Codan Limited (CDA) Earnings Call Transcript & Summary

Good morning everyone and welcome to Codan's FY '23 Full Year Results Investor Webinar. My name is Sam Wells and joining me from the company today is Managing Director and Chief Executive Officer, Alf Ianniello; as well as Chief Financial and Company Secretary, Michael Barton. Following a brief summary of the FY '23 results released to the ASX this morning, investors and research analysts will have the opportunity to ask questions. There will be the choice of 2 options: first, you can submit a written question via the Q&A function at the bottom of your screen. Alternatively, research analysts may raise your hand via Zoom, should you wish to ask a verbal question to the management team. We would kindly ask that you limit your verbal questions to 2 per person and we'll endeavor to get to all questions asked. Thank you, and over to you Alf.

Thank you, Sam. Good morning and welcome to the FY '23 full year results investor presentation for Codan. Thank you all for joining. For those who don't know me, my name is Alf Ianniello, I am the CEO of Codan. Joining me today to step through the investor presentation is our CFO and Company Secretary, Michael Barton. Before we proceed, please take note of our standard notice and disclaimer. The plan for today's presentation is for Michael and I to provide some key highlights on our FY '23 results, touching on each of Codan's 3 business units. Following the result-specific detail, we like to take some time to illustrate some of our key strategic initiatives, and finally, we will aim to tie it all together and provide some high-level commentary on the Company's outlook for FY '24. Despite the uncertain geopolitical environment and challenging global macroeconomic factors, Codan has delivered a stronger second-half result, with Group revenues up 16% versus the first half. In this financial year, Codan has become a stronger business, as it has reduced its reliance on Africa, while enhancing its diversification, with a strong communications segment performance. The management team is focused on building a stronger Codan by leveraging its strength of innovative product development with diversifying our earnings and pointing our resources towards large global addressable markets in Communications. Group revenue came in at approximately $457 million, down 10% on last year. The Group delivered a statutory NPAT of $67.7 million, while the underlying NPAT was $65.5 million, down 33% and 35% respectively, primarily as a result of the ongoing and significant disruption in our Minelab African market. This was partially offset by 2 factors, strong organic revenue growth within Communications, up 14% versus FY '22, this was towards the upper end of our target range, and Minelab Rest of the World recreational detector sales supported by innovative new product launches. Will touch on this in more detail shortly. I will now pass over to Michael to run through our P&L and balance sheet.

Thanks Alf. Good morning everyone and thanks again for taking the time to join our results call today. And this slide highlights the changing nature of the business at the revenue line. Strong growth from our Communications business and the decline of the African Metal Detection market, we now see our Communications business delivering 60% of the Group's revenues. This is consistent with building a stronger Codan strategy to diversify earnings and have a more balanced, stable, and predictable revenue base. We did see a reduction in gross margin percentage from 57% to 55% in FY '23 and while Codan has seen an inflationary impact on our labor costs, our supply chains are largely normalizing to pre-COVID levels, and so the decline in gross margin was more driven by changing sales mix, rather than inflationary pressures. Also worth noting on this slide, is our second-half NPAT of $34.7 million, up 13% versus the first half, a meaningful half-on-half increase. The Group's underlying effective tax rate was 21%, down from 26% in FY '22. This is largely a result of an increased proportion of the Group's earnings being generated in the U.K., which had a tax rate of 19% for the majority of the year. As of April this year, the U.K. tax rate has been increased to 25%, such that we'd expect our future effective tax rate to move closer to FY '22 levels. During FY '23, the Group also recorded a $2.2 million tax benefit in relation to the recognition of tax losses not previously recognized. As this is a largely one-off item, it's been deducted from our statutory profit, as shown in the table to deliver an underlying result. Turning to our balance sheet; as expected, we continue to reduce our net debt balance through the year from $61 million at 31 December, down to $52 million at 30 June. This is a direct result of improved financial performance and a continued focus on working capital management. It is after the upfront cash consideration, paid in relation to the GeoConex acquisition, which was $6.6 million, and also the payment of the interim dividend of $16.3 million. During the second half, we also renewed our bank facilities of $140 million and we have additional capacity over and above that facility limit of $150 million available to us subject to bank approval. This enhanced facility provides us with the financial capacity and flexibility to support our acquisition strategy going forward. The increase in inventory to $121 million as of 30 June, mainly attributable to the growth in our Communications business and the deliberate buildup of our stock of Minelab's newly released detectors, to meet ongoing demand. As we look forward, we'd expect inventory to decline over FY '24, as we settle down African market gold detector and as a result, we expect ongoing positive cash generation and further net debt reductions over the course of FY '24. Back to you Alf.

