Codan Limited (CDA) Earnings Call Transcript & Summary

Welcome to the Codan Results Briefing. We have a presentation that should be in front of you, and I will run through that presentation. We'll just go to the next slide. We've obviously had a fantastic year in FY '20, and I think we did flag that earlier with an announcement some weeks ago, and pleased to report that the announcement that we made a few weeks ago came to fruition and a little bit extra, which is fantastic. So we have the highest full year profit in the company's history with records across both Metal Detection and Communications. And the Communications broken down into Tactical and LMR were both records in their own rights. So I think the perfect storm of everyone having a record has contributed to clearly the biggest sales and profit year in the company's history. As a result, we felt it prudent to increase our dividend. So we've gone for an $0.11 fully franked final dividend, which supplements the interim dividend and gives us a total of $0.185. The balance sheet has also strengthened. We've generated cash at very good levels and that has continued into the first 1.5 months, I suppose, of FY '21. And we continue with the core of our strategy to invest in new product development. So we have $30 million that we've spent this -- last year into new product development. And you can see at the bottom of the chart, just some of the numbers, the sales just shy of $350 million, an EBITDA of $117.8 million, NPAT of $64 million and earnings per share at $0.355. So a very pleasing result, I suppose, all around. I'll move forward on to the dividend slide, and we can see that the $0.11 per share that we've declared as a final dividend just shows, I suppose, a progression in our dividend payout over the last few years. The record dates are recorded there, payment on the 11th of September. And the Board expects to continue its policy of paying shareholders in the order of 50% of our full year profits as dividends. So no change to our dividend policy as we move forward. I'm going to talk at the highest level about group sales, and you can see the chart shows a spread between the 3 main divisions. So 68% for Metal Detection; Communications came in at 30% of sales; and Minetec, although significant in its own right in terms of the technology story, is still a very small part of our business. Metal Detection sales grew 30%. And the pleasing thing was that that growth came both in Recreational and Gold Mining. Gold Mining has been the stellar performer as it has been in the last few years. But with Recreational gaining momentum and traction with respect to its retail distribution and geographic footprint increase will become more significant as time goes on, particularly as we launch new products into that space. Communication sales, I think, was a really good story for us. We are now transitioning our Tactical Communications business from being a business that solely supplied aid in humanitarian and government customers into becoming a full metal spec systems and solutions provider, which really opens up our addressable market share significantly, and we'll talk about that later in the conversation. Land Mobile Radio has now started to hit its straps also. We have an order book at the moment, which is close to $16 million entering the year. So we picked up in the last month significant orders of systems-type nature, but really shows the diversification in that business from being a single mountain top repeater business to become a much more sophisticated solutions provider with multicast, simulcast and voting products in that space. Before we go into the divisions, what I'd like to do is just take a look forward and talk about where we're headed as a company and what our strategy is. We spend a lot of time as a group thinking about the future, looking at opportunities and trying to sort of imagine what this company could be in the next 5 years or so. So we run what we call a 1,000-day rolling plan, and that plan is a dynamic document that changes regularly. We're pretty pleased with where it's arrived out at the moment. And what I've done is taken out some of the -- 4 of the key elements of that plan. I'll just talk you through them briefly. So the company does have a history of IP creation, and Mike Cyr, the previous Managing Director, left an indelible saying in my mind which is, this company must innovate or die. And we've taken that mantra forward over the last 10 years. So the core of our growth strategy is in the invest in the core business part, which is the innovate or die part. So we spend a large percentage of our sales to make sure that we are regenerating the technology, we're staying relevant and we're ensuring that we don't become disrupted by new and emerging technologies. That is the core, the base, the foundation of how this company has grown. In order for us to have reached where we are today, where we're having to supplement that core growth strategy with some other elements and particularly, that will become more relevant as we move forward, and the numbers that we're dealing with in terms of sales and profit become higher. There's less room for error in terms of making investments that don't pay off. So we then move on to strengthening the core business. So that is about taking the foundation of our growth, which is to develop, innovate and bring new products to new markets and new geographies but also look at the way that we serve customers. And as I've mentioned previously, we've now looked at transitioning this business from a product supplier to a full solutions provider, and that transition is pretty well advanced in our Communications business. It is the way that we've always operated in Minetec, which is why Caterpillar, I suppose, were so interested to join with us and have an exclusive arrangement. And we're also looking at geographies that today are underserved. The world is a big place, and Codan, although we have a very, very strong global network, there's a lot of places in the world that I would describe our products as being underrepresented. And particularly in places like Asia Pacific, we just opened up outlets in Brazil and are about to open one in Mexico. And we've also done the same thing through other parts of the world with representation in Dubai and also now into Afghanistan. We move into the acquisition phase, and the acquisition conversation has sparked a lot of discussion when we've done these conversations previously. We certainly are not in a position to go out there and just spend the money that we have without really proper consideration to the benefit that that will deliver to shareholders in the future. And therefore, we have a very, very strict set of criteria which changes almost monthly as we walk through the acquisition landscape. Our priority over the next 2 to 3 years will be to try and supplement some of the companies that we already have developed or businesses that we have developed with companies that play in adjacent spaces. So for example, Communications has a rich ecosystem of technologies and solutions that today we don't own, but we partner with third-party providers. So an acquisition target for us moving forward might be to strengthen our Communications landscape because it's something we know, it's a market we understand and users we understand. And so the first priority for us wouldn't be to go out and make a large diversification acquisition. That may come in the future. And I think our priorities and the opportunities that we can see in our near-term viewfinder