ANNUAL REPORT 2021
Innovation
wherever you are
Innovation
wherever you are
FY21 SUMMARY
CHAIRMAN’S LETTER TO SHAREHOLDERS
CEO’S REPORT
GLOBAL LOCATIONS
OPERATIONS
METAL DETECTION
COMMUNICATIONS
SUSTAINABILITY 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 meeting will be held virtually via an online platform at
https://web.lumiagm.com with meeting ID 399-977-515
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 and
communications solutions for some of
the harshest environments on earth.
CODAN
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ANNUAL REPORT 2021 FY21 SUMMARY
Record statutory
net profit after tax
$90 million
An increase of 41%
Highest full‑year
sales in the
company’s history
$437
million
Return on equity
36%
Underlying earnings
per share
54.0 cents,
up 52%
Annual dividend
27.0 cents
fully franked
(interim 10.5, final 16.5)
Communications
capability expanded
with two recent
acquisitions
Excellent cash
generation;
close to zero net debt
at year end after
acquisition purchases
Metal Detection
delivered another
record sales
year in both
recreational and
gold mining
Sold the
Minetec
business
to Caterpillar
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 and communications.
We have approximately 735 employees located in Australia, Canada, the USA, the United Kingdom,
Ireland, the UAE, Singapore, Denmark, Brazil and Mexico. Our marketing reach embraces activity in over
150 countries, with exports accounting for more than 85% of our sales.
Operating
revenue
$437.0m
EBITDA
$158.8m
NPAT
$90.2m
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
226.1m
229.9m
270.8m
348.0m
437.0m
75.6m
70.4m
78.6m
44.7m
39.8m
45.7m
117.8m
158.8m
64.0m
90.2m
Results for the year ended
30 June
% of
sales
2021
% of
sales
2020
% of
sales
2019
% of
sales
% of
sales
2017
2018
Revenue
Communications
Metal Detection
Tracking Solutions
Other
Total revenue
EBITDA
EBIT
Interest
Note
$95.5m 22% $104.0m 30%
$77.6m 29% $56.5m 25%
$70.9m 31%
$326.5m 75% $236.4m 68% $182.1m 67% $164.0m 71% $148.0m 66%
$15.0m
3%
$7.6m 2% $11.1m 4%
$9.4m 4%
$7.2m 3%
$437.0m 100% $348.0m 100% $270.8m 100% $229.9m 100% $226.1m 100%
$158.8m 36% $117.8m 34%
$78.6m 29%
$70.4m 31%
$75.6m 33%
$139.8m 32%
$89.6m 26% $63.4m 23%
$53.7m 23%
$61.5m 27%
($1.1)m
($0.6)m
($0.1)m
($0.5)m
($0.8)m
Net profit before tax
$138.7m 32%
$89.0m 26% $63.3m 23%
$53.2m 23%
$60.7m 27%
Taxation
($41.4)m
($25.0)m
($17.6)m
($13.4)m
($16.0)m
Underlying net profit
after tax
Non-recurring income/
(expenses) after tax*:
Acquisition related expenses
Restructuring expenses
Net profit after tax
Earnings per share, fully diluted
Ordinary dividend per share
Special dividend per share
Return on equity
1
$97.3m 22% $64.0m 18%
$45.7m 17%
$39.8m 17%
$44.7m 20%
($5.2)m
($1.9)m
$90.2m
49.8c
27.0c
– c
36%
$64.0m
35.3c
18.5c
– c
28%
$45.7m
25.3c
9.0c
5.0c
23%
$39.8m
22.1c
8.5c
4.0c
23%
$44.7m
24.9c
7.0c
6.0c
29%
* Non‑underlying income/(expenses) are considered to be outside of normal business activities of the group and for comparability reasons have been separately identified. Underlying
profit is a non‑IFRS measure used by management of the company to assess the operating performance of the business. The non‑IFRS measures have not been subject to audit.
Notes:
1. Return on equity is calculated as net profit after tax divided by average equity
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CODANANNUAL REPORT 2021
From the board’s perspective,
the most pleasing aspect of
our result was the consistent
performance, month on month,
throughout the entire year.
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 FY21 was an all‑time record
by a large margin. Cash flow was strong and we ended the year with
close to zero net debt, notwithstanding the circa $174 million spent
on acquiring the Domo Tactical Communications (DTC) and Zetron
businesses during the year.
Since 2014 we have grown EBIT across the business
from around $14 million to $130 million this
year. In 2014, the challenge was to regain market
credibility by improving our profitability three years
in a row. Since then we have set challenges for our
executive team in three year blocks. This has linked
in nicely with our 1000 day rolling growth strategy
(or strategic plan) and our Long Term Incentive (LTI)
scheme. I am delighted that the executive team
members have been able to see the value of the
shares issued under the LTI scheme significantly
increase as a result of their endeavours. They are truly
invested shareholders. We would like the LTI scheme
to continue to reward consistent growth over time.
The practice of setting hurdles largely based on
average profitability over a three year period and then
incorporating challenging, but not unrealistic growth
targets to determine LTI share awards will continue.
Codan is a fundamentally different business today
compared to 2014. Everything we do is aimed at
enhancing shareholder value. We really appreciate
your support and look forward to providing an update
on our current year trading at the AGM in October.
David Simmons
Chairman
From the board’s perspective, the most pleasing
aspect of our result was the consistent performance,
month on month, throughout the entire year.
Covid‑19 continued to impact our Communications
businesses and in particular, Tactical
Communications. Donald has provided some real
insights into each of our business units in his report.
Our strategy is clear. We will strengthen our core
businesses through product development,
partnerships and acquisition integration. Acquisitions
that allow us to evolve to a more integrated and more
sustainable, balanced business will be pursued and
we will invest in core and emerging technologies to
provide a pipeline of truly differentiated capabilities.
In FY22 we will be focussed on investing in, and
integrating the DTC and Zetron businesses, whilst
continuing the significant new product development
investment in Minelab. History shows that many
acquisitions fail to deliver their full value for a variety of
reasons. We have spent considerable time and money
in developing a repeatable acquisition justification
and integration process, with a particular focus on
market knowledge. Process does not guarantee
success, but it certainly helps. It is early days, but both
acquisitions are proceeding in line with the approved
integration and profit plans. Covid‑19 is presenting
some challenges, particularly in terms of travel,
but these were understood and planned for when
developing our integration plans. We will be able to
provide a more comprehensive update at the AGM.
Your board is mindful of the fact that we have a
growing presence in North America and Europe.
We now have around 300 employees in USA and
Canada and well in excess of 100 in Europe as a result
of the recent acquisitions. We have commenced a
director search with an initial focus on the USA, as we
believe an engaged director based there will be
very advantageous.
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CODANANNUAL REPORT 2021
CEO’s REPORT
I am very pleased to report that Codan has again achieved its highest
ever level of sales and profit, despite some challenges associated with travel
restrictions and deferred project spending in some of our markets.
Underlying net profit after tax was $97 million for the year on
group sales of $437 million. The company declared a fully
franked final dividend of 16.5 cents per share, following on
from the 10.5 cent per share fully franked interim dividend.
This resulted in a total dividend of 27 cents for the full year,
an increase of 46% over FY20.
to achieve the FY22 EBITDA contributions of $14 million
and $8 million for Domo Tactical Communications (DTC) and
Zetron respectively, as previously announced.
Cash generation was excellent with close to zero net debt
at year end after funding circa $174 million for acquisitions
(excluding the costs incurred to execute these acquisitions).
The result was driven primarily by the growth in both gold
detector and recreational metal detector sales across most
of our markets as a result of our strategy to strengthen and
invest in our core business through releasing new products and
broadening our geographic footprint.
During FY21, the group incurred $7.1 million after tax in
one‑off expenses relating to costs associated with making two
acquisitions and the related restructuring. The board is pleased
with the initial integration of both acquisitions and we expect
In FY21, we invested in excess of $30 million in engineering in
order to further diversify our revenues through new product
introductions. This will ensure that our products remain
leading‑edge, continue to drive future growth and position us
to take further market share from competitors.
Metal Detection – Recreational,
Gold Mining and Countermine
Minelab delivered another record performance during
the last 12 months, with sales increasing 38% to $327
million. The business achieved significant growth across all
market segments with recreational and gold mining having
record sales years and Countermine sales increasing 34%
on FY20.
In recreation, our strategy to develop lower priced
detectors, using our Multi‑IQ® technology has allowed
Minelab to grow its market share and successfully
penetrate a number of big box retailers. The VANQUISH®
product, now in its second year, has exceeded all
expectations. Traditionally, Minelab has focused almost
exclusively on high end detectors and by extending our
product portfolio to include entry level and mid‑market
segments, we have been able to gain market share, as well
as grow the total size of the market. Minelab’s presence
in big box retail stores across North America has grown,
providing significant brand awareness and accessibility to
our products.
In artisanal gold mining, Minelab continued to grow
across its entire product range, with our detectors
achieving market leadership across all price points.
The Gold Monster®, which was designed to withstand the
harsh African environment, has become the machine‑of‑
choice at the entry level and we continue to see customers
upgrade to the top‑of‑line GPZ 7000®.
Minelab released the GPX 6000® in the second half
of FY21 and we expect this product to become the
bestselling high‑end gold detector over the next one
to two years. Initial feedback from the market has been
very positive and with production now reaching targeted
levels, GPX 6000® is expected to make a significant
contribution to Minelab’s sales in FY22.
During FY21, Minelab launched the MF5®, a Countermine
detector based on our Multi‑IQ® technology, which is
also incorporated into our successful MDS‑10® dual
sensor detector. Minelab now offers the latest metal
detection technology across both single and dual
sensor requirements.
As the market leader in metal detectors, our investment
in product development remains a priority, so that we
can continue to widen the technology gap between
Minelab and our competitors. The unique and distinctive
technology embedded within our metal detectors
underpins the success of this business.
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CODANANNUAL REPORT 2021 CEO’s REPORT
Communications – Tactical,
DTC, Zetron and LMR
As expected, Codan Communications sales reduced by
$8.5 million compared to FY20. Whilst the LMR business
achieved another record performance, the Tactical
Communications business continued to be impacted
by COVID‑19. Deferred government programs due to
health spending priorities and the inability to travel freely
restricted our efforts to develop and close new business.
The recent acquisition of DTC for a consideration of $114
million is an important acquisition that adds leading
edge technology to our communications solutions. Our
strategy is to provide a total solution by transitioning
from a traditional voice platform to one including
data and video. This acquisition will supplement our
traditional HF business and provide another significant
revenue stream, particularly in the large North
American market.
DTC’s MIMO Mesh products provide wireless
transmission of video and other data applications, which
are complementary capabilities to our existing Tactical
Communications solutions. We have realised immediate
synergies by integrating the sales and marketing teams
of both DTC and Codan. This will allow us to access new
geographic routes to markets by leveraging Codan’s
existing global distribution channels into the developing
world. Over the long term, our combined engineering
capabilities will allow us to bring unique value to a
diverse global customer base from military to security
to broadcasting.
By continuing to transition into larger systems projects,
we achieved another record sales year for our LMR
products. Our LMR customers predominantly reside in
North America and as such, travel and the ability to close
sales have been less affected by COVID‑19.
The strategy for LMR has been to expand into adjacent
technology solutions and in April 2021, we announced
the Zetron acquisition for a consideration of $60 million.
Zetron’s technology solutions provide the software that
is used in control centres to receive and triage incoming
calls and then communicate with public safety first‑
responders. Our merged LMR and Zetron businesses
will operate under the Zetron brand in the future. The
integration of the two operations has commenced and
is progressing as planned.
In FY22, the focus will be on integrating the new
businesses and realising the planned sales and
cost synergies.
Tracking Solutions – Minetec
In June 2021, Codan entered into an agreement
to sell 100% of the shares in Minetec to Caterpillar
Holdings Australia.
Under Codan’s ownership, the Minetec business had not
scaled to a level that supported the ongoing investment
required for a technology‑based business. As a result,
the board undertook a strategic review of the business.
While the technology developed by Minetec is world
class, the board concluded that Codan was not the
best owner and therefore the decision was made to sell
the business.
This transaction was settled on 1 July 2021 for a
consideration of $18 million with an earn out in place for
the next five years.
Our People
Once again, the record results this year could not have
been achieved without the willingness of our people
to adapt to an ever‑changing landscape, where snap
lockdowns and changed working conditions were the
new norm. We have all found new ways to work and
communicate remotely and these valuable lessons will be
carried forward to ensure that our business continues to
be flexible and agile.
Global supply chains were further disrupted during
the past 12 months and this trend remains one of our
biggest challenges. We have great people using great
processes and systems to ensure that we continue to
find solutions as and when new supply chain related
problems arise.
Despite all of these difficulties, which came with the
added pressure of personal uncertainty, people right
across the business 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 all of our people for their outstanding
responses across a range of issues. Without them and
their exceptional efforts, none of this would be possible.
Donald McGurk
Managing Director and CEO
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CODANANNUAL REPORT 2021 I
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GLOBAL LOCATIONS
SELLING INTO 150 COUNTRIES
WITH OPERATIONS ACROSS THE GLOBE
Hampshire
Randers
Whiteley
Cork
Dubai
Penang
Singapore
Operating from 17 locations worldwide
Employing 735 staff
Adelaide
Brisbane
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Australia
Adelaide, South Australia
Brisbane, Queensland
Europe
Cork, Ireland
Hampshire, UK
Whiteley, UK
Randers, Denmark
USA and Canada
Chicago, Illinois
Herndon, Virginia
Redmond, Washington
Tampa, Florida
Washington, DC
Victoria, British Columbia
Central and South America
Itajaí, Brazil
Monterrey, Mexico
Asia and South East Asia
Dubai, United Arab Emirates
Penang, Malaysia
Singapore
Victoria
Redmond
Monterrey
Chicago
Washington
Herndon
Tampa
Itajaí
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CODANANNUAL REPORT 2021 FY21 Summary
• Fourth consecutive year of record sales
with growth across all markets and
market segments
• Opened a new sales office in Mexico
to focus on both gold mining and
recreation markets
• Launched a direct to consumer
e‑commerce platform in Brazil for
recreation products
• Premium gold detector, GPX 6000® and
Countermine metal detector, the MF5®,
released to market
FY22 Objectives
• Get back on the ground in Africa to further build on the
launch of the GPX 6000®
• Increase customer service training and support with dealer
network across Africa
• Drive customer engagement to build on the relationship
with our loyal Minelab enthusiasts
• Continue the expansion of our retail distribution channels
across all markets
• Increase engineering expenditure to capitalise on a
pipeline of new product opportunities
• Increase investment across the Asia Pacific region which
presently has a low penetration of metal detecting activity
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MINELAB IS THE WORLD LEADER
IN PROVIDING METAL DETECTION
TECHNOLOGIES FOR RECREATION,
GOLD PROSPECTING AND
HUMANITARIAN 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 most
experienced metal detection research and
development team in the world, developing
technologies that are consistently superior
to those of our competitors. Our new
products, including the latest premium
gold detector to join the Minelab range,
the GPX 6000®, are a reflection of the world‑
leading engineering development that is
undertaken at Minelab.
Minelab’s leading edge technology is
strengthened through our direct regional
engagement and support. This year
Minelab expanded its presence in Central
and South America with the opening of a
sales office in Mexico along with significant
investment in our Brazil office, now in
its fourth year of operation. With the
regions well known for gold prospecting
opportunities, Minelab’s presence on the
ground has also boosted the market for
recreation products. Within the past year,
we have signed on a significant number
of additional dealers, introduced our
products into retail stores, and launched an
e‑commerce platform in Brazil. We plan to
further grow such emerging markets in the
year ahead via additional investment in this
region and across the Asia Pacific.
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CODANANNUAL REPORT 2021
METAL DETECTION
Recreation – all targets,
all soils, all the time
Minelab’s initial success was built on the superior
performance of our products sold into the developed
economies of Australia, North America, Europe and
Russia. Our customers’ interests range from metal
detecting as a casual activity, 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 recreation detectors used to find
jewellery and artefacts.
With socially‑distanced activities now embedded
into our way of life, we have seen the metal detecting
market grow in size. Minelab’s easy to use products
make it a simple choice for new consumers to take
up this hobby and choose Minelab in the process.
This has been backed by the growth in our entry
level detector, the VANQUISH®, now in its second
year of sales. Across North America and Europe, our
presence has significantly grown, making it readily
available for new consumers to adopt, and will place
our detectors into more retail outlets in FY22.
Whilst experiencing growth in Europe and Russia in
FY21, there is still room for greater inroads into the
retail distribution channels. With the expectation
of an ease in travel restrictions in FY22 Minelab is
optimistic for further growth in this market.
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.
Global artisanal mining areas tend to have relatively
young populations which when coupled with high
unemployment rates tends to lend itself to the
expansion of artisanal small‑scale miners in gold
bearing regions.
These artisanal 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 extracted.
Minelab’s detectors add accuracy and efficiency
to finding and extracting gold, chemical free, and
deliver a rapid return on investment to the user.
