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Innovation wherever you are
CONTENTS
CODAN FY22 SUMMARY
CODAN AT A SNAPSHOT
CHAIRMAN’S LETTER TO SHAREHOLDERS
CEO’S REPORT
METAL DETECTION
COMMUNICATIONS
SUSTAINABILITY REPORT
BOARD OF DIRECTORS
LEADERSHIP TEAM
FINANCIAL REPORT
ASX ADDITIONAL INFORMATION
CORPORATE DIRECTORY
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Innovation wherever you are
Annual General Meeting
The Annual General Meeting of Codan Limited will be held at
11:00 am on Wednesday, 26 October 2022
at Codan Limited, 2 Second Avenue, Mawson Lakes, South Australia.
The meeting will also be held virtually via an online platform at
https://meetnow.global/MP74WFV.
Codan Limited
ABN 77 007 590 605
1
ANNUAL REPORT 2022 CODAN FY22 SUMMARY
Record underlying
net profit after tax
$100.5
million
An increase of 3%
Codan group sales
increased by
16%
to
$506.1
million
Earnings per share
55.6 cents
Return on equity
30%
DTC and Zetron
exceeded first year
acquisition targets
achieving
$19 million
and $15 million
EBITDA
respectively
More balanced
and stable
revenues
across the Codan group
Annual dividend
28.0 cents
fully franked
(interim 13.0¢, final 15.0¢)
DTC secured
largest contract
award in the
company’s
history
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 730 employees
located in Australia, Canada, the USA, the
UK, Ireland, the UAE, Singapore, Denmark,
Brazil, Mexico and India. Our marketing reach
embraces activity in over 150 countries, with
exports accounting for more than 85% of
our sales.
Operating
revenue
$506.1m
EBITDA
$162.0m
UNDERLYING
NPAT
$100.5m
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
229.9m
270.8m
348.0m
437.0m
506.1m
75.6m
70.4m
70.4m
78.6m
78.6m
117.8m
117.8m
158.8m
158.8m
162.0m
39.8m
45.7m
64.0m
97.3m
100.5m
Results for the year ended
30 June
Note
2022
% of
sales
% of
sales
2021
% of
sales
2020
% of
sales
2019
% of
sales
2018
Revenue
Communications
Metal Detection
Other
Total revenue
EBITDA
EBIT
Interest
$241.7m 48%
$95.5m 22% $104.0m 30%
$77.6m 29% $56.5m 25%
$262.3m 52% $326.5m 75% $236.4m 68% $182.1m 67% $164.0m 71%
$2.1m
0%
$15.0m 3%
$7.6m 2% $11.1m 4%
$9.4m 4%
$506.1m 100% $437.0m 100% $348.0m 100% $270.8m 100% $229.9m 100%
$162.0m 32% $158.8m 36% $117.8m 34%
$78.6m 29%
$70.4m 31%
$137.4m 27% $139.8m 32%
$89.6m 26% $63.4m 23%
$53.7m 23%
($1.7)m
($1.1)m
($0.6)m
($0.1)m
($0.5)m
Net profit before tax
$135.7m 27% $138.7m 32%
$89.0m 26% $63.3m 23%
$53.2m 23%
Taxation
($35.2)m
($41.4)m
($25.0)m
($17.6)m
($13.4)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
$100.5m 20%
$97.3m 22% $64.0m 18%
$45.7m 17%
$39.8m 17%
($5.2)m
($1.9)m
$90.2m
49.8c
27.0c
– c
36%
$100.5m
55.6c
28.0c
– c
30%
$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%
* 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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3
CODANANNUAL REPORT 2022
CODAN AT A SNAPSHOT
Global sales
Total sales revenue
$506M
$206M
NORTH
AMERICA
Victoria
Redmond
Monterrey
Chicago
Herndon
$19M
$85M
Randers
Whiteley
Cork
Hampshire
EUROPE
ASIA
AFRICA
Dubai
Gurugram
Penang
Singapore
Business segments
Metal Detection
52%
Communications
48%
SOUTH
AMERICA
$15M
Florianopolis
$133M
$48M
AUSTRALIA
Brisbane
Adelaide
Our global technology business
Invest in ourselves
730
200+
7
15
total
employees
engineers
key manufacturing
sites
sales offices
$46M
invested in R&D
9%
engineering % to sales
4
5
CODANANNUAL REPORT 2022 CHAIRMAN’S LETTER
TO SHAREHOLDERS
It is pleasing to be able to comment on another successful year for
our company. In FY21 we increased underlying NPAT by around 52%,
so the challenge was always there to further improve profitability this
year. I could go into all the issues and headwinds we faced but suffice
to say it is very satisfying to report another year of record profitability.
Our strategy remains clear. We will
strengthen our core businesses through
product development and partnerships.
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 market offerings.
The DTC and Zetron businesses have been excellent
acquisitions. The integration of new businesses
is never easy, but our team has done a great job.
“Acquire, integrate, grow” is the simple plan that we
are following for both companies. I am pleased that
we have a well-documented and executable M&A
process right through from the investment thesis
and valuation metrics to the integration plan.
Faced with more supply chain and production
uncertainties than any of us had ever experienced,
we took the decision in July 2021 to aggressively
build inventories as a key risk mitigation strategy.
This obviously had a significant impact on cash
generation for the year, but it has proven to be
the correct decision. Inventory levels will gradually
normalise over the next 12 months.
In terms of revenues and profit, FY22 was Minelab’s
second best year ever, and we expect it to form
a new base from which the business will grow in
future years. The growth will come from continued
penetration of new geographic markets and new
product releases that will drive further market
share increases. In other than the last two COVID-19
affected years, sales for Minelab has always been
stronger in the second half. We will return to this
pattern this year.
I am very conscious of the wide range that Codan
shares have traded in during the last 2 years. The
logic behind the very rapid growth in our share
price in FY21 was never clear to me, nor the decline,
particularly since the AGM last year. We are however
clear in our approach. Deliver quality earnings with
an executable growth strategy and the market will
follow. We are working hard on our messaging to the
market as our business is difficult to model and some
of our products and markets are complex. We need
to be clear on where we see the growth over time
coming from.
At the AGM this year I will reflect on the excellent
career of Donald McGurk. Donald left Codan in
great shape for our new Managing Director, Alf
Ianniello. The board is very confident that Alf will take
Codan to new levels of innovation and profitability.
Donald has been outstanding in introducing Alf to
the business and Alf knows that he can reach out
to Donald at any time. In terms of CEO transitions,
this has been largely seamless, which is a credit to
both individuals.
Earlier this year I was finally able to travel overseas
and visit the majority of our operations. I am
convinced that Codan is a better business today than
at any time in the past. We can become a truly global
business that just happens to have its head office
in Australia.
Our strategy remains clear. We will strengthen our
core businesses through product development and
partnerships. 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 market offerings.
You will see from the annual report that we
have provided a comprehensive update on our
ESG initiatives. We have not delegated these
responsibilities to a board sub-committee as we
believe the whole board and management team
need to be actively engaged. We are clear that
outcomes are the measure, not words.
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
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CODANANNUAL REPORT 2022 CEO’S REPORT
Taking over as the CEO of Codan has been an exhilarating yet
humbling experience. Humbling, as I have the opportunity to
lead a long-standing successful company that has been well
positioned by my predecessor Donald McGurk. I have found
the move exhilarating as there is tremendous enthusiasm to
capitalise on the opportunities that exist over the next three
to five years in the Communications and Minelab businesses.
During my first seven months at Codan there
have been several key observations. Firstly,
our products are world class and with ongoing
investment in product development we will
continue to deliver great products and solutions
to our customers. Secondly, we operate in harsh
and difficult environments where we service our
customers in a manner that differentiates us from
our competitors. Lastly, we have exceptional
people that live our core values and this is the
foundation of our successful culture. All of this has
been evident whilst I have travelled overseas to
visit our businesses and customers.
Codan is positioning itself as a strong global
technology business and has evolved into a very
different business compared to 12 months ago.
The recent acquisitions have not only increased
our product and solutions portfolio but have
significantly expanded our addressable markets
both geographically and into adjacent markets.
Our combined offering means that Codan can now
compete globally with larger players.
Our FY22 results reflect the resilience of the
business. Despite a challenging operating
environment, Codan delivered another record
profit year. Sales revenue increased 16% to $506
million and we achieved 20% NPAT margins.
We have declared a fully franked dividend of
15.0 cents per share, following on from the 13.0
cent per share fully franked interim dividend.
This resulted in a total dividend of 28.0 cents for
the full year, an increase of 4% over FY21.
Cash conversion remains strong, with $51.7 million
operating cash generated in FY22 after the
conscious decision to increase inventory holdings.
The investment into inventory has enabled us to
maintain supply to our customers and position
ourselves to satisfy future demand. We were also
able to reduce freight costs through increasing
sea freight and, more importantly, we were able
to largely mitigate the supply chain risks from the
global shortage of electronic components.
FY22 has been a difficult year for many businesses
as COVID-19 had an unprecedented impact on
people and economies worldwide. The restrictions
and government stimulus that impacted
consumer demand patterns, logistics and
supply chains, coupled with growing inflationary
pressures, geopolitical disruptions and the
Ukraine conflict, made FY22 a challenging year
for Codan.
Despite the above, in FY22 we delivered another
record profit and achieved the following:
• Maintained continuous supply to customers
despite global supply chain challenges;
• Resumed in-country business development
and geographic expansion initiatives post
covid related travel restrictions;
• Minelab achieved its second highest sales
result despite ongoing geopolitical disruptions
and an unprecedented level of demand during
FY21;
• Minelab achieved record sales in North
America, LATAM and Countermine;
• Development of several new metal detector
products has progressed well and we are on
track for late first half FY23 product releases;
• Both DTC and Zetron exceeded year one
EBITDA targets, with integration progressing
ahead of plans;
• Codan via DTC was awarded its largest ever
contract with a leading global technology
company and we delivered our miniaturised
mimo mesh radio against the first purchase
order;
• Further strengthened our Communications
segment by acquiring Broadcast Wireless
Systems;
• Zetron exceeded $100 million in sales as a
result of securing numerous large contracts;
and
• Increased the Communications orderbook of
by 23% to $149 million.
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CODANANNUAL REPORT 2022 CEO’s REPORT
t
st in ourselves S
Continue to bring world
leading technology to our
customers
e
v
n
I
r e n g t h en core business G
Continue diversification strategy
Geographic expansion
Leverage distribution channels
Be consumer centric
Build more predictable
revenue streams
r
o
w
t
h
b
y
a
c
q
u
i
s
i
t
i
o
n
Continue to deliver
growth by acquisition
Drive synergies
Adjacent markets
Technology lead
Capitalise on distribution
channels
Invest in new technology
Strong pipeline of future products
Leading technology in
markets we serve
STRATEGY
The Acquisitions
The acquisition of both DTC and Zetron has been
very successful with both businesses exceeding year
one EBITDA targets of $14 million and $8 million,
achieving $19 million and $15 million respectively.
The acquisition of BWS was completed in December
for a total payment of $8.4 million inclusive of a
$4.8 million earn-out. BWS technology allows our
customers to adopt a remote production capability,
save costs and improve production quality. BWS is
exceeding our year one expectations under
DTC’s ownership.
During FY22, DTC was awarded the largest
ever order in Codan’s history for the supply of
software defined mesh radios. This first order for
approximately $38 million is part of a multi-year
framework agreement, of which $13 million was
delivered in FY22.
We have successfully integrated our existing LMR
business with the acquired Zetron business and the
combined business exceeded $100 million in sales in
FY22, which was a great achievement. The business
secured numerous large contracts including the
upgrade and expansion of our emergency response
system for Delta Air Lines and a renewal of up to 10
years for our contract with the State of Iowa for a
hosted Next Generation 911 emergency call taking
solution.
Strategy
We will remain disciplined in execution of our
strategy with a significant focus on diversifying
revenue and profitability of our businesses with
an emphasis on revenue predictability within our
Communications business. Our three strategic
priorities are:
• Invest in ourselves;
• Strengthen the core business; and
• Growth by acquisition.
Our strategic plan is to invest and strengthen our
core business by introducing new products and
technologies and through geographic expansion,
which is supplemented by acquisition growth.
This strategy is working as the business today has
much stronger foundations with a more balanced
portfolio of sales.
Invest in Ourselves
We invest in our core business by introducing new
products and technologies. During FY22, we spent
in excess of $40 million in new product development
and engineering. We will continue to commit
between 8 to 10% of our revenues back into product
development and engineering. There is no shortage
of product and development projects in the
pipeline, as we continue to introduce leading edge
technology in the future.
Our People
The largest inhibitor to growth is being able to
recruit, develop and retain good people. Therefore,
the HR agenda will be pivotal to Codan’s future
success. Our people are one of our greatest assets
who live our core values on a day-to-day basis. This is
the key foundation to our successful culture and it is
what sets us apart from our competitors.
The business is focused on investing in its people,
growing our future leaders and building capability
through high-quality learning experiences and
development opportunities. We utilise a number of
tailored training approaches, from online learning,
external courses and a mentoring program that
is now into its second year. This program has
been extremely well received by both mentors
and mentees.
Acknowledgements
We have achieved another excellent result in FY22
while still responding to the ongoing uncertainties
brought on by COVID-19 and geopolitical challenges.
Throughout this uncertainty there has been one
constant, our people. On behalf of the Board and
leadership I would like to thank our people for being
adaptable, flexible, and resilient in helping Codan
achieve success in a challenging global environment.
This result would not have been possible without
your commitment, skill and passion. We would also
like to thank our business partners and shareholders
for your continued support as we look forward to
another successful year.
Alf Ianniello
Managing Director and CEO
Strengthen the Core Business
The business continues its diversification strategy by
expanding geographically and into adjacent markets.
Minelab is developing an omni-channel distribution
model, by penetrating big box retailers, leveraging
existing distribution channels and more recently
driving an e-Commerce strategy.
In Communications, the acquisition of DTC has
significantly increased our Tactical addressable
market. In the past we were focussed on the
developing world but now our markets have
expanded into Five Eyes intelligence communities.
DTC’s technology also allows us to access several
market segments outside of Codan’s traditional
markets. These include Law Enforcement and
Intelligence, Unmanned (drones) and Broadcast.
Zetron is one of only two providers globally that
offers a full suite of integrated emergency response
technologies, with an exceptionally strong brand in
North America. Like Tactical, Zetron’s technology
is applicable to a wide range of market segments
including transportation, utilities, domestic security,
natural resources and institutions.
Growth by Acquisition
The last pillar to our strategic plan is to continue to
deliver growth by acquisition. Our acquisition targets
must be culturally and strategically aligned, be
technology leaders with valuable IP and there must
be synergies that can be realised through integration
and leveraging distribution channels.
All of our businesses have a clear acquisition strategy,
whether it is into adjacent markets or into products
and services that are complementary to our existing
solutions.
The DTC, Zetron and BWS acquisitions and
integration processes have been a success and we
now have a framework that is proven and repeatable
for future acquisitions.
Sustainability
Codan continues to execute on its sustainability
strategy and during FY22 the group established a
sustainability council dedicated to identifying and
managing risks, issues and opportunities that are
important to the business and our stakeholders.
The council will be focused on making a long-term
and sustainable impact, with specific initiatives
that will be closely aligned to Codan’s purpose.
Our sustainability report, now in its third year of
production, will continue to evolve as we progress
our sustainability journey.
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CODANANNUAL REPORT 2022
FY22 Summary
• Maintained supply to our customers in a
very difficult manufacturing and freight
environment
FY23 Objectives
• Further develop and expand distribution
across Africa and improve customer service,
training and support
• Established a sales office in India to
• Continue our geographical and distribution
concentrate our efforts in this emerging
market
• Consecutive year of sales growth in Central
and South America
• Record year of sales for North America and
Countermine sales
expansion and reach to consumers
worldwide including the expansion of our
retail channels and e-commerce
• Improve tactical marketing to capitalise
on our full suite of products across all
categories
• Complete and launch the new products
planned for FY23
M
E
T
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D
E
T
E
C
T
O
N
I
Minelab is the world leading producer of in ground metal detection
technologies for recreation, gold prospecting, humanitarian and military
requirements. Our uniting purpose is to deliver innovative technology and
exceptional support to all detectorists, the world over. For more than 30 years,
Minelab have introduced more innovative and practical technology than any
of our competitors and has taken metal detection technology to new levels of
excellence through our dedication to research and development, innovative
design and production quality.
