Codan Limited (CDA) Earnings Call Transcript

Good morning. Thanks for joining our earnings call. We appreciate your time. It's been a really busy year. And I think every company is doing earnings calls. I'll start with the same narrative. It's been challenging. It's been an ever-changing landscape, but we are at least pleased to report that we've had the highest year of sales and profit in the company's history. We started the year with high expectations and these expectations were exceeded as we move through the year. It's fair to say that in an environment such as this, people warmed to our products, bought our products on mass, and the investments that we have made in the last 4 or 5 years have really come to the fore in terms of some of the sales volumes that we saw, particularly in our Minelab business. So sales of $437 million, NPAT at the underlying level of $97.3 million and an earnings per share of $0.54. I'll move to the next slide. The company has continued its dividend policy of paying 50% of full year profits. The Board met recently and decided that in order to reward shareholders and to reflect the strong position of our balance sheet, we would pay the 50% at an underlying basis or $0.165 per share as a final dividend, gives a full year dividend of $0.27. Move to the next slide. This slide really just shows the makeup of the business. We -- again, we're heavily dominated by Minelab, 75% of the sales. We had a 26% increase overall in our sales from FY '20. Metal Detection segments grew right across the board, so 38% in total. But the real pleasing part was that our recreational sales grew by 42%. Now this has been a common theme in the narrative that I've been giving over the last 2 or 3 years. The vast investment that we've made in our coin and treasure recreational business, we anticipated being really, really strong in terms of growth. This has probably exceeded our expectations, and we continue to invest heavily right across the Metal Detection business. Countermine in particular, has had a very good year, and we have a very strong start to FY '22 right across all 3 product groups. The box retailers into the U.S., which is one of the means for us to distribute our products in the recreational sector, has also grown quite remarkably in the U.S. particularly. We now have a plan and a strategy to continue our growth through Europe and some of the other markets in Asia Pacific and also in Central and Latin America. Communications sales did reduce by 8%. I think we flagged on multiple occasions during the year, that particularly in Tactical, that business was having some headwinds due to health spending taking priority over what we call discretionary communications spending. And we're going to use the work to stretch there, doesn't mean that there is no requirement. In fact, there's a higher requirement than we've been told that right across our markets for our Tactical Communications equipment. But right now, governments have just held off spending that money choosing to look at what's required from a half fiscal stimulus and health spend priority. The LMR business did record another record year. So that's 2 in a row, which is very pleasing, and we're starting to now see some of the investments flow through from the Cascade product. And of course, Scott will talk in a minute about some of the DTC and Zetron synergies and how he expects to see that fold out -- or play out. Paul will do the same thing when we get on to the DTC slides. We also divested our Tracking Solutions business, I think, with the 2 acquisitions in comms, which we see as very core to where we're heading in the next 5 to 10 years. The mining -- the Minetec solutions business was more of a distraction for us, and with a very strong interest shown by Caterpillar, we decided to really just focus on the core Communications and Metal Detection businesses and divest the Tracking Solutions business. We then move on to the strategic growth plan. We're trying to be consistent and communicate what it is we, as a business, have in our minds when we look to grow this business. So the strategy is really a four-fold strategy. It's investing in ourselves, which has always been our core. So that's where we're spending circa $30 million per annum to invest in new product technology around our Communications and Metal Detection businesses. We're looking for strength in the core by geographic expansion. We're moving from products to solutions right across our business, and voice to data to video in our Communications business. We've just commissioned now a study right across our group to look at the Communications, the tracking, the data analytics and the video technologies that we possess. So just because we have divested Minetec, we still hold tracking and sensing technology. And what we're looking to do is to do an inventory or a stock take, if you like, of all of the technologies that we possess within the group to look at how we can leverage these across the group and also look at whether we can leverage these into new adjacent markets in time. The acquisition strategy remains alive. We finished the year with 0 debt. I can report now that we are cash positive at the end of July. So our balance sheet continues to strengthen, which gives us options to look at supplementing the core. So looking predominantly at our Communications business and any of the potential add-ons that we can add there to just strengthen some of the sectors in these businesses. We now have 4 businesses running. Zetron and LMR will quickly be consolidated into one -- under the Zetron banner. LMR will be called Zetron from here on in. And Scott has consolidated that organization. He will talk more about that. DTC will run as an independent business for the next 12 months and Tactical obviously stands alone. But we're looking in these new 3 businesses to combine the technologies, look at where we can focus sales teams to cross-sell products to existing customers from other parts of the business and also the inventory of the technology to look at where the opportunities might be to strengthen some of the offerings across each of these businesses and also to look at logical, additional add-ons that strengthen the core. If we look to the next slide, which is our FY '21 strategic achievements, we have, as I've said, invested $30 million to regenerate and continue to produce groundbreaking leading-edge technology right across the board. We bought the businesses in DTC and Zetron with an intention to continue to invest. So we are not a venture capital business. So we've bought these companies to continue to invest to strengthen their market share positions and grow their profitabilities over time. We've added video command and control technologies and established a Mexico office, which I've just spoken about. And we will continue to explore opportunities to further develop and deploy Codan's technologies, which is the technology inventory or stock take that I referred to. Next slide. The business now has in excess of 700 employees across -- selling into over 150 countries. And you can see there in the top right-hand panel, the 10 sites that we now have across the world. So we are truly cementing our footprint right across the world. And I would call this business more international now than it was 12 months ago. The global footprint on the next slide shows just where our sales are being forecast. I think the key thing to note here is Africa is still our #1 leading market, but we are increasingly seeing a strong growth in the North American market, which is actually supplementing our long-held value proposition, which is to serve the underdeveloped countries in the world. We've now supplemented that with leading-edge first-world technology in the North American market, which we hope in time to be able to take to some of the developing markets that we are very strong in, particularly Africa. Moving to Metal Detection. We've had a record performance, as I've mentioned, 38% growth in sales. In our outlook section, we talked about sales being in line with the total run rate for FY '21. We wrote these slides probably about 3 weeks ago. We continue to see a strong start to the year. In fact, July was a record start to the year for our business. The Metal Detection business, in particular, was very strong. It's early days, we're 6 weeks in, but we're feeling very confident about having another good year moving forward. The reason for that is we're seeing a good balance across each of the 3 segments. So gold detecting has