Thanks, Michael. As a reminder for those new to our story, our Communications business designs and manufactures mission-critical communications equipment for global military, public safety, law enforcement, unmanned systems, broadcast, and commercial applications. These solutions allow customers to save lives, enhance security, and support peacekeeping activities worldwide. Our Communications business had an excellent year, with both Tactical Communications and Zetron achieving strong growth, taking total Communications revenue up 14% year-on-year versus our 10% to 15% guided range. Communications segment profit margin was 25% in line with our target and materially up from 21% in FY '22. Importantly, we continue to target long-term margins of 30% within this business, resulting from operational leverage, as we continue to grow revenues. As of 30 of June, our Communications forward order book was $163 million, up 9% year-on-year. Continued success within this business reflects the strategic focus on larger and growing addressable markets. As a result, we have achieved an increase in Communication revenues from developed markets and government customers, in turn, enhancing the quality of our revenues and the stability of the business more broadly. We continue to invest in our technology platform, further enhancing our value proposition to customers, as we position the business as a true end-to-end solutions provider. Throughout this year, considerable effort and investment was directed towards strengthening sales teams and ensuring resources and expertise are in place to pursue opportunities in key growth markets. Tactical Communications achieved double-digit growth during the year, driven mainly by strength in the unmanned systems, broadcast, and law enforcement markets. In FY '23, $20 million of our revenues related to a large military communications project announced in October 2021, while a pleasing contribution to the FY '23 result, management does not expect this revenue to be repeated in FY '24. FY '24 will be heavily focused on converting our pipeline of sales opportunities into revenue and continuing to invest into new technologies across our key markets. During the year, we have invested in waveform enhancements to deliver significant improvements in contested environments. We also released the Sentry Mesh 6161 radio, a compact and lightweight software-defined radio tailored for soldier systems, and lastly DTC launched its Onyx platform to address growing demand in remote broadcast production, and maintain its dominance in Europe, all of which placed DTC in a strong position for the future. Zetron also achieved double-digit revenue growth in FY '23, as the U.S. public safety market continues to grow and recognize the value of Zetron's integrated command and control solutions. We were successfully awarded business from an expanding mix of high-quality enterprise and government customers throughout North America. As pointed out on this slide, a pleasing feature of the Zetron business is the predictability of future revenues from long-term support contracts. Specifically these accounted for 30% of Zetron's revenue in FY '23. Supplementing Zetron's organic growth, we also acquired 2 businesses; GeoConex in February and Eagle announced on August 2, both bolstering our service offering and consistent with our overall inorganic growth strategy which I'll run through in more detail shortly. Given that GeoConex acquisition was announced in February, and discussed within our half-year results, I'll instead focus time today on our Eagle acquisition. As announced earlier this month, we successfully completed the Eagle acquisition, which was a carve-out from NEC's operation following a U.K. Government force sale. In terms of rationale, this acquisition is strategically important for Zetron, beyond the highly complementary technology as outlined on the prior slide, it will accelerate Zetron's growth, by gaining immediate access to the U.K. public safety market and providing a platform to address broader European opportunities. Lastly, given 45% of its existing revenue base comes from support and services contracts, it will also help provide more stable and predictable revenues, a key strategic focus. We're particularly excited about this acquisition, notably widening our core capabilities within Zetron, while providing new international growth opportunities across public safety and transportation. Importantly, Eagle is a supplier to the U.K. Home Office on the Emergency Services Network transition project, which is a leading project to deliver new critical comms system and replace the current airwave services in Great Britain. This positions Zetron to capture additional market opportunities arising from the ESN transition. Given it's a carve-out, we entered a transitional services agreement with NEC and expect this integration to be completed within 12 months. These transitional costs, combined with the establishment and integration