are much more aligned to what we know and what we're doing well today. Moving into the technology council part, that's a new initiative that we launched, I think, about a year ago. And that really is about having internal capabilities supplemented with external experts. They just look at environmental scanning of technologies that are coming at us, that we have the ability to utilize and create value with, but more importantly, make sure that we don't become disrupted by technologies that have the potential to damage us. One example of that might be in our Land Mobile Radio business as the technology called FirstNet that's coming at us, which is really taking advantage of the 5G network. We, at this stage, feel reasonably comfortable in the space that we serve because we are in a very specific and defined market segment of looking at remote areas that require low power. So FirstNet won't reach these people for many, many years. But now that we understand that the world is moving much, much more rapidly from voice to data and then to video, then we understand that, and we are looking at the technology council to make sure that we future-proof our Land Mobile Radio business moving forward and also take advantage of some of these disruptive technologies to supplement some of our existing businesses. I've now pushed up the chart that shows where we are selling. And you can see that Africa is still very significant and permanent market for us, particularly in Tactical and Metal Detection. There's a high number of sales recorded in the U.S., just bear in mind that where we record sales or where the purchase orders, if you like, originate from. So the $82 million also represents products that we sold into parts of the world like Afghanistan and Central Asia more generally because the product order has been generated from the U.S. government and that is where we have invoiced. Part of the growth for us is in the Central and Latin America area. When we look at these numbers, we kind of include Mexico, which is a bigger number for the purposes of being geographically direct. It's still a small number in that region, and we see that as a potential for growth over the next few years. along with other regions. So the bottom line is we are very well distributed with respect to the partners, the dealers and the networks that we have, which has kind of future-proofed us to some extent against the inability of our people to travel into some countries because we have people on the ground in most countries. We have 50 dealers, for example, in Africa. But the fact that we can't travel means that there's more reliance on us getting on to a Zoom call or a Microsoft Teams call with our partners and dealers in trying to direct traffic from afar. And at this point, it hasn't damaged us too much. I mean I think it may have an impact as we move into some new customers with Tactical Communications. But certainly, our Metal Detection business hasn't missed a beat based on our inability to travel. And that's really due to the fact that over the last 30-odd years, we've sought to put in place trusted partners that have been with us for many years and can do a lot of the work on the ground that needs done during a business development phase and has helped us, if you like, weather some of the storms with lack of travel. I'll move inside the business units now. I put up a slide on Metal Detection. That slide really seeks to show the 3 divisions. And I think I famously said that over the next 5 years, I expect Recreational to be as big as, if not bigger than, our Gold Mining division, just based on the potential that comes from some of the regions that they are underserved. And that is from a geographic perspective and also based on the potential that some of the large retailers offer us with respect to bringing products and arranging these products. So we're getting a lot of positive feedback from people, particularly with some of the high-volume products like VANQUISH, which have been very, very successful in some of these large retailers, and they are looking to expand the conversation with Minelab in some other areas. Metal Detection graph probably speaks for itself. We've seen fantastic growth over the last few years. And we're sitting here today feeling like we're going to have another good year. Demand is at unprecedentedly high levels. We are in fact supply constrained across 3 products at the moment, which is not a great position to be in, but it's off a relatively high manufacturing base. And we're now in the process of actually increasing capacity at both Plexus and Venture to allow us to increase our volumes, which means we're going to spend some more money in inventory and that's really to serve 2 purposes. Number one, to meet the demand that we're seeing in the market; but more importantly, to try and get some products on the water and sea freight them to try and avoid some of the massive hikes in costs that we're seeing across our air freight services. So air freight has quadrupled in some cases. So it's a significant part of our cost and we are looking at ways to try and reduce that by getting product on the sea. I'm going to move forward now into the product road map slide, and you can see that there are 5 key products currently under development. We can probably just make that now 6 as we speak. We've just actually put another one in the pipeline as of our Board meeting yesterday. So we see an opportunity in another space in the market. And we've stretched even further and gone from 5 to 6 new platforms to try and utilize the cash that we have directed against opportunities that almost always deliver when you apply it to our Metal Detection product. So a very active new product lineup, some of which have just been released recently. In the VANQUISH, for example, we have a new GPX detector that will come out in the next month or 2. We are still working on timing around that product. There are some complexities around when and where and how we launch that, and so we're just looking at the optimal time. We expect it to be closer to November. So that's slipping out from September, but that's more through choice than necessity. I'll put up a slide now on the Gold Detection product lineup, and you can see the new release GPX, which will be an expensive product. And we've previously talked about that being about an $8,000 retailed product. So up at levels close to the GPZ, much USD. Moving into our Recreational product lineup. This is an area that we see having massive potential for us simply because of the new Multi-IQ technology, which means that you can simultaneously move up and down the frequency band as you look for targets. So it's all targets, all soils, all the time. So it makes the process of Metal Detection much more simplistic and can turn a novice into an expert within 10 minutes. What we're looking to do with that Multi-IQ is expand it through some of the other platforms that today don't have the Multi-IQ, which I think with the CTX replacement product. So that's the one that will come out next in that lineup. So that's our top of the range Recreational product and also looking to put that technology into other products along that lineup. Moving into Communications. I put up a slide that just tries to show the breadth of the customers that we serve, and it's a pretty impressive lineup with an intersection between the 2 technologies, which is why we seek to become a full solutions provider and integrator because customers buy more than just an HF radio or a land mobile radio, they're buying