started the year extremely strong. A lot of that has been to do with the GPX6000 now being rolled out in reasonable volumes across the first world. It has always -- the concern when you produce a new product at the high end that the African market takes a little bit longer to adopt the product than the first world, and that is still the case. So there's a lot of product being put into the African market, but they're looking at that and comparing it to the existing GPX series and also the GPZ7000. Interestingly enough, we had a record sale of GPZ7000s in July, the highest ever sales month for that product, which is very interesting. So the high-end products are still in very high demand. The GPX6000 is a high-end product. That product is being seeded into the African market. We expect that to take a number of months before people start to get on to the chat sites and the social media platforms and really just talk to each other about how good that machine is. And make no mistake, this machine is exceptional, and we expect it to do very well in Africa. And so that is probably going to be more of a second half focused sales push into the developing world, but we're seeing really good and strong uptake in the developed world from July. The actual recreational space has also been really something that's exceeded our expectations. The VANQUISH coin and treasury machine has been seen as the #1 low-end coin and treasure recreational machine in the market. And that, coupled with the continued geographic expansion and some of the financial fiscal stimulus in Australia and the U.S., has resulted in that product having a record year. This continued to sell well in the first 6 weeks of this financial year. Countermine has been the sleeping giant for us. We use the countermine area to really see the lot of our technology. So a lot of the Multi-IQ, a lot of the stuff that's been imported into the MDS10, GeoSense was developed in the countermine space and then imported to the coin and treasure recreational and gold mining products, but we're seeing really strong demand and a really strong strengthening sales pipeline for the new MF5 and for our dual sensor detectors. So right now, we're expecting to see a record year in Countermine just based on some of the new products and the demand that we're seeing in the interest across the industry. Moving on to the second Metal Detection slide. We wanted to just spend a little bit of time talking about supply chain. I've read some results that have been published by some other companies in our segment. And I think everyone recognize and appreciate some of the difficulties, particularly around the supply chain of IC, integrated circuits, some of the other high-value electronic components. It's fair to say that we're seeing a resurgence in the automotive segment, which is taking up a lot of the supply of the integrated circuits. The chip plants and the [ wafer ] plants are now struggling to increase capacity. Where are we positioned? We are in a position where we kind of saw this coming from a few months sites. So we have publicly been telling a market that we're building inventory, and we have successfully been able to do that. So there's an increase in our inventory position at the year-end, and that it will continue to grow as we put our arms around more components and turn them into finished goods just to try and protect our supply chain moving forward. As recently as last week, we were also able to secure a large number of chips, which, if you'd asked me 2 weeks ago, was not the case. So right now, we've locked in supply for the first half in our Metal Detection business. So we have enough stock and enough forward demand of components that we've pushed into our fabrication plants. And so we are now set to be able to deliver on a good first half result. It won't be supply chain constrained. Moving forward, of course, we've got to solve problems daily. We are seeing some problem chips that are stretching out 6 to 9 months. Our engineering team have diverted some resource to reengineering out some of these difficult to source chips, so that we can actually continue to manufacture product using chips that we can readily have supply of. We're also conducting continuous supply-and-demand reviews. We had a Board meeting yesterday, and of course, I presented some of this material. And the first reaction of people around the Board table is to really -- I think panic's too strong a word, but to really show some deep concern over our ability or the industry's ability to supply components. And I pointed out to them that in my 21 years at Codan, if you went down to the supply department, it would at least be 10 components that are on a daily basis are going to stop the line at some point during the next 4 weeks. That's been like that for 21 years. We have made a business that are having the best people in our supply departments who can solve problems. And so what I say to people is, don't worry about the detail, the detail will have you run screaming from the building if you look at all of the supply shortages that happen on a daily basis. But we have never stopped the company in the 21 years that I've been there. And at this point, we don't look likely to do that anytime soon. So we will work around some of the constraints that we are faced with and work on the things that we can control to ensure supply. I'll move forward into the GPX6000 slide. The GPX6000, I think, has been well marketed by us over the last 1.5 years. Everything that we have said to the market about this product is true and more, so an exceptional product. If you read the chat sites, you will see that the results being achieved have been nothing short of spectacular, and we have high hopes for this product this year to really help boost our sales in the gold section. Now whether we can maintain the type of record result that we achieved last year is very, very difficult to predict. That was a stellar performance. With 6 weeks in, things are looking good. But it is way too early for us to know whether or not we can repeat or grow the Metal Detection and in particular, the gold segment sales that we achieved in FY '21. But of course, as Codan has famously done over the years, we tend to try to be a little bit more conservative in our narrative and hopefully surprise on the upside. Moving into Communications. The headline is clearly the fact that we've gone out after a number of years of looking and found what we consider to be 2 exceptional additions to our product and solutions portfolio. So both DTC and Zetron are working on leading-edge technology and products that take us into what we consider to be high-growth markets over the next 10 years. The Tactical business has been impacted by COVID, but there are still some lights shining through. Paul has just secured some reasonable orders in North America from customers that we have not been able to penetrate for the last 15 years. So we're starting to see some brand switching into our products in the North American market. And of course, there's a full pipeline of demand products right across our markets in Africa and Asia Pacific, particularly. And of course, we are now traveling to the African market. We use [indiscernible] very freely from Dubai, and we're doing everything that we can to try and close sales and meet some of the pent-up demand that we're seeing in the market. The Land Mobile Radio business continues to strengthen. We continue to spend money up featuring the Cascade product, and with Zetron products now in our portfolio, we have a much broader conversation to have with customers who today are using Zetron and looking to potentially have a one-stop shop for the total communications solutions. I'll move to the Tactical Communications slide on Page 14. And I just wanted to reiterate our strategy. So you can see there that we have a product suite or portfolio that provides us the ability to be the integrator and the one-stop shop for all of our customers. So having added DTC was a massive piece of the jigsaw for us, and that is the part that will take us into the video world, which is going to, we think, provide us with massive growth opportunities over the next 10 years. I'll pause there and move to the next slide, which is DTC and tactical and integration. And what I'll do at this stage is hand you over to Paul Sangster, who will just take you through at the highest level, just where we're sitting with the DTC and tactical integration plan and how he's feeling about the combined business. Paul?

