Annual Report 2020
Innovation
wherever you are
At Codan, our purpose is to create long‑term
shareholder value through the design,
development and manufacture of innovative
technology solutions.
We work with customers in over 150 countries,
providing metal detecting, communications,
security and productivity solutions for some of
the harshest environments on earth.
Innovation
wherever you are
C
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FY20 SUMMARY
CHAIRMAN’S LETTER TO SHAREHOLDERS
CEO’S REPORT
GLOBAL LOCATIONS
OPERATIONS
ENVIRONMENTAL, SOCIAL, GOVERNANCE REPORT
BOARD OF DIRECTORS
LEADERSHIP TEAM
FINANCIAL REPORT
ASX ADDITIONAL INFORMATION
CORPORATE DIRECTORY
Codan Limited
ABN 77 007 590 605
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Annual General Meeting
The Annual General Meeting of Codan Limited will be held at
11:00 am on Wednesday, 28 October 2020.
The meeting will be held virtually via an online platform at
https://web.lumiagm.com with meeting ID 384-150-475.
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ANNUAL REPORT 2020 Highest full-year
sales in the
company’s history
$348.0
million
Record
sales
achieved in both
Metal Detection and
Communications
Earnings per share
35.5 cents
up 39%
Record statutory
net profit after tax
$64.0
million
An increase of 40%
Annual dividend
18.5 cents
fully franked
(interim 7.5, final 11.0)
Strong balance
sheet continues
$92.8
million
net cash
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 metal detection, communications and tracking solutions.
We have approximately 450 employees located in Australia, Canada, the USA, Ireland, the UAE
and Brazil. Our marketing reach embraces activity in over 150 countries, with exports accounting
for more than 85% of our sales.
F
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CODAN
Operating
revenue
$348.0m
EBITDA
$117.8m
NPAT
$64.0m
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
$169.5m
$226.1m
$229.9m
$270.8m
$41.9m
$75.6m
$70.4m
$78.6m
$348.0m
$117.8m
$21.1m
$44.7m
$39.8m
$45.7m
$64.0m
Results for the year
ended 30 June
% of
sales
% of
sales
2019
% of
sales
% of
sales
2017
% of
sales
2016
2018
2020
Note
Revenue
Communications
Metal Detection
Tracking Solutions
Other
$104.0m 30%
$77.6m 29% $56.5m 25%
$70.9m 31% $65.0m 38%
$236.4m 68% $182.1m 67% $164.0m 71% $148.0m 66%
$99.2m 59%
$7.6m
2%
$11.1m
4%
$9.4m
4%
$7.2m
3%
$5.3m
3%
Total revenue
$348.0m 100% $270.8m 100% $229.9m 100% $226.1m 100% $169.5m 100%
EBITDA
EBIT
Interest
$117.8m 34%
$78.6m 29%
$70.4m 31%
$75.6m 33%
$41.9m 25%
$89.6m 26%
$63.4m 23%
$53.7m 23%
$61.5m 27%
$29.2m 17%
($0.6)m
($0.1)m
($0.5)m
($0.8)m
($1.7)m
Net profit before tax
$89.0m 26%
$63.3m 23%
$53.2m 23%
$60.7m 27%
$27.5m 16%
Taxation
($25.0)m
($17.6)m
($13.4)m
($16.0)m
($6.4)m
Net profit after tax
$64.0m 18%
$45.7m 17%
$39.8m 17%
$44.7m 20%
$21.1m 12%
Earnings per share,
fully diluted
Ordinary dividend
per share
Special dividend
per share
Return on equity
Gearing
1
2
35.3c
18.5c
- c
28%
0%
25.3c
22.1c
24.9c
11.9c
9.0c
5.0c
23%
0%
8.5c
4.0c
23%
0%
7.0c
6.0c
29%
0%
6.0c
- c
16%
8%
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
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ANNUAL REPORT 2020
CHAIRMAN’S LETTER
TO SHAREHOLDERS
It is pleasing to be able to comment on another very
successful year for your company. The profit achieved
in FY20 was an all-time record by some margin.
Cash flow was strong and we ended the year with net
cash of $93 million. Some may think that our balance
sheet is too conservative. I disagree. Our combination
of cash on hand and access to additional funding
provides us with real optionality and supports our
investment in innovation.
We are committed to ongoing education across the entire
business, including your board. This year we have invested
significant time and money to better understand the vagaries
of the Anti Bribery and Corruption regimes around the world,
with a particular focus on the USA legislation. We also spent
time working with the executive team so that the value drivers
in M&A are fully understood and that M&A is seen as a tactic to
create value via growth, rather than a strategy in itself.
Last year I mentioned the rise and rise of litigation funders and
class actions. Our Directors and Officers Insurance premiums
have increased from under $100,000 in FY18 to a likely cost of
$1 million on renewal this year. We believe that urgent federal
government intervention is required as Australia is largely out of
step with the rest of the world.
As a board, we are very clear that for Codan, the primary
sources of wealth creation are innovation and capability
development. Over the last three years we have invested $83
million or 10% of sales in R&D and new product development.
This has driven the growth across our business and has been
the primary driver of wealth creation. We remain committed to
this strategy.
We really appreciate your support of Codan and look forward
to providing an update on our current year trading at the AGM
in October.
David Simmons
Chairman
COVID-19 has impacted our business in many ways but I
don’t intend to dwell on this issue. Rather, we are focussing on
adjusting our business to ensure that we continue to deliver
strong results. We will have a much better view on the year
ahead by the time the AGM comes around.
Donald has provided some real insights into each of our
business units in his report. From the board’s perspective,
the most pleasing aspect of our result is that it was the most
balanced that we have ever achieved.
Within Minelab, Recreation and Countermine are making
steady progress towards achieving $100 million in turnover
in these two markets alone. The days of our Minelab business
being completely dominated by Gold Mining sales are now
distant. That said, the Minelab Gold Mining business had
another outstanding year as we again extended our product
offering. Product range and geographic market extensions will
continue to be the cornerstones of success for Minelab. High
levels of investment in R&D and new product development to
ensure that Minelab remains the global market leader in metal
detection products is an easy decision.
It was really pleasing to see that the hard work put into
reshaping our Tactical Communications business paid off
during the year. We are now very much a communications
solutions provider with a strong focus on interoperability.
The record sales achieved in this division meant that Tactical
Communications was a strong contributor to our results.
Next year we fully expect that our LMR division will further
deliver on its systems sales strategy, so that it too will become
an important part of a balanced portfolio of businesses that is
Codan today.
You will note that we have revised the content of our
Remuneration Report this year. Hopefully this will help
shareholders to better understand this important but complex
area of our business. Given that the FY21 year will present
a number of unique challenges, we will be taking a slightly
different approach to short-term incentives for the executive
team this year. I will provide further details at the AGM.
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CODAN Over the last three years we have
invested $83 million or 10% of sales in
R&D and new product development.
This has driven the growth across our
business and has been the primary
driver of wealth creation.
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ANNUAL REPORT 2020 CEO’s REPORT
I am very pleased to report that despite the
challenges presented by the global COVID-19
pandemic, Codan has once again achieved
its highest ever sales and profitability, as we
continued to successfully implement our
strategic growth plan.
This was driven by the strength of gold detector sales into the
artisanal gold mining market, continued growth in sales of
our recreational metal detectors and several major contracts
delivered by the Communications business.
During FY20, we increased our investment to $31 million in
engineering in order to further diversify our revenues through new product introductions. We continued
to make the transition to a full solutions provider in our Communications business and further broadened
our geographic footprint in Minelab. As a result, demand across all of our international markets was more
evenly distributed.
Net profit after tax was $64 million for the year on group sales of $348 million. The company declared a fully
franked final dividend of 11 cents per share, following on from the 7.5 cent per share fully franked interim
dividend. This resulted in a total dividend of 18.5 cents for the full year, an increase of 32% over FY19.
Strong cash generation again during FY20 resulted in a net cash position of $93 million at 30 June 2020,
up from $38 million at the same time last year.
Metal Detection
Minelab is the world leader in handheld metal
detecting technologies for recreational, gold
mining, demining and military markets. For more
than 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 delivered a record performance during
the last 12 months, with sales increasing 30% to
$236 million. The key driver was our commitment
to ongoing investment into new products and
business development in new geographic
territories, creating a strong demand for our full
range of metal detectors across both the artisanal
gold mining and recreational markets. We are
particularly pleased with the growth we have
achieved over recent years in the recreational
market as we continue to introduce new technology
to our customers and significantly expand our retail
distribution footprint.
In artisanal gold mining, Minelab continues to
dominate, with the GPZ 7000®, SDC 2300® and
Gold Monster®. Gold Monster® was designed
specifically for our African customers and has
become the machine-of-choice for entry level
artisanal miners.
The SDC 2300® is exceptionally good at discovering
fine-particle gold in highly mineralised soils, and
existing customers are upgrading to the top of
line GPZ 7000® detection performance as they
become more successful. Minelab will soon release
an exciting new GPX® gold detector which will draw
upon the best features of the GPX 5000™ and
SDC 2300®.
Despite the challenges presented by COVID-19,
Minelab’s recreational business achieved a record
result. The demand for our recreational detectors
has been remarkably resilient right through the
pandemic, which we attribute to metal detecting
being a remote outdoor hobby that has the
potential to find items of value. The successful
release of our second simultaneous multi-
frequency (Multi-IQ®) detector, VANQUISH®, and
the sustained strong demand for our Multi-IQ®
EQUINOX® detector positioned us to take additional
market share.
In FY21, Minelab will benefit from a full year
of VANQUISH® sales, the release of a new
gold detector and an expanding geographic
sales footprint.
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CODAN 7
ANNUAL REPORT 2020 During FY20, we increased our
investment to $31 million in
engineering in order to further
diversify our revenues through
new product introductions.
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CODAN As previously announced, in 2018, Minetec entered
into an exclusive global licensing, technology
development and marketing agreement with
Caterpillar Inc. We have since integrated Minetec’s
high-precision tracking capability into the Caterpillar
MineStar® solution which is providing marketing
leverage into Caterpillar’s global dealer network.
During FY20, the board conducted a strategic
review of our Tracking Solutions business.
The global agreement with Caterpillar Inc. has
resulted in Minetec transitioning into a pure
software and development support business.
This coupled with the fact that Minetec did not
meet Codan’s expectations in FY20, has resulted
in a decision to write down capitalised product
development by $7.5 million this year.
Our strategy for Minetec continues to focus on
working with Caterpillar in order to leverage their
global distribution network. As we continue to
transition the business to being a technology
provider to Caterpillar, we have reduced our cost
structure and as a result, we expect the business to
return to profitability in FY21.
Our People
The record results this year could not have been
achieved without the dedication and flexibility
of our people, who worked tirelessly under very
difficult circumstances in the second half of the
year. Global supply chains and new business
development were all decimated by the lockdowns
and travel bans imposed as a result of the recent
COVID-19 pandemic.
Despite all of these challenges, which came with
the added pressure of personal uncertainty,
people right across the business continued to seek
solutions and did what it took to ensure that we
continued to operate and meet the requirements of
our customers.
On behalf of the board, I would like to give a heartfelt
thanks to our people for their outstanding response
to this situation. Without them and their exceptional
efforts, none of this would be possible.
Donald McGurk
Managing Director and CEO
Communications
Codan Communications designs and manufactures
mission-critical communications equipment for
global military and public safety applications. Its
solutions allow customers to save lives, enhance
security and support peacekeeping activities
worldwide.
The division had an excellent year in FY20, with both
Tactical Communications and LMR achieving record
sales levels, resulting in a sales increase of 34% to
$104 million. This growth was largely attributed
to a number of major contracts being delivered in
Tactical Communications, including the $15 million
East African contract and several larger systems
sales by LMR.
We continue to execute our strategy of transitioning
the Communications division from a product-centric
business to a full solutions provider. Ongoing
product development is being complemented by
strategic partnerships with key suppliers in order to
further broaden our solutions offering.
Tactical Communications continues to target the
global military market, with a focus on developing
world militaries in Africa, the Middle East, Asia and
Latin America.
Our Tactical Communications portfolio includes a
highly advanced software defined radio platform
and interoperability solutions which are further
supplemented by our in-country service, training
and customer support. The strength in our existing
partner network will allow us to continue to offer
the same level of in-country service and support,
despite the current travel restrictions imposed
by COVID-19. We are also investing in our digital
footprint to increase remote support to our partners
and end users, now and into the future.
In LMR, our strategy is to grow the business by
transitioning into larger systems projects and
offering ongoing service and support. This will
be enabled by the release of our new Cascade™
software defined solution, an interoperable first-
responder radio with excellent performance at a
competitive price point. Cascade™ is scheduled for
full release in FY21.
Tracking Solutions
Minetec provides unique, high-precision tracking,
productivity and safety solutions for underground
hard-rock mines. Minetec’s technology allows real-
time monitoring and control of mining operations in
order to optimise productivity and enhance safety.
It is an enabling technology required for mining
automation.
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ANNUAL REPORT 2020 Selling into 150 countries
with operations across the globe
CORK
VICTORIA
WASHINGTON
DUBAI
CHICAGO
ITAJAI
PENANG
PERTH
ADELAIDE
Operating from
Employing
9
locations worldwide
450
staff
CODAN OFFICES
MANUFACTURING OPERATIONS
ENGINEERING TEAMS
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METAL DETECTION
COMMUNICATIONS
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TRACKING SOLUTIONS
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ANNUAL REPORT 2020 FY20 Summary
• Another record year with highest sales in the
history of Minelab
FY21 Objectives
• New gold detector to be released
• New Countermine metal detector, the MF5™,
• VANQUISH® coin and treasure detector released
to be released
and sold through hundreds of retail outlets
across North America
• Sales growth in Latin America driven by Brazil
office expansion
• Build on VANQUISH® launch success to
maximise our foothold into the North American
retail outlets
• Continue expansion of our retail distribution
• Maintained stronghold on the African artisanal
channels in Europe
gold mining market
Minelab is the world leader in providing metal detection technologies for
coin and treasure, gold prospecting and military requirements. Through our
dedication to research and development, innovative design and production
quality, Minelab is the world-leading manufacturer of handheld metal detection
products. Over more than 30 years, Minelab has introduced more innovative and
practical technology than any of our competitors and has taken metal detection
technology to new levels of excellence.
Minelab employs the largest and world’s best
metal detection research and development
team, developing technologies that are
consistently superior to those of our competitors.
Our new products, including the latest coin and
treasure detector to join the Minelab portfolio,
the VANQUISH®, with Multi-IQ technology, are a
reflection of the world-leading engineering
development that is undertaken at Minelab.
The decision to establish a sales and distribution
hub in Brazil is continuing to prove successful. In
2020 we further invested in our Brazil office with
additional staff employed and the establishment of
a large dealer network. Sales into Latin America have
primarily been driven by the gold market, however
we have also recently added the coin and treasure
detector range to the portfolio with initial success.
Recreation – all targets, all soils,
all the time
Minelab was built on the success of selling metal
detectors into the developed economies of Australia,
North America, Europe and Russia. Our customers'
interests range from metal detecting as an interest,
as a hobby and passion, as a sport, or in some cases,
as a source of income.
Our comprehensive range includes gold detectors for
prospectors 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 has continued to grow from strength to
strength as we release new and improved technology
and products into this market.
Contributing to this growth was the launch of the
VANQUISH® coin and treasure detector. Released
in the first half of FY20, the VANQUISH® is an
introductory simultaneous multi-frequency detector,
(Multi-IQ technology), with a recommended retail
price of US$199 to US$499. With this entry level
price point we have expanded our presence into the
North American retail segment with these detectors
now available in over 900 “big box” retail stores across
North America, driving solid brand awareness and
increasing exposure to new consumers.