interoperability solutions, they're buying tactical VHF, they're buying satellite, they're buying MIMO Mesh radios. So there's an extensive ecosystem of product that serves the same customer to solve their complete communications problems. You can see the growth in the next chart in Communications, delivered significantly through the Tactical Communications business, up 34% as a total division over last year. So we've tracked through the $100 million mark, which was our target. We got there quicker than we expected, which is fantastic. We actually delivered some major contracts into East Africa, Central Asia and Asia Pacific. The pipeline remains very strong. So that's a point that I'll make. Whilst it's difficult to look into the future and determine whether we can repeat the result that we have had in this financial year, we certainly have the ability to do so with large projects in places like Morocco and Afghanistan, to name 2. Question and the issue there is about funding being freed up in light of some of the other challenges faced by governments with the COVID situation. But we're reasonably confident that Morocco and Afghanistan will drop. Whether they drop and ship in the first half is yet to be seen, but there's a possibility both could, but we certainly expect them both to drop and ship in the full year. And the Morocco opportunity is similar in size to the East African opportunity we had last year. So exciting times in a business that is now able to supply more products to the customer than previously we were able to do. The military customer base has grown, and that's the area that we see most of the growth coming. The next slide will talk to the market sizes. It's the Sentry Manpack now, along with the Sentry Military Radio has given us product that is comparable to Harris product at a fraction of the price. So a Harris product would sell for USD 25,000 for a base model product. We can do the same base model product for about $10,000 to $12,000. And in a world that is becoming more cost sensitive and requiring more of these types of products to try and coordinate communications internally and also look at protection of their borders, then the value for money over the total life of the product is becoming a much higher consideration for most governments, particularly in the parts of the world that we do well in the developing world. The Land Mobile Radio business, named Critical Communications, so we will have Tactical and Critical Communications. Land Mobile Radio, we feel, is just a bit too generic. It describes the market segment as opposed to the division. So that will change in correspondence that you will see in future interfaces with the market. That will become Critical Communications. And with the release of the CASCADE product in its full state during the course of this financial year, we expect to see good growth in Critical Communications, and we're seeing already a very high order book entering into the new year. So we will see growth over the record of this year in the financial year FY '21. The Tactical Communications ecosystem that I spoke of is pictorially drawn on this next slide. So at the heart of everything that we seek to do, interoperability is the key. Today, we have a strategic partnership with a company called [ Cytec ] in the U.S. but that is a white label Codan product. So our customers only know the interoperability solution as a Codan RIOS product. We achieved good margins on that third-party product, but it is the glue that holds together all of the other elements. So the Tactical VHF, the Tactical HF that we spoke of, the MIMO Mesh and the Satcom, all are integrated through an interoperability switch. And the reason interoperability is so critical is because we are entering this market as a relatively new player. Although we have a brand that goes back 50 to 60 years, we're kind of newbies in the Tactical VHF, in the Tactical HF space. Therefore, we need to be able to play in legacy networks. So where a customer has spent significant dollars putting in Harris, Tadiran or Thales networks, we are now able to come along and do this, we can give you the same capability in a fraction of the price, and we can still render the radios you have bought usable through the interoperability switch. And that's caused us to win some of these large projects that you've seen us win in places like Afghanistan, East Africa, Central Asia and also Asia Pacific. So we've taken away the objection from the buyer. I've put a slide in here just to show you the market sizes. For the Tactical HF market that we have spoken about previously, it's about a $0.5 billion market. Now that's larger than the traditional markets that we've played in, where it's been government aid, humanitarian NGOs. That market was probably about a $200 million market, and we were between $40 million and $50 million of that market year-on-year. So still the #1 player in the defined markets we serve, but not large enough to move the needle. So moving into Tactical HF has opened that up into a $0.5 billion market. The fact that we are now able to address the Tactical VHF solution and interoperability solution and working on Satcom and MIMO Mesh partnerships, it opens up a much larger addressable market with a brand that has 50 years of exceptional coverage in the developing world. So this is the total market. We would obviously look to direct these solutions into the developing world markets, which would reduce the total addressable size from $10.5 billion, probably down to something like between $1 billion and $2 billion. It's still significant for our company over the next 5 to 10 years. Here we go, Critical Communications. We've changed it as we spoke. So we've now tried to pictorially address what is the value proposition of the CASCADE. Why would people buy a CASCADE product rather than a Motorola product. And really, the issue is around price, but more importantly, simple to use, it's interoperable, so you can still use your legacy Motorola products. And of course, Daniels has been in the market for close to 70 years, which is a business we bought and has a reputation second to none in the unique defined spaces that it operates in. We want to broaden that reach by putting in the CASCADE product, which we spent close to $20 million developing. So we bought the company and immediately thought about putting in a much, much more sophisticated product that allows us to do multiple users simultaneously, which is your simultaneous multicast voting systems. Our addressable market is about a $350 million U.S. market, for the markets that we think we can reach outside of the large states in the U.S. So we would never win the LMR radio contract for New York or for Boston or for some of the larger cities, but we certainly play well in a lot of the more remote areas in the U.S., of which there are many. I'm going to move on to Tracking Solutions, and the Tracking Solutions story becomes more attractive as we move through and really bet ourselves into the MineStar product for Caterpillar. So we now have an expansion and a rollout for the Tanami mine. We also have an expansion coming for the Freeport mine in Indonesia. So we're starting to now see revenue. I think -- as of today, I think we've got $2 million worth of hardware orders on the books, which is a much improved position from where we were at this time last year. But more importantly, Caterpillar are now funding our entire operation to the tune of about $0.5 million a month. So they are now paying for all of the work that we are doing. And you might have