Our team offer a high level of product training and
support to our extensive dealer networks in artisanal
mining countries so they can, in turn, pass this onto
their end users to get the best performance from
their detectors. The strength in this dealer network
has been invaluable in FY21 as our dealers continued
to support our customers on the ground whilst travel
restrictions have limited our direct engagement.
We will continue to build this capability with our
regional accredited service centres whose trained
technicians provide maintenance and technical
support for our end users.
Minelab launched a premium gold detector,
GPX 6000®, in the second half of this financial
year. The detector is the easiest and lightest
high performance detector on the market with
performance near to the renowned GPZ 7000®.
It features GeoSense Pulse Induction technology,
which responds to ground signals with great
clarity and precision, and also accurately isolates
and reports gold signals in the most difficult
environments. We were able to launch this new
detector via a set of virtual dealer conferences,
including presentations, training videos, Q&A and
information sessions and within the coming year
we will continue to promote the benefits of the
GPX 6000® to dealers and customers.
With travel restrictions easing, we will also directly
re-engage with our emerging markets to establish
a dealer network, to drive further growth.
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 often being driven from our
Countermine activities.
This year Minelab launched the MF5®, our newest
single sensor Countermine detector based on our
Multi-IQ® Simultaneous Multifrequency technology.
Using the same metal detection technology as
the successful MDS-10® (a dual sensor combining
metal detection and ground penetrating radar),
Minelab can now compete for and supply the
market’s requirements for both dual and single
sensor detectors with the latest metal detection
technology incorporated. Subsequent international
independent trials confirmed the MF5’s® superior
detection performance on landmines, improvised
explosive devices, wires and artefacts of war.
Consequently, in October 2020 Minelab secured
a substantial contract to supply the MF5® to
a European military displacing an incumbent
European supplier. Minelab’s Countermine
detectors are manufactured in Adelaide and
are supplied to humanitarian demining non-
government organisations, commercial demining
companies and militaries across the globe.
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CODANANNUAL REPORT 2021 “Two days, 93 pieces, 17.56g
– most over old ground and
patches that I’ve been over with
my GPX 5000®. The GPX 6000®
doesn’t miss anything.”
Field Tester, Australia
METAL DETECTION
FIND BIG AND SMALL GOLD IN ALL SOILS
Minelab’s GPX 6000® is the fastest, lightest, and simplest way to find all types of
gold in one machine. With automatic features and an easy‑to‑use interface, the
GPX 6000® is ready to find gold from the moment it’s switched on. Powered
by GeoSense‑PI® (Pulse Induction) technology, the detector continuously adapts
to changing soil conditions during use, tracking the conditions automatically.
There’s no need to adjust any settings; simply swing the detector and find gold.
The GPX 6000® includes a versatile 11″ Monoloop coil
for an ideal balance between ground coverage and
pinpointing small gold pieces, as well as a larger
14″ Double-D coil to detect gold accurately in the
saltiest and noisiest of environments. Both included
coils are waterproof to 1 metre. For more versatility,
the new GPX® 17 17″ x 13″ elliptical Monoloop coil option
is available as an accessory.
Tested in harsh gold field environments worldwide,
the GPX 6000® is both durable and reliable. It withstands
both extreme heat and heavy rains. From professional
prospectors in outback Australia to new gold miners
in Africa, the GPX 6000® combines the best all-round
performance on gold big and small, detected in shallow
soil and at extreme depth – with the best all-round
detecting experience.
Geo Sense-PI® precisely analyses gold signals while
eliminating ground signals, enabling beginners to
become experts easily, and all hunters to hear
all gold pieces at depth – even in mineralised
soils. Geo Sense-PI® technology responds to ground
signals with clarity and precision, accurately isolating and
reporting gold signals in the most difficult environments
– even those once considered undetectable. It rapidly
suppresses unwanted signals via three overlapping
feedback systems for superfast responsiveness
to all gold pieces. This places anyone swinging the
GPX 6000® completely in tune with the ground they
are hunting.
The detector is engineered so the user may detect
longer, with premium ergonomics that contribute to
a more comfortable and lighter swing. Weighing only 2.1
kg (4.6 lbs), the new Minelab GPX 6000® incorporates
serious features like carbon fibre shafts, a streamlined and
intuitive control box, signature U -Flex™ armrest, and a
new Li-Ion quick-release rechargeable battery. Delivering
up to eight hours of operation on a single charge, the new
lightweight battery design ensures the GPX 6000® doesn’t
limit users.
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CODANANNUAL REPORT 2021 C
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CODAN COMMUNICATIONS OFFERS
A FULL SUITE OF SOLUTIONS TO
SERVICE WORLDWIDE DEFENCE,
PEACEKEEPING, HUMANITARIAN,
COMMERCIAL, BROADCASTING,
SECURITY, PUBLIC SAFETY, AND
PUBLIC SECTOR MARKETS.
Our mission is to provide complete
communications solutions that allow our
customers to be connected so that they
can save lives, protect assets, ensure
security and support their local needs.
Our focus is firmly on delivery to our
customers as we give them the power
to respond and be connected in the
most testing conditions in the moments
that matter.
Codan’s Communications business
continued its transformation this year,
with record organic growth from our
land mobile radio (LMR) business and
the recently announced acquisitions of
Domo Tactical Communications (DTC) and
Zetron, both taking effect in May 2021.
With more than 60 years in the business,
Codan Communications has earned
a reputation for quality, reliability
and customer satisfaction, producing
innovative, interoperable and industry-
leading technology solutions.
With deployments in more than
150 countries and all 7 continents,
Codan Communications continues to
enhance its world-class product and
solutions design, development and
implementation capability.
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CODANANNUAL REPORT 2021 COMMUNICATIONS
FY21 Summary
• Acquired Zetron, a global leader of mission
critical command and control solutions
FY22 Objectives
• Leverage existing Tactical and DTC sales
networks to promote total systems solutions
• Acquired DTC, a provider of secure
• Pursue opportunities with large defence
networking and communications solutions
for military, law enforcement, and
commercial customers
• Another record year of LMR sales
• Delivered our largest order on record
of Sentry units to an African military
customer
• Released Cascade™ to the market and
received orders for multiple Cascade™
solutions
programs
• Target markets outside our core utilising our
existing technology and expertise
• Substantially progress the integration of Zetron
• Enhance Zetron’s international go to market
strategy to grow our systems and services
business
• Commence development of next generation
command and control solutions
LMR sales were the highest on record for a
consecutive year, due to strong demand for our
MT4E product line, large federal orders for our
transportable stratus solution, and the successful
staging and delivering of three major systems across
three counties in the United States. We were able
to take market share from our competitors with
the award of those three major projects with key
differentiators being efficient lead times due to tight
control on our supply chain, a weighted focus on
account management and customer support, and
investment of people on the ground in the region.
In May 2021, we finalised the Zetron acquisition,
and have since re‑branded our existing LMR business
as Zetron, and have commenced integration with
one go to market sales team across The Americas.
Our strategy, with the newly acquired Zetron
products and services, is to continue the pursuit
of larger project systems business while building a
compelling services portfolio. The future growth
of our combined Zetron solutions will be enabled
by the Cascade™ software‑defined networked
communication solution, the added value of
command and control solutions, along with the
synergy benefits of leveraging a broader sales
team. By the end of FY22 we expect to substantially
complete the integration of Zetron.
A significant portion of revenue in the Tactical
Communications business is derived from spend
in the military, defence and security markets
in developing countries. In this last year, many
developing countries have redistributed budgeted
communications spend to aid in combatting the
global pandemic, Covid‑19. This redirection of
funds has meant the timing of communications
systems projects has been delayed. Our business
development team continue to focus on these
emerging markets, including the G5 African
region, using technology and our global footprint
to provide product demonstrations, trainings and
briefings to engage and support our loyal dealer and
customer base.
In FY21 the Tactical Communications business was
awarded the contract to deliver the largest single
shipment of Sentry‑H™ radios on record to an African
military customer. We have also sold the Sentry‑H™
to a Special Forces customer within NATO. Customer
feedback has been exceptional which has prompted
other countries within NATO to express interest.
Our Tactical Communications solutions offering
has been greatly enhanced with the recent
acquisition of DTC. We are now able to provide
total communications solutions via the addition of
DTC’s data and video communication capabilities.
We have merged the two sales teams to allow us
to immediately promote our total solution offering
across Codan’s global distribution channels.
DTC’s product range extends further than the
tactical market. With solutions across wireless
video and IP, covert audio and video and command
and control systems, which provides real time
situational awareness, this opens up new markets
for our Communications business, including the
broadcast market.
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CODANANNUAL REPORT 2021 COMMUNICATIONS
COMMAND
AND CONTROL
BROADCAST
22
UNMANNED
SYSTEMS
DOMO TACTICAL
COMMUNICATI0NS VIDEO & IP
DTC’s Video & IP ensures real-time video, audio
and meta-data surveillance systems by networking
capabilities that leverage proprietary IP mesh
technology and COFDM waveforms and are
applied across several markets including law
enforcement, TV Broadcast for news, live sports
and entertainment.
The unmanned systems market also provides
significant opportunity with DTC’s smallest and
smartest SDR transceiver. Weighing just 24g,
this SDR radio can be fitted on devices such as
drones to broadcast cameras at sporting events
and provides real-time video from the remotest
of locations.
SAFE CITIES
Codan images to the left show the breadth of
market diversity that DTC brings to the portfolio.
COMMAND AND CONTROL
UNMANNED SYSTEMS
Software solutions providing
single point-of-data
management, as well as two-way
communications capabilities.
• Defence
• Homeland
• Federal Agencies
Enabling fully mobile
communications and data for
“On-the-Move” applications
across land, sea and air.
• Defence
• Law Enforcement
• Broadcast
BROADCAST
SAFE CITIES
Delivering innovative live content
while reducing personnel and
rigging time.
• TV Broadcast
• Live Sports
• Live News
Real-time, recorded video,
audio and meta-data
surveillance systems.
• Law Enforcement
• City Security
• Federal Agencies
23
CODANANNUAL REPORT 2021 “We were incredibly thrilled to continue our
relationship with Sydney Airports Corporation
Ltd and contribute to their vision to deliver a
world-class airport experience,” said Ranjan
Bhagat, vice president and general manager of
Zetron Australasia. “Everyone’s happy with
how the project turned out and we’re looking
forward to serving them for years to come.”
COMMUNICATIONS
SYDNEY AIRPORT DELIVERS WORLD‑CLASS
AIRPORT EXPERIENCE WITH ZETRON’S INTEGRATED
COMMUNICATIONS & CONSOLE SYSTEMS
41 million passengers travel through the Sydney Airport each year,
making it one of the most important pieces of infrastructure and
an essential part of Australia’s transport network. Keeping everyone
connected, from the security personnel to airfield operations at
Australia’s busiest airport requires a reliable, yet flexible integrated
communications system. Since 2005, Zetron’s ACOM system has helped
make sure travelers arrive safely and on-time to their destinations,
24 hours a day, seven days a week.
World-Class Airport Experience
The Future is Digital
After years of operating with no major
upgrades, the Sydney Airport set out to
construct a brand new Integrated Operations
Centre (IOC). With that came the need for a new
Integrated Communications system. Although
the current ACOM system proved to be just as
reliable as it was over a decade ago, in order to
integrate with the current digital services, the
time came to upgrade.
After identifying their core requirements
in the new system including, enhanced
telephony functions, SIP telephony integration,
console functionality on tablet PCs and
an IP architecture, they began evaluating
different systems.
Don’t Change a Winning Team
Being accustom to the reliability and flexibility
of the ACOM system, they found without
question, Zetron and its resilient architecture,
dedicated service and competitive bid was the
clear winner. Not only could the new ACOM
system meet their requirements, it allowed for
a smooth migration thanks to its ability to keep
the ACOM system fully functional during the
migration period.
Keeping the ACOM system running was achieved
with a temporary CSG (Conventional Services
Gateway) from Zetron to facilitate both the new
and old ACOM systems and retaining access
to the shared radio resources. This allowed
personnel to keep both systems fully functional
for a period of time after migrating and the
option to roll back to the old control centre if
they needed to.
With its unmatched reliability and flexibility,
the new server based ACOM system gave the
Sydney Airport the capacity to scale in the
future and peace of mind it would last for years
to come. Now they’re more likely to migrate to a
new digital radio platform in the future knowing
it can easily be migrated.
With the addition of improved overall coverage,
the new ACOM system helped achieve their goal
of greater automation in terminal operations
as well, while still being compatible with other
agencies across the state.
Training Day
As the new Integrated Operations Centre was
up and running along with the new ACOM
command-and-control system, the next phase
was training. In order for everyone to get
up to speed on all the new equipment, the
train the trainer proved to be the quickest
and easiest approach as well as allowing the
operators to provide additional input on their
GUI requirements at the same time, saving time
and resources.
Located only eight kilometres from the city
centre, Sydney Airport connects to more than
90 destinations worldwide. These connections
rely on a resilient, fully redundant system to
keep things moving safely. And with Zetron’s
ACOM command and control system, operators,
as well as passengers from around the world can
count on the Sydney Airport to help them reach
their destinations.
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CODANANNUAL REPORT 2021 I
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S
T
A
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A
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P
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I
About this report
This Sustainability Report covers the sustainability practises of
the Codan Group across all its controlled entities during the year
ended 30 June 2021. The Sustainability Report is published on
22 September 2021 as part of Codan’s Annual Report.
This year’s report is broken down into four main reportable
pillars; Innovation, Social, Environment and Governance.
In FY21 we engaged the assistance of an external consultant
to facilitate a series of workshops with employees across the
company to identify the material topics to be the focus of
Codan’s Sustainability Report. We assessed this materiality on
two criteria; what is material to our business as well as our
stakeholders. We have included Innovation as a reportable topic
for the first time this year, as our culture of innovation, and
the way we protect our Intellectual Property, is fundamental to
ensuring the longevity of our business.
The information has been compiled with the contribution of
various leaders across the business. The Board Audit, Risk
and Compliance Committee has approved the content within
this report.
CEO’s statement
Now in its second year of production, Codan’s Sustainability Report
continues its evolution as we become more aware of our sustainability
practices and the subsequent impact on our long term business outlook.
Developing a more sustainable business is at the heart of what we do, as is
demonstrated by our ongoing investment in innovation and our people for
over 62 years.
We recognise the need to continuously identify, respond to and manage
risks, issues and opportunities that are important to our business and our
stakeholders. As such, we will establish a regular Sustainability reporting
framework via a Sustainability committee, and will formalise this report
using the Global Reporting Index framework for FY22 reporting.
Donald McGurk
Managing Director and CEO
PILLARS
26
INNOVATION
SOCIAL
ENVIRONMENT
GOVERNANCE
INNOVATION
Promoting a culture of innovation is embedded in the way we do business.
Our capabilities span across multiple engineering disciplines, including
software, electronics and mechanical engineering. We also have a
number of PhD‑qualified physicists in our team. Our engineering teams
ensure that technology is released to specification, on schedule and with
appropriate Intellectual Property (IP) protection. This combination of
core competencies allows us to continuously develop unique IP to solve
our customers’ communications and detecting problems in some of the
harshest environments.
Intellectual Property
Great lengths are taken to protect our Intellectual
Property, with the use of patents. A registered
patent provides our business with the exclusive
right to commercialise it for the life of the patent.
We use patents to protect an idea or process,
the design, including visuals, and the brand/logo.
We also have a strong anti‑counterfeit strategy,
to protect the integrity of our brand and
products. We enforce this by using a third party
to actively search for and pursue sites selling fake
Minelab products.
During the period we analysed
14,925 listings on 55 online
marketplaces removing 12,694
infringing listings – for a
99.99%
success rate
Creating our culture
of innovation
To continuously boost its innovative edge, the
engineering team pursue new recruits which
share a similar attitude, fit and desire to learn.
Continuous improvement is facilitated through
training, coaching, regular Innovation and Product
Review forums, (where staff are able to pitch novel
ideas), and regular one‑to‑one communication.
This ensures an optimum path for our people to be
“the best that they can be”, promoting freedom of
thought and the desire to innovate and succeed.
When designing new or improved products,
the team looks beyond its own innovative ideas
and strengths and seeks broad market research to
help balance product capabilities. We also routinely
seek customer feedback through our sales and
distribution network, as well as talking direct to
users, fuelling further thoughts for both innovation
and general product improvement.
Codan’s reputation for quality is paramount to our
success, and this is a testament to the efforts put
into the research & development phase, along with
the rigorous testing undertaken.
In FY21 we invested in excess
of $30 million into R&D, and
released five new products
to market.
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CODANANNUAL REPORT 2021
SUSTAINABILITY REPORT
Silversaver®
Minelab is about to launch an innovative product which sits adjacent
to its core metal detecting business. Minelab was approached to
design and manufacture a piece of equipment to sit on top of a
restaurant bin, utilising its metal detection technology, to capture all
cutlery to prevent loss of product for restauranteurs.
