Codan Limited (CDA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is David Simmons, and I'm your company's Chairman. As Chairman of this meeting and on behalf of my fellow directors, I'm pleased to welcome you to the 2021 Annual General Meeting of Codan. It's now just after 11:00, and I've been advised that a quorum is present, so I will declare the meeting open. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. The question process, if you need to understand it, questions from shareholders can be submitted at any time during today's meeting. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated, or if there are multiple questions on the 1 topic, amalgamated together. There's also an audio question process, which you can now see. For those shareholders who wish to ask a verbal question, an audio question facility is available during the meeting. [Operator Instructions] Further, while we will not be able to do with all of your questions, I'll ensure that all members, as a whole, have a reasonable opportunity to ask questions. The voting today will be conducted by a way of a poll on each item of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. You'll see now the voting process. If you're eligible vote at this meeting, a polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with the voting options. To cast your vote, simply select one of the options. There's no need to press a submit or enter button as a vote is automatically recorded. You do have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I'll provide ample notice prior to close the meeting. Shareholders are reminded that your Board strongly recommends that you vote for all resolutions. And I appoint Nigel Bulling of Computershare Investor Services to be the returning officer and to conduct the poll. The notice of meeting and explanatory memorandum were distributed to all shareholders on the 22nd of September, and I propose to take them as read. The format of today's meeting is to conduct the formal business of the meeting after some presentations. This first -- the first will be my brief comments on the company's performance during the recent completed 2021 financial year and some comments about our current performance, near-term outlook and strategic direction. There will then be a presentation by your Managing Director and CEO, Donald McGurk, followed by a discussion with some of our executive team. I'll now introduce the Board of Directors of Codan Limited, remembering that some are here physically and some are joining us remotely. As I said, my name is David Simmons, and I was appointed to the Codan Board in May of 2008. This is now my sixth AGM as Codan Chairman. I'm Chairman of the Remuneration and Nomination Committee and a member of the Audit Risk and Compliance Committee. Today, I'm retiring by rotation and will be standing for reelection. Firstly, I'd like to introduce the Lieutenant General Peter Leahy. He was appointed to the Board in September of 2008 and is a member of the Remuneration and Nomination Committee. Peter is attending today's meeting virtually. Good morning to you, Peter.

Good morning, David, and good morning, ladies and gentlemen.

Thank you. Next, I'd like to introduce Graeme Barclay, who was appointed in February of 2015 as a member of the Rem Committee and the Audit, Risk and Compliance Committee. Graeme is also attending today's meeting virtually. Good morning, Graeme.

Good morning, David, and welcome to all of our shareholders.

Thank you. The following directors are here with me at Mawson Lakes. Kathy Gramp was appointed the Board in November 2015 and is Chair of the Audit Risk and Compliance Committee. Kathy?

Good morning, everyone.

Thank you. And finally, your Managing Director and CEO, Donald McGurk, who joined the Board in 2010. He was appointed Managing Director in that November of that year.

Good morning.

We're also joined by Michael Barton, who became Codan Secretary in May 2008.

Good morning, David.