Now with seven offices strategically located around the
globe, we are positioned to expand the business further
worldwide whilst improving existing market shares and
distribution structures. We have increased investment
across the Asia Pacific region with the recent establishment
of a sales office in India which will focus on developing the
market and our share in it. Following on from the success
in establishing Minelab’s presence into Central and South
America via Brazil and Mexico, our objectives in India are to
create a strong marketing campaign to build awareness and
establish the recreational market, recruit an extensive dealer
network and establish e-commerce trading platforms.
Recreation – all targets, all soils,
all the time
Minelab’s complete range of recreation detectors, including
the simple yet powerful VANQUISH, industry leading
Equinox, and superior CTX 3030™, enables any user to
unearth coins, jewellery, and relics. Our customer’s interest
ranges from metal detecting as a casual activity, as a hobby
and passion, a sport, or in some cases, a source of income.
We have continued our strategy to expand the retail market
in North America, which continues to experience growth
year on year. In FY22 we have signed on more store fronts
and increased our points of distribution, including online
channels. We made a conscious decision to increase stock
levels to protect against supply disruptions, minimise air
freight and have product available to our customers on
demand; a major advantage compared to our competitors
in recent times. With international travel opening up, our
sales and marketing team are actively engaging with the
market, including attendance at detector rallies. Business
development and marketing investment will be a continued
focus for our business in the coming year.
Minelab has continued to invest and grow the LATAM
market in the last 12 months. In Mexico, we have grown
the dealer network more than threefold , and launched
e-commerce to support the easy and convenient sale
of our popular detectors to the consumer. In Brazil, our
dealer network has increased, providing more points of
distribution. E-commerce sales continue to grow, and the
Vanquish, now in its third year, remains the detector of
choice for new consumers.
Minelab have not sold any detectors into Russia in the
second half of the financial year due to the conflict in
eastern Europe. Whilst this challenging situation has had
a flow on effect with a decrease in consumer spending
and commercial trade, distribution has remained strong
in Europe through our existing dealer network. Priorities
for next year include a strong marketing program to keep
Minelab products as the detector of choice and adding
additional retail chains and stores.
Small-scale gold mining – striking gold
Minelab manufacturers a comprehensive range of
innovative gold detectors to cater for the professional gold
prospector, artisanal miner, and weekend enthusiast. Our
detectors are the deepest and most able to adjust and track
the varying soil conditions typically found in gold fields,
finding gold in a chemical free manner, and delivering a
rapid return on investment to the user.
The artisanal mining areas in Africa are the largest market
for gold detectors. After a twelve month hiatus from
entering Sudan due to travel restrictions in place for safety
concerns, our sales team has recently returned to this
strategically important country for Minelab. Our dealer in
Mali, West Africa, has continued to grow its sales off the
back of the record year in FY21. Contributing to this was
the successful uptake of the premium gold detector, GPX
6000®, launched late in FY21. Uptake in other regions will
now occur as the West African success with the machine
spreads and as we are able to directly introduce the product
into the various gold fields following the lifting of pandemic
travel restrictions.
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CODANANNUAL REPORT 2022
METAL DETECTION
Countermine – all mines,
all soils, all conditions
Minelab manufactures high-performance
countermine metal detectors for landmine detection
and UXO clearance. Used by humanitarian demining
non-government organisations (NGOs), commercial
demining companies and militaries, Minelab’s range
of countermine detectors include the industry-
leading F3™ mine detector and the advanced MDS-
10® and MF5® detectors. Minelab’s countermine
detectors are manufactured in Adelaide and are
supplied to our customers across the globe.
The Countermine division has recorded its largest
sales year on record in its 24 year history. The team
have been able to establish significant share in
both the military and humanitarian markets and will
continue to focus on maintaining this share in the
coming year.
Countermine secured several large contracts this
year including a significant contract in Colombia.
We supplied hundreds of F3Ci™ detectors to the
Colombian Army Humanitarian Demining Brigade.
Post the release of the MF5® last year, we have
secured significant contracts into established
countries with this new product.
We have also continued to strengthen our
relationships with global humanitarian demining
NGOs. These relationships have been built on our
proven track record of detector performance
coupled with exceptional customer service, which
will continue to be a priority in the year ahead.
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CODANANNUAL REPORT 2022 BRAZIL E-COMMERCE (July 1 2021 – June 30 2022)
Average Order Value (AOV)
Customer Acquisition Cost (CAC)
Average Conversion Rate
$775 AUD
$42 AUD
88%
METAL DETECTION
Minelab: Transforming
through e-commerce for
the Global Consumer
The pandemic accelerated Minelab’s digital strategy as consumers
further embraced e-commerce around the world. Prior to the
pandemic we had a vision to generate long-term shareholder
value through international e-commerce expansion and ongoing
investment in our product range. While e-commerce adoption
accelerated over the past two years, in many markets, the pandemic
effect was to press “fast forward” on trends that were already
gaining steam. Focusing on growth markets and these accelerating
consumer habits became our priority. E-commerce embraces
all aspects of engaging with the consumer electronically, from
shopping sites such as Amazon through to social media and beyond.
Through the responsible use of data and
e-commerce, we seek growth across our digital
ecosystems; from partnerships with retailers and
e-tailers through consumer-direct activities in
selected markets.
We launched our first Minelab direct e-commerce
store in Brazil, South America, in 2020. This
e-commerce solution was chosen such that it
is scalable, adaptable, and globally applicable.
When deployed, this solution generated increased
customer engagement while driving overall market
expansion, driving increased business for both the
new but also the existing channels. Through the
use of e-commerce platforms, we are able to adapt
and tailor the offering to suit the market specifics
across all aspects of the experience, from delivery
through to payment and become properly aligned
with each country’s specifics, thereby generating
new opportunities and being able to delight
our consumers.
We are harnessing the power of data to streamline
our business practices, becoming more strategic
and predictive while making changes in real-time.
We continue to upgrade our analytics capabilities
to measure the value of each consumer and
customer touchpoint and the impact of every
campaign. This allows us to make smarter,
quicker decisions.
Minelab has expanded its online platforms now to
five different countries and is continuing to pursue
strategic growth opportunities.
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CODANANNUAL REPORT 2022 C
O
M
M
U
N
C
A
T
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N
S
I
I
Codan Communications, via the Tactical and Zetron divisions, offers
a full suite of solutions to its addressable markets. With customers
in more than 150 countries across all seven continents, Codan
Communications continues to enhance its world-class design,
development, and implementation capability. With more than 65
years in the business, Codan has earned a reputation for quality,
reliability, and high customer satisfaction, by producing innovative,
interoperable, and industry-leading technology.
FY22 Summary
• Zetron and DTC’s first year acquisition financial
targets exceeded
• Successfully integrated Critical
Communications’ LMR and Zetron’s Command
and Control businesses into a single company
now branded as Zetron
• Strengthened Tactical Communications’
routes to market with key focus on business
development
• Awarded largest contract win in Codan history
FY23 Objectives
• Strengthen our core businesses through
product development, routes to market,
partnerships, and acquisitions
• Focus on front end business development
in key growth markets with investments to
address market requirements
Tactical Communications
Our mission is to be a full communications
solutions provider to our key customers in our
core markets, servicing military, law enforcement
and intelligence, unmanned, broadcast,
commercial and NGO.
The DTC acquisition has exceeded its financial
objectives for the fiscal year. The integration of
its people continues, and will remain, a priority.
The business has focused on strengthening the
sales team to pursue opportunities in new and
existing markets. With the integration of the
global sales teams across DTC and Codan Tactical
Communications, we have created new routes
to market.
In the United States, our key focus has been on
the execution of a multi-year contract to supply
DTC software defined MANET mesh radios to
a sensitive military program. Building on the
success of this program, we have expanded our
US business development efforts to address other
potential opportunities.
Globally, we have experienced our largest growth
in military opportunities with unprecedented
sales in the unmanned markets. Both in the US
and international markets we have expanded
our support to law enforcement using our mesh
ad-hoc networks in areas of interest such as urban
cities and borders.
The most recent acquisition of Broadcast Wireless
Systems (BWS) has expanded our portfolio to
address customer broadcasting requirements.
Rebranded as Domo Broadcast Systems (DBS),
the business is scaled to offer turnkey solutions
catering for live events and remote productions,
including the V8 Supercars in Australia.
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CODANANNUAL REPORT 2022 COMMUNICATIONS
DTC Broadcast – For the
moments that matter
DTC and Gravity demonstrate enhanced capability in live Broadcast
solutions for the Australian Supercars Championship
DTC has received a significant order to supply Gravity
Media (a leading provider of complex live broadcast
facilities and production services) with enhanced
capability in live broadcast solutions for its global
customers including an initial deployment at the
Repco Supercars Championship – Australia’s touring
car racing series.
motorsport, and Gravity Media is committed to
ensuring that loyal fans continue to receive an
unbeatable viewer experience, with the very best
live in-car camera coverage. That’s why we’ve
significantly invested in new DTC equipment to
support our live broadcast solution. Given its 35
years’ experience at the cutting edge of transmitting
and receiving in live broadcast environments, DTC is
a partner we can rely on.”
The order includes 55 Broadcast Nano Transmitters,
55 SOL7NAMP Mini Robust 1W Amplifiers and 12
PRORXD-1RU Broadcast Receiver Decoders, adding
to Gravity Media’s already impressive stock of
communications kit. To ensure the equipment is
set up for the best performance at the Supercars
Championship and beyond, the DTC team worked
closely with Gravity Media to customise the
configuration of the equipment.
Australian racing fans will be provided with more
camera angles than ever before at the Repco
Supercars Championship – Australia’s touring car
racing series.
Greg Littrich, Gravity Media’s Director of Media
Services and Facilities commented: “The Supercars
Championship represents the best of Australian
Gareth James, DTC’s APAC Sales Manager, added:
“We are proud of our partnership with Gravity
Media as a leading provider of production services
worldwide. The Supercars project endorses our
belief that DTC’s Broadcast equipment range has
become the prime choice for motor racing and other
speciality camera applications and has been verified
time and time again as the best in its field for RF
coverage.”
The new equipment made its debut at the last round
of the Supercars Championship 2021 season at the
highly anticipated “Repco Bathurst 1000”, which took
place in New South Wales from 30 November to
5 December 2021.
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CODANANNUAL REPORT 2022 COMMUNICATIONS
Zetron
Through our Zetron business, our purpose is firmly
on providing communications solutions that save
lives and enable critical operations. The integration
of the two legacy LMR and Zetron businesses
has pleasingly outperformed the financial and
operational milestones that were set. Most
importantly, our people are united and engaged,
motivated by quarterly town halls and monthly
updates communicated by the leadership team.
The global sales teams have been streamlined
and brought together under one go to market
sales strategy. Customers, including public
safety, transport and utilities, can partner with
Zetron for a full suite of products that provide an
end-to-end solution. This strategy has produced
record revenue across all regions, and a strong
order book, including the award of a $7 million
contract to provide an ACOM console system for
existing customer, Delta Air Lines Inc, a $5 million
contract for a major US utility to provide a MAX
call taking solution, and execution of a multi-year
extension to Iowa’s homeland security emergency
management division hosting next generation 911
emergency call taking solutions.
We have also accelerated the engineering
integration across the three offices. The creation
of these ‘centres of excellence’ has ensured
consolidated development and testing facilities
so that each site can effectively expand their
automation and development capacity.
The final stages of integration will be completed
by the end of calendar year 2022 including an ERP
implementation, and two facility relocations to
better accommodate our workforce.
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23
CODANANNUAL REPORT 2022 I
I
S
U
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T
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B
L
T
Y
R
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P
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I
About this report
This Sustainability Report seeks to provide information regarding the
material aspects of Codan’s sustainability practises across the Codan
Group including all its controlled entities during the year ended 30 June
2022 (FY22). The Sustainability Report (report) is published on 21
September 2022 and forms part of Codan’s Annual Report.
This report has been prepared in accordance with the Global Reporting
Initiative (GRI) Standards: Core option. For a full list of disclosures
referenced in this report, please refer to the GRI Content Index
available within the Sustainability Report published on our website.
The information contained within this report has been compiled with
the contribution of various leaders across the business and has been
approved by the board. Please note this report has not been externally
assured. We welcome any feedback and questions you may have
on the information presented and encourage you to contact us at
sustainability@codan.com.au.
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 form the focus of this report. We assessed this
materiality on two criteria; namely: (1) what is material to our business;
and (2) the industry in which we, and our stakeholders, operate. Codan’s
stakeholders include employees, customers, suppliers, investors and key
regulatory, government and industry bodies (e.g., ASIC, ASX).
List of Material Topics
• Innovation – Our Culture
• Innovation – Our Intellectual Property
• Social – Our People
• Social – Our Customers
• Social – Our Community
• Environment
• Governance – Corporate Governance Statement
• Governance – Business Ethics / Behaviour / Compliance
• Governance – Our Supply Chain
• Governance – Cyber Security
• Governance – Tax
All data referenced in this report is in AUD unless otherwise specified. Note that FY22 data is inclusive of
DTC and Zetron businesses acquired in May 2021, and FY21 data is exclusive.
CEO’s statement
In the current global environment businesses have an obligation to lead on Environment Social and Governance (ESG) issues and
make them part of the organisation's long term success.
As an organisation, the Codan values drive our approach to ESG and as such we have challenged our approach to addressing
sustainability, with the purpose to build a framework that can drive greater impact for all internal and external stakeholders.
The newly created cross functional sustainability committee has gained inspiration from Codan’s rich history of innovation and
developed a forward looking framework that endeavours to make an impact that is applicable in the markets and communities
we are involved in. Our current initiatives are focussed on outcomes that directly align to the framework presented below, and
build upon the work we already do within the community to provide greater impact.
To provide greater transparency regarding the compilation of this report, we have been guided by recognised standards of
sustainability reporting and have aligned our FY22 report utilising the GRI Standards: Core option.
In FY23 we look forward to providing further updates throughout the year on the progress of our initiatives.
Alf Ianniello
Managing Director and CEO
Sustainability Framework
P
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INNOVATION
SOCIAL
ENVIRONMENT
GOVERNANCE
2
2
0
2
–
–
–
–
–
–
–
1
2
0
2
Promote a culture of innovation and protect our intellectual property.
Encourage, promote, and develop all students, regardless of gender, age,
family status, culture, ethnicity, and religion to pursue a career in STEM.
Target Community Programs that assist disadvantaged groups within
the communities our businesses operate.
Empower a connected and high-performing workforce to deliver long term
value creation.
Review our environmental footprint to establish the timeframe and financial
implication of making a net zero statement.
Committed to conducting business in an honest, ethical, and accountable
way in accordance with our core values.
Upholding a strong governance program, including a Sustainability Council, dedicated
to identifying and managing risks, issues and opportunities that
are important to our business and stakeholders for long term value.
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CODAN
ANNUAL REPORT 2022
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CODANANNUAL REPORT 2022
SUSTAINABILITY REPORT
26
Innovation
Our Culture
Promoting a culture of innovation is embedded in
the way Codan does business. Our capabilities span
across multiple engineering disciplines, including
software, electronics and mechanical engineering.
We also have several PhD-qualified physicists in
our engineering teams. Our engineering teams
ensure that technology is released to specification,
on schedule and with the 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 in the world.
To continuously boost its innovative edge, the
engineering team pursue new recruits who share a
similar attitude, fit and desire to learn. Continuous
improvement is facilitated through training,
coaching, regular innovation and product review
forums, (where staff can put forth 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
directly to users, fuelling further thoughts for both
innovation and product improvement.
Codan’s reputation for quality is paramount to its
success, and this is a testament to the efforts put into
the research & development phase, along with the
rigorous testing undertaken.