After our own internal research was conducted, we confirmed this
was a problem for restauranteurs, who tasked staff to sort through
rubbish at the end of the night to retrieve any cutlery accidently
thrown away. Restauranteurs often had to re‑order cutlery, resulting
in additional time and expense for the business, not to mention the
environmental impact.
With the Silversaver® 1000 retailing for US$899, and the
Silversaver® 200 for US$499, it is a relatively small investment for
the restaurateur with a quick payback. The Silversaver® series will be
available for sale in the North American market in the first half of FY22.
SOCIAL
Core Values
Can-Do
High Performing
Customer Driven
Openness & Integrity
Codan’s core values are a shared set of principles that shape our company
culture and ultimately enable us to achieve our organisational goals.
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.
Codan has continued it’s partnership with Next
Level Elite, a South Australian organisation which
supports athletes in broadening their professional
goals to make the most of their athletic success.
Athletes meet with selected Codan employees to
share cross‑skills and collaboration.
"My mentor brings a unique
perspective on how to achieve
success and build resilience,
which I’ve found beneficial in
my professional and personal
endeavours."
Codan employee
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 work force 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 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 FY21 we issued a non‑compulsory Diversity
and Inclusion survey, which sought feedback
across the business to gauge our strengths and
areas for improvement. With a 75% completion
rate, the group scored highly for "Fairness" and
"Belonging". Specific focus areas for improvement
were actioned across specific departments and/
or business units.
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CODANANNUAL REPORT 2021 SUSTAINABILITY REPORT
The board work with management to set specific
gender equity targets ahead of each financial year.
All objectives were met for FY21. It was pleasing
to note that the percentage of females hired for
technical and leadership roles more than doubled
versus the previous year. The board have set an
objective to achieve 30% of each gender for directors
by FY26.
In FY20, we introduced a paid maternity leave
program. Since it’s introduction, all staff who have
taken advantage of the policy have returned to work.
Gender
representation
Board
Senior executive
Senior management
Other
Whole workforce
Male
(%)
Female
(%)
30 June 2021 30 June 2020
Male
Female
(%)
(%)
20% 80% 20% 80%
0% 100% 0% 100%
27% 73% 30% 70%
30% 70% 26% 74%
29% 71% 27% 73%
In FY21, voluntary turnover was
under 6%, which is pleasing to
report against a benchmark
of 10%.
Health, Safety and Wellbeing
Throughout another year of disruption due to
Covid‑19, the health, safety and wellbeing of our
people remain of utmost importance. We continue to
provide flexible work arrangements, with work from
home checklists to ensure staff are working safely
at home. We encourage staff to remain connected
to one another, and look after their mental health.
Staff have access to confidential counselling support
if required.
Head office provides voluntary flu shots for staff,
and has an onsite gym. The in house café located at
our head office provides meals which are subsidised
by Codan. This staff benefit encourages our people
to get away from their desk and mingle with others
and to enjoy our canteen and courtyard facilities.
The ‘Stark Tower’ meeting room is configured with
dual AV, phone, game console, child friendly games
and toys so that a child can be brought to work and
staff are able to work in the room at the same time.
We maintain an effective Work Health and Safety
System that is integral to our business processes
and are accredited to OHSAS 18001 and AS/
NZS 4801 Occupational Health and Safety
Management Systems.
FY21 Workplace, Health & Safety Statistics
Lost Time Injuries (all now resolved)
Near misses
Incidents
3
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CODANANNUAL REPORT 2021 "I think this is a great program
and I love how everyone, including
the most senior management,
are supportive of the time we are
investing in it."
"My mentor has challenged me to
drastically rethink my approach
to career progression and people
management, something that has
already paid off significantly in my
work life."
In building our future capability, Codan also offers
selected candidates a four year apprenticeship within
our head office at Mawson Lakes, and also offer
internships across the business.
Our Customers
Codan’s commitment to its customers is second to
none. We pride ourselves in the highest of customer
satisfaction. We aim to get as close to the end user as
possible, by establishing global offices in our markets,
to where possible, being on the ground with our
customers, no matter how harsh the environment.
In FY21, we incurred no product
recalls, and warranty costs
were less than 1% of sales.
SUSTAINABILITY REPORT
Learning & Development
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. We utilise a number
of tailored training approaches, including short
courses on our online Learning Management System,
a platform which houses various mandatory and
optional training content for all staff to access. Some
business units accessed micro‑learning content
provided by Adelaide Uni, and we held two global
leadership workshops throughout the year; a Leaders
Mindset program for 100 staff, and Emotional
Intelligence, for 50 staff.
Learning and Development spend
$504,000
In FY21, our learning and
development spend equated
to 1% of staff costs, in line with
previous years.
Codan launched a mentoring program this year.
The aim of this voluntary program is to develop
the career pathways and leadership capabilities of
our team within Codan, aligning with our culture
of collaboration and leadership development.
The mentoring partnership runs for 12 months,
and includes a mix of formal and informal meetings.
Whilst the program is still in its infancy, initial feedback
is positive, with 89% noting that the mentoring
partnerships meet their needs.
Codan Mentoring Program
7
5
5
22
16
7
22
1
Mentees
Mentors
5
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Serving our African customers
Africa is one of our most important gold detecting
markets. Minelab staff are unique in their plight to visit
the rural villages, sometimes driving for days outside
of cities, to offer free of charge training over three or
four days. People are gathered for demonstrations,
and have access to use the machines. Practical
merchandise, such as clothing and caps, are
also donated, which is greatly appreciated in the
communities. Our staff also provide advice on how
to get the most out of older machines, for example
reviewing machine settings for efficiency.
A defining moment for Ali, Business Development
Manager, was on a field visit to a rural community,
where he was approached by an existing customer
who had an issue with the control box on the GPZ®.
Ali was able to replace the control box on the spot so
the customer didn’t have to send away the detector
for warranty, which would have resulted in the
customer foregoing any source of income for weeks.
These in‑country visits are mutually beneficial.
What we learn from the field visits drive our future R&D
to enable continued ease of use for our consumers.
Our products are designed and supplied in a way
to maximise customer satisfaction. For the African
market, we supply our detectors with two batteries
as standard, as African customers go into the field
all day, without power supply, so this allows use for
one battery for the working day, and the secondary
battery can be left at camp on solar charge for
the following day. For our newer detectors, if the
shaft becomes damaged or lost, you don’t need to
purchase a spare part. You can use any replacement
stick, for example a broom handle, and the detector
will continue to work. The Gold Monster® uses
universal headphone jacks so customers do not have
to purchase any additional accessory. We offer a three
year warranty, however our products are designed to
be used much longer than this.
Machines are also designed with OH&S in mind.
Our detectors are continually engineered as lighter
pieces of equipment to hold for all day use, and
designed for comfort for women as well. In West
Africa, it is common practice for many women to
detect for gold.
Thought is also going into our packaging, to save our
environment. We no longer ship construction guides
and are minimising plastic in our cardboard packaging.
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CODANANNUAL REPORT 2021 SUSTAINABILITY REPORT
Our Community
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 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.
In FY21, Codan donated
$280,000 to charities*
*inclusive of product donations
Codan is a long time proud supporter of Variety – the
Children’s Charity, with 2021 marking our 33rd year
of Gold sponsorship of the Variety Bash, Australia’s
largest and longest running charity motoring event
through the Australian outback. Codan participates
in the event with our own Variety Bash vehicle, and
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. This year we also provided new Envoy
radios including GPS for tracking and vehicle antenna
tuners for three support vehicles.
Codan hosted a charity Golf Day, where key
stakeholders were invited to register a team to
participate in a fun filled day on the course. Over
$180,000 was raised inclusive of key stakeholder
and Codan donations, and the amount was donated
evenly amongst three chosen charities.
Codan is committed to developing the next
generation of STEM professionals. Codan, in
partnership with the Playford Trust, offers an annual
$10,000 Honours Scholarship to a student studying
STEM. The scholarship is awarded to a student
selected jointly by Codan and the Playford Trust,
who is innovative and collaborative and shares the
values that drive Codan’s culture of excellence –
can‑do; high performing; customer driven; openness
and integrity. The successful student also has the
opportunity to undertake a work placement at
Codan. Codan also attends career nights to support
STEM girls in secondary schools.
"A huge thank you to both the
Playford Memorial Trust and
Codan for partnering to support
high-achieving STEM students
contributing to the skills,
knowledge and research base of
South Australia."
Matthew Rehbein, awarded 2021 Codan
/ Playford Trust Honour Scholarship
ENVIRONMENT
Codan is conscious of our impact on the environment during
the manufacture, distribution, use and disposal of our products.
We maintain an effective Environmental Management System that
is integral to our business processes and are accredited to AS/NZS
ISO 14001 Environmental Management Systems. Our direct
environmental impact largely relates to the energy to run our global
offices and our travel footprint, which has been negligible this year
due to the travel restrictions in place.
Our global head office located in the
Technology Park precinct, South Australia,
houses around 258 staff, and is currently
awarded a 5.5 star Nabers energy rating, which
increased from last year’s 4.5 energy rating,
due to efficiency gains with our solar panels.
FY21 Emissions 1
• Total emissions (CO2e)
623 tonnes
• Emissions intensity (CO2e)
per FTE 1.65 tonnes
• Emissions intensity (CO2e)
per $ million 1.48 tonnes
1 Calculated for Scope 1 & 2 emissions only.
Excludes DTC and Zetron
Solar panels have reduced
our head office energy
consumption by 25% in FY21
Head office is fitted with multiple recycling
stations and organic waste bins in staff kitchen
areas to enable sustainable disposal of organic
materials.
We are mindful of our indirect environmental
impact within our supply chain. Our two
largest contract manufacturers, Plexus Corp
and Venture, are accredited with ISO 14001
Environmental Management Systems. Both
contract manufacturers have confirmed their
sites reported no environmental incidences
for FY21.
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 extends to our
supply chain, with both our largest contract
manufacturers also holding these same
accreditations. As part of our ISO certification
process, we continually review and update our
business risk management register, and can
report there were no environmental incidences
in FY21.
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 sticker
which encourages consumers to dispose of
the product thoughtfully when at the end of
its lifecycle.
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CODANANNUAL REPORT 2021
SUSTAINABILITY REPORT
GOVERNANCE
Codan’s corporate governance statement, which was approved by the
board on 18 August, 2021, is available on the company’s website and may be
accessed at https://codan.com.au/who-is-codan/corporate-governance
Business Ethics / Behaviour
Codan’s Code of Conduct provides a framework for employee
conduct, with guidance around expected and acceptable
standards of behaviour that are aligned with our core values,
and which allow us to work together to achieve the goals
of the business. The Code of Conduct and Core Values are
published on our website, and included in induction packs for
new starters.
An essential part of our culture of “Openness & Integrity”, one
of Codan’s four Core Values, is underpinned by our Speak Up
framework. This framework encourages staff to raise issues
or conduct that concerns them. Our Speak Up framework
is reinforced by our Code of Conduct, Core Values, and
Whistleblower Policy. We take all reports of harassment,
discrimination, bullying and any form of misconduct very
seriously. Our grievance procedure facilitates the appropriate
investigation and resolution of complaints. There were two
workplace grievances filed with human resources globally
during FY21, which were addressed and resolved. An
employee which was found to have breached our Code
of Conduct was terminated this year. For misconduct
matters, employees can report concerns either internally, or
anonymously by accessing a confidential, externally managed
helpline. There were no reports to the hotline in FY21.
With two recent acquisitions, extensive work has been done
to ensure cultural integration. We produced a “Why Codan”
video for the newly acquired staff, along with Town Halls to
bring newly merged teams together, and induction packs
to share our core values and policies. Shortly, we will launch
the LMS platform to these staff, to provide training videos on
our culture, values, code of conduct, safety and compliance
content, such as Cyber Security, Anti Bribery and Anti
Corruption, Whistleblower, and Modern Slavery.
Compliance Programs
At Codan, we take compliance seriously. We have a strong, fit
for purpose compliance program run by our in house Legal
& Compliance department. Staff training is a critical part of
this program. This training is mandatory for all our people.
New employees are also required to complete mandatory
compliance training. Our training program is multi‑tiered, with
short training videos required for all staff, managed within the
LMS platform, and tailored, in depth training sessions for staff
in high risk roles.
FY21 LMS Training course
completion rates
Modern Slavery
Anti Bribery and
Anti Corruption
Whistleblower
Bullying & Harassment
Security Awareness
87%
98%
97%
98%
98%
The business’ priorities for FY22 are to carry out a risk review
of DTC and Zetron’s businesses and integrate our compliance
program across the newly acquired businesses, and make any
adjustments to our policies and procedures, if required.
Codan’s Anti Bribery and Anti Corruption (ABAC) program
involves a risk driven due diligence process for third party
business partners, regular training for high risk staff and third
parties, and an approval based Gratuities Register. There were
no violations of our ABAC Policy in FY21, and we maintain an
internal target of zero violations for FY22.
Codan’s sanctions compliance program is a group‑wide
approach that uses enhanced due diligence measures, external
resources, monitoring and approval procedures to ensure we
meet our global sanctions obligations. During FY21 Codan did
not breach any sanctions and was not subject to any fines or
sanction notifications within any jurisdiction.
In March 2021, Codan published its first Modern Slavery
Statement, prepared in accordance with the disclosure
requirements of the Australian Commonwealth Modern
Slavery Act (2018). We partner with suppliers who meet
stringent quality standards, are innovative and work in safe and
responsible ways. We have systems in place to carry out daily
online searches on our highest risk suppliers for any adverse
media, including modern slavery topics, and to date we have
had no adverse “hits”. To strengthen our supplier expectations,
a Supplier Code of Conduct is being prepared for rollout in
FY22, and we are in the process of updating our Supplier terms
and conditions to include additional Modern Slavery clauses. In
FY21, we had no breaches of our Modern Slavery Policy.
Codan’s ABAC, Whistleblower and Modern Slavery Policies and
Statement can be found on our website.
Cyber Security
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 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 FY21 Codan completed penetration testing and
regular vulnerability assessments to highlight potential system
vulnerabilities. Codan also undertook multiple Cyber Tabletop
exercises to simulate specific cyber‑attacks. This allowed
Codan to test our security monitoring systems and incident
response plans in response to a simulated cyber‑attack. Codan
has implemented additional technologies to further segregate
our assets, along with increased security awareness training for
all employees.
In FY21, Codan had no known major security incidents or
events that resulted in loss of confidential information or
intellectual property.
The main focus in FY22 is reviewing and improving where
necessary the Cyber Security processes and procedures across
the newly acquired businesses.
Tax
As part of our commitment to meeting our global taxation
obligations in a transparent and open manner, we conduct
our tax affairs within a robust tax risk management policy and
framework overseen by the Board.
Codan’s tax governance process is documented in our Tax Risk
Management Policy and Framework. This framework is based
on the philosophy of managing tax risk through a well‑planned
approach built around the following principles:
• A transparent and accountable relationship with local
country tax authorities;
• The payment of the legally correct amount of tax in a
timely manner;
• The systematic identification of significant tax sensitive
transactions ahead of time;
• The documentation of tax processes to facilitate review
and minimise the impact of changes in personnel;
• Defined channels for the reporting of tax information to
the Board;
• Internal controls, with effectiveness of those controls
assessed on a regular basis;
• Codan should not enter any transaction where there is
a material risk that any legislative general anti‑avoidance
provisions will be applied by a Court; and
• Codan will not promote tax exploitation schemes.
The Board has delegated oversight of Codan’s taxation affairs
and the framework to the Board Audit Risk and Compliance
Committee. The framework requires the Committee to attest
to the Board on a yearly basis that it has effective policies and
processes in place to manage tax risk.
The Chief Financial Officer has overall responsibility for the
group’s taxation affairs, including enforcing policies and
implementing strategies approved by the Board, developing
and implementing systems that identify, assess, manage
and monitor tax risks, monitoring the appropriateness,
adequacy and effectiveness of tax risk management systems
and reporting on tax risk and management thereof to the
Board. The Chief Financial Officer is also responsible for the
maintenance of in‑house tax resources with appropriate
qualifications and experience in taxation matters, to oversee
that Codan’s obligations globally are discharged in a legally
correct and timely basis and that the tax risk management
controls set out in the framework operate in an effective and
robust manner.
The framework requires management to consult with
reputable local country external tax advisors where
appropriate to ensure compliance with local country
obligations. KPMG is engaged to review the numbers disclosed
in the Tax Note in the Annual Report each year, as part of the
half‑year review and full‑year audit. We apply arms’‑length
principles to our international related party dealings, engaging
with external advisors with appropriate expertise to ensure our
compliance with transfer pricing laws globally.
As part of our commitment to our tax risk management
policy and framework, we welcome the Board of Taxation’s
Tax Transparency Code and the opportunity to adopt the
recommendations of the Code with effect from June 30, 2021.
To this end, the Board has directed that each year the Annual
Report should contain sufficient information to comply with
Part A of the Code. The Part A disclosures required of Codan by
the Code are:
• Codan’s Australian and Global effective tax rates;
• a reconciliation of the accounting profit to income tax
expense;
• a reconciliation from income tax expense to current year
income tax payable.