costs, will result in Eagle being only marginally profitable for us in FY '24. The acquisition was debt-funded and expected to be EPS accretive from year 2. So, what exactly is Eagle? Eagle's technology offering is highly complementary to Zetron's core command and control portfolio. Eagle provides mission-critical control room communication and workforce management solution to over 100 emergency services and transport customers across the U.K., Europe, and the Middle East. For context, their solutions are currently used by more than 2/3 of police forces in the U.K. as well as major transportation hubs and airports, including Dubai International Airport and the London Underground. Minelab is the world leader in handheld metal detection technologies for the recreational coin and treasure, gold mining, demining, and military markets. For more than 30 years, Minelab has introduced more innovations than any of its competitors, leading the Metal Detection industry to new levels of technological excellence. On a full-year basis, Minelab revenues declined to $176 million from over $260 million in FY '22. This is predominantly due to the continued disruption of the Northeast African market. It's pleasing to see that other countries within Africa are trading in line to pre-COVID levels. What's useful in the context of this year is a closer look at the performance across the second half. Notably, all key Minelab markets delivered stronger half-on-half results, as Minelab revenues grew 38% in H2 versus H1. Minelab's segment profit margin also remained stable versus its first half at 32%. Rest of the World recreational detector revenues have remained remarkably resilient, growing 9% versus last year. Despite the global trend of increasing inflationary pressures affecting consumer sentiment and discretionary spending, aiding this in the second, half has been the newly released Manticore, X-Terra Pro, Equinox 700 and 900 detectors, all of which have been well received, delivering exceptional results so far, with a full year benefit anticipated in FY '24. Elsewhere Countermine also delivered a strong result supporting humanitarian efforts to demining countries such as Ukraine. Following off on the previous slide, this shows each of our newly launched recreational products, that have contributed strongly to the improved second half. We have elaborated on specific detail for each of these previously. Notably, these products are the direct output of prior engineering investment to drive innovation, a core feature of our business. From here, we now move into the Strategy Overview portion of the presentation. Our strategy is focused on 3 core pillars to drive long-term sustainable value for shareholders. The first, investing in ourselves; this is what I'd term doing everything right internally. Here, we seek to focus across people, process, and systems driving improvements in core financial metrics, as well as investing in technology, innovation, and new product development across segments. For example, as a global business with a large international workforce, it is important for us to have the right systems in place. This year we will be implementing a Human Resource Information System across all offices. We continue to invest in our employees to ensure that we have the right structure, people, and roles to deliver the Company's strategic growth plan and build a stronger Codan. Secondly, strengthen our core business. This is where we seek to improve the quality of our topline, pursuing geographic and business unit diversification, while seeking to expand our suite of products and services in our growing addressable markets. A key component of this is building more stable and predictable revenue streams. The third circle, a disciplined capital allocation is our inorganic growth strategy around pursuing strategically aligned and accretive acquisitions, specifically targeting opportunities that fill our technology gap, offer enhanced scale or increased market penetration, and impact the predictability of the revenue line. As per the more recent GeoConex and Eagle acquisitions, we will often execute bolt-on opportunities complementing existing technologies that strengthen our differentiated product pipelines. This slide shows the key members within our leadership team, many of which you'll be familiar with, if you followed the story, including some new faces. Structured [indiscernible] strategy, and as such Codan has made key changes to the executive leadership team to enhance its ability to deliver on its plans. A couple of notable mentions, Marjolijn Woods, who has been with us for 5 years was promoted to Chief Human Resource Officer. Marjolijn consistently brings her people and cultural experience to Codan aligning us with our mandate to diversify knowledge and thought leadership, a great alignment with investing in [ our growth overall ] strategy. Daniel Hutchinson has recently joined us as EGM, Strategy, Corporate Development, and M&A, joining