Thanks, Michael. I've asked Michael to read out any shareholder questions that we receive at today's meeting, and we'll hand over to him at the appropriate time. As mentioned above, there will be an opportunity for verbal questions to be asked virtually. Proxies have been received from 377 members, representing over 74% of the company's voting shares. These will be reported to the ASX for each resolution. After the discussion of each resolution and before putting the resolution to a vote, the proxy votes will be displayed on the screen for members information. Okay. Now I'd like to update you on the year that was and perhaps more importantly, where we see this year going. Given the nature of this meeting, I do intend to keep my comments relatively brief. Once we've attended to the formalities, I will ask Donald and a number of our key executives to join me in a more informal discussion, which I think you will find interesting. The financial results we achieved last year were outstanding on all measures. We achieved a record level of sales, profitability and cash flow, and we're able to reward shareholders with an annual dividend of $0.27 fully franked. These results were achieved against a backdrop of the challenges that COVID-19 continues to trail up. In our case, we saw a significant increase in sales of Minelab products in first all, recreational markets. However, our communications business suffered a severe downturn as a number of major projects in technical communications were delayed due to the financial pressure caused by the pandemic, particularly in developing world countries. While global economies performed better than expected, ongoing and unpredictable restrictions designed to curb the spread of COVID-19 disrupted supply chains and shipping networks with the latter resulting in a significant costs. To increase underlying profit by over 50% in these circumstances was truly a remarkable result. Late in the financial year, we deployed circa $174 million in capital to acquire the Domo Tactical- Communications business, which we call DTC, and the Zetron business. We have detailed and executable plans to reshape and grow both businesses so they become a significant contributors to Codan over time. In our first full year of ownership of Minelab, which was 2009, the business turned over $42 million. Last year, the same business turned over $326 million. We know that investing in quality businesses will bring results. We will bring this thinking to both DTC and Zetron. Later in the meeting, Paul Sangster and Scott French will tell you about some of the plans they have to invest in and grow these 2 new Codan businesses. I'll also ask Peter Charlesworth about his plans to further grow the Minelab business. We will continue to change our mix as we reshape our portfolio of businesses. In line with this philosophy, we sold the Minetec business to Caterpillar on the 1st of July this year. And we are reviewing acquisition opportunities in adjacent markets to all of our businesses. We believe that small programmatic acquisitions to speed the way to new markets and products make sense for Codan on the back of our significant commitment to in-house R&D and product development. In August, we advised the market that Donald will be retiring as Managing Director of Codan. Donald's commitment to assisting me with the transition to a new CEO is much appreciated by the Board. To this end, I can advise that our search is very well progressed and that we should be in a position to make an appointment sometime in November. Our search criteria of appointing a CEO with international experience running a complex business at scale will be fulfilled. With international travel hopefully opening up towards the end of the calendar year, Donald should be able to travel to all of our operations and introduce our new CEO to our staff, our customers and our key suppliers. I can confirm that our detailed 3-year plan remains in place and that with the assistance of our high-quality committed executive team no momentum will be lost as we work through the change of leadership. We fully expect that our new management director will pick this plan up and own it. No big business or organizational review, just a simple and single plan to get on with it. I can advise you that our search for a director based in the U.S.A. is similarly well progressed. Given the reshaping of our business following the DTC and Zetron acquisitions, we think it's sensible to have a board presence on the ground in the U.S.A. We are now approaching 300 staff employed in North America. Technical leadership is the governing criteria for this search. There are significant headwinds facing many companies in Australia and around the world due to the unpredictable restrictions caused by COVID-19 outbreaks. We're not immune to these. As vaccination levels improve globally, a sense of normality should return. This year will present many challenges, I'm sure, but I'm pleased to report that our first quarter results are ahead of what was a record year last year, but there's still a long way to go. This year, it's all about integrating our 2 businesses whilst keeping the momentum going across the balance of Codan, particularly in Minelab. This morning's announcement of our success in securing a multiyear contract to supply DTC software-defined mesh radios into a major military program, coupled with the fact that we are positioning Zetron to access the emerging next generation 911 program across the U.S.A. gives me real confidence that our strategy to diversify our revenue base is on track. Shareholders will be rewarded by our success. Thank you for your interest in Codan. I'll now hand over to Donald, who will give you a more detailed update on our position from last year and where we see this year going.

Thanks, David. I would like to comment on a record 2021 financial year and the current state of the business ahead of a more informal discussions, as David mentioned with our executives. FY '21 was a significant challenge for every business. Despite this, we were able to achieve record levels of profitability as well as make 2 high-quality acquisitions in an environment where we were challenged to conduct face-to-face meetings outside of Australia. Domo Tactical Communications and Zetron were acquired in May of this year, and we sold Minetec to our long-standing partner, Caterpillar. We delivered another record year with metal detection sales achieving a new all-time high. Minelab has continued to reap the benefits of our increased investment into new product development, widening the technology gap between Minelab and its competitors. This has most recently been demonstrated by the release of a new top-end gold detector, the GPX 6000, which we expect to make a significant impact on future gold detector sales. Based on our previous experience, there is generally a more gradual uptake of new gold detectors into developing world markets. I am pleased to announce since the launch of the GPX 6000, the reviews have been overwhelmingly positive, and the machine has been very well received both in metal detecting communities in Australia, North America and Europe. The pandemic has undoubtedly posed different challenges and opportunities for our metal detection segment. The travel restrictions have increased the exposure of outdoor recreational hobbies such as metal detection, which accelerated our growth in our consumer business, and government stimulus may also have been a positive in FY '21. These factors combined are estimated to have contributed between $15 million and $20 million to sales during FY '21. Some 18 months ago, the business made a conscious effort to increase Minelab inventory levels in order to mitigate supply chain risks and minimize escalating freight costs. As a result, Minelab inventory increased $50 million during the year, which is serving us well given the current shortage of key electric -- electronic components. I would like to reassure you that we are well positioned for the balance of the financial year. And we continue to actively manage our supply chain through sourcing alternative parts and carrying additional holdings of key components. Turning your attention to the communications business. Our strategy for growth is to transition to a full communication solutions provider. And during FY '21, we made further progress by broadening our technology offerings which will deliver greater value and better serve our existing and future customers' needs. We have made substantial progress integrating the DTC business, which supplies products and solutions to the video, broadcast, command and control and covert surveillance markets. DTC has previously focused heavily on its video communications business, which targets first world military markets. This technology allows DTC to participate in large military programs, such as this morning's announcement of a multiyear contract to supply software-defined mesh radios. While the military market is a key focus for DTC, there are also applications in other industries and market segments which provide further opportunity for growth. The broadcast business provides audio and low-latency video transmission solutions. And as the world starts to relax, COVID restrictions and sporting events return to normal, we are seeing signs of recovery in this industry. The covert surveillance business provides audio and video capabilities to law enforcement, national security and intelligence agencies. This business is also experiencing a resurgence in demand and has recently won a number of large projects on the back of increased spending in homeland security markets. Order intake for the first quarter has been strong with $33 million of orders secured, which is in line with our acquisition assumptions. We are on track to deliver against our FY '22 EBITDA target for this business of $14 million. At Zetron, the emphasis of our first year of ownership has been to restructure, refocus and then grow the business. We are pleased to advise that we are on track to deliver the planned savings and the previously stated $8 million EBITDA. Accelerated integration of our services and support teams is allowing for greater levels of customer service and delivery to our customers. Feedback from our distribution partners and customers has been very positive, and we look forward to realizing significant sales synergies in FY '23 and beyond. The Communications segment will grow in FY '22 with that growth largely coming from the newly acquired DTC and Zetron businesses. During August, we announced my intention to retire. I want to emphasize to Codan shareholders that I'm committed to ensuring a smooth and seamless transition to the new CEO. Codan's well-stated strategy is to invest in ourselves, strengthen our core through geographic product and technology expansion and to pursue acquisitions that build on our communications core and take us into adjacent markets. This strategy is well documented, as David mentioned, and we'll continue past my retirement due to the exceptional strength of Codan's executive and senior management team. While parts of our business remain difficult to forecast, we have made an excellent start to the financial year. Our existing businesses are tracking in line with last year's record first half profitability. Both DTC and Zetron are transitioning and integrating well into the Codan Group and are tracking in line with plan. The Board is pleased to see a much more distributed and balanced business portfolio, and we are confident of delivering a new record first half result. Finally, on behalf of the Board, we would like to acknowledge the significant efforts of our people and thank them for their contribution to the outstanding results achieved again last year. I would now like to pass back to David.