Thank you, Donald. So we've owned DTC for 8 or 9 weeks now, and things have been going fantastic. We've -- our focus, as we've outlined from the outset, has been to integrate the sales and marketing teams. We've appointed a VP of Sales for North America, Europe, Middle East and Africa and Asia Pacific, and we've had a very acute focus on the front end of the business and it's working very well. I'm currently in Atlanta, Georgia at the Unmanned Systems Show, which is fantastic to be at a show in the U.S. after not being able to attend shows for a while. So the uptick on the show has been absolutely fantastic. Our 100-day plan around integration has been very acutely focused on the front end of the business and the marketing side. We've had very strong reaction from the customer community, and we've had a very strong focus around 5 areas: Number one, the broadcast community; number two, the military community; number three, the law enforcement community; number four, programs of record; and number five, it's been around adjacent markets, which has served us really well. So we're very pleased on where we're at with integration, very pleased with the results that we've seen so far in the DTC business. Routes to market. We've already identified a number of routes to market outside of our first world and developed markets in Asia Pacific and Africa, where we've seen opportunities. So we're very pleased with that. In Australia alone, we've seen a number of sovereign capabilities and sovereign programs that M&A radio capability that DTC offers is in high demand from the Australian forces. So we're very pleased with that. So from a brand perspective, in North America, we continue to operate under DTC in North America, where there's a strong brand. And outside of North America, Codan is well recognized in Africa, Europe and the Middle East. So very pleased in terms of where we're at. The customers have also appreciated the fact that we are becoming more and more of a full solution provider from HF to MANET radio. So we're happy with that and also with the routes to market. So with that, I'll move on with the next slide. We've talked about the EBITDA, which we stand very firm, that we will deliver $14 million of EBITDA. We are well on track at the moment for that for FY '22, and we're pleased where we're at. Recognizing that we do have some headwinds with COVID sitting here in North America after spending the last 19 months in Australia, it's certainly eye-opening, but there are some challenges with COVID. But the diverse nature of the DTC business allows us to try and look at the levers in terms of where we're at. So very pleased with where we're at with that. Next slide.