We have continued to experience growth with the
EQUINOX® Multi-IQ simultaneous multi-frequency
detector in its second full year of sales. EQUINOX®
has become the machine of choice for detectorists
around the world. As more detectors are used in
the field and the true performance of the detector
across various ground conditions is experienced,
more demand has resulted, with flow on share gains
in the segment.
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CODAN
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ANNUAL REPORT 2020 Small-scale gold mining – striking gold
Minelab’s world-leading gold detection
technology continues to revolutionise the
way small-scale gold miners around the world
prospect for gold. Artisanal mining areas
around the world tend to have relatively
young populations and, coupled with high
unemployment rates, lends itself to the
expansion of artisanal small-scale miners in
gold bearing regions.
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’s detectors add accuracy and efficiency
to finding and extracting gold, and deliver a
rapid return on investment to the user.
With direct presence now in Dubai and Brazil
we are closer to many of our artisanal mining
customers and markets which has allowed us
to strengthen and support our distribution
channels and broaden our customer base.
Our team offer a high level of product training
and support to our extensive dealer networks
so they can in turn pass this onto their end
users to help get the best performance from
their detectors. This training also enables us to
establish regional accredited service centres with
trained technicians to provide maintenance and
technical support for our end users.
Minelab will soon release a new GPX® detector
which introduces an ease of use technology,
GeoSense Pulse Induction, and will sit within
the premium end of our gold detector product
portfolio.
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CODAN
Countermine – all mines, all soils, all conditions
Minelab’s detectors are widely recognised for
locating landmines and explosive remnants of war
as well as the detection of improvised explosive
devices (IEDs). The Countermine business is
strategically important to Minelab, with the
continual development of leading-edge technology
and products to increase our global market share.
Utilising the same metal detection technology
as used by the metal detector sensor in the
MDS-10®, the MF5™ will be released as our new
dedicated Countermine detector in FY21. We have
successfully tested MF5™ prototypes with
international militaries and both products are now
well placed to secure significant contracts against
their competition.
Since the successful launch of the dual sensor (metal
detection and ground penetrating radar) MDS-10®
in FY19, the product has undergone comprehensive
accredited international trials, proving it is an
exceptional dual sensor detector with sales made to
allied international militaries.
Minelab’s Countermine detectors are manufactured
in Adelaide and are supplied to humanitarian
demining non-government organisations,
militaries and commercial demining companies
across the globe.
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ANNUAL REPORT 2020 ALL MINES. ALL SOILS.
ALL CONDITIONS.
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CODAN
This detector has an excellent metal detector
and demonstrated superior detection of high/
low metal and non‑metal conductive targets
and long wires… The MDS‑10® provides an
intuitive and easy‑to‑use interface providing
graphical indications of both GPR and
metal detection. The MDS‑10® requires
limited number of user settings for optimum
operation and at 6.1 pounds, it is considered
light and compact for the capability provided.
The training burden for this system is expected
to be low due to the systems ease of use.
Extract from the Sub-Surface Ordnance and
Improvised Explosive Device Locator (SOIL)
Assessment Report prepared by the US Naval Surface
Warfare Center.
The trusted global leader in
humanitarian demining, UXO clearance
and countermine operations, Minelab
mine detectors can be found in service
in more than 55 countries around the
world through partnerships with NGOs,
commercial demining companies,
the United Nations and individual
nation state militaries. Minelab recently
released their newest ground search
detector, the MDS-10®.
The MDS-10® is a dual sensor detector with unique
Metal Detection (MD) and Ground Penetrating
Radar (GPR) technologies to provide superior results
in the detection of metal and non-metal targets
utilising Minelab’s Simultaneous Multi-Frequency
Digital technology and Chemring’s proven Ultra
WideBand Impulse Radar. This combination is
engineered to detect all conductive and non-
conductive targets of interest in varied soil
conditions and operating environments.
The MDS-10® is easy to operate — even with
one gloved hand. The 3.5 inch waterproof and
shockproof QVGA display, compatible with night
vision goggles, delivers optimal performance during
tactical operations.
Minelab’s engineering team were presented with
the EIDA Electronics Industry Excellence Awards at
the World Electronics Conference for New Product
Design of the MDS-10® based on both the superior
design as well as the significant technical innovation.
17
ANNUAL REPORT 2020 Codan Communications is a leading international provider of premium
communications solutions for Tactical and Land Mobile Radio (LMR).
Our mission is to provide communications solutions that allow our customers
to be heard so that they can save lives, protect assets, ensure security and
support their local needs. With more than 60 years in the business, Codan
Communications has earned a reputation for quality, reliability and customer
satisfaction, producing innovative and industry-leading technology solutions.
FY21 Objectives
Tactical Communications
• Continue to deliver on our strategy of
diversifying and growing sales by broadening
our solution offering
• Continue to expand market share
in the defence sector, and security
communication markets
• Expand our range of solutions, by addressing
the real world challenges experienced by our
customers in key areas of interoperability,
situational awareness, and secure voice and
data communications
• Focus on continuing to grow our in-country
services, training and customer support
Land Mobile Radio
• Continue transition to a systems provider in the
public safety communications market
• Deliver on Cascade™ LMR solutions
• Explore strategic opportunities to diversify and
grow sales in the public safety market
Tactical Communications experienced another year
of strong growth in its core defence and security
markets after successfully expanding into the
US funded foreign aid communications market,
and significant contract wins from its Asia Pacific,
Middle East and African defence-based customers.
During FY20, we delivered our largest order on
record to an African security and defence customer
and won a significant US funded Security Assistance
Program in the Middle East.
With deployments in more than 150 countries,
Codan Communications continues to enhance
its world-class product and solutions design,
development and implementation capability.
Our focus is firmly on delivery to our customers as
we enable them to be heard in the most testing
conditions in the moments that matter.
Tactical Communications serves worldwide
defence, peacekeeping, humanitarian, commercial,
security and public safety markets.
Land Mobile Radio serves worldwide security,
public safety, and commercial markets.
FY20 Summary
As a result of record sales in both Tactical and Land
Mobile Radio markets, the Communications division
achieved unprecedented revenue of $104 million,
with both markets recording their largest contracts
in the history of Codan.
Tactical Communications
• Expanded market share in the defence market
by the successful launch of Sentry® Software
Defined Manpack
• Delivered multiple large scale system programs
• Successfully renewed NGO contracts
• Grew revenue and demand for our in-country
services and training
• Diversified and grew sales by broadening
our solution offering
Land Mobile Radio
• Significantly progressed the Cascade™
LMR solution for planned release in FY21
• Introduced CodanCare service for
LMR customers
• Record sales year; won a number of
communication systems orders growing
the business in this area
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CODAN Our Tactical Communications strategy
continues to focus on expansion into the
defence and security markets, through the
provision of complete communication solutions
that leverage an agile and highly advanced
software defined platform. Our software
defined platform is a future-proven
investment, allowing adaptation for upcoming
tactical waveform requirements and providing
sustainability and interoperability that is
further strengthened by our in-country service,
training and customer support.
LMR sales increased markedly in the state and
local market with the successful deployment of
systems into North Carolina, New York, Oregon
and Washington. During FY20, we shipped
our first release of Cascade™ to key customers
in New Mexico. In June we signed our largest
contract to date with Coos County, Oregon.
Our LMR strategy continues to be the pursuit
of larger-project systems business while
building a compelling services portfolio
sustaining long-term growth. This is enabled
by the FY21 release of our new Cascade™
software defined networked communications
solution, an interoperable first-responder
solution with excellent performance at
a competitive price point in the North
American market.
19
ANNUAL REPORT 2020 A MOUNTAINOUS NEED FOR
RELIABLE COMMUNICATIONS
Reliable communication network plays vital role in delivering
one-of-a-kind adventures and supporting public safety.
THE CHALLENGE
Sun Valley Heli Ski’s (SVHS) business involves
helicoptering skiers in and out of isolated
mountain peaks, so when they began
experiencing outage, coverage, and reliability
issues, it hired Tajkowski Technical Planning to
find a solution. Tajkowski did a complete system
audit and evaluation which uncovered myriad
issues that led to the unreliable communications.
THE RESULT - A NETWORK THAT
EXCEEDS EXPECTATIONS
The customer decided to decommission its
old system and install Codan. The Codan MT
Series is designed to provide reliable coverage
in challenging terrains – ranging from freezing,
snow-filled mountaintops to scorching deserts.
The Codan repeaters were installed on the
mountaintop to support person-to-person
communications between all parties, including
the helicopter crew, those back at headquarters,
guests and the SVHS guides on the ground.
The main radio/repeater is located in a shelter
that sits at 10,000 feet and is powered by a DC
solar power plant. With temperatures commonly
dropping to -400F, the equipment has to be
robust enough to withstand this.
SVHS also uses the Codan transportable
repeaters at various locations to extend
coverage when needed. These are flown via
helicopter to the top of peaks and placed
in areas that support the broadest possible
coverage range.
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CODAN A BIG INVESTMENT IN PUBLIC SAFETY
SVHS’s Codan network is so robust that it
plays a dual role. It is used both for SVHS
operations and also for search and rescue.
“We wanted a public safety grade network
so we can assist government agencies with
life-saving missions,” says Tajkowski. “Using
Codan,” he continues, “when there is an
emergency, we have full radio interoperability
with public safety teams from state and
local governments. And because of our
state-of-the-art helicopters, we are often the
first choice when transporting responders to
the scene.”
Codan sells solutions, not products.
My business isn’t about building
standard radio systems. I design
mission‑critical special application
radio systems. And when I talk to
Codan, I’m talking to engineers who
help me find many ways to overcome
network challenges.
Sean Tajkowski,
Tajkowski Technical Planning
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ANNUAL REPORT 2020 Minetec provides unique high-precision tracking, productivity and safety
solutions for underground hard-rock mines. Minetec’s technology enables
real-time monitoring and control of mining operations, allowing miners to
visualise the whole mine in order to optimise productivity and enhance safety.
This technology is now integrated into the Caterpillar MineStar® for Underground
solution and available through the Caterpillar global dealer network.
The enhanced MineStar® for Underground
solution now combines a range of safety and
productivity capabilities to our customers:
Safety:
• Proximity awareness; increased visibility of
machines and vehicles
• Traffic management; control of physical access
within congested areas
• Proximity detection; audio and visual alerts
of machinery, vehicles or other miners in
close proximity
• Collision avoidance; the ability to
automatically slow or stop a vehicle in
response to nearby threats
Productivity:
• Machine data; provision of real-time data to
support production and maintenance planning
• Development, production and maintenance
scheduling; automated shift planning for
underground operations
• Short interval control; the ability to modify the
shift plan in real time
These capabilities are now integrated into
MineStar® for Underground software system
branded as Caterpillar Fleet, Detect and Health.
FY20 Summary
• Achieved general availability of MineStar® for
Underground software solutions; for stope and
block cave mines
• Won contract for Newmont’s Tanami stope
mine in Northern Territory
• Completed final product validation for a large
block cave mine in Indonesia
• Completed production readiness of the
software for the BHP Olympic Dam project;
this validates our ability to deploy at scale
• Further integrated Minetec’s engineering team
into the Caterpillar business, allowing for a
restructure of Minetec’s cost base
FY21 Objectives
• Quantify the productivity and safety
improvements from deploying the MineStar®
for Underground solution at key reference sites
• Secure new customers through the Caterpillar
global dealer network – targeting Australia,
North America and Latin America
• Transfer legacy Minetec customer sites
to Caterpillar management, with Minetec
continuing to provide expert technical support
• Return Minetec to profitability
Our strategy for Minetec continues to focus on
working with Caterpillar in order to leverage their
global distribution network. We are continuing
our transition to become a software systems
business: developing, delivering and supporting
technology solutions to Caterpillar and their end
user customers.
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CODAN
We are continuing our transition to
become a software systems business;
developing, delivering and supporting
technology solutions to Caterpillar and
their end user customers.
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Codan has assessed our ESG (Environmental, Social, Governance)
risks and opportunities and presented them below. The Board
Audit, Risk and Compliance Committee has endorsed the content
within this report, which was compiled with the contribution of
various leaders across the business.
ENVIRONMENTAL
Codan is conscious of our impact on the environment during the manufacture, distribution,
use and disposal of our products. We maintain an effective Work Health, Safety and
Environmental Management System that is integral to our business processes and
are accredited to OHSAS 18001 and AS/NZS 4801 Occupational Health and Safety
Management Systems and AS/NZS ISO 14001 Environmental Management Systems.
Codan has adopted stringent testing and quality
control procedures. It is accredited to AS 9100
Quality Management System – Requirements for
Aviation, Space and Defence and maintains quality
assurance systems approved to International
Standard AS/NZS ISO 9001. Codan’s commitment
also extends to our supply chain. Our two
largest suppliers, Plexus Corp and Venture
Corporation Limited, comply with ISO 9001
Quality Management Systems and ISO 14001
Environmental Management Systems. We partner
with suppliers who meet stringent quality
standards, are innovative and work in safe and
responsible ways.
As part of our ISO certification process,
we continually review and update our business
risk management register, and conclude that we
do not have any significant environment risks.
We consider our potential environmental incidences
could range from a dangerous chemical spill that
requires notifying the EPA, to a noise complaint
from neighbours. In FY20 we reported no
environmental incidences.
Our global head office located in the Technology
Park precinct at Mawson Lakes, South Australia,
houses around 240 Codan, Minelab and Minetec
staff, and is currently awarded a 4.5 star Nabers
energy rating, which exceeds the minimum 4
star requirement.
Solar panels at head office
reduced our energy consumption
by 25% in the last six months.
Codan products are RoHS (Reduction of Hazardous
Substances) certified. The goal of RoHS is to reduce
the environmental effect and health impact of
electronics. The legislation’s primary purpose is to
make electronics manufacturing safer at every stage
of an electronic device’s life cycle. Codan products
are also fitted with a WEEE (Waste Electrical and
Electronic Equipment) sticker which encourages
consumers to dispose of the product thoughtfully
when at the end of its lifecycle.
Head office is fitted with multiple
recycling stations and organic
waste bins in staff kitchen areas
to enable sustainable disposal of
organic materials.
Codan has a low carbon footprint with the exception
of air travel, which has been essential given our
global sales footprint. Current COVID-19 restrictions
have prompted a business review of our reliance on
air travel and we are working through some options
to reduce this reliance when restrictions ease.
CODAN
SOCIAL
Our People and Values
Can-Do
High Performing
Customer Driven
Openness & Integrity
Codan’s core values are a shared set of values that shape our company culture
and ultimately enable us to achieve our organisational goals.
Our core values are embodied in the strong
culture of our organisation. We strive for our
values to help guide our day-to-day decisions
and provide the framework for not only what
we do, but more importantly, how we do it.
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 seeks to employ individuals who
align to and genuinely relate to our core
values, and encourages all staff to help bring
these values to life through their everyday
interactions with one another. We hold all of
our staff accountable to our values and, most
importantly, our senior leaders of the business,
who play a significant part in shaping our
core values.
Commencing in 2019, Codan partnered
with Next Level Elite, a South Australian
organisation which supports athletes in
broadening their professional goals to make
the most of their athletic success. As part
of the athletes' tailored mentoring program,
which includes topics such as leadership and
media training to life beyond sport, athletes
presented their unique stories to Codan staff.
Each athlete spoke about how they personify
a specific Codan Core Value, such as “Can-Do”
or “High Performing”. This program has proven
to be mutually beneficial for both Codan staff
and the athletes involved. Staff feedback from
these sessions has strongly suggested that this
should be a continuing arrangement.