Thanks, Donald. And I think we're now going to sort of enter this informal discussion stage with 2 of our -- 3 of our key executives, but also Donald. And the question, Donald, I think the shareholders would be particularly interested in you explaining what we are doing about executive development and succession planning across the group because that really is the key to our long-term success.

Sure. Thanks, David. Look, we've, as an executive team, given a lot of thought to how we succeed and how we replace ourselves. To that extent, we've been working for a couple of years on a succession plan which is aimed at developing and strengthening the team that sits below the executive level. To that end, we've identified a number of what we would call high-potential individuals. These high-end potential individuals, we believe have the capability within the next 2 to 3 years, through further development, to be seriously considered as candidates for each of the executives sitting around the table. To that end, we've put in place with them a program which includes having external mentors, access to executive education and some technical skills training so that they are well positioned, and they carry the culture of the business. And we would hope, if the plan is successful, that we would see some internal appointments as and when the executives that are sitting around the table currently see fit to move on over the next 5 years or so.

And I think it's important to also acknowledge that those rising stars, for want of a better term, we have also admitted them to our long-term incentive scheme at various percentages of their salary because the connection between the long-term incentive scheme and Codan's success is -- just cannot be doubted. And I think if Codan succeeds and we see those particular individuals grows some reasonable shareholding in the company, I will be delighted. We've just discussed those new admissions to the long-term incentive scheme in today's Board meeting, and we're very pleased that we're able to extend that to those individuals. So thanks, Donald. I think it's an important issue, and I think we're well placed. Now I'd like to introduce Peter Charlesworth, Paul Sangster and Scott French. Peter and Paul are with me here today at Mawson Lakes, and we have Scott attending from U.S. Seattle at the moment. Scott, is that where you are?

I am in Seattle today, yes.

Yes. Scott's in Seattle. So the first question, and the questions will be the same largely because I think what I would like shareholders to understand is where growth in the future is going to come from. When you come off the back of the year where you deliver a 50% increase in your net profit after tax and you start to do the math, it's hard to keep adding and adding and adding to a number, which is now a very large number compared to where we've been historically. But if we were -- we thought we were out of part and we've squeezed everything out of the lemon, then I'd be concerned. So what I want these guys to be telling me and telling the shareholders is how we're going to continue to grow. So Peter, Minelab is an outstanding business. As I mentioned before, we've grown the revenue from 40s -- in the $40 million to in excess of $340 million over a relatively short period of time. Where are we going to get the growth in the future? What are you really focusing on?