noticed in the accounts that we decided to take a write-down of $7.5 million of capitalized R&D in Minetec, and we did that because the business has now matured and transitioned into a software development business for Caterpillar's MineStar product. So everything that we had developed previously that wasn't to do with the integration of the MineStar product, we have chosen to write off. And so what we carry in our books now is about $18 million worth of carrying value including inventory, and that product is the product -- the capitalized product and the product that we will now amortize over the next few years, is product that is directly attributable to the MineStar product given that the MineStar and Caterpillar are the front-end sales side of our business now. We are simply supporting Caterpillar after a very long and painful transition over the last 18 months to become a software development house that supports Caterpillar exclusively. So we will return to profitability this year. We have very little cost and we have revenue now starting to come in. Caterpillar have given us a 5-year revenue forecast, which I think is still conservative from their perspective, but certainly gets us to the point where this business now looks to be attractive and profitable. I'm going to move on to the financial results, and I think these results largely speak for themselves. I think I've already noted on the first slide, at the highest level, what these numbers are. These numbers can be read in more detail on these slides. And again, record profits, record sales. And moving forward into the engineering investment slide, it's 9% of sales. Now it used to be about 11%. But when you grow your sales by about $130 million, it quickly dilutes the percentage to the extent that we can't spend the money as quickly as we have planned to spend it. Thus, the additional project in Minelab. So we are seeking to keep the expense to sales for product development up at around 10% to 12%, which means we need to do more. This business is a cash generation -- or generating business. The charts that we're looking at now show that we are sitting at [ 93 ] because that number is now higher because we've had a very successful July and are having a successful August. So that number is probably north of [ 100 ]. We're going to pay a dividend, and we're also going to put some money back into inventory to try and get product on the water and to make sure that we can serve the demand that we're seeing across our Gold markets, particularly. If you look at the objectives, I think we spoke about our strategic plan, but taking that into a more granular conversation around the business units. In Minelab, it's all about launching the new GPX. It's about maximizing VANQUISH sales. We've already -- as of today, we're probably up at about 40,000 to 45,000 units of VANQUISH and gaining traction in retail. And we want to continue the expansion of our retail distributions, particularly in Europe. I mean all over the world, but particularly in Europe is a focus this year so that we can actually try to grow the consumer business once again. Moving into Codan Communications. We want to continue the transition to the full military systems business. What that really means is that we need to become a more significant controller of some of the technologies that today we don't own. So we are -- we have partnerships with people with Tactical VHF, interoperability antennas. We're seeking to have more control over the manufacture, development and supply of these products, which means that we can then increase our margins. We want to focus in growing in-country service, training and customer and support revenue. That's a model that Scott French has brought through LMR. So he's expecting to see that move from 0 to [ $2 million ] in short order by signing service contracts to do the full customer support over the term of the product. We've just signed a big contract in Afghanistan to do a similar thing for the U.S. control border program. And of course, the full release of Cascade, which is now gaining traction. In Minetec, it's about growing revenue by leveraging off the Caterpillar global dealer network. Again, they have dealers all over the world, which negates the need for us to travel as a business. And so we're doing a lot of training over Microsoft Teams, which we're learning to become somewhat expert at. Looking to quantify the productivity and safety improvements in our key reference sites. Olympic Dam have signed off on our solution now after the interface with their IT systems. That's now being completed, and they are in the process of deciding when the rollout will take place through a live environment, which, of course, then generates revenue. That program will transfer to Caterpillar because they will be the people on the ground now doing the work. They're paying for the labor. So they will receive the revenues for that. And of course, we will return to profitability in FY '21. The final slide is our outlook, how do we feel sitting here today. As I've mentioned previously, we are now sitting here, at the 20th of August, and we are on track to do similar to what we did last year in the first half. So the numbers are similar. I think we're sitting at about on average $5 million NPAT per month. We expect to be at $10 million at the end of August, which is really online with the $30 million that we did for the first half. Demand remains strong for our metal detection products. So we can't look into the future much beyond the 2-month rolling forecast that we supply through our Board, but at least in that time frame things look as good as we did last year. We'll benefit -- so when you look at tailwinds and headwinds, we'll certainly benefit from a full year of VANQUISH and the release of a new gold detector, which we expect to be significant in terms of takeup rate. Current travel restrictions and Tactical Comms are probably a headwind for us. Although I've mentioned previously that we have 2 large projects from customers that already know us, so there's no need for us to go there and demonstrate the product. It's really now about the administration of their government, where you want the minister signing the final approval for the Moroccan deal, which we expect to happen within weeks and also with Afghanistan, similar situation. So although it's a tailwind with respect to us getting to new customers, we're having to leverage our dealer network more, which, look, at the end of the day, it allows them the opportunity to step up and demonstrate how good they are. We've been used to holding their hand, maybe it's time for them to leave home and go to college. And as I've said, Minetec expected to turn to profitability, which will be a tailwind for us. Gold price is a tailwind for us. A strong balance sheet allow -- gives us opportunity. So we have opportunities around the cash that we hold in our facility with the banks. We have a number of areas that we are examining around our communications ecosystem at the moment, too early for us to be saying anything about a deal that's going to come off, but we certainly have opportunity and we're in conversations. So I think that just about concludes the formal part of this conversation. We will provide another business update at the AGM. So we'll have 4 months under our belt then, and we'll be able to look out towards, I suppose, the end of the first half of the 2-month rolling forecast, and we'll have a better idea about how we're going to finish the half. So I'll pause there and hand back to the moderator.

