The music being switched off is the cue to start. Good morning, ladies and gentlemen. My name is Graeme Barclay, and I am the Chair of your company. Privileged to be the Chair of your company, and have been so since February 2023. We acknowledge the Kaurna people of the Adelaide Plains as the traditional custodians of the land where we are meeting on today. We pay our respects to elders past and present, and recognize the enduring connection of Aboriginal and Torres Strait Islanders peoples to the country. As Chair of this meeting, on behalf of my fellow directors, I am pleased to welcome you all to the 2026 annual general meeting of Codan Limited. It is just after 11:00 A.M., and we have a quorum, so I declare the meeting open.
Today's meeting is a hybrid meeting, in that, in addition to company representatives and shareholders present here in the room, shareholders, proxy holders, and guests can participate in the meeting via Computershare's online virtual meeting platform. Virtual attendees can watch a live webcast of the meeting, and shareholders and proxy holders can ask questions and submit votes via the platform. It is my pleasure to introduce the current Board of Directors of Codan Limited to you, and I will ask each Director to acknowledge and raise their hand when I introduce them. Firstly, I would like to introduce Kathy Gramp. Kathy was appointed to the Codan Board in November 2015 and is a member of the Audit and Risk Committee and a member of the People, Remuneration, and Nomination Committee.
Next, I would like to introduce Sarah Adam-Gedge, who was appointed on 1st of February 2023, and is Chair of the Audit and Risk Committee. Next, I would like to introduce Heith Mackay-Cruise, who was appointed 1 March 2023, and is the Chair of the People, Remuneration, and Nomination Committee and is standing for re-election at this meeting. Finally, our Managing Director and CEO, Alf Ianniello, who joined the Board in January 2022.
We are also joined by Daniel Widera, who is Codan's Company Secretary. I have asked Daniel to address some administrative matters in relation to voting procedures for today's meeting and to read out any shareholder questions that we received prior to or during today's meeting. I will ask him to do that at the appropriate time. You will note the slide above displays, to those attending virtually, how to ask a question and how to vote on the virtual platform.
Technical difficulties may or could arise during the meeting, and I note I have the discretion to determine the impact on the meeting and how the meeting should proceed if we experience any technical issues. If I have to exercise this discretion, I will have regard to the number of shareholders impacted and the extent to which participation in the meeting is affected. I declare voting open on all items of business, so the vote icon will appear for those voting online, and you can submit votes at any time. Nigel Bulling of Computershare Investor Services is appointed as the Returning Officer and to conduct the poll. As outlined in the notice of meeting, where your Directors can express a view on the resolutions, your Board strongly recommends that shareholders vote for the resolutions.
The notice of meeting and explanatory memorandum were released on the 18th of September 2026, and I propose to take those as read. The format for today's meeting is an address, firstly from myself as Chair, and then an address from our CEO on Codan's strategy, financial performance in FY 2026 and year-to-date, and the near-term outlook. We will then move, following those presentations, to the formal resolutions to be voted on at today's meeting. We will take questions in relation to the resolutions as relevant, and there will be an opportunity at the end of the formal business to have a general Q&A session on any other aspect of the business that shareholders want to get the opportunity to discuss. In terms of proxy votes, proxies have been received from 340 shareholders, representing 78% of the company's voting shares.
As we get to each of the resolutions, and prior to shareholders who have not voted yet being asked to cast their vote, the proxy votes will be displayed on the overhead and online screens for shareholders' information. Before I ask Alf to address shareholders, I would like to take a few minutes just to reflect on the progress that Codan has made over the 12 months to June 2026, and how the 2027 financial year is shaping up so far. In FY 2026, Codan had an outstanding year achieving growth of 30% in Group revenues to AUD 875 million, which was a 67% growth in Group EBIT of AUD 244 million and a 69% growth in Group NPAT to AUD 175 million.
Our communications business, comprising DTC and Zetron, grew revenues to AUD 506 million, up 22% compared to FY 2025. That was slightly above the top end of the targeted 15%-20% range, driven primarily by strong demand for unmanned radio systems in the second half of the year. Segment profit also increased significantly to AUD 156 million, which was a segment profit margin improvement to 31%. In May 2026, Codan announced the acquisition of Adaptive Dynamics, a U.S.-based engineering company specializing in the development of anti-jamming and interference mitigation technologies, critical to the resilience of tactical communications. The acquisition of Adaptive Dynamics completed early in the FY 2027 year and is now being integrated into our DTC business.
The communication segment ended FY 2026 with a closing order book of AUD 380 million, up 50% compared to June 2025, achieved by a strong uplift in order intake across both DTC and Zetron, and providing a leading indicator for continued growth in the current FY 2027 year. That indicator of strong demand from June has continued, with elevated levels of demand for unmanned products from conflict regions in the first three months of FY 2027, leading to the trading performance upgrade that we announced on the 29th of September. Our Minelab business had an exceptional year in FY 2026, growing revenues by 42% compared to FY 2025 and profit increasing by 65% compared to FY 2025, an amount of AUD 162.4 million for that year. Segment profit margin improved to 45%, up from 39% in FY 2025, driven by revenue growth, product mix, and operating leverage.
Performance was strong across the business, with Minelab Africa increasing revenue by 60% compared to FY 2025, and Minelab's Rest of World business lifting revenue by 32% compared to FY 2025. Minelab successfully launched four new products in FY 2026 in the gold, recreational, and countermine markets, including the new flagship GPZ 8000 gold detector, the Gold Monster 2000, the Vanquish 60, and Countermine's MDS-20 detector. Bringing new products to market reflects Minelab's global technology leadership and continuing investment in its product portfolio and positions FY 2027 to be another year of strong growth. In terms of strategy, the clarity of our strategy of building a stronger Codan has delivered exceptional growth over the past three or four years, and we remain focused on the three core pillars of that strategy that drive long-term value. Invest in ourselves, strengthen our core businesses, and disciplined capital allocation.