Thanks, David. Thanks for the question. And look, in terms of answering this, I'd like to actually split the answer into 4 parts, if I may. And maybe if you can indulge me for a few minutes, I'll go through those 4 areas that I think we have opportunities for good growth. The first one is market share growth in North America and Europe. Now in North America, we estimate we have a market share of around 27%. This is up from 22% in FY '20. And we also had significant market growth last year of around 20%. Now that will contract, but I think it will remain above the FY '20 level. Similarly, in Europe, we have an estimated market share of around 28%, up from 26% in FY '20, and again, market growth of around 17%. Now this market is mainly coin and treasure, and it's harder to differentiate one's products through technology alone. Indeed, distribution, in particular, retail is crucial to market share in these markets. We've been building and improving our retail position through the launch of retail price point matched products, VANQUISH and EQUINOX, for example, and through retail relationships. This is further advanced in North America with retailers like Dick's Sporting Goods, Cabela's, Bass Pro, Canadian Tire than it is in Europe, but Europe is certainly back underway now that we're able to travel again. As you can see, there's still significant scope to fight it out for market share in Europe and U.S.A. and through excellent products, product awareness, Minelab product awareness, technical advantage, marketing and distribution improvements, we expect to fight it out and improve our market share in these markets because I think at the high 20s, we're still at the low end of the market share that we can achieve there. In South America, let me move to that now. Only a few years ago, South America represented less than $1 million per annum of sales to us. We decided to take destiny into our own hands after failing to find partners that were willing to invest in and back the distribution of Minelab products into the various countries. We've established direct distribution and indeed direct-to-consumer Minelab companies in Brazil and recently Mexico. And I'm pleased to say that our sales are now over $1 million per month, a lift of more than 12x in that period and spread across coin and treasure and gold products. We're structuring our operations to be able to distribute into all South American countries, probably through Uruguay and as we develop all the markets. So I expect we're just in the first 1/3 of the growth curve for South America. If I may now move to Asia Pacific. Asia Pacific, as we define it, Pakistan to Japan, Mongolia to Indonesia and Papua New Guinea and across to the Philippines, represents more than 50% of the world's population, 4 billion people of 7.9 billion worldwide. However, into the region, in 2021, we sold just 2.2% of our sales to this half of the world's population. There are challenges, of course, but we're not trying to sell cricket bats into China or table tennis bats into India. Metal detectors are generally applicable to all. However, it's far less well known in these regions, and indeed, as far as gold prospecting is concerned, relatively unknown. It's often difficult to get to the gold miners due to remoteness or safety and security concerns, but in particular, COVID hasn't helped in the last 2 years to be able to further develop these markets because we just haven't been able to travel. However, we're starting to invest into making roads. And for reasons similar to that of Brazil, we've just established our own company in India and intend to distribute and promote our products directly into India. We've also set up direct consumer e-commerce into Indonesia, and we'll be repeating this model across other areas. I expect the growth will be a slower development than we've seen in some other markets, but we need to continue to develop the awareness of the products, how and where they're used and for what purpose and then build the case for Minelab products specifically. As the biggest company in the industry by quite a long way, it's incumbent upon us to do that work. And finally, into Africa, further geographical market development across Central Africa, Nigeria through to Mozambique is underway. It's true that the low-hanging fruit in Africa has been tapped by us, and we have near 100% market share in those regions. However, there are vast areas of Africa that remain relatively untapped for gold prospecting with metal detectors, such as countries -- countries such as Nigeria -- mind you, the mining is in the less accessible Western -- Eastern part; Central African Republic; Democratic Republic of the Congo; through to Mozambique. These are remote regions with accessibility difficulties. But with the high price of gold and the right partners, these markets can be developed, and this development is now underway again. So those 4, in particular, I think, David, are the key to a continued substantial growth within Minelab.

And the future product development for us, I mean are we all tapped out. We've bedded anything that's any good or have you got something more to come, Pete?

If we were, that would be a relief. But in fact, it's quite the opposite. We've got the largest engineering team, including R&D, that we've ever had, and we've got the longest list of innovative technologies we could put into metal detecting than we've ever had. The issue is getting them into products, not thinking up of -- not the thinking up of new opportunities and technology to further advance the metal detection -- detecting. So no, I think that, indeed, the opportunities that we have in technology present a significant opportunity to put an even further gap between us and our competitors.

And I think that encapsulates what we as a Board are committed to investing in what is a fantastic business. I have to tell you, there's also going to be a new convert to detecting because I was at a charity event just recently, and Minelab had offered up a price, which was a situation where if you were successful in bidding for this, you got to go prospecting with 2 or 3 of our key experts over 2 or 3 nights, all accommodation paid...

All expenses paid.

All expenses paid and training on how to use the product, and most importantly, 50% discount on an acquisition of a detector of your choice. So I thought I'd better get the bidding underway. So I put in an opening bid, and that was the only bid there was. And so I won, and I get to go. I suppose I have to declare that I've got a discount on a product in next year's Annual General Meeting. Michael, we'll cross that bridge when we get to it. So next time you see me, well, you might not see me again. I might find the big prize...

The retirement nugget.

Where I go the, retirement nugget. Now 15 weeks ago, Paul Sangster left Australia to go and visit all the businesses that we acquired out of the DTC banner. And 3 weeks ago, he came back to Australia. And he then spent 2 weeks in the Peppers Hotel in isolation, and I understand a very comfortable room with no windows, no balcony. And he got out, he broke out of there last Friday, and he's back in the real world now. But I think the 12 weeks that he spent on the road, touching every piece of the DTC acquisition, was time well spent, and probably gives you an opportunity and the background to tell us how you're going to grow that business and how we're going to make it a price in the Codan offer. Paul, what do you got to say?