[Operator Instructions] We'll take our first question. [Operator Instructions]

It's Elijah Mayr here from CLSA. Just congratulations on the results. I just wanted to touch on, just more specifically, I guess, with the metal detectors. Obviously, a very strong second half. I just wanted to sort of see what that run rate was sort of exiting FY '20. Do you sort of see acceleration in those sales as the second half continues?

We did because we entered into the seasonally high part of the year in the second half, Elijah. So we always have a second half, first half that's kind of 60%, 40%. We did see that pick up in the second half. Of course, right now, we're in the quiet season, although we stocked out a product. So there's 2 parts to your question. Number one, the run rate was higher in the second half than we're seeing in the first half, but we don't know if it's because we're in the quiet season, relatively speaking, in Africa or because we don't have products. I guess we'll never know because we can't supply any more than we're supplying.

Yes. I understood. I was going to say, yes, follow on and sort of see what that run rate was sort of going into FY '21. You sort of said it was in line with FY '20 or this year. Is that from the second half versus the first half?

Yes. So the first half, we did $30 million NPAT. We had a run rate in Minelab that was X, and that run rate is similar to the run rate that we had at the same time last year.

No problem. And just on the new GPX product. Just in terms of how you're sort of looking at and sort of forecasting those sales to sort of come through now that's being sort of pushed back to November, you mentioned. So that intended customer, do you expect that to be sort of upgraded products from the GOLD MONSTER sort of or more people replacing from the GPZ products or sort of new customers coming on board?

So it's more predominantly going to be people replacing product at the high end. The GOLD MONSTER customer tends to be an entry-level customer. An entry-level customer will progress naturally up the value curve in terms of product once they have made enough money to be able to afford to buy the product. So if you were asking me what the demographic is going to be, it's going to be a replacement of GPXs and GPZs in the field moving into this product. But also people from the GOLD MONSTER entry level, as they become more successful, will aspire to move into that product.

Understood. Could you give us a sense, particularly, I guess, in those sort of African gold sort of sales of how much is made up from the GOLD MONSTER and how much from the GPZ and the GPX? Maybe sort of, I guess, on a volume basis and perhaps the revenue?