us with almost 2 decades of investment banking and corporate advisory experience. His appointment to the leadership team reflects our commitment to expanding Codan's business through targeted strategic acquisitions that complement existing technology, products, and markets. Peter Charlesworth has advised us that he will be transitioning to retirement with Ben Harvey to be promoted to succeed him as Minelab's Executive General Manager effective October 2023. Ben has been instrumental in growing our Rest of the World business, and the ability to have an internal successor to Peter was [indiscernible] with a seamless transition. Peter will remain with Codan in a part-time capacity, in a Chief Technology role for the next year. This slide elaborates on earlier strategy slides, delving each of the business units into a little bit more detail. Given this isn't the first time we presented this slide, we largely take it as read. Suffice to say we're consistently focused on the initiatives and objectives outlined on this slide. The successful execution of the near-term strategy will see a more balanced, integrated and sustainable Codan. This is consistent with our aspiration to continue to deepen and strengthen our strategic priorities. Whether you followed the business for an extended period or listening for the first time today, our focus around innovation and new products and solutions to add value for the customers we serve, should be evident. During the full year, we invested $45 million into engineering development, further strengthening our pipeline of products and solutions. In line with the first half, this represents 10% of our revenues, reinvested back into future product development and innovation. Continuing to invest in product development remains a key strategic initiative for Codan and our technology roadmap for short-term, medium-term, and long-term growth opportunities. Importantly, our engineering investment is well distributed across all of our key businesses and their key growth markets. Over the last 12 months, across the organization, we have taken significant strides in embedding our environmental, social, and governance framework. The framework endeavors to both build upon and enhance the work we do within the communities we operate to provide greater impact. As part of our commitment to being a responsible company, we joined the United Nations Global Compact and seek to entrench its principles as part of the strategy, culture, and day-to-day operations of our Company. Within our social pillar, STEM has been a focus area and I'm pleased to see some tangible outcomes delivered, which accomplishes our target to encourage diversity and inclusion for all students to pursue a career in STEM. This has included the establishment of the inaugural Women in STEM undergraduate scholarship at the University of South Australia and we're also delighted to honor the Codan Founders with a long-term commitment with the University of Adelaide to fund multiple PhD research scholarships, that could span the research field of AI, Electronic Engineering, signal processing, and geophysics. Our values, organizational culture and positive outlook is the foundation that enables us to build a stronger Codan. Our people demonstrated courage and tenacity in FY '23. I want to recap a couple of key points highlighted within today's presentation, particularly as we continue to strive to become a stronger Codan and generate sustainable value for shareholders. We're a global business and continue to selectively expand into new and adjacent markets and geographies. We are focused on delivering sustainable revenue and profitable growth. We are confident the strategic initiatives currently in place will position Codan to further grow our market share. We have a more diverse earnings base across our businesses. We have significantly reduced our reliance on Africa, as we continue to lay the foundations to achieve more predictable revenue streams. We continue to invest heavily into product development, which will have us well placed for the future. And we seek to further strengthen the balance sheet, with a focus on improved working capital, growing operating cash flows and flexibility from available undrawn debt facilities. Now for some high level outlook comments. As we can really think about FY '24, there are a number of key considerations. After normalizing for the impact of the large Communications project delivered in FY '23, approximately $20 million, the Communications business excluding Eagle is targeting to deliver 10% to 15% revenue growth in FY '24. Minelab's Rest of the World recreational sector is targeting high-single-digit revenue growth, with the full-year benefit of newly launched detectors and regional [Technical Difficulty] and we'll take note of any regional geopolitical issues persisting and any global macroeconomic conditions moving forward. A further business update will be provided at our AGM on October 25. Back to you, Sam.