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ANNUAL REPORT 2020 COVID-19 RESPONSE
In light of the recent worldwide pandemic,
COVID-19 has tested our resilience and
ability to respond quickly to modify our
way of working. The below measures were
implemented by the business to not only
support staff but also seamlessly continue our
business operations:
Codan’s IT department responded swiftly
to ensure staff were equipped to work from
home as quickly and efficiently as possible;
Codan released a ‘COVID-19 staff check in
survey’. With an 82% participation rate,
the results were overwhelmingly positive
with company confidence at 90%, and 98%
of staff felt supported by the company
during this time;
HR held numerous focus groups across
varying parts of the business to capture
any learnings from our modified way
of working, with two of the main
considerations under review being a
Working From Home policy, and future
travel assessment requirements;
Mental health and wellbeing training
facilitated by external psychologists was
offered to all employees. These sessions
focussed on self-care and resilience in the
workplace, as well as additional training for
managers to look out for any early warning
signs if members within their team were
suffering, and what next steps to take.
WORKPLACE, HEALTH & SAFETY
Codan is committed to a philosophy of
zero harm for all staff in all areas of the
business, and we are particularly conscious
of exposing employees to critical risk,
especially with respect to those travelling to
remote locations. As such, Codan engages
experts to ensure the safety and welfare of
its travellers.
Codan has not had a
lost time injury in the last
three financial years.
Codan’s latest culture
survey included an
inaugural safety section.
After reviewing staff
feedback, we’ve taken
additional steps in
FY20 to increase safety
communication, and to
encourage all staff to
report all incidences and
near misses.
We are working on a training module to
improve safety awareness across the group
sites, and undertaking an audit against our
legislative requirements for consultation
and communication.
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CODAN
SOCIAL RESPONSIBILITY
Being a socially conscious and responsible organisation is a part of Codan’s corporate
identity. We endeavour to foster a sense of awareness through our charity programs.
We administer this through our Sponsorships & Charity Committee. We are an avid
supporter of a number of charities, via numerous initiatives such as direct sponsorship
dollars and product donations, charity events and providing employees with time away
from work to volunteer.
Codan is a long time proud supporter of Variety
– the Children’s Charity, with 2020 marking our
32nd year of sponsorship. Specifically Codan is
a Gold sponsor of the Variety Bash, Australia’s
largest and longest running charity motoring
event through the Australian outback. Throughout
the Variety Bash, participants visit local towns,
stopping into schools and organisations to present
grants and visit the children. Codan participates in
the event with our own Variety Bash vehicle, and
encourages local and international employees
to be part of the annual eight day event. Codan
oversees the radio communications in the lead up
to the event as well as manning the control centre
to facilitate the communication and tracking of
all official vehicles, mobile workshops and mobile
doctors, for a safe and successful Variety Bash.
Codan employees conduct site surveys ahead of
the Variety Bash to ensure the remote site provides
reliable communications along the Variety Bash
route, as well as provide HF radio operator training,
assist with radio installations and attend Variety
Bash meetings.
The Variety Bash truly feels like a once in a lifetime
experience. Not only did we get to travel through
some remote and beautiful parts of South
Australia, but the focus was always brought
back to the brilliant work that Variety do for the
kids in need, living in these remote communities.
It is heart‑warming to see firsthand how Variety
improves the lives of these children.
Rory, Bash participant
After Australia experienced one of the most
devastating bushfire seasons throughout the
summer of 2019/2020, Codan has assisted the
South Australian Country Fire Service (CFS) in
preparation for the upcoming bushfire season. In
June, Codan donated five HF SDR Manpacks with
all the latest features and capability, alongside five
VHF transportable repeaters with UHF Links. Codan
is ready to assist the CFS with configuration and
operational training. This equipment will offer CFS
volunteers improved communications and safety
during extended operational incidents.
As part of Codan’s response to assist NGOs on the
ground in Africa in their COVID-19 relief efforts,
Codan has made communications product
donations to various organisations to support
their work.
A sign of appreciation from staff at The Hutt Street Centre
An employee led fundraising drive to raise much
needed funds for the Hutt Street Centre, located in
Adelaide, South Australia, resulted in a combined
effort from Codan, our employees, suppliers and
customers, raising enough funds to provide more
than 30,000 freshly prepared, hot, nutritious meals
for people experiencing homelessness.
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EMPLOYEE ENGAGEMENT
Codan continues to focus on growing our
own future leaders and building capability
by providing all employees with high-quality
learning experiences and development
opportunities. In the last three financial
years, we have spent 1% of our staff costs on
education and training. This included a number
of senior and up and coming leaders attending
a two day workshop on "Building High
Performance Teams". In FY20, we rolled out
an online Learning Management System (LMS)
platform which houses various mandatory and
optional training content for all staff to access.
The mental health and wellbeing of our staff is
of the upmost importance, and to encourage
this our staff have access to confidential
counselling support, as well as an onsite
gym at head office, employer funded fitness
challenges such as Corporate Cup, 10,000
daily step challenge, and Adelaide’s City to Bay
fun run.
In building our future capability, Codan also
partners with the Australian Industry Group
Training Services (AIGTS) to offer selected
candidates a four year apprenticeship within
our head office at Mawson Lakes. This has
been a mutually beneficial program for Codan
and the individual with some of these past
apprentices now joining our "20 years of
service" club.
The in house café located at our head office
premises provides Codan-subsidised meals.
This staff benefit encourages our people
to get away from their desks and mingle
with others and to enjoy our canteen and
courtyard facilities.
Codan tests its culture through biennial
employee culture surveys.
Our most recent survey in 2020, [which had
an 89% participation rate] revealed that
90% of staff agreed they would recommend
Codan as a great place to work, and are
proud to work for Codan.
The overall engagement score also increased
10% to 78%.
The "Stark Tower" meeting room is configured
with dual AV, phone, game console,
child-friendly games and toys such that a child
can be brought to work and staff are able to
work in the room at the same time.
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CODAN
WORKPLACE DIVERSITY
Codan is committed to promoting a culture that supports the development of and
embraces a diverse mix of employees throughout all levels of the organisation.
Codan recognises that our success is directly
related to our people. Our people reflect a growing
diversity, with different gender, ages, family status,
cultures, ethnicities, and religions represented
among our employees. Research shows that
a diverse workforce is strongly linked to high
performing teams, and we see evidence of that at
Codan through innovation, product development
and our global workforce.
Codan’s purpose to “deliver innovation wherever
you are”, can only be achieved through the wide
range of talent, experience, skills and perspectives
of our employees. We recognise that this is
reinforced by ensuring that our diversity is reflected
throughout all levels of the organisation.
Codan continues to monitor our diversity profile,
review our recruitment and development processes
and challenge ourselves to understand our
employees better, so that all of our employees have
the ability to succeed and meet their potential.
Codan is committed to sustaining an inclusive
environment where our people feel part of the team
and contribute to Codan’s wider success.
In 2020 we updated both our Diversity and
Inclusion and Parental Leave Policies, with the
inclusion of paid parental leave for both the
primary and secondary caregiver. One of our FY21
objectives is to increase the percentage of female
applicants for technical and leadership roles. We
have a number of strategies in place to achieve this.
30 June 2020
30 June 2019
Gender
representation
Female
(%)
Male
(%)
Female
(%)
Male
(%)
Board representation
20%
80%
20%
80%
Senior executive
representation
Senior management
representation
Group representation
Total
0%
100%
0%
100%
30%
26%
27%
70%
74%
73%
30%
26%
25%
70%
74%
75%
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CORPORATE GOVERNANCE
Codan’s corporate governance statement, which was approved by the board on 19 August 2020,
is available on the company’s website and may be accessed via the following URL:
https://codan.com.au/who-is-codan/corporate-governance/
Compliance
Cyber Security
Fraud, anti-bribery and anti-corruption (ABAC)
remains a material topic for our business, as we
acknowledge some of our businesses operate
in high risk environments. Codan finalised a
formal review of our ABAC program in FY20, and
implemented a number of initiatives to further
strengthen our program including more tailored
training for high risk roles, defined the acceptable
use of gratuities,and a risk-driven third party due
diligence program. We can confirm the program
remains fit for purpose and in line with good anti-
bribery compliance programs.
We are pleased to report in
FY20 there were zero violations
of our ABAC Policy, and we
maintain an internal target of
zero violations for FY21.
As part of Australia’s new Whistleblower legislation,
Codan has formalised a Whistleblower Protection
Policy. Employees can report misconduct concerns
either internally, or anonymously by accessing
the confidential, externally managed hotline.
There were no reports to the hotline in FY20.
Codan has recently issued all staff with mandatory
training courses for completion to create awareness
of our updated ABAC Policy and Whistleblower
Program, with a target for 100% completion by the
end of the 2020 calendar year.
Codan has also implemented a Modern Slavery
Policy following on from the introduction of
Australia’s Modern Slavery Act 2018. We have
recently conducted the KPMG Modern
Slavery Benchmark which provided Codan
with a self-assessment report with results and
recommendations, to be implemented throughout
FY21, including tailored Modern Slavery training for
our purchasing team.
The revised ABAC, Whistleblower and Modern
Slavery Policies can all be found on our website.
As a global technology company, safeguarding our
intellectual property and confidential information is
paramount to maintaining trust with our customers,
suppliers and partners. Codan is compliant with the
legal and regulatory frameworks pertaining to data
security and protection for all of our global locations.
As the probability of cyber-attacks increase and
become more complex, Codan has adopted a risk-
based framework to protect our assets. Cyber risks
are regularly reported to the Codan Board and
Board Audit, Risk and Compliance Committee.
Relevant organisational policies and standard
operating procedures are in place and are regularly
reviewed to ensure they remain commensurate with
the external risk.
During FY20 Codan completed penetration testing
and regular vulnerability assessments to highlight
potential system vulnerabilities. Codan also
undertook an ethical hacking “Red Team” assessment
to test our physical, digital and social engineering
controls. This also allowed Codan to test our security
monitoring systems and incident response plans in
response to a simulated cyber-attack.
In FY20, Codan had no known
major security incidents
regarding the loss of confidential
information or intellectual
property.
FY20 Highlights
• Systems implemented to reduce time to detect
and respond to cyber incidents
• Implemented systems and technologies to
strengthen the way we access information
and systems
• Introduced additional employee
cyber-awareness programs across all global
locations
FY21 Priorities
• Increase awareness and cyber security
programs
• Implement additional technologies to further
segregate our assets
CODAN
Tax
TAX
$
Codan conducts its tax affairs within a robust
risk management policy and framework.
Under this framework, we approach
our dealings with taxation authorities
globally with transparency and integrity,
maintaining a conservative approach to tax
risk management. As most of the activities
and assets which generate our income are
in Australia, Codan pays the majority of its
taxes here.
In 2020, we paid $17.2 million corporate
tax in Australia, or 97% of our global tax
contribution. As a result, our shareholders
are able to benefit from the generation of
Australian franking credits, notwithstanding
that a high proportion of our sales are to
overseas customers. Our global effective
income tax rate was 28% in 2020, slightly
lower than the Australian corporate tax rate of
30%. This difference is due mainly to the tax
incentives available in Australia and Canada
for the extensive research and development
activities that the group undertakes.
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ANNUAL REPORT 2020 DAVID SIMMONS
BA (Acc)
Chairman, Independent Non-Executive Director
Chair of Remuneration and Nomination Committee
David was appointed by the board as Chairman in February 2015
and has been a director of Codan since May 2008. He has extensive
financial and general management experience, having worked in large,
diversified businesses throughout his career, including as Managing
Director for 16 years of a then large Australian-based publicly
listed company.
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. Donald 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 Donald 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. Donald came
to Codan with an extensive background in change management
applied to manufacturing operations, and held senior manufacturing
management positions in several industries. Donald holds a Masters
Degree in Business Administration from The University of Adelaide
and completed the Advanced Management Program at Harvard
University in 2010.
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PETER LEAHY AC
BA (Military Studies), MMAS, GAICD
Independent Non-Executive Director
Peter was appointed to the board in September 2008. He retired from
the Army in July 2008 after a 37-year career and six years as Chief of Army.
His distinguished service was recognised with his 2007 appointment as a
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 has been a director of Electro Optic
Systems Holdings Limited since May 2009 and a director of Citadel Group
Limited since June 2014. Peter is a member of the Advisory Board to China
Matters and is a technical advisor to WarpForge Limited.
GRAEME BARCLAY
MAICD, F Fin, CA, MA (Hons)
Independent Non-Executive Director
Graeme was appointed to the board in February 2015. He has more than 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. From 2014
to 2018, he was Chairman of the Nextgen Group that successfully divested
the Nextgen Networks and Metronode data-centre businesses in 2016 and
2018 respectively. He is currently Chairman of Uniti Group Limited and was
a non-executive director of BSA Limited from June 2015 to December 2019.
Graeme is a chartered accountant, holding membership of the Institute of
Chartered Accountants of Scotland and of Chartered Accountants Australia
and New Zealand.
KATHY GRAMP
BA (Acc), CA, FAICA, FAICD
Independent Non-Executive Director
Chair of Board Audit, Risk and Compliance Committee
Kathy was appointed to the board in November 2015. She has had a long and
distinguished executive career and over 21 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, Kathy
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. Kathy is a director, Chair of Audit & Risk and
member of the Remuneration and Nomination Committees of Uniti Group
Limited, a chartered accountant and a Fellow of the Australian Institute of
Company Directors and the Institute of Chartered Accountants Australia and
New Zealand. Kathy was a director, Chair of Audit & Risk and a member of the
Remuneration Committee of Godfreys Group Limited from January 2018 to
May 2018 and has significant audit committee experience.
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ANNUAL REPORT 2020 DONALD MCGURK
HNC (Mech Eng), MBA, FAICD, Harvard AMP
Managing Director and Chief Executive Officer
Donald is a motivator of people, with extensive knowledge and
experience in the areas of change management and strategy
formulation.
Donald joined Codan in December 2000 and had executive
responsibility for group-wide manufacturing until his transition
into the role of CEO. From 2005 to 2007, he also held executive
responsibility for sales of the company’s communications products
and, from 2007 to 2010, executive responsibility for the business
performance of HF radio products.
Donald was appointed to the board as a director in May 2010 and
became Managing Director in November 2010.
For more details of Donald’s qualifications and experience, please
see page 32.
MICHAEL BARTON
BA (Acc), CA
Chief Financial Officer and Company Secretary
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.
PETER CHARLESWORTH
BEEEng (Hons), MBA, GAICD, Harvard AMP
Executive General Manager, Minelab
Peter brings extensive knowledge and experience to Codan from
more than 30 years in the electronics industry, including more than
17 years at Codan and formerly in management and technical roles
at Tenix Defence and Vision Systems.
Peter joined Codan in December 2002 as General Manager of
Engineering and subsequently held various roles including New
Business Manager and HF Radio Business Development Manager.
He was appointed Executive General Manager of Minelab in 2008,
following its acquisition by Codan in that same year.
Peter holds a degree in Electrical and Electronic Engineering with
First Class Honours, and a Masters of Business Administration,
both from The University of Adelaide. He is also a Graduate
Member of the Australian Institute of Company Directors and
completed the Advanced Management Program at Harvard
University in 2014. He was Chairman of the Technology Industry
Association from 2006 to 2011 and was on The University of
Adelaide ARI Advisory Board from 2009 to 2015.
L
E
A
D
E
R
S
H
P
T
E
A
M
I
34
CODAN
SCOTT FRENCH
BSc
Executive General Manager, Land Mobile Radio
Scott was appointed to the role of Executive General Manager, Land Mobile Radio in
February 2019 and is based in Victoria, British Columbia.
Scott came to Codan highly recommended for his lateral thinking, strategic approach
to business and for his strong leadership. He brings a wealth of experience gained
from almost 30 years with world-class organisations such as Motorola, Panasonic
and Zetron. During his time at Motorola, Scott made the transition from engineering
leadership to overall go-to-market leadership for several lines of business, helping
to transform Motorola into a solutions provider beyond land mobile radio (LMR).
Throughout his journey, Scott gained a high-level appreciation of LMR technology,
solutions, services and associated markets. At Panasonic, he continued his leadership
by transforming the company from product to solutions sales, with focus on mobile
devices and security, before assuming the role of General Manager, Americas for two
years with Zetron, a command and control company.
