Codan Limited (CDA) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen. It's -- we'll just wait for that plane to go over. It's now 11 a.m. My name is David Simmons, and I'm your company's Chairman. Before I start my address, I do have a couple of apologies today. Peter Griffiths, long-term Board Member of Codan rang me yesterday and said he liked to be here, but he's had some minor surgery on his ankles, which he -- maybe he can't get onto his feet, so he sends his apologies. I also have an apology from Donald McGurk, but I'm pleased that Sally is here, and it's much better to have Sally than Donald. So welcome, Sally. I do have some sad news this morning. Ian Wall passed away this morning at 9 a.m. Ian, of course, is -- was the remaining co-founder of the Codan business, served on the Codan Board for many years, over 40 years, I believe. A fantastic supporter of Codan both -- whilst an executive and a director and very supportive of many people who are around here at Codan today. So we send all our best to Pam and the family. We will be making an announcement to the ASX to acknowledge the contribution that he had made over the so many years. We'll probably do that tomorrow. So -- yes, it's a sad day and perhaps some irony that to occur at the AGM date for Codan, the company that he very much loved and was seriously invested in. Okay. As Chairman of this meeting and on behalf of my fellow directors, I'm pleased to welcome to the 2022 AGM. There is a quorum present, and I will declare -- I can declare the meeting open. Today's meeting is a hybrid meeting and that in addition to the company representatives and shareholders present here today at Mawson Lakes, shareholders, proxy holders and guests can participate in the meeting virtually via Computershare's online virtual meeting platform. Virtual attendees can watch a live webcast of the meeting. In addition, shareholders and proxy holders have the ability to ask questions and to submit votes. For those attending in person who wish to ask a question, you may raise your blue attendee card to ask a question when called upon to do so. And you may speak once you have been acknowledged by me. For those attending online, there are 2 methods to participate. Firstly, to ask a verbal question, please follow the instructions below the broadcast window on the virtual meeting platform, and the moderator will facilitate your participation in the meeting at the appropriate time. [Operator Instructions] I ask that you identify the capacity in which you're attending the meeting, shareholder, proxy holder, et cetera, when asking a question. Please note the way 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 1 topic, amalgamated together. Further whilst, we may not be able to deal with all of your questions. I will ensure that members as a whole have a reasonable opportunity to ask those questions. 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. For shareholders and proxy holders who are attending in person, you would have been issued with a blue attendee card, with the voting details on the reverse side. I'll advise the procedure on how to vote once the resolutions have been put to the meeting. Now the online voting process for those attending virtually, if you are eligible to vote at this meeting, a vote icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select 1 of the options. There's no need to press submit or enter button as the vote is automatically recorded. You will receive a late confirmation notification on your screen. You do have the ability to change your vote up until the time I declare that voting is closed. For full details on how to log on and vote online, please refer to the user guide outlined in the notice of meeting. Unfortunately, technical difficulties may arise during the course of the meeting. I note that I will have the discretion to determine whether and how the meeting should proceed in the event that a technical difficulty does arise. If I'm required to exercise this discretion, I will have in regard to the number of shareholders impacted and the extent to which participation in the business of the meeting is affected. I now declare open -- the voting open on all business -- items of business. The polling icon will soon appear. Please submit your votes at any time. I'll provide ample notice prior to the close of voting. As already mentioned, voting on all items of business will be by poll, and I appoint [indiscernible] of Computershare Investor Services to be the returning officer and to conduct the poll. As outlined in the notice of meeting, your Board strongly recommends that shareholders vote for all resolutions. The notice of meeting and explanatory memorandum was distributed to all shareholders on the 21st September. And I propose to take them as read unless there are any objections. The format of today's meeting is to conduct the formal business of the meeting after some presentations. The first will be my brief comments on the company's performance during the recently completed 2022 financial year and some comments about our current performance, near-term outlook and strategic direction. This will be followed by a presentation by your managing director and CEO, Alf Ianniello, and then some presentations by our executive team. I'll now introduce the Board to you. As I said, my name is David Simmons. I was appointed by the Codan Board in 2008. This is now my seventh AGM as Codan's Chairman. I'm also Chair of the Remuneration and Nomination Committee and a member of the Audit, Risk and Compliance Committee. I'll ask each director to stand as I introduce them. Firstly, I'd like to introduce Graeme Barclay. Graeme was appointed by the Codan Board in February 2015 and is a member of the Remuneration and Nomination Committee and the Audit, Risk and Compliance Committee. Next, I'd like to introduce Kathy Gramp. Kathy was appointed to the Codan Board in November 2015, and is Chair of the Audit, Risk and Compliance Committee. Kathy is retiring by rotation today and will be standing for reelection. I'd also like to introduce lieutenant general, Peter Leahy, to my left. He was appointed to the Codan Board in September 2008. Peter announced his retirement as the Director of Codan who will not stand for reelection. His retirement is effective from the end of our meeting today. Finally, our Managing Director, Alf Ianniello, who joined the Board in January 2022, and he was appointed as Managing Director and CEO at the same time. We're also joined by Michael Barton, who will act as the Company Secretary for this meeting. Michael was appointed to the position of Chief Financial Officer and Company Secretary in 2009. I've asked Michael to speak during the course of today's business as today's meeting -- to address some administrative matters. I've also 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, we also have the opportunity for verbal