Great. Thanks very much, Alf, and thanks Michael. Just as a reminder for those in the audience, you can ask questions either via submitting written questions through the Q&A function at the bottom of your screen, or analysts if you'd like to ask a verbal question, please raise your hand and we'll try to get to you. We will just kick things off with a couple of pre-submitted questions, Firstly, just on the Communications baseline, we [ didn't Tactical ] identify the $20 million of a single large military project not likely to repeat in '24. As you think about the expectations for the 10% to 15% growth, comms growth, how should we think about the starting point for FY '24?

Yes Sam, we've tried to be quite clear in that outlook statement, that we really need to normalize our FY '23 numbers for that $20 million project that we've called out, and that is the base from which we are targeting to grow from, in FY '24.

Okay, great. And just on strategy -- within the strategy section, you talk about investing in people, processes, and systems. Can you just elaborate on that, Alf?

I think what we've seen over the last 2 to 3 years, Codan has gone from an employee base of roughly 250 people in Adelaide to over 800 people globally. In order to have an efficient organization, you need efficient systems to back it up. So I guess we are globalizing Codan from a back-end perspective at the moment, either through implementing [ HRS ] systems or rolling through our SAP programs throughout the globe.

Got it. On cost of doing business, there is a lot of focus on costs within today's inflationary environment. Can you elaborate on your cost growth during the year, including any one-offs as well as your expectations into FY '24?

Yes, so the cost base, you know, we -- like all organizations have some inflationary pressures. So we did have a higher-than-normal 1st of January pay increase across all of our sites. But we've largely seen the challenges in the supply chain really normalize, Sam. So a year or 2 ago, you were paying significant premiums for electronic components and there was a lot of noise around that. All of that part of our business is largely normalized. Our businesses are maintaining their individual gross margins in their own P&L. So we think we're in pretty good shape to manage those inflationary pressures.

Okay. Just moving to the foreign exchange impacts, Codan has been growing its exposure and revenue from North America and Europe in particular. Can you remind us of your hedging strategy, particularly as it relates to Aussie-USD?

Yes, so, Aussie-USD is the main currency that we focus on. We have a hedging policy that has us hedge about 50% of our exposures in any year. And as the Aussie to U.S. exchange rate has been falling, those hedge contracts have effectively cost us money over the course of FY '23, and that's disclosed in the accounts, that was in excess of $4 million. So it's hard to predict where the currency is going to go, other than to say with the rate currently in the low to mid 60s, that will be a tailwind for Codan, given we are creating U.S. dollars and bringing them back into Aussie. So that'll be a tailwind for us in FY '24.

On further inorganic growth and pipeline, you've commented on GeoConex and Eagle, which was a period of a strong bolt-on acquisitions. Can you just elaborate on where you see the greatest future opportunity, including pipeline in general?

I think the key focus for Codan from an inorganic perspective is, we are heavily focused about quality of the revenue line, either having customers and institutions around us, that provide us predictability moving forward. As you can see, in Zetron, we are quite keen on increasing that predictable base of reoccurring revenue. Hence the appealing nature of Eagle and we'll keep looking at if there's any gaps in our technology roadmaps, to just accelerate our product development cycles. But what we're really looking at, we are looking at markets that are growing moving forward. We are heavily becoming a Northern hemisphere organization, and we think our product suite, especially in the comms segment, is positioning us well for some very good growth areas. So anything that aligns to that we'll keep looking at.

And just turning into the African market, Minelab grew H2 revenues 38% versus H1, can you just dive a little deeper into any of the changes observed during the second half within Africa specifically, including any country-specific observations?

So, as mentioned in the presentation, Northeast Africa, which is fundamentally Sudan region, no change. It's still at a zero level. Where in the Northwest part, being Mali, Mauritania, Burkina Faso region, we've actually seen a return to pre-COVID level run rates, supply chains are normalizing, products being pulled through. So, yes, that's -- we would suggest, a positive sign.

