Codan Limited · ASX:CDA
Codan — FY2008 Earnings Presentation
35 slides from Codan's earnings presentation, Sep 1, 2008
Slide 1: ASX company announcement cover letter
4 CODAN Codan Limited 1 September 2008 ABN 77 007 590 605 81 Graves Street Newton SA 5074 Australia PO Box 96 Campbelltown SA 5074 Australia Company Announcements Australian Securities Exchange Limited Dear Sir/Madam We attach a series of slides, for presentation to investors and analysts, for immed
Slide 2: Full Year Results to 30 June 2008
CODAN Codan Limited Investor Presentation bs - Full Year Results to 30 June 2008 1 September 2008 Rick Moody Company Secretary & Chief Financial Officer
Slide 3: Highlights
Highlights e Result as forecast for FY08 e Underlying net profit after tax of $10.5m. e Dividend maintained at 6.5 cents per share e Resource refocussed on growth opportunities e Minelab acquisition performing well e HF Radio penetrating new markets e Group EPS in FY09 to be at least 20% greater tha
Slide 4: Financial overview
Financial overview Full year results FYO8 FYO7 | $m % $m % [Revenue | Communication Products $83.4 76% $111.0 91% Metal Detection $16.2 15% $0.0 0% Other $10.3 9% $10.6 9%) ‘Total revenue $109.9 100% $121.6 100% Key highlights: e Revenue on communication products lower than 2007: « Continued strengt
Slide 5: Financial overview
Financial overview Full year results FYOS FYO7 $m % $m % \Total revenue $109.9 100% $121.6 100% Underlying business performance EBITDA $24.3 22% $24.2 20% EBIT $17.0 15% $16.5 14% Interest ($2.2) ($0.6) Net profit before tax $14.8 13% $15.9 13% Net profit after tax $10.5 10% $11.2 9% Non-recurring e
Slide 6: Non-recurring expenses
Non-recurring expenses Non-recurring expenses e Integration and restructuring expenses $0.8m (after tax). e Non-cash impairment write downs in digital microwave radio and TV broadcast $8.7m (after tax). Sharpened strategy e Digital microwave radio and broadcast sales are small and not contributing t
Slide 7: Minelab acquisition
Minelab acquisition Exceed forecasts e Minelab exceeded the FY08 forecast e Also expected to exceed earlier forecast in FYO9 Synergies Adds significant potential for synergy and growth to the group Leveraging Minelab and Codan’s manufacturing and distribution capability to e Improve production effic
Slide 8: Ratios
Ratios - excluding restructuring and integration expenses and assets write down Return on net operating assets (average) 20.5% 22.1% Return on equity (average) 15.8% 16.1% Underlying earnings per share 6.5 cents 6.9 cents Definitions « Return on net operating assets: EBIT / average net operating ass
Slide 9: Dividends
FY08 FYO7 Interim dividend per ordinary share 3.0 cents 3.0 cents Final dividend per ordinary share 3.5 cents 3.5 cents Total dividend per ordinary share 6.5 cents 6.5 cents Franking 100% 100% Record date 16 September 2008 Payment date 1 October 2008 . CODAN
Slide 10: Balance sheet
Balance sheet Working Capital Receivables $18.3 $15.7 Inventories $18.4 $14.1 Accounts Payable ($18.1) ($12.7) Total Working Capital $18.6 $17.1 Property, Plant & Equipment $25.0 $17.8 Product Development $12.5 $14.4 Intangible Assets $73.2 $25.0 Other $4.0 $2.0 Total Assets $133.3 $76.3 Other liabi
Slide 11: Borrowings
Borrowings Funding: e 3 year evergreen « Negative pledge » Covenants (EBIT / net interest, net debt / EBITDA and dividend payment) e Closing net debt $62.1m Key ratios Net debt / EBITDA* 2.1x Net Debt / (Net Debt + Equity) 50% * Excluding restructuring and integration expenses and assets write down
Slide 12: Outlook
Outlook Summary Environment eExcellent HF product range for global security, protection and military markets launched and achieving orders eMinelab acquisition exceeding earlier forecasts and well established within the Codan group eMetal detection markets growing eFull year of metal detection in FY
Slide 13: Outlook: key initiatives
Outlook Summary ————— ——— Key Initiatives eStrengthening market positions in all products eHF radio growth from new Codan markets eConsolidation of Satellite Communications eImminent launch of important new products eConsolidating outsourcing to Malaysia Significant cost reductions on outsourced com
Slide 14: Outlook: guidance
Outlook Summary Guidance eFY08 a watershed year and solid platform for growth eGroup eps in FY09 at least 20% greater than the underlying eps in FY08 eGrowth to continue beyond FY09 » Ed CODAN
Slide 15: Mission Ready: Military Communications
MISSION READY. MILITARY COMMUNICATIONS CODAN CODAN HF RADIO Donald McGurk General Manager, HF Radio
Slide 16: HF Radio communications
HF (High Frequency) Radio communications: — Free to air — Remote — Long distance — Infrastructure Free Only HF Radio can do this HF Radio communications will always be required : lonosphere 20.- 300 km above earth A B Earth Long range communications 0 - 5000 kms CODAN
Slide 17: Codan is the global market leader in its existing HF markets
Codan is the global market leader in its existing HF markets: — Aid — Humanitarian — Government and Business Outstanding products: — Robust and reliable — Innovative features — Competitively priced Unique value proposition: - Exceptional product performance and quality — Comprehensive global sales a
Slide 18: Codan is entering a new market segment