There's no next slide, Paul. So are you continuing on, Paul, or...

No. I'm good. Happy to have questions at the end. For now, Donald, whatever you want.

Okay. No, we'll wait till the end. Thank you. Appreciate it. Okay. So what I'd like to do now is move on to the public safety communications Zetron slide. So Scott, why don't you take us through the next 2 slides and just tell us how you're thinking and feeling after your first 90 days?

Yes. Thank you, Donald, and good morning to most of you. I really like the representation of this slide. Earlier, Donald talked about our purposeful move from voice to data to video. And through the acquisition of Zetron and our existing solutions in LMR, we're able to combine that voice to data to video in one simple acquisition of Zetron. So it's absolutely a merger. But what -- the main point on this slide is you see Zetron is represented by the blue boxes, the command and control business and our mission-critical wireless communications, previously known as critical communications, is represented in the black box with LMR and broadband. We now can offer solutions to the entire emergency response continuum. So our end-to-end solution, we can touch every piece of data, voice, video in the command and control center and then deliver it reliably, securely to the responders in the field. So this is a very representative slide of why the strategic fit between Zetron and LMR made so much sense. Next slide. As Donald mentioned, we're just roughly 100 days in, and I want to kind of share with you what our progress has been to date. We were hyper-focused since we announced the acquisition at the end of April or the beginning of May to get as much in place from a go-to-market perspective at the start of our fiscal year, July 1, as possible. I'm happy to share that we've 100% integrated our -- we had 6 different and distinct sales organizations going to market across the globe. We've integrated that into a single go-to-market organization. And we just had our national sales meeting earlier this month, and things are progressing well. Our sales professionals previously may have had one solution to sell. Now they have 6 solutions to sell into the same customers they always sold into. So we're 100% in terms of integration of our go-to-market teams. As Donald mentioned, we're moving forward with the Zetron brand. We're launching a rebranding, a slight tweak to the Zetron brand. But within North America, Zetron brand is very strong, much stronger than Codan's, frankly, in terms of public safety and mission-critical communications. So we made the decision to rebrand our entire portfolio as Zetron and that's being received very well by the marketplace. As Paul mentioned, he's at a trade show in Atlanta. Most -- quite a few people on our team were in the largest public safety communications trade show this week in San Antonio. The traffic in our booth was very strong, and it's the first time we're able to show to our customers the value of an end-to-end solution between Zetron's command and control applications complemented with our Land Mobile Radio solution side by side. I would say we are ahead of plan on cost synergies. We made some tough decisions early to execute on some cost synergies prior to the fiscal year starting, and that has put us in a very good position and tracking very well to our stated EBITDA goal of $8 million. So I feel very strongly that we will achieve that goal. And we had a very strong July in support of that number. From a sales synergy perspective, I think we're on plan. One of the unique things that the acquisition of Zetron allow for us to do is build our -- and build and propose our solutions into 1,000 more accounts than we had prior to the acquisition of Zetron. Zetron brought us 1,000 state and local customer accounts that we did not have presence in, and we're underway calling on all of those accounts on our Land Mobile Radio solutions. The one last thing I would mention is that we now have -- as I mentioned prior, and what I like about the boxes on the right here, you can clearly see how well our solutions fit together. So prior to acquiring Zetron, we offered a Land Mobile Radio solution and a basic interoperability. Now we can offer Land Mobile Radio interoperability across a whole variety of applications, including emergency call taking, which is going to allow us to capitalize on next-generation 911, for which we expect very significant funding from the U.S. Federal Government to move all of the public safety answering point. So this is where you dial 911, to a next-generation broadband platform. We focused our engineering on developing or advancing our platforms to be ready when that happens, which we believe that will occur in the next 18 to 24 months. And with that, back to you, Donald.