FY22
FY21
Total R&D investment ($M)
Number of products brought
to market
46
4
30
5
Our IP
Great lengths are taken to protect our IP, with the
use of patents, designs and trade marks. Broadly,
registered IP provides us with a legal right to
exclusively use our novel ideas. A registered patent
provides our business with the exclusive right to
use or commercialise a product or invention for the
life of the patent. Registered designs protect the
shape, configuration, pattern or ornamentation of
a product, that is, what gives a product a unique
appearance. Registered trade marks provide
protection for our brands/logos.
39
400
13
CURRENT
PATENTS
CURRENT REGISTERED
TRADEMARKS
(APPROXIMATELY)
CURRENT
DESIGNS
We also have a strong anti-counterfeit strategy.
The purpose of this is to protect the integrity of our
brand and products. We enforce this by using a third
party to actively search for and pursue on-line B2B
sites, platforms and marketplaces selling counterfeit
Minelab products. Utilising numerous investigation
firms across the world, in China we have successfully
criminally prosecuted six serious infringers and have
ongoing civil actions against three of the six entities,
with a further 11 people serving prison sentences for
counterfeit offences. We have ongoing civil actions
against three of the six entities in China. In Dubai,
we removed the biggest trader of counterfeit
Minelab products and, since 2016 with the
cooperation from the Dubai Economic Department
raided over 20 traders. We have proactively trained
multiple customs officials both in Dubai and China
with respect to our products.
Online marketplace
listings analysed
Number of removed
infringement listings
Investigations of potential
infringing entities
Investigations of potential
infringing entities
FY22
FY21
38,875
14,925
16,838
12,694
Police raids
Police raids
21
21
2013-
2022
2013-
2022
44
44
2
2
2013-
2022
2013-
2022
7
7
China
China
UAE
UAE
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CODANANNUAL REPORT 2022 SUSTAINABILITY REPORT
Social
Our People
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.
Throughout another year of disruption, the health,
safety and wellbeing of our people remains of
utmost importance. During periods of shut down
due to COVID-19 our staff were swiftly and safely
moved to a work from home arrangement. For
production staff who were unable to work from
home, we continued to pay wages in full if those
staff had to isolate. We encourage staff to remain
connected to one another and look after their
mental health, with access to confidential counselling
support also available. Specific online training
sessions focused on mental health have also been
provided to staff. Head office provides voluntary free
flu shots for staff, hosts an onsite gym, and an in-
house café with subsidised meals to encourage staff
to socialise with others and enjoy our state-of-the-art
canteen and courtyard facilities. The office also caters
for parents when flexible working arrangements
are required; there is a dedicated meeting room
configured with dual AV, phone, game console, child
friendly games and toys so both children and parents
can continue to work when necessary.
Codan continues to focus on growing its own future
leaders and building capability by providing all
employees with high-quality learning experiences
and development opportunities. We utilise several
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,
as well as providing select staff with professional
management and various other leadership programs
to build our own internal capabilities. We have a
license to The Growth Faculty, which provides
live and library online content from change-
making leaders.
Spend on external training courses was down
compared to prior year as we opted for more online
training, as the pandemic disrupted face to face
training. In addition, the spend reduction reflects the
organisation’s focus on the integration of the DTC
and Zetron businesses with staff across the globe
working on integration projects which has provided
many development opportunities.
Codan’s mentoring program has continued into its
second year after the success from last year, with
registrations more than doubling and some mentors
volunteering their time for a second consecutive
year. Participation in the program provides our
team with additional support in their professional
development and assists to broaden their networks
across the Codan group. This aligns with our culture
of collaboration and leadership development.
The mentoring partnership runs for 12 months and
includes a mix of formal and informal meetings.
Learning & Development
($000)
FY22
361
FY21
504
“To be effective in our roles, careers,
and lives, we need to listen to
understand, learn, and be empathetic.
Building a rapport and practicing my
communication skills while transferring
knowledge to the mentee has been a
very positive learning experience."
"Having time set aside to pursue new
things that I don’t normally find time for.
Getting fresh ideas from my mentor”.
Australia
Brazil
Canada
Denmark
Ireland
33
44
Mexico
UAE
UK
USA
Mentors Mentees
Australia
Brazil
Canada
Denmark
Ireland
33
44
Mexico
UAE
UK
USA
Mentors Mentees
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CODANANNUAL REPORT 2022 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 working
environment where our people feel part of the
team and contribute to Codan’s wider success. On
International Women’s Day our staff had access to
curated content with top diversity and inclusion
thought leaders heading up a week long event to
help leaders become more aware and inclusive.
Throughout the year we introduced diversity training
and team building in our Mawson Lakes production
facility. Facilitated by an external inclusion expert,
the three sessions were well received and will be an
ongoing program.
The board work with management to set specific
gender equity targets ahead of each financial year.
All objectives were met for FY22, with an increase
in female applications for technical and leadership
roles versus the previous year. The board have set
an objective to achieve a minimum of 30% female
directorship by FY26.
The decrease in overall female representation in our
workforce is due to the acquisition of Zetron and DTC
which have a high number of engineers. Engineers
Australia has produced a report which tracks females
studying STEM degrees, which helps to explain the
lower proportion of female engineers. This is why
Codan is committed to investing more time and
resources into educating and promoting a STEM
career for all minority diversities.
Gender
representation
Board
Senior Executive
Senior Management
Other
Whole workforce
FY22
FY21
Female %
Male % Female %
Male %
20%
0%
23%
27%
26%
80%
100%
77%
73%
74%
20%
0%
27%
30%
29%
80%
100%
73%
70%
71%
Three years ago, we introduced a paid maternity
leave program, and since its introduction, we have
had 31 staff utilise this, and had 100% of female staff
return to work.
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.
Workplace Health &
Safety Statistics
Lost Time Injuries
Near Misses
Incidents
FY22
FY21
3
17
17
3
14
24
31
Voluntary turnover
FY22
FY21
12%
6%
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.
In an effort to attract talent to build our future
capability, Codan offers selected candidates a four
year apprenticeship at our head office, and also
offer internships across the business, including paid
co-op placements at Zetron. Zetron has also paid
the university fees for one co-op placement on the
provision they will work for us once they graduate.
Codan also supports the South Australian Node of
the Australian National Fabrication Facility (ANFF-
SA) Microengineering School as part of the industry
tour groups to demonstrate career opportunities
in manufacturing.
The pandemic has presented its challenges on the
workforce, and talent retention has proved to be
one of these. Dubbed “The Great Resignation”, the
increased number of voluntary resignations post
COVID-19 is widely reported and Codan has similarly
experienced this. We are currently working on a
strategy to actively retain key talent, by investing
in our employees and providing development
opportunities and identifying career pathways.
30
CODANANNUAL REPORT 2022 ‘Wildfires continue to plague our national parks and
forests and the safety of those that combat those
fires is foremost in our minds when we design,
deliver and service communications solutions.
Zetron is proud to be the primary provider of
communications technology for every major
forestry agency and national park in North America.’
Scott French
Executive General Manager, Zetron
SUSTAINABILITY REPORT
Our Customers
Codan is a customer driven organisation. We pride ourselves in ensuring we offer premium customer
satisfaction. We aim to get as close as possible to the end users of our products. To achieve this, we have
established offices in all of our key regional markets, and spend time on the ground with our customers no
matter how harsh the environment.
In FY22, we incurred no product recalls, and warranty costs were less than 1% of sales.
Zetron provides essential communication
services to US government agencies to keep our
first responders and our environment safe
The customers
The United States Forest Service (USFS) deploys
over 1,500 Zetron radio systems into the field to
provide essential communication services to keep
our first responders and our environment safe. The
USFS manages a system of 154 national forests and
20 national grasslands encompassing 193 million
acres (78 million hectares).
The United States National Park Service (USNPS) has
over 500 Zetron radio systems in place across the
400 parks, monuments and other areas of national
interest in land that encompasses 84 million acres
(34 million hectares).
The Bureau of Land Management (BLM) is
responsible for administering federal lands across
the United States, with over 700 Zetron radio
systems, with oversight over 247.3 million acres
(100 million hectares), governing one eighth of the
country’s landmass.
How our technologies are deployed
The lands managed by these agencies include
specially designated wilderness areas, wild and
scenic rivers, national monuments, research and
experimental areas, and other unique natural and
cultural treasures. These radio networks are used
by maintenance, protection and law enforcement
employees and are used to keep the millions of
visitors safe within the boundaries of the forests and
parks. A major aspect of these land management
agencies, and their use of the radio networks is
for preventative measures against, and fighting,
wildland fires.
The National Interagency Incident Communications
Division (NIICD) is a multi-agency partnership
between the USFS, USNPS and BLM. The NIICD
maintains a cache of 400 Zetron repeaters in
transportable cases for rapid deployment anywhere
in the country. The NIICD’s major focus is wildland
fire suppression, however their equipment and
personnel have been utilised on hurricanes, floods,
earthquakes, volcanic eruptions, oil spills, and other
man-made and natural disasters where federal
assistance is required.
Zetron is honoured that we can fulfil our purpose
to provide communications solutions that save
lives and enable these critical operations, and most
importantly our customers trust us to protect one of
our greatest resources, our environment.
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CODANANNUAL REPORT 2022 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 charitable programs and product
donations as well as giving our time and resources to
support our community.
We proudly participated in the University of South
Australia’s STEM Girls Conference in September 2021,
where we hosted female students at our head office
facilities and have similarly hosted secondary school
tours. Codan has exhibited at various career fairs
hosted by local universities. It is mutually beneficial
to meet the up-and-coming generation interested in
tech, and to discuss the vast opportunities we have
within the Codan Group.
Donations ($000) inclusive
of product donations
FY22
263
FY21
280
Zetron are the proud title sponsor of Shoot for
the Stars, an annual public safety golf fundraiser
with all proceeds directly benefiting Behind the
Badge Foundation, an organisation supporting
the agencies, families, and communities of law
enforcement officers that are seriously injured or
killed in the line of duty.
Shoot for the Stars has consistently grown each
year and is now the largest public safety charity
golf tournament in the region. The event has
raised $275,000 for Behind the Badge Foundation
to date. Beyond the golf course, many lasting
relationships have been formed with public safety
first responders, along with our sponsors. Zetron
supports and provides volunteers to Behind the
Badge Foundation well beyond the golf event.
Codan is a long-time proud supporter of Variety
– the Children’s Charity (Variety). 2022 marks our
34th 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. In addition, Codan is
responsible for 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.
I have been playing in Zetron’s “Shoot for the Stars” tournament since 2016.
It is such a positive and uplifting event. The golf course is so beautiful, and
the event is so well organized, that I am honored to participate. But more
importantly, it means so much to me that Zetron is doing this for the
Behind the Badge Foundation. Especially now, in these tough times,
it feels so good to know that the people at Zetron appreciate what we
do. To know that they have our backs and appreciate the sacrifices that so
many Officers and their families have made, really means the world. I don’t
think people realize how touching it is just to have someone say “Thank
you” which is what Zetron, its sponsors, and supporters are doing when
they honor us with this event. For this, I say, “Thank you Zetron for making
this such a special gift for all of us.”
Detective Fran Smith
Seattle Police Department – 37 year veteran
Internet Crimes Against Children Task Force
“Through Zetron’s unwavering support for Behind the Badge Foundation,
we are able to expand officer wellness programs into new communities across
Washington State. This generous donation also provides immediate and
adaptable resources for families, agencies and communities grieving the loss of
their fallen officer. Behind the Badge Foundation is honored to be the recipient of
the challenging work and dedication this company shows the community.”
Tracy! Michel, Community Engagement,
Behind the Badge Foundation
The Hutt St Centre provides a welcoming and
safe place with the purpose to end homelessness.
The golf day donation has helped 850 people each
month experiencing homelessness with:
• Essential health and wellbeing services including
meals, bathrooms, laundry and locker facilities,
phone charging, mail collection and pastoral care;
• Connections to more than 20 visiting services
including daily healthcare appointments with a
RDNS nurse, twice-weekly GP clinics, eye clinics
and dental care, as well as professional services
such as financial counselling and legal aid; and
• Pathways Program which creates opportunities
for education, training and employment
through individual coaching and group sessions,
supporting people to learn new skills and
qualifications, prepare resumes, practice job
interviews, and obtain or renew important
identification documents.
Other initiatives across our head office and regional
offices include a charitable giving matching program,
where the company matches staff contributions
dollar for dollar, with proceeds benefiting employee
chosen charities, such as the MS Society of SA &
NT, Queensland SES to assist with the 2022 Eastern
Australia Floods Donation Drive, the American Red
Cross, and supporting Hopelink with holiday food
and donations drives to assist families in our local
community who are in need.
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.
Codan hosted its second annual charity golf day in
South Australia, 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 this amount
was donated and distributed evenly amongst
three chosen charities, Variety, Hutt St Centre and
KickStart for Kids. Variety, who invests into the
wellbeing of children who are sick, disadvantaged or
living with a disability, has been able to use the funds
to assist specialist schools via a 22-seat wheelchair
accessible Sunshine Coach that takes children to
and from school and transports them to social and
sporting experiences.
“Codan’s support over so many years has been
invaluable in changing the lives of children in need
in our community. Beyond the balance sheet, we
have enjoyed the personal engagement of senior
management and staff who live the values of the
company and are authentic in their care for the
outcomes we achieve” said Mark McGill CEO.
KickStart for Kids creates extensive programs
within schools to serve breakfast, lunch, mentoring,
school holiday care programs, and period poverty.
Codan’s donation has allowed 30 schools to access
these programs for the year. These funds give many
disadvantaged children the opportunity to achieve
favourable educational outcomes, with the end goal
of breaking out of the unemployment and poverty
cycle that their families have lived in for generations.
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CODANANNUAL REPORT 2022 SUSTAINABILITY REPORT
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. Our scope 1 and 2 emissions increased in FY22
due to the additional office locations acquired from Zetron and DTC. As part
of our recent board approved initiatives, we have committed to review our
environmental footprint to establish the timeframe and financial implication of
making a net zero statement.
Our global head office located in the Technology Park precinct,
South Australia, houses around 240 staff, and is currently
awarded a 5 star Nabers energy rating. Our consumption
decreased by 32% this financial year, which is attributed to
solar panel gains. Head office is fitted with multiple recycling
stations and organic waste bins in staff kitchen areas to enable
sustainable disposal of organic materials.
Scope 1 and 2 emissions
FY22
FY211
Total emissions (CO2e)
Emissions intensity (CO2e)
per FTE
Solar panels (head office)
consumption reduction
1 Excludes DTC and Zetron
1,104 tonnes 623 tonnes
1.51 tonnes
1.65 tonnes
35%
25%
We are mindful of our indirect environmental impact within
our supply chain. Our Supplier Code of Conduct, encourages
our suppliers to develop a more sustainable business by
minimising their environmental impact. 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 FY22.
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 confirm we encountered no environmental
incidences in FY22.
Codan products are RoHS (Restriction 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 Waste
Electrical and Electronic Equipment (WEEE) sticker which
encourages consumers to dispose of the product
thoughtfully when at the end of its lifecycle.
Governance
Corporate Governance Statement
Codan’s Corporate Governance Statement, which was
approved by the board on 17 August 2022, is available on the
company’s website.
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
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 Protection 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 registered
globally during FY22, and both have been resolved. One
of these grievances was reported through our externally
managed hotline.
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 and is compulsory for all employees and forms
part of our induction program. This includes training on Anti-
Bribery and Anti-Corruption, Modern Slavery, Whistleblower
Protection and Code of Conduct. Our training program is
risk-appropriate, with additional tailored training sessions
conducted for staff in high-risk roles.
Anti-Bribery and Anti-Corruption (ABAC) remains a material
topic for our business, as we acknowledge some of our
businesses operate in high-risk environments. Our program
and ABAC Policy is reviewed annually to ensure it remains
fit for purpose and in line with best in practice anti-bribery
compliance programs. Key aspects of the program involve
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. Internal audits are
conducted on our high risk transactions.
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.