Okay, great. And just on order book before we take a couple of questions from the analysts, and as a reminder, please raise your hand for research analysts looking to ask questions. Just on order book, can you help us better understand, how we should interpret your forward order book? Does that materially differ from Tactical versus Zetron?

So, when we look at the order book, at the moment it's a forward leading indicator, shows that our sales and operations structure is working, we're bringing in orders, we're trying to get to a level of execution, that shows that we have work ahead of us. And I guess that's one of the key changes in the business. You know, we have got comms businesses that are creating a level of visibility moving forward. So at the moment, it's increasing, you know, it wax and wanes due to some binary natures of products coming in, predominantly in the Tactical part of the business. But order book is growing, and our focus is just to continue that positive momentum in that order book, and it's probably -- you know, an order book is probably weighted more towards a Zetron than a DTC, due to the nature of its business, where Zetron brings far more longer-term contracts, where DTC is more of a book-to-bill business.

2 questions just on cost from Jason Palmer at Taylor Collison, can you explain please the $4 million increase in corporate overheads in the second half versus H1? And then secondly, increased sales and marketing spend by 400 basis points, is the 19% to 20% spend relative to sales now a new baseline for the business?

I think in terms of the corporate costs, some of that is the increase in the second half, really activity-based. So in the second half, we had programs to integrate the GeoConex acquisition. We also had quite an extensive due diligence process to buy Eagle, given that was a carve-out from NEC. So there have been some activities in the second half that did not exist in the first half, that have caused some of that cost increase. And as Alf alluded to, there are some investments that we are making in the corporate area of the business, to have us able to integrate these acquisitions that have been made in the past couple of years. So it is an increase from H1 to H2, but I think if you were to look at the total cost over the full year, that really is reflective of Codan going forward into FY '24. It's not like there were a whole heap of costs in H2 that we wouldn't expect to repeat, it is reflective of the new Codan that's being built here. So that's on the corporate side. On sales and marketing, some of the increase that you see in the individual expense lines is currency-related, given that we now do have the majority of our employees overseas, as we report in Australian dollars, that has become more expensive, remembering we're getting a compensating increase at the sales line as well, but if you look at in expense line in isolation, currency does have an impact. I think we've also called out in the presentations that, more specifically in our Tactical business, FY '23 has been a year where we've worked really hard to structure our sales teams and have them aligned with the different markets that we're targeting. So there has been an increase in headcount and an increased focus, with having people directed at those key growth markets that we see going forward. As to the sales force that we have today, it is representative of what we would expect in FY '24. We're pretty well structured at the moment in terms of all our key [ eyes ]. So it is reflective of what we would expect, to see over the course of FY '24.

Okay, great. Next question on the line from Mitch Sonogan. Mitch, please go ahead.

Just a few quick ones. Just on the segment profit margins, solid result there, with comms at 25%. Just wondering if the target is still around the 30% and over what timeframe? Then also just on the Detection segment profit margins, though pretty stable there. Is that a fair assessment when we look out into FY '24, with the ongoing growth in the Rest of World recreational markets?

Yes. So I'll take to the coms segment margin first. I think we believe with the operating leverage, of having 10% to 15% growth over the next 18 months, getting to a 30% margin is not out of the realms, and I think that is important. You know, from the onset, if you go back 12 to 18 months, we've been very clear about creating equity at that segment margin perspective. So we're still driving for that, and I think the result from 21% to 25% was a great result for this last financial year. So within 18 months plus, we would like to see that margin at 30%. With Minelab, obviously, we're selling recreational detectors I think the 32% is a fair target for this financial year moving forward. I think it's in a far more competitive space than the dominant space of gold detection. So that 32%, 33%, that would be a fair margin.

If there are any other analysts that would like to ask a question, please raise your hand and we'll get to you. There are a few more written submitted questions. There is a big step-up in PP&E this year, how should we think about this going forward please?