Pillar one is to invest in ourselves by continuing to build business development, engineering development, and operational capability around the globe so that we are well positioned to win new business in large, growing addressable markets. Pillar two is to strengthen our core businesses through sustained engineering investment in product development to maintain our competitive position across all segments. Pillar three is to diversify earnings and create value through the allocation of capital to inorganic growth of the communications business. We are partway through the process to reset the strategy for the next phase of Codan's growth.
We envisage retaining the three pillar framework that has served us well over the past three years to assess our strategic options, including strengthening our systems, processes and people, sustaining engineering investment in innovation and product development to maintain our competitive position across all segments, and geographic expansion into new and adjacent markets, primarily within developed markets. We will evaluate the allocation of capital where we see compelling returns, whether in R&D, market development, operational capability, or in inorganic growth opportunities as we seek to build a larger, more resilient and diversified earnings base for Codan. Where we identify acquisition opportunities that allow us to expand our addressable markets, cost effectively accelerate differentiated product development or fill technology gaps, or provide complementary technologies and capabilities, we will continue to pursue these opportunities where we believe the outcome will be accretive for shareholders.
Our interest remains primarily on inorganic opportunities for our communications businesses. We require capital flexibility to be able to take advantage of inorganic opportunities as they arise, and this means that our capital structure will need to evolve to meet our future funding needs, depending on the scale of that capital requirement. That brings me to the balance sheet. Our balance sheet at 30 June showed a very strong position. We're actually on a net cash position with AUD 35 million in cash and substantial debt funding capacity, including an undrawn AUD 250 million total debt facility and a further AUD 150 million in accordion capacity available subject to bank approval. That capacity provides us with near-term liquidity and flexibility to act decisively on inorganic opportunities as they arise if they're of that scale. Shareholder returns. This FY 2026 result was another excellent year for Codan shareholders.
Earnings per share grew by 69% compared to FY 2025, increasing to AUD 0.965 per share and full-year fully franked dividends totaled AUD 0.485, an increase of 70% compared to FY 2025. In addition, Codan share price has risen from AUD 20.11 at 30 June 2025 to AUD 62.69 being last night's closing price. The market capitalization of your company is now approximately AUD 11.4 billion. We were pleased to announce in September that Codan had been included in the ASX 100 index for the first time in our history. Executive remuneration, structure and outcomes for FY 2026 were set out in considerable detail in the remuneration report. The STI outcomes for the CEO and other executive KMP reflected the Group's exceptional performance during the year.
For FY 2027, we've simplified the long-term incentive structure by combining the long-term and superior performance incentive plans into a single plan and increasing the weighting of relative TSR from 11% to 25%. The other 75% of the long-term incentive scheme will continue to be based on compound annual growth in earnings per share over the three-year performance period. Your board believes these changes strengthen the link between executive remuneration, shareholder returns, and the Group's long-term performance. It's also worth highlighting that last month we announced that revised remuneration terms had been agreed with Codan's CEO. Codan Group performance under Alf's leadership over the past four years has been exceptional, and we therefore wanted to ensure Alf's commitment to Codan for the next four years at least, and that is what the new arrangements do.
They provide significantly higher performance goals linked to higher remuneration, largely at risk, performance related, and paid in equity instruments. These arrangements were externally benchmarked as part of the process, and we believe that the new package aligns Alf with shareholder outcomes for the medium to long term. I do wish to advise shareholders that Alf has indicated an intention to sell up to approximately 43,000 shares between now and the end of the calendar year. The board has approved the proposed sale in principle, which must occur within permitted trading windows and would be subject, as always, to Codan share trading policies. The proposed sale is to meet personal tax obligations and other personal financial commitments.
As MD and CEO, I believe Alf remains committed to Codan's long-term growth, and he will retain a significant shareholding of approximately 177,000 shares in Codan, together with a significant number of performance rights whose vesting is tied to achieving performance targets over the coming years. A couple of comments in relation to the Group auditor. Since listing on the ASX in 2003, KPMG has acted as Codan's auditor. We've been satisfied with KPMG's performance over that period, and we have no concerns over audit quality or independence. Given the parliamentary joint committee inquiry into whistleblower and misconduct allegations involving KPMG, I can confirm we are also satisfied that none of the recent concerns over access to private and confidential information impacts Codan or Codan information in any way.
Whilst audit firm rotation has not been mandated by ASIC or Treasury, we have formed the view that it is good practice that Codan seek tenders for the provision of external audit services, which we intend to do in the second half of the FY 2027 year. If there is to be a change, it would likely to be implemented for the FY 2028 year. We will keep shareholders informed at the appropriate stage of that process. The outstanding FY 2026 results could not have been achieved without the significant contribution, expertise, and effort of Codan's people across the globe. Our more than 1,100 employees are the cornerstone of our success, and we are committed to nurturing a positive and inclusive workplace.
On behalf of the board, I thank Codan's high caliber executive team, led expertly by Alf and all Codan employees around the world for their hard work and contribution to the results achieved during the last financial year and the FY 2027 year-to-date. I also thank my fellow directors for their diligence, hard work, wise counsel and collaborative approach. Finally, to our shareholders, we appreciate you have a choice of how and where you invest, and we thank you for your continuing support of and investment in Codan. Please welcome your Managing Director, Alf Ianniello, for his address.