FY23
Target
FY22
FY21
ABAC Policy violations
ABAC Internal audits
Sanction breaches and fines NIL
NIL
3
NIL
2
NIL
NIL
1
NIL
Our Supply Chain
Codan has an extensive global supply chain in place, sourcing
product and material from most regions in the world. We
partner with suppliers who meet stringent quality standards,
are innovative and work in safe and responsible ways.
Our dealings with our suppliers reflect Codan’s core values,
and as such, we have built collaborative, honest and trusting
relationships which have resulted in reliable supply over the
long term.
Our supply chain is responsive to the changing needs of our
customers and markets. All Codan suppliers must provide
agility, flexibility and speed to market. At the end of our supply
chain are global distribution centres located in the UAE,
USA, Netherlands, Malaysia, Poland, Brazil, Mexico, India and
Australia, which ensure product is regionally distributed for the
fastest route to market.
Codan Group supplier spend
35%
29%
16%
20%
Asia
North America
Europe
Australia / New Zealand
There are 1,000 active suppliers across the Codan Group,
with supplier spend circa $161 million across mostly
electronic components, as well as cables, antennas, plastics,
and packaging.
36
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CODANANNUAL REPORT 2022
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.
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 FY22 Codan completed penetration testing and
regular vulnerability assessments to highlight potential
system vulnerabilities. Codan has implemented additional
technologies to further segregate our assets, along with
increased security awareness training for all employees.
In FY22, Codan had no known major security incidents or
events that resulted in loss of confidential information or
intellectual property.
SUSTAINABILITY REPORT
Codan produces a Modern Slavery Statement designed
to meet the disclosure requirements of the Australian
Commonwealth Modern Slavery Act 2018. In undertaking
its risk assessment with respect to Modern Slavery, Codan has
again identified that its main risk lies with its major third-party
contract manufacturers. Presently, this includes Venture
and Plexus Corp. Both are based in Penang, Malaysia and
manufacture up to 41% of Codan product.
Codan’s supply and procurement team are in consistent
contact with Plexus and Venture and have undertaken
numerous discussions around their approaches to Modern
Slavery. More recently, Codan’s compliance team has reached
out independently to both contract manufacturers to have a
discussion around the procedures, policies and practises they
have in place to allow Codan’s compliance team full visibility
of their modern slavery programs. It was pleasing to learn
that both contract manufacturers’ programs were in line with
Codan’s expectations. Importantly, both conduct appropriate
training and awareness programs internally, and conduct
ongoing internal audits across their site.
Plexus is in full compliance with the UK Modern Slavery
Act, and are a member of the Responsible Business Alliance
(RBA), being the world’s largest industry coalition dedicated
to corporate social responsibility in global supply chains.
Moving forward, we will continue to work with both
organisations to ensure that they comply with the standards
we expect. We will also extend this requirement to relevant
DTC and Zetron contract manufacturers.
More generally, we have created a Supplier Code of Conduct
and have updated our Supplier Terms and Conditions to
include additional Modern Slavery clauses. 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”. In FY22,
we had no breaches of our Modern Slavery Policy.
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 adopted
the recommendations of the Board of Taxation’s Tax
Transparency 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;
and
• Identification of material temporary and non-
temporary differences.
The Part A financial information can be found in the
Taxation Note (Note 7) of the Notes to the Financial
Report on page 80 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 2022, we paid $38.0 million 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.
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.
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CODANANNUAL REPORT 2022 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 net
profit after tax has grown from less than $16 million
to more than $100 million. This has been achieved
by investing in people, having a commitment to
continuous learning, encouraging entrepreneurship,
rewarding performance and sensible diversification
via acquisitions. 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 defenses.
David has chaired several 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.
ALF IANNIELLO
Wharton GCP, GradCertMgmt, BEng (Electronics)
Managing Director and Chief Executive Officer
Alf joined Codan as the Managing Director and
CEO in January 2022, bringing with him extensive
international experience in the packaging, defence
and automotive industries, most notably holding
senior positions with Schefenacker Vision Systems
and British Aerospace. This international experience
saw Alf manage major facilities in China, Vietnam,
Singapore, Indonesia, and South Africa.
Prior to this appointment, Alf was CEO of the
Adelaide-based Detmold Group for 14 years
and positioned Detmold to become a leading
international packaging solutions provider with
revenues reaching US$450 million. Alf has also held
board positions with SME’s, Tertiary Institutions and
Local Government.
Alf attended the Wharton Business School Global
CEO Program at the University of Pennsylvania
in 2012. He also holds a Graduate Certificate in
Management and Bachelor of Engineering (Electronic
Engineering) from the University of South Australia.
DONALD MCGURK
HNC (Mech Eng), MBA, FAICD, Harvard AMP
Managing Director and Chief Executive Officer
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. He was appointed to the board as a director
in May 2010 and became Managing Director in
November 2010. He retired as Managing Director of
Codan on 28 February 2022.
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 six-year appointment as Chief of
Army. He was appointed to the Codan board in September
2008. 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.
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 terrorism, cybersecurity, and digital
disruption. He will retire as a director of Codan effective on 26
October 2022.
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 37 years’ experience in
professional services, investment banking, broadcast and
telecommunications infrastructure businesses.
Over the past 21 years Graeme has held Executive Chairman
or Group CEO roles at BAI Communications, Transit Wireless
LLC (New York), Nextgen Group (including 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 21 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,
BSA Limited (ASX:BSA, until December 2019) and Chairman
of the main board and of the audit and risk committee for
the Nextgen group (Ontario Teachers’ majority owned
telecommunications infrastructure business).
His current public company board appointments are Codan
(ASX:CDA, since 2015) and until August 2022 he was chairman
of Uniti Group Limited (ASX:UWL). As chairman of Uniti,
Graeme oversaw an IPO in 2019, ten business acquisitions
and several associated equity and debt capital raisings and
significant organic growth. In just over 3 years as a public
company, Uniti grew from a loss making business to circa
$145 million in EBITDA and its enterprise value grew from
around $30 million at the time of listing to $3.8 billion in
August 2022 when the business was sold to a consortium of
financial investors. Uniti’s principal business was the ownership
and operation of a private fibre to the premise network in
Australia, delivering super fast wholesale broadband services
to connected premises.
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 was a Director of Uniti Group Limited (ASX:UWL),
Chair of Audit & Risk Committee and member of the
Nomination & Remuneration Committee until August 2022.
Uniti, a diversified provider of telecommunication services,
listed in February 2019 and through acquisition and organic
growth, increased its enterprise value from around $30 million
at the time of listing to $3.8 billion in August 2022 when the
business was sold to a consortium of financial investors. She
is also a Director of QANTM IP Limited (ASX: QIP), appointed
11 May 2022. QANTM is the owner of a group of leading
intellectual property and trademark services businesses
operating in Australia, New Zealand, Singapore, and Malaysia.
Kathy is a Council member of Flinders University and Chair of
its 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 2022
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ALF IANNIELLO
Wharton GCP, GradCertMgmt, BEng (Electronics)
Managing Director and Chief Executive Officer
Alf joined Codan as the Managing Director and CEO in January 2022, bringing
with him extensive international experience in the packaging, defence and
automotive industries.
Prior to this appointment, Alf was CEO of the Adelaide-based Detmold Group
for 14 years and has held board positions with SME’s, Tertiary Institutions and
Local Government.
Alf attended the Wharton Business School Global CEO Program at the
University of Pennsylvania in 2012. He also holds a Graduate Certificate in
Management and Bachelor of Engineering (Electronic Engineering) from the
University of South Australia
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 19 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 is
presently leading the management of Codan’s strategy for 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, 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 Sangster is the Executive General Manager of the Tactical Communications segment for Codan and
has over 25 years of industry experience. He is responsible for business strategy, financial performance
and operational execution covering a broad portfolio of products and services. Prior to leading the Tactical
Communications segment, he led the global business development efforts for the Communications Division.
Paul joined Codan in 2013.
Prior to Codan, Paul spent 12 years at Cobham Tactical Communications and Surveillance as the Vice President
of Sales and Marketing, based in Washington DC.
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.
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CODANANNUAL REPORT 2022
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2022
44
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
46
62
63
64
65
66
67
68
107
108
45
CODANANNUAL REPORT 2022 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 2022 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
Alf Ianniello
Donald McGurk
Peter Leahy AC
Graeme Barclay
Kathy Gramp
Details of directors and their qualifications and experience are set
out on pages 40 to 41.
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
A
5
10
6
10
10
10
B
5
10
6
10
10
10
Board Audit,
Risk and
Compliance
Committee
meetings
Remuneration
and Nomination
Committee
meetings
A
5
5
5
B
5
5
5
A
2
2
B
2
2
Director
Mr A Ianniello
Mr D J Simmons
Mr D S McGurk
Lt-Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
46
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 over the longer term
and to ensure that Codan continues to operate in a manner that
is aligned to our Core Values and our Sustainability objectives.
The remuneration structures consider:
• the overall level of remuneration for each director and
executive;
• the executive’s ability to control the relevant segment’s
performance; and
• the value of incentives within each key management person’s
remuneration.
In 2020 the Remuneration and Nomination Committee
completed a review of executive remuneration packages to
ensure alignment with shareholders’ interests. This review
resulted in the establishment of a new short-term incentive (STI)
plan for Executives. The STI plan is based on a pooled approach
with a percentage of Codan group EBIT being contributed
to an STI pool with key Executives then sharing in that pool
subject to achieving a threshold level of profitability. From the
board’s perspective, what was most pleasing with this STI plan
structure in its first year of operation in FY21 was the heightened
level of teamwork and camaraderie across our executive team,
which resulted in a significant increase in cooperation across
business units.
In FY21 the STI pool was calculated at 2.4% of the Codan group
EBIT, with this percentage being in line with the average of total
executive STI’s to EBIT over the preceding 2 to 3 years. In FY22
the STI pool percentage was reduced to 2.0% and the individual
cap for each executive (which was one times fixed salary)
was removed.
Our key executives share, in the STI pool, at different percentages
and these percentages are set by the Remuneration and
Nomination Committee each year. No STI’s are paid to executives
unless a minimum threshold level of profitability is achieved, with
this threshold currently being set at 80% of the record level of
EBIT that was achieved in the prior year.
A key improvement to the STI program in FY22 has been the
inclusion of stage gates for each executive, the achievement of
which will determine what percentage of that executives STI will
be paid. The stage gates have 50% of each executive’s STI being
at risk and dependent on the achievement of clearly defined
objectives for the individual’s business unit or the company
overall. The remaining 50% of the STI for each executive is
based on group EBIT achievement as detailed above. In FY22
the stage gates related to the integration and success of the
DTC and Zetron businesses and a threshold level of profitability
for Minelab. Pleasingly all stage gates were achieved. It is not
our intention to publish the specific stage gates each year for
each executive as they will largely reflect key strategic and other
competitively sensitive initiatives. We will however report the
reasoning behind any decisions to pay an element of STI, in the
event that a stage gate is not achieved.
As always, the payment of an STI to an executive is subject to the
Board’s overriding discretion, having considered the executives
compliance with Codan’s core values, objectives, and policies.
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.
47
CODANANNUAL REPORT 2022CODAN 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 risk
of forfeiture at the Board’s discretion until 12 months after the
executive leaves the employment of Codan.
The Board conducted a review of the performance rights plan in
2021 and has made the following changes to the plan for 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 was amended so that the automatic vesting of
performance rights as a result of a take-over bid for Codan
was removed with the vesting of any rights in this situation
now being 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
–
Directors
Mr A Ianniello*
Executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr S P Sangster
* Mr A Ianniello was appointed as a director on 4 January 2022.
10,124
13,774
12,688
12,126
Grant date
Average fair
value per right
at grant date
Exercise
price
per right
Expiry date
Number of
rights vested
during year
–
6 December 2021
6 December 2021
6 December 2021
6 December 2021
($)
–
8.17
8.17
8.34
8.17
($)
–
–
– 30 June 2025
– 30 June 2025
– 30 June 2025
– 30 June 2025
–
–
–
–
–
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
Directors
Mr D S McGurk*
Executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr S P Sangster
91,972
63,647
27,809
48,421
33,509
14,641
10,124
59,881
41,431
18,102
13,774
42,696
17,788
12,688
31,208
35,996
17,536
12,126
16 November 2018
15 November 2019
13 November 2020
16 November 2018
15 November 2019
13 November 2020
6 December 2021
16 November 2018
15 November 2019
13 November 2020
6 December 2021
15 November 2019
13 November 2020
6 December 2021
16 November 2018
15 November 2019
13 November 2020
6 December 2021
100
–
–
100
–
–
–
100
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2022
2023
2024
2022
2023
2024
2025
2022
2023
2024
2025
2023
2024
2025
2022
2023
2024
2025
* Mr D S McGurk ceased to be a director on 28 February 2022.
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%. During FY22, 40,618 performance rights have
been cancelled.
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.
As the earnings per share target has been exceeded to 30 June
2022, it is expected that the performance rights will vest and be
converted into shares before the end of August 2022.
48
49
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
REMUNERATION REPORT – AUDITED (continued)
Performance rights (continued)
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%. During FY22, 17,747 performance rights have
been cancelled.
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.
Performance rights issued on 6 December 2021
The company issued 48,712 performance rights in December
2021 to executives. The fair value of the rights was on average
$8.20 based on the Black-Scholes formula. The model inputs
were: the share price of $9.11, no exercise price, expected volatility
45%, dividend yield 3.0%, a term of three years and a risk-free rate
of 1.6%.
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 38.15 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
8% per annum over the three-year period from the base earnings
per share. The threshold earnings per share will be calculated
using a 2% per annum growth rate.
The movements during the reporting period in the number
of performance rights over ordinary shares in Codan Limited,
held directly, indirectly or beneficially by each key management
person, including their related parties, is as follows:
Directors
Mr A Ianniello*
Mr D S McGurk**
Executives
Mr M Barton
Mr P D Charlesworth
Mr S A French
Mr S P Sangster
Held at
1 July 2021
Issued
Vested
Lapsed
Held at
30 June 2022
–
183,428
96,571
119,414
60,484
84,740
–
–
10,124
13,774
12,688
12,126
–
91,972
48,421
59,881
–
31,208
–
–
–
–
–
–
–
91,456
58,274
73,307
73,172
65,658
* Mr A Ianniello was appointed as a director on 4 January 2022.
** Mr D S McGurk ceased to be a director on 28 February 2022. The closing balance
disclosed reflects the numbers held the day he ceased being a director.
50
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 A Ianniello**
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 S P Sangster
Held at
1 July 2021
Received on
exercise of rights
Other
changes *
Held at
30 June 2022
86,636
N/A
600,948
57,708
38,829
12,500
207,145
445,891
–
4,377
–
–
91,972
–
–
–
48,421
59,881
–
31,208
13,364
41,120
–
–
24,923
3,000
(45,000)
(53,221)
–
2,613
100,000
41,120
692,920
57,708
63,752
15,500
210,566
452,551
–
38,198
* Other changes represent shares that were purchased or sold during the year.
** Mr A Ianniello was appointed as a director on 4 January 2022.
*** Mr D S McGurk ceased to be a director on 28 February 2022. The closing balance
disclosed reflects the numbers held the day he ceased being a director.
51
CODANANNUAL REPORT 2022CODAN 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 A Ianniello*
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
$
$
189,935
185,751
94,968
92,876
94,968
92,876
103,601
101,319
483,472
472,822
–
–
–
–
–
–
–
–
–
–
518,872
–
350,148
585,031
1,352,492
1,057,853
150,308
–
563,657
609,153
713,965
609,153
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
18,993
17,646
9,497
8,823
9,497
8,823
10,360
9,625
48,347
44,917
13,750
–
15,712
23,502
77,809
68,419
$
–
–
–
–
–
–
–
–
–
–
11,850
–
10,092
17,469
21,942
17,469
$
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
$
208,928
203,397
104,465
101,699
104,465
101,699
113,961
110,944
531,819
517,739
–
–
–
–
–
–
30,000
–
154,050
280,087
184,050
280,087
724,780
–
1,093,659
1,515,242
2,350,258
2,032,981
%
–
–
–
–
–
–
–
–
–
–
24.9
–
65.6
58.7
–
–
* Mr A Ianniello was appointed as a director on 4 January 2022. Subject to shareholder approval at the 2022 AGM, performance rights to the value of 15% of fixed remuneration will be
issued under the FY22 performance rights plan.