In addition, Scott served as Vice Chairman on the state and local board of directors
of TechAmerica, representing both Motorola and Panasonic, and was also the Chair
of the State and Local Government and Education Executive Council of IT Alliance for
Public Sector.
Scott holds a Bachelor of Science in Industrial and Systems Engineering from
Virginia Tech, and undertook MBA studies with a focus on leadership at Loyola
University Maryland.
RORY LINEHAN
BSc (Hons), MSc, PhD, Harvard AMP
Chief Technology Officer, Codan and Executive General Manager, Minetec
Rory brings a unique mix of technical knowledge, diverse commercial skills and
broad experience to Codan, delivering insightful leadership across the business.
He joined Codan in March 2014, working across the group to leverage technology
and innovation in developing strategies for growth. In February 2019, he was
appointed to the role of Chief Technology Officer and leads the company’s
Technology Council to maximize synergies across the Codan group and assess new
opportunities for organic and acquisitive growth. In addition to this group role,
Rory is Executive General Manager of Minetec.
Rory holds degrees in Physics and Engineering and a PhD in Mathematics from
Coventry University (UK). In November 2018, Rory completed the Harvard Business
School Advanced Management Program (AMP). He has skills in strategy, marketing,
business development, systems engineering and programme management gained
across a wide range of complex projects, including development of the Boeing 787
primary flight-control system.
Prior to Codan, Rory held a number of senior positions with blue-chip firms in the
UK, including McLaren, Cobham and Goodrich.
PAUL SANGSTER
BS, Chicago Booth AMP
Executive General Manager, Tactical Communications
Paul joined Codan in 2013 as the Vice President and General Manager of Business
Development for the Communications Division and brings over 20 years of
progressive experience in communications and surveillance solutions. He was
appointed Executive General Manager of Codan Tactical Communications in 2017.
Prior to Codan, Paul spent 12 years at Cobham Tactical Communications and
Surveillance as the Vice President of Sales and Marketing.
Paul holds a Bachelor of Science in Management Studies from University of Maryland,
Global Campus. He also completed the Executive Development Program and the
Advanced Management Program at University of Chicago’s Booth Business School.
35
ANNUAL REPORT 2020 FINANCIAL
REPORT
FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS’ REPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
38
52
53
54
55
56
57
58
93
94
36
CODAN
ANNUAL REPORT 2020
37
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 2020 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 Leahy AC
Graeme Barclay
Kathy Gramp
Details of directors and their
qualifications and experience are set out
on pages 32 to 33.
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.
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:
Board
meetings
Board Audit,
Risk and
Compliance
Committee
meetings
Remuneration
and Nomination
Committee
meetings
Director
Mr D J Simmons
Mr D S McGurk
Lt-Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
A
10
10
10
10
9
B
10
10
10
10
10
A
4
4
4
B
4
4
4
A
2
2
2
B
2
2
2
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
Remuneration packages 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.
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 has reference to trends
in comparative companies both
locally and internationally and may
obtain independent advice on the
appropriateness of remuneration
packages.
38
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN 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 50% 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. For executives not participating
in the performance rights plan, other
benefits may be offered to encourage
long–term performance.
In recent years, the Remuneration and
Nomination Committee have made a
number of changes to the structure of
executives’ remuneration packages to
ensure alignment with shareholders’
interests. These changes have been:
• reduction of short–term cash
incentives from 60% of fixed salary
to 50%;
• increase of long–term share–based
remuneration from 40% of fixed
salary to 50%;
• introduction of a “good leaver”
clause in the long–term incentive
structure so that 10% of any shares
issued remain restricted and subject
to Board cancellation for a period
of 12 months after the executive’s
employment ceases with the
company.
Short–term incentive plans are based
on the achievement of performance
hurdles which relate to the profitability
delivered by our business segments
and the group. For a business unit
executive, the short–term incentive is
split between the group results and the
performance of the business unit. Group
level executives are measured on group
profit. The short–term incentive targets
are set by the board each year based
on a percentage of the budget which is
approved by the board. For example, in
FY20, the profit target used for group
incentive calculation purposes was
16% higher than the FY19 target. The
short–term incentive 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.
For FY20, the short–term incentive
payable to executives was based on 50%
of the executives’ fixed salary inclusive
of superannuation, but can exceed
this level if performance hurdles are
exceeded, subject to a cap equal to the
executive’s fixed salary.
These performance conditions have
been established to encourage the
profitable growth of the group. The
board considered that for the year ended
30 June 2020 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 $850,000 per annum.
Non–executive directors do not
receive any performance–related
remuneration nor are they issued options
on securities. Directors’ fees cover all
main board activities and membership
of committees.
Service contracts
It is the group’s policy that service
contracts for key management
personnel executives are unlimited in
term but capable of termination on
three to six months’ notice, and that
the group retains the right to terminate
the contract immediately by making
payment in lieu of notice. The group has
entered into a service contract with each
key management person.
Details of performance rights granted to executives during the year are as follows:
Number of
performance
rights granted
during year
Grant date
Average fair
value per right
at grant date
($)
Exercise
price
per right
($)
Expiry date
Number of
rights vested
during year
DIRECTORS
Mr D S McGurk
EXECUTIVES
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr R D Linehan
Mr S P Sangster
63,647
15 November 2019
33,509
41,431
42,696
40,618
35,996
15 November 2019
15 November 2019
15 November 2019
15 November 2019
15 November 2019
5.12
5.12
5.12
5.79
5.12
5.12
– 30 June 2023
– 30 June 2023
– 30 June 2023
– 30 June 2023
– 30 June 2023
– 30 June 2023
–
–
–
–
–
–
39
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 DIRECTORS' REPORT (continued)
Remuneration Report – Audited (continued)
Performance rights (continued)
Mr S A French was appointed to the
position of Executive General Manager,
Land Mobile Radio on 25 February 2019.
The performance rights granted in
FY20 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
a non-statutory target earnings per
share of 16.2 cents as set by the board.
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 5%
per annum over the three-year period from
the base earnings per share. A pro-rata
vesting will occur between the 5% 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 in the
twelve-month period following the vesting
date .
Details of vesting profiles of performance
rights granted to executives are
detailed below:
Performance rights granted
Number
Date
Percentage
vested in year
Percentage
forfeited
in year
Financial years in which
shares will be issued if
vesting achieved
Directors
Mr D S McGurk
Executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr R D Linehan
Mr S P Sangster
173,959
124,524
91,972
63,647
91,586
65,559
48,421
33,509
113,237
81,058
59,881
41,431
42,696
113,237
79,469
58,694
40,618
69,728
40,373
31,208
35,996
23 November 2016
10 November 2017
16 November 2018
15 November 2019
23 November 2016
8 December 2017
16 November 2018
15 November 2019
23 November 2016
8 December 2017
16 November 2018
15 November 2019
15 November 2019
23 November 2016
8 December 2017
16 November 2018
15 November 2019
23 November 2016
8 December 2017
16 November 2018
15 November 2019
100
–
–
–
100
–
–
–
100
–
–
–
–
100
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
2023
2020
2021
2022
2023
2020
2021
2022
2023
In relation to the performance rights granted in FY18, the performance requirements were based on the group’s aggregated earnings
per share over a three–year performance period exceeding 59.51 cents per share. As this earnings per share target has been exceeded
to 30 June 2020, it is expected that the performance rights will vest and be converted into shares before the end of August 2020.
40
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN 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:
Directors
Mr D S McGurk
Executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr R D Linehan
Mr S P Sangster
Held at
1 July 2019
Issued
Vested
Lapsed
Held at
30 June 2020
390,455
63,647
173,959
205,566
254,176
–
251,400
141,309
33,509
41,431
42,696
40,618
35,996
91,586
113,237
–
113,237
69,728
–
–
–
–
–
–
280,143
147,489
182,370
42,696
178,781
107,577
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.
Director share ownership
The Directors’ Shareholding Policy
requires directors to build a minimum
shareholding in the company.
For non–executive directors this
minimum shareholding should equate
to their annual director fee and for
executive directors, their annual fixed
remuneration. Under the policy,
directors have five years to reach the
minimum holding.
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 2019
Received on
exercise of rights
Other changes *
Held at
30 June 2020
Directors
Mr D J Simmons
Mr D S McGurk
Lt–Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
Specified executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr R D Linehan
Mr S P Sangster
86,636
746,342
57,708
38,829
10,000
271,347
541,347
–
154,240
370
–
173,959
–
–
–
91,586
113,237
–
113,237
69,728
–
(307,877)
–
–
2,500
(109,229)
(193,250)
–
2,000
(69,758)
* Other changes represent shares that were purchased or sold during the year
86,636
612,424
57,708
38,829
12,500
253,704
461,334
–
269,477
340
41
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 DIRECTORS' REPORT (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:
Year
Salary
and 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
$
183,912
179,133
91,957
89,567
91,957
89,567
100,316
97,709
468,142
455,976
$
–
–
–
–
–
–
–
–
–
–
599,424
548,140
1,067,566
1,004,116
554,144
410,104
554,114
410,104
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
17,471
17,018
8,736
8,509
8,736
8,509
9,530
9,282
44,473
43,318
21,003
20,531
65,476
63,849
$
–
–
–
–
–
–
–
–
–
–
17,546
23,589
17,546
23,589
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
$
201,383
196,151
100,693
98,076
100,693
98,076
109,846
106,991
512,615
499,294
261,189
226,670
261,189
226,670
1,453,276
1,229,034
1,965,891
1,728,328
%
–
–
–
–
–
–
–
–
–
–
–
–
56.1
51.8
Directors
Non–Executive
Mr D J Simmons
Lt–Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
Total non-executives’ remuneration
Executive
Mr D S McGurk
Total directors’ remuneration
42
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Directors
Year
Salary
and fees
Short-term
incentives
Other
Post-employment
short-term
and superannuation
Other long-term
Termination benefits
Performance rights
Total
Proportion of remuneration
performance related
Non–Executive
Mr D J Simmons
Lt–Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
Total non-executives’ remuneration
Executive
Mr D S McGurk
Total directors’ remuneration
$
183,912
179,133
91,957
89,567
91,957
89,567
100,316
97,709
468,142
455,976
$
–
–
–
–
–
–
–
–
–
–
599,424
548,140
1,067,566
1,004,116
554,144
410,104
554,114
410,104
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
contributions
$
17,471
17,018
8,736
8,509
8,736
8,509
9,530
9,282
44,473
43,318
21,003
20,531
65,476
63,849
$
–
–
–
–
–
–
–
–
–
–
17,546
23,589
17,546
23,589
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
$
201,383
196,151
100,693
98,076
100,693
98,076
109,846
106,991
512,615
499,294
261,189
226,670
261,189
226,670
1,453,276
1,229,034
1,965,891
1,728,328
%
–
–
–
–
–
–
–
–
–
–
56.1
51.8
–
–
43
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 Other long-term
Termination
Performance
Total
Proportion of remuneration
benefits
rights
performance related
9,837
10,051
12,902
19,106
$
–
–
8,067
9,678
8,770
8,233
39,576
47,068
$
–
–
–
–
–
–
–
–
–
–
–
–
135,058
116,884
166,998
144,528
82,395
$
–
163,712
142,628
111,003
82,142
$
751,210
642,122
919,228
817,982
843,053
362,120
844,267
731,485
822,972
732,358
659,166
4,180,730
486,182
3,286,067
%
56.8
51.8
57.4
50.7
45.0
24.6
51.6
37.4
51.6
44.6
–
–
DIRECTORS' REPORT (continued)
Remuneration Report – Audited (continued)
Directors’ and senior executives’ remuneration (continued)
Executive officers
Year
Salary
and fees
Short-term
incentives
Other
short-term
Mr M Barton
(Chief Financial Officer
and Company Secretary)
Mr P D Charlesworth
(Executive General Manager,
Minelab & Codan Defence)
Mr S A French
(Executive General Manager,
Land Mobile Radio)
Mr R D Linehan
(Chief Technology Officer, Codan
and Executive General Manager, Minetec)
Mr S P Sangster
(Executive General Manager,
Tactical Communications)
Total executive
officers’ remuneration
$
$
293,525
291,732
276,527
215,911
358,724
360,698
362,641
270,079
$
–
–
–
–
398,944
297,080
64,634*
265,517
89,201
7,402
Post-employment
and superannuation
contributions
$
21,058
22,749
19,906
21,628
–
–
363,449
271,915
16,121*
21,003
362,251
130,860
86,068
346,541
313,378
43,280*
352,325
244,585
45,073
2020
1,761,183
1,534,803
124,035
2019
1,619,261
950,636
138,543
–
–
–
61,967
44,377
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
* Other short–term benefits relate to costs incurred for arrangements made following the executives’
relocation from an overseas country to the location of their employment with Codan.
Executive officers outside of Australia
are paid in their local currencies. The
Australian dollar equivalents are
calculated using average exchange rates.
Directors and executives received a pay
increase of 2.5% effective 1 July 2019.
At this point in time, no increase has been
granted for FY21.
Mr S A French was appointed to
the position of Executive General
Manager, Land Mobile Radio on 25
February 2019.
Short–term incentives which vested
during the year are as follows: Mr D S
McGurk 93% (7% forfeited), Mr M Barton
93% (7% forfeited), Mr P D Charlesworth
93% (7% forfeited), Mr S A French 74%
(26% forfeited), Mr R D Linehan 71%
(29% forfeited) and Mr S P Sangster 93%
(7% forfeited).
The remuneration amounts disclosed
above have been calculated based on
the expense to the company for the
financial year. Therefore, items such as
performance rights, annual leave and
long service leave taken and provided for
have been included in the calculations. As
a result, the remuneration disclosed may
not equal the salary package as agreed
with the executive in any one year.
Other than performance rights, no
options or shares were issued during
the year as compensation for any key
management personnel.
44
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Mr M Barton
(Chief Financial Officer
and Company Secretary)
Mr P D Charlesworth
(Executive General Manager,
Minelab & Codan Defence)
Mr S A French
(Executive General Manager,
Land Mobile Radio)
Mr R D Linehan
Mr S P Sangster
(Executive General Manager,
Tactical Communications)
Total executive
officers’ remuneration
(Chief Technology Officer, Codan
and Executive General Manager, Minetec)
$
$
293,525
291,732
276,527
215,911
358,724
360,698
362,641
270,079
$
–
–
–
–
contributions
21,058
22,749
19,906
21,628
363,449
271,915
16,121*
21,003
398,944
297,080
64,634*
265,517
89,201
7,402
362,251
130,860
86,068
346,541
313,378
43,280*
352,325
244,585
45,073
$
–
–
–
–
–
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
1,761,183
1,534,803
124,035
2019
1,619,261
950,636
138,543
61,967
44,377
* Other short–term benefits relate to costs incurred for arrangements made following the executives’
relocation from an overseas country to the location of their employment with Codan.
Executive officers
Year
Salary
Short-term
Other
Post-employment
and fees
incentives
short-term
and superannuation
Other long-term
Termination
benefits
Performance
rights
$
9,837
10,051
12,902
19,106
–
–
8,067
9,678
8,770
8,233
39,576
47,068
$
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
751,210
642,122
919,228
817,982
843,053
362,120
844,267
731,485
822,972
732,358
$
135,058
116,884
166,998
144,528
82,395
–
163,712
142,628
111,003
82,142
659,166
4,180,730
486,182
3,286,067
Proportion of remuneration
performance related
%
56.8
51.8
57.4
50.7
45.0
24.6
51.6
37.4
51.6
44.6
–
–
Corporate performance
As required by the Corporations Act
2001, the following information
is presented:
2020
$
2019
$
2018
$
2017
$
2016
$
Profit attributable to shareholders
Dividends paid
Share price at 30 June
Change in share price at 30 June
Earnings per share, fully diluted
$63,795,377
$26,998,945
$7.09
$3.62
35.3c
$45,665,443
$26,872,758
$3.47
$0.47
25.3c
$41,574,557
$19,593,194
$3.00
$0.66
22.1c
$43,514,938
$17,723,725
$2.34
$1.16
24.9c
$15,494,607
$7,082,530
$1.18
$0.03
11.9c
45
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 Dividend
The company announced a final dividend
of 11.0 cents per share, fully franked,
bringing the full-year dividend to 18.5
cents, up 32%. This dividend has a
record date of 28 August 2020 and will
be paid on 11 September 2020 .