Codan is currently entering a new market segment: — Security — Protection — Military This adjacent market was selected on the basis of: — Larger, definable niche (double existing) — Opportunity in the market caused by geopolitical environment — Current product technology transportable — Good access
Slide 19: Military HF radio product system
FREQUENCY HOPPING ZGALE VOICE ENCRYPTION DATA MODEM GPS ANTENNA TUNER INTELLIGENT BATTERY MANAGEMENT as ww. ot. ANTENNAS ‘BATTERY (MOUNTING CRADLE POWER AMPLIFIER SULAR PANELS 6 CHARGERS ANTENNA TUNERS, BACKPALK, FIELD DATA TERMINAL ea = & (COMBAT DATA TERMINAL Sami. (MOUNTING CRADLE ‘POWER SUPPLY 6
Slide 20: Why we believe we will be successful
Why we Believe we Will be Successful =» Market Launch Conducted — High level of interest created — Market assumptions confirmed — Attracted competitor channels — Inundated by product demonstration requests = Compelling value proposition for our new market — Rugged and proven reliability — Excellent
Slide 21: Competitor channels signed and opportunity pipeline
Signed up a number of competitor channels and have a strong opportunities pipeline 2006 m Existing market m New market Received a substantial level of new market orders during past 2 months 2008 Expect to become number one in our defined niche mExisting market m New market 2010 Will progressively gr
Slide 22: Minelab: an exciting addition to the Codan group
N Codan Investor Presentation MINELAB AN EXCITING ADDITION TO THE CODAN GROUP Minelab Overview — September 2008 Treasure through Technology Peter Charlesworth ne _ General Manager ‘Minelab
Slide 23: Markets
Minelab Markets The Minelab Metal Detection Market is NOT a TOY market! It is comprised of the Sophisticated Leisure Market and the Demining Equipment Market. It is served by sophisticated equipment developers and manufacturers. People make money from products or lives are saved from the demining ac
Slide 24: Products: competitive advantage
Minelab Products Competitive Advantage e Minelab detectors incorporate the most advanced metal detection technology in the world e The best detection depth across all soil types (benign to highly mineralised) e Minelab has: - a beumrenis Patents on Metal Detection Technology, out to — 4 more in deve
Slide 25: Hand-held metal detectors
Hand-held metal detectors for the hobbyist/ outdoor enthusiast and prospector Minelab is a Member of the Codan Group of Companies CODAN Metal detectors for humanitarian organisations and military bodies for demining
Slide 26: Consumer: market segment by product
Minelab Consumer Market Segment - Product 2 Significant Market Segments — Gold — Coin, Treasure and Relics Addressable Market ~ $200m+ Market Minelab is a Member of the Codan Group of Companies CODAN
Slide 27: Consumer: market segment by geography
Minelab Consumer Market Segment - Geographic Developing & Rest of World ee e Mixture of Gold and Coin and ie ’ Treasure Markets e Gold prospecting accounts formost of the market, given an abundance of _| gold deposits \. ¢ Growth Market e Large gold and coin and treasure market e Many detector clubs
Slide 28: Consumer: gold detector market segment
Minelab Consumer Gold Detector Market Segment e Customer profile — from proiessional and semi-professional prospectors to weekend hobbyists e A hobby/leisure activity that holds the potential to pay you back! e Growing market segment — “baby-boomers” favourable demographics e Growing hobby popularit
Slide 29: Consumer: gold segment
Minelab Consumer Gold Segment (cont.) e April 08 release of the GPX4500 resulted in HUGE demand for this premium machine. e Minelab dominates the high performance Gold Machine market; without peers in technology and performance. e Recently a customer with a new GPX4500 found approximately $400,000 o
Slide 30: Consumer: coin and treasure market
Minelab Consumer Coin and Treasure Market ° uingle> competes in the mid to high end Coin and Treasure arke e Minelab’s technology produces the world’s most advanced Coin and Treasure machines e Not the Toy Market where price is the only discriminator Growth is aided by: — Developing country wealth i
Slide 31: Countermine: products
Minelab Countermine Products e Handheld Mine Detectors e OEM Supply (for incorporation into the US Army HSTAMIDS programme) e Arrays 7 Minelab is a Member of the Codan Group of Companies CODAN
Slide 32: Countermine: reason for the market
Minelab Countermine Reason for the market e Legacy and Tactical Countermine Operations Minelab is a Member of the Codan Group of Companies CODAN
Slide 33: Countermine: customers
Minelab Countermine MINELAB Customers e Humanitarian Demining ~US$20M-$30M — UN-through the Mine Action Programme — Non-Government Organisation (NGO's) ¢ eg: HALO Trust (Princess Di’s supported charity) — Governments — Commercial Demining Companies e Defence/Military Customers — Countermine Operatio
Slide 34: Countermine: competitive advantage
Minelab Countermine Competitive Advantage e Leading technology to find minimum metal Mines in mineralised soils e Test Reports — IPPTC (International Pilot Project for Technology Co-operation) Report Cambodia 2001 e Minelab rated best overall — STEMD (Systematic Test and Evaluation of Metal Detector
Slide 35: Summary
Minelab Summary e Minelab has outperformed Codan’s acquisition expectations in the first 4 months of ownership. e Minelab is forecast to do equal to or better than our acquisition expectations for 08/09. e There are significant synergies that will be unlocked over the next 12 months. e It is a Growt