questions. Proxies have been received from 589 members, representing over 65% of the company's voting shares. These will be reported to the ASX for each resolution. After discussion of each resolution and before putting the resolution to a vote, the proxy votes will be displayed on the overhead screens for members' information. I also have one further apology, which I admitted that [ David Uhrig ] on behalf of the [ Uhrig ] family is also an apology, and I did have a discussion with him yesterday. Now ladies and gentlemen, now to update you on Codan's business over the last 12 months and how the 2023 financial year is shaping so far. Since I've been the Chair, we have prioritized consistent growth in sales and profitability. The growth in profit over the 3 years from 2018 to 2020, which went from $40 million to $46 million to $64 million, whilst in my mind, an excellent achievement. But our results were dominated by the contribution of Minelab. The deployment of capital to acquire DTC and Zetron in FY '21 was a sensible decision to diversify the Codan business, and to access new growth markets. These successful acquisitions, however, were somewhat overshadowed by the continuing impacts of COVID-19 across all business units, some positive and some negative. There are also other adverse events such as withdrawal of troops from Afghanistan and the war in Ukraine, both of which impacted our business. To elaborate, in FY '21, in Minelab, we had the competing forces of componentry supply shortages, country lockdowns in many parts of the world, supply chain disruptions resulting in increased shipping costs, unprecedented demand for gold machines in Africa as well as significant government stimulus in developed nations which benefit sales. Minelab sales increased in 1 year or lower by 38% while unsatisfied demand at the end of the year washed into early FY '22. In FY '21, Codan reported a $97 million NPAT, which is an increase of 56% over the previous year. And we ended the year with a minimal working capital. In fact, I think it was negative. The fact that we were able to exceed this level of profitability in FY '22 was an excellent achievement assisted by contributions from the new businesses, Zetron and DTC. The reality is that in both FY '21 and FY '22, we were significantly impacted by COVID with different results. Specifically, our inventories materially shifted, taking us from a position of minimal working capital in FY '21 to elevated levels of inventory in FY '22 in light of supply chain uncertainties. As we've said to the market a number of times, we took the conscious decision to build inventories because to have inventory in hand meant that we would not miss any sales opportunities. It was probably the most disruptive period in terms of supply chain disruption than I've ever seen in my life. Secondly, a reduced cost base was also observed due to the inability of our sales and business development teams to travel. So we saved some costs, but the reality is we lost contact with markets. It was a position that none of us wanted to be in. The real question then became, what does the return to normality look like? And this takes us to FY '23. We are very pleased with our newly acquired DTC and Zetron businesses. We are very pleased with our newly acquired DTC and Zetron businesses performing above expectation. Although as advised, when we released our FY '22 results in August, we're having to rebuild market in Minelab, which will take time. Africa is an important market for Minelab, but right now, large sections are closed for a variety of reasons, mainly geopolitical. We also have the ongoing impact of the war in Ukraine. When we prepared our budgets in FY '23, we anticipate sales in Africa would slightly recover, but this has not yet occurred. While we've not lost market share, we're having to work extremely hard to stimulate demand. Elsewhere in our traditional HF markets, developing world economies are still recovering from the financial impact of COVID. Importantly, FY '23 is a year for us to refocus the entire business, positioning it to return to a pattern of consistent growth in profitability. While we want to achieve the same level of profitability this year as we did in FY '21 and '22, it's too early for us to provide a full year forecast. We will have -- be talking about the half year when Alf makes his presentation. Notwithstanding this, the entire Board and executive team remain committed to drive the business to maximize profit and cash flow results. In this regard, there will be a particular focus on increasing the profitability of our communications businesses. In terms of long-term sustainability, we have a much stronger business today at this time last year, primarily due to diversification. With the exception of African gold, all other sections of the business are performing well in a more challenging global environment. We have a strong new product release in Minelab and some exciting developments in DTC and Zetron including accessing new market segments through small logical acquisitions. Shortly, I will ask Alf to reflect on his first 10 months at Codan. Alf has been very good, appointed to the role of Managing Director. Alf is fact and data driven. He is disciplined, methodical and has a very strong focus on profitable growth. Alf will reflect on FY '22 before spending considerable time on FY '23 training outlook, an important focus for us all. Before handing over to Alf, I'd like to acknowledge the efforts of Donald McGurk and Peter Leahy. Donald did a fantastic job for Codan over an extended period of time. In his role as Managing Director, he rode both the highs and lows over the years, but always maintained a consistent, firm but fair approach with a great ability to take quick positive action as and when required. I have a great relationship with Donald and very much enjoyed working with him. On behalf of the Board, I wish Donald and Sally all the best for the future. Peter Leahy joined the Codan just after he retired as Head of Army in Australia. Peter has been a strong, reliable Board member who has always spoken his [ mind ] and has provided us with invaluable insights into the workings of government and the military in Australia and internationally. On behalf of the Board, Peter, I wish you [indiscernible] best of the future. Peter's retirement is part of the planned refresh of the Codan Board, which will include my own retirement sometime this financial year. Following the appointment of 2 new Board members, 1 of at least will be a female. Graeme Barclay will succeed me as Chair. Graeme has great energy and a proven track record of developing focused international businesses. I'm very confident that Graeme and Alf will take Codan to the next level. Thank you for your interest in Codan. Please now welcome your Managing Director, Alf Ianniello, for his market update and his address.