Operating and
Financial Review
Codan is a technology company
that provides robust technology
solutions that solve customers’
communications, safety, security
and productivity problems in some
of the harshest environments around
the world. Our customers include
United Nations organisations, mining
companies, security and military
groups, government departments,
major corporates as well as individual
consumers and small–scale miners.
FY20 highlights:
• Record statutory net profit after tax
of $64.0 million, increased by 40%
• Highest full-year sales of $348 million
in the company’s history
• Record sales achieved in both Metal
Detection and Communications
• Annual dividend of 18.5 cents, fully
franked (interim 7.5, final 11.0)
• Earnings per share of 35.5 cents,
up 39%
• Strong balance sheet continues –
$92.8 million net cash
Despite the pandemic challenges in
FY20, Codan has had a very strong
12 months and has delivered another
record profit year. This was driven by the
strength of gold detector sales into the
artisanal gold mining market, continued
growth in sales of our recreational metal
detectors and several major contracts
delivered by the Communications
business.
As a result of our strategy to further
diversify our revenues by releasing more
new products, transitioning to a full
solutions provider and broadening our
geographic footprint, we were pleased
to see that demand across all of our
international markets was more evenly
distributed. In FY20 we:
• released our second simultaneous
multi-frequency (Multi-IQ®) coin and
treasure detector series, VANQUISH®;
• progressed the development of our
new GPX® replacement gold detector,
to be released in FY21;
• significantly increased our Minelab
retail footprint across North America,
Europe and Asia Pacific and expanded
the geographic reach of our gold
detectors;
• expanded our market share in the
defence communications sector
through the successful launch of
Sentry® Software Defined Manpack;
• successfully delivered multiple
large-scale systems projects in
Communications, validating our
transition to a full solutions provider;
• completed and delivered the first
release of the Cascade™ software
defined networked communications
solution;
• restructured Minetec’s cost base
in order to return the business to
profitability; and
• through the pandemic, we validated
that we have the right manufacturing
systems and processes in place which
enabled us to maintain supply in very
challenging circumstances.
As a result of these initiatives, the
business is well placed to deliver another
strong performance in FY21.
46
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Financial performance and other matters
Revenue
Communications
Metal Detection
Tracking Solutions
Total revenue
Business performance
EBITDA*
EBIT*
Interest*
Net profit before tax
Taxation
Net profit after tax
$m
104.0
236.4
7.6
348.0
117.8
89.6
(0.6)
89.0
(25.0)
64.0
FY20
% of sales
30%
68%
2%
100%
34%
26%
26%
18%
$m
77.6
182.1
11.1
270.8
78.6
63.4
(0.1)
63.3
(17.6)
45.7
FY19
% of sales
29%
67%
4%
100%
29%
23%
23%
17%
Earnings per share, basic
Ordinary dividend per share
Special dividend per share
Total dividend
* The group adopted AASB 16 Leases from 1 July 2019. The previous operating lease expenses have been replaced by depreciation and interest expense on leases.
Refer to note 27 in the financial report for more information.
35.5 cents
18.5 cents
– cents
18.5 cents
25.3 cents
9.0 cents
5.0 cents
14.0 cents
The key driver was our commitment to
ongoing investment into new products
and business development in new
geographic territories, creating a strong
demand for our full range of metal
detectors across both the artisanal gold
mining and recreational markets. We are
particularly pleased with the growth
we have achieved over recent years in
the recreational market as we continue
to introduce new technology to our
customers and significantly expand our
retail distribution footprint.
In artisanal gold mining, Minelab
continues to dominate, with the GPZ
7000®, SDC 2300® and Gold Monster®.
Gold Monster® was designed specifically
for our African customers, and has
become the machine–of–choice for
entry level artisanal miners. The SDC
2300® is exceptionally good at
discovering fine–particle gold in highly
mineralised soils, and existing customers
are upgrading to the top of the line GPZ
7000® detection performance as they
become more successful.
During FY21, Minelab will introduce a
new gold detector, which will include the
best features from both the SDC 2300®
and GPX platforms.
Despite the challenges presented
by COVID–19, Minelab’s recreational
business achieved a record result. The
demand for our recreational detectors
has been remarkably resilient right
through the pandemic, which we
attribute to metal detecting being
a remote outdoor hobby that has
the potential to find items of value.
The successful release of our second
simultaneous multi–frequency (Multi–
IQ®) detector, VANQUISH®, and the
sustained strong demand for our Multi–
IQ® EQUINOX® detector positioned us to
take additional market share.
In FY21, Minelab will benefit from a full
year of VANQUISH® sales, the release of
a new gold detector and an expanding
geographical sales footprint. We
remain confident of continued success
next year.
Cash generation was excellent,
resulting in a net cash position of $92.8
million at 30 June 2020. Over the
coming months, we expect to rebuild
inventory levels that were depleted
by a very strong finish to the year.
We continue to invest heavily in new
products, with FY20 engineering spend
in excess of $30 million. This will ensure
that our products remain leading–edge
and continue to drive future growth in
the business.
Performance by
business unit:
Metal Detection – Recreational,
Gold Mining and Countermine
Minelab is the world leader in handheld
metal detecting technologies for the
recreational, gold mining, demining
and military markets. For more than
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 delivered a record performance
during the last 12 months, with sales
increasing 30% to $236 million.
47
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020
DIRECTORS' REPORT (continued)
Operating and Financial Review (continued)
Performance by Business Unit (continued)
Communications – Tactical and
Land Mobile Radios (LMR)
Codan Communications designs
and manufactures mission–critical
communications equipment for global
military and public safety applications.
Its solutions allow customers to save
lives, enhance security and support
peacekeeping activities worldwide.
The division had an excellent year in
FY20, with both Tactical and LMR
achieving record sales levels, resulting
in an increase in sales of 34% to $104
million. This growth was largely
attributed to a number of major
contracts being delivered in Tactical
Communications, including the $15
million East African contract and several
larger systems sales by LMR.
We continue to execute our strategy
of transitioning the Communications
division from a product–centric business
to a complete solutions provider.
Codan’s ongoing product development
is being complemented by strategic
partnerships with key suppliers in order
to further broaden our solutions offering.
Tactical Communications continues to
target the global military market, with a
focus on developing world militaries in
Africa, the Middle East, Asia and Latin
America.
Our Tactical Communications
portfolio includes a highly advanced
software defined radio platform and
interoperability solutions which are
further supplemented by our in–country
service, training and customer support.
The strength in our existing partner
network will allow us to continue to offer
the same level of in–country service
and support, despite the current travel
restrictions imposed by COVID–19.
We are also investing in our digital
footprint to increase remote support to
our partners and end users, now and into
the future.
In LMR, our strategy is to grow the
business by transitioning into larger
systems projects and offering ongoing
service and support. This will be
enabled by the release of our new
Cascade™ software defined solution, an
interoperable first–responder radio with
excellent performance at a competitive
price point. Cascade™ is scheduled for
full release in FY21.
Tactical Communications entered
FY20 with a record $34 million order
book, which delivered a record sales
year. However, given the current
travel restrictions, coupled with the
changing priorities of governments in
this environment, some project awards
may be delayed. Despite the sales
opportunity pipeline remaining very
strong, Tactical Communications will
enter FY21 with a much reduced order
book and, as a result, it may be difficult to
repeat the record level of sales achieved
in FY20. On the other hand, LMR has
recently won a large contract, and this
business is well placed to deliver growth
in FY21.
Tracking Solutions – Minetec
Minetec provides unique, high–precision
tracking, productivity and safety
solutions for underground hard–rock
mines. Minetec’s technology allows
real–time monitoring and control of
mining operations in order to optimise
productivity and enhance safety. It is
an enabling technology required for
mining automation.
As previously announced, in 2018,
Minetec entered into an exclusive global
licensing, technology development and
marketing agreement with Caterpillar
Inc (“CAT”). We have since integrated
Minetec’s high–precision tracking
capability into the CAT MineStar®
solution, which is providing marketing
leverage to CAT’s global dealer network.
During FY20, the board conducted a
strategic review of our Tracking Solutions
business. Under the global partnership
agreement with CAT, Minetec is
transitioning to a Software Systems
business, developing and delivering
supporting technology to CAT and their
end–user customers. This transition,
coupled with the fact that Minetec did
not meet Codan’s expectations in FY20,
resulted in a decision to write down the
non–CAT specific capitalised product
development, which was $7.5 million
in total.
Our strategy for Minetec continues
to focus on working with CAT in order
to leverage their global distribution
network. As we continue to transition
the business to being a technology
provider to CAT, we have reduced our
cost structure and, as a result, we expect
the business to return to profitability
in FY21.
48
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Outlook
As a result of the strategic initiatives
discussed above, Codan remains well
positioned for another successful year
in FY21. Whilst it is too early for the
board to give profit guidance, there are a
number of factors that are relevant when
considering the outlook for FY21:
• strong start to the year and in line
with FY20;
• demand for our metal detection
products remains strong;
• Minelab will benefit from a full year of
Vanquish® sales and the release of a
new gold detector;
• current travel restrictions will
make it more difficult for Tactical
Communications to conduct
business development activities and
close orders with new customers;
and
• Minetec is expected to return to
profitability;
Our combination of cash on hand and
cash generation, underwrites our
investment in new product innovation.
The board will provide a further business
update at the Annual General Meeting
in October.
Dividends
Dividends paid or declared by the
company to members since the end of
the previous financial year were:
Cents
per share
Total
amount
Franked
Date of
payment
$000
Declared and paid
during the year ended
30 June 2020:
FY19 final ordinary
FY19 final special
FY20 interim ordinary
Declared after the end
of the year:
FY20 final ordinary
5.0
2.5
7.5
8,999
4,500
13,499
100%
100%
100%
13 September 2019
13 September 2019
12 March 2020
11.0
19,799
100% 11 September 2020
All dividends paid or declared by the
company since the end of the previous
financial year were fully franked.
Events subsequent
to reporting date
There has not arisen in the interval
between the end of the financial year
and the date of this report any item,
transaction or event of a material and
unusual nature likely, in the opinion of
the directors of the company, to affect
significantly the operations of the group,
the results of those operations, or the
state of affairs of the group, in future
financial years.
49
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 DIRECTORS' REPORT (continued)
Indemnification and
insurance of officers
Indemnification
The company has agreed to indemnify
the current and former directors and
officers of the company and certain
controlled entities against all liabilities to
another person (other than the company
or a related body corporate) that may
arise from their position as directors
and secretaries of the company and its
controlled entities, except where the
liability arises out of conduct involving a
lack of good faith. The Deed of Access,
Indemnity and Insurance stipulates that
the company and certain controlled
entities will meet the full amount of
any such liabilities, including costs
and expenses.
Insurance premiums
The directors have not included details of
the nature of the liabilities covered or the
amount of the premium paid in respect
of the directors’ and officers’ liability and
legal expenses insurance contracts, as
such disclosure is prohibited under the
terms of the contract.
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 G R C Barclay
Ms K J Gramp
Ordinary
shares
86,636
612,424
57,708
38,829
12,500
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 52 for a copy of the auditor’s
independence declaration as required
under Section 307C of the Corporations
Act 2001.
50
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
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
2020
$
2019
$
231,259
231,259
214,763
214,763
49,383
55,973
–
10,945
40,466
–
60,328
96,439
Statutory audit
Audit and review of financial reports
Services other than
statutory audit
Taxation advice and
compliance services
Corporate finance services
Royalty agreement
assurance services
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 19th day of August 2020.
51
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020
LEAD AUDITOR’S
INDEPENDENCE DECLARATION
under Section 307c of the Corporations Act 2001
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Codan Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Codan Limited for the
financial year ended 30 June 2020 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Paul Cenko
Partner
Adelaide
19 August 2020
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved
under Professional Standards
Legislation.
17
52
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Administrative expenses
Sales and marketing expenses
Engineering expenses
Net financing costs
Other expenses
Profit before tax
Income tax expense
Profit for the period
Attributable to:
Equity holders of the company
Non–controlling interests
Note
Consolidated
2020
$000
2019
$000
2
4
3
4
7
348,017
(151,481)
196,536
359
(21,925)
(51,054)
(25,920)
(1,457)
(7,518)
89,021
(25,058)
63,963
270,811
(117,478)
153,333
–
(20,830)
(44,159)
(24,756)
(203)
(83)
63,302
(17,646)
45,656
63,795
168
63,963
45,665
(9)
45,656
Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share
Diluted earnings per share
6
6
35.5 cents
35.3 cents
25.5 cents
25.3 cents
The consolidated income statement is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 58 to 92.
53
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 30 June 2020
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
Consolidated
2020
$000
63,963
713
(214)
499
(2,160)
2019
$000
45,656
406
(122)
284
3,124
Note
21
21
Other comprehensive income/(loss) for the period, net of income tax
(1,661)
3,408
Total comprehensive income for the period
62,302
49,064
Attributable to:
Equity holders of the company
Non–controlling interests
62,134
168
62,302
49,073
(9)
49,064
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 58 to 92.
54
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
CONSOLIDATED BALANCE SHEET
as at 30 June 2020
Consolidated
2020
$000
2019
$000
Note
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
Right–of–use assets
Product development
Intangible assets
Total non–current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Current tax payable
Provisions
Total current liabilities
Non–current liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Total non–current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Total equity attributable to the equity holders of the company
Non–controlling interests
8
11
12
7
14
13
15
27
16
17
18
27
7
19
27
7
19
20
21
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 58 to 92.
92,830
25,307
32,606
343
–
37,521
19,007
36,703
337
3,750
6,414
157,500
5,189
102,507
14,176
25,367
67,777
86,746
194,066
351,566
47,044
3,775
11,958
8,159
70,936
26,779
4,727
1,781
33,287
104,223
247,343
44,746
66,688
135,909
247,343
247,303
40
247,343
14,126
–
69,857
87,827
171,810
274,317
44,161
–
1,635
8,033
53,829
–
8,082
1,192
9,274
63,103
211,214
43,761
67,652
99,801
211,214
211,342
(128)
211,214
55
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 30 June 2020
Consolidated
2020
Balance as at 1 July 2019
Transition to AASB 16 (net of tax)
Profit for the period
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
Issue of shares from performance rights
Balance at 30 June 2020
2019
Balance as at 1 July 2018
Profit for the period
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
Issue of shares from performance rights
Employee share plan, net of issue costs
Foreign
currency
translation
reserve
$000
6,712
–
–
–
–
Share
capital
$000
43,761
–
–
–
–
Hedging
reserve
$000
(146)
–
–
–
499
Equity
based
payment
reserve
Profit
reserve
Retained
earnings
Total
$000
2,105
–
–
1,682
–
$000
58,981
–
–
–
–
$000
$000
99,801 211,214
(857)
63,963
1,682
499
(857)
63,963
–
–
–
(2,160)
–
–
–
–
(2,160)
43,761
4,552
353
3,787
58,981 162,907 274,341
–
985
985
44,746
–
–
–
4,552
–
–
–
353
–
(985)
(985)
2,802
– (26,998)
–
–
– (26,998)
(26,998)
–
(26,998)
58,981 135,909 247,343
Consolidated
Foreign
currency
translation
reserve
$000
3,588
–
–
–
3,124
Equity
based
payment
reserve
$000
2,187
–
712
–
–
Hedging
reserve
$000
(430)
–
–
284
–
Profit
reserve
$000
58,981
–
–
–
–
Retained
earnings
$000
Total
$000
81,018 188,065
45,656
45,656
712
–
284
–
3,124
–
–
6,712
–
(146)
–
2,899
–
58,981
–
126,674
–
237,841
–
–
–
–
–
–
–
–
–
(794)
–
(794)
–
–
–
–
(26,873)
–
–
(26,873)
(26,873)
–
246
(26,627)
Share
capital
$000
42,721
–
–
–
–
–
42,721
–
794
246
1,040
Balance at 30 June 2019
43,761
6,712
(146)
2,105
58,981
99,801
211,214
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 58 to 92.