Good morning, ladies and gentlemen. I am delighted to welcome you all to the 2026 Codan Annual General Meeting. It is my fifth as CEO of the company. It is a pleasure to see so many familiar faces here in person and also acknowledge those shareholders joining us online. As Graeme highlighted, FY 2026 was an exceptional year for Codan, achieving growth of 30% in Group revenues, 67% in Group EBIT and 69% in Group NPAT. Within our communications business, revenue from defense customers represented 58% of the segment total, up from 38% in FY 2025, underscoring the increasing importance of this vertical to Codan. DTC delivered an outstanding performance, with revenue from high growth unmanned sector more than doubling in FY 2026 versus the prior year to approximately AUD 215 million.
Key order wins for Zetron included a AUD 19 million contract with one of the largest utilities on the U.S. East Coast and an AUD 11 million mission critical services contract with the U.K. ESN network. Minelab's rest of the world business achieved significant growth in FY 2026, driven primarily by strong uptake of the GPZ 8000, as well as the Gold Monster 2000, and has also meaningfully expanded its distribution footprint and retail presence in Australia and North America.
Minelab Africa delivered revenue growth across all regions, driven by the successful launch of the Gold Monster 2000. User feedback for both the GPZ 8000 and Gold Monster 2000 has been resoundingly positive, in particular for their performance in highly challenging and previously explored areas. Our strategy, building a stronger Codan, was executed and completed 18 months ahead of schedule, and work has begun on the second iteration of this strategy.
Our focus remains clear: sustainable organic growth in both Minelab and communications, disciplined capital allocation and continued investment in innovation and our people. On the people side, we have invested in critical hires to strengthen capability in key areas. We also continue to develop internally to deepen our leadership bench and improve succession planning across the business. The Group continues to concentrate on areas where Codan can differentiate and lead. Our acquisition of Adaptive Dynamics, which completed at the end of July 2026, is expected to meaningfully enhance DTC's U.S.-based technical capabilities in unmanned systems and strengthen its ability to compete for next generation U.S. and allied defense programs. Our focus is now on integrating Adaptive Dynamics' electronics warfare capabilities across DTC's suite of unmanned products. in FY 2026, Codan invested approximately AUD 76 million in engineering across its businesses, representing around 9% of Group revenues.
This investment ensures the Group remains at the forefront of innovation and product development, supports our competitive positioning and drives our organic growth strategy. Our investment continues to be focused on future technologies, including multi-waveform radios, AI-enabled dismounted soldier ecosystems, next generation cloud-based command and control capabilities, and new detection products across recreational, gold and military markets. In FY 2026, ongoing innovation across our BluSDR range led to DTC securing its first orders of the sale of radios into multiple programs of records for U.S. military initiatives to drive sovereignty. Codan continues to strengthen its environmental, social and governance initiatives, and we remain deeply committed to living our values and maintaining an exceptional culture. Regarding the environment, FY 2026 marked an important milestone for Codan as our first year of mandatory climate related financial reporting.
We have strengthened the collection of Scope One, Scope Two and Scope Three emissions data, assessed climate related risk and opportunities, engaged with suppliers and conducted climate scenario analysis. With respect to social initiatives, we continued our long-standing support for a range of organizations, including Variety, Youth Opportunities, KickStart for Kids, Hutt St Centre and Catherine House. From an education perspective, we deepened our investment in STEM through university scholarships, student mentoring and industry engagement. Also in FY 2027, we awarded the inaugural Codan Founders' PhD Scholarship, which is a significant milestone for us and acknowledgement of the legacy of our founders. We also continued our support for Yalari and Indigenous education scholarships. Our values, customer-driven, trust and integrity, high-performing and can-do, are guiding principles that shape our discussions, decisions, and interactions.
By embracing these values, we create a culture of excellence, collaboration, and integrity that brings out the best in our people and sets Codan apart in the industry. On the 29th of September 2026, Codan released a trading update for the first half of FY 2027 and an updated communications outlook statement for the full-year of FY 2027. This update highlighted the outstanding trading conditions we are experiencing in the first half of FY 2027. Regarding the communication segment, Codan continues to experience unprecedented levels and pace of demand for unmanned systems in conflict areas. Outside of conflict areas, Codan now expects the communications segment to deliver first half FY 2027 revenue growth above 20%. With the strength of trading and order intake year-to-date FY 2027, Codan now expects the communication segment to deliver first half FY 2027 revenue of between AUD 410 million and AUD 420 million.
This compares to AUD 221.8 million for the first half of FY 2026 and AUD 506.2 million for the full-year of FY 2027. The elevated level and mix of demand is expected to generate significant operating leverage, resulting in first half FY 2027 EBIT margin for the segment in the order of 40%, compared to 26% in the first half FY 2026 and 31% in the full-year of FY 2026. With respect to Minelab, the first half FY 2027 revenue run rate is tracking slightly above the second half of FY 2026. This is driven by the demand for the recently launched GPZ 8000 and Gold Monster 2000 detectors, a favorable gold price, and the continued expansion of its rest of the world business.
At a Group level, based on order visibility across the remainder of the second quarter of FY 2027 and subject to final product mix and shipments, Codan currently expects to achieve NPAT for the first half of FY 2027 of not less than AUD 162 million, versus AUD 71.2 million in the first half of FY 2026 and AUD 175.2 million in the full-year of FY 2026, sorry. Regarding the full-year FY 2027 outlook for communication segments, while current indications are that the elevated sales orders momentum may continue into the second half, order visibility in conflict regions is low, and it's too early to determine whether the elevated demand and margin experienced in the first half of FY 2027 will continue into the second half of FY 2027.