Thank you, David. Good morning, all. I'd like to start off with providing a brief overview of the business before moving into the formal part of the presentation. The business today is a very different business when compared to 18 months ago. We've continued to diversify the business, not only at a geographical level but also at a segment level. We have over 700 employees globally with offices located in our key growth markets being North America and Europe. We are building a stronger Codan, and we'll continue the evolution to grow and diversify the business with more predictable revenues. Now I'd like to comment on the 2022 financial year and the current state of the business before handing over to our business unit executives to talk through some of the key initiatives happening within their divisions. During FY '22, the group increased sales by 16%, with the Communications division being the main driver of growth, more than offsetting the reduced FY '22 Minelab result when compared to an abnormally strong FY '21. Profitability of $100 million was another robust statutory net profit result and reconfirms our focus on achieving strong NPAT margins. DTC and Zetron were acquired on a combined forward EBITDA estimate of $22 million. The final EBITDA result was $34 million, an exceptional achievement and evidence of our ability to integrate new acquisitions. The Communications division in its entirety made a significant contribution to the group EBITDA, an encouraging step change versus prior years, and we will believe this will continue. We declared a fully franked dividend of $0.15 per share, following on from the $0.13 per share fully franked interim dividend. This resulted in a total dividend of $0.28 for the full year, an increase of 4% over FY '21. It's pleasing to see our current diversification strategy is working, as we continually seek to achieve more balanced and predictable revenues across the Codan Group. The acquisitions of DTC and Zetron have diversified Codan sales with Communications division increasing from 23% to 48% in sales from FY '22. Communications sales are generally more stable and predictable as we have long-term relationships with governments and other large commercial entities. This has driven a pipeline of sales opportunities, which will convert into a strong order book, predominantly in the developed markets. Minelab segment profit margin percentage is exceptional achieving 46% during FY '22, setting a very high bar for communications. However, as the Communications business continues to grow their sales, we would expect segment profit margins achieved in FY '22 of 21% to increase as the business will benefit from operating leverage. Our longer-term objective is for the Communications segment profit margin to reach 30%. This may take some time. However, we are confident in both the near and long-term growth prospects of our growth of our Communications division. Codan has continued to execute on its strategy to diversify revenues and profits, not only at a business segment level but also across different geographies. As many will be aware, Africa has been Codan's single largest market in previous years. And while Africa continues to remain a very important market for us, it has also been a less stable and more unpredictable market. In order to reduce risk and address our strategic goal of generating more predictable revenues, it is extremely important for us to reduce our relative dependence on Africa. While we remain committed to maximizing and growing sales within Africa, our goal is also to expand sales into other geographical regions, many of which are more stable and predictable markets. On that basis, it's pleasing to note our Rest of the World sales for Minelab and Communication businesses into markets such as North America, Europe, Latin America and Asia Pacific represented over 70% of our FY '22 revenues. The performance of our metal detection business, Minelab, is best considered for a discussion on the African gold detecting market and then the Rest of the World detecting business. The African gold detecting market has been the largest market for Minelab historically, with sales peaking at $185 million in FY '21 before declining to $125 million in FY '22. There were several factors contributing to this reduction in sales. Firstly, FY '21 was an exceptional year with an unprecedented level of demand for our products due to an influx of artisanal gold miners as many other industries were impacted by COVID. The exceptional levels of demand for gold detectors in FY '21 and early FY '22, which was driven by COVID has proven unsustainable. With the ability to now travel more freely, our people have only recently been able to get back into the field and have learned that there are a number of factors impacting sales in Africa. Beyond COVID, geopolitical and macroeconomic challenges remain across Africa. And it's only clear -- now clear that there is an overhang of product in the market following the very significant volumes of detectors purchased in FY '21 and FY '22. Sudan, our single largest market in Africa, has been materially impacted by a military coup. The previous democratically elected government actively encouraged artisanal gold mining as a means of driving employment and building wealth in the regional communities. Now under the military rule, some gold mining regions are being controlled by military forces and remain off limits for artisanal miners. This was a key reason for the reduction of sales in FY '22, and this market has further declined in FY '23 along with the broader weakness seen throughout Africa. Our planning and budgeting for this year anticipated a gradual improvement in sales in Africa in the first 6 months of this financial year. Following a recent in-depth market-by-market analysis after our people traveled to all regions, we have now formed a view that sales will remain depressed in FY '23. While our sales into Africa are currently lower, I want to assure our shareholders that management are working hard to rebuild and maximize our sales of gold detectors into this market. Peter will talk later about our plans and opportunities in Africa. Encouragingly, Minelab's Rest of the World sales, excluding Africa, has been a fantastic growth story, with sales growing at 14% CAGR from FY '18 to FY '22 despite the cessation of sales into Russia. The breadth of products being sold, including gold, Coin & Treasure, and landmine detectors as well as growth in key geographic markets in North America, Central and Latin America, Australia, Europe and Asia means these sales are generally more predictable and more stable compared to our African market. Minelab has a strong track record of successfully entering new geographic markets, and we are confident that our ongoing engineering capability and innovation will support the continued release of leading-edge products. Having not released a high-end Coin & Treasure detector for over 10 years, it is with much excitement that during FY '23, Minelab will launch several new Coin & Treasure detectors. Like many businesses, we are operating under challenging market conditions with geopolitical issues, a high inflationary environment and an increasing risk of a global recession. The risk of a declining sentiment may impact sales in the short term and management continues to monitor this risk closely. Despite these headwinds, our Rest of the World metal detection business continues to perform well, maintaining gains made in FY '22, and we expect the first half of FY '23 to be in line with the prior year after the normalization of the ceased Russian market. The company expects sales for Minelab to be in the region of $75 million to $80 million in the first half of FY '23 compared to $138 million in the prior corresponding period. The reduction primarily relates to the disruptive nature of the African market, the normalization of sales as we transition to living with COVID, the previously disclosed $15 million of additional FY '22 sales into the sales not repeat in FY '23 as well as ceased FY '22 Russian sales of $7 million. Based on this level of sales in the first half of FY '23, we would expect Minelab to report a segment profit in the range of 30% for the first half. In light of the reduced level of sales, management is rebasing operating costs to maximize future segment profit margins. Turning to Communications. This business performed strongly in FY '22, and I am pleased that this has continued in FY '23. We believe our communication business represents a significant future growth engine for Codan and expect our results for the first half of FY '23 to have sales in the range of $123 million to $135 million, which represents a 5% to 15% increase on our prior corresponding period. With respect to the large communication project announced at this time last year, there is currently some uncertainty relating to the timing of shipments. Orders remain in place, and we are confident that all products will ship over time. It is our expectation with both -- that both the Zetron and Tactical Communications businesses will contribute to FY '23 growth. Through the acquisitions of DTC and Zetron, we have increased our value offering to customers, and we are now a full communications solutions provider. We have also successfully restructured and invested in the front end of our communications business with dedicated resources now aggressively targeting sales opportunity in each of our key growth markets. Our strategy to invest in product development, coupled with us being able to leverage our new and existing distribution channels means that we are confident that communication is well positioned for success into the future as evidenced by our order book growing circa 10% since the 30th of June 2022. With the growth in sales, we are expecting to lift the segment profit margin for our Communications business from 21% in FY '22 to 25% over FY '23, as the business will benefit from operating leverage. So to summarize, the FY '23 outlook for the half, a number of macroeconomic and geopolitical factors have significantly impacted Minelab African sales. Minelab's Rest of the World sales are proving resilient and in line with the normalized FY '22. Lastly, Communications will deliver strong growth in both sales and segment profit. Divisional profit forecast of December were considered in detail by the Board late yesterday. We are expecting a first half net profit after tax in the range of $25 million to $30 million, given the uncertainty relating to the timing of shipments on the large communication projects as well as the lack of visibility in a number of African markets. We believe this is an appropriate range. The results for the second half of FY '22 are expected to be stronger than the first half. Cash generation in the first half of FY '23 has been impacted as our sales into Africa have reduced. Sales into Africa are generally made on a cash before delivery basis. We have -- we also have a major $5 million capital expenditure program underway to relocate our Zetron business, which will minimize future rental costs. We expect to close the first half of FY '23 with net debt in order of $70 million. Over the second half of FY '23, we expect to return to the positive cash generation that Codan is known for and therefore, drive down our net debt position. During my first 10 months in the role, I've taken the time to learn the business, but also identify how to make Codan, which is already a great business, become a stronger Codan. I have worked with our businesses and senior leadership teams to define key metrics and targets that will be measured and delivered against. The metrics and targets are twofold. Firstly, we are focused on maximizing sales and profitability across all business segments. Secondly, cash generation has been prioritized, ensuring that we have the appropriate working capital requirements across all businesses. Each business has defined KPIs, which are reviewed monthly and have detailed plans to achieve these targets. Ultimately, these metrics will help achieve the following outcomes: a more diverse earnings base across our businesses, more repeatable and predictable revenue streams, reduce Codan's relative reliance on Africa, growth segment profit margins across the Communications business and further strengthen the balance sheet and maintain flexibility. Finally, on behalf of the Board, I would like to acknowledge the significant efforts of our people and thank them for their contribution in helping Codan achieve our FY '22 results. I will now hand back to David to continue with the meeting.