** Mr D S McGurk ceased to be a director on 28 February 2022.
52
53
CODANANNUAL REPORT 2022CODAN 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
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 S P Sangster
(Executive General Manager,
Tactical Communications)
Total executive
officers’ remuneration
Year
Salary
and fees
Short–term
incentives
$
$
306,042
409,932
289,069
320,708
422,791
365,471
406,025
398,514
406,607
478,254
396,525
409,932
383,604
409,932
400,615
384,131
1,541,465
1,453,669
1,708,050
1,484,968
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Other
short–
term*
$
Post–employment
and superannuation
contributions
$
–
–
–
–
22,760
21,743
2,809
24,993
25,569
46,736
27,500
27,551
23,568
21,694
20,912
–
–
–
71,980
49,245
* 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 A Ianniello 50%, Mr D S McGurk 75%, Mr M Barton 100%,
Mr P D Charlesworth 100%, Mr S A French 100%, and
Mr S P Sangster 100%.
Codan conducts an annual salary review process with an effective
date of 1 January. As part of this process, Directors and Executives
received a 2.5% pay increase on 1 January 2022.
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
$
11,084
10,408
34,361
12,438
–
–
10,730
12,661
56,175
35,507
$
–
–
–
–
–
–
–
–
–
–
$
139,816
147,460
175,123
182,332
188,812
144,974
159,394
146,892
663,145
621,658
$
894,374
795,196
1,134,097
978,460
1,048,441
948,835
989,472
969,292
4,066,384
3,691,783
%
61.5
58.7
57.6
58.9
57.1
55.7
57.5
54.8
–
–
Corporate performance
As required by the Corporations Act 2001, the following
information is presented:
2022
2021
2020
2019
2018
Profit attributable to shareholders ($000)
$100,736
Dividends paid ($000)
Share price at 30 June
Change in share price at 30 June
Earnings per share, fully diluted
$53,361
$6.96
($11.07)
55.6c
$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
54
55
CODANANNUAL REPORT 2022CODAN 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.
FY22 highlights:
• Record underlying net profit after tax of $100.5 million,
representing an increase of 3% over FY21
• Codan group sales increased 16% to $506 million
• More balanced and stable revenues across the Codan group
• DTC and Zetron exceeded first year acquisition targets
achieving $19 million and $15 million EBITDA respectively
• DTC secured largest contract award in the company’s history
• Annual dividend 28.0 cents, fully franked (interim 13.0 cents,
final 15.0 cents)
• Statutory earnings per share 56 cents
• Return on equity of 30%
Despite a challenging operating environment, Codan delivered
another record profit year. We have been able to successfully
execute on our strategy and as a result, the business has grown
and diversified its sales base. The business today has much
stronger foundations and with a well-balanced portfolio of sales,
there is more stability in the business.
DTC and Zetron both delivered results exceeding our year one
expectations. The DTC and Zetron acquisition and integration
processes have been a success and we now have a framework
that is proven and repeatable.
FY22 in summary:
• Maintained 20% NPAT margins despite global inflationary
pressures;
• In-country business development and geographic expansion
initiatives are underway post covid travel restrictions;
• Maintained continuous supply to customers despite global
supply chain challenges;
• Minelab achieved its second highest sales result despite
ongoing geopolitical disruptions and an unprecedented level
of demand during FY21;
• Minelab Countermine business achieved record sales of
$22 million;
• Development of several new metal detector products has
progressed well and we are on track for late first half FY23
product releases;
• Codan, via DTC, was awarded its largest ever contract with a
leading global technology company and we have delivered
against the first purchase order;
• Further strengthened our Communications segment by
acquiring Broadcast Wireless Systems;
• Zetron exceeded $100 million in sales as a result of securing
numerous large contracts; and
• Increased the Communications orderbook by 23% to
$149 million.
Dividend
The company announced a final dividend of 15.0 cents per share,
fully franked, bringing the full-year dividend to 28.0 cents, up 4%
for the year. This dividend has a record date of 26 August 2022
and will be paid on 7 September 2022.
Financial performance and other matters
Revenue
Communications
Metal Detection
Other
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
Underlying earnings per share, basic
Statutory earnings per share, basic
Ordinary dividend per share
FY22
$m
% of sales
FY21
$m
% of sales
241.7
262.3
2.1
506.1
162.0
137.4
(1.7)
135.7
(35.2)
100.5
–
–
100.5
55.6 cents
55.6 cents
28.0 cents
48%
52%
0%
100%
32%
27%
27%
20%
95.5
326.5
15.0
437.0
158.8
139.8
(1.1)
138.7
(41.4)
97.3
22%
75%
3%
100%
36%
32%
32%
22%
(5.2)
(1.9)
90.2
54.0 cents
50.1 cents
27.0 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.
The decision to invest in production capacity and inventory
across all business units impacted cash generation in FY22.
As inventory levels have reached targeted levels and supply
chains normalise, cash generation will gradually improve in FY23.
Notwithstanding the substantial inventory investment, the
second half cash generation improved significantly, generating
$65 million of cash from operating activities in comparison to
cash outflow of $13 million in the first half.
56
57
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
DIRECTORS' REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Performance by business unit:
Metal Detection
Minelab is the world leader in handheld metal detecting
technologies for the recreational, gold mining, demining
and military markets. Over the last 30 years, Minelab has
introduced more innovations than any of its competitors
and has taken the metal detection industry to new levels of
technological excellence.
Covid has had an unprecedented impact on people and
economies worldwide and the restrictions and government
stimulus impacted consumer demand patterns, particularly in
FY21 and the early months of FY22. So, while FY22 sales of $262
million did not reach the record highs of FY21, they were Minelab’s
second best year and represented growth of 11% over FY20. In
FY22, Minelab had a clear focus on improving profit margins and
cost efficiencies by passing on price increases to customers and
reducing freight expenses. As a result, Minelab increased its profit
margin percentage from 44% in FY21 to 46% in FY22, which was a
remarkable achievement given the operating environment.
Gold mining sales in FY22 did not reach the record highs of FY21.
This was primarily due to lower sales into the Northeast African
market. This market was impacted by a number of factors,
including geopolitical unrest and a decline in the number of
artisanal miners as they returned to more traditional forms of
employment post covid. With travel restrictions being lifted,
business development activities have fully resumed and we
are confident of continuing Minelab’s historical success of
establishing new regions and countries to sell our market leading
gold detectors, but it will take some time as we have effectively
been out of the market for over 2 years.
Recreational markets held up throughout FY22 and were
remarkably resilient despite returning to a normalised demand
profile post covid, growing inflationary pressures impacting
consumer sentiment and the cessation of sales into Russia.
Despite these headwinds, sales in North America grew 9% and
LATAM grew 35%, largely attributable to the ongoing success in
penetrating retail distribution channels and the establishment
of e-commerce channels. The business remains well positioned
to drive further market share growth with new product releases
in FY23, new geographies being established and e-commerce
distribution channels continuing to develop.
As a result of winning numerous large tenders in both established
and emerging markets, Countermine achieved record sales in
FY22. The new products that have been introduced in recent
years have been very well accepted, particularly by a number of
global humanitarian demining agencies.
The challenging business conditions outlined above have
continued into the start of FY23. In FY22, we experienced a very
strong start to the year through a combination of the tail end of
abnormal covid related demand and the supply of some orders
that could not be fulfilled due to stock shortages. These factors
increased sales in July 2021 by approximately $15 million. This,
coupled with the fact that sales into Russia have ceased, means
that FY23 first half sales may not reach the $138 million achieved
in FY22. We do however expect improvement in the second half
of FY23, as we generate sales from new product releases and
realise the benefits of our business development and marketing
initiatives. There is a clear global strategy that will be executed
over the next three years focussed on marketing, business
development and the introduction of our next generation range
of products. Since FY18, Minelab sales achieved a compound
annual growth rate of 12% and we are confident that the business
will continue to grow as we enter new geographies and introduce
our world leading metal detection technology.
Communications
Codan Communications comprises our Tactical (including DTC)
and Zetron businesses which 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 communications
activities worldwide.
Codan Communications sales increased by $146 million on FY21,
with this increase driven by our newly acquired businesses. Both
DTC and Zetron exceeded year one EBITDA targets of $14 million
and $8 million, achieving $19 million and $15 million respectively.
The business remains well positioned as we enter FY23 with a
strong order book of $149 million, representing a 23% increase
from June 2021.
The Communications division is now a much more globally
relevant, robust and diversified business and is well positioned to
serve high growth markets. This division will continue to evolve
and grow by penetrating new geographies, introducing new
products, leveraging technologies into adjacent markets and
continuing with a clear acquisition strategy.
The business completed the acquisition of Broadcast Wireless
Systems (BWS) on 1 December 2021 for a total consideration of
$8.4 million inclusive of a $4.8 million earn-out. BWS is exceeding
our year one expectations under DTC’s ownership.
Tactical Communications (including DTC)
Outlook
While general business conditions remain challenging, we
continue to focus on building a more predictable and diversified
sales base, delivering long term shareholder value. In relation to
the FY23 outlook:
• Sales and marketing initiatives and global business
development activities have resumed across all businesses;
• The business conditions Minelab experienced in the second
half of FY22 are expected to continue into the first half of
FY23;
• We expect Minelab’s second half sales to improve as business
development activities continue and additional new Minelab
products are released;
• We have a strong Communications orderbook of $149 million
and a growing pipeline of quality opportunities;
• Tactical Communications is focussed on business
development opportunities, in particular military programs,
given the increased instability in the world;
• Zetron is now successfully integrated and the business
expects to realise greater sales synergies in FY23; and
• The business will continue to manage inflationary pressures
to maintain profitability, maximise cash generation and seek
to execute on its acquisition strategy.
We believe that our Communications business will achieve strong
growth in FY23. As explained above, Minelab’s sales in the first
half of FY23 may not reach the level achieved in FY22, however
with new product releases we are confident of a stronger
second half.
The Board will provide a further business update at the Annual
General Meeting on October 26 2022, which will be a hybrid
meeting with in-person and virtual attendance, to provide all
shareholders with the ability to participate.
The acquisition of DTC has been a strategically important one
for Tactical Communications, transitioning us from a traditional
voice only platform to now include data and video. A key
differentiator of Tactical Communication’s technology relates
to the tailored waveforms and the size, weight, and power of
our products. This technology also allows us to access several
market segments outside of Codan’s traditional markets. These
include Law Enforcement and Intelligence, Unmanned (drones)
and Broadcast. Tactical Communications is well positioned to
serve these growing market segments from participating in large
military programs of record through to servicing the remote
broadcast production industry.
During FY22, there has been strong demand in military markets
with Tactical Communications being awarded the largest ever
order in Codan’s history for the supply of software defined mesh
radios. This first order for approximately $38 million is part of
a multi-year framework agreement, of which $13 million was
delivered in FY22.
Zetron
Zetron is one of only two providers globally that offers a full
suite of integrated emergency response technologies, with
an exceptionally strong brand in North America. Like Tactical,
Zetron’s technology is applicable to a wide range of market
segments including transportation, utilities, domestic security,
natural resources and institutions.
Zetron has successfully integrated the legacy LMR business
and the acquired Zetron business and this combined business
exceeded $100 million in sales in FY22, which was a great
achievement. The business secured numerous large contracts
including the upgrade and expansion of our emergency response
system for Delta Air Lines and a renewal of up to 10 years for our
contract with the State of Iowa for a hosted Next Generation
911 emergency call taking solution. FY22 focussed on the
consolidation and integration of the business, and as we enter
FY23, we expect to realise greater sales synergies by investing in
marketing and the go-to market strategy.
Sustainability
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 60 years. Codan continues
to execute on its sustainability strategy and during FY22, the
group established a sustainability committee dedicated to
identifying and managing risks, issues and opportunities that
are important to the business and our stakeholders. In FY23,
additional areas of focus include specific objectives to promote
and develop diversity amongst students pursuing a career in
STEM (including females and students from low socio-economic
backgrounds) and to establish a targeted approach to giving
back to the disadvantaged groups in the communities in which
our businesses operate.
Now in its third year of production, Codan’s Sustainability Report
continues its evolution and will be published as part of Codan’s
Annual report on 21 September 2022.
58
59
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' REPORT (continued)
DIVIDENDS
Dividends paid or declared by the company to members since
the end of the previous financial year were:
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.
Refer page 62 for a copy of the auditor’s independence
declaration as required under Section 307C of the Corporations
Act 2001.
Cents
per
share
Total
amount
$000 Franked
Date of
payment
Declared and
paid during
the year ended
30 June 2022:
FY21 final
16.5
29,846
FY22 interim
13.0
23,515
100% 10 September
2021
10 March
2022
100%
Declared after
the end of
the year:
FY22 final
15.0
27,133
100%
7 September
2022
All dividends paid or declared by the company since the end of
the previous financial year were fully franked.
EVENTS SUBSEQUENT TO REPORTING DATE
Except for the declaration of the FY22 final dividend detailed in
note 5, there has not arisen in the interval between the end of the
financial year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the
directors of the company, to affect significantly the operations of
the group, the results of those operations, or the state of affairs of
the group, in future financial years.
LIKELY DEVELOPMENTS
The group will continue with its strategy of continuing to invest in
new product development and to seek opportunities to further
strengthen profitability by expanding into related businesses
offering complementary products and technologies.
Further information about likely developments in the operations
of the group and the expected results of those operations
in future financial years has not been included in this report
because disclosure of the information would be likely to result in
unreasonable prejudice to the group.
DIRECTORS’ INTERESTS
The relevant interest of each director in the shares issued by the
company as notified by the directors to the Australian Securities
Exchange in accordance with S205G(1) of the Corporations Act
2001, at the date of this report is as follows:
Ordinary shares
100,000
41,120
57,708
63,752
15,500
Mr D J Simmons
Mr A Ianniello
Lt-Gen P F Leahy
Mr G R C Barclay
Ms K J Gramp
60
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 below. Included in the audit
fees for the year ended 30 June 2022 is an amount of $49,975
related to the acquisitions of DTC and Zetron which was agreed
after completion of the 30 June 2021 Directors’ Report.
STATUTORY AUDIT
Audit and review of financial reports
SERVICES OTHER THAN
STATUTORY AUDIT
Taxation advice and
compliance services
Consolidated
2021
$
2022
$
327,551
327,551
218,644
218,644
24,607
22,997
24,607
22,997
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
A Ianniello
Director
Dated at Mawson Lakes
this 17th day of August 2022.
61
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
LEAD AUDITOR’S
INDEPENDENCE DECLARATION
under Section 307c of the Corporations Act 2001
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2022
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
Note
Consolidated
2022
$000
2021
$000
2
4
3
4
7
6
6
506,145
(219,796)
286,349
1,744
(36,151)
(78,864)
(33,288)
(2,396)
(1,727)
135,667
(35,137)
100,530
100,736
(206)
100,530
437,049
(193,911)
243,138
49
(23,151)
(53,463)
(26,234)
(1,612)
(7,913)
130,814
(40,617)
90,197
90,351
(154)
90,197
55.7 cents
55.6 cents
50.1 cents
49.8 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 68 to 106.
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 2022 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
17 August 2022
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.
62
63
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2022
CONSOLIDATED BALANCE SHEET
for the year ended 30 June 2022
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
2022
$000
100,530
(2,339)
702
(1,637)
17,837
2021
$000
90,197
(1,441)
433
(1,008)
4,097
Note
20
20
Other comprehensive income/(loss) for the period, net of income tax
16,200
3,089
Total comprehensive income for the period
116,730
93,286
Attributable to:
Equity holders of the company
Non-controlling interests
116,936
(206)
116,730
93,440
(154)
93,286
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 68 to 106.