56
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended 30 June 2020
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Interest on lease assets
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
Payment of lease liabilities
Dividends paid
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial year
Consolidated
2020
$000
2019
$000
Note
350,298
(227,888)
378
(271)
(703)
(17,830)
103,984
290,738
(208,290)
176
(226)
–
(20,305)
62,093
3,981
(18,769)
(24)
(3,759)
(442)
(19,013)
(2,983)
(26,998)
(29,981)
54,990
37,521
319
92,830
–
(20,453)
(226)
(4,132)
(866)
(25,677)
–
(26,873)
(26,873)
9,543
27,711
267
37,521
27
10
27
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 58 to 92.
57
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS
for the year ended 30 June 2020
• impairment assessments of non–current assets, including
product development and goodwill (refer note 17)
• measurement of inventory net realisable value (refer note
1(l))
• measurement of expected credit loss allowance for trade
receivables (refer note 28(a))
Changes in accounting policies
Except for AASB 16 Leases as described in note 27, the
accounting policies applied in these financial statements are
the same as those applied in the group’s consolidated financial
statements as at and for the year ended 30 June 2019.
(c) Basis of consolidation
Subsidiaries are entities controlled by the group. Control exists
when the group has the power, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential
voting rights that currently are exercisable are taken into
account. The financial statements of subsidiaries are included
in the consolidated financial statements from the date control
commences until the date control ceases. The accounting
policies of subsidiaries have been changed when necessary to
align them with the policies adopted by the group.
Unrealised gains and losses and inter–entity balances resulting
from transactions with or between subsidiaries are eliminated
in full on consolidation.
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on
which control is transferred to the group. Transaction costs,
other than those associated with the issue of debt or equity
securities that the group incurs in connection with a business
combination, are expensed as incurred.
Upon the loss of control, the group derecognises the assets
and liabilities of the subsidiary, and non–controlling interests
and the other components of equity related to the subsidiary.
Any surplus or deficit arising on the loss of control is recognised
in the income statement.
Non–controlling interests are measured at their proportionate
share of the subsidiaries’ net assets.
Significant Accounting Policies
1.
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
2020 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
19 August 2020.
Statement of compliance
(a)
The financial report is a general purpose financial report which
has been prepared in accordance with Australian Accounting
Standards (AASBs) 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) 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.
The group is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors' Reports) Instrument
2016/191 and, in accordance with that Legislative Instrument,
amounts in the financial report have been rounded off to the
nearest thousand dollars, unless otherwise stated.
Use of estimates and judgements
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to
make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. These estimates and
associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods
affected. The estimates and judgements that have a significant
risk of causing a material adjustment to the carrying amounts of
assets within the next financial year relate to:
58
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Foreign currency
(f)
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.
(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 performance obligations are satisfied and 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 as performance obligations are satisfied and. 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) Net financing costs
Net financing costs include interest paid relating to borrowings,
interest received on funds invested, unwinding of discounts
and foreign exchange gains and losses. Qualifying assets are
assets that take more than 12 months to get ready for their
intended use or sale. In these circumstances, borrowing costs
are capitalised to the cost of the qualifying assets. Interest
income and borrowing costs are recognised in the income
statement on an accruals basis, using the effective–interest
method. Foreign currency gains and losses are reported on a
net basis.
59
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
(g) Derivative financial instruments
The group has used derivative financial instruments to
hedge its exposure to foreign exchange and interest rate
movements. In accordance with its policy, the group does not
hold derivative financial instruments for trading purposes.
However, derivatives that do not qualify for hedge accounting
are accounted for as trading instruments. Derivative financial
instruments are recognised initially at fair value. Attributable
transaction costs are recognised in the income statement
when incurred. Subsequent to initial recognition, derivative
financial instruments are stated at fair value. The gain or loss
on re–measurement to fair value is recognised immediately
in the income statement unless the derivative qualifies for
hedge accounting.
Hedging
On initial designation of the hedge, the group formally
documents the relationship between the hedging instrument
and hedged item, including the risk management objectives
and strategy in undertaking the hedge transaction, together
with the methods that will be used to assess the effectiveness
of the hedging relationship.
Where a derivative financial instrument is designated as a
hedge of the variability in cash flows of a highly probable
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
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.
60
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Goods and services tax
(i)
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 Consolidated 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.
Cash and cash equivalents
(j)
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 Consolidated
Statement of Cash Flows.
Trade and other receivables
(k)
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
expected credit loss allowances. Under the “expected credit
loss” model, the allowance for credit losses is calculated by
considering on a discounted basis the cash shortfalls it would
incur in various default scenarios for prescribed future periods
and multiplying the shortfalls by the probability weighted
outcomes. Significant receivables are individually assessed.
Non–significant receivables are not individually assessed;
instead, credit loss testing is performed by considering the risk
profile of that group of receivables. All allowances for credit
losses are recognised in the income statement.
Inventories
(l)
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 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.
61
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
(n)
Intangible assets (continued)
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 estimated useful lives in the current and comparative
periods are as follows:
Straight–line
Units of
production
2 – 15 years
5 – 10 years
Product development, licences
and intellectual property:
The group measures any non–controlling interest at its
proportionate interest in the identifiable net assets of
the acquiree.
Computer software:
Amortisation methods, useful lives and residual values are
reviewed at each reporting date.
3 – 7 years Not applicable
Transaction costs
Transaction costs that the group incurs in connection with a
business combination, such as finder’s fees, legal fees, due
diligence fees, and other professional and consulting fees, are
expensed as incurred.
Licences and other intangible assets
Licences and other intangible assets that are acquired by the
group, which have finite useful lives, are stated at cost, less
accumulated amortisation and accumulated impairment
losses. Expenditure on internally generated goodwill and
brands is recognised in the income statement as incurred.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates. 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 either a
straight–line or units of production basis. Intangible assets are
amortised over their estimated useful lives from the date that
they are available for use, but goodwill is only written down if
there is an impairment.
Assets held for sale
(o)
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, were 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.
62
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
The group’s corporate assets do not generate separate cash
inflows. If there is an indication that a corporate asset may be
impaired, then the recoverable amount is determined for the
cash–generating units to which the corporate asset belongs.
An impairment loss is recognised whenever the carrying
amount of an asset exceeds its recoverable amount. A cash–
generating unit is the smallest identifiable asset group that
generates cash inflows that are largely independent from other
assets or groups of assets. Impairment losses are recognised
in the income statement. Impairment losses recognised in
respect of cash–generating units are allocated first to reduce
the carrying amount of any goodwill and then to reduce the
carrying amount of the other assets in the cash–generating
unit on a pro–rata basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimate
used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Payables
(r)
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.
Interest bearing borrowings
(s)
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.
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.
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:
Right–of–use assets
Leasehold property
Plant and equipment
7% to 25%
6% to 10%
7% to 40%
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
Impairment
(q)
The carrying amounts of the group's assets, other than
inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication
of impairment. A financial asset is considered to be impaired
if objective evidence indicates that one or more events have
had a negative effect on the estimated future cash flows of that
asset. If any such impairment exists, the asset's recoverable
amount is estimated.
For goodwill and intangible assets that have an indefinite useful
life or are not yet available for use, the recoverable amount is
estimated annually.
The recoverable amount of assets is the greater of their fair
value, less costs of disposal and 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.
63
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
(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 superannuation, workers’
compensation insurance and payroll tax.
Long service leave
The provision for employee benefits for long service leave
represents the present value of the estimated future cash
outflows resulting from 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.
Provisions
(u)
A provision is recognised when there is a present legal or
constructive obligation as a result of a past event, it can be
estimated reliably and it is probable that a future sacrifice of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows required to settle the obligation at a pre–tax rate
that reflects the current market assessments of the time value
of money and the risks specific to the liability. The unwinding of
the discount is recognised as a finance cost.
Dividends
A provision for dividends payable is recognised in the reporting
period in which the dividends are declared.
Restructuring and employee termination benefits
A provision for restructuring is recognised when the group has
approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced
publicly. Future operating costs are not provided for.
Warranty
A provision is made for the group's estimated liability on all
products sold and still under warranty, and includes claims
already received. The estimate is based on the group's warranty
cost experience over previous years.
Share capital – ordinary shares
(v)
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.
Share–based
(w)
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.
Future Australian Accounting
(x)
Standards requirements
A number of new standards are effective after 2020 and earlier
application is permitted; however, the group has not early
adopted the new or amended standards in preparing these
consolidated financial statements. The group does not expect
that these new accounting standards will have a material
impact on the consolidated financial statements.
64
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN GROUP PERFORMANCE
Segment activities
2.
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 three business segments. The Communications
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. Lastly, the
Tracking Solutions segment includes the design, manufacture,
maintenance and support of a range of electronic products and
associated software for the mining sector.
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, United Arab Emirates, South Africa, Brazil
and Ireland.
65
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
GROUP PERFORMANCE (continued)
Information about
reportable segments
Communications
Metal Detection
Tracking Solutions
Consolidated
2020
$000
2019
2020
2019
2020
2019
2020
2019
$000
$000
$000
$000
$000
$000
$000
7,642
(1,183)
67,323
16,715
(3,567)
97,384
23,849
103,987
77,639 236,388 182,058
117,666
(7,518)
(754)
(20,373)
89,021
(25,058)
63,963
11,114 348,017 270,811
`
82,855
–
(203)
(19,350)
63,302
(17,646)
45,656
Revenue
External segment revenue
Result
Segment result
Impairment
Unallocated net financing costs
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
Impairment
Total depreciation
and amortisation
Assets
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
Segment assets
Unallocated corporate assets
Consolidated total assets
The group derived its revenues from a number of countries. The two significant countries where revenue was 10% or more of total
revenue were United Arab Emirates totalling $127.019 million (2019: $65.908 million) and the United States of America totalling
$79.620 million (2019: $60.141 million).
3,373
386
3,759
26,646 229,655
121,911
351,566
2,401
1,731
4,132
227,875
46,442
274,317
88,574 114,290 112,655
536
–
96,252
28,169
19,786
19,113
15,245
14,709
8,988
8,451
2,347
7,518
1,442
1,312
5,874
7,523
2,350
865
806
104
153
919
The group’s non–current assets, excluding financial instruments and deferred tax assets, were located as follows: Australia $147.702
million (2019: $128.234 million), Canada $45.023 million (2019: $43.254 million), United Arab Emirates $0.622 million (2019:
$0.223 million), the United States of America $0.588 million (2019: $0.079 million), Brazil $0.108 million (2019: nil) and Ireland
$0.023 million (2019: $0.020 million).
66
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Expenses
3.
Net financing costs:
Interest income
Net foreign exchange (gain)/loss
Interest expense
Finance charge on lease liabilities
Depreciation of:
Right–of–use assets
Leasehold property
Plant and equipment
Amortisation of:
Product development – straight–line
Product development – units of production
Intellectual property
Computer software
Licences
Personnel expenses:
Wages and salaries
Other associated personnel expenses
Contributions to defined contribution superannuation plans
Long service leave expense
Annual leave expense
Performance rights plan
Employee share plan
4.
Other expenses / (income)
Impairment of Minetec product development
(Gain)/loss on sale of property, plant and equipment
Other expenses/(income)
Consolidated
2020
Note
$000
2019
$000
(378)
(176)
27
861
271
703
1,457
3,179
98
3,629
6,906
9,154
3,594
409
291
297
13,745
48,311
3,499
4,572
771
2,521
1,682
250
61,606
7,518
(206)
(153)
7,159
134
245
–
203
–
90
2,478
2,568
7,477
4,007
409
289
495
12,677
42,181
3,746
3,719
886
2,514
712
246
54,004
–
62
21
83
67
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
GROUP PERFORMANCE (continued)
5.
Dividends
Codan Limited has provided or paid for dividends as follows:
– ordinary final fully-franked dividend of 5.0 cent per share paid on 13 September 2019
– special final fully-franked dividend of 2.5 cent per share paid on 13 September 2019
– ordinary interim fully-franked dividend of 7.5 cents per ordinary share paid on 12 March 2020
– ordinary final fully-franked dividend of 4.5 cents per ordinary share paid on 14 September 2018
– special final fully-franked dividend of 4.0 cents per ordinary share paid on 14 September 2018
– ordinary interim fully-franked dividend of 4.0 cents per ordinary share paid on 13 March 2019
– special interim fully-franked dividend of 2.5 cents per ordinary share paid on 13 March 2019
Consolidated
2020
$000
2019
$000
8,999
4,500
13,499
–
–
–
–
–
–
–
8,062
7,166
7,166
4,479
26,998
26,873
Subsequent events
Since the end of the financial year, the directors declared a final ordinary fully franked dividend of 11.0 cents per share, payable
on 11 September 2020. The financial impact of this final dividend of $19,799,217 has not been brought to account in the group
financial statements for the year ended 30 June 2020 and will be recognised in subsequent financial reports.
Dividend franking account
Franking credits available to shareholders for subsequent financial years (30%)
42,604
27,110
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
$8,485,379 (2019: $5,760,897).
Earnings per share
6.
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
63,795
45,665
The weighted average number of shares used as the denominator number for basic earnings per share was 179,867,477
(2019: 178,994,483). The movement in the year is as a consequence of the shares issued under the performance rights plan.
The calculation of diluted earnings per share at 30 June 2020 was based on a weighted average number of ordinary shares
outstanding, after adjustment for the effects of all dilutive potential ordinary shares of 180,961,854 (2019: 180,530,338).
The movement in the year relates to the shares issued under the performance rights granted.
68
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN 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
Effect of tax rates in foreign jurisdictions
(Over)/under provision for taxation in previous years
Other deductible expenses
Increase in income tax expense due to:
Non–deductible expenses
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
Consolidated
2020
$000
2019
$000
27,909
(204)
27,705
(2,647)
25,058
16,336
(135)
16,201
1,445
17,646
26,706
18,991
(1,294)
(9)
(204)
(259)
24,940
118
25,058
(1,298)
25
17,830
(263)
(27,909)
(11,615)
343
(11,958)
(11,615)
(1,139)
(193)
(135)
(21)
17,503
143
17,646
(5,966)
4
20,305
695
(16,336)
(1,298)
337
(1,635)
(1,298)
69
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
TAXATION (continued)
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
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 overseas tax losses
Carry forward overseas R&D tax credits
D. Effective tax rates
Global operations – total consolidated tax expense
Australian operations – Australian company income tax expense
Consolidated
2020
$000
2019
$000
19,841
20,241
(1,640)
(1,671)
(2,250)
(4,467)
(249)
–
(4,837)
4,727
28%
29%
(330)
(2,165)
(2,042)
(3,367)
(144)
(55)
(4,056)
8,082
28%
28%
70
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN CASH MANAGEMENT
Cash and cash equivalents
8.
Cash on hand
Cash at bank
9.
Loans and borrowings
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 – guarantees
Commercial credit card
Facilities not utilised at balance date:
Multi–option facility
Commercial credit card
Consolidated
2020
$000
2019
$000
516
92,314
92,830
2,012
35,509
37,521
40,000
200
40,200
1,113
16
1,129
38,887
184
39,071
40,000
200
40,200
6,281
23
6,304
33,719
177
33,896
In addition to these facilities, the group has cash at bank and short–term deposits of $92,830,000 as set out in note 8.