Thanks, Alf. Pretty good for #1. Well done. I'll now invite each of our executive team to provide some commentary relevant to the outlook of the business units they lead. Like -- first, I'll introduce Scott French, put your hand up, Scott. Scott looks after our Zetron business. Scott, you've met before. Scott's now located back in the U.S.A., heading up the Zetron Global Operations from there. We've got Paul Sangster. You've also met before. Paul is looking out to the combined DTC HF business and is doing a really great job for us. Now learning the difficulties of trying to manage operations all around the world, but he has a terrifically energetic look. And one of the most energetic looks I've ever met. So good to see [indiscernible] and keep up the great work. And finally, Peter Charlesworth, fantastic, long-time employee of Codan and runs the brilliant mine business. So welcome to you, too. So first, I'm going to hand over to Peter, and he's going to tell us about Minelab and some of the initiatives that he's got in place to make sure we return to a growth strategy.

Thank you, David. Well, as mentioned, Africa continues to be volatile with the recent coup in Sudan in last October, impacting our business at the mines in Northern Sudan which are now off limits to our artisanal miners. However, of the 54 countries in Africa, almost all of them have some artisanal gold mining activity. The GPX6000 is barely launched in Africa as it was launched during COVID restrictions, and so we'll pick this up with focus. With the ability to again conduct in-country business development activities, we've restarted developing the other top priority markets. I note we did such work before COVID in West Africa with significant success. Further, we are implementing prospecting teams and what we call the experts to establish continuous proactive sales presence in the gold fields conducting demonstrations, education, support and facilitating sales. And this will be a significant new initiative as we get closer to our customers because there remains a significant amount of artisanal miners that still do not know or use metal detectors for artisanal mining activities. In regard to the Rest of the World business, we're about to launch 4 new detectors in the Coin & Treasure space in the second half, including the Manticore, which has been launched and is about to start supplying volume. We're rolling out e-commerce and marketplace solutions to be closer to our customers and to build direct market share and to build markets with presence already in Brazil, Mexico, Chile, Indonesia and India with some mainstream markets and countries to follow. This is a significant change in our strategy and our tests in the countries mentioned has been very successful. So we'll be continuing down that path. One of the areas we've made significant progress is in big box retail for both exposure of our products and sales of our products. Ongoing significant development in retail across U.S.A., Australia and Europe will continue with new retailers to add and a larger presence in store or share of shelf. And I'm pleased to report that Minelab India is now trading and an in-country manager has been hired in a market with such potential as India, where we have such low sales presently, it represents an exciting medium-term opportunity. I'd further like to say we've received significant orders from a number of customers on behalf of the Ukraine for our countermine products. And we've also received significant orders for our new countermine dual sensor, the MDS-10T, which is an updated version of the MDS-10 for the U.S. DoD. The Rest of the World market for metal detectors is relatively stable, and we are step-by-step growing market share and dominance of these markets with our industry-leading technology and detectors, which brings me to the exciting Manticore. In a space where Minelab was restricted to some years ago, being the premium end of the Coin & Treasure market with products launched in 2018 and 2012, we then spent resources and time expanding our range to the full Coin & Treasure product offering. That is the lower-cost detectors such as [indiscernible] through to the more premium Equinox. This market entry strategy has been very successful, leveraging off unique Minelab Multi-IQ technology provided in the Vanquish and Equinox products. There is significant demand for an updated premium product with higher performance to step up from the Equinox and to replace Minelab's existing premium detectors. So we're very proud to launch the Manticore or the perfect beast, which is what Manticore actually means with 2D discrimination building on the CTX 3030 2D discrimination of targets, and a more powerful Multi-IQ plus technology that is 50% more power along with other updates. Huge pent-up demand and customer anticipation exists for this product, and if preorders are any indication across Europe and North America, in particular. So we're very excited about it, and it's about to start volume supply towards Christmas. Thank you. Back to David.

Now we are going to get Paul Sangster to talk about Tactical Communications next. Paul?

Thank you, David. As most people here would certainly understand Codan has a very strong and rich history in HF Communications, as the leader in HF Communications. And we've traditionally relied on HF Communications to focus on the NGO market and some of the developing nations. With the acquisition of DTC and broadcast wireless out of the U.S. and the U.K., respectively, we now have the ability to operate in 5 markets. Four of those markets are extremely attractive and offer double-digit growth. So the core technology that we have from both BWS and from DTC underpin a lot of the developments that we're going to take to make new products into each of those markets. What that provides for the Communications business is diversity. So instead of relying on just HF Communications, we now rely on multiple video, audio, and situational awareness applications across 5 different markets. One of the questions that I'm often asked is why do we win? And that's not certainly a hard -- that's not a hard question to answer these days with the breadth of technology that we have and the people that we have in the business. So we're very proud of the diverse engineering capability that we have. One of the examples that we've recently achieved as a diverse engineering team is we've taken intellectual property out of the U.K. and modified it to make a product for a sovereign Australian program, LAND 125 here in Australia. So we now have a much more diverse business that's a lot more predictable. So we're very proud of that and where we've gotten to. From an order perspective, I won't get into all of the wins that you see on the right-hand column, but 1 win that I will talk about that I had the opportunity to visit 4 weeks ago was a win that we've had on the southern border in the United States. So we've had a number of key wins across the business. And the key takeaway from this slide certainly from my perspective, is we're not winning in just 1 market, we're winning in all markets that we operate in. And that's very important to have a more predictable, sustainable business in the long term. So we're not focused on the binary business anymore. We're focused on markets that are both in the developing and developed nations where there's more predictable revenue. So the last win that we have is that is on the screen that talks about the win from the Department of Justice and Department of Homeland Security is very significant. It's not significant just in terms of dollars, but it's significant in terms of the future and it's a program of record that we will see more success in the future. To that end, this -- on the screen, you will see a picture of the United States and Mexico. And as many people in this room and online will have seen or heard, the United States has a massive problem on its southern border from organized crime to illicit drugs, human trafficking and illegal immigration has become a very significant problem, not just in the United States, but beyond. So we are helping combat these problems, and we're helping the law enforcement agencies by providing communication solutions that offer situational awareness where they do not have coverage on the border. So our ability to provide both overt and covert solutions allows law enforcement agencies to combat the war on drugs and to provide safer America. This is just 1 example of the many that are out there in terms of the new technology from DTC and BWS, where we're able to go out and make the world a safer place. Thank you, David.