The volume is much, much, much heavily weighted into the GOLD MONSTER by definition. The GOLD MONSTER is a high-volume product. The GOLD MONSTERs we're selling about 10,000 a month. When you look at GPZs, you're down at about 500 or 600 a month. And of course, we make more margin on the 500 or 600 a month in terms of dollars than we do out of the 10,000 at a much lower price. So the volumetric differential is huge. And what we're seeing is 10,000 people entering the detection market. It gives us the potential to have customers later down the track. So that's why I think -- that's one of the keys to our success in the last year or 2 is the fact that we've brought this GOLD MONSTER out. So we're now taking the entry-level guys from day 1.

Understood. Just to kind of get a sense, I guess, of the base of how many GPZ, I guess, customers and GPX customers you have in Africa that are potentially going to upgrade to the new product coming through.

Well, we've sold -- probably sold about 250,000 GPXs over the last 10 years. So -- and in terms of how many GPZs we've sold, that number would probably be close to, I'm going to say. I think it's a guess. I don't know how many GPZs we've sold, I don't have the numbers right in front of me, but -- no, I've got the numbers in front of me now. GPZs, 35,000.

And that's over the last 10 years?

GPZ has only been in the market for 2.5, 3 in Africa.

2.5 years. Excellent. And then just one more if I could. Just in terms of acquisitions, could you give, to the extent you can, some detail at some of the sort of companies that you -- or the spaces that you're sort of looking at, and if there's been any progression with any potential candidates?

Not beyond what I've already said.

We'll take our next question. [Operator Instructions]

It's Ronan Barratt from Moelis Australia. Can you hear me?

We can.

Just focusing on the Coin & Treasure division for a second, could you just call out how many sales were made from Coin & Treasure in F '20 and how many of those sales specifically were generated by the VANQUISH machine? And what your expectations are for VANQUISH unit sales F '20 versus F '21, just roughly?

FY '20 was the release of the VANQUISH, you might remember, and up until June 30 we sold 30,000 units of VANQUISH.

Yes. And -- yes. So what sort of average price point that was at in F '20? And then also how many units incrementally you'd expect to sell in F '21?

That 30,000 units represented about $8 million in sales. So again, it's a low-priced product to capture the high-volume part of the Coin & Treasure. Similar strategy, I suppose in consumer, Ronan, to what we've just articulated with the GOLD MONSTER in gold.

Sure. I think earlier in the call you mentioned you sold 45,000 units of that device to date. So that it imply you've sold circa 15,000 units over the first couple of months of F '21. Is that right?

Right.

I did have one last question, which was just with regards to the current political situation in Mali. If you could just comment on that and any sensitivity to Codan's business from that situation?

Yes. So Mali is a reasonably significant market for us, particularly the surrounding areas. So I think we did something like $40 million-ish worth of sales was into Mali and surrounding regions in the last financial year. We've been in very close contact with our people on the ground. So we've got 2 major dealers in Mali, and also our guys in Dubai are very close to that marketplace. So overnight, the information coming out of Mali is this. The coup is seen as a positive because the government was highly corrupt. So what you may not know or have read in the papers is that there was demonstrations for the last month with probably up to 20 people killed in these demonstrations, and the demonstrators were starting to gain momentum just based on the corruption that was coming from the government in Mali. So the Military have effected what they call a bloodless coup. So they've gone there and arrested the Prime Minister, basically twisted his arm to resign. No one was killed. They are now looking to transition to a civilian government. And so it's seen as a victory for the people in Mali. Clearly, there's a short-term disruption to the way that the business is conducted in Mali because borders have then shut with countries around them because they didn't know what the situation was. But the news as of this morning is that it's seen as a positive situation. The transition will take place over the next few months so that the medium term will be very positive. And in the short term, we are getting reports from our dealers that there is no effect in terms of their ability to do business nor the demand that they're seeing. So it's better than we had feared when we first heard the news a few days ago.

We'll take our next question. [Operator Instructions]

Just a couple of quick follow-ups for me. It's Callum Sinclair from Macquarie. I guess just going back to the supply constraints that you experienced out of Malaysia early in COVID. I mean, I guess I'm just wondering which products and how early you might have stocked out or had constrained sales some supply issues. And I know you mentioned it earlier around not knowing the pent-up demand, but when I look at the finished inventory balance, it's well down at sort of 30 June. So I guess, how long before you can get some of those SKUs back into normalized levels of inventory?