Balancing all these factors, Codan is currently targeting full-year FY 2027 revenue growth for the communication segment to be at the upper end of the previously announced 30%-40% range compared to the full-year of FY 2026. In closing, FY 2026 was another year of strong execution for Codan. We continue to innovate, invest in our people and in product development, and focus on understanding our customers' needs and exceeding their expectations. This success was underpinned by our people, and on behalf of the board and the leadership team, I thank all our employees for their dedication to high performance, the quality of our products, and the way they support our customers. I would also like to thank our executive team for their strategic vision, work ethic, and commitment.
This year also marked the retirement of Michael Barton as Codan's Chief Financial Officer and Company Secretary on the 31st of August 2026. Michael's here today with a big grin on his face, and I thank him for his outstanding and steadfast contribution to Codan over 22 years of service. Finally, I'd like to thank our shareholders for their support and investment in Codan. Together, we're all building a stronger Codan. Thank you.
Thanks, Alf. That takes us to the formal aspects of the meeting, and I will ask Dani to come up and run through the voting procedure, and then I will be back.
Thanks, Graeme. Shareholders were given a blue or pink admission card when they registered for the meeting. Pink admission cards have been issued to joint shareholders, where one of the joint shareholders has already been issued with a blue admission card. For attendees who are voting in person, persons entitled to vote on the poll are all shareholders, representatives, and attorneys of shareholders and proxyholders who hold blue attendee cards. On the reverse of your blue attendee card is your voting paper and instructions. Attached to proxyholders' attendee cards is a summary of proxy votes, which details 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 in the room will collect your completed voting paper at the appropriate time during the meeting. Please note that only persons who are shareholders or holders of blue or pink cards are entitled to address this meeting. In terms of voting online, for shareholders and proxy holders who are eligible to vote, select the vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as 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 can change your vote up until the time the Chairman declares voting closed.
I will pass back to Graeme now.
Thanks, Dani. I now turn to the business agenda for this AGM. The first item is to receive, consider, and discuss the company's financial statements and report of the directors and auditor for the year ended 30 June 2026. We are not required to formally adopt these documents by way of a resolution of shareholders. However, I would be pleased to take any comments or questions from shareholders on this item. 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 and content of the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements, and the independence of the auditor in relation to the conduct of the audit.
Codan's auditor is represented by Julie Cleary of KPMG, who is present and available to answer questions where appropriate. I do not think there are any questions for Julie online. Are there any questions for Julie in the room? Just wait for the microphone.
Microphone.
Thanks, Robert.
Tony, can you hear me? Robert Kendrick, a shareholder . Regarding the audit report, I note that the only significant audit amount listed in the audit report was revenue recognition. I would have thought, I always think of Codan as mainly a manufacturing business. You ship the goods, and you recognize the revenue. Do you have a significant amount of long-term contract work in progress that would mean that revenue recognition was a big issue?
I will let Julie comment in a moment. But we do have systems sales activity that we do contract with customers, and the delivery of that system is progressive. It is not simply shipping and delivering a single product. So yes, there are system sales across the business. Okay. One other question in the room.
Good morning, Graeme. My name is Tony Greco. Just here representing the Australian Shareholders Association. We are holding proxies for 50 shareholders of approximately 246,000 shares.
Morning, Tony.
Just want to acknowledge the great performance of Codan and thank yourself, the board, all the employees for the great work that they have done this year. I think all our ASA members are very happy with the performance, very happy with the increased dividends. Looking forward to the next year as well. We intend to vote in favor of all resolutions that are put forward this morning.
Thanks, Tony. Just dealing with the specific resolution in relation to the financial statements. Are there any other questions for Julie? Okay. We'll move on to the ordinary business of the meeting. As set out in the notice of meeting and sample proxy form, I, as Chair, will exercise any undirected proxies in accordance with the proxy appointment and the applicable voting exclusions. The first resolution is in relation to the adoption of the remuneration report for the year ended 30 June 2026. Section 250R(2) of the Corporations Act requires that the remuneration report be adopted at the Annual General Meeting. Please note that the vote on this resolution is advisory only and does not bind the directors of the company. The proxy votes for this resolution are shown on the screen, on the overhead, and on the online screen.
Are there any questions on the remuneration report? Anything online? Anything in the room? Okay. No questions. Please lodge your vote for resolution one as an ordinary resolution. Virtual attendees, please select the vote icon on your screen and cast your vote. Simply select one of the options. Resolution two is the reelection of myself. I'll ask Sarah to take the Chair for this. It's inappropriate for me to chair on the item.
Thanks, Graeme. Okay. In accordance with Clause 9.3 of the company's constitution, Graeme is required to retire and being eligible, has offered himself for reelection at this Annual General Meeting. Accordingly, resolution two provides for the reelection of Mr. Barclay or Graeme as a Director of the company. Other than Graeme, the directors recommend shareholders vote in favor of this resolution. Please note that the details of the proxy votes are shown on the overhead and online screen. I'd like to invite Graeme to address the meeting regarding his reelection. Do you want to do it from there, Graeme, or up here? Okay.
Musical chairs. Thank you for the opportunity to address this resolution. I joined the Codan Board in 2015 and became Chair in 2023. Over that period, Codan has transformed into a defense electronics technology company with global relevance and built the leading gold and metal detector company in the world. Particularly since 2023, the company has grown substantially in scale and performance and has delivered exceptional returns to shareholders over that period. In the past three years, shareholder returns exceeded 480% and Codan ranked number one in its peer group for relative total shareholder return. The increase in market cap has taken Codan into the ASX 100 for the first time in its 60-year history, and I'm proud of these achievements. I bring extensive and varied executive leadership experience to the role.