Thanks, Paul. Now Scott. Tell us about a good news story.

Happy to. So roughly a year ago when we acquired Zetron and formed a new Zetron, we became one of 2 global providers of end-to-end mission-critical solutions, positioning us for growth into the future. One of the reasons we exceeded our results in fiscal year '22 was because the market noticed. And they started to understand why do we win? Our primary markets happen to be public safety, transportation and utilities. When you're looking to save a life, have the trains, planes and buses arrive on time and keep the lights on, mission-critical communications are paramount. And in each of those verticals, what's most important to those customers is proven experience, not proven experience over a single event but proven experience a year after year after year, and Zetron represents 75 years of proven experience. Beyond that, we have a long-term steadfast commitment to standards and interoperability in our mission-critical communications. What does that mean for our partners and our customers? They have more choice when they choose our technology than any other provider in the market. We are committed to providing our customers choice and that's why they choose us. So in addition to the technology and the solutions, it's also important for our customers to focus on their mission. Therefore, it's imperative that we have very excellent services in field services that we provide by Zetron professionals as well as our partners and an undying commitment to quality. We're the only mission-critical solutions provider, whereby every single 1 of our facilities is ISO certified, and that is our commitment to quality. I would further add our engineers based in Canada, Redmond and Brisbane bring such expertise in terms of designing our hardware and developing our software such that all of our solutions can exist and deliver unparalleled radiofrequency performance in some of the harshest environments. As we enter the winter months in North America, it's interesting to note that more than half of our radio sites will be covered by snow and ice, but we'll continue to provide reliable communications through to the summer though. And lastly, one of the things we really pride ourselves on do and creates a very loyal channel for Zetron is the ease by which we allow our customers and our partners to conduct business. We want to conduct business in the same means with which our customers want to buy or support their channel. I did want to identify a couple of key wins. And of note, Otero County at the top, which we -- all of these wins we've contracted in the last 12 months represents a land mass that is -- to a single county in New Mexico represents a land mass that is larger than Massachusetts, Connecticut and Rhode Island combined. And they chose us due to our expertise in providing land mobile radio coverage in the harshest environments, and it also represents a very significant synergy win when we acquired Zetron because it includes also our dispatch console -- our voice dispatch console. A couple of other logos I bring your attention to our Delta Airlines and New York MTA. Although the slide represents that those are long-term contract commitments, both of those customers have been customers of Zetron for more than 20 years. So what that represents is sustainable, predictable ongoing revenue as we expand our sales moving forward. One win, in particular, we're quite proud of is the State of Iowa. The State of Iowa has led the United States in terms of advancement towards next-generation 911 emergency call taking as that entire market is transformed over the next several years. Iowa was one of the first states to demonstrate some of the next-generation 911 services that are available, such as allowing people to text into the 911 centers -- emergency call centers and receive response, allow the ability to locate where cell phones are. Iowa was 1 of the first states in the nation to deliver that. 5 years ago, Iowa let out a tender and Zetron was very fortunate to win to provide a hosted multi-tenant network that would serve every single county in the State of Iowa and deliver next-generation 911 services as they become available. Over the first 2 years of that contract, we worked very closely with the State of Iowa to connect every single county together on next-generation 911 network, build the hosted servers and the multi-tenant facilities in 2 heavily fortified centers in Iowa. And then in the following 3 years, we were able to bring on board roughly 50% of all of the counties on Iowa onto the network. And as a result of that, Iowa has rewarded us with up to a 10-year extension on the contract, whereby we expect to not only complete and bring the rest of the counties on board, but set the path forward for other states to follow. We believe we are incredibly well positioned as funding finally will be released from the federal government as Congresses passes a bill that will bring $10 billion to $15 billion for the rest of the states in the U.S. as well as -- and Canada is following the -- following as well, but will position us well to take advantage of that funding as it is released. David?

Thanks, Scott Excellent. Okay. The formal business. Before moving on to the various motions, I'll ask Michael to briefly run through the voting procedure. Michael?

Thanks, David. There are 2 options available for shareholders today. For those voting in person, shareholders were given a blue or pink admission card when they registered. The pink admission cards have been issued to joint shareholders, where 1 of the joint shareholders has already been issued with a blue card. For attendees who are voting in person, persons entitled to vote on the poll are all -- persons entitled to vote on the poll are all shareholders, representatives and attorneys of shareholders and proxy holders who hold blue cards. On the reverse of your blue card is your voting paper and your instructions. Attached to proxy holders cards is a summary of proxy votes, which detail the voting instructions. By completing the voting paper, you are deemed to have voted in accordance with those instructions. In respect of any open votes, a proxy holder may be entitled to cast. You need to mark a box beside the motion to indicate how you wish to cast your open votes. Shareholders need to mark a box beside the motion to indicate how you wish to cast your votes. A Computershare representative will collect your completed voting paper at the appropriate time during the meeting. And only persons who are shareholders, holders of the blue or pink card are entitled to address this meeting. For shareholders and proxy holders who are eligible to vote, if you're online, select the vote icon and all resolutions will be activated with voting options. To cast your vote, simply select 1 of the options. It's no need to hit a submit or enter button. The vote is automatically recorded. You will receive a vote confirmation notification on your screen. Voting on all items of business will be by poll, and you have the ability to change your vote right up until the time the Chairman declares the meeting closed. David?