Thanks, Callum. Good question. Callum, the products that we ran out of first were the volume products. So GOLD MONSTER, predominantly VANQUISH, which was a new release. So we had demand for a new release product precisely at the time the Malaysian government shutdown manufacturing. So that was a bit of a problem for us. So VANQUISH, GOLD MONSTER. SDC 2300 as well at that time, but that's recovered pretty well now. GPZ, although that's recovering. So really VANQUISH, EQUINOX and GOLD MONSTER are the 3 most affected products. What we've done is we've gone and duplicated all of our jigs and fixtures and spent, I think, $200,000. It's not a lot of money, relatively speaking, to try to double capacity in these places. And the issue now is for them chasing components which -- and if you've spoken to me a week ago, I would have been looking very stressed and frazzled because we had something like 50 shortages to get to the new higher levels of capacity. I'm pleased to report the team have been able to solve every one of these in the last 7 days, which is a great testament to them. So short answer to your question is within 2 months we will be in a position we expect to at least satisfy demand. So in other words, we will supply more than they can buy, which is always a challenge in manufacturing. And then from there, we're looking to get product on the sea. So it depends to the extent that we have a buffer between supply and demand will determine how quickly we're able to then get product on the sea and reduce our freight costs. But within -- certainly this month to get to our forecast has been a challenge, but we will get there. So our forecast would have had us manufacture everything we possibly could. Last week, it was a little late. We fall short of the forecast in Metal Detection. As of today, we will comfortably meet it. Next month, [indiscernible], we will make more product than they are forecasting.

Okay. Great. So I guess in terms of that comment around the strong outlook to the start of the year and the sort of run rate earlier questions from the other analysts, I guess, you don't really know what the actual demand run rate is at the moment until you get some of those lines back in and some of the supply chain still normalizes. Is that, I guess, a fair way to think about it?

That is absolutely the way to think about it because the issue when you become supply constrained as people panic and they try and place orders in multiple [ airlines ] in the hope that they can get product. Once you then take away that demand, sometimes some of these orders drop off because it's duplicated. So it's just impossible to know what the strength of the demand is. I mean we're being told by our people in the field that the demand is strong and real, but that's a relative term. Let's find out what it's like when we're able to supply what's in the forecast. But it's hard to know is the answer.

Okay. Great. And maybe just on the GPX release. Maybe to the extent that you're able to share the price point that you're planning to release that at or the range? I know it sits below the GPZ. But I guess how far below and in terms of where that price point will sit to new customers?

Yes. Well, it's an AUD 8,000 product as opposed to USD 8,000 for the GPZ. So that's kind of the rough order of magnitude pricing. That obviously varies a little bit with respect to the people that are selling high volumes. So there's volume discounts in place for people that sell high volume. And of course, people that buy one of the share off will pay probably the full $8,000. So it's anywhere in between based on if there's an intermediary in the middle and whether the person is a high or low volume retailer or seller.

Right. And just last one. I know you touched on it earlier a bit. I think in the account you mentioned the large LMR contract that will be delivered in FY '21. I guess in terms of thinking about the potential offset of any pushing out of some Tactical Comms tenders, I guess is that enough of an offset if some of those Tactical contracts may be pushed out into -- beyond FY '21?

It's not enough of an offset because the numbers we're talking about an LMR represents 3 contracts or 4 contracts to get to $60 million. The contract in Morocco is of that order on its own. And of course, Afghanistan is quite large also. So it doesn't make up for it. So what I've said previously, when I've spoken to the market is -- we did $80 million in FY '20. Right now, sitting here today, you'd have to go -- it'd be crazy to forecast $80 million. I'm forecasting -- it's going to be closer to $60 million until we see some of these large projects land.

We'll take our next question. [Operator Instructions]

Yes. It's Jason here from Taylor Collison. Great results. A couple of questions from me. Just probably just following on from the last question that Callum asked and also your answer. I'm a little confused around radio comms, Donald. We're talking about a couple of large big contracts that may fall and will likely fall in the first half of '21 and definitely fall in the second half of '21 was the comment earlier on. But you're also sort of talking about, on the flip side that you're sort of expecting that radio comms business at the Tactical end to reduce from $80 million to $60 million. I'm just trying to understand that comment.

Okay. I'll make it easy for you. If we get these 2, we do $60 million. The reason we don't get to $80 million is because all I'm talking about are the really large projects, but there's also 10 or so projects that sit between the $1 million and $3 million mark that are much more difficult to close due to our inability to travel. And I'll talk more particularly about Asia Pacific. So last year, we did Afghanistan and East Africa, but we also did the Philippines Police and we also did the Bangladesh Navy. We also did the Malaysian police, the Indonesian Army. Indonesia, Malaysia, Philippines and Bangladesh are proving extremely difficult for us because they are customers that like to come and inspect their product. They like to see people train and do product demos. So business development is much more difficult in that part of the world as opposed to Africa, where we have strong dealers in place. We have our own office in Afghanistan. So it's much easier to service the requirements of these customers. So if we get these 2, which we expect to get, then we'll do $60 million. If we don't get them -- or sorry, if we don't get the other ones that I've spoken about, it will be difficult to stretch to $80 million.