Yes. Thanks, David. I've now acclimated myself back into society after 2 weeks. So first, it's been a great 12 weeks or 15 weeks, if you will, traveling around the world to have the opportunity to meet the high-quality staff that we have in this business. And as you highlight from the outset, we've been very fortunate to acquire 2 high-quality businesses in DTC and Zetron. Both businesses are rich in intellectual property. And 1 area that I'm very pleased with is the level of talent that I've seen in the businesses for the last 15 weeks is certainly second to none when it comes to world-class engineering talent in particular. Both of these acquisitions obviously fit the strategic objectives to become a full solution provider. And the technology integration for us, in particular with DTC and Codan comms, has been excellent. We identified, during the due diligence process, that we need a very strong and focused 100-day integration plan. And I'm pleased to report that we're past that 100-day integration plan, and we've achieved several objectives that we outlined from the start. One of those objectives was to reorganize the front end of the business, to upskill and appropriately resource to go after the 3 key regions that we're focused in on in North America; EMEA, Europe, Middle East and Africa; and here in Asia Pacific. We've also undertaken a number of marketing initiatives. I'm pleased to report that as we're seeing the -- as we're coming to the other end of COVID and things are opening up, we've attended 2 large defense shows, one in the United States, AUSA; and one in the United Kingdom, DSCI. And we've also attended the world's largest unmanned system show in AU VSI in Atlanta, Georgia. And it was very clear to me that the DTC technology offers tremendous opportunity. And obviously, buying this organization from a private equity firm, they were more cautious on their investments. But the fact that we understand and know this market and integrate it into our systems and processes, it's allowed us to really excel and drive the front end of the business that we -- as we have seen this morning from the announcement, we're starting to see the fruits of that labor. So we're very pleased on where we've gotten to in the first 100-day integration plan and very proud of the team for what they've achieved. So as we turn past and turn the next chapter of focusing on the next 100 days, if you will, we're focused on mostly on appropriately resourcing and leveraging our global engineering teams to ensure that we're well positioned to capture as much market share in the various markets that we serve and also to find some efficiencies within the systems engineering and back office of our business. And also moving on, we'll continue to evaluate investments in technology and acquisition targets, which are complementary to our core. We have a very strong focus in that area as we move forward. From a growth perspective, as Donald highlighted, we focus in different markets. The law enforcement market, which has seen a bit of a shift of late, there's been a plus up in spending, particularly in the United States. So it's been a very good first quarter, under Codan's ownership of DTC, particularly in the covert business and the law enforcement market. The military market, the buying cycles are traditionally a little bit longer, but we're starting to see a number of programs come to fruition. Again, as I say, we announced this morning, but even here in Australia with some of the sovereign programs and the modernization of the Five Eyes militaries, we're seeing a number of acquisitions around the DTC technology for operational testing, which will lead into larger programs. In the broadcast, as live sports opens up, we're starting to see an uptick in demand in our broadcast products, which is great to see. And these successes in the DTC business help us mitigate the challenges that we've seen in our traditional HF business, particularly with the withdraw of Afghanistan. And the 2 other areas that we focus in on are the Unmanned Systems business. So the DTC software-defined radios have achieved some miniaturization characteristics in that we can put our software-defined radio on unmanned platforms, whether it's UAVs or UGV. So we're starting to see some excitement in that area, recognizing that, again, the buying cycles are a little bit longer. And lastly, some of the major programs. We've been successful in selling into several major programs. Again, from an early test phase perspective, but here in Australia and in the U.S. and in the U.K., we're starting to be recognized as a serious player in the defense market. So all of that combined with the investments and growth opportunities really speaks to our strategic objectives of being a full solution provider. So I couldn't be happier and more proud of what the team has accomplished so far. And as Donald points out, our results are in line with what we had told the market in the early days of the acquisition. So thank you for that.

Thank you. And we'll go to Scott in a minute. But I think I will comment that you don't deploy $170 million in capital lightly. And as a Board, we sat down with the management team now probably 2 years ago and said that we really needed a repeatable process for acquisitions where Board's expectations are understood, what we require to be served up in terms of justifying acquisition was understood. And there was a process which any part of the business could pick up and run with. And 1 of the key parts of that was to really change our focus from ticking off the balance sheet added up to actually investing in getting independent market intelligence for new areas of investment and opportunity. So we've done that. And I think one legacy we have now, and we've got in place is the fact we do have a repeatable, executable process in relation to acquisitions. So it won't come as a surprise when Scott talks to us and probably tells us about the same thing that we've been through a 100-day integration plan, and he will tell us how we progress with that. But it's consistent across the business. And I think whether it's a big acquisition or a small acquisition, the process will still be the same. So that makes me and the Board more comfortable that we have something to shake out opportunities. Every opportunity looks great. You can nail it in every number. The only number you can never nail down with any great confidence is the revenue. So we focus on the revenue piece, and the rest, I reckon pretty much will follow. So Scott, welcome from the, don't whether it's Sunny Seattle, but welcome from Seattle, and how about you tell us about what you've done in the first 100 days, but probably more important, the next 365 past that.