Thanks, Michael. In addition to the voting procedures outlined by Michael, the notice of meeting provides details of the motions to be put to this meeting, and I'll give shareholders the opportunity to ask questions and comment on each motion. The financial statements and reports. I'll now turn to the business agenda for the Annual General Meeting. The first item is received to consider and discuss the company's financial statements and the report of the directors and auditor for the year ended 30th of June '22. We're not required to formally adopt these documents by way of a resolution. However, I will be pleased to take comments or questions for shareholders on this item at the right time. The notice of meeting invited shareholders to submit written questions to the auditor if the questions are relevant to the conduct of the audit, the preparation of the -- preparation and content of the auditor's report, the accounting policies adopted by the company, the independence of the audit in relation to the conduct of the audit. [ Paul Chenko ] is present from KPMG here today and is available also to answer questions where appropriate. I can advise at the meeting that we've not received any written questions for the auditor. This, of course, is the right time for shareholders to ask questions about this item of business. I will now invite shareholders and proxy holders who are attending the meeting here today if they have any questions or comments to please raise your blue or pink attendee cards if you wish to speak to the meeting. If you have a question or comment, please wait for acknowledgment for me and for the microphone to reach you. When asked, please state your name and direct your questions and comments to me. Are there any questions from those present? Yes, sir. Please wait. If we can get the mic down to you.

Thank you, Chairman. My name is [ Ray Miles ], and I'm a shareholder on behalf of myself, managed superfund. I might have also mentioned that I'm also a member of a group called Teaminvest, which has over 400 investor members across Australia. A number of our members from Adelaide are here today to the AGM. My question is largely been answered actually by your Managing Director in his address because what I was focusing on was segment profitability, and he has indicated some more figures about that today. But from the FY '22 annual report, apart from the actual sales of each segment, there was -- you had to really dig down to Page 76 of the annual report in the notes to find how much contribution each segment had made. And clearly, there were significant differences and the Managing Director have pointed out how he's trying to move forward. My question really is, in next year's results, would it be possible to bring more segment information up into the main body of the reports?

Okay. I think when we prepared the annual report, which is not a simple document, as you know, we have requirements to comply with the disclosure, regulations and segment reporting is one of those. I think our presentation today gives a pretty clear indication that we need to be more open with the relative segment profitability and also what we're targeting. So we'll take your question on board. And if we think we can improve the shareholder information by changing how we presented or where we would present it, then we will do so. Yes, sir? Sorry, Chris, I'll get you next.

Good morning, Chairman.

Good morning.

I am also from Teaminvest and self-managed certified. I'm having some shares in [ my wife's ] name. I've followed this company for some time, and I recognized the change moving into the diversification of comms. I also recognized that the retirement of PLA, as an experienced person I would give guidance to the Board on the global military markets. And I was wondering what Codan has got in place to add more experience or maintain that level of experience into the com sector, which is clearly where your growth is?

Yes. That's a good question. We are only today, we have decided the approach to recruiting an additional two Directors. So we will be using a search firm to do that. And we've got a very well-defined criteria for the talent and expertise that we expect and experience in global communications and telecommunications business is clearly as part of an ideal candidate. So we recognize that what we have to have around the Board table is a blending of skills. And we also recognize that right now, we've got too many accountants, okay? So you can be assured, I think that the next appointment certainly won't have Bachelor of Accountancy next to it. And I think those skillsets are well recognized. If you were here last year, I spoke about the fact we were looking for a U.S.-based Director. And we were looking for specific skills in a U.S.-based director. We had a candidate who we were very keen on. We took a lot longer than we had intended because COVID meant we couldn't travel. And I wanted to personally meet the individual rather than make an appointment by phone. So Alf and I managed to do that in February or March this year. I think Alf was the first time we could do that. And unfortunately, the individual for his own private reasons, family-related reasons, had to withdraw at the very last moment. So we spent almost 18 months getting the horse to the start, but we couldn't get it to gallop. So -- but the point is we do recognize that we need to have a better blend of skills around the table. I think in combination, Graeme, Kathy and I can pick a hole in the balance sheet quicker than pretty much most people. But on the technical end, we need to have somebody who, from first principles, understands a lot of where we're trying to head. So your point is well made and we acknowledge it. Chris [ Chart ]?

Thank you, Mr. Chairman. Let's say, with the airplane flying over here, I've now become a devotee of [ parafield ] be shifted out to [indiscernible], et cetera, first. Second, I want to make a comment, I want to pay tribute to Ian Wall. He was unfortunately -- I have to say was a very great South Australian. Not only what he created here at Codan with the other two co-founders way back in the '60s, I think it was. What he then did with the company and what he did privately as a philanthropic person into various charities, the arts. The only thing I disagreed with him, he certainly gave a considerable amount of money to the liberal party was something that I was not overly in favor of. But everything else he did, I give great tribute to him and I pass to him, to his -- to Pam and the family, the recognition that he's already had received an order of Australia that he was a very, very great South Australian. And I think we should all realize that most of us would not be here in a public company if it hadn't been for Ian. But my question is to deal with the structure -- the value of the company. Nearly 2 years ago, the share price reached in my view, an unbelievable height of nearly $19 a share. It also meant that the capitalization of this company was nearly $3 billion, made us in South Australian terms, 1 of the 4 or 5 biggest companies by value in South Australia, something Ian and all of us could be very proud of. Today, I looked on my phone, the price is now $4 a share. That means the capitalization of this company is now -- is under $700 million, probably $600 million. That is a major drop in the valuation of the company at which we are shareholders. My concern and the question to you, Mr. Chairman and to the Board, with this extraordinary, first of all, increase, which we all had a big smile about, now the drop over 18 months, is there evidence that there is short selling going on against the shares in this company by hedge funds and investors in Australia and overseas, enforcing the price down so that the value of the company is now where it is and makes us more vulnerable to a takeover bid if it's $700 million? In view of the business plan, which I agree with and the potential after COVID, et cetera, where we're going, this company, if smart people look at it, unfortunately, from the short sellers, they would see this as a company to get hold of. We all know what short sellers will do. If they got hold of it, they would break it up into 4 or 5 components and sell each part off, make a profit and then leave and we'd be left with a shell. So that's my question, overwhelmingly, but the Board, is there any evidence of short selling where people borrow the shares of someone else, force the price down and then make that profit as well as then opening up the company to being more vulnerable for a takeover in one form or another? That's my question. And I have to say it is very disappointing to see how the market is treated and finishing up, it dropped $1 today, the share price this morning. Was there anything in what we released to the market for the meeting today that would indicate why it would have dropped $1 from -- to down to where it is about $4?

