2016.
Dated at Mawson Lakes this 23rd day of August 2016.
Signed in accordance with a resolution of the directors:
D J Simmons
Director
D S McGurk
Director
PAGE 99
CODAN LIMITED AND ITS CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT
ANNUAL REPORT 38 to 46
PAGE 101
CODAN LIMITED AND ITS CONTROLLED ENTITIES
ASX ADDITIONAL
INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules not disclosed
elsewhere in this report is set out below.
Shareholdings as at 18th August 2016
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
24,228,533
12,320,566
Number of equity
security holders
Ordinary shares
1,083
1,556
717
949
118
4,423
The number of shareholders holding less than a marketable parcel of ordinary shares is 568.
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.
ANNUAL REPORT
The number of shareholders holding less than a marketable parcel of ordinary shares is 568.
Number of ordinary
shares held
34,808,151
11,404,224
9,118,356
8,854,251
8,631,790
5,124,125
5,074,029
5,000,000
4,764,585
3,562,124
3,226,763
3,202,210
2,999,050
2,522,458
2,125,687
2,008,463
1,907,359
1,489,875
1,314,508
1,205,143
Percentage of
capital held
19.6%
6.5%
5.2%
5.0%
4.9%
2.9%
2.9%
2.8%
2.7%
2.0%
1.8%
1.8%
1.7%
1.4%
1.2%
1.1%
1.1%
0.8%
0.7%
0.7%
118,343,151
66.8%
Location of share registry
Computershare Investor Services
Pty Limited
GPO Box 1903
Adelaide, South Australia 5001
Twenty largest shareholders
Name
I B Wall and P M Wall
Starform Pty Ltd
Kynola Pty Ltd
Dareel Pty Ltd
J P Morgan Nominees Australia Limited
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
Griffinna Pty Ltd
M K and M C Heard
A Bettison
National Nominees Limited
Warren Glen Pty Ltd
Fruehling Pty Ltd
Mitranikitan Pty Ltd
Pinara Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Bond Street Custodians Limited
G Bettison
Cedara Pty Ltd
J A Uhrig
Total
Offices and officers
Company Secretary
Mr Michael Barton BA
(ACC), CA
Principal registered office
Technology Park
2 Second Avenue
Mawson Lakes,
South Australia 5095
Telephone: (08) 8305 0311
Facsimile: (08) 8305 0411
Internet address:
www.codan.com.au
PAGE 103
CODAN LIMITED AND ITS CONTROLLED ENTITIES
CORPORATE
DIRECTORY
Directors
Mr David Simmons (Chairman)
Mr Donald McGurk (Managing Director and Chief Executive Officer)
Lt-Gen Peter Leahy AC
Mr Jim McDowell
Mr Graeme Barclay
Ms Kathy Gramp
Company Secretary
Mr Michael Barton
Principal registered office
Technology Park
2 Second Avenue
Mawson Lakes, South Australia 5095
Australia
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
2 0 1 6 C O D A N A N N U A L R E P O R T
ANNUAL REPORT I N N O V A T I O N W H E R E V E R Y O U A R E
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