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
Trade and other payables
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
2022
$000
2021
$000
Note
8
11
12
7
13
14
31
15
16
17
31
7
18
17
31
9
7
18
19
20
22,613
59,775
102,488
767
–
17,852
203,495
19,732
25,067
92,261
250,377
387,437
590,932
95,812
4,592
6,806
–
14,987
122,197
5,676
25,651
52,000
9,482
7,970
100,779
222,976
367,956
47,059
86,431
234,466
367,956
368,276
(320)
367,956
22,362
34,189
62,770
122
17,762
15,273
152,478
17,580
26,989
74,569
231,229
350,367
502,845
101,542
6,950
14,785
1,043
13,214
137,534
4,973
25,170
24,000
4,746
2,812
61,701
199,235
303,610
45,842
70,471
187,297
303,610
303,724
(114)
303,610
64
65
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 68 to 106.
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021 previously accounted for on a provisional basis,
refer note 32.
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2022
Consolidated
Foreign
currency
translation
reserve
$000
8,649
–
–
–
Share
capital
$000
45,842
–
–
–
Hedging
reserve
$000
(655)
–
–
(1,637)
Equity
based
payment
reserve
$000
Profit
reserve
$000
Retained
earnings*
$000
Total
$000
3,496
–
750
–
58,981 187,297 303,610
– 100,530 100,530
750
–
–
(1,637)
–
–
–
17,837
–
–
–
–
17,837
2022
Balance as at 1 July 2021
Profit for the period
Performance rights expensed
Change in fair value of cash flow hedges
Exchange differences on translation of
foreign operations
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
45,842
26,486
(2,292)
4,246
58,981 287,827 421,090
CASH FLOWS FROM INVESTING ACTIVITIES
Consolidated
2022
$000
2021
$000
Note
486,313
(394,657)
14
(1,063)
(686)
(38,200)
51,721
(3,606)
240
17,773
(27,572)
(6,087)
(501)
(19,753)
450,231
(281,501)
385
(741)
(718)
(36,356)
131,300
(159,774)
2
–
(18,566)
(4,139)
(244)
(182,721)
28,000
(7,317)
(53,361)
24,000
(4,195)
(38,809)
(32,678)
(19,004)
(710)
(70,425)
22,362
961
–
22,613
92,830
351
(394)
22,362
31
10
32
4
15
9
31
5
8
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
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 68 to 106.
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 2022
–
990
227
1,217
47,059
–
–
–
–
26,486
–
–
–
–
(2,292)
–
(990)
–
(990)
3,256
– (53,361)
–
–
–
–
– (53,361)
(53,361)
–
227
(53,134)
58,981 234,446 367,956
*The amounts in retained earnings includes the portion for non-controlling interests with an opening retained loss as at 1 July 2021 of $0.114 million, FY22 loss after tax of $0.206
million (FY21 loss: $0.154 million) which results in a closing balance of $0.320 million retained loss as at 30 June 2022.
Consolidated
Foreign
currency
translation
reserve
$000
Share
capital
$000
Equity
based
payment
reserve
$000
Hedging
reserve
$000
Profit
reserve
$000
Retained
earnings
$000
Total
$000
2021
Balance as at 1 July 2020
44,746
4,552
353
2,802
58,981 135,909 247,343
Profit for the period
Performance rights expensed
Change in fair value of cash flow hedges
Exchange differences on translation of
foreign operations
–
–
–
–
–
–
–
–
–
(1,008)
–
1,537
–
4,097
–
–
–
–
–
–
90,197
–
–
90,197
1,537
(1,008)
–
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
–
–
–
–
58,981
(38,809)
–
–
(38,809)
187,297
(38,809)
–
253
(38,556)
303,610
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 68 to 106.
66
67
CODANANNUAL REPORT 2022CODAN 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 2022
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
2022 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
17 August 2022.
(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 16).
• measurement of inventory net realisable value (refer note 1 (l))
• measurement of expected credit loss allowance for trade
receivables (refer note 26(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 2021.
(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.
Construction contracts
Foreign operations
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 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.
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 over time as the
services are provided. The stage of completion for determining
the amount of revenue to recognise is assessed by reference
to costs incurred comparing with total estimated costs. If the
services are provided under a single arrangement, then the
consideration is allocated based on their relative stand-alone
selling prices. The stand-alone selling price is determined based
on the list prices at which the group sells the services in separate
transactions.
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.
(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.
(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.
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CODANANNUAL REPORT 2022CODAN 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 2022
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Derivative financial instruments (cont'd)
Hedging (cont'd)
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.
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.
Tax consolidation
The company is the head entity in the tax-consolidated group
comprising all the Australian wholly owned subsidiaries.
The company recognises the current tax liability of the tax-
consolidated group. The tax-consolidated group has determined
that subsidiaries will account for deferred tax balances and will
make contributions to the head entity for the current tax liabilities
as if the subsidiary prepared its tax calculation on a stand-
alone basis.
The company recognises deferred tax assets arising from unused
tax losses of the tax consolidated group to the extent that it is
probable that future taxable profits of the tax consolidated group
will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets
arising from unused tax losses, as a result of revised assessments
of the probability of recoverability, are recognised by the head
entity only.
(i) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred is
not recoverable from the Australian Taxation Office (ATO). In
these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or is expensed.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability in the
balance sheet.
Cash flows are included in the 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.
(l)
Inventories
Raw materials and stores, work in progress and finished goods are
measured at the lower of cost (determined on a first-in first-out
basis) and net realisable value. Net realisable value 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 or groups of cash-generating units and
is not amortised but is tested annually for impairment.
Measuring goodwill
The group measures goodwill as the fair value of the
consideration transferred including the recognised amount of
any non-controlling interest in the acquiree, 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.
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CODANANNUAL REPORT 2022CODAN 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 2022
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Intangible assets (continued)
(p) Property, plant and equipment
Amortisation
Subsequent costs
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 &
intellectual property
Computer software
Brand names
Customer relationships
Straight-
line
Units
of production
2–15 years
5–10 years
3–7 years
20 years
5 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date.
(o) Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly probable that
they will be recovered primarily through sale rather than through
continuing use.
Such assets are generally measured at the lower of their carrying
amount and fair value less costs to sell. Once classified as held-for-
sale, intangible assets and property, plant and equipment are no
longer amortised or depreciated.
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.
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.
(q)
Impairment
The carrying amounts of the group's assets, other than
inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication
of impairment. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that asset.
If any such impairment exists, the asset's recoverable amount
is estimated.
For goodwill and intangible assets that have an indefinite useful
life or are not yet available 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.
(s)
Interest bearing borrowings
Interest bearing borrowings are recognised initially at their fair
value, less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised
cost, with any difference between cost and redemption value
being recognised in the income statement over the period of the
borrowings on an effective-interest basis.
(t) Employee benefits
Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries, incentives
and annual leave represent 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.
Warranty
A provision is made for the group's estimated liability on all
products sold and still under warranty, and includes claims
already received. The estimate is based on the group's warranty
cost experience over previous years.
(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.
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CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES 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 cash balances),
corporate expenses, 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.
The “Other” business segment relates to the Tracking Solutions
business that was sold on 1 July 2021 and the ongoing
manufacturing and sale of tracking products to Caterpillar Inc.
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: DTC, Tactical Communications and Zetron,
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, India, Ireland, Mexico, Singapore and the United
Arab Emirates.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2022
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(v) Leases (continued)
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.
(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 2022 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.
74
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CODANANNUAL REPORT 2022CODAN 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 2022
GROUP PERFORMANCE (continued)
Information about reportable
segments
Communications Metal detection Tracking solutions
Consolidated
Revenue
External segment revenue
Result
Segment result
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
Total depreciation and amortisation
Assets
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
Segment assets
Unallocated corporate assets
Consolidated total assets
2022
$000
2021
$000
2022
$000
2021
$000
2022
$000
2021
$000
2022
$000
2021
$000
241,736
95,490 262,252
326,564
2,157
14,995 506,145 437,049
49,952
16,206
121,372
142,384
865
3,111
14,184
7,743
9,467
9,461
–
1,071
172,189
(1,710)
(34,812)
135,667
161,701
(895)
(22,079)
138,727
(35,137)
(41,438)
100,530
–
–
100,530
23,651
949
24,600
97,289
(5,177)
(1,915)
90,197
18,275
754
19,029
2,059
335
2,578
2,226
–
351,409 294,043 190,558 130,879
1,998
16
2,577
4,637
1,541
1,450
4,118
6,087
17,762 543,965 442,684
60,875
46,967
590,932 503,559
The group derived its revenues from a number of countries. The two significant countries where revenue was 10% or more of total
revenue were the United States of America totalling $198.754 million (2021: $102.134 million) and United Arab Emirates totalling $69.650
million (2021: $133.487 million).
The group’s non-current assets, excluding financial instruments and deferred tax assets, were located as follows: the United States of
America $172.882 million (2021: $151.371 million), Australia $141.295 million (2021: $137.902 million), Canada $51.882 million (2021: $47.694
million), United Kingdom $18.568 million (2021: $2.948 million), Denmark $2.554 million (2021: $1.463 million), United Arab Emirates
$0.137 million (2021: $0.268 million), Brazil $0.103 million (2021: $0.150 million) and Ireland $0.016 million (2021: $0.019 million).
3. 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
Customer Relationships
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
Consolidated
2022
$000
2021
$000
(14)
661
1,063
686
2,396
7,281
292
3,853
11,426
7,478
4,120
410
417
178
247
324
13,174
85,039
13,794
8,119
(45)
5,605
750
228
113,490
(385)
538
741
718
1,612
3,554
119
3,023
6,696
7,746
3,678
409
306
168
–
26
12,333
55,766
4,425
4,943
856
3,198
1,537
253
70,978
76
77
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES Consolidated
2022
$000
2021
$000
6. EARNINGS PER SHARE
The group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or
loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the
period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise performance rights granted to
employees.
Net profit used for the purpose of calculating basic and diluted earnings per share
100,736
90,351
The weighted average number of shares used as the denominator number for basic earnings per share was 180,826,994 (2021:
180,424,509). 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 2022 was based on a weighted average number of ordinary shares
outstanding, after adjustment for the effects of all dilutive potential ordinary shares of 181,312,097 (2021: 181,255,390). The movement in
the year relates to the shares issued under the performance rights granted and employee share plan.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2022
GROUP PERFORMANCE (continued)
4. OTHER EXPENSES / (INCOME)
Other income:
Gain on sale of Tracking Solutions business
Other income
As disclosed in the 30 June 2021 annual financial report, Codan Limited sold 100% of the shares in
its wholly-owned subsidiary Minetec Pty Ltd to Caterpillar Holdings Australia Pty. Ltd on 1 July 2021.
The consideration comprised cash received of $17.773 million and a holdback amount of $1.662
million, and the net assets disposed were $17.853 million, which resulted in a gain on sale of $1.582
million.
Other expenses:
Acquisition related expenses
Restructuring expenses
Loss on sale of property, plant and equipment
5. DIVIDENDS
Codan Limited has provided or paid for dividends as follows:
• ordinary final fully-franked dividend of 16.5 cents per ordinary share paid on 10 September 2021
• ordinary interim fully-franked dividend of 13.0 cents per ordinary share paid on 10 March 2022
• 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
Consolidated
2022
$000
2021
$000
1,582
162
1,744
–
49
49
–
1,610
117
1,727
5,177
2,736
–
7,913
29,846
23,515
–
–
–
–
19,856
18,953
53,361
38,809
Subsequent events
Since the end of the financial year, the directors declared a final ordinary fully franked dividend of 15.0 cents per share, payable
on 7 September 2022. The financial impact of this final dividend of $27.133 million has not been brought to account in the group
financial statements for the year ended 30 June 2022 and will be recognised in subsequent financial reports.
Dividend franking account
Franking credits available to shareholders for subsequent financial years (30%)
69,191
64,894
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
$11.628 million (2021: $12.764 million).
78
79
CODANANNUAL REPORT 2022CODAN 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 2022
TAXATION
7.
INCOME TAX
A. Income tax expense
Current tax expense:
Current tax paid or payable for the financial year
Adjustments for prior years
Deferred tax expense:
Origination and reversal of temporary differences
Total income tax expense in income statement
Reconciliation between tax expense and pre-tax net profit:
The prima facie income tax expense calculated at 30% on the profit from ordinary activities
Decrease in income tax expense due to:
Additional deduction for research and development expenditure
Effect of tax rates in foreign jurisdictions
(Over)/under provision for taxation in previous years
Non-assessable amounts
Other deductible expenses
Recognition of tax losses
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
2022
$000
2021
$000
30,922
(610)
30,312
4,825
35,137
39,675
(70)
39,605
1,012
40,617
40,700
39,244
(1,531)
(1,769)
(610)
(475)
(825)
(468)
35,022
18
97
–
–
35,137
(14,663)
(19)
38,200
1,365
(30,922)
(6,039)
767
(6,806)
(6,039)
(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)
C. Deferred tax liabilities
Provision for deferred income tax comprises the estimated expense
at the applicable tax rate of 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
Comparative information were restated due to finalisation of fair values recognised in the balance
sheet as at 30 June 2021 previously accounted for on a provisional basis, refer note 32.
D. Effective tax rates
Global operations - total consolidated tax expense
Australian operations - Australian company income tax expense
Consolidated
2022
$000
2021
$000
23,922
21,277
2,299
2,351
(780)
(591)
(2,305)
(5,327)
(1,538)
(247)
(5,951)
9,482
(776)
(1,183)
(2,552)
(6,820)
(747)
(2,082)
(4,722)
4,746
2022
26%
27%
2021
31%
31%
80
81
CODANANNUAL REPORT 2022CODAN 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 2022
CASH MANAGEMENT
8. CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
9. 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
2022
$000
2021
$000
192
22,421
22,613
179
22,183
22,362
52,000
52,000
24,000
24,000
100,921
1,307
102,228
52,000
1,464
344
53,808
47,457
962
48,419
80,645
1,133
81,778
24,000
1,427
230
25,657
55,218
903
56,121
10. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of profit after income tax to net cash provided by operating activities
Profit after income tax
Add/(less) items classified as investing or financing activities:
Gain on sale of Tracking Solutions business
(Gain)/loss on sale of non-current assets
Add/(less) non-cash items:
Depreciation
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
Increase/(reduction) in provisions
Net cash from operating activities
Consolidated
2022
$000
2021
$000
100,530
90,197
(1,582)
117
11,426
13,174
977
(3,063)
1,977
–
(2)
6,696
12,333
1,790
4,261
(747)
123,556
114,528
(24,466)
(39,718)
(2,579)
(7,168)
2,096
51,721
9,239
(16,441)
(418)
24,205
187
131,300
In addition to these facilities, the group has cash at bank and short-term deposits of $22.613 million as set out in note 8.
Bank Facilities
The multi-option facility has a number of components that are supported by interlocking guarantees between Codan Limited and
its subsidiaries and are subject to compliance with certain financial covenants. The first multi-option facility is for $80 million and
has a term of three years expiring in April 2024 and the second facility is for $20 million and has a term of 12 months expiring in
March 2023. A third multi-option facility for $20 million may be available subject to our financial institution’s approval.