Thank you, David, and I appreciate the ability to be able to comment on behalf of all of our employees, our partners as well as our customers. It's certainly not sunny in Seattle today. We're going through a batch of rain that will last for a few more days, but I do want to talk about 3 areas that we're focused on in terms of investment to enable the long-term growth that made Zetron attractive to us as an acquisition. And I believe, David, you had mentioned earlier, around the next-generation 911 technology that is forthcoming in the U.S., and that migration we expect to really accelerate over the next couple of years. So in the acquisition of Zetron, we found ourselves going from a single engineering center of excellence in Victoria, British Columbia, to having 3 very high-caliber engineering centers of excellence in Seattle, Washington; Victoria, British Columbia as well as Brisbane in Queensland, Australia. So we are challenging ourselves to how do we best tap that talent that we have in each of those centers of excellence. So we've really got to invest in areas of automation and modernization across our global engineering function as well as product development because we're seeing the market really rapidly change and focus on solutions that are at the intersection of radio, which is core to the Codan critical communications business; broadband, as we figure out how do we take radio and make it interoperable with broadband; and command and control, which has been Zetron's sweet spot over their 40-year career. So it's really important for us to automate and modernize those functions so that we can meet the market demand that is rapidly evolving. The other area that we've -- we were very pleased with during the first 100 days of integration was taking essentially 6 disparate sales organizations across the globe and combining them into 2 organizations, one an international sales organization as well as a North America sales organization. And we were able to accomplish that before the start of our fiscal year in July. So we're off to a very good start. I'm happy to report that our first quarter of revenue as well as bottom line exceeded our expectations, grew year-over-year, such that we are now -- we are certainly on target for our commitment of $8 million EBITDA and hopefully exceed that as well. But what we -- where we focused our investment with the sales organizations is cross-training on the technologies so that our -- all of our sales professionals are very savvy and educated in terms of not only our command control offerings, but also the land mobile radio interoperability offerings that we've had between the 2 combined companies. And lastly, I'll talk about an area that historically, we had not invested on the critical communications side nor at Zetron Command and Control historically invested and that's in the roles of product marketing and demand generation. So we found ourselves with this exceptionally strong brand of Zetron, notably in North America as well as the Asia Pacific region in Australia. We found ourselves with this very strong brand, but not a sophisticated engine to create demand in the marketplace. So we are heavily investing in those areas. And then the last area that I would comment on, David, is that as with any acquisition, you've got different ERP systems, different customer relation managements or CRM systems. We're accelerating the integration of those such that we can just be so much more quick -- make decisions so much more faster, so much more quickly across the global organization that we find ourselves today. But very pleased with the first 100 days, the outlook for the next quarter and the second half, very positive. And as Donald mentioned earlier, the feedback from our channel partners as well as our market has been very, very positive and very refreshing to hear.

And Scott, we spent a fair amount of money investing in our traditional LMR business to change it from a mountaintop repeater company to a full solutions provider. I understand you had a bit of good news recently in terms of getting a sale under your belt of an integrated product. Do you want to tell us about that?

Yes. Sure will. So as you noted, we started as a mountaintop repeater company. We made the deliberate decision to move to end-to-end solutions, investing in a new repeater platform known as Cascade, and we've talked quite a bit about that just last month. We shipped our first multi-site Project 25-compliant, which is very important in the North American market, to a reasonably sized customer in New Mexico. We have 3 more orders ready to go with the Cascade platform. And we're actually working very closely with a customer in Missouri that will have a combined Zetron Command and Control. So Zetron voice dispatch, Zetron 911 call taking and our Cascade platform, and we're looking forward to announcing that as well.

We'll come to see that one. I reckon.

Yes.

Thanks, Scott. That's terrific. Okay. So thank you, Donald. Thank you, Peter. Thank you, Paul. Thank you, Scott. I think that's been useful and gives shareholders an appreciation of how good this business is. I'll now turn to the business agenda for the Annual General Meeting. The first item is to receive, consider and discuss the financial statements and report of the directors and orders for the year to June '21. We're not required to formally adopt these documents. However, I would be pleased to take comments or questions from shareholders on this item. The notice of the meeting invites shareholders to submit written questions to the auditor. If the questions are relevant to the conduct of the audit, the preparation, content of the auditor's report, the accounting policies adopted and the independence of the audit in relation to the conduct, Paul Cenko from KPMG is here today, Paul, welcome, and is available to answer questions where appropriate. I can advise we've not received any written questions for the auditor. I think that hasn't changed. It is, of course, the right time for shareholders to ask questions about this item of business. [Operator Instructions]

So are there any comments or questions, Michael, for the audit -- about the business or for the auditor, sorry.

So no questions for the auditor. We do have some questions for you, David.

Okay.

You want me to go through those?

Go ahead.

So first question is from Mr. and Mrs. Duncan. The question is, what is the company doing to grow the share price? A full review of expectations and KPIs seems critical.

Okay. Well, I think -- I talked to the management team about this quite regularly. And I think I have a very simple philosophy that if you make good profit and generate good cash, then the logic says the share price should follow if you've got a sustainable business. I believe we generate good profits, and we generate good cash, and I believe we have a sustainable business. The share price -- share market is anything but predictable. But it's not something we should worry about on a day-to-day basis. We should stick to our knitting and deliver the results, and I think the results will follow. I do note that if you've been a shareholder over a period of 5 years that you had a return of something like 800% over that period of time compared to the ordinaries 200 -- ASX 200 of about 40%. So I think if you've been a long-term shareholder, you've got half a smile, and hopefully, we can make that a full smile over the longer term.