I've worked as CEO or Chair in the telecommunications infrastructure sector for the past 25 years, including in broadcast and mobile towers, managed services, wholesale fiber and subsea cables, data centers, and fiber to the premise businesses. I've led large-scale global M&A transactions along with sourcing the requisite capital to be able to close a number of deals to support the strategy of these various companies. I've worked with institutional capital providers for most of the last 25 years, successfully grown value for investors by building stronger, more profitable businesses and successfully executed exit transactions. Some of my experience is in the public market, in addition to Codan.
A good example is the experience I had as Chairman of Uniti Group Limited, which went through an IPO under my chairship and as an ASX-listed company between 2019 and 2022, undertook 10 acquisitions in that period, and the company was sold for AUD 3.8 billion of enterprise value in a successful exit for investors. I'm also a chartered accountant with a finance background, so I have a strong understanding and a keen focus on numbers, commercial metrics, operational performance, and risk-adjusted returns on capital invested. To summarize, my contribution to your board is a combination of knowledge of the Codan business, its strategy and people, technology and telecommunications industry, and public markets experience, coupled with M&A, capital markets, commercial and contract skills, and my experience as an executive.
If reelected, my focus is to continue to create value for investors, working closely and collegiately with my board colleagues and with Alf and the management team, and I would appreciate your support. Thank you.
Thanks, Graeme. Does any member wish to speak or ask a question on the proposed resolution? If you do, if you could just raise your pink or blue card. Okay. No. Are there any questions online, Dani?
We do, Sarah. We have one question for you, Graeme. Are you planning to serve your full three-year term? Can you describe for us your dealings with the founding families? It is from a shareholder.
In terms of the full term, that will depend on a number of things. It was very important to ensure that we had longevity of our CEO for the next period. It, I think, provides the opportunity to work through board succession over the next three years. The exact timing of that will be worked out with my board colleagues. In terms of the founding shareholder families, yes, I do have a direct, regular, and ongoing dialogue with representatives of those two major shareholding families, and I meet with them on a reasonably regular basis.
Okay. Thanks, Graeme. Dani, anything else on that? No? Okay. Well, there being no further questions or comments, I ask shareholders in the room to cast their votes on resolution two as an ordinary resolution, and I will now pass back to Graeme.
Resolution three is the reelection of Heith Mackay-Cruise as a director of the company. In accordance with clause 9.3 of the company's constitution, Mr. Mackay-Cruise is required to retire and being eligible, has offered himself for reelection at this AGM. Resolution three provides for that reelection of Heith as a director of the company. Other than Heith, the directors recommend shareholders vote in favor of the resolution. The proxy votes are shown in the overhead and on the online screen. Before I ask shareholders that have not voted to vote, I am going to ask Heith to address the meeting.
Thank you, Chair. Good morning, everyone. I'm Heith Mackay-Cruise, and I'm seeking your support for my reelection. I joined your board in March of 2023 and earlier this year was made chair of the People, Remuneration, and Nomination Committee. I'm proud to be involved with Codan, a business that over the past three years has delivered a total shareholder return of 486%. I bring three things to your board. First, leadership experience in international consumer businesses, from PepsiCo to PBL Media to the Global CEO of Study Group, a private tertiary education operation across 70 locations worldwide. Second, major transactions and capital markets. I've held multiple chair and board appointments on both listed and private equity boards, each with major transactions. Most recently, I led Southern Cross Media's merger with Seven West Media. This experience supports Codan's disciplined approach to acquisitions.
Third, technology, cyber risk, and governance. I chair the private equity-owned Orro, which provides secure networks and cybersecurity to enterprise and governments, clients across Australia and New Zealand. I also bring contemporary governance as a national director on the board of the Australian Institute of Company Directors. I am committed to building a stronger Codan, and I'd be grateful for your support. Thank you.
Is there any member in the room? Are there any questions online?
Well, we do have one question. So Heith, if you can address this. You obviously resigned as chair of Southern Cross Media within months of taking the job earlier this year. Can you please comment for the shareholders here what happened and whether you picked up any learnings and how you'll apply them around the Codan board table?
Thank you to the shareholder that asked the question. Just to qualify, I was on the board for six years and chair for the previous two, and I led the instigation of the acquisition, which was a merger as previously described. I decided to step down as part of board succession, which was clearly amplified and notified to the market. My learnings, I think at the end of the day, the merger of the two of the largest media companies in Australia was the most significant media merger in the past 20 years for the country. A very significant transaction and a lot of complicated aspects to do with the merger, which those learnings get applied to the way we think about any of the acquisitions we do here at Codan.
Are there any other questions? Okay. Can I ask shareholders to cast their votes in relation to resolution three as an ordinary resolution? We can now move to the special business of the meeting. Resolution number four is the approval of the grant of performance rights to Alf. This is for his short-term incentive under the Codan Limited Share Rights Plan. This plan is designed to focus the CEO on the creation of sustainable shareholder value. At least 60% of any short-term incentive awarded to Alf for FY 2027, FY 2028, and FY 2029 would be delivered through performance rights. The maximum number for FY 2027 is 54,752 rights, and the maximum number for each of FY 2028 and FY 2029 will be calculated on the same basis when we know what the appropriate share price is at the relevant time.
As required under ASX Listing Rule 10.14, shareholder approval is sought for the issue of these performance rights to a director. The board will assess performance against profitability, cash flow, and non-financial objectives before determining any award. Further details in relation to the plan rules and performance measures were set out in the explanatory memorandum. Now added to the screen, the proxy votes in relation to this item. Does any member wish to speak on the proposed resolution? Do we have any questions in the room or online? Okay. There being no questions, I move, that Oh, sorry. My apologies.