Okay. Great. That's very clear. A couple of more questions, if I could. In respect of the retooling, you spoke about it in Malaysia, in particular, which would obviously allow for more supply and take away that supply constraint that you felt. Could you talk about the type of savings the business might experience from returning to sea freight, which I guess you've been doing air freight for the past 12 to 18 months, given the unprecedented demand. So I'm just trying to understand that. And any offsets against that that you might have banked this year because of an inability to travel and move around?

Absolutely. Well, it's a good question. We've always air freighted, and we've supplemented that with sea freight. The reason we haven't pushed too hard to put everything on the water is because it's a balance between working capital that we're holding and our ability to ship straight from source. That has now become overwhelmingly easy for us to justify with respect to the cost of air freight in terms of the holding cost of inventory. So for us, air freight has quadrupled from about $500,000 a month to about $2 million a month. So it's a significant number. When you sea freight, the number is probably -- so on air freight at $500,000 a month, close to $100,000 a month for sea freight.

Okay. So quite a substantial saving. But what about the offsets that you've had this year, maybe with the inability to move around?

The offsets are probably about half. So when air freight had doubled from $500,000 to $1 million, we pretty much covered that with lack of travel and hotel accommodation [indiscernible] for dinners. We're now into the negative with respect to that equation. So the savings that we're making on travel are more than being offset by the hike in air freight because of the volumes that we're doing in air freight. So it's a volumetric discussion. As volumes increase, and we had a massive July, I think we moved something like 40,000 detectors in July, the air freight bill was $2 million. It's a lot. And the same thing is happening as you ship more and more, what you call, low-value detectors. So we are shipping VANQUISH and GOLD MONSTER which are both high-volume products, and we pay for space, not weight, believe it or not.

Yes. So you could -- I mean potentially moving towards a bigger rec portfolio. And I guess, what you've been paying in air freight, it's conceivable that there's $1 million or maybe $1.5 million of savings moving to a sea freight model. Is that sort of what you're trying to lead me to?

Absolutely.

Right. Okay. Understood. And maybe I might just finish off with a bit more of a challenging question. The geographical expansion you talk about, I can't really see it in the presentation deck relative to what's been depicted in previous presentations. I can see that you've created -- I guess you've released some software updates for both the VANQUISH and the EQUINOX, which could help sales in Asia Pacific. Could you maybe help us understand a bit more about that geographical expansion piece and just how meaningful that could be relative to cracking the U.S. market in the rec space.

Okay. So there's 2 ways to look at geographic expansion. There's geographies by continent, which is what we show in the presentation, and that's the one that you're having trouble reconciling, I suppose, and I can see why. There's also geographic expansion within regions. So for example, in Europe, a geographic expansion -- instead of selling just to Russia, we're now selling to 10 countries within that region. With respect to the U.S., there's a growth there because we're doing much, much more mass market retailers in the U.S. So the geography is spread all over North America and the Americas, and as I mentioned Mexico. Mexico is shown in the American number. So when I say geographic expansion, I suppose what I mean is more -- customers in more places, not necessarily growing the particular regions on their own relative to the third world. So I'm looking inside places like Africa. We're selling more gold detectors to more people in Africa. So that geographic expansion has increased Africa significantly, and also the U.S. has increased significantly because of the geographic footprint in the mass market retailers within that region.

Okay. If I could ask one more, just question. You put in a really good slide around the addressable market for Tactical Radio Communications. In the past, you've been roughly, what, 25% of that HF legacy market. So aspirationally, if you're saying the total addressable market going all the way up the stack is somewhere between $1 million and $2 million in the developing world, how should we be thinking about aspirations for the business from a market share perspective going forward? And I guess, what's the critical steps you need to get to, in your mind, given that at the moment you're sort of struggling to keep the velocity of the closure of those sales to go through the same speed as last year.

COVID exempted. So let's talk about normal world conversations because no one can predict COVID and the effects and vaccines and return to normality. In terms of our planning strategically, we would look to take that division to $250 million in the next 3 to 5 years. So $250 million in the next 3 to 5 years. In order to do that, we need to add controlling interests in some of the products that you see on the road map. So we need to have a MANET radio. We need to have our own interoperability software product. We need to have a Tactical VHF product. Now we can still get to $250 million in sales by selling these products from a third-party perspective, but that when -- they wouldn't be at the margins that we expect, which are 50% to 60%. So in order to get these sales over the next 3 to 5 years at our margins, we need to have controlling interests, at least have control of supply, design and distribution of these technologies that sit outside of our core capability.

Unfortunately, due to the time constraints, we will now be concluding our Q&A session. We will attempt to respond to any unanswered questions submitted via the webcast interface in due course. I would like to pass the call back to Mr. Donald McGurk for any closing remarks.

Okay. Thank you. So thanks for your time. I know it's a busy period for everyone with the reporting season, but appreciate your indulgence. And as the moderator said, we will answer all of the written questions as soon as we can so that we give you the courtesy of an answer, and thank you for your time. We appreciate it.

Thank you. This concludes today's presentation. Thank you for participating. You may now disconnect.