Yes. Okay. Let me answer the question. So the first question is in relation to short selling. Short-selling positions are publicly available. We have had modest short-selling positions, very, very small. So in terms of short selling, my view is that's not currently an issue which should occupy too much of our time. In relation to the share price, I think I had a discussion with Alf, and I said if we didn't both take it personally, there'll be -- maybe you just move on. We all, of course, do. Your point that $19 wasn't the right prices, right? Your point at $4 is not the right price is also right. What we've got to do, however, is to ensure that we are not in a position again where changes in single segments of our market today have such a big impact on our profitability. So that's what we are -- I recall having a discussion with Brian Burns. He's a [indiscernible] character, former Board Director, and he said to me, well, sometimes people just think that improvements in profit and growth in sales just continues on forever. Of course, it doesn't, okay? What we're trying to do with Codan now is to build a diversified business where, not everything will go the same -- in the same direction at the same time, but you do have some swings and roundabouts possibilities, and we will balance the portfolio. We've been unbalanced and the share market punishes imbalance in a company like ours. So our strategy is right. It's a timing of what's occurred to us in the last little period. I mean if you look at the issues of the Ukraine, Afghanistan, Sudan and other African markets to come together at the one time is not what you would expect, but that's our lot. So we've got to react to that. We're a reasonable way down the path in terms of making sure that the diversification strategy pays off. So I think we stick to the knitting, demonstrate I say to the guys demonstrate that your strategy is being executed on, demonstrate that you generate cash and profit and the market should react. So that's what we intend to do, Chris. Any other questions? Yes, sir?

Mr. Chair, Board, Executive. My name is Chris Max [ Worthy ]. I'm a ASA member, a shareholder -- a long-term shareholder in the company. And I make these comments as both a long-term officer in the Australian Defense Forces and as a former member of IBM Corporation for 10 years and also KBR, Kellogg Brown & Root. Look, I think Chris -- opening the betting. I'm underwater at the moment with Codan. I didn't it buy at $19. But I bought in early in the piece and saw some profits, and I think it's a good company. But I think your strategy is correct. You need to have regular guaranteed flows of revenue that you can turn into profit. I'd also say to you that in terms of being short sold, I think Codan sells itself short, okay? What I mean by that is for anybody that reads the FINRA review, you will not find Codan listed as part of the announcements of profits. So we get the profit season. There's no Codan listed. There's no CDA that one can look down in the diary. And to me, that is a sign of a company that is seen as being significant. So the lack of that AFR results entry and the fact that when they do it, you're linked to the results of that company once declared. So the absence of that, the lack of standing within the AFR put this company at significant risk. And I would suggest the reason that the AFR covers this company very lightly is because it doesn't have a story. It doesn't have a story because at one level, we have gold detection equipment. At the other level, we have comms and our story for comms is appalling. And I say that because here is a company in South Australia, technology hump. I've been in the -- in your technology area, you've got outstanding engineers. You've got great technical capability, but you're not engaging with the #1 client for defense communications as in the Department of Defense. You are -- I think the result was $0.5 million for Phase 1 of Land 125. Is that correct?

Yes. Do you have a question?

Yes. My question is, when are you going to establish an office in Canberra in order to do sales and marketing business development for our comms sector? I would suggest we have an -- it's a publicly available tender that will be coming out for satellite comms. Where is the strategy about how we will engage in the defense works? Because if we stick with trying to export comms equipment and missing this key market, then there is something wrong with this company. I invite your comment.

Yes. No, we -- the Canberra office has been discussed a number of times, particularly recently. I'm not sure where we're currently sitting on that, Alf. I think we -- okay. So we have now appointed a person in Canberra. So the lack of on-the-ground involvement in Canberra has been something Peter Leahy has spoken about in the past. So we actually have taken the action. So historically, Codan's involvement with defense projects in Australia is being minimal, okay? So we've come from a -- and we haven't been focused on it. So the point you raised is a valid point. There are now opportunities in defense. You may recall that we invested over 3 -- nearly 4 years. We had a defense electronics start-up within Codan. That was probably the most frustrating period that we'd ever experienced. Lots of [ EMIs ] and no orders. So we said, well, that approach is not right. But we also have -- you also have to consider that -- you've actually got to have a vast set of goods, which can target opportunities, which we didn't have. I mean, in defense, really, we were potentially a HF radio provider and probably mine detection in some areas. We've even had circumstances where we've received government grants to develop product, which we sold overseas, but never sold one here. So there's Australian government money got us through the development phase, but we never got orders. So defense is not for the light-hearted or for the short-termers, okay? But we do acknowledge it is an opportunity for us. It's part of the portfolio. We now have products which -- and Paul -- if we ask Paul to talk about some of the opportunities in defense, there are lots of them. But we have to be also [indiscernible] enough to know you want to chase those ones where you're going to get a result because it can be a lot of long effort, short reward. So we're focused. The establishment of the individual in Canberra is part of that. So your observations are fair. I think appalling might be a bit of a hard word in terms of our presence, the AFR always gets up [indiscernible], I think we can produce a profit better than anybody in the world for whatever reason you never got to run. So it's been our lot forever. I don't think we can force anybody to put us in the favor. It's a bit like the issue of being put into the tech stock index. I mean, probably back in the smoke-stack. I mean, whoever dreamt up that we should be in the tech stock index. We have no input to that. That's done by some PR firm somewhere, well, let's put these companies together and call it a tech stock index. So Codan is a complicated story. We accept that. We have tried to, over the time, and Donald did a very good job of getting the Codan story much better understood in the investing community. We've now added two additional businesses to the group. And they're not easy to understand at first pass. So we do know we have to work on the story, and we are doing that. We've actually engaged with a PR consultancy to help us get consistent message out. So there's not a silver bullet that get you from, hey, you misunderstood. Hey, I understand everything. It's something you have to work on, and we will progress. But your observations are fair.