Weighted average interest rates:
Cash at bank
Cash advance
Consolidated
2022
%
0.22
1.36
2021
%
0.42
1.35
82
83
CODANANNUAL REPORT 2022CODAN 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 2022
OPERATING ASSETS AND LIABILITIES
11. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Less: expected credit loss provision
Other debtors
Consolidated
2022
$000
2021
$000
60,939
(2,950)
1,786
59,775
37,185
(3,019)
23
34,189
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
12. INVENTORY
Raw materials
Work in progress
Finished goods
14. PROPERTY, PLANT AND EQUIPMENT
Leasehold property at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Capital work in progress at cost
35,944
18,287
48,257
102,488
29,325
16,146
17,299
62,770
Total property, plant and equipment
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set
out below:
In FY22, inventories of $179.483 million (2021: $169.540 million) were recognised as an expense and included in cost of sales. As at
30 June 2022, $52.511 million of inventory has been written down to net realisable value less cost to sell.
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
13. OTHER ASSETS
Prepayments
Project work in progress
Other
10,258
5,231
2,363
17,852
7,334
4,392
3,547
15,273
84
Leasehold property improvements
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Adjustment on prior year's acquisitions
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
Net foreign currency differences on translation
Carrying amount at end of year
Total carrying amount at end of year
Consolidated
2022
$000
2021
$000
6,659
(6,049)
610
7,149
(6,321)
828
57,610
(42,406)
15,204
58,254
(43,282)
14,972
3,918
1,780
19,732
17,580
828
–
–
8
–
–
(292)
66
610
14,972
–
3,465
578
–
(357)
(3,853)
399
15,204
1,780
–
2,614
(578)
102
3,918
19,732
522
607
(183)
10
5
–
(119)
(14)
828
11,696
1,701
3,060
1,799
(315)
–
(3,023)
54
14,972
1,958
557
1,069
(1,804)
–
1,780
17,580
85
CODANANNUAL REPORT 2022CODAN 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 2022
OPERATING ASSETS AND LIABILITIES (continued)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
Consolidated
2022
$000
2021
$000
15. 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
Amortisation
Net foreign currency differences on translation of foreign entities
16. 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
86
201,402
(109,141)
92,261
171,739
(97,170)
74,569
74,569
–
27,572
–
(11,598)
1,718
92,261
22,051
(21,245)
806
15,439
(14,569)
870
5,396
(4,935)
461
7,335
(418)
6,917
1,161
(261)
900
67,777
1,455
18,566
(2,094)
(11,424)
289
74,569
21,986
(20,740)
1,246
15,096
(14,296)
800
5,442
(4,826)
616
6,674
(26)
6,648
1,064
–
1,064
240,423
220,855
250,377
231,229
Reconciliations
Intellectual property
Carrying amount at beginning of year
Amortisation
Net foreign currency differences on translation of foreign entities
Computer software
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Adjustment on prior year's acquisitions
Additions
Transfers from capital work in progress
Amortisation
Net foreign currency differences on translation of foreign entities
Consolidated
2022
$000
2021
$000
1,246
(410)
(30)
806
800
–
–
501
–
(417)
(14)
870
1,704
(409)
(49)
1,246
753
403
(275)
237
–
(306)
(12)
800
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
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
616
–
–
–
(178)
23
461
473
312
7
(9)
(168)
1
616
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)
Amortisation
Net foreign currency differences on translation of foreign entities
6,648
–
(324)
593
6,917
1,064
–
(247)
83
900
–
6,442
(26)
232
6,648
–
1,064
–
–
1,064
87
CODANANNUAL REPORT 2022CODAN 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 2022
OPERATING ASSETS AND LIABILITIES (continued)
16. INTANGIBLE ASSETS (CONTINUED)
Goodwill
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Adjustment on prior year's acquisitions
Reclassification to asset held for sale
Net foreign currency differences on translation of foreign entities
The following divisions have significant carrying amounts of goodwill:
Tactical Communications*
Zetron
Minelab
Consolidated
2022
$000
2021
$000
220,855
7,826
–
–
11,742
240,423
124,906
61,560
53,957
240,423
83,816
138,047
4,177
(8,538)
3,353
220,855
108,826
58,072
53,957
220,855
*Tactical Communications goodwill includes $7.416 million that relates to the BWS acquisition (refer note 32). The BWS goodwill is
also tested for impairment annually.
Goodwill
The recoverable amount of cash generating units or groups of cash generating units has been determined using value-in-use
calculations. The approach to the value-in-use calculations for these units or groups of units is similar. The first year of the cash
flow forecasts is based on the oncoming year's budget, and cash flows are forecast for a 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 12% (FY21: 10%) 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.
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables and accruals*
Net foreign currency hedge payable
Non-Current
Other payables and accruals*
41,705
50,831
3,276
95,812
42,423
58,183
936
101,542
5,676
4,973
* In the prior year financial report deferred income was classified as current liabilities in full. In the current year $5.676 million of
the deferred income has been classified as non-current liabilities. The prior period non-current other payables and accruals has
been increased and the current portion decreased by $4.973 million for comparability purposes.
18. PROVISIONS
Current
Employee benefits
Warranty repairs
Other
Reconciliation of warranty provision
Carrying amount at beginning of year
Acquisitions through entities acquired (net value)
Provisions made
Payments made
Non-Current
Employee benefits
Other
Consolidated
2022
$000
2021
$000
10,142
3,914
931
14,987
3,440
–
2,020
(1,546)
3,914
1,046
6,924
7,970
9,774
3,440
–
13,214
1,921
627
2,039
(1,147)
3,440
1,469
1,343
2,812
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
88
89
CODANANNUAL REPORT 2022CODAN 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 2022
CAPITAL MANAGEMENT
19. SHARE CAPITAL
Share capital
Opening balance (180,506,054 ordinary shares fully paid)
Issue of share capital through vested performance rights
Issue of share capital through employee share plan
Closing balance (180,883,935 ordinary shares fully paid)
Consolidated
2022
$000
2021
$000
45,842
990
227
47,059
44,746
843
253
45,842
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at shareholders' meetings. In the winding up of the company, ordinary shareholders rank after all creditors and are fully entitled to
any proceeds on liquidation.
20. RESERVES
Foreign currency translation reserve
Hedging reserve
Equity based payment reserve
Profit reserve
26,486
(2,292)
3,256
58,981
86,431
8,649
(655)
3,496
58,981
70,471
21. CAPITAL MANAGEMENT
The board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. The board of directors monitors the level of dividends paid to ordinary shareholders and the
overall return on capital.
The board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings, and
the advantages and security afforded by a sound capital position. This approach has not changed from previous years.
Neither the company nor any of its subsidiaries is subject to externally imposed capital requirements.
4,552
4,097
8,649
8,649
17,837
26,486
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.
2,802
Balance at beginning of year
1,537
Performance rights expensed
(843)
Performance rights vested
3,496
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
3,496
750
(990)
3,256
(655)
(1,637)
(2,292)
353
(1,008)
(655)
58,981
58,981
58,981
58,981
90
91
CODANANNUAL REPORT 2022CODAN 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 2022
GROUP STRUCTURE
22. GROUP ENTITIES
Name
Parent Entity
Codan Limited
Controlled Entities
Broadcast Wireless Systems Limited*
Codan Defence Electronics Pty Ltd
Codan Executive Share Plan Pty Ltd
Codan Radio Communications ME DMCC
Codan Radio Communications Pty Ltd
Codan RSA (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 de Mexico SA de CV
Minelab do Brasil Equipamentos Para Mineração Ltda
Minelab Electronics Pty Limited
Minelab India Private Limited**
Minelab International Limited
Minelab MEA General Trading LLC
Minetec Pty Ltd***
Spectronic Denmark 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
2022
%
2021
%
Australia
Ordinary
UK
Australia
Australia
UAE
Australia
South Africa
UK
USA
USA
Canada
UK
Singapore
USA
USA
UK
USA
USA
USA
Mexico
Brazil
Australia
India
Ireland
UAE
Australia
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
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
100
100
100
100
100
-
100
49
100
100
100
100
100
100
100
* Broadcast Wireless Systems Limited was acquired by the group on 1 December 2021. Refer note 32 for details.
** Minelab India Private Limited was incorporated on 13 October 2021.
*** Minetec Pty Ltd was disposed on 1 July 2022. Refer note 4 for details.
92
23. 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
CURRENT LIABILITIES
Trade and other payables
Current tax payable
Lease Liability
Provisions
Total current liabilities
Consolidated
2022
$000
2021
$000
243,783
(1,918)
(120,091)
121,774
(30,353)
91,421
148,248
186,308
308,476
(149)
(197,221)
111,106
(38,634)
72,472
114,585
148,248
7,380
50,000
64,455
3,210
125,045
202,262
19,006
14,177
52,336
54,651
342,432
467,477
76,071
3,610
4,592
9,070
93,343
4,834
20,835
34,527
1,303
61,499
207,088
21,264
13,215
47,537
54,958
344,062
405,561
68,650
14,401
6,950
9,321
99,322
93
CODANANNUAL REPORT 2022CODAN 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 2022
GROUP STRUCTURE (continued)
23. DEED OF CROSS GUARANTEE (continued)
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
2022
$000
2021
$000
52,000
19,441
6,652
182
78,275
171,618
295,859
47,059
62,492
186,308
295,859
24,000
19,266
4,201
613
48,080
147,402
258,159
45,842
64,069
148,248
258,159
24. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2022, the parent company of the group was Codan Limited.
94,003
(2,135)
91,868
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
47,059
Reserves
60,022
Retained earnings
179,793
Total equity
286,874
As at 30 June 2022, Codan Limited entered into contracts to purchase plant and equipment for $0.789 million (2021:
$1.857 million).
127,920
442,687
75,427
155,813
81,092
(568)
80,524
48,818
370,503
67,452
123,113
45,842
62,397
139,151
247,390
OTHER NOTES
25. AUDITOR'S REMUNERATION
Audit services:
KPMG - audit and review of financial reports - Group
Other firms - audit and review of financial reports
Other Services
KPMG - taxation advice and compliance services
KPMG - other services
Other firms - taxation advice and compliance services
Other firms - other services
2022
$
2021
$
327,551
311,741
218,644
64,916
24,607
–
83,275
25,799
772,973
22,997
–
13,802
12,061
332,420
26. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE
Financial risk management
(a) Credit risk
Overview
The group has exposure to the following risks from its use of
financial instruments:
• credit risk
• liquidity risk
• market risk
• operational risk.
This note presents information about the group's exposure to
each of the above risks, its objectives, policies and processes for
measuring and managing risk, and its management of capital.
Further quantitative disclosures are included throughout these
consolidated financial statements.
The board of directors has overall responsibility for the
establishment and oversight of the risk management
framework.
The Board Audit, Risk and Compliance Committee is
responsible for developing and monitoring risk management
policies. The committee reports regularly to the board on its
activities.
Risk management policies are established to identify and
analyse the risks faced by the group, to set appropriate risk
limits and controls, and to monitor risk and adherence to limits.
Risk management policies and systems are reviewed regularly
to reflect changes in market conditions and the group's
activities. The group, through its training and management
standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees
understand their roles and obligations.
The Board Audit, Risk and Compliance Committee oversees
how management monitors compliance with the group's
risk management policies and procedures, and reviews the
adequacy of the risk framework in relation to the risks faced by
the group.
Credit risk is the risk of financial loss to the group if a customer
or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the group's
receivables from customers and bank accounts.
The credit risk on the financial assets of the consolidated entity
is the carrying amount of the asset, net of any impairment
losses recognised.
The group minimises concentration of credit risk by
undertaking transactions with a large number of customers in
various countries.
As at 30 June 2022, the customer with the group's highest
trade and other receivable balance accounted for $5.3 million
(2021: $2.2 million)
Trade and other receivables
The group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The demographics
of the group's customer base, including the default risk of the
industry and country in which customers operate, have less of
an influence on credit risk.
The group has established a credit policy under which new
customers are analysed for credit worthiness before the
group's payment and delivery terms and conditions are offered.
Goods are sold subject to retention of title clauses, so that in
the event of non-payment the group may have a secured claim.
The group does not normally require collateral in respect of
trade and other receivables.
94
95
CODANANNUAL REPORT 2022CODAN 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 2022
OTHER NOTES (continued)
26. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(a) Credit risk (continued)
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
8
11
13
Consolidated
2022
$000
22,613
59,775
5,231
3,091
9,044
36,334
3,253
9,217
60,939
2021
$000
22,362
34,189
4,392
3,173
5,608
20,411
4,178
3,815
37,185
Consolidated
Gross Impairment
2022
2022
$000
$000
Gross
2021
$000
Impairment
2021
$000
48,272
7,310
2,056
1,660
1,641
60,939
(1,276)
(26)
(188)
(195)
(1,265)
(2,950)
24,476
4,362
2,992
2,415
2,940
37,185
(1,438)
(24)
(16)
(25)
(1,516)
(3,019)
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-120 days
More than 120 days
96
Trade receivables have been reviewed, taking into consideration letters of credit held and the credit assessment of the individual
customers. The impairment recognised is considered appropriate for the credit risk remaining.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Consolidated
2022
$000
2021
$000
Balance at 1 July
Acquisition through entities acquired
Adjustment on prior year's acquisitions
Impairment loss/(reversal) recognised
Trade receivables written off to the allowance for impairment
Balance at 30 June
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
3,019
–
–
93
(162)
2,950
2,234
692
303
(164)
(46)
3,019
(b) Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group's approach to
managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions and without incurring unacceptable losses or risking damage to the group's reputation. Refer note 9 for a
summary of banking facilities available.
The following are the contractual maturities of financial liabilities:
30 June 2022
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Cash advance
Derivative financial liabilities
Net foreign currency hedge payables
30 June 2021
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Cash advance
Derivative financial liabilities
Net foreign currency hedge payables
Carrying Contractual 12 months
or less
cash flows
amount
$000
$000
$000
1-5 years More than
5 years
$000
$000
98,212
30,243
52,000
180,455
(98,212)
(30,243)
(52,708)
(181,163)
(92,536)
(4,592)
(708)
(97,836)
(5,676)
(14,004)
(52,000)
(71,680)
–
(11,647)
–
(11,647)
3,276
3,276
(3,276)
(3,276)
(3,276)
(3,276)
–
–
–
–
105,579
32,120
24,000
161,699
(105,579)
(36,395)
(24,312)
(166,286)
(100,606)
(6,950)
(312)
(107,868)
(4,973)
(14,666)
(24,000)
(43,639)
–
(14,778)
–
(14,778)
936
936
(936)
(936)
(936)
(936)
–
–
–
–
97
CODANANNUAL REPORT 2022CODAN 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 2022
OTHER NOTES (continued)
26. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the
group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising the return.
The group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are
carried out within the policy set by the board. Generally, the group seeks to apply hedge accounting in order to manage volatility in
the income statement.
The net fair values of monetary financial assets and financial liabilities not readily traded in an organised financial market are
determined by valuing them at the present value of the contractual future cash flows on amounts due from customers (reduced
for expected credit losses), or due to suppliers. The carrying amount of financial assets and financial liabilities approximates their
net fair values.
Interest rate risk
Profile
At the reporting date, the interest rate profile of the group's interest-bearing financial instruments was:
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Cash flow sensitivity
Consolidated
2022
$000
2021
$000
–
–
–
416
–
416
22,613
(52,000)
(29,387)
21,946
(24,000)
(2,054)
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 2022
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 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
Consolidated
EUR
$000
USD
$000
986
747
(19)
1,714
8,177
15,490
(28,163)
(4,496)
–
1,714
(7,258)
(11,754)
1,192
2,250
(1,059)
2,383
4,890
13,498
(22,085)
(3,697)
–
2,383
(3,990)
(7,687)
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:
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 2022.
30 June 2022
Variable rate instruments
30 June 2021
Variable rate instruments
Currency risk
Profit/(loss) before tax
100 bp
decrease
$000
100 bp
increase
$000
Reserve
100 bp
increase
$000
100 bp
decrease
$000
(294)
294
(21)
21
–
–
–
–
2022
EUR
USD
2021
EUR
USD
The group is exposed to currency risk on sales, purchases and balance sheet accounts that are denominated in a currency other than the
respective functional currencies of group entities, primarily the Australian dollar (AUD). The currencies in which these transactions are
denominated are primarily USD and EUR.
The group enters into foreign currency hedging instruments or borrowings denominated in a foreign currency to hedge certain
anticipated highly probable sales denominated in foreign currency (principally in USD). The terms of these commitments are usually less
than 12 months. As at the reporting date, the group has entered into a number of forward exchange contracts which will limit the foreign
exchange risk on USD $71.900 million of FY22 cash flows. The average forward exchange contract rate is 1AUD:0.71USD.
Consolidated
Reserve
credit/
(debit)
$000
Profit/
(loss)
before tax
$000
–
298
298
–
85
85
(156)
1,069
913
(217)
699
482
98
99
CODANANNUAL REPORT 2022CODAN 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 2022
OTHER NOTES (continued)
26. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued)
(c) Market risk (continued)
Currency risk (continued)
Sensitivity analysis (continued)
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 $3.276 million,
for which an independent valuation was obtained from the relevant banking institution.