Okay. Thank you, Scott. Appreciate it. Scott and Paul will be around for questions if there's any at the end. We'll move forward to the Minetec slide. Slide really just summarizes and doesn't quite end the chapter on the Minetec. We are still contracted to produce the product for Caterpillar for the next 5 years, and we also will participate in [indiscernible] over that period also. And pleased to report that the sales of Caterpillar products, which include Minetec, are still happening quite well. So I think they've renewed their focus now that they are the owners, and I think we should see some benefit to us as a company with no downside risk to us over the next 5 years. Michael, I'd like to turn over to you now to take investors through the financial slides.

Thanks, Donald. Yes, we've probably mentioned the word record a few times. So the numbers read well. There's probably just a couple of points that I would make. The profit margins improved across the business over the course of FY '21. And this was in spite of incurring some additional costs in the COVID environment. I think a lot of people would appreciate the freight costs that companies are incurring in COVID times has significantly increased. We're not immune to that. So these results were produced with freight costs almost doubling from FY '20 to FY '21, so significant increase, a circa sort of $12 million of additional costs purely in freight in the business. We did incur some non-underlying expenses. They're almost entirely to do with the acquisitions of DTC and Zetron. We incurred sort of due diligence and related costs of $5.2 million and restructure costs of $1.9 million, and they've been excluded from the underlying net profit result that we've included in these papers. And the last point on this slide has really been about the investment we've made in inventory. So just to give a perspective to our listeners today, so we closed June '21. We've doubled the amount of inventory in our warehouses for Minelab compared to when we closed June '20. So quite a significant increase, and it's largely in finished goods available to sell to customers. So we are in a stronger position today, albeit the risks that Donald talked about regarding supply chain continued, but we are in a stronger position today. The next slide just highlights the amount of investment that we make in our business on an annual basis. We continue to invest heavily in new products. You can see it's evenly distributed across our core businesses, and we'll continue to do so. Given we've got the acquisitions of DTC and Zetron, Donald's already mentioned Codan has got a strong history of investing in the companies that we acquire. The return on equity chart, 36%, really a phenomenal result in a record year for the company. Cash generation over the course of the year was excellent. We continue to do very well in clicking our debtors from our customers, albeit in these COVID times. And largely, we funded both of the acquisitions through the cash that's been generated over the last couple of years of record performance, sold the Minetec business early in July. So as Donald mentioned, we're back to being in a net cash position in FY '22. And Donald, back to you to talk about the outlook.