The Part A financial information can be found in the Taxation
Note (Note 9) of the Notes to the Financial Report on page
78 of this Annual Report. As most of the activities and assets
which generate our income are in Australia, Codan pays most
of its taxes here. In 2021, we paid $36.1 m corporate income
tax in Australia, or 99% of our global corporate income tax
contribution. As a result, our shareholders can benefit from the
generation of Australian franking credits notwithstanding that
a high proportion of our sales are to overseas customers.
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CODANANNUAL REPORT 2021 B
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DAVID SIMMONS
BA (Acc)
Chairman, Independent Non-Executive Director
Chair of Remuneration and Nomination Committee
David was appointed Chairman of the board in
2015 and has been a director of Codan since 2008.
Prior to joining the Codan board, David was the
Managing Director of Hills Industries Limited
(Hills) for 16 years. On appointment, Hills had a
turnover of around $200 million. On his retirement
in 2008, Hills turnover and market capitalisation
were both in excess of $1 billion. Hills was in the
ASX200 index and under David’s leadership, profit
increased every year for 16 years.
Hills grew through a combination of internal
growth and via acquisitions. During his time
as Managing Director, David led around 30
successful acquisitions and joint ventures. David
has strong people, financial, capital markets
and M&A skills and has significant international
experience, particularly focused on China, the
USA and the UK. Hills employed 4,000 people
globally at its peak.
Since David was appointed Chairman, Codan’s
market capitalisation has grown from less than
$150 million to more than $3 billion. This has
been achieved by investing in people, having a
commitment to continuous learning, encouraging
entrepreneurship, rewarding performance and
investing in innovation in a digital world.
In his role on the Board, Audit Risk and
Compliance Committee, David has a particular
focus on the ever present cyber threats and
will continue to push and support best in class
defences.
David has chaired a number of charitable and
government related organisations since retiring
from Hills. He is currently the Chair of the Kickstart
for Kids charity based in South Australia and is a
former Chair of the South Australian Economic
Development board.
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 operations until
his transition into the role of CEO in 2010. In
addition to his operations 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
Communications 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.
PETER LEAHY AC
BA (Military Studies), MMAS, GAICD
Independent Non-Executive Director
Peter Leahy retired from the Australian Army
in 2008 as a Lieutenant General after a 6 year
appointment as Chief of Army.
In his board appointments since then he has been
on the boards of Codan, Electro Optic Systems
Holdings Limited and Citadel Group Limited,
including one year as Chair of CGL prior to its
acquisition to go private. He is the current Chair of
Electro Optic Systems Holdings Limited.
During his time as Chair of CGL he led the
company through a major international
acquisition, a substantial capital raise and then
negotiated the go private acquisition of the
company.
He is a member of the Nomination and
Remuneration Committee for both EOS and CGL,
and a former Chair of EOS’s Audit Committee.
In addition, to his board activities, he has been
an advisor to both the Queensland and South
Australian Governments, was a member of the
First Principles Review of the Department of
Defence, Chair of the Invictus Games in Australia
and is an active supporter of veteran’s charities.
As a Professor at the University of Canberra he
lectures on National Security, which includes
cybersecurity and digital disruption.
GRAEME BARCLAY
MAICD, F Fin, CA, MA (Hons)
Independent Non-Executive Director
Graeme Barclay is a former CEO and qualified chartered
accountant with more than 35 years’ experience in
professional services, investment banking, broadcast
infrastructure and telecommunications.
Over the past 20 years Graeme has held Executive
Chairman or Group CEO roles at BAI Communications,
Transit Wireless LLC (New York), Nextgen Networks,
Metronode data centres and Axicom (formerly
Crown Castle Australia), and for 8 years was also an
executive director in Macquarie Group's infrastructure
team. In these roles, Graeme was responsible for
all aspects of strategy, M&A, sales and business
development, contract delivery and operations, as well
as implementing the appropriate capital structure and
raising third party debt for these businesses in Australia,
UK, Hong Kong, Singapore, Canada, USA and New
Zealand. Over the past 20 years in these businesses,
Graeme led and completed more than 20 acquisition and
divestment transactions including the sale of Nextgen
Networks to Vocus for $820 million in 2016 and the sale
of Metronode to Equinix for $1.04 billion in 2018.
Included in his prior board appointments are Arqiva
Limited (institutionally owned UK telecommunications
infrastructure group), BSA Limited (ASX:BSA, until
December 2019) and Chairman of the main board and of
the audit and risk committee for Nextgen group (Ontario
Teachers' majority owned entity).
His current board appointments are Codan (ASX:CDA,
since 2015), Axicom (institutionally owned mobile
tower infrastructure in Australia, having resigned as
CEO during 2020) and chairman of Uniti Group Limited
(ASX:UWL). As chairman of Uniti Graeme has overseen
an IPO, ten acquisition transactions over a 2 year period,
several capital raisings in the equity and corporate debt
markets, and Uniti has grown to be the fifth largest
listed telecommunications company on the ASX with a
market capitalisation of circa $2.2 billion. Uniti's business
includes ownership of fibre to the premise networks,
a digital communications platform as a service for
inbound voice, text, data and analytics and a consumer
and business broadband service provider.
Graeme holds an honours economics degree, is a
qualified CA, a fellow of FINSIA and a member of AICD.
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 of Codan in
November 2015. She has had a long and distinguished
executive career and over 24 years of board experience
across a diverse range of complex organisations and
industry sectors. She has significant experience as Chair
of Audit & Risk Committees.
Prior to joining Codan, Kathy was CFO of Austereo
Ltd. Joining in 1989, retiring June 2011. In that time
the company grew from 2 radio stations to the
largest commercial radio network in Australia, and
the leader in Digital and Online Media. Leadership
roles and responsibilities included business planning
& re-engineering, debt & equity raising, acquisitions
& integration, capital investment, major IT projects,
corporate governance, risk management, financial
management, tax & accounting, change management
and investor & key stakeholder relations. Further
experience was gained through exposure to
international markets such as Greece, UK, USA, South
Africa, Argentina, Malaysia and New Zealand.
Kathy is a Director of Uniti Group Limited (ASX:UWL),
Chair of Audit & Risk Committee and member of the
Nomination & Remuneration Committee. Uniti, a
diversified provider of telecommunication services,
listed February 2019 and through acquisition and
organic growth now has a market capitalisation of
circa $2.2 billion. She is also a Director of The Australian
Institute of Company Directors and is Chair of the HR &
Remuneration Committee and is a Council member of
Flinders University and Chair of Audit & Risk Committee.
Kathy holds a BA Accounting, is a Chartered Accountant
and a Fellow of the Australian Institute of Company
Directors and the Institute of Chartered Accountants
in Australia & New Zealand and is a member of Chief
Executive Women.
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CODANANNUAL REPORT 2021
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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 operations until his transition into the role of CEO in 2010. 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 the
communications business.
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 38.
MICHAEL BARTON
BA (Acc), FCA
Chief Financial Officer and Company Secretary
Michael joined Codan in May 2004 as Group Finance Manager after a 14 year career with
KPMG in their assurance division. He was appointed Company Secretary in May 2008
and in September 2009, Michael was promoted to the position of Chief Financial Officer
and Company Secretary. Michael leads a team responsible for managing Codan’s financial
operations as well as legal and commercial matters, investor relations, information
technology and business systems. He holds a Bachelor of Arts in Accountancy from the
University of South Australia and was recently made a fellow 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 18 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 also contributes to the
management of Codan’s strategy for technical innovation and acquisitions.
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.
SCOTT FRENCH
BSc
Executive General Manager, Zetron
Scott was appointed to the role of Executive General Manager, Codan Critical
Communications in February 2019. With the acquisition of Zetron in May 2021, Scott is now
leading Zetron, a merger of Codan Critical Communications Land Mobile Radio and Zetron
headquartered in the USA with operations in Canada, Australia and the UK.
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.
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.
40
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CODANANNUAL REPORT 2021
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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
44
59
60
61
62
63
64
65
101
102
42
43
CODANANNUAL REPORT 2021 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 2021 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 38 to 39.
COMPANY SECRETARY
Mr Michael Barton BA (Acc), FCA
Michael joined Codan in May 2004 as Group Finance Manager
after a 14‑year career with KPMG in their assurance division.
He was appointed Company Secretary in May 2008 and in
September 2009, Michael was promoted to the position of Chief
Financial Officer and Company Secretary. Michael leads a team
responsible for managing Codan’s financial operations as well as
legal and commercial matters, investor relations, information
technology and business systems. He holds a Bachelor of Arts
in Accountancy from the University of South Australia and was
recently made a fellow 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
A
11
11
11
11
B
11
11
11
11
A
4
4
B
4
4
A
2
2
2
B
2
2
2
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. 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.
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.
Traditionally, Short‑term incentive (STI) plans have been based
on the achievement of performance hurdles which related to the
profitability delivered by our business segments and the group.
For a business unit executive, their short‑term incentive was split
between the group results and the performance of their business
unit. Group level executives were measured on group profit. The
short‑term incentive targets were set by the board each year
based on the achievement of a percentage of the budget or the
previous year’s results or a combination of both.
When the board considered what the approach to STI’s for FY21
should be, there was considerable uncertainty in relation to the
impact the COVID‑19 pandemic would have on our business. By
June 2020 we were already experiencing a significant downturn
in our Tactical Communications business. Mindful of the need to
retain and motivate key executives in those uncertain times, the
board decided on a pooled approach. We determined that an
STI pool of 2.4% of the group EBIT would be accumulated during
the year (2.4% being the average of total executive STI’s to EBIT
over the preceding 2 to 3 years). Our key executives would then
share that pool subject only to achieving 80% of the EBIT achieved
in FY20 (which at the time was an all‑time record for Codan by a
large margin). The percentage share for each executive was to be
consistent with FY20. Part of our reasoning was that under this
approach, individual executives would not be unfairly impacted
by issues totally outside of their control. The STI’s earned under
this approach were to be capped at 100% of fixed salaries where
the business over achieves against the set targets, and the STI
payable to an executive could be reduced if the Managing Director
or the Chairman determined that the relevant executive had not
operated in a manner consistent with Codan Values.
As it turned out, Codan had another all‑time record result for
FY21. From the board’s perspective, what was most pleasing
was the heightened level of teamwork and camaraderie across
our total executive team and a significant increase in co‑operation
across business units. This pooled approach to STI’s with some
modifications and improvements will also apply to the FY22 STI
program and to future years. We are committed to providing
additional disclosures next year in relation to the new STI program
and in particular the key specific and quantified profitability and
other metrics applying to the Managing Director and the senior
executive team. A key change to the FY22 STI program will be
the inclusion of stage gates for each executive, the achievement
of which will determine what percentage of that executives
STI pool will be paid. The profit pool rate of 2.4% will also be
reduced to 2.0%. As always, the payment of an STI will be subject
to the Board’s discretion having considered the executives
compliance with Codan’s core values which will also consider
sustainability objectives.
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.
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.
Ms K J Gramp
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
11
11
4
4
44
45
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
REMUNERATION REPORT – AUDITED (continued)
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.
Performance rights granted become exercisable if certain
performance requirements are achieved. The performance
requirements are based on Codan achieving earnings per share
targets over a three‑year period. For the maximum available
number of performance rights to vest, Codan’s earnings per
share must achieve a certain target level set by the Board. For
any of the performance rights to vest Codan’s earnings per share
must achieve a certain threshold level. A pro‑rata vesting of
performance rights occurs between the threshold and target
levels of earnings per share.
If achieved, performance rights are exercisable into the same
number of ordinary shares in the company in the twelve‑month
period following vesting.
Of the performance rights granted to Codan’s Australian based
executives, 90% remain restricted for a further two years after
vesting whereby executives are prohibited from trading the
shares. This two‑year restriction period does not apply to our
overseas based executives (such as Mr S A French) due to local
taxation requirements. The remaining 10% of performance rights
are subject to a “good leaver” clause such that they remain at the
Board’s discretion until twelve months after the executive leaves
the employment of Codan.
The Board has recently conducted a review of the performance
rights plan and will be making the following changes to the plan for
the FY22 and following years.
• The earnings per share targets will be based on the average
of the last three years earnings per share results.
• This three‑year average will then be increased by a growth
rate that the Board considers to be appropriate.
• For FY22, the target earnings per share will be calculated
using an 8% per annum growth rate and the threshold
earnings per share will be calculated using a 2% per annum
growth rate.
• The plan will be amended so that the automatic vesting of
performance rights as a result of a take‑over bid for Codan
will be removed and the vesting of any rights in this situation
will be at the Board’s discretion.
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
27,809
13 November 2020
10.11
– 30 June 2024
14,641
18,102
17,788
17,747
17,536
13 November 2020
13 November 2020
13 November 2020
13 November 2020
13 November 2020
10.11
10.11
10.55
10.11
10.11
– 30 June 2024
– 30 June 2024
– 30 June 2024
– 30 June 2024
– 30 June 2024
–
–
–
–
–
–
Details of vesting profiles of performance rights granted to
executives are detailed below:
Performance rights
granted
Percentage
vested in year
Number
Date
Percentage
forfeited
in year
Financial years in which
shares will be issued if
vesting achieved
100
–
–
–
100
–
–
–
100
–
–
–
–
–
100
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2021
2022
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
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
124,524
91,972
63,647
27,809
10 November 2017
16 November 2018
15 November 2019
13 November 2020
65,559
48,421
33,509
14,641
81,058
59,881
41,431
18,102
42,696
17,788
79,469
58,694
40,618
17,747
40,373
31,208
35,996
17,536
8 December 2017
16 November 2018
15 November 2019
13 November 2020
8 December 2017
16 November 2018
15 November 2019
13 November 2020
15 November 2019
13 November 2020
8 December 2017
16 November 2018
15 November 2019
13 November 2020
8 December 2017
16 November 2018
15 November 2019
13 November 2020
Performance rights issued on 16 November 2018
The company issued 290,176 performance rights in November
2018 to executives. 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%.
The performance rights 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 15.6 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. As the earnings per share target has been exceeded to
30 June 2021, it is expected that the performance rights will vest
and be converted into shares before the end of August 2021.
46
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
REMUNERATION REPORT – AUDITED (continued)
Performance rights (continued)
Performance rights issued on 15 November 2019
The company issued 257,897 performance rights in November
2019 to executives. 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%.
The performance rights 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.
Performance rights issued on 13 November 2020
The company issued 113,623 performance rights in November
2020 to executives. The fair value of the rights was on average
$10.18 based on the Black‑Scholes formula. The model inputs
were: the share price of $11.17, no exercise price, expected
volatility 60%, dividend yield 1.7%, a term of three years and a
risk‑free rate of 0.9%.
The performance rights 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 27.8 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
10% per annum over the three‑year period from the base earnings
per share.
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:
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:
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
Held at
1 July 2020
Received on
exercise of rights
Other
Held at
changes *
30 June 2021
86,636
612,424
57,708
38,829
12,500
253,704
461,334
–
269,477
340
–
124,524
–
–
–
65,559
81,058
–
79,469
40,373
–
(136,000)
–
–
–
(112,118)
(96,501)
–
(154,240)
(36,676)
86,636
600,948
57,708
38,829
12,500
207,145
445,891
–
194,706
4,037
Held at
1 July 2020
Issued
Vested
Lapsed
Held at
30 June 2021
* Other changes represent shares that were purchased or sold during the year
280,143
27,809
124,524
147,489
182,370
42,696
178,781
107,577
14,641
18,102
17,788
17,747
17,536
65,559
81,058
–
79,469
40,373
–
–
–
–
–
–
183,428
96,571
119,414
60,484
117,059
84,740
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
48
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES 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:
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
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
$
$
185,751
183,912
92,876
91,957
92,876
91,957
101,319
100,316
472,822
468,142
–
–
–
–
–
–
–
–
–
–
585,031
599,424
1,057,853
1,067,566
609,153
554,144
609,153
554,114
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
17,646
17,471
8,823
8,736
8,823
8,736
9,625
9,530
44,917
44,473
23,502
21,003
68,419
65,476
$
–
–
–
–
–
–
–
–
–
–
17,469
17,546
17,469
17,546
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
$
203,397
201,383
101,699
100,693
101,699
100,693
110,944
109,846
517,739
512,615
280,087
261,189
280,087
261,189
1,515,242
1,453,276
2,032,981
1,965,891
%
–
–
–
–
–
–
–
–
–
–
58.7
56.1
–
–
50
51
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES 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)
Mr S A French
(Executive General Manager, Zetron)
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
$
$
289,069
320,708
293,525
291,732
365,471
358,724
398,514
398,944
368,019
396,525
360,698
383,604
297,080
388,750
2021
2020
2021
2020
2021
2020
2021
2020
363,449
271,915
400,615
384,131
346,541
313,378
2021
2020
2021
2020
1,821,688
1,761,183
1,873,718
1,534,803
53,798
124,035
$
–
–
–
–
21,743
64,634
7,062
16,121
24,993
43,280
Post–employment
and superannuation
contributions
$
27,551
21,058
21,694
19,906
–
–
21,694
21,003
–
–
70,939
61,967
* 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.