I do have some other questions, David. So I'll just keep working through some of them -- some of the comments may have already addressed, but I'll ask the question, you can consider whether it needs a further question. The next question is from a Mr. Macduff. Since COVID has stopped the importation of skilled staff from overseas, how has Codan addressed the increasing need for microcontroller and programmable gate array programmers?

Well, I think the short answer is that our strategy over time is not to import expertise. We have our -- if you take the Minelab business and the traditional HF business in communications, we have a large group of engineers, which are either homegrown or home recruited. Right now, we're a global business. So we have centers of excellence for engineering in the U.S., in Canada, in the U.K., in Denmark. We have a distributed engineering expertise base. I think one of the things which excites me and excites Donald over time is the ability to leverage that distributor base to deploy expertise where it needs being deployed. And the way the world works these days is you don't have to be positioned anywhere. I mean you can work from anywhere you like. So our philosophy is to recruit where we need to recruit, and any restriction on people coming to Australia won't impact Codan whatsoever.

Question from a company, [ Got Damron ]. Mr. Chairman, can you chat as to the skills required and the KPIs anticipated for the likely successor of Mr. McGurk? And thank you to Mr. McGurk for his efforts at Codan.

Yes. I's think when I spoke in my Chairman's address, I commented that the search criteria for our CEO was really clear. We want someone with international experience, running a complex business at scale. And that's what we will fulfill with the appointment. So there, the -- they are the key requirements. In terms of KPIs, it will be no different from the KPIs we have in place for Donald, which is to grow a long-term sustainable business. So that will be how we approach the expectation. And we will look to reward the appointee in the same way that we've rewarded the -- Donald and the executive team through a combination of base salary, short-term incentive and long-term incentive.

Same shareholder. Mr. Chairman, can you talk to the due diligence process undertaken for DTC and Zetron, given the constraints of COVID and Codan's checkered to poor history around M&A?

I've had to check with the poor history shown up a few times, but people tend to forget, Minelab was an acquisition that hasn't done bad actually, I think. So -- and I think I've explained that 2 years ago, we did sit down as a Board, and we did reflect on a couple of acquisitions we have made. And we said, look, I think we can do better here. So the process we've been through has resulted in us having a repeatable process and a very disciplined process in place. The challenges of COVID were top of mind, I have to say, when we looked at both DTC and Zetron. What it ended up meaning is that we spent a lot of time and money looking for independent views on whether -- what was being served up in terms of future opportunities could be fulfilled. Now hand on heart, people won't ever guarantee that, but I think knowledge is king. And what we saw was independent knowledge. It's part of human nature that when you make an acquisition, you get tied up, you get emotionally involved in it, you want to do it because you see individually, you see merit in it. And sometimes you do turn a blind eye to a red flag. What we encourage was that red flags have to be really put up there, don't hide them. If there's red flags, let's address it. If we can address the red flag, mitigate the risk, then move forward. So in both cases, as I say, we spent a lot of time and money getting the independent views, and I'm very comfortable with the process. Would we have liked to travel there, had some handshakes, look at people eye to eye? Yes, absolutely, we would have. But the fact that we had, in Scott's case with Zetron, past knowledge of the Zetron business; and in Paul's case, in relation to DTC, past knowledge of the DTC business, gave us quite a unique advantage compared to a cold case acquisition. So a lot of the people were known to us, a lot of the approaches were known to us. So that tends to derisk. But as I said, you don't deploy $174 million in capital lightly, and we certainly didn't do that. And I'm very comfortable with the process we follow, including, most importantly, once you get the job done in terms of signing the check away, that's when the hard work begins. And that first 100-day integration plan for both have been executed. And I got to say, reported to the Board. So sometimes you do these things and you forget what you've signed up for. Well, we certainly haven't forgotten what we signed up for, and we're on track to make Codan a much stronger and better business because of the diversified revenue stream that we will achieve. Minelab is a terrific business, but we've been far too dependent on the success of the Minelab business over the last few years. So I think hopefully that answers the question.

Same shareholder. Can you talk to the cost escalation that Codan is currently experiencing with raw materials and freight? And how Codan is adjusting pricing to accommodate these inflationary cost escalations?

The answer is we are adjusting pricing. Probably the trickiest part in terms of imports is not necessarily the price of the components, it's the availability. The availability is really the critical issue for us. Yes, there's been some escalation in some of the inputs. The real difficult one to manage has been the freight dilemma. And that's -- every time we pick up a newspaper, you'll read some story about how the supply chains globally have been massively impacted with container ships packed up around major ports around the world. We're not immune to that. The -- probably the smartest thing that Donald and the executive team proposed 12-or-so months ago was to increase our inventory levels so that we could get off air freight and get back to sea freight. And then sea freight became difficult because of congestions at port, et cetera. But we have enough inventory in the system to mean that we are not right now supply constrained. And we have enough inventory to largely cushion lack of component availability. It doesn't mean that here and there that we're not going to have hiccups. I mean, as Donald said, to me, it's part of doing business in the electronics world, always has been. It's just it's a higher challenge today than it has been. So yes, freight's been a killer. One of the grass we have in our Board paper is what the freight expense is in the Minelab business compared to what historically we have experienced. So how we adjust the price here, we have where we have when we can, but there's a limit to how far you go on that as well. So a challenge for everybody, but I think we're reasonably well placed.