Bank Facilities
Facilities are supported by interlocking guarantees between the company and its subsidiaries. The multi–option facility of $40 million
has a term of three years expiring in January 2022, and is subject to compliance with certain financial covenants, with an additional
facility of $40 million available subject to our financial institutions' approval.
Weighted average interest rates:
Cash at bank
Cash advance*
*The group did not draw down on the bank facilities during the financial year ended 30 June 2020.
Consolidated
2020
%
0.66
N/A
2019
%
0.67
2.61
71
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
CASH MANAGEMENT (continued)
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
Impairment of product development costs
Amortisation
Performance rights and employee share plan expensed
Increase/(decrease) in income taxes
Increase/(decrease) in net assets affected by foreign currency 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
Reversal of deferred lease liabilities
Increase/(reduction) in provisions
Net cash from operating activities
Consolidated
2020
$000
2019
$000
Note
63,963
45,656
(206)
62
6,906
7,518
13,745
1,682
7,228
(805)
100,031
(6,300)
4,097
(1,225)
2,883
3,783
715
103,984
2,568
–
12,677
958
(2,659)
278
59,540
10,777
(5,115)
(2,715)
(1,779)
–
1,385
62,093
27
72
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN OPERATING ASSETS AND LIABILITIES
Consolidated
2020
$000
2019
$000
Trade and other receivables
11.
Current
Trade receivables
Less: expected credit loss provision
Other debtors
Inventory
12.
Raw materials
Work in progress
Finished goods
26,929
(2,234)
612
25,307
11,666
14,622
6,318
32,606
In FY20, inventories of $134.760 million (2019: $102.216 million) were recognised as an expense and included in cost of sales.
13. Other assets
Prepayments
Net foreign currency hedge receivable
Project work in progress
Other
3,326
505
2,063
520
6,414
20,177
(1,343)
173
19,007
9,667
14,003
13,033
36,703
3,811
–
832
546
5,189
14. Assets held for sale
Freehold land
Reconciliation
Carrying amount at beginning of year
Disposals
Carrying amount at end of year
In FY18, the company signed a contract for the sale of its Newton property and the settlement took place in FY20.
3,750
(3,750)
–
–
3,750
Property, plant and equipment
15.
Leasehold property at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Capital work in progress at cost
Total property, plant and equipment
1,190
(668)
522
38,312
(26,616)
11,696
1,958
14,176
3,750
–
3,750
1,134
(566)
568
33,703
(23,346)
10,357
3,201
14,126
73
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OPERATING ASSETS AND LIABILITIES (continued)
Property, plant and equipment (continued)
15.
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
Leasehold property improvements
Carrying amount at beginning of year
Additions
Transfers
Disposals
Depreciation
Net foreign currency differences on translation of foreign entities
Carrying amount at end of year
Plant and equipment
Carrying amount at beginning of year
Additions
Transfers
Disposals
Depreciation
Net foreign currency differences on translation of foreign entities
Carrying amount at end of year
Capital work in progress at cost
Carrying amount at beginning of year
Additions
Transfers
Carrying amount at end of year
Total carrying amount at end of year
Consolidated
2020
$000
2019
$000
568
16
32
–
(98)
4
522
10,357
2,080
2,874
(24)
(3,629)
38
11,696
3,201
1,717
(2,960)
1,958
14,176
360
288
2
–
(90)
8
568
10,802
1,541
429
(41)
(2,478)
104
10,357
1,327
1,874
–
3,201
14,126
74
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Product development
16.
Product development at cost
Accumulated amortisation and impairment losses
Reconciliation
Carrying amount at beginning of year
Capitalised in current period
Impairment
Amortisation
Net foreign currency differences on translation of foreign entities
Intangible assets
17.
Intellectual property at cost
Accumulated amortisation
Computer software at cost
Accumulated amortisation
Licences at cost
Accumulated amortisation
Goodwill
Total intangible assets
Reconciliations
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
Net foreign currency differences on translation of foreign entities
Consolidated
2020
$000
2019
$000
Note
17
170,311
(102,534)
67,777
69,857
18,769
(7,518)
(12,748)
(583)
67,777
21,976
(20,272)
1,704
10,664
(9,911)
753
5,741
(5,268)
473
83,816
86,746
2,171
24
(409)
(82)
1,704
630
343
54
(291)
–
17
753
152,153
(82,296)
69,857
59,830
20,453
–
(11,484)
1,058
69,857
21,981
(19,810)
2,171
10,254
(9,624)
630
5,717
(4,971)
746
84,280
87,827
2,319
226
(409)
35
2,171
323
590
21
(289)
(21)
6
630
75
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OPERATING ASSETS AND LIABILITIES (continued)
17.
Intangible assets (continued)
Licences
Carrying amount at beginning of year
Acquisitions
Amortisation
Net foreign currency differences on translation of foreign entities
Goodwill
Carrying amount at beginning of year
Net foreign currency differences on translation of foreign entities
The following segments have significant carrying amounts of goodwill:
Communications
Metal Detection
Tracking Solutions
Consolidated
2020
$000
746
45
(297)
(21)
473
84,280
(464)
83,816
21,321
53,957
8,538
83,816
2019
$000
965
276
(495)
–
746
82,978
1,302
84,280
21,785
53,957
8,538
84,280
The strategy for Minetec is to pursue opportunities that will scale
the business to achieve sales and profitability levels that will make
a significant contribution to the Codan group. As previously
announced, in 2018, Minetec entered into an exclusive global
licensing, technology development and marketing agreement
with Caterpillar Inc. (“CAT”). We have since integrated Minetec’s
high–precision tracking capability into the CAT MineStar® solution
for underground hard–rock mines and the focus is to now leverage
CAT’s global dealer network to expand sales.
During FY20, the Board conducted a strategic review of our
Tracking Solutions business. Under the global partnership
agreement with CAT, Minetec is transitioning to a software
systems business, developing, delivering and supporting
technology to CAT and their end–user customers. This transition,
coupled with the fact that Minetec did not meet Codan’s profit
expectations in FY20, has resulted in a decision to write down
the capitalised product development that pre–dates the CAT
relationship, which was $7.518 million.
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 management’s internal
forecasts, and cash flows are forecast for a five–year period. The
key assumption driving the value–in–use valuation is the level of
sales, which is based on management assessment 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 11% (FY19: 11%) has been applied
to the forecast cash flows. Management’s sensitivity analysis
indicates that there is not a reasonable possibility that changes in
the assumptions used would result in an impairment in the cash–
generating units.
Tracking Solutions which comprises Minetec was acquired
by Codan in 2012 and over the past eight years, Minetec has
developed unique high precision, productivity and safety
solutions for underground hard–rock mines.
76
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN In performing the value–in–use calculations for the Minetec
business, the first year of the cash flow forecasts is based on
management’s internal forecasts. Cash flows are forecast for a
five–year period. The key assumption to the valuation scenario
is the level of sales achieved by this business. Management have
increased the sales in years two to five by a generally accepted
long–term growth rate of 3%. 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 14% (FY19: 14%)
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 CAT MineStar®. If Minetec's revenue and
cost base from the FY21 plan were to remain flat over the forecast
period, the recoverable amount of the Minetec cash–generating
unit would support its carrying amount. Management’s sensitivity
analysis indicates that there is not a reasonable possibility that
changes in the assumptions used would result in an impairment in
the cash–generating unit.
Trade and other payables
18.
Current
Trade payables
Other payables and accruals
Net foreign currency hedge payable
Provisions
19.
Current
Employee benefits
Warranty repairs
Reconciliation of warranty provision
Carrying amount at beginning of year
Provisions made
Payments made
Non-current
Employee benefits
Consolidated
2020
$000
2019
$000
21,548
25,496
–
22,634
21,319
208
47,044
44,161
6,238
1,921
8,159
1,798
1,514
(1,391)
1,921
6,235
1,798
8,033
1,452
1,644
(1,298)
1,798
1,781
1,192
77
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
CAPITAL MANAGEMENT
Share capital
20.
Share capital
Opening balance (179,227,907 ordinary shares fully paid)
Issue of share capital through vested performance rights
Issue of share capital through employee share plan
Closing balance (179,992,883 ordinary shares fully paid)
Consolidated
2020
$000
2019
$000
43,761
985
–
44,746
42,721
794
246
43,761
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.
Reserves
21.
Foreign currency translation
Hedging reserve
Equity based payment reserve
Profit reserve
4,552
353
2,802
58,981
66,688
6,712
(146)
2,105
58,981
67,652
6,712
(2,160)
4,552
Foreign currency translation
The foreign currency translation reserve records the foreign currency differences arising from the
translation of foreign operations.
Balance at beginning of year
Net translation adjustment
Balance at end of year
Hedging reserve
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
Equity based payment reserve
The equity based payment reserve comprises Codan Limited's accumulated expenses in relation to
unvested performance rights.
Balance at beginning of year
Performance rights expensed
Performance rights vested
Balance at end of year
Profit reserve
The profit reserve comprises a portion of Codan Limited's accumulated profits.
Balance at beginning of year
Balance at end of year
2,105
1,682
(985)
2,802
(146)
499
353
58,981
58,981
3,588
3,124
6,712
(430)
284
(146)
2,187
712
(794)
2,105
58,981
58,981
78
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN 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 is subject to externally
imposed capital requirements.
GROUP STRUCTURE
23. Group entities
Name
Parent Entity
Codan Limited
Controlled Entities
Codan Defence Electronics Pty Ltd
Codan Executive Share Plan Pty Ltd
Codan Radio Communications ME DMCC
Codan Radio Communications Pty Ltd
Codan (UK) Limited
Codan US Inc
Daniels Electronics Ltd
Minelab Americas Inc
Minelab do Brasil Equipamentos Para Mineração Ltda
Minelab Electronics Pty Limited
Minelab International Limited
Minelab MEA General Trading LLC
Minelab Mining Pro (FZE)
Minelab Mining Pro General Trading (FZC)
Minetec Pty Ltd
Minetec RSA (Pty) Ltd
Country
of incorporation
Interest held
2020
2019
Class of share
%
%
Australia
Ordinary
Australia
Australia
UAE
Australia
England
USA
Canada
USA
Brazil
Australia
Ireland
UAE
UAE
UAE
Australia
South Africa
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
49
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
49
100
50
100
100
79
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
GROUP STRUCTURE (continued)
24. Deed of cross guarantee
Pursuant to ASIC Corporations (Wholly owned Companies)
Instrument 2016/785, the wholly-owned subsidiary listed
below is relieved from the Corporations Act 2001 requirements
for preparation, audit and lodgement of financial and
directors' reports.
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:
Consolidated
2020
$000
2019
$000
87,334
(28,058)
59,276
82,894
(587)
82,307
114,585
60,422
(17,398)
43,024
66,743
–
66,743
82,894
85,819
43,097
25,785
–
3,106
157,807
32,976
23,522
12,320
43,868
55,468
168,154
325,961
29,583
44,021
28,938
3,750
3,720
110,012
32,976
–
11,919
39,982
55,804
140,681
250,693
Summarised income statement and retained earnings
Profit before tax
Income tax expense
Profit after tax
Retained earnings at beginning of year
Adoption of AASB 16 (net of tax)
Revised retained earnings at beginning of year
Retained earnings at end of 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
Right–of–use assets
Property, plant and equipment
Product development
Intangible assets
Total non–current assets
Total assets
80
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Current liabilities
Trade and other payables
Other liabilities
Current tax payable
Lease liability
Provisions
Total current liabilities
Non–current liabilities
Lease liability
Deferred tax liabilities
Provisions
Total non–current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
40,921
8,585
11,937
3,775
6,494
71,712
39,914
6,705
1,568
–
6,175
54,362
24,747
3,922
1,535
30,204
101,916
224,045
–
4,306
1,000
5,306
59,668
191,025
44,746
64,714
114,585
224,045
43,761
64,370
82,894
191,025
25. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2020, 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
2020
$000
2019
$000
57,194
2,136
59,330
140,836
289,288
51,242
85,403
44,746
62,271
96,868
45,304
1,154
46,458
98,065
221,128
43,066
48,575
43,761
61,532
67,260
203,885
172,553
During the year, Codan Limited entered into contracts to purchase plant and equipment for $945,000 (2019: $1,264,000).
81
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OTHER NOTES
Consolidated
2020
$
2019
$
221,944
9,315
66,382
214,763
–
87,285
10,945
–
49,383
–
19,339
33,364
410,672
55,973
40,466
16,971
44,003
459,461
The group used the following practical expedients when
applying AASB 16 to leases previously classified as operating
leases under AASB 117:
• Applied a single discount rate to a portfolio of leases with
reasonably similar characteristics.
• Applied the exemption not to recognise right–of–use
assets and liabilities for leases with less than 12 months of
lease term.
• Excluded initial direct costs from measuring the right-of-
use asset at the date of initial application.
• Used hindsight when determining the lease term if the
contract contains options to extend or terminate the
lease.
26.
Auditor's remuneration
Audit services:
KPMG – audit and review of financial reports – Group
KPMG – audit and review of financial reports – Controlled entities
Other firms – audit and review of financial reports
Assurance services:
KPMG – royalty agreement assurance services
Other services:
KPMG – taxation advice and compliance services
KPMG – other services
Other firms – taxation advice and compliance services
Other firms – other services
Leases and commitments
27.
Effective from 1 July 2019, the group adopted AASB 16
Leases, requiring an amendment to its accounting policies.
This note explains the impact to the group's financial
statements from adopting AASB 16 and discloses the new
accounting policies that have been applied.
AASB 16 Leases – Transition approach
The group has adopted AASB 16 using the simplified transition
approach and has not restated comparative amounts. The
group has measured its lease liabilities at the present value
of the remaining lease payments, discounted using the
appropriate incremental borrowing rates as of 1 July 2019.
The associated right–of–use assets were measured on
transition as if the new Standard had been applied since the
commencement date of the lease. The main type of leases
of the group impacted by AASB 16 are leases for offices,
warehouses and manufacturing facilities. The adjustments
arising from the new leasing rules are recognised in the opening
balance of retained earnings on 1 July 2019.
82
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Adjustments to the Statement of Financial Position at 1 July 2019
Right-of-use assets recognised
Lease liabilities recognised
Deferred tax assets (net) recognised
Reversal of deferred lease liabilities
Retained earnings reduction
Reconciliation of non-cancellable operating lease commitments to lease liabilities at 1 July 2019
Operating lease obligation 30 June 2019
less:
Short-term and low value leases
Commitments reassessed as having no leasing arrangements
add:
Reasonably certain extension clauses
Undiscounted lease liabilities at 1 July 2019
Current lease liabilities
Non-current lease liabilities
Discounted lease liabilities at 1 July 2019 *
$000
28,546
(33,537)
351
3,783
(857)
41,184
(307)
(3,709)
509
37,677
3,668
29,869
33,537
* The weighted-average incremental borrowing rate for lease liabilities initially recognised as of 1 July 2019 was 2.27%.
To assist with the understanding of the impact of the application of AASB 16 in this initial period refer to the following summary:
Right-of-use assets
Balance at 1 July 2019
Additions
Depreciation
Balance at 30 June 2020
Lease Liabilities
Balance at 1 July 2019
Finance charge on lease liabilities
Lease payments
Balance at 30 June 2020
of which are:
Current lease liabilities
Non-current lease liabilities
28,546
–
(3,179)
25,367
33,537
703
(3,686)
30,554
3,775
26,779
83
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OTHER NOTES (continued)
27.