Short‑term incentives which vested during the year are as follows:
Mr D S McGurk 100%, Mr M Barton 100%, Mr P D Charlesworth
100%, Mr S A French 100%, Mr R D Linehan 100% and Mr S P
Sangster 100%.
Directors’ and executives’ salaries have historically been reviewed
as at 1 July each year. Given the uncertainty created by the
COVID‑19 pandemic, the 1 July 2020 review was delayed to 1
January 2021 when a 2% increase was approved. As a result of
superannuation changes in Australia from 1 July 2021 a 0.5%
increase has been approved for executives from that date.
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.
Other
long–term
Termination
benefits
Performance
rights
Total
Proportion of remuneration
performance related
$
10,408
9,837
12,438
12,902
–
–
9,939
8,067
12,661
8,770
45,446
39,576
$
–
–
–
–
–
–
–
–
–
–
–
–
$
147,460
135,058
182,332
166,998
144,974
82,395
178,744
163,712
146,892
111,003
800,402
659,166
$
795,196
751,210
978,460
919,228
948,835
843,053
974,208
844,267
969,292
822,972
4,665,991
4,180,730
%
58.7
56.8
58.9
57.4
55.7
45.0
58.3
51.6
54.8
51.6
–
–
Corporate performance
As required by the Corporations Act 2001, the following
information is presented:
2021
2020
2019
2018
2017
Profit attributable to shareholders ($000)
Dividends paid ($000)
Share price at 30 June
Change in share price at 30 June
Earnings per share, fully diluted
$90,351
$38,809
$18.03
$10.94
49.8c
$63,795
$26,999
$7.09
$3.62
35.3c
$45,665
$26,873
$3.47
$0.47
25.3c
$41,575
$19,593
$3.00
$0.66
22.1c
$43,515
$17,724
$2.34
$1.16
24.9c
52
53
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
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.
FY21 highlights:
• Record statutory net profit after tax of $90.2 million and
underlying net profit after tax of $97.3 million, representing
an increase 41% and 52% respectively over FY20
• Highest full‑year sales of $437 million in the company’s
history
• Metal Detection delivered another record sales year in both
recreational and gold mining
• Communications capability expanded with two recent
acquisitions
• Sold the Minetec business to Caterpillar
• Annual dividend of 27.0 cents, fully franked
(interim 10.5, final 16.5)
• Underlying earnings per share of 54.0 cents, up 52%
• Return on equity of 36%
• Cash generation was excellent with close to zero net debt at
year end, after funding circa $174 million for acquisitions
the proceeds from the Minetec sale were received 1 July 2021)
Codan experienced very strong trading throughout the year
delivering another record profit. We acquired Domo Tactical
Communications (DTC) and Zetron in May 2021 and streamlined
the business with the divestment of Minetec. As a result of our
strategy to strengthen and invest in our core business through
releasing new products and broadening our geographic footprint,
we were pleased to deliver another record year.
In FY21 we:
• released our new GPX6000® gold detector and MF5®
Countermine detector;
• established a new sales office in Mexico to focus on both gold
mining and recreational markets;
• launched a direct to consumer e‑commerce platform in Brazil
for recreation products;
• delivered our largest ever order of Sentry HF radio units to an
African military customer;
• achieved another record year in LMR, successfully delivering
multiple systems projects and validating our transition to a
full solutions provider;
• further strengthened our Communications segment by
acquiring DTC and Zetron;
• streamlined the business to focus on core segments with the
sale of Minetec to Caterpillar for $18 million cash; and
• worked with key suppliers to increase supply chain
robustness in a very challenging COVID‑19 environment,
positioning us well for the future.
As a result of these initiatives, the business is well placed to deliver
another strong performance in FY22, with the record run rate of
FY21 being maintained thus far in the new financial year.
Dividend
The company announced a final dividend of 16.5 cents per share,
fully franked, bringing the full‑year dividend to 27.0 cents, up
46%. This dividend has a record date of 26 August 2021 and will
be paid on 10 September 2021.
Financial performance and other matters
Revenue
Communications
Metal Detection
Tracking Solutions
Total revenue
Business performance
EBITDA
EBIT
Interest
Net profit before tax
Taxation
(excluding tax on restructuring expenses)
Underlying net profit after tax
Non-recurring income/(expenses) after tax*:
Acquisition related expenses
Restructuring expenses
Net profit after tax
FY21
$m
% of sales
FY20
$m
% of sales
95.5
326.5
15.0
437.0
158.8
139.8
(1.1)
138.7
(41.4)
97.3
(5.2)
(1.9)
90.2
22%
75%
3%
100%
36%
32%
32%
22%
104.0
236.4
7.6
348.0
117.8
89.6
(0.6)
89.0
(25.0)
64.0
‑
‑
64.0
30%
68%
2%
100%
34%
26%
26%
18%
Underlying earnings per share, basic
Statutory earnings per share, basic
Ordinary dividend per share
54.0 cents
50.1 cents
27.0 cents
35.5 cents
35.5 cents
18.5 cents
* Non‑recurring income/(expenses) are considered to be outside of normal business
activities of the group and for comparability reasons have been separately identified.
Underlying profit is a non‑IFRS measure used by management of the company to assess
the operating performance of the business. The non‑IFRS measures have not been
subject to audit.
During FY21, the group incurred $7.1 million after tax in one‑
off expenses relating to costs associated with making two
acquisitions and the related restructuring. The Board is pleased
with the initial integration of both acquisitions and we expect to
achieve the FY22 EBITDA contributions of $14 million and $8
million for DTC and Zetron respectively, as previously announced.
Cash generation was excellent with close to zero net debt at year
end after funding circa $174 million for acquisitions (excluding the
costs incurred to execute these acquisitions).
We deliberately increased inventory holdings during the year to
minimise the risk to supply and to reduce freight costs. Due to
strong demand and some manufacturing constraints, we have not
been able to reach our targeted inventory levels to date; however,
we have maintained continuous supply throughout FY21, often
under very challenging conditions. During FY22, it is expected
that inventory across all key product lines will reach targeted levels.
In FY21, we invested in excess of $30 million in engineering in
order to further diversify our revenues through new product
introductions. This will ensure that our products remain leading‑
edge, continue to drive future growth and position us to take
further market share from competitors.
54
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS' REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Financial performance and other matters (continued)
Performance by business unit:
Communications – Tactical, DTC, Zetron and LMR
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 another record performance during the last
12 months, with sales increasing 38% to $327 million. The
business achieved significant growth across all market segments
with recreational and gold mining having record sales years and
Countermine sales increasing 34% on FY20.
In recreation, our strategy to develop lower priced detectors,
using our Multi‑IQ® technology has allowed Minelab to grow its
market share and successfully penetrate a number of big box
retailers. The VANQUISH® product, now in its second year, has
exceeded all expectations. Previously, Minelab had focused
almost exclusively on high end detectors and now by extending
our product portfolio to include entry level and mid‑market
segments, we have been able to gain market share, as well as grow
the total size of the market. Minelab’s presence in big box retail
stores across North America has grown, providing significant
brand awareness and accessibility to our products.
In artisanal gold mining, Minelab continued to grow across its
entire product range, with our detectors achieving market
leadership across all price points. The Gold Monster®, which
was designed to withstand the harsh African environment, has
become the machine‑of‑choice at the entry level and we continue
to see customers upgrade to the top‑of‑line GPZ 7000®.
Minelab released the GPX®6000 in the second half of FY21, which
includes our latest Geo Sense‑PI® (Pulse Induction) technology.
Geo Sense‑PI® technology responds to ground signals with
great clarity and precision, accurately isolating and reporting
gold signals in the most difficult environments – even those once
considered undetectable. Since the product launch, feedback
from the market has been very positive and with production
now reaching targeted levels, GPX 6000® is expected to make a
significant contribution to Minelab’s sales in FY22.
During FY21, Minelab launched the MF5®, a Countermine
detector based on our Multi‑IQ® technology, which is also
incorporated into our successful MDS10 dual sensor detector.
Minelab now offers the latest metal detection technology across
both single and dual sensor requirements.
As the market leader in metal detectors, our investment in product
development remains a priority, so that we can continue to widen
the technology gap between Minelab and our competitors.
The unique and distinctive technology embedded within our
metal detectors underpins the success of this business.
In FY22, Minelab will benefit from a full year of GPX 6000® sales,
increased geographical expansion and the on‑going release of
new products. Despite ongoing supply challenges, we remain
confident of continued success in FY22.
Codan Communications designs and manufactures mission‑
critical communications solutions for global military, public safety
and commercial applications. Its solutions allow customers to
save lives, enhance security and support peacekeeping activities
worldwide.
As expected, Codan Communications sales reduced by $8.5
million compared to FY20. Whilst the LMR business achieved
another record performance, the Tactical Communications
business continued to be impacted by COVID‑19. Deferred
government programs due to health spending priorities and the
inability to travel freely, restricted our efforts to develop and close
new business.
One of the great strengths of the Tactical Communications
business has been our ability to deliver communications solutions
to customers in difficult and diverse environments, one of these
markets in recent years has been Afghanistan. During FY21, sales
into Afghanistan made up 9% of our Communications business.
Given the developments in Afghanistan our sales team will
continue to focus on the other markets in the Central Asia region.
The recent acquisition of DTC for a consideration of $114 million
is an important acquisition that adds leading edge technology to
our communications solutions. Our strategy is to provide a total
solution by transitioning from a traditional voice platform to one
including data and video. This acquisition will supplement our
traditional HF business and provide another significant revenue
stream, particularly in the large North American market.
DTC’s MIMO Mesh products provide wireless transmission of
video and other data applications, which are complementary
capabilities to our existing Tactical Communications solutions.
We have realised immediate synergies by integrating the sales
and marketing teams for both DTC and Codan. This will allow us to
access new geographic routes to markets by leveraging Codan’s
existing global distribution channels into the developing world.
Over the long term, our combined engineering capabilities will
allow us to bring unique value to a diverse global customer base
from military to security to broadcasting.
By continuing to transition into larger systems projects,
we achieved another record sales year for our LMR products.
Our LMR customers predominantly reside in North America and as
such, travel and the ability to close sales have been less affected by
COVID‑19.
The strategy for LMR has been to expand into adjacent
technology solutions and in April 2021, we completed the Zetron
acquisition for a consideration of $60 million. Zetron’s technology
solutions provide the software that is used in control centres to
receive and triage incoming calls and then communicate with
public safety first‑responders. Our merged LMR and Zetron
businesses will operate under the Zetron brand in the future.
The integration of the two operations has commenced and is
progressing as planned.
In FY22, the focus will be on integrating the new businesses and
realising the planned sales and cost synergies.
Tracking Solutions – Minetec
DIVIDENDS
In June 2021, Codan entered into an agreement to sell 100% of
the shares in Minetec to Caterpillar Holdings Australia.
Under Codan’s ownership, the Minetec business had not scaled
to a level that supported the ongoing investment required for a
technology‑based business. As a result, the Board undertook a
strategic review of the business. While the technology developed
by Minetec is world class, the Board concluded that Codan was
not the best owner and therefore the decision was made to sell the
business.
This transaction was settled on 1 July 2021 for a consideration of
$18 million with an earn out in place for the next five years.
Outlook
As a result of the strategic initiatives discussed above, Codan
remains well positioned for another successful year in FY22. Whilst
it is too early for the Board to give profit guidance for Codan, there
are a number of factors that are relevant when considering the
outlook for FY22:
• strong start to the year and in line with the FY21 run rate;
• demand for our metal detection products remains strong;
• Minelab will benefit from a full year of GPX 6000® sales;
• Communications segment to include a full year of the newly
acquired DTC and Zetron businesses. FY22 will be a year of
integration for these two new businesses; and
Dividends paid or declared by the company to members since the
end of the previous financial year were:
Cents
per
share
Total
amount
$000
Franked
Date of
payment
Declared and
paid during
the year ended
30 June 2021:
FY20 final
11.0
19,856
FY21 interim
10.5
18,953
100% 11 September
2020
11 March
2021
100%
Declared after
the end of
the year:
FY21 final
16.5
29,783
100% 10 September
2021
All dividends paid or declared by the company since the end of the
previous financial year were fully franked.
• uncertainty around Tactical Communications and supply
EVENTS SUBSEQUENT TO REPORTING DATE
chain due to COVID‑19 still exists.
The Board will provide a further business update at the Annual
General Meeting in October, which will be held virtually.
Managing Director
Donald McGurk has advised the Board today that it is his intention
to retire from his role as Managing Director of Codan sometime
within the next 9‑12 months. Donald will remain as Managing
Director until such time as a successor is appointed to ensure a
smooth transition.
Sustainability reporting
The Board engaged a consulting firm to assist with the
identification of the environmental, social and governance
matters most relevant for Codan and to then assess how to
address those risks and report against them. While these risks
may not have a material financial impact on Codan in the short
term the Board is conscious of ensuring that Codan appropriately
addresses the environmental, social and governance risks that are
relevant for the organisation. The Board is pleased that the FY21
annual report includes Codan’s second environmental, social and
governance report which has been prepared under the banner of a
Sustainability Report.
Except for the sale of Minetec which settled on 1 July 2021 and
has been mentioned elsewhere in this financial report and the
declaration of the FY21 final dividend detailed in note 7, there has
not arisen in the interval between the end of the financial year and
the date of this report any item, transaction or event of a material
and unusual nature likely, in the opinion of the directors of the
company, to affect significantly the operations of the group, the
results of those operations, or the state of affairs of the group, in
future financial years.
LIKELY DEVELOPMENTS
The group will continue with its strategy of continuing to invest in
new product development and to seek opportunities to further
strengthen profitability by expanding into related businesses
offering complementary products and technologies.
Further information about likely developments in the operations
of the group and the expected results of those operations
in future financial years has not been included in this report
because disclosure of the information would be likely to result in
unreasonable prejudice to the group.
56
57
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
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:
Refer page 19 for a copy of the auditor’s independence
declaration as required under Section 307C of the Corporations
Act 2001.
Details of the amounts paid or payable to the auditor of the
company, KPMG, and its related practices for audit and non‑audit
services provided during the year are as follows:
LEAD AUDITOR’S
INDEPENDENCE DECLARATION
under Section 307c of the Corporations Act 2001
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
600,948
57,708
38,829
12,500
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.
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.
STATUTORY AUDIT
Audit and review of financial reports
SERVICES OTHER THAN
STATUTORY AUDIT
Taxation advice and
compliance services
Royalty agreement
assurance services
Consolidated
2021
$
2020
$
218,644
218,644
231,259
231,259
22,997
49,383
–
10,945
22,997
60,328
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 18th day of August 2021.
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 2021 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
18 August 2021
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
58
59
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2021
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
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE
TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY:
Basic earnings per share
Diluted earnings per share
Consolidated
2021
Note
$000
2020
$000
2
6
5
6
9
8
8
437,049
(193,911)
243,138
49
(23,151)
(53,463)
(26,234)
(1,612)
(7,913)
130,814
(40,617)
90,197
348,017
(151,481)
196,536
359
(21,925)
(51,054)
(25,920)
(1,457)
(7,518)
89,021
(25,058)
63,963
90,351
(154)
90,197
63,795
168
63,963
50.1 cents
49.8 cents
35.5 cents
35.3 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 65 to 100.
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
Note
23
23
2021
$000
90,197
(1,441)
433
(1,008)
4,097
2020
$000
63,963
713
(214)
499
(2,160)
Other comprehensive income/(loss) for the period, net of income tax
3,089
(1,661)
Total comprehensive income for the period
93,286
62,302
Attributable to:
Equity holders of the company
Non‑controlling interests
93,440
(154)
93,286
62,134
168
62,302
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 65 to 100.
60
61
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED BALANCE SHEET
for the year ended 30 June 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2021
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
Liabilities held for sale
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Lease liabilities
Loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
Total equity attributable to the equity holders of the company
Non‑controlling interests
Consolidated
2021
$000
2020
$000
Note
10
13
14
9
16
15
17
34
18
19
20
34
9
16
21
34
11
9
21
22
23
22,362
34,959
66,433
122
17,762
15,273
156,911
17,763
26,989
74,569
227,327
346,648
503,559
106,515
6,950
14,785
1,043
13,214
142,507
25,170
24,000
7,018
1,254
57,442
199,949
303,610
45,842
70,471
187,297
303,610
303,724
(114)
303,610
92,830
24,752
32,606
343
–
6,969
157,500
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
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 65 to 100.