Okay. Thank you, Michael. One of the things that never fails to amaze me is the way that we choose our words can be very sensitive to the market. And I'll start with saying a strong start to the year and these 2 words in line with FY '21 run rate. So we use the word in line with given that we are 2 weeks or 3 weeks into this financial year, when we wrote these things, interesting to see the reaction in the market. But we're very confident that we're going to have another good year. What does that mean? Too early to tell. We are certainly off to a flyer in July. So July is now complete. We've done the result, and we've got a strong start off to August. So we're 6 weeks in, and we're feeling pretty good about where we're at. If you go back and choose your time again, would you use the word in line with? Who knows. That's interesting [indiscernible] these things, but we're off to a good start. It's too early to give a full year forecast. We certainly will give an update at the AGM, and we will have closer to 4 months of sales under our belt. As I said, demand for Metal Detection has never been stronger, it's fantastic. And we've got the benefit of the new GPX6000. You've heard from both Paul and Scott, and I think having these guys feel the way they're feeling makes the rest of us in the business feel pretty good. So they're not stepping away from their commitment to deliver 14 and 8, respectively, in terms of EBITDA. And I think just having Paul in the U.S. now has been a massive relief for everyone and he and Juan have been able to connect and are working very well together. So we are we're thinking that now that Paul is able to travel, he's going to be in the U.K. speaking to our engineering guys and then into Dubai speaking to the sales guys over the next 2 weeks. He will have a much fuller appreciation after 2 to 3 months in the U.S., and we'll be able to come back and be much more informed about that DTC business. And of course, we have a Scott on the ground in Seattle, as we speak, so that's been excellent. There's still some uncertainty. I mean, I think, that's the universal qualifier and every result that I've seen announced to the market over the last couple of weeks, people just don't know. The events in Afghanistan clearly have shook the world. Luckily, our exposure in Afghanistan was reducing, not increasing. So we have just focused more on the other markets that we have been involved in over the last few years. So Saudi and [ Stans ] to name 2 major markets for us. We're just focusing on our efforts there. And last but not least, I have given a lot of consideration to my future. One of the things that I had said to myself when I took this my job on was for goodness sake, don't stay too long. I think that some of the mistakes that you see from CEOs as they hang on. They hang on, they stay too long. I think we've got this organization into the best possible condition that it's ever been. I've given the Board more notice than I'm required to give. It's with a heavy heart that I'm looking to move on, and I'm not moving on to anything else. So it's really just moving on to a clean slate at this stage. But I'll be there and the Boards have involved me heavily in selecting the new CEO. So we will make sure that the Managing Director and CEO that replaces me is someone that's stronger than me, can take us to the next level. And obviously, I'll be available to the Board for as long as they need me to help with the transition of the new guy. And hopefully, we can be in a position to bring the new guy, whoever that might be, to the next investor road show. We can rock out together and do a seamless transition. So that really concludes the formal part of the process in terms of the presentation. I'll turn you back over to the moderator.

[Operator Instructions] Your first question comes from Aaron Muller with Canaccord Genuity.

Congrats on a very good result, and congratulations, Donald on what you've achieved over the last 20-odd years with the company. Just a couple of questions. First of all, could you just provide us with a bit of an update on Venture and Plexus, and what capacity you're sort of running at the moment?

Sure. Yes. it's a moving piece. Right now, Plexus have immunized every one of their employees. So they've had the double vaccination, which has allowed them to continue operating at a reasonably full capacity. The situation in Penang is probably escalating in terms of cases per day. But what the Plexus and Venture teams and all businesses in that region or lobbying government for is that if they are double vaccinated employees, then they're putting a case forward to at least continue to operate even in a worsening situation. So for now, we are able to still get products coming out of these factories pretty much as per normal, both up at around 60% to 65% capacity. The big danger for us has been the worsening situation with the ports. So they're looking potentially to close airports or ports based on the escalating situation. That hasn't happened yet. And so we have some contingency plans to truck product to Singapore and ship from there should that actually eventuate. But just remember, we have probably about 2 months' worth of stock sitting in the pipeline that's been either on the sea or in warehouses. So even if there was a 7-day lockdown in an airport, which has been mooted, it's not going to affect us in terms of our ability to supply. And as I say, we have plan B to try and truck product into Singapore.

Okay. Great. And just consumers seems to be going very well. You mentioned, obviously, growth of 42%. Look, in the past, you've talked about that consumer business being sort of $10 million to $12 million a month. Does that mean it's sort of risen up to $14 million to $15 million a month?

Well, 42% divided by 14 to 15 and times 12 doesn't get you to these numbers. But -- and certainly, I mean, we're hitting $10 million months more regularly than we have, and so the business has completely moved to a new level.

Yes. Okay. I was -- the 42% I was referring to was growth rate, I think you mentioned.

Yes, 42% growth, but I don't think that quite gets us to 15 a month.

Just testing you out there. Now in terms of the Communications, with the order book for Tactical, I think you mentioned a couple of years ago that you entered 2020 with a $34 million order book. And last year, it was down a little bit on that or quite a bit down on that. I mean how are you sort of looking into FY '22?