27. EMPLOYEE BENEFITS
Aggregate liability for employee benefits, including on-costs:
Current - short-term incentives and other accruals
Current - employee entitlements
Non-current - employee entitlements
Consolidated
2022
$000
2021
$000
11,465
10,142
1,046
22,653
9,097
9,774
1,254
20,125
The present values of employee entitlements not expected to be settled within 12 months of the reporting date have been
calculated using the following weighted averages:
Assumed rate of increase in wage and salary rates
Discount rate
Settlement term
3.00%
5.07%
10 years
3.00%
2.46%
10 years
Employee Share Plan
On 19 December 2012, the directors approved the establishment of an Employee Share Plan (ESP). The ESP is designed to
recognise the contribution made by employees to the group and provides eligible employees with an opportunity to share in the
future growth and profitability of the company by offering them the opportunity to acquire shares in the company.
The company issued 13,908 shares to eligible employees in August 2021. The fair values of the shares was $16.34 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 FY22 in
relation to the ESP shares issued was $227,000. 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.
Performance rights issued in financial year 2020
The company issued 349,991 performance rights in November 2019 to certain employees. The fair value of the rights was on
average $5.22 based on the Black-Scholes formula. The model inputs were: the share price of $6.31, no exercise price, expected
volatility 31%, dividend yield 2.2%, a term of three years and a risk-free rate of 1.2%. Due to the departure of employees, 47,347
performance rights have been cancelled. The total recovery recognised as employee costs in FY22 in relation to the performance
rights issued was $207,845.
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.
The group’s earnings per share over the three-year period to 30 June have exceeded the performance target. Therefore, it is
expected that 302,644 shares will be issued to the relevant employees by the end of August 2022.
Performance rights issued in financial year 2021
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%. Due to the departure of employees, 17,747
performance rights have been cancelled. The total expense recognised as employee costs in FY22 in relation to performance rights
issued was $685,546.
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.
If achieved, performance rights are exercisable into the same number of ordinary shares in the company.
Performance rights issued in financial year 2022
The company issued 80,011 performance rights in November 2021 to certain employees. The fair value of the rights was on
average $8.20 based on the Black-Scholes formula. The model inputs were: the share price of $9.11, no exercise price, expected
volatility 45%, dividend yield 3.0%, a term of three years and a risk-free rate of 1.6%. The total expense recognised as employee costs
in FY22 in relation to performance rights issued was $271,848.
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 38.15 cents. For employees to receive the total number of performance rights, the group’s earnings per share
must increase by at least 8% per annum over the three-year period. The threshold earnings per share will be calculated using a 2%
per annum growth rate.
No performance rights have been issued since the end of the financial year.
100
101
CODANANNUAL REPORT 2022CODAN 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 2022
OTHER NOTES (continued)
28. KEY MANAGEMENT PERSONNEL DISCLOSURES
Transactions with key management personnel
(a) Loans to directors
There have been no loans to directors during the financial year.
(b) Key management personnel compensation
The key management personnel compensation included in "personnel expenses" (refer note 3) is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long term benefits
Consolidated
2022
$
2021
$
5,341,541
149,789
847,195
78,117
6,416,642
5,416,210
139,358
1,080,489
62,915
6,698,972
(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.
29. 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.
30. 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)
2022
2021
19.2 cents
5.4 cents
1.4 cents
(13.5) cents
Comparative information has been restated due to finalisation of fair values recognised in the balance sheet as at 30 June 2021
previously accounted for on a provisional basis, refer note 32.
31. 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)
Additions
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
Additions
Finance charge on lease liabilities
Reclassification to liabilities held for sale
Lease payments
Net foreign currency differences on translation
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
Consolidated
2022
$000
2021
$000
43,058
43,058
(17,991)
25,067
37,565
37,565
(10,576)
26,989
26,989
–
4,671
–
(7,281)
688
25,067
32,120
–
5,140
686
–
(8,003)
300
30,243
25,367
5,183
–
(103)
(3,554)
96
26,989
30,554
5,871
–
718
(110)
(4,913)
–
32,120
4,592
25,651
6,950
25,170
6,184
–
6,184
2,034
–
2,034
102
103
CODANANNUAL REPORT 2022CODAN 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 2022
OTHER NOTES (continued)
32. ACQUISITIONS OF SUBSIDIARIES
On 1 December 2021, Codan Limited’s subsidiary Domo Tactical Communications (DTC) acquired all of the shares in UK-based
company, Broadcast Wireless Systems Limited (BWS) for an upfront cost of $5.475 million noting that cash of $1.869 million was
held by the business (net cash paid: $3.606 million). If certain gross margin targets are achieved over the three-year period after
completion, there is the possibility of additional earn-out payments of up to $4.836 million. This potential earn-out (contingent
consideration) is recognised as another provision in the group’s Consolidated Balance Sheet as at 30 June 2022.
From the acquisition date, BWS 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
Contingent consideration
Acquiree's cash balance at acquisition date
Estimated fair value of identifiable assets acquired and liabilities assumed, on a provisional basis
Total assets
Total liabilities
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
5,475
4,836
(1,869)
8,442
1,120
(504)
616
8,442
(616)
7,826
The goodwill is mainly attributable to the synergies that will be realised by incorporating BWS into DTC’s broadcasting business.
BWS’s technology enables access to the growing remote broadcast industry more quickly than developing this technology
internally. The goodwill is not expected to be deductible for tax purposes.
The company acquired all of the shares in US-based company, Domo Tactical Communications (DTC) on 12 May 2021 and
initially recognised the acquired assets and liabilities of DTC at their provisional fair values as disclosed in the FY21 annual report.
Subsequently the company conducted detailed valuations of the assets and liabilities acquired as at the acquisition date which
resulted in the following adjustments:
Consideration transferred
Cash paid on completion
Acquiree's cash balance at acquisition date
Identifiable assets acquired and liabilities assumed
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
Goodwill as a result of the acquisition
Consideration transferred
Identifiable assets acquired and liabilities assumed
Provisional
fair value
recognised
$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
Fair value
adjustment
Final fair
value
$000
$000
(899)
–
(899)
113,051
(4,612)
108,439
(466)
(316)
–
(183)
–
–
(275)
–
–
(1,343)
2,272
(311)
4,565
8,497
5,042
1,368
2,222
1,455
5,441
(14,373)
(2,489)
(3,551)
1,517
9,694
(899)
311
(588)
108,439
(9,694)
98,745
The company acquired all of the shares in US-based company, Zetron on 30 April 2021 and initially recognised the acquired assets
and liabilities of Zetron at their provisional fair values as disclosed in the FY21 annual report. Subsequently the company conducted
detailed valuations of the assets and liabilities acquired as at the acquisition date which resulted in the following adjustments:
104
105
CODANANNUAL REPORT 2022CODAN 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 2022
DIRECTORS’ DECLARATION
OTHER NOTES (continued)
32. ACQUISITIONS OF SUBSIDIARIES (continued)
Consideration transferred
Cash paid on completion
Acquiree's cash balance at acquisition date
Identifiable assets acquired and liabilities assumed
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
Goodwill as a result of the acquisition
Consideration transferred
Identifiable assets acquired and liabilities assumed
Provisional
fair value
recognised
$000
Fair value
adjustment
Final fair
value
$000
$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
(1,114)
–
(1,114)
(303)
(3,347)
–
–
–
–
–
–
(215)
–
(3,865)
59,102
(9,780)
49,322
18,849
5,226
4,415
1,314
2,961
2,505
(20,005)
(3,382)
(3,161)
(865)
7,856
(1,114)
3,865
2,751
49,322
(7,856)
41,466
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 63 to 106 and the
remuneration report on pages 47 to 55 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 2022 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 22 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 2022.
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 17th day of August 2022.
As a result of the revision to the fair values recognised, the comparative information in the balance sheet at 30 June 2021 has been
restated as follows:
D J Simmons
Director
A Ianniello
Director
Consolidated balance sheet at 30 June 2021
CURRENT ASSETS
Trade and other receivables
Inventory
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Total assets
NON-CURRENT LIABILITIES
Deferred tax liabilities
Provisions
Total liabilities
Net assets
As
previously
reported
$000
Adjustment
Restated
$000
$000
34,958
66,433
(769)
(3,663)
34,189
62,770
17,763
227,328
503,559
7,018
1,254
199,949
303,610
(183)
3,901
(714)
17,580
231,229
502,845
(2,272)
1,558
(714)
–
4,746
2,812
199,235
303,610
106
107
CODANANNUAL REPORT 2022CODAN 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 2022 and of
financial
performance for the year ended on
that date; and
its
complying with Australian Accounting
Standards and
the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2022;
• Consolidated income statement, consolidated statement of
comprehensive income, consolidated statement of cash
flows and consolidated statement of changes in equity for the
year ended 30 June 2022;
• Notes including a summary of significant accounting policies;
and
• Directors' Declaration.
The Group consists of the Company and the entities it controlled
at the year-end or from time to time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements.
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.
The Key Audit Matter we identified was the valuation of goodwill relating to Tactical Communications and
Zetron.
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.
Tactical Communications and Zetron Goodwill ($186.5 million)
Refer to Note 16 to the financial report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the annual
impairment testing of goodwill allocated to Tactical
Communications and Zetron operating segments,
given the size of the balance (being 32% of total
assets) and the recency of the two significant
acquisitions that resulted in the recognition of the
large majority of this goodwill balance ($140.2
million).
Group
Domo
acquired
The
Tactical
Communications and Zetron in FY21. These
acquisitions and subsequent
into
existing operations of the Group necessitate
ongoing
Group’s
determination of cash generating units (“CGUs”),
and the level at which goodwill should be allocated
and measured for impairment testing purposes.
consideration
integration
the
of
We focussed on the significant forward-looking
assumptions the Group applied in the value in use
models for Tactical Communications and Zetron,
including:
•
•
to
small
Forecast cashflows, growth rates and terminal
growth rates – the Group’s models are highly
sensitive
these
assumptions, reducing available headroom.
This drives additional audit effort specific to
their feasibility and consistency of application
to the strategy of the Tactical Communications
and Zetron operating segments.
changes
in
and
Forecast foreign exchange rates – the Tactical
Communications
operating
segments transact in several foreign countries
therefore the Group uses forecast foreign
exchange rates to translate these foreign
operations into Australian Dollar.
Zetron
• Discount rate – these are complicated in nature
and vary according to the conditions and
environment the specific CGU’s are subject to
from time to time.
•
The Group’s modelling is highly sensitive to
small changes in the discount rate. We involve
our valuations specialists with the assessment.
The Group uses complex models to perform their
annual testing of goodwill for impairment. The
largely manually developed, use
models are
adjusted historical performance, and a range of
internal and external sources as inputs to the
assumptions. Complex modelling using forward-
looking assumptions tend to be prone to greater
risk for potential bias, error and inconsistent
application.
conditions necessitate
additional scrutiny by us, in particular to address the
objectivity of sources used for assumptions, and
their consistent application.
These
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
Our procedures included:
• We considered the Group’s determination of their CGUs
based on our understanding of the operations of the
Group’s business, the impact of Zetron and Domo Tactical
Communications acquisition, and, how independent cash
inflows were generated, against the requirements of the
accounting standards.
• We analysed the Group’s internal reporting to assess the
Group’s monitoring and management of activities, and the
consistency of the allocation of goodwill to CGUs or
groups of CGU’s.
• We considered the appropriateness of the value in use
method applied by the Group to perform the annual test
of goodwill for impairment against the requirements of
the accounting standards.
• We assessed the integrity of the value in use models
used, including the accuracy of the underlying calculation
formulas.
• We assessed the Group’s determination of CGU assets
for consistency with the assumptions used in the forecast
cash flows and the requirements of the accounting
standards.
• We compared the forecast cash flows contained in the
value in use models to Board approved forecasts.
• We assessed the accuracy of previous Group forecasts to
inform our evaluation of forecasts incorporated in the
models.
• We assessed the Group’s underlying methodology and
documentation for the allocation of corporate costs to the
forecast cash flows contained in the value in use model,
for consistency with our understanding of the business
and the criteria in the accounting standards.
• We assessed the Group’s allocation of corporate assets
to CGUs for reasonableness and consistency based on
the requirements of the accounting standards.
• We checked the consistency of the growth rates to the
Group’s stated plan and strategy, past performance of the
Group, and our experience regarding the feasibility of
these in the industry and economic environment in which
they operate.
• Working with our valuation specialists we compared the
foreign exchange rates to published views of market
commentators on future trends.
• Working with our valuation specialists we independently
developed a discount rate range considered comparable
using publicly available market data for comparable
entities, adjusted by risk factors.
• We considered the sensitivity of the models by varying
key assumptions, such as forecast growth rates, terminal
growth rates and discount rates, within a reasonably
possible range. We did this to identify whether the
models had a higher risk of impairment and to identify
those assumptions at higher risk of bias or inconsistency
in application and to focus our further procedures.
• We assessed the disclosures in the financial report
against the requirements of the accounting standards.
108
109
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT (continued)
Other Information
Other Information is financial and non-financial information in Codan Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for
the Other Information.
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.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Codan Limited for the year ended 30
June 2022, 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 2022.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Paul Cenko
Partner
Adelaide
17 August 2022
110
111
This is the original version of the audit report over the financial statements signed by the directors on 17 August 2022. 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 47 to 55, as opposed to pages 3 to 11 outlined above.
CODANANNUAL REPORT 2022CODAN 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 12 August 2022
Substantial shareholders
The numbers of shares held by substantial shareholders and their associates are set out below:
Shareholder
Number of ordinary shares
I B Wall and P M Wall
Interests associated with Starform Pty Ltd, Dareel Pty Ltd and Pinara Group Pty Ltd
34,808,151
27,894,135
Distribution of equity security holders
Number of shares held
Number of equity security
holders Ordinary shares
Issued Capital %
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and Over
Total
6,751
4,163
964
802
65
12,745
1.5%
5.7%
4.0%
10.7%
78.0%
100%
The number of shareholders holding less than a marketable parcel of ordinary shares is 631.
Securities exchange
The company is listed on the Australian Securities Exchange. The home exchange is Sydney.
Other securities on issue
The company has performance rights on issue in addition to ordinary shares. The detail of the securities held as at 12
August 2022 are as follows:
Class of security
Performance Rights
Number of holders
Number of securities
22
545,820
No voting rights attach to the above securities, however, any ordinary shares that are alloted to the holders of the
securities upon vesting or conversion of the above mentioned securities will have the same voting rights as all other
ordinary Codan shares.
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
18,762,576
15,112,587
14,117,681
12,570,867
6,627,630
6,627,548
6,404,224
3,562,124
3,090,231
2,400,000
1,778,194
1,575,690
1,237,673
1,107,254
1,107,254
1,070,485
800,000
742,000
610,000
134,112,169
19.2%
10.4%
8.4%
7.8%
6.9%
3.7%
3.7%
3.5%
2.0%
1.7%
1.3%
1.0%
0.9%
0.7%
0.6%
0.6%
0.6%
0.4%
0.4%
0.3%
74.1%
Twenty largest shareholders
Name
I B Wall and P M Wall
Dareel Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Kynola Pty Ltd
Starform Pty Ltd
A Bettison
BNP Paribas Nominees Pty Ltd
M K and M C Heard
Mitranikitan Pty Ltd
M Choate
J A Uhrig
Rosevine Pty Ltd
Cedara Pty Ltd
G Bettison
Warren Glen Pty Ltd
Griffina Pty Ltd
D Uhrig and L Uhrig
Total
Offices and officers
Company Secretary
Mr Michael Barton BA (ACC), CA
Principal registered office
Technology Park
2 Second Avenue
Mawson Lakes, South Australia 5095
Telephone: (08) 8305 0311
Facsimile: (08) 8305 0411
Internet address: www.codan.com.au
Location of share registry
Computershare Investor Services Pty Limited
GPO Box 1903
Adelaide, South Australia 5001
112
113
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIESCODAN LIMITED AND ITS CONTROLLED ENTITIES
CORPORATE DIRECTORY
Directors
David Simmons (Chairman)
Alf Ianniello (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
114
115
CODANANNUAL REPORT 2022CODAN LIMITED AND ITS CONTROLLED ENTITIES Innovation wherever you are
116
CODAN codan.com.au