2021
Balance as at 1 July 2020
Profit for the period
Performance rights expensed
Change in fair value of cash flow hedges
Exchange differences on translation of
foreign operations
Foreign
currency
translation
reserve
$000
4,552
–
–
–
Share
capital
$000
44,746
–
–
–
Consolidated
Equity
based
payment
reserve
$000
2,802
–
1,537
–
Hedging
reserve
$000
353
–
–
(1,008)
Profit
reserve
Retained
earnings*
Total
$000
$000
$000
58,981 135,909 247,343
90,197
90,197
1,537
–
(1,008)
–
–
–
–
–
4,097
–
–
–
–
4,097
44,746
8,649
(655)
4,339
58,981 226,106 342,166
Transactions with owners of the company
Dividends recognised during the period
Issue of shares from performance rights
Employee share plan, net of issue costs
Balance at 30 June 2021
–
843
253
1,096
45,842
–
–
–
–
8,649
–
–
–
–
(655)
–
(843)
–
(843)
3,496
– (38,809)
–
–
–
–
– (38,809)
(38,809)
–
253
(38,556)
58,981 187,297 303,610
*The amounts in retained earnings includes the portion for non–controlling interests with an opening retained earnings as at 1 July 2020 of $0.040 million, FY21 loss after tax of
$0.154 million which results in a closing balance of $0.114 million retained loss as at 30 June 2021.
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
Consolidated
Foreign
currency
translation
reserve
Equity
based
payment
reserve
Hedging
reserve
$000
6,712
–
–
–
–
(2,160)
$000
(146)
–
–
–
499
–
$000
2,105
–
–
1,682
–
–
Share
capital
$000
43,761
–
–
–
–
–
Profit
reserve
Retained
earnings
$000
58,981
–
–
–
–
–
$000
99,801
(857)
63,963
–
–
–
Total
$000
211,214
(857)
63,963
1,682
499
(2,160)
43,761
4,552
353
3,787
58,981
162,907
274,341
Transactions with owners of the company
Dividends recognised during the period
Issue of shares from performance rights
Balance at 30 June 2020
–
985
985
44,746
–
–
–
4,552
–
–
–
353
–
(985)
(985)
2,802
–
–
–
58,981
(26,998)
–
(26,998)
135,909
(26,998)
–
(26,998)
247,343
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 65 to 100.
62
63
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2021
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Finance charge on lease liabilities
Income taxes paid (net)
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries (net of cash acquired)
Proceeds from disposal of property, plant and equipment
Payments for capitalised product development
Payments for intellectual property
Acquisition of property, plant and equipment
Acquisition of intangibles (computer software and licences)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdowns/(repayments) of borrowings
Payment of lease liabilities (principle)
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 reclassified to asset held for sale
Cash and cash equivalents at the end of the financial year
Consolidated
2021
$000
2020
$000
Note
450,231
(281,501)
385
(741)
(718)
(36,356)
131,300
(159,774)
2
(18,566)
–
(4,139)
(244)
(182,721)
350,298
(227,888)
378
(271)
(703)
(17,830)
103,984
–
3,981
(18,769)
(24)
(3,759)
(442)
(19,013)
24,000
(4,195)
(38,809)
–
(2,983)
(26,998)
(19,004)
(29,981)
(70,425)
92,830
351
(394)
22,362
54,990
37,521
319
–
92,830
34
12
3, 4
11
34
7
16
10
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 65 to 100.
1. SIGNIFICANT ACCOUNTING POLICIES
Codan Limited (the "company") is a company domiciled in Australia
and is a for‑profit entity. The consolidated financial report of the
company as at and for the year ended 30 June 2021 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 18 August 2021.
(a) Statement of compliance
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:
• impairment assessments of non‑current assets, including
product development and goodwill (refer note 19).
• measurement of inventory net realisable value (refer note 1 (l))
• measurement of expected credit loss allowance for trade
receivables (refer note 29(a))
Changes in accounting policies
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 2020.
(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.
Transaction costs that the group incurs in connection with a
business combination, such as mergers and acquisitions advisory
fees, legal fees, due diligence fees, and other professional and
consulting fees, are expensed as incurred.
(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.
64
65
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign exchange gains and losses arising from a monetary item
receivable or payable to a foreign operation, the settlement of
which is neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and on consolidation they are recognised in other comprehensive
income, and are presented within equity in the foreign currency
translation reserve.
Foreign currency differences arising on the retranslation of a
financial liability designated as a hedge of a net investment in a
foreign operation are recognised directly in other comprehensive
income to the extent that the hedge is effective, and are presented
within equity in the hedging reserve. To the extent that the hedge
is ineffective, such differences are recognised in the income
statement. When the hedged part of a net investment is disposed
of, the associated cumulative amount in equity is transferred to
the income statement as an adjustment to the income statement
on disposal.
(g) Derivative financial instruments
The group has used derivative financial instruments to hedge its
exposure to foreign exchange and interest rate movements. In
accordance with its policy, the group does not hold derivative
financial instruments for trading purposes. However, derivatives
that do not qualify for hedge accounting are accounted for
as trading instruments. Derivative financial instruments are
recognised initially at fair value. Attributable transaction costs are
recognised in the income statement when incurred. Subsequent
to initial recognition, derivative financial instruments are stated
at fair value. The gain or loss on re‑measurement to fair value
is recognised immediately in the income 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.
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. 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 costs incurred
comparing with total estimated costs. 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. Revenue is determined based on
hours incurred.
(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.
(f) Foreign currency
Foreign currency transactions are translated to Australian dollars
at the rates of exchange ruling at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated to Australian dollars at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income
statement, except for differences arising on the retranslation of
a financial liability designated as a hedge of a net investment in
a foreign operation, or qualifying cash flow hedges, which are
recognised in other comprehensive income and presented within
equity, to the extent that the hedge is effective.
Foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair‑value adjustments arising on acquisition, are translated
to Australian dollars at the foreign exchange rates ruling at the
reporting date. Equity items are translated at historical rates.
The income and expenses of foreign operations are translated
to Australian dollars at the foreign exchange rates ruling at
the dates of the transactions. Foreign exchange differences
arising on translation are taken directly to the foreign currency
translation reserve until the disposal, or partial disposal, of the
foreign operations.
66
(g) Derivative financial instruments
Tax consolidation
(continued)
Hedging (continued)
If the hedge no longer meets the criteria for hedge accounting
or the hedging instrument is sold, expires, is terminated or is
exercised, then hedge accounting is discontinued prospectively.
When hedge accounting for cash flow hedges is discontinued,
the amount that has been accumulated in the hedging reserve
remains in equity until, for a hedge of a transaction resulting in the
recognition of a non‑financial item, it is included in the non‑financial
item’s cost on its initial recognition or, for other cash flow hedges,
it is reclassified to profit or loss in the same period or periods as
the hedged expected future cash flows affect profit or loss. If the
hedged future cash flows are no longer expected to occur, then
the amounts that have been accumulated in the hedging reserve
and the cost of hedging reserve are immediately reclassified to
profit or loss.
(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.
The company is the head entity in the tax‑consolidated group
comprising all the Australian wholly owned subsidiaries.
The company recognises the current tax liability of the tax‑
consolidated group. The tax‑consolidated group has determined
that subsidiaries will account for deferred tax balances and will
make contributions to the head entity for the current tax liabilities
as if the subsidiary prepared its tax calculation on a stand‑
alone basis.
The company recognises deferred tax assets arising from unused
tax losses of the tax consolidated group to the extent that it is
probable that future taxable profits of the tax consolidated group
will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets
arising from unused tax losses, as a result of revised assessments
of the probability of recoverability, are recognised by the head
entity only.
(i) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred is
not recoverable from the Australian Taxation Office (ATO). In
these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or is expensed.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability in the
balance sheet.
Cash flows are included in the 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.
(j) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with an original maturity of three months or less. Bank
overdrafts form an integral part of the group's cash management
and are included as a component of cash and cash equivalents for
the purpose of the Consolidated Statement of Cash Flows.
(k) Trade and other receivables
Trade debtors are to be settled within agreed trading terms,
typically less than 60 days, and are initially recognised at fair value
and then subsequently at amortised cost, less any expected
credit loss allowances. Under the “lifetime 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.
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(l)
Inventories
Measuring goodwill
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 represents
the selling price that could be achieved in the ordinary course of
business, and is calculated having regard to the quantity of stock
on hand in comparison to past usage. 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.
The group measures goodwill as the fair value of the consideration
transferred including the recognised amount of any non‑
controlling interest in the acquiree, as well as the fair value of any
pre‑existing non‑controlling interest, less the net recognised
amount (generally fair value) of the identifiable assets acquired
(including intangible assets) and liabilities assumed, all measured
as of the acquisition date.
Consideration transferred includes the fair values of the assets
transferred, liabilities incurred by the group to the previous
owners of the acquiree, and equity interests issued by the group.
Consideration transferred also includes the fair value of any
contingent consideration and share‑based payment awards of
the company.
Contingent liabilities
A contingent liability of the acquiree is recognised as an assumed
liability 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.
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.
The estimated useful lives in the current and comparative periods
are as follows:
Product development, licences
and intellectual property
Straight-line
Units
of production
2 ‑ 15 years
5 ‑ 10 years
Computer software
3 ‑ 7 years Not Applicable
Brand names
Customer relationships
20 years Not Applicable
5 years Not Applicable
Amortisation methods, useful lives and residual values are
reviewed at each reporting date.
(o) Assets held for sale
(q)
Impairment
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.
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.
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.
(p) Property, plant and equipment
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. 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.
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 non‑financial 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.
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 non‑financial 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.
(r) Payables
Liabilities are recognised for amounts to be paid in the future for
goods or services received. Trade accounts payable are normally
settled within 60 days.
68
69
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES (w) Share capital - ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects.
(x) Share-based payment transactions
Share‑based payments in which the group receives goods
or services as consideration for its own equity instruments
are accounted for as equity‑settled share‑based payment
transactions, regardless of how the equity instruments are
obtained from the group.
The grant‑date fair value of share‑based payment awards
granted to employees is recognised as an employee expense,
with a corresponding increase in equity, over the period that
the employees unconditionally become entitled to the awards.
The amount recognised as an expense is adjusted to reflect the
number of awards which vest.
(y) Future Australian Accounting
Standards requirements
A number of new standards are effective after 2021 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.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(s)
Interest bearing borrowings
Warranty
Interest bearing borrowings are recognised initially at their fair
value, less attributable transaction costs. Subsequent to initial
recognition, interest‑bearing borrowings are stated at amortised
cost, with any difference between cost and redemption value
being recognised in the income statement over the period of the
borrowings on an effective‑interest basis.
(t) Employee benefits
Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries, incentives
and annual leave represent current 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.
(u) Provisions
A provision is recognised when there is a present legal or
constructive obligation as a result of a past event, it can be
estimated reliably and it is probable that a future sacrifice of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows required to settle the obligation at a pre‑tax rate that
reflects the current market assessments of the time value of
money and the risks specific to the liability. The unwinding of the
discount is recognised as a finance cost.
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.
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.
(v) Leases
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. The main type of leases of the group are leases for
offices, warehouses and manufacturing facilities.
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.
Lease liabilities
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.
70
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
GROUP PERFORMANCE
2. SEGMENT ACTIVITIES
The group determines and presents operating segments based
on the information that is internally provided to the CEO, who is the
group's chief operating decision‑maker.
An operating segment is a component of the group that engages
in business activities from which it may earn revenues and incur
expenses. All operating segments' results are regularly reviewed
by the group's CEO, to make decisions about resources to be
allocated to the segments and assess their performance.
Segment results relate to the underlying operations of a segment
and are as reported to the CEO, and include the expense from
functions that are directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated
items comprise mainly corporate assets (primarily the company's
headquarters and cash balances), corporate expenses, non‑
underlying other income and expense, and income tax assets
and liabilities.
Segment capital expenditure is the total cost incurred during the
period to acquire property, plant and equipment, and intangible
assets other than goodwill.
The group's primary format for segment reporting is based on
business segments.
Business segments
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. The Tracking Solutions
segment was sold on 1 July 2021 and therefore will not be
reported in future financial statements.
Two or more operating segments may be aggregated into
a single operating segment if they are similar in nature. The
Communications segment comprises of the following operating
segments: Tactical, DTC, Zetron and LMR, which are aggregated
because they have similar characteristics such as long‑term
average gross margins, nature of products, production process
and regulatory environment, type of customers and distribution
methods.
Geographical areas
In presenting information on the basis of geographical areas,
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, Canada, Denmark, United
Kingdom and United States, with overseas representative offices
in Brazil, Ireland, Mexico, Singapore and the United Arab Emirates.
Information about reportable
segments
Communications Metal detection Tracking solutions
Consolidated
Revenue
External segment revenue
Result
Segment result
Impairment
Unallocated net financing costs
Unallocated income and expenses
Underlying Profit from operating
activities
Income tax expense (excluding tax on
restructuring expenses)
Underlying net profit
Acquisition related expenses
Restructuring expenses
Statutory 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
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
95,490 103,987 326,564 236,388
14,995
7,642 437,049
348,017
16,206
23,849 142,384
97,384
3,111
(3,567)
161,701
–
(895)
(22,079)
117,666
(7,518)
(754)
(20,373)
138,727
89,021
(41,438)
(25,058)
97,289
(5,177)
(1,915)
90,197
63,963
–
–
63,963
7,743
8,988
9,461
8,451
1,071
2,347
18,275
19,786
335
919
2,226
2,350
16
294,043
96,252 130,879 114,290
17,762
754
865
–
19,029
7,518
28,169
104
2,577
1,541
4,118
19,113 442,684
60,875
503,559
3,373
386
3,759
229,655
121,911
351,566
The group derived its revenues from a number of countries. The three significant countries where revenue was 10% or more of total
revenue were United Arab Emirates totalling $133.487 million (2020: $127.019 million), the United States of America totalling
$102.134 million (2020: $79.620 million) and Australia totalling $52.761 million (2020: 32.781 million). The two significant customers
where revenue was 10% or more of total revenue totalled $50.051 million (2020: $22.677 million) and $44.387 million (2020:
$38.065 million) respectively.
The group’s non‑current assets, excluding financial instruments and deferred tax assets, were located as follows: the United States of
America $156.025 million (2020: $0.588 million), Australia $137.902 million (2020: $147.702 million), Canada $47.694 million (2020:
$45.023 million), United Kingdom $2.948 million (2020: Nil), Denmark $1.463 million (2020: Nil), United Arab Emirates $0.268 million
(2020: $0.622 million), Brazil $0.114 million (2020: $0.108), Mexico $0.035 million (2020: nil) and Ireland $0.019 million (2020:
$0.023 million).
72
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
The goodwill is mainly attributable to the synergies that will be
realised by incorporating Zetron into Codan’s Communications
business, Zetron’s extensive distribution network and customer
loyalty.
The goodwill is not expected to be deductible for tax purposes.
Acquisition-related costs
During the year the group incurred acquisition‑related costs of
$1.343 million relating to external legal fees, consulting and due
diligence costs. The due diligence costs have been included as
other expenses within the consolidated income statement. No
other acquisition‑related costs were incurred.
Contribution to year-end results
The acquired business contributed revenues of $9.263 million
and a breakeven EBITDA to the Group for the period from 30 April
2021 to 30 June 2021. If the acquisition had occurred on 1 July
2020, the acquired business’ contribution to the consolidated
pro‑forma revenue and EBITDA for the year ended 30 June 2021
would have been $59.737 million and $3.881 million respectively.
It is impractical to estimate the impact the acquisition would
have had if applied from 1 July 2020, at a net profit after tax
level, due to the impact of taxation and amortisation. Zetron
was not controlled by Codan for the most part of FY21 and there
are synergies to be realised by bringing Zetron into Codan’s
Communications business and as a result, past performance is
not expected to be representative of future results under Codan’s
ownership.
GROUP PERFORMANCE (continued)
3. ACQUISITION OF ZETRON
On 30 April 2021, the company acquired all the shares in US‑
based company, Zetron, Inc. (Zetron), for an upfront cost of
$60.216 million inclusive of $9.780 million in cash that was held by
the business. The acquisition of Zetron is in line with Codan’s well
publicised strategy to transform our Communications businesses
from products to solutions.
From the acquisition date, Zetron has been consolidated within
the group’s results and has been reported in the Communications
segment in Note 2. The following summary provides current
estimates of the major classes of consideration transferred, the
expected recognised amounts of assets acquired and liabilities
assumed and the estimated goodwill at the acquisition date.
Estimated fair value of
consideration transferred
Cash paid on completion
Acquiree's cash balance at acquisition date
Estimated fair value of identifiable assets
acquired and liabilities assumed, on a
provisional basis
Trade and other receivables
Inventories
Other assets
Property, plant and equipment
Right–of–use assets
Intangible assets
Trade and other payables
Lease Liabilities
Provisions
Taxes
Estimated goodwill as a result of
the acquisition
Estimated fair value of consideration transferred
Estimated fair value of identifiable assets acquired and
liabilities assumed, on a provisional basis
$000
60,216
(9,780)
50,436
19,151
8,574
4,415
1,314
2,961
2,505
(20,005)
(3,382)
(2,946)
(865)
11,722
50,436
(11,722)
38,714
The goodwill is mainly attributable to the synergies that will be
realised by incorporating DTC into Codan’s Communications
business, access to significant potential wins from DTC’s pipeline
of projects, the knowledge of the engineering team, customer
loyalty and Codan’s opportunity to grow the DTC business using
Codan’s existing routes to market.