I'll just follow up that comment. Many years ago, I bought shares in this company in 2003, mainly because I knew Mike [ Heard ], when I was a science minister, I put Mike [ Heard ] on an advisory council committee for the Australian space industry not for his fault. It didn't go far way back in the beginning of the previous decade. But when I bought -- what he told me about Codan, when I left parliament, I bought shares and et cetera, et cetera. About 10 years ago, I said to my stock broker who was based in Melbourne, that was a problem, I suppose, have they been looking at Codan? He said, who?" Never heard of them. So I spent 5 minutes giving him the rundown of the company. And what it had done, its significance with its communication that I had seen that the radio telephone operating in the UN, in Cambodia all around the world in UN, et cetera. So I said you should have a look at it. Took no notice. And then when the share price got the boom 2 years ago, again, I raised it with the game that people said, oh, yes, we've noticed. I wonder what all that is about? I said go and read it.

Do we have the question, Chris?

Well, the comment I just want to make is that at that time, Ian Wall, you may remember, was on the front page of The Advertiser as one of the richest people in South Australia, worth $600 million. That was based to the calculation on the value of the shares he had in this company and what he was earning in dividend. Again, that was a profile that brought the company forward. My view is you can have consultants and lobbyists or whatever you want to call them in Canberra. The real issue about profile has to be built by the company itself. The context from the company have to be talking to the media and we can be dismissive of the papers and the media are saying, well, they're bunch of whatever [ falls ]. You've got to deal with it. I think the Board has got to spend some time working out its communication strategy, and it's going to cost some money in employing people to do it. But on a company where we are in valuation where we want to be, that's just a natural expenditure. It shouldn't be the first thing you cut. It should be the last thing for the value of all of us in the company. So I, as a strong and enthusiastic support of this company and what it's achieved, it frustrates me when idiots in the Eastern states don't even hear about us, don't want to know about us, despite the fact of our success.

I think the notion that we don't spend any time on it is not correct. So we've gone from a situation where we had almost zero analyst coverage to now, I think, Michael, seven organizations cover us in depth. The analysis by those organizations is not trivial. I'm not sure whether you -- about yourself of it. So we've moved substantially along the line of trying to get the Codan story out, but we'll continue to work at it. As I say, it's not -- there's no silver bullet. And we are -- we don't just make a single digit. We have some complications in what we had to offer. We acknowledge that. Any other questions, please? Yes, sir.

Good morning. Stephen Matt's my name. I'm a ASA member as well and a significant shareholder in the company. Just following on from a couple of the previous commentors, looking at your Director skills matrix, one of the things that jumps out to me is that marketing is listed as a skill in your current skills matrix. So I'm pleased to hear that there's some Board renewal happening and maybe that's something that you could consider given the comments this morning. And then the second question I had was I applaud the sustainability report. I think it was a great read and gave me some good insight where you're going. One of the sections, I think you talked about staff retention and that staff turnover, I think, had doubled in the last 12 months from 6% in FY '21 to 12% last year. Any reasons for that? Is that a trend that you're seeing again this year? And if so, do you think it's going to result in some increase in staff costs to retain people?

Yes, good observation. I think globally, staff retention is an issue, which is occupying management and Board times. The whole work-from-home situation, trying to get people back to work. If you think they need to come back to work. Scott could tell you about the stories in the U.S. where it's even more pronounced in terms of people's willingness to change jobs frequently. It is an issue. We acknowledge it. A couple of other companies I'm involved in have got staff turnover rates in the mid-20s. And I mean, if you just think about the cost of effectively replacing a quarter of your staff every year, it's horrendous. So it's a bit like the story we were talking about before, I don't know a single thing you can do to change that. But we've got to work on making sure that Codan is a desirable place to work. We have to pay competitive wages. Part of what we're doing in the U.S. and Canada are in terms of our office relocations is to make sure that what we're providing is what we would call -- it's not best-in-class, but it's going to be -- someone will come into the office in our operations and say, well, great, there's a great place to be. Now we choke at what we're going to spend to do that but it's a bit like the investment elsewhere. It comes with the game. So staff retention is a big issue, and there's obviously a lot of wage pressure in the economy as well. One thing that always greats me, I suppose, over a long period of time is that you put time and efficacy to develop and growing people only to have them pinched. So there's a few lazy organizations in this world, too, who will target good expertise but that's our lot. I mean we're an engineering-based company. We have unique skills. Some of those skills are in very short supply globally, which also means a supply/demand sort of curve is difficult to manage. But yes, it's a good observation, but it is not missed on us. Okay. If there are no more questions from here, Michael, I think we have some questions which have been sent in prior to the meeting or have been received since.

Yes, so some online questions, David, that I'll read out. First one is a presubmitted question. How are things looking in Africa? And do you expect detector sales to increase there soon? And is the conflict in Africa still causing problems?

Okay. So I think we fully covered that in our presentation, so I don't think I'll add anything more to that one.

Next one. There are concerns with the reduction in share price and shareholders seeking to understand reasons why the market has reacted this way? And what is Codan implementing to improve the current situation?

Yes. And look, it's a fair observation. But as I said, as Alf said, part of the reason our share price is so variable and vulnerable is that we were too dependent on single markets. And our strategy is really simple, we want to diversify into growth businesses. Having bought Zetron and DTC and those businesses themselves didn't have the ability to grow over time, they would be dumb decisions. But we bought those businesses, and I have to be honest, they weren't betting at 100% when we bought them. We knew we had work to do with them. But the fact we've been able to make improvements in those businesses early on, tells me two things. We've got an acquisition process, which is solid and repeatable. And we've also bought some businesses which are exhibiting just what we want, which is growth. I think Zetron is a business in terms of what we are looking in terms of opportunities in developments, particularly in the U.S., there's real opportunities for us there. And the same in technical communications. We've -- as we've broadened the product range and get back out into the market and say, hey, we're back in town, I think we're going to see that people acknowledge that what we have to offer is something they want to access. So we will stick to the knitting. So our strategy is clear. We said what it is. We're execute on that strategy. And if we get it right, the share market should react.

Next question from shareholder, [ Jason Hunt ]. Will Codan consider a buyback of its shares on the basis that the company is undervalued?