Leases and commitments (continued)
The following table has been included to compare the new
accounting treatment under AASB 16 with how the same
transactions would have been shown under the previous AASB
117 for the period from 1 July 2019 to 30 June 2020:
Previous AASB 117 accounting treatment
Expenses (lease payments)
Expenses (lease payments short-term leases)
Cash flow s from operating activities
Total
New AASB 16 treatment
Expenses (lease payments short-term leases)
Finance charge on lease liabilities
Depreciation right-of-use asset
Cash flow s from operating activities
Cash flow s from financing activities
Total
Income
Statement
$000
Statement of
cash flows
$000
(3,686)
(153)
(3,839)
(153)
(703)
(3,179)
(4,035)
(3,839)
(3,839)
(856)
(2,983)
(3,839)
Leases
Lease liabilities
A lease arrangement is one that conveys the right to control
the use of an identified asset for a period of time in exchange
for consideration. The group does not recognise lease
arrangements in respect of intangible assets. The payments
associated with short–term lease arrangements and leases of
low–value assets are recognised on a straight–line basis in the
Income Statement. Short–term leases are leases with a lease
term of 12 months or less. The group applies the requirements
of the leasing standard on a lease–by–lease basis.
Right-of-use assets
The group recognises a right–of–use asset and a lease liability
at the commencement date of the lease arrangement.
The right–of–use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement
date, plus any initial direct costs incurred and estimates of
costs to dismantle or remediate the underlying asset, less any
lease incentives received. Subsequent to initial recognition,
the assets are accounted for in accordance with the accounting
policy applicable to that asset. In addition, the right–of–use
asset may be adjusted periodically due to remeasurements of
the lease liability.
The lease liability is initially measured at the present value of the
outstanding lease payments at the commencement date of
the arrangement, discounted using the borrowing rate implicit
in the lease or, if that rate cannot be readily determined, the
group's incremental borrowing rate. Generally, the group uses
its incremental borrowing rate as the discount rate.
Some property leases contain extension options exercisable
by the group. The group assesses at lease commencement
whether it is reasonably certain to exercise the extension
options. The group reassesses whether it is reasonably
certain to exercise the options if there is a significant event or
significant change in circumstances within its control.
The lease liability is subsequently measured through increasing
the carrying amount to reflect interest on the lease liability, less
lease payments made. It is remeasured when there is a change
in future lease payments arising from a change in an index or
rate or if the group changes its assessment of whether it will
exercise a purchase, extension or termination option. When
the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right–of–use
asset, or is recorded in the profit and loss if the carrying amount
of the right–of–use asset has been reduced to zero.
84
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Capital Expenditure Commitments
Aggregate amount of contracts for capital expenditure
Within one year
One year or later and no later than five years
28.
Additional financial instruments disclosure
Financial risk management
(a) Credit risk
Consolidated
2020
$000
951
–
951
2019
$000
1,589
–
1,589
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 framework in relation to the risks faced by the group.
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 and bank accounts.
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. As at 30 June 2020, the customer with the group's
highest trade and other receivable balance accounted for $6.5
million (2019: $4.2 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, have less of an
influence on credit risk.
The group has established a credit policy under which new
customers are analysed for credit worthiness before the group's
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 expected credit losses
that represents its estimate of 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. This allowance has taken into account the increased credit
risk currently being caused by COVID–19.
Guarantees
Group policy is to provide financial guarantees only to wholly
owned subsidiaries.
85
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OTHER NOTES (continued)
28. Additional financial instruments disclosure (continued)
(a) Credit risk (continued)
The carrying amount of the group's financial assets represents the maximum credit exposure. The group's maximum exposure to credit
risk at the reporting date was:
Consolidated
Note
2020
$000
Cash and cash equivalents
Trade and other receivables
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
8
11
92,830
25,307
6,443
1,301
11,644
2,283
5,258
26,929
2019
$000
37,521
19,007
4,083
5,103
2,874
5,368
2,749
20,177
Impairment losses
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
Consolidated
Gross
2020
$000
Impairment
2020
$000
Gross
2019
$000
Impairment
2019
$000
17,253
7,960
791
104
821
26,929
(1,262)
(151)
(102)
(2)
(717)
(2,234)
16,112
2,840
66
504
655
20,177
(795)
–
–
–
(548)
(1,343)
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
86
Consolidated
2020
$000
1,343
1,236
(345)
2,234
2019
$000
459
905
(21)
1,343
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN (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 2020
Non–derivative financial liabilities
Trade and other payables
Lease liabilities
Derivative financial liabilities
Net foreign currency hedge payables
30 June 2019
Non–derivative financial liabilities
Trade and other payables
Lease liabilities
Derivative financial liabilities
Net foreign currency hedge payables
(c) Market risk
Carrying
amount
Contractual
cash flows
12 months
or less
$000
$000
$000
1–5
years
$000
More than
5 years
$000
47,044
30,554
77,598
(47,044)
(34,338)
(81,382)
(47,044)
(3,775)
(50,819)
–
(12,624)
(12,624)
–
(17,939)
(17,939)
–
–
–
–
–
–
43,953
–
43,953
(43,953)
–
(43,953)
(43,953)
–
(43,953)
208
208
(208)
(208)
(208)
(208)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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.
87
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OTHER NOTES (continued)
28. Additional financial instruments disclosure (continued)
(c) Market risk (continued)
Interest Rate Risk
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
Cash flow sensitivity
Consolidated
2020
$000
40,000
–
40,000
52,830
–
52,830
2019
$000
15,017
–
15,017
22,504
–
22,504
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 2019.
Profit/(loss) before tax
Reserve
100 bp
increase
$000
100 bp
decrease
$000
100 bp
increase
$000
100 bp
decrease
$000
528
(528)
225
(225)
–
–
–
–
30 June 2020
Variable rate instruments
30 June 2019
Variable rate instruments
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 and EUR.
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 $18,000,000 of FY21 cash flows. On average, the collars give protection above 69
cents and enable participation down to 64 cents, and the average forward exchange contract rate is 67 cents.
88
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN 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 2020
Cash and cash equivalents
Trade receivables
Trade payables
Gross balance sheet exposure
Hedge transactions relating to balance sheet exposure
Net exposure at the reporting date
30 June 2019
Cash and cash equivalents
Trade receivables
Trade payables
Gross balance sheet exposure
Hedge transactions relating to balance sheet exposure
Net exposure at the reporting date
Consolidated
EUR
$000
580
576
(164)
992
–
992
441
542
(30)
953
–
953
USD
$000
5,698
16,795
(17,260)
5,233
(2,914)
2,319
4,348
9,431
(11,953)
1,826
(4,278)
(2,452)
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:
2020
EUR
USD
2019
EUR
USD
Consolidated
Reserve
credit/(debit)
Profit/(loss)
before tax
$000
$000
–
(46)
(46)
–
19
19
(90)
(211)
(301)
(87)
223
136
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.
89
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
OTHER NOTES (continued)
28. Additional financial instruments disclosure (continued)
(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
receivable of $505,000, for which an independent valuation
was obtained from the relevant banking institution.
Employee benefits
29.
Aggregate liability for employee benefits, including on-costs:
Current - short-term incentives and other accruals
Current - employee entitlements
Non-current - employee entitlements
Consolidated
2020
$000
2019
$000
8,917
6,238
1,781
16,936
6,790
6,235
1,192
14,217
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
3.00%
2.51%
10 years
3.00%
2.81%
10 years
Employee Share Plan
Performance rights issued in financial year 2018
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.
No employee shares were issued during the financial year
ended 30 June 2020.
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.
The company issued 124,524 performance rights in
November 2017 to the chief executive officer. The fair value
of the rights was on average $1.80 based on the Black-Scholes
formula. The model inputs were: the share price of $2.26, no
exercise price, expected volatility 39%, dividend yield 5.8%, a
term of three years and a risk-free rate of 2.6%.
The company issued 416,536 performance rights in
December 2017 to certain employees. The fair value of the
rights was on average $1.67 based on the Black-Scholes
formula. The model inputs were: the share price of $2.09, no
exercise price, expected volatility 37%, dividend yield 6.2%,
a term of three years and a risk-free rate of 2.6%. Due to the
departure of employees, 51,511 performance rights have
been cancelled. The total expense recognised as employee
costs in 2020 in relation to the performance rights issued was
$141,917 (2019: $347,630).
90
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Performance rights issued in financial year 2020
The company issued 349,991 performance rights in
November 2019 to certain employees. The fair value of the
rights was on average $5.22 based on the Black-Scholes
formula. The model inputs were: the share price of $6.31, no
exercise price, expected volatility 31%, dividend yield 2.2%,
a term of three years and a risk-free rate of 1.2%. Due to the
departure of employees, 6,729 performance rights have
been cancelled. The total expense recognised as employee
costs in 2020 in relation to the performance rights issued was
$987,197.
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 using a non-statutory target earnings
per share as set by the board, which was 16.2 cents. For
employees 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 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 using a non-statutory target earnings
per share as set by the board, which was 14.9 cents. For
employees to receive the total number of performance rights,
the group’s earnings per share must increase by at least 15%
per annum over the three-year period.
The group’s earnings per share over the three-year period to
30 June have exceeded the performance target. Therefore, it
is expected that 489,549 shares will be issued to the relevant
employees by the end of August 2020.
Performance rights issued in financial year 2019
The company issued 409,731 performance rights in
November 2018 to certain employees. The fair value of the
rights was on average $2.54 based on the Black-Scholes
formula. The model inputs were: the share price of $3.14, no
exercise price, expected volatility 30%, dividend yield 4.0%,
a term of three years and a risk-free rate of 2.7%. Due to the
departure of employees, 19,676 performance rights have
been cancelled. The total expense recognised as employee
costs in 2020 in relation to the performance rights issued was
$553,031 (2019: $418,163).
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 using a non-statutory target earnings
per share as set by the board, which was 15.6 cents. For
employees 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.
91
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2020 (continued)
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 benefits
Consolidated
2020
$000
2019
$000
5,041,701
4,541,357
127,443
920,355
57,122
109,633
712,852
135,289
6,146,621
5,499,131
(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.
Other related parties
31.
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 per share
Net tangible asset per share
2020
2019
53.9 cents
34.1 cents
92
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
DIRECTORS’ DECLARATION
Codan Limited and its controlled entities
1.
In the opinion of the directors of Codan Limited (“the company”):
a)
the consolidated financial statements and notes that are set out on pages 53 to 92 and the remuneration report on
pages 38 to 45 in the directors’ report, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the group’s financial position as at 30 June 2020 and of its performance for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
There are reasonable grounds to believe that the company and the group entities identified in note 23 will be able to meet
any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
company and those group entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 30 June 2020.
The directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
2.
3.
4.
Signed in accordance with a resolution of the directors:
Dated at Mawson Lakes this 19th day of August 2020.
D J Simmons
Director
D S McGurk
Director
93
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Codan Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Codan Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with
the Corporations Act 2001, including:
•
•
giving a true and fair view of the Group's
financial position as at 30 June 2020 and
of its financial performance for the year
ended on that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2020;
• Consolidated
income
statement,
consolidated
statement of comprehensive income, consolidated
statement of changes in equity and consolidated
statement of cash flows for the year ended 30 June
2020;
• Notes including a summary of significant accounting
policies; and
• Directors' Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of
the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the
Code.
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved
under Professional Standards
Legislation.
58
94
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Key Audit Matters
The Key Audit Matter we identified was the valuation of the Group’s Goodwill.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our
audit of the Financial Report of the current period.
This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on this matter.
Valuation of goodwill ($83.816 million)
Refer note 17 to the financial report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the Group’s annual
testing of goodwill for impairment, given the size
of the balance (being 24% of total assets).
We focussed on the significant forward-looking
assumptions the Group applied in their value in
including forecast cash flows,
use models,
growth rates during the forecast period, terminal
growth rates and discount rates.
global
Our testing focussed on the carrying value of
($8.538 million).
Tracking Solutions goodwill
Tracking Solutions, which comprises
the
Minetec business, is in the early stage of
its products, with a
commercialisation of
significant
technology
licencing,
development and a marketing agreement with
Caterpillar. The Group's ability to secure further
market acceptance and full-scale operational
deployment of
its productivity and safety
solutions depends on successful integration of
Minetec and Caterpillar technology, forecast
growth of the mining sector, leverage of the
Caterpillar global dealer network and widespread
uptake of the products. Minetec did not meet
Codan’s profit expectations
the current
financial year.
in
Our procedures included:
• We considered the appropriateness of the value in
use method applied by the Group to perform the
annual test of goodwill for impairment against the
requirements of the accounting standards
• We assessed the integrity of the VIU model,
underlying
accuracy
the
the
of
including
calculations.
• We compared the forecast cash flows contained in
the VIU model to Board approved forecasts.
• We checked the consistency of the forecast cash
flows to the Group’s stated plans and strategy;
using our knowledge of the Minetec business
model, key customers and
its early stage of
commercialisation of its products.
• We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
included in the VIU models.
• We considered the sensitivity of the VIU models by
varying key assumptions such as sales forecasts,
gross margin, operating costs and discount rates,
within a reasonably possible range, to identify those
assumptions at higher risk of bias and to focus our
further procedures.
The VIU models are internally developed and
uses a range of internal and external data as
inputs. Forward looking assumptions may be
prone to greater risk of potential bias or error
• Working with our valuation specialists we
independently developed a discount rate range
considered comparable using publicly available
market data for comparable entities.
These conditions increase the possibility of
goodwill being impaired, raising our audit focus.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
• We assessed the disclosures in the financial report
using our understanding obtained from our testing
and against the requirements of the accounting
standards.
59
95
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT (continued)
Other Information
Other Information is financial and non-financial information in Codan Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error; and
assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
60
96
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Codan Limited for the year ended 30
June 2020, complies with Section 300A
of the Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 38 to 45 of the Directors’ report for the year ended
30 June 2020.
responsibility
Our
the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
to express an opinion on
is
KPMG
Paul Cenko
Partner
Adelaide
19 August 2020
61
97
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 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 13 August 2020
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
Number of
ordinary shares
34,808,151
27,027,925
Distribution of equity security holders
Number of shares held
Number of equity security
holders Ordinary shares
Issued Capital %
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and Over
Total
The number of shareholders holding less than a marketable parcel of ordinary shares is 252.
2,527
2,024
589
577
69
5,786
Securities exchange
The company is listed on the Australian Securities Exchange. The home exchange is Sydney.
Other information
Codan Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
On-market buy-back
There is no current on-market buy-back.
0.6%
2.9%
2.5%
8.2%
85.7%
100%
98
CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN Twenty largest shareholders
Name
I B Wall and P M Wall
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Dareel Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
Kynola Pty Ltd
Starform Pty Ltd
A Bettison
BNP Paribas Nominees Pty Ltd
M K and M C Heard
Warren Glen Pty Ltd
Mitranikitan Pty Ltd
J A Uhrig
G Bettison
Rosevine Pty Ltd
Cedara Pty Ltd
L F Choate
Griffinna Pty Ltd
UBS Nominees Pty Ltd
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
Location of share registry
Computershare Investor Services Pty Limited
GPO Box 1903
Adelaide, South Australia 5001
Number of ordinary
shares held
Issued Capital %
34,808,151
23,431,166
18,620,665
17,899,872
9,191,386
7,763,335
6,627,548
6,404,224
3,562,124
3,476,987
2,737,399
1,843,567
1,778,194
1,235,853
1,228,342
1,107,254
1,107,254
850,482
850,000
841,912
145,365,715
19.3%
13.0%
10.3%
9.9%
5.1%
4.3%
3.7%
3.6%
2.0%
1.9%
1.5%
1.0%
1.0%
0.7%
0.7%
0.6%
0.6%
0.5%
0.5%
0.5%
80.7%
99
CODAN LIMITED AND ITS CONTROLLED ENTITIESANNUAL REPORT 2020 CORPORATE DIRECTORY
Directors
David Simmons (Chairman)
Donald McGurk (Managing Director and Chief Executive Officer)
Peter Leahy AC
Graeme Barclay
Kathy Gramp
Company Secretary
Michael Barton
Principal registered office
Technology Park
2 Second Avenue
Mawson Lakes
South Australia 5095
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
100
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