The goodwill is not expected to be deductible for tax purposes.
Acquisition-related costs
During the year the group incurred acquisition‑related costs of
$3.834 million relating to mergers and acquisitions advisory fees,
external legal fees, consulting and due diligence costs. The due
diligence costs have been included as other expenses within the
consolidated income statement. No other acquisition‑related
costs were incurred.
Contribution to year-end results
The acquired business contributed revenues of $7.684 million
and EBITDA of $0.453 million to the Group for the period from 12
May 2021 to 30 June 2021. If the acquisition had occurred on 1
July 2020, the acquired business’ contribution to the consolidated
pro‑forma revenue and EBITDA for the year ended 30 June 2021
would have been $59.684 million and $4.667 million respectively.
It is impractical to estimate the impact the acquisition would have
had if applied from 1 July 2020, at a net profit after tax level, due
to the impact of taxation and amortisation. DTC was not controlled
by Codan for the most part of FY21 and there are synergies
to be realised by bringing DTC into Codan’s Communications
business and as a result, past performance is not expected to be
representative of future results under Codan’s ownership.
4.
ACQUISITION OF DOMO
TACTICAL COMMUNICATIONS
On 12 May 2021, the company acquired all of the shares in US‑
based company, Domo Tactical Communications (DTC), for an
upfront cost of $113.950 million inclusive of $4.612 million in cash
that was held by the business, with the possibility of an earn‑out of
up to USD 16 million if certain gross margin targets are achieved in
calendar year 2021. The company has attributed no value to this
earn‑out as the gross margin targets are unlikely to be achieved.
The acquisition of DTC is consistent with Codan’s strategic growth
plan for our Tactical Communications business. This is focused on
providing total communications solutions by transitioning from a
traditional voice only platform via the addition of data and video
communication capabilities. This acquisition fills a technology gap
and will be able to leverage Codan’s global distribution channels
into the developing world.
From the acquisition date, DTC has been consolidated within the
group’s results and has been reported in the Communications
segment in Note 2. The following summary provides current
estimates of the major classes of consideration transferred, the
expected recognised amounts of assets acquired and liabilities
assumed and the estimated goodwill at the acquisition date.
Estimated fair value of
consideration transferred
Cash paid on completion
Acquiree's cash balance at acquisition date
Estimated fair value of identifiable assets
acquired and liabilities assumed, on a
provisional basis
Trade and other receivables
Inventories
Other assets
Property, plant and equipment
Right‑of‑use assets
Product development
Intangible assets
Trade and other payables
Lease Liabilities
Provisions
Taxes
Estimated goodwill as a result of
the acquisition
Estimated fair value of consideration transferred
Estimated fair value of identifiable assets acquired and
liabilities assumed, on a provisional basis
$000
113,950
(4,612)
109,338
5,031
8,813
5,042
1,551
2,222
1,455
5,716
(14,373)
(2,489)
(2,208)
(755)
10,005
109,338
(10,005)
99,333
74
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
GROUP PERFORMANCE (continued)
5. EXPENSES
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
Brand names
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
6. OTHER EXPENSES / (INCOME)
Acquisition related expenses
Restructuring expenses
Impairment of Minetec product development
(Gain)/loss on sale of property, plant and equipment
Other expenses/(income)
3,554
119
3,023
6,696
7,746
3,678
409
306
168
26
3,179
98
3,629
6,906
9,154
3,594
409
291
297
–
12,333
13,745
55,766
48,311
4,425
4,943
856
3,198
1,537
253
3,499
4,572
771
2,521
1,682
250
70,978
61,606
5,177
2,736
–
(2)
(47)
7,864
–
–
7,518
(206)
(153)
7,159
Consolidated
2021
$000
2020
$000
Note
(385)
538
741
718
(378)
861
271
703
7. DIVIDENDS
Codan Limited has provided or paid for dividends as follows:
– ordinary final fully–franked dividend of 11.0 cents per ordinary share paid on 11 September 2020
– ordinary interim fully–franked dividend of 10.5 cents per ordinary share paid on 11 March 2021
– ordinary final fully–franked dividend of 5.0 cents per ordinary share paid on 13 September 2019
1,612
1,457
– special final fully–franked dividend of 2.5 cents per ordinary share paid on 13 September 2019
– ordinary interim fully–franked dividend of 7.5 cents per ordinary share paid on 12 March 2020
Consolidated
2021
$000
2020
$000
19,856
18,953
–
–
–
38,809
–
–
8,999
4,500
13,499
26,998
Subsequent events
Since the end of the financial year, the directors declared a final ordinary fully franked dividend of 16.5
cents per share, payable on 10 September 2021. The financial impact of this final dividend of $29.783
million has not been brought to account in the group financial statements for the year ended 30 June
2021 and will be recognised in subsequent financial reports.
The sale of Minetec settled on 1 July 2021; refer to note 16 for more information.
Dividend franking account
Franking credits available to shareholders for subsequent financial years (30%)
64,894
42,604
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 $12.764 million (2020:
$8.485 million).
8. EARNINGS PER SHARE
The group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the
period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise performance rights granted to
employees.
Net profit used for the purpose of calculating basic and diluted earnings per share
90,351
63,795
The weighted average number of shares used as the denominator number for basic earnings per share was 180,424,509 (2020:
179,867,477). The movement in the year is as a consequence of the shares issued under the performance rights plan and employee
shares plan.
The calculation of diluted earnings per share at 30 June 2021 was based on a weighted average number of ordinary shares outstanding,
after adjustment for the effects of all dilutive potential ordinary shares of 181,255,390 (2020: 180,961,854). The movement in the
year relates to the shares issued under the performance rights granted and employee share plan.
76
77
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
TAXATION
INCOME TAX
9.
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:
Capital expenses relating to acquisitions and disposals
Non–deductible expenses
Non–assessable amounts
Effect of tax rates in foreign jurisdictions
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
2021
$000
2020
$000
39,675
(70)
39,605
1,012
40,617
27,909
(204)
27,705
(2,647)
25,058
39,244
26,706
(958)
–
(70)
(47)
38,169
1,633
556
121
138
40,617
(11,615)
(124)
36,356
395
(39,675)
(14,663)
122
(14,785)
(14,663)
(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)
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 (intangible assets)
Liabilities recognised from the identifiable intangible assets acquired from business combination
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
2021
$000
2020
$000
21,277
2,351
(658)
(1,183)
(2,552)
(6,387)
(634)
(474)
(4,722)
7,018
19,841
–
(1,640)
(1,671)
(2,250)
(4,467)
(249)
–
(4,837)
4,727
31%
31%
28%
29%
78
79
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
CASH MANAGEMENT
10. CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
11. LOANS AND BORROWINGS
Non-Current
Cash advance
The group has access to the following lines of credit:
Total facilities available at balance date:
Multi‑option facility
Commercial credit card
Facilities utilised at balance date:
Multi‑option facility ‑ cash advance
Multi‑option facility ‑ guarantees
Commercial credit card
Facilities not utilised at balance date:
Multi‑option facility
Commercial credit card
Consolidated
2021
$000
2020
$000
179
22,183
22,362
516
92,314
92,830
24,000
24,000
–
–
80,645
1,133
81,778
24,000
1,427
230
25,657
40,000
200
40,200
‑
1,113
16
1,129
55,218
903
56,121
38,887
184
39,071
In addition to these facilities, the group has cash at bank and short‑term deposits of $22.362 million as set out in note 10.
Bank Facilities
The cash advance facility is supported by interlocking guarantees between Codan Limited and its subsidiaries. The multi–option facility
of $80 million has a term of three years expiring in April 2024 and is subject to compliance with certain financial covenants over that term
Weighted average interest rates:
Cash at bank
Cash advance
Consolidated
2021
%
0.42
1.35
2020
%
0.66
N/A
12. 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
2021
$000
2020
$000
90,197
63,963
(2)
(206)
6,696
–
12,333
1,790
4,261
(747)
114,528
9,239
(16,441)
(418)
24,205
–
187
131,300
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
80
81
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OPERATING ASSETS AND LIABILITIES
13. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Less: expected credit loss provision
Other debtors
14. INVENTORY
Raw materials
Work in progress
Finished goods
Consolidated
2021
$000
2020
$000
37,652
(2,716)
23
34,959
29,325
16,146
20,962
66,433
26,929
(2,234)
57
24,752
11,666
14,622
6,318
32,606
In FY21, inventories of $169.540 million (2020: $134.760 million) were recognised as an expense and included in cost of sales. As at 30
June 2021, $19.789 million of inventory has been written down to net realisable value less cost to sell.
15. OTHER ASSETS
Prepayments
Net foreign currency hedge receivable
Project work in progress
Other
7,334
–
4,392
3,547
15,273
3,326
505
2,063
1,075
6,969
16. DISPOSAL GROUP HELD FOR SALE
Codan has entered into an agreement on 2 June 2021 to sell 100% of the shares in its wholly–owned subsidiary Minetec Pty Ltd to
Caterpillar Holdings Australia Pty. Ltd. The sale was successfully settled on 1 July 2021 for $18.056 million. Following completion,
Codan will provide manufacturing services to Caterpillar for up to five years, to ensure a successful transition and continuous supply to
Caterpillar customers.
Assets and liabilities of disposal group held for sale at 30 June 2021, the disposal group was stated at carrying amount and comprised
the following assets and liabilities.
Assets held for sale
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Right of use assets
Product development
Intangible assets
Liabilities held for sale
Trade and other payables
Provisions
Lease liabilities
82
394
4,736
1,573
315
103
2,094
8,547
17,762
(121)
(812)
(110)
(1,043)
–
–
–
–
–
–
–
–
–
–
–
–
17. PROPERTY, PLANT AND EQUIPMENT
Leasehold property at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Capital work in progress at cost
Total property, plant and equipment
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
Acquisitions through entities acquired (net value)
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
Acquisitions through entities acquired (net value)
Additions
Transfers
Reclassification to asset held for sale
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
Acquisitions through entities acquired (net value)
Additions
Transfers
Carrying amount at end of year
Total carrying amount at end of year
Consolidated
2021
$000
2020
$000
7,149
(6,138)
1,011
58,254
(43,282)
14,972
1,780
17,763
1,190
(668)
522
38,312
(26,616)
11,696
1,958
14,176
522
607
10
5
–
(119)
(14)
1,011
11,696
1,701
3,060
1,799
(315)
–
(3,023)
54
14,972
1,958
557
1,069
(1,804)
1,780
17,763
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
83
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OPERATING ASSETS AND LIABILITIES (continued)
Consolidated
2021
$000
2020
$000
Note
18. PRODUCT DEVELOPMENT
Product development at cost
Accumulated amortisation and impairment losses
Reconciliation
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Capitalised in current period
Reclassification to asset held for sale
Impairment
Amortisation
Net foreign currency differences on translation of foreign entities
19
19. INTANGIBLE ASSETS
Intellectual property at cost
Accumulated amortisation
Computer software at cost
Accumulated amortisation
Licences at cost
Accumulated amortisation
Brand names
Accumulated amortisation
Customer relationships
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
84
171,739
(97,170)
74,569
67,777
1,455
18,566
(2,094)
–
(11,424)
289
74,569
21,986
(20,740)
1,246
15,096
(14,021)
1,075
5,442
(4,826)
616
6,674
(26)
6,648
1,064
–
1,064
216,678
227,327
1,704
–
(409)
(49)
1,246
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
Computer software
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Additions
Transfers from capital work in progress
Amortisation
Net foreign currency differences on translation of foreign entities
Licences
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Additions
Reclassification to asset held for sale
Amortisation
Net foreign currency differences on translation of foreign entities
Brand names
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Amortisation
Net foreign currency differences on translation of foreign entities
Customer Relationships
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Goodwill
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Reclassification to asset held for sale
Net foreign currency differences on translation of foreign entities
The following segments have significant carrying amounts of goodwill:
Communications
Metal Detection
Tracking Solutions
Consolidated
2021
$000
753
403
237
–
(306)
(12)
1,075
473
312
7
(9)
(168)
1
616
–
6,442
(26)
232
6,648
–
1,064
1,064
83,816
138,047
(8,538)
3,353
216,678
162,721
53,957
–
216,678
2020
$000
630
–
343
54
(291)
17
753
746
–
45
–
(297)
(21)
473
–
–
–
–
–
–
–
–
84,280
–
–
(464)
83,816
21,321
53,957
8,538
83,816
85
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
Consolidated
OPERATING ASSETS AND LIABILITIES (continued)
2021
$000
2020
$000
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 10% (FY20: 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.
At 30 June 2021, the Tracking Solutions business is classified as an Asset held for sale, with the estimated sale price to Caterpillar of
$18.056 million, supporting the carrying value. The sale of the Tracking Solutions business was successfully completed on 1 July 2021.
Consolidated
2021
$000
2020
$000
42,423
63,156
936
106,515
21,548
25,496
‑
47,044
9,774
3,440
13,214
1,921
627
2,039
(1,147)
3,440
6,238
1,921
8,159
1,798
‑
1,514
(1,391)
1,921
1,254
1,781
20. TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables and accruals
Net foreign currency hedge payable
21. PROVISIONS
Current
Employee benefits
Warranty repairs
Reconciliation of warranty provision
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Provisions made
Payments made
Non-Current
Employee benefits
86
22. SHARE CAPITAL
Share capital
Opening balance (179,992,883 ordinary shares fully paid)
Issue of share capital through vested performance rights
Issue of share capital through employee share plan
Closing balance (180,506,054 ordinary shares fully paid)
Terms and conditions
Consolidated
2021
$000
2020
$000
44,746
843
253
45,842
43,761
985
‑
44,746
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.
23. RESERVES
Foreign currency translation reserve
Hedging reserve
Equity based payment reserve
Profit reserve
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
8,649
(655)
3,496
58,981
70,471
4,552
353
2,802
58,981
66,688
4,552
4,097
8,649
6,712
(2,160)
4,552
353
(1,008)
(655)
(146)
499
353
2,802
1,537
(843)
3,496
2,105
1,682
(985)
2,802
58,981
58,981
58,981
58,981
87
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
CAPITAL MANAGEMENT (continued)
24. 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.
88
GROUP STRUCTURE
25. 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
Corp Ten International, Inc.
Daniels Electronics Ltd
Domo Tactical Communications (DTC) Limited
Domo Tactical Communications (DTC) PTE limited
DTC Communications, Inc
DTC Group Holdings, LLC
DTC International Holdings Ltd
DTC North America Holdings, LLC
MEP Surveillance Midco, Inc
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)
Minelab de Mexico SA de CV
Minetec Pty Ltd
Minetec RSA (Pty) Ltd
Spectronics A/S
Zetron Air Systems Pty Ltd
Zetron Australasia Pty Ltd
Zetron, Inc. (US)
Zetron Inc. (UK)
Zetron Limited
Country
of incorporation
Class
of share
Interest held
2021
%
2020
%
Australia
Ordinary
Australia
Australia
UAE
Australia
UK
USA
USA
Canada
UK
Singapore
USA
USA
UK
USA
USA
USA
Brazil
Australia
Ireland
UAE
UAE
UAE
Mexico
Australia
South Africa
Denmark
Australia
Australia
USA
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
100
100
100
100
49
100
50
100
100
100
100
–
–
–
–
–
89
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
GROUP STRUCTURE (continued)
26. 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:
Summarised income statement and retained earnings
Revenue
Net finance costs
Other expenses
Profit before tax
Income tax expense
Profit after tax
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
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
Consolidated
2021
$000
2020
$000
308,476
(149)
(197,221)
111,106
(38,634)
72,472
114,585
148,248
257,579
(1,364)
(168,881)
87,334
(28,058)
59,276
82,307
114,585
4,834
20,835
34,527
1,303
61,499
207,088
21,264
13,215
47,537
54,958
344,062
405,561
85,819
43,097
25,785
3,106
157,807
32,976
23,522
12,320
43,868
55,468
168,154
325,961
CURRENT LIABILITIES
Trade and other payables
Current tax payable
Lease Liability
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Lease Liability
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
Consolidated
2021
$000
2020
$000
68,650
14,401
6,950
9,321
99,322
24,000
19,266
4,201
613
48,080
147,402
258,159
45,842
64,069
148,248
258,159
49,506
11,937
3,775
6,494
71,712
–
24,747
3,922
1,535
30,204
101,916
224,045
44,746
64,714
114,585
224,045
27. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2021, the parent company of the group was Codan Limited.
Result of parent entity
Profit after tax for the period
Other comprehensive income/(loss)
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
81,092
(568)
80,524
57,194
2,136
59,330
48,818
370,503
67,452
123,113
45,842
62,397
139,151
247,390
140,836
289,288
51,242
85,403
44,746
62,271
96,868
203,885
As at 30 June 2021, Codan Limited entered into contracts to purchase plant and equipment for $1.857 million (2020: $0.945 million).
