Slide 1: 2019 Half-Year Results & Update
INNOVATION WHEREVER YOU ARE 2019 Half-Year Results & Update 4 March 2019 DONALD McGURK Managing Director & CEO MICHAEL BARTON Chief Financial Officer SARAH EMMS Investor Relations
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER Disclaimer This presentation has been prepared by Codan Limited (ABN 77 007 590 605) (Codan). The information contained in this presentation is for information purposes only and is not investment, financial product, legal or tax advice. This presentation contains summ
Slide 3: Codan: Robust, innovative technology for global markets
CODAN Robust, innovative technology for global markets Portfolio of technology solutions: Communications Metal Detection Tracking Unique, protected intellectual property Superior performance in harsh environments 60 year history Customers in 150 countries
Slide 4: Global Footprint
GLOBAL FOOTPRINT Customers in 150 countries, exporting around 85% of sales $35m $37m $44m $31m $17m $91m $6m $37m New Brazil office FY18 sales 4
Slide 5: FY19 Half-Year Results
FY19 HALF-YEAR RESULTS Continuing growth across all business units, NPAT up 40% Interim dividend 4.0 cents, fully franked Special dividend 2.5 cents, fully franked Metal Detection sales and segment profit up 29% over prior first half Communications sales up 41%, segment profit up 85% over prior firs
Slide 6: Dividend
DIVIDEND Interim dividend maintained at 4 cents + special dividend Interim and special dividend will be paid together: Record date 27 February 2019 Payment date 13 March 2019 Maintaining 50% payout ratio Outperformance rewarded with a special dividend Ordinary interim dividends have grown at 28% com
Slide 7: Strong and Growing Base Business
STRONG AND GROWING BASE BUSINESS Annual sales $180-200 million / Annual NPAT $25-30 million Sales Outperformance can occur during periods of stronger demand for gold detectors in Africa and large communications projects Outperformance Outperformance $ millions Metal Detection Metal Detection Base Bu
Slide 8: Continue to Build the Base Business
CONTINUE TO BUILD THE BASE BUSINESS Delivered in the first half: Strong Equinox® sales are growing our recreational business Gold detector sales continue to be strong Developed new SDR Manpack radio for tactical military market Key projects into tactical military communications market Integrated Min
Slide 9: Continual Innovation
CONTINUAL INNOVATION 3 new products adding to Base Business from FY20 Military base and mobile radio Gold detector Coin & treasure detector Large coil Dual sensor detector (countermine) New SDR Manpack Military handheld Announced Jan 2019 software VHF radio FY16 FY17 FY18 FY19 FY20 HF messaging & tr
Slide 10: Business Units
DEFENCE ELECTRONICS
Slide 11: Metal Detection
METAL DETECTION Continuing to grow the base business Metal Detection sales 29% growth in sales and segment profit in the 1st half Recreational: Base Sales EQUINOX® continues to grow market share Expanding multi-frequency technology across product range Gold Mining: Continuing strong demand for gold
Slide 12: Recreation
RECREATION Expanding EQUINOX technology across product range ® RECREATIONAL DETECTORS Simultaneous multi-frequency technology Adaptable for all target types and ground conditions Obsoletes all single frequency detectors USD RRP ex $99 - $249 $259 - $499 $649 - $899 $999 $1499 $1549 $2499 tax/shi
Slide 13: Gold Mining
GOLD MINING No longer heavily reliant on a single product GOLD DETECTORS USD RRP $799 $3750 $2699 - $3999 $7999 ex tax/shipping ENTRY - MID RANGE - PROFESSIONAL 13
Slide 14: Communications
COMMUNICATIONS Transitioning to a full solutions provider Sales up 41%, segment profit up 85% over prior 1st half Communications sales Tactical Communications (formerly HF): Base Sales Penetrating the global tactical Mil2 market Broadening our offering to a full solutions provider New Sentry® SDR Ma
Slide 15: Tactical Communications
TACTICAL COMMUNICATIONS WHAT IS A TACTICAL COMMUNICATIONS? Continuing to target the Military 2 market: Tactical Communications Developing world - Modern militaries tactical incommunication battlefield Africa, Middle East, our is beyond Asia, Eastern current Europe & Latin America HF offering - Inclu
Slide 16: Tactical Communications: New SDR Manpack
TACTICAL COMMUNICATIONS New SDR Manpack boosts our Tactical Military offering TM Smaller, lighter, digital voice, encryption Easy to use and competitively priced Integrates with existing platforms Complements Codan’s Sentry™ base station and handheld radios Replaces our analogue Manpack, released 20
Slide 17: Tracking Solutions
TRACKING SOLUTIONS Key deliverables completed Caterpillar collaboration: Completed phase 1 integration with Caterpillar Minestar® for Underground Technology trial nearing completion at Newmont’s Tanami mine in Northern Territory Working with CAT® to leverage their dealer network BHP Olympic Dam cont
Slide 18: Defence Electronics
DEFENCE ELECTRONICS Leveraging Codan’s RF defence capability to participate in future Australian defence contracts Qualified Australian partner for Defence Primes Invested $1.6 million in manufacturing equipment for future contract fulfilment Prime Defence Contractors: 18
Slide 19: Financial results
Financial results 19
Slide 20: Strong First Half
STRONG FIRST HALF Half Year Half Year Half Year Underlying NPAT Underlying business performance ($ millions) Dec 16 Dec 17 Dec 18 $m $m $m Revenue $103.9 $94.7 $128.4 Underlying business performance EBITDA $37.1 $27.4 $38.0 EBIT $30.3 $20.9 $30.4 Net interest ($0.5) ($0.2) - Net profit before tax $2
Slide 21: Engineering Investment
ENGINEERING INVESTMENT Consistently investing around 10% of sales Engineering spend ($m) Engineering spend (% sales) A number of planned product releases due in FY20 Significant investment in engineering and product development Technology roadmap to drive future growth 21
Slide 22: Balance Sheet
BALANCE SHEET Strong balance sheet continues $12.5 million net cash generated from operations, strong cash conversion Debt-free, $13 million net cash position Investment in inventory to better meet metal detection demand Dec-17 Jun-18 Dec-18 $m $m $m Receivables 20.5 29.8 21.1 Inventories 34.5 31.6
Slide 23: Debt Free Since 2017
DEBT FREE SINCE 2017 Net debt Gearing ratio = net debt / (net debt + equity) 23
Slide 24: Change in Net Cash Position
CHANGE IN NET CASH POSITION Large final dividend payment including $7.2 million special Timing of tax instalments now normalised $ millions Liability reduction driven by timing of trade creditors Higher engineering spend than prior half Historic strong second half cash flows 24
Slide 25: Key Ratios
KEY RATIOS Underlying earnings per share (cents) Free cash flow ($m)2 Return on equity (%)1 Net cash (debt) ($m) 1Return on equity = underlying net profit after tax divided by total equity 2Free cash flow = operating cash flow + interest – cash outflow for all product development, IP acquisition and
Slide 26: Positive Outlook for FY19
POSITIVE OUTLOOK FOR FY19 Expect to exceed base-level NPAT ($30 million) for the full year, but difficult to forecast by how much Expect Communications to deliver FY19 sales in the range of $65 million to $75 million Minelab will exceed base-level sales for the full year, too early to determine by h