Yes, Sam, so the PP&E spend -- so sort of real spend on tangible fixed assets, really look at it as a one-off item in FY '23. We had 2 major building programs to house our employee base in the U.S. and in Canada. So the step-up was really a one-off because we had 2 projects running in the same year. So we would expect a more normalized CapEx spend going forward.

Got it. A couple of questions coming in on Eagle, are you able to just discuss the general reason for Eagle to be spun off from NEC? And maybe just elaborate on some of the sales growth opportunities you see within Eagle?

Yes, I think it was driven by the U.K. regulators as NEC had completed another acquisition that gave them too much market share in this public safety space. So the regulator wanted it to go back to probably a 30-30-30 split. So that was -- it was driven for that. Nothing with NEC. NEC were a reluctant seller in this. I guess the growth opportunities for us, obviously, it's given us a step change in our European markets. Something that would have taken us 3 to 4 years to do organically. So, that's positive. It's opened us up to other European nations, that we could work it through, and also leveraging the ESN rollout throughout the U.K. which is going to be a benefit. Secondly to that, we have the great opportunity to roll out our product, our next generation of Zetron products into these control rooms, throughout Europe. So that's a positive. So we've taken a step change by using an inorganic opportunity to get our market share up, and now we will grow that, as we've consistently grown that market share in the U.S., we have a lot of experience in public safety, and we can leverage that throughout Europe. So that's positive, and that's just in public safety. I think there's also the opportunity to grow in transportation. The public safety market in Europe is growing at high single-digits from a CAGR perspective, which is a couple of percent higher than the U.S. equivalent market.

Okay, great. Can you please provide more detail on the M&A and integration costs from the Eagle acquisition, which have been included in the underlying costs, both for FY '23 and FY '24?

Yes. So I guess it's fundamentally all the back-end requirements to run an organization. You know, it's human resources, it's IT, it's accounting, so the first step in the integration is to get the appropriate resources in place, and over the next 12 months, we need to put our back-end, our SAPs, our ERP systems. A good point was that Eagle is already on SAP, so there is an alignment from a systems perspective, bolt-on our legal and really fundamentally Codanize that part of the business like we've done. We've actually deployed our integration teams out of Zetron U.S. So we've got people on the ground at the moment. So it's all those elements of standing up a business unit with the backend, so that they can communicate with the rest of Codan, communicate with and [ incorporate ].

Okay. Thank you. And 1 from Cameron Bell at Canaccord, can you clarify what the tax losses benefit was and if there's any further potential impact in the future?

Yes Sam, it was actually a result of some legislation that changed in the U.S., and the significant improvement in the profitability of Zetron business in the U.S. When we bought that entity, it did have tax losses which we didn't attribute any value to. But given the growth and the improved financial performance, we've got to a point now, where we could see some value and we actually utilized some of the losses in FY '23. So it has really been a result of improved business performance, and we've recorded the losses that we think we will utilize over the next 5 years. There is a tail of losses that goes out longer than that, but we've recognized the majority of that asset.

Okay, great. I think that's all that we have for questions today. If you do have any follow-up questions, please send them through to either Kayi Li or myself, and we will aim to get back to you. And I think with that, maybe I'll just pass it back to you, Alf and Michael if there is any closing comments?

I think the only -- what we would like to reiterate Sam and to our investors, we're heavily focused on building a stronger organization here. As you can see, we've been very consistent in our approach, in executing against our strategic plan, and we'll continue to do that. We're being very prudent on any inorganic growth moving forward and if we reflect on it, and you take away the 2 COVID significant years we did have, this is a significant profit achievement. So we've created a baseline in Minelab, and we've got a Communications segment, that is delivering on its strategy moving forward. So we're very confident that we'll continue to have a strong FY '24.

Okay, great, thank you very much for joining today's Codan FY '23 Investor Webinar. Enjoy the rest of the day. Thank you and goodbye.