Mr. Chairman. John Green, shareholder. With tax considerations, are these performance rights likely to continue to have the same value in the future?
It's unlikely given what's going on with the CGT rules that apply. For the holder, they'll have to navigate the changed environment, changed tax environment.
The obvious question that follows is whether, in fairness, the performance rights conditions may have to be changed in the future.
Fair question, John, and we'll take that under advisement, and we'll consider it. My immediate reaction, though, would be that we've just been through the exercise of re-benchmarking what is a pretty significant change in the remuneration of the CEO, and we're going through the same exercise for the executive team to make sure that we can lock in the team that's delivered a fantastic performance for the company for at least the medium term. I don't envisage that, but we'll take it under consideration. Okay. Let's move to members considering and if thought, passing resolution four. So you're invited to lodge your votes for resolution four as an ordinary resolution. Resolution five relates to the grant of performance rights to Alf for the long-term incentive plan.
Resolution five is to approve the issue of 63,878 performance rights for his FY 2027 long-term incentive award. The structure of this incentive is that it's equity-based, it's focused on multi-year performance delivered for shareholders, with 75% of the award linked to growth in EPS, so compound annual growth in EPS, and 25% linked to relative TSR, and measured over the period FY 2027 to FY 2029. As I outlined in my address, I believe this structure creates strong alignment with shareholder outcomes whilst also supporting the retention of Alf as the CEO of our business. For FY 2027, the board has consolidated the previous long-term incentive and superior performance incentive plans into a single long-term incentive plan, which we have recalibrated, as set out in the explanatory memorandum.
This plan requires compound annual growth rates of 13% at threshold, 16% at target, and 22% at max using the FY 2026 base EPS of AUD 0.965 per share as the starting benchmark. As required under ASX listing rule 10.14, shareholder approval is sought for the issue of these performance rights to Alf as a director. As I have noted, I believe this creates a significant alignment of Alf with shareholders. The details of the proxy votes are now on the screen, online and overhead. Are there any questions or would anybody like to speak to this resolution? Are there any questions online? Nothing? Okay, I have asked shareholders to lodge their votes for resolution five in respect of the approving of the grant of performance rights to Alf for the long-term incentive. Resolution six relates to the remuneration of non-executive directors.
It is to approve the increase in the pool, fee pool, for non-executive directors from AUD 1.2 million to AUD 1.8 million per annum. Notwithstanding your current NED fees are within the limits of the current pool, the board is seeking approval to an increase in accordance with ASX listing rule 10.17 and clause 9.9A of the company's constitution. We believe it is appropriate and reasonable to seek more headroom to attract and retain directors with the necessary skills and to provide flexibility to add board members as the company grows. If approval is not obtained, the current fee level will remain as it currently is at AUD 1.2 million per annum. As the non-executive directors have an interest in this resolution, the board has refrained from making a recommendation, and the applicable voting exclusions are set out in the notice of meeting.
The proxy votes that have been received in relation to this resolution are set out on the online screen and on the overhead. Does any member wish to speak for this resolution? Thanks, John.
If my calculation is correct, this is a 50% increase. Could you give a little history over the remuneration for non-executive directors over perhaps the last three years, and whether this is seen to just give headspace for more than one future year? In other words, the sort of longer-term relationship between non-executive remuneration and the shareholders' positions.
Yeah. I think there is a couple of things to respond to that. One is that the fee levels paid to non-executive directors is something that is benchmarked externally, and we benchmark that on a regular basis. We want to make sure that the fees being paid to non-executive directors are market-based and have a reference to that external exercise. That is not the issue here. The issue here is that we are a small board. We are four non-executive directors, and as this company continues to grow in scale and complexity, I think there is an acknowledgment that whilst a small board has been very effective to date, that we are going to need to add some additional capabilities, some additional skills around the board table. And this increase gives us the ability to do both things.
One is pay market-based fees and also to increase the number and capability and skills of directors that we have on the board. Are there any other questions? Is there anything online? Okay. I would now move that members consider, and if thought fit, pass resolution six to approve the increase in non-executive director fee pool, and you are invited to lodge your votes for resolution six as an ordinary resolution. And I will just pause for a minute or so to allow those online time to finalize their votes. Then we are going to move to a general Q&A around the business, where the business is at, and where the business is headed. So have all votes been cast in the room? Does anybody need more time? Okay.
So if Nigel Bulling, as the returning officer, could collect the voting slips for everyone in the room, and I will give those online another 30 seconds or so to finalize their votes. So after all of the votes have been counted, the results of today's poll will be released to the ASX and will also be displayed on the company's website. Okay. So while Nigel and team are collecting the votes in the room, at this point, I am happy to open the floor to any general questions or comments that shareholders may have. Questions that have not yet been asked but have been lodged online, it will be the opportunity to present those as well. Dani? Let me start with any questions in the room. Yeah.
Robert Kendrick again. I am a shareholder.
Thank you.
I have got two questions. First of all, the board's policy for distributions is already fairly generous at 50%. However, due to the change in capital gains tax, which has already been mentioned, we now have a situation in Australia where dividends are very lightly taxed by international standards, whereas capital gains, we actually have the highest rate in the developed world, apart from Denmark. Would the board consider changing the distribution policy to take account of this, bearing in mind that the idea of introducing imputation back in the 1970s and 1980s was that companies were encouraged to distribute and then raise capital as required as a separate operation? The second question, which is slightly connected, you are expanding very fast, or the company is expanding very fast. Can you give a comment on whether you are expanding commensurate controls? I am particularly concerned about overseas acquisitions.