Look, probably similar -- probably a similar start to this year as well as to last year. As I've mentioned in the last couple of days, we've had some pretty good news out of the North American market with some customers that Paul has been working on for the last 2 years, so that looks to be exciting. So some of the government organizations and some of the air patrol parts of the market. So we are probably similar to where we were at last year. Probably our pipeline is a bit stronger, and our ability to travel is better. So all in all, we hope to be in a better position from June 30 than we are this year. So that's certainly what we're planning for.

Okay. And then just actually one final question on Metal Detection. Maybe just talk about new product development in Metal Detection and getting more products sort of planning to release in '22 or '23.

The next one for us is really the high-end coin and treasure machine. So the CTX 3030 replacement, that's probably the next detector off the rack, having just released the s3 replacement. And beyond that, we are also working on the GPZ too. So that's a product that continues to be developed. That's probably, as I said, it's 18 months to 2 years away, but that's obviously going to be a key part of our growth, we think, beyond that period when we take our GPZ 7000, which has been spectacularly successful and pushed the balance of physics once again and bring a new product out. So high-end coin and treasure, high-end gold and beyond that, we're working through replacing and updating the EQUINOX. So the EQUINOX will be EQUINOX [ map 2 ]. So there's 3 major platforms that we are working on in the near-term arena. And of course, we continue to look at improving our whole product range as technology develops.

Your next question comes from Elijah Mayr with CLSA.

Congrats on the results and obviously on your fantastic tenure, Donald, over the last 20 years.

Thank you.

Just on the -- maybe some of the Metal Detection business, I mean you sort of called out the fact that you provided an outlook saying in line and then the talking points during the presentation was sounding like it's running above. Could you maybe just call out what that growth rate in July was or perhaps with the sales run rate in July was for Metal Detection and maybe like recreation in gold?

Look, it was strong right across the business, Elijah. So as I say, we get tied up in words and these 2 words in line seemed to have caused everybody to panic for some reason. But we're certainly feeling very comfortable. We had a strongest July on record. And it's actually positioned us to feel very confident, particularly about the first half.

Yes, there might be some negative reaction to you leaving as well, Donald. Just following on with the Metal Detection business as well, can you quantify how much of the growth rate was sort of attributed to increased distribution in these geographies in FY '21 and how that looks relative going into FY '22 for that [indiscernible]? And I'm just trying to get a sense for underlying...

That question is probably at the heart of all the conversations that we've been having over the last 2 months, Elijah. So it's a very, very good question. So what -- I think I've mentioned briefly, what we try to do was do a waterfall bridge. So we looked at the Metal Detection results for this year, which was exceptional. And we said, well, what were the kind of tailwinds? What were the headwinds? What do we expect to happen next year? We're very mindful of the consensus forecast is in the market. It's a big number. And so for us, the kind of conversation was chalked out like this. We've got a result that we think is exceptional. We've got some tailwinds that we think we'll have next year with respect to the GPX. We're seeing VANQUISH, EQUINOX and these types of products, the Gold Monster continue to hold up. GPZ 7000 seems to be enjoying some sort of a renaissance. So these are kind of things that we feel good about, they're positives. Would you start to look at some of the chunks that could be perceived as headwinds? You have a little bit of exchange rate in there, you have some stimulus that we saw from first world governments that might have -- I mean we were seeing sales in circa $5 million a month in Australia, for example, during that stimulus period. We don't expect to see that repeated this year because it was clearly an event-driven outcome. So when you look at some of these positives, you look at some of the negatives, you then look at, well, what about our distribution, our distribution has increased. That's, we think, sustainable because the fact that we're now in Mexico, Brazil and soon to be India means that in terms of consumer distribution, that's going to help us. And also, particularly in Central and Latin America will help us distribute more gold product. So if you look at where we started this year, you look at the tailwinds, you look at the headwinds, we kind of see it being reasonably flat from our own perspective, but flat at an exceptionally high level. Now are we able to sustain that for the year? We don't know, it's too early in 6 weeks in. Do we feel good about the first 6 weeks? Absolutely, it's probably exceeded our expectations. But there's a lot of water to go under the bridge between now and June 30.

Yes. Understood. The business seems to always exceed your expectations. Again, congrats, and I'll jump back in the queue to see if we've got time for more questions.