And last question from the shareholder. Could you please discuss the likely product release schedule for Minelab envisaged over the oncoming 2 years? Comment on the product pipeline, the target markets that are currently being worked on by the Minelab R&D team.

Yes. I think that's for us, it's our proprietary knowledge. And I think, suffice to say that we do have a pipeline, that's what you need to be important. That's much important to know. If that one was empty, then it will be a concern, but the last thing I'm going to do is give our competitors any inkling about what we're about to work with.

And a question from [ Mrs. Mellick ]. Post COVID, will the Board continue with online meeting availability for shareholders who are not able to attend the meeting personally for any reason?

Yes. We actually discussed it this year because it looked like we could, at one stage, quite simply go back to having a -- the whole physical meeting. The common feedback is that people really like the online platform. So I think subject to there being a sensible cost component to do that, I think as a Board, we'll be inclined to say yes. The question is, to what extent you have to duplicate your cost. You have to have a physical meeting and also have it online. So look, I think it sort of works. And I think it's somewhat archaic, isn't it, that if you happen to be resident in Adelaide, you get to attend an AGM. It's not consistent with being a global company. So I think online is here to stay. All we got to do. Maybe we can find a way to get the cost down a bit, Michael.

Maybe, maybe.

So a question we will keep under review.

And that clears the questions at this moment, David. So happy to progress the meeting.

Okay. Where was I up to?

Over at Page 11.

Okay. Now we go back to the ordinary resolution, adoption of the remuneration report. So I think we've got a slide up here. How we now, Michael, we're going to?

Yes.

Okay. The first resolution is for the adoption of the rem report for the year to June '21. Section 250R2 of the Corp Act requires that the remuneration report be adopted at the AGM. The vote is advised on in [indiscernible] the directors or the company. Does any member wish to make a comment or ask a question on this resolution? Do you have anything, Michael?

None at this moment, David.

Okay. I will now move that members consider, and if thought fit, pass the Resolution 1 in the notice of meeting to adopt the remuneration report. [Voting]

So now I see the votes to that. Is that what we will see?

Yes.

Okay. So I think it's a pretty resounding yes vote. Okay. So is that -- Michael, do we now need to -- do we need to do with that? We just...

Yes. So it's just putting the motion. So it will be done by poll, David. So once the meeting is closed, [indiscernible] the results. So you just continue on and people can continue updating their voting.

I got it. Okay. Now we're up for reelection of myself. I wouldn't mind doing this myself, Kathy, I'm not allowed to. So I'll let you do it.

Thank you, David. Good morning, ladies and gentlemen. This resolution is for the reelection of David Simmons as Director of the company. David was appointed Chairman of the Board in 2015 and has been Director of Codan since 2008. Prior to joining Codan Board, David was the Managing Director of Hills Industries Limited for 16 years. On appointment, Hills had a turnover of around $200 million. On his retirement in 2008, turnover and market cap were both in excess of $1 billion. Hills was in the ASX 200 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 a strong people, financial, capital markets and M&A skills and has had significant international experience, particularly in China, the U.S.A. and the U.K. Hills employed 4,000 people globally at its peak. Since David was appointed Chairman, Codan's market capitalization has grown significantly. This has been achieved by investing in people and having a commitment to continuous learning, encouraging entrepreneurialship, rewarding performance and investing in innovation in the digital world. In his role on the Board, Audit, Risk and Compliance Committee, David has a particular focus on the ever present cyber threat and will continue to push and support best-in-class defenses. David has Chaired a number of charitable and government-related organizations 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. Does any member wish to make a comment or ask a question on proposed resolution. Michael?

At this point, no questions.

Thank you. So no questions. I have great pleasure in moving that the members consider, and if thought fit, pass Resolution 2 in the notice of meeting to reelect Mr. David Simmons as a Director of the company. Please note that the details of the proxy votes are now shown on the screen. I will now put the motion to a vote as an ordinary resolution. Again, you're invited to lodge your vote for Resolution 2 by using the polling icon. To cast your vote, simply select one of the options. There is no need to press a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time the Chair declares the voting closed. I will now pass the chair back to David.

Thank you, Kathy. That concludes all the resolutions to be voted on. Shortly, I'll close the voting system. So please ensure that you've cast your vote on both resolutions. Michael, can I ask whether you have any further questions?

No more further questions.

Okay. So I'll now pause for 2 minutes to allow you time to finalize your voting. Shareholders, I remind that your Board strongly recommends that you vote for all resolutions. So we now have the 2 minutes. [Voting]

Okay. I declare the poll closed and formally charge Mr. Bulling as returning officer to count the votes. And the results of today's poll will be released to the ASX later today and displayed on the company's website. Ladies and gentlemen, being the business brought before the meeting, that concludes the formal business of the AGM. I now declare the meeting closed. I thank you for your attendance and support during the year. Bye for now.