There are a number of companies in Australia who have made what seem like very good, well-advised overseas transactions, and then eventually the whole thing has fallen apart. Just think of Boral, for instance. The other thing is with the high expansion rate, are you running into physical constraints? Regarding increasing the output of the company. Well, financially, your balance sheet looks perfect, but there must be some physical constraints around.
There are a few things to pick at in those questions, Robert. I think in terms of constraints, start, work backwards. In terms of constraints, I think one of the challenges that the team has to deal with, given the accelerated pace of demand for some of our products, is implications on the supply chain and making sure that we are able to keep up with demand. That takes a huge amount of focus for the team. I think as I stand here today, we are very actively managing our supply chain, and by that increasing capability, increasing capacity to ensure that we can continue to keep up with demand. So that is probably the biggest consequence of the success is that there are challenges in that area, which so far we are managing to address.
In terms of are we executing on a strategy that's got risk in global markets by looking to acquire capability companies or technology overseas? We're in global markets. Defense tech and the technology that we deliver for our detectors are global businesses. We sell products in 150 different countries around the world. We have to operate, and we have to execute in overseas markets. The question is have we got the appropriate controls in place to ensure that what's happening in those overseas markets is under control and appropriate? In the room today, for example, we have the business unit leaders for the three businesses, all of whom are based in North America. We have regular dialogue, and the board actually travels overseas and to meet with and understand the markets in which we're operating.
I think we're comfortable with the strategy, and we're comfortable with the way we're executing on it. The capability that we're adding to the executive ranks, we continue to lift the capability across the organization to ensure that we can continue to execute. From a board perspective, I'm comfortable with that. The only implications for future dividends and how returns are delivered back to investors, we'll keep that under review. An increasing proportion of profits is generated offshore, which doesn't bring franking credits with it. Over time, our ability to distribute franking credits in the medium to long term is going to be challenged. That'll create a need to rethink what does that mean for our Australian-based shareholders.
That said, we've got a growing register of international institutional investors in the company, and so there'll be a balance required to ensure that we've got the right outcome.
Perhaps it's old age and hearing, but I felt you emphasized the considerations from the board on inorganic growth for the company. Whereas the CEO emphasized the importance of organic growth. Perhaps you could differentiate what you understand and how the two would think.
Yeah. That's why we make a good team, John. Look, I think we've been very successful with the acquisitions that we've undertaken to date. If you go back to 2021 when we acquired the Zetron and DTC businesses, those acquisitions have actually fueled the ability for us to grow organically. We've substantially grown those businesses over that period. I'm a big fan of continuing to grow our business organically. We do have opportunities to accelerate our strategy, to add technologies to our current product mix that will be accretive for shareholders. I'm sure if I asked Alf to come up here, he would say that inorganic growth is part of his strategy. It's a combination, is kind of what I'm saying. I think the acquisitions that the executive team and this board have delivered for shareholders have been a great success.
Just a couple of questions. We've had an exceptional FY 2026, FY 2027 looks really good. Is there anything out there in left field that you see that could create this to come to an end? In particular, like conflict, we talk about the conflict zones, that looks like it's unlikely to be resolved anytime soon. Any thoughts there? Just the other one, with the U.S. and the midterms coming up, the spat with Canada as far as trade, is that causing any issues?
Well, let's deal with that one first. We do import product into the U.S. from Canada in our Zetron business. The tariff impost, there is a tariff impost there. That's reflected, and that's dealt with in the results. We've absorbed that. I wouldn't describe that as material, and we continue to try and find ways to mitigate the impact of tariffs. That's something we're obviously very watchful and thoughtful about. In terms of the midterms and the consequences of that, the unknown, of course, is the budgetary approval by the U.S. Congress. The implications for that, we don't know. We're obviously keeping a watching brief on that. Not sure much more I can say. Kind of aware of the potential concern, but we're a diversified business with products, markets, customers that are highly diversified.
We think we're well-positioned to weather anything that may occur there or not occur. In terms of issues that are out there, it's all the usual sort of things that the management team deal with day in, day out. Macroeconomic factors around FX, interest rates, inflation, geopolitical changes. All of that we kind of deal with on a day-by-day basis. In terms of conflict region revenues, I think the way I would describe that is we have growth across a large. Most of our businesses and most of our geographies are growing. We've had the benefit of and taken advantage of the opportunities in conflict regions, and that's clearly fueled a lot of growth. If that conflict was to end, we don't see all of that revenue just stopping.
I say that because what has happened in that conflict region is kind of reframed the way that wars will be conducted into the future. I think drones have actually just changed that really significantly. What that means is that as a defense preparedness and as a deterrent, all countries will have to rethink the allocation of their defense budgets and how to be positioned to operate in what is a new dynamic. We are really focused on looking to expand and grow those opportunities across the globe. So that is how I would respond to that. I do not know what else you want to add to that? Yeah. Okay.
Graeme's point was valid. In most conflict areas, they can become binary. This is not a binary situation. The structural change and the introduction of the unmanned market has really changed the face of warfare. Other countries having to evolve and to really create capability, I think will be a benefit for Codan. Obviously, the demand profiling is very different because there is a heavy requirement on a daily basis. The product suite that DTC has and the continued improvement of that product suite really positions it well for other geographies or other nations globally. One thing we need to also remember, the whole SDR range is just not an unmanned range, it is a broadcast range, it is a law enforcement range. So there are other verticals that we can sell the product into.
Dani, let us just deal with any questions that we have got online.
Yeah, sure, Graeme. So there is probably an additional part to that question that links to the gold rush. Is there any other new technology and products in the pipeline that would carry us to the next generation in addition to the discussion we have just had?