90
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OTHER NOTES
28. 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
Consolidated
2021
$
2020
$
218,644
–
64,916
221,944
9,315
66,382
–
10,945
22,997
–
13,802
12,061
332,420
49,383
–
19,339
33,364
410,672
29. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE
Financial risk management
Overview
The group has exposure to the following risks from its use of
financial instruments:
• credit risk
• liquidity risk
• market risk
• operational risk.
This note presents information about the group’s exposure to
each of the above risks, its objectives, policies and processes for
measuring and managing risk, and its management of capital.
Further quantitative disclosures are included throughout these
consolidated financial statements.
The board of directors has overall responsibility for the
establishment and oversight of the risk management framework.
The Board Audit, Risk and Compliance Committee is responsible
for developing and monitoring risk management policies. The
committee reports regularly to the board on its activities.
Risk management policies are established to identify and
analyse the risks faced by the group, to set appropriate risk limits
and controls, and to monitor risk and adherence to limits. Risk
management policies and systems are reviewed regularly to
reflect changes in market conditions and the group’s activities.
The group, through its training and management standards
and procedures, aims to develop a disciplined and constructive
control environment in which all employees understand their roles
and obligations.
The Board Audit, Risk and Compliance Committee oversees
how management monitors compliance with the group’s risk
management policies and procedures, and reviews the adequacy
of the risk framework in relation to the risks faced by the group.
(a) Credit risk
Credit risk is the risk of financial loss to the group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the group’s receivables
from customers 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 2021, the customer with the group’s highest trade
and other receivable balance accounted for $2.2 million (2020:
$6.5 million)
Trade and other receivables
The group’s exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The demographics
of the group’s customer base, including the default risk of the
industry and country in which customers operate, 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 (ECL) based on the lifetime ECL approach 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. In determining the lifetime ECL, management uses both
historical credit loss experience and forecasts of future economic
conditions for trade receivables. The need to consider forward‑
looking information means that the group exercises judgement as
to how changes in macroeconomic factors will affect the ECL on
trade receivables.
Guarantees
Group policy is to provide financial guarantees only to wholly
owned subsidiaries.
The carrying amount of the group's financial assets represents the maximum credit exposure. The group's maximum exposure to credit
risk at the reporting date was:
Cash and cash equivalents
Trade and other receivables
Project work in progress
The group's gross trade receivables at the reporting date by geographic region was:
Australia/Oceania
Europe
Americas
Asia
Africa/Middle East
Impairment losses
The aging of the group's trade receivables at the reporting date was:
Note
10
13
15
Consolidated
2021
$000
22,362
34,959
4,392
3,639
5,608
20,411
4,178
3,816
37,652
2020
$000
92,830
25,307
2,063
6,443
1,301
11,644
2,283
5,258
26,929
Not past due
Past due 0‑30 days
Past due 31‑60 days
Past due 61‑120 days
More than 120 days
Consolidated
Impairment
2021
$000
Gross
2020
$000
Impairment
2020
$000
(1,438)
(24)
(16)
(25)
(1,213)
(2,716)
17,253
7,960
791
104
821
26,929
(1,262)
(151)
(102)
(2)
(717)
(2,234)
Gross
2021
$000
24,942
4,362
2,992
2,415
2,941
37,652
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.
92
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OTHER NOTES (continued)
29. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(a) Credit risk (continued)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 July
Acquisition through entities acquired
Impairment loss/(reversal) recognised
Trade receivables written off to the allowance for impairment
Balance at 30 June
(b) Liquidity risk
Consolidated
2021
$000
2,234
692
(164)
(46)
2,716
2020
$000
1,343
–
1,236
(345)
2,234
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 11 for a summary of banking
facilities available.
The following are the contractual maturities of financial liabilities:
Carrying
amount
Contractual
cash flows
12 months
or less
$000
$000
$000
1–5
years
$000
More than
5 years
$000
105,579
32,120
24,000
(105,579)
(36,395)
(24,312)
(105,579)
(6,950)
(312)
–
(14,666)
(24,000)
–
(14,778)
–
161,699
(166,286)
(112,841)
(38,666)
(14,778)
936
936
(936)
(936)
(936)
(936)
47,044
(47,044)
(47,044)
–
–
–
–
–
–
30,554
77,598
(34,338)
(81,382)
(3,775)
(50,819)
(12,624)
(12,624)
(17,939)
(17,939)
–
–
–
–
–
–
–
–
–
–
30 June 2021
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Cash advance
Derivative financial liabilities
Net foreign currency hedge payables
30 June 2020
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Derivative financial liabilities
Net foreign currency hedge payables
94
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices, will affect the
group’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while
optimising the return.
The group enters into derivatives, and also incurs financial
liabilities, in order to manage market risks. All such transactions are
carried out within the policy set by the board. Generally, the group
seeks to apply hedge accounting in order to manage volatility in
the income statement.
Interest Rate Risk
Profile
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.
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
2021
$000
2020
$000
416
40,000
–
–
416
40,000
21,946
52,830
(24,000)
–
(2,054)
52,830
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 2021.
Profit/(loss) before tax
Reserve
100 bp
increase
$000
100 bp
decrease
100 bp
increase
100 bp
decrease
$000
$000
$000
30 June 2021
Variable rate instruments
30 June 2020
Variable rate instruments
(21)
21
528
(528)
–
–
–
–
95
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OTHER NOTES (continued)
29. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(c) Market risk (continued)
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.
instruments which will limit the foreign exchange risk on USD
$27,000,000 of FY22 cash flows. On average, the collars give
protection above 1AUD:0.80USD cents and enable participation
down to 1AUD:0.74USD, and the average forward exchange
contract rate is 1AUD:0.75USD.
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
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 2021
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 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
Consolidated
EUR
$000
1,192
2,250
(1,059)
2,383
–
2,383
580
576
(164)
992
–
992
USD
$000
4,890
13,498
(22,085)
(3,697)
(3,990)
(7,687)
5,698
16,795
(17,260)
5,233
(2,914)
2,319
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:
2021
EUR
USD
2020
EUR
USD
Consolidated
Reserve
credit/(debit)
Profit/(loss)
before tax
$000
$000
‑
85
85
‑
(46)
(46)
(217)
699
482
(90)
(211)
(301)
A 10% weakening of the Australian dollar against the above currencies at 30 June would have had the equal but opposite effect on
the above currencies to the amounts shown above, on the basis that all other variables remain constant.
(d) Fair value hierarchy
The group’s financial instruments carried at fair value have been
valued by using a “level 2” valuation method. Level 2 valuations
are obtained from inputs, other than quoted prices, that are
observable for the asset or liability either directly or indirectly. At
the end of the current year, financial instruments valued at fair value
were limited to net foreign currency hedge payable of $936,000,
for which an independent valuation was obtained from the relevant
banking institution.
96
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
OTHER NOTES (continued)
30. EMPLOYEE BENEFITS
Aggregate liability for employee benefits, including on-costs:
Current – short-term incentives and other accruals
Current – employee entitlements
Non-current – employee entitlements
The present values of employee entitlements not expected to be settled within 12 months of
the reporting date have been calculated using the following weighted averages:
Assumed rate of increase in wage and salary rates
Discount rate
Settlement term
Consolidated
2021
$000
2020
$000
9,097
9,774
1,254
20,125
8,917
6,238
1,781
16,936
3.00%
2.46%
10 years
3.00%
2.51%
10 years
Employee Share Plan
Performance rights issued in financial year 2019
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.
The company issued 23,622 shares to eligible employees in
August 2020. The fair values of the shares was $10.74 per
share, based on the volume weighted average price at which
Codan shares were traded on the ASX for the five trading days
immediately preceding the date of issue of the shares. The
exercise price was nil. The total expense recognised as employee
costs in FY21 in relation to the ESP shares issued was $253,000.
The shares are restricted from sale until the earlier of three years
from the issue date or the date an employee is no longer employed
by the group.
Performance Rights Plan
At the 2004 AGM, shareholders approved the establishment
of a Performance Rights Plan (Plan). The Plan is designed to
provide employees with an incentive to maximise the return to
shareholders over the long term, and to assist in the attraction and
retention of key employees.
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 FY21 in relation to the
performance rights issued was $18,972.
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.
The group’s earnings per share over the three‑year period to
30 June have exceeded the performance target. Therefore, it
is expected that 390,055 shares will be issued to the relevant
employees by the end of August 2021.
Performance rights issued in financial year 2020
Performance rights issued in financial year 2021
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 FY21 in relation to the
performance rights issued was $806,355
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.
The company issued 154,830 performance rights in November
2020 to certain employees. The fair value of the rights was on
average $10.18 based on the Black‑Scholes formula. The model
inputs were: the share price of $11.17, no exercise price, expected
volatility 60%, dividend yield 1.7%, a term of three years and a risk‑
free rate of 0.9%. The total expense recognised as employee costs
in FY21 in relation to performance rights issued was $711,445.
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 27.8 cents. For employees to receive
the total number of performance rights, the group’s earnings per
share must increase by at least 10% per annum over the three‑
year period.
No performance rights have been issued since the end of the
financial year.
31. 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 5) is
as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long term benefits
Consolidated
2021
$
5,416,210
139,358
1,080,489
62,915
6,698,972
2020
$
5,041,701
127,443
920,355
57,122
6,146,621
(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.
98
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2021
DIRECTORS’ DECLARATION
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 60 to 100 and the remuneration report on pages 45
to 53 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 2021 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.
2. There are reasonable grounds to believe that the company and the group entities identified in note 25 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.
3. 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 2021.
4. The directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Mawson Lakes this 18th day of August 2021.
D J Simmons
Director
D S McGurk
Director
OTHER NOTES (continued)
32. OTHER RELATED PARTIES
All transactions with non‑key management personnel related parties are on normal terms and conditions.
Companies within the group purchase materials from other group companies. These transactions are on normal commercial terms.
Loans between entities in the wholly owned group are repayable at call and no interest is charged.
33. NET TANGIBLE ASSET PER SHARE
Net tangible asset per share (including right of use assets)
Net tangible asset per share (excluding right of use assets)
34. LEASES AND COMMITMENTS
Reconciliations
Right-of-use assets at cost
Accumulated depreciation
Right-of-use assets
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Reclassification to asset held for sale
Depreciation
Net foreign currency differences on translation of foreign entities
Carrying amount at end of year
Lease Liabilities
Carrying amount at beginning of year
Assumed liabilities through entities acquired
Finance charge on lease liabilities
Reclassification to liabilities held for sale
Lease payments
of which are:
Current lease liabilities
Non-current lease liabilities
Capital expenditure commitments
Aggregate amount of contracts for capital expenditure
Within one year
One year or later and no later than five years
2021
2020
4.8 cents
(10.1) cents
53.9 cents
40.1 cents
Consolidated
2021
$000
37,565
(10,576)
26,989
25,367
5,183
(103)
(3,554)
96
26,989
30,554
5,871
718
(110)
(4,913)
32,120
6,950
25,170
2,034
–
2,034
2020
$000
28,546
(3,179)
25,367
28,546
–
–
(3,179)
–
25,367
33,537
–
703
–
(3,686)
30,554
3,775
26,779
951
–
951
100
101
CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES 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 2021 and of its financial
performance for the year ended on that
date; and
•
•
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2021;
• Consolidated
income
consolidated
statement of comprehensive income, consolidated
statement of cash flows and consolidated statement of
changes in equity for the year ended 30 June 2021;
statement,
• Notes including a summary of significant accounting
policies; and
• Directors' Declaration.
complying with Australian Accounting
Standards
the Corporations
Regulations 2001.
and
The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.
Basis for opinion
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.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report 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.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
Valuation of Other Identifiable Intangibles Acquired through Business Combinations ($8.2m)
Refer to Note 3 and Note 4 to the Financial Report
The key audit matter
How the matter was addressed in our audit
During 2021 the Group made two significant
acquisitions:
• On 30 April 2021 the Group acquired Zetron
Inc (Zetron) for $60.2 million.
Our procedures included:
• Evaluating the acquisition accounting by the Group
against the requirements of the accounting
standards;
• On 12 May 2021 the Group acquired Domo-
Tactical Communications (DTC) for $113.9
million.
• Reading the underlying transaction agreements to
understand the terms of the acquisition and nature
of the assets and liabilities acquired;
The acquisitions resulted in the recognition of
other intangible assets of $8.2 million and
goodwill of $138.0 million.
The valuation of other identifiable intangibles
acquired through business combinations are
considered to be a key audit matter due to the:
• Size of the acquisitions having a significant
impact on the Group’s financial statements;
•
The judgement required by the Group to
determine the contingent consideration
payable for DTC considering the possibility
of an additional payment of up to USD 16
million in the event certain gross margin
targets are achieved by 31 December 2021.
• Significant
the Group
judgements by
relating to the determination of the fair
values of
the
acquisitions requiring significant audit effort.
intangible assets
in
• Assessing the accuracy of the consideration paid
for DTC against forecast DTC gross margin to 31
December 2021, actual DTC gross margin from
acquisition date and in accordance with the
accounting standards;
• Evaluating the valuation methodology used by the
Group to determine the provisional fair value of
identifiable
considering
assets,
accounting standard requirements;
intangible
• Working with our valuation specialists, we
assessed the key assumptions used by the Group
in the identification and valuation of intangible
assets including:
o assessing
the useful
life of product
development, customer relationships and
brands by using our industry experience and
knowledge of the terms and conditions of the
underlying agreements and against
the
accounting standard requirements;
The Group’s valuation model used to determine
the fair value of intangibles assets is complex
and sensitive to changes in a number of key
assumptions. This drives additional audit effort
specifically on the feasibility of these key
assumptions and consistency of application to
the Group’s strategy. The key assumptions we
focussed on in the valuation of intangible assets
included forecasted revenue, royalty rates,
discount rates and useful lives of customer
relationships, product development and brands.
We
to
involved our valuation specialists
supplement our senior audit team members in
assessing this key audit matter.
o checking forecasted revenue used by the
Group was consistent with the Group’s
valuation model used as part of the pre-
acquisition due diligence process;
o assessing royalty rates used in the valuation
of product development and brands against
publicly available comparable royalty rates
from comparable markets; and
o checking the discount rates applied in the
valuation of intangible assets are comparable
with the internal rate of return implied by the
diligence
Group’s
valuation models.
pre-acquisition
due
• We assessed the adequacy of disclosures in the
financial report using our understanding of the
acquisitions, against the requirements of the
accounting standard.
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT (continued)
Other Information
Report on the Remuneration Report
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.
The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report and
Remuneration Report. The Chairman’s Letter to Shareholders, CEO’s Report, Operations Report,
Sustainability Report and ASX Additional Information are expected to be made available to us after the date
of the Auditor's Report.
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.
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Codan Limited for the year ended 30
June 2021, 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
3 to 11 of the Directors’ report for the year ended 30 June
2021.
*
is to express an opinion on the
Our responsibility
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Paul Cenko
Partner
Adelaide
18 August 2021
* This is the original version of the audit report over the financial statements signed by the directors on
18 August 2021. Page references should be read as follows to reflect the correct references now that the
financial statements have been presented in the context of the annual report in its entirety:
– the Remuneration Report is set out on pages 45 to 53, as opposed to pages 3 to 11 outlined above.
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules not disclosed elsewhere in this report is set
out below.
Shareholdings as at 13 August 2021
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
27,055,528
Distribution of equity security holders
Number of shares held
1 ‑ 1,000
1,001 ‑ 5,000
5,001 ‑ 10,000
10,001 ‑ 100,000
100,001 and Over
Total
Number of equity security
holders Ordinary shares
Issued Capital %
4,220
2,153
554
532
63
7,522
0.9%
3.0%
2.3%
7.7%
86.1%
100%
The number of shareholders holding less than a marketable parcel of ordinary shares is 285.
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.
Number of ordinary
shares held
Issued Capital %
34,808,151
25,463,611
18,266,845
17,926,872
13,712,878
6,627,548
6,404,224
6,331,911
3,562,124
3,101,123
2,400,000
1,778,194
1,575,690
1,237,673
1,228,342
1,107,254
1,107,254
1,009,647
800,000
742,000
149,191,341
19.3%
14.1%
10.1%
9.9%
7.6%
3.7%
3.5%
3.5%
2.0%
1.7%
1.3%
1.0%
0.9%
0.7%
0.7%
0.6%
0.6%
0.6%
0.4%
0.4%
82.7%
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
Kynola Pty Ltd
Starform Pty Ltd
National Nominees Limited
A Bettison
BNP Paribas Nominees Pty Ltd
M K and M C Heard
Mitranikitan Pty Ltd
M Choate
J A Uhrig
G Bettison
Cedara Pty Ltd
Rosevine Pty Ltd
NewEconomy Nominees Pty Limited
Warren Glen Pty Ltd
Griffinna Pty Ltd
Total
Offices and officers
Company Secretary
Mr Michael Barton BA (ACC), FCA
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
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CODANANNUAL REPORT 2021CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES CODAN LIMITED AND ITS CONTROLLED ENTITIES
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
Innovation
wherever you are
108
CODAN codan.com.au
Innovation
wherever you are