So obviously, the two trends that get brought up is obviously the conflict, which we discussed, or the high gold pricing. Not dissimilar to conflicts, the gold pricing has created an elevated level of demand. That is just one point. If you did not have these exceptional products, the 2000 and the 8000, you would not have been able to really take the benefit of. Minelab, these decisions were made five years ago to invest in R&D on these great products. As these products have rolled through and with the recreational base and expanding other markets away from the principal gold markets, it has really assisted Minelab to keep growing. If the gold price did reduce, there may be some softening of demand, but I am quite sure with all the other activities that Minelab have, whether it is geographical expansion, the next generation of gold recreational and countermine detectors.
I am quite confident that the technology advantage we have today, we will continue to have in the future and in the future beyond that. That has been one of the key. If you look at Codan and you look at its real superpower, it is the ability to create intellectual property and commercialize it and make money off it. It is one thing having IP, but the other thing is making it super useful to your customer, solving a real-world example, and then commercializing. I think if you look at across our three divisions then, Zetron, DTC and Minelab, we have significant product roadmaps that go well beyond what we have today.
The next question, Graeme, is a follow-up to the question around KPMG. Can you confirm that KPMG has not been subject to any competitive tenders during its uninterrupted 23-year run as the Codan auditor? Secondly, with the benefit of hindsight, do you agree that it is not good practice and important functions like the external audit should be tendered at least once a decade as a matter of good governance?
Because it is my understanding that there has not been an external audit tender over the period since Codan has been an ASX listed company, which was 2003. As I said in my address, we have been extremely happy with the performance, the audit quality and the independence of the service that we have received from KPMG over a long period. We have also had a rotation of the signing audit partner, which is required every five years. The maximum number of continuous reports that an auditor can sign is five years. We have rotated the audit signing partner more regularly than that over the last 10 years. With hindsight, I am not sure I can answer that.
With hindsight, I think all I can say is we've taken the position that it's an appropriate thing to do is to put the audit out to tender, and we're going to run that in the next few months.
Sure. The next question is, does the board have any concerns about retaining the people with skills and abilities who have seemingly been driving the key product developments that have made Codan so successful?
I think we're aware of the value of the key people in the business. As I've spent quite a bit of this meeting talking about, is to make sure that we've got the right remuneration arrangements in place for our executive team. Those arrangements actually flow down into the organization. So the benefits of the value that's being created by this business are being shared. Do I have concerns that we've done everything possible to retain people? I think we have. I'm going to maybe ask you, Alf, if you've got anything you want to add to that.
That's a really important point for a company that makes its living on technology development. So we have very key personnel globally. I'll probably answer the question away from just the remuneration slant. People that have this bent are far more interested in creating a next generation of product, creating product that is far better than the competitor. So keeping them employed and interested is really important, and I think we're doing a good job with that. Over the course of the last four to five years, the standing up of a global HR function where we're working through a lot of initiatives to become the employer of choice, which is really, really important. Those softer initiatives make a big difference. So we do engagement surveys globally, and we would sit in the high 70%s, which is an extraordinary number.
And if there are areas of improvement, we work through them collectively. So when we talk about culture through our addresses and our values, they mean a lot. And that is how you really retain people. I think everybody gets to a point where remuneration would not get in the way of making a decision because I do not like working somewhere. So a lot of the softer things we are doing are really important, and I think they have made a difference on who Codan is. And you have to understand, that is difficult when you are trying to do it across 15 countries. So to get that alignment, the executive team that are sitting here today, they do a really great job in making sure that corporate people aspect flows through.
Good answer.
Next question, Graeme, touches on something you spoke about earlier around the unusual position in having two founding families own approximately 30% of the company. Can you tell us who you and Alf deal with in both families on items like the selection of new directors and whether they are comfortable with remuneration arrangements.
I think I answered this previously. I am not going to name the individuals that we deal with other than to confirm that we have an open and regular dialogue with both of those major founding family shareholders. I do not know if you have got anything else to add to that.
Then I think this is the last one. How reliant is Codan's earning growth on allied military spending on unmanned communication systems? Do you believe Codan is dominant in this area?
Anyone want to have a go at that?
I think a lot of opportunities sit with our allies. Definitely, we're well-positioned for that. When you look at the SDR space, the software-defined radio space, we have a lot of very good competitors. We're very good in our own right. The team at DTC really have created a significant technical stamp on this unmanned space in a very short amount of time. Using the word dominant is a very strong word. I think we are a key player in this market, and that's through our experiences in these heavily contested environments. These are products that work and are reliable in mission-critical situations. That reputation has really positioned us well, either locally or for our allies.
Anything?
We've got one more. This is the last one.
You promise?
Promise. After the blip in security some years ago, Codan tightened their processes. Have security issues become more challenging, and how do you keep up with the latest threats?
Is that an IP question, do we think? Because of IP protection? Is it security? How do you want to handle that, Alf?
Well, I think that IP security, if it was an IP issue related to Minelab, I think that was back in 2013, 2014. So a long time ago. The world of cyber and the world of physical security evolves. What it was five years ago, it is not what it is today. I would suggest that we have increased our investment in both of these spaces, either from processes, software implementations and just people headcount. We have really globalized the function to ensure that we have consistency across the whole world. This is a moving target, and I think I am comfortable that with the information that we know today, we are doing all the right things. This is definitely something that changes quite quickly.
Okay. I think a good discussion, so thank you, everyone. I think that concludes the formal business of this AGM. Thank you again for your support of Codan and for attending today's AGM. I now declare this AGM closed. I invite you to stay for lunch and refreshments and so on, and to chat with our directors and staff who are all present. Thank you very much, everyone.