Codan shares surge on news of record full-year profit

Codan shares surged after the manufacturer of communications and mining technologies said the second half of the financial year would match its bumper first half result.

Codan shares rose 14.52 per cent, or 98c, to close at $7.73. However, they have fallen more than 19.3 per cent – or $1.85 – since the start of the calendar year. Picture: NCA NewsWire / Damian Shaw

Codan shares rose more than 14.5 per cent on Monday after the manufacturer and supplier of communications and mining technologies said the second half of the financial year would match its bumper first half result.

In an ASX statement coinciding with an institutional investors presentation and tour of its facilities in Adelaide, Codan said it expected “the record FY22 first half profit of $50m to be matched in the second half of FY22”.

“This will result in a record FY22 full year profit,” the company added.

Codan put the result down to the increasing profitability of its communications division – noting Domo Tactical Communications and Zetron were two “excellent acquisitions” that had integrated faster than expected.

Codan acquired Zetron, a US-based company, for $59m from the JVCKENWOOD Corporation in April. At the time, it said it expected $67m in sales and $8m in earnings from the acquisition in the 2022 financial year.

Zetron offers a suite of integrated emergency response technologies including voice dispatch, mapping, computer-aided dispatch and fire station alerting.

In February, it said it would acquire another US firm, DTC, which is a long-term supplier to government agencies as well as the intelligence community.

“Both businesses are expected to deliver a strong second half result consistent with the first half performance,” Codan said in a statement on Monday.

Another of its businesses, MineLab, will record its second best year in 2022 despite the cessation of sales to Russia.

“MineLab’s excellent profit margins have continued in the second half, so while sales into Russia have ceased and consumer demand has normalised post-Covid in our recreational markets, the profit contribution from MineLab is expected to be comparable to the first half,” it said.

The $50m first half profit compared to a full-year profit of $97m in 2021, $64m in 2020 and $46 in 2019. Sales are increasingly coming from the communications business. This year, the company is on track to report that 54 per cent of sales were from the division, compared to 23 per cent in the last financial year.

Codan shares rose 14.52 per cent, or 98c, to close at $7.73. However, they have fallen more than 19.3 per cent – or $1.85 – since the start of the calendar year.

Analysts at Canaccord Genuity had earlier been sceptical about whether the company would skew revenues and profits to the second half of the year.

“This is clearly in an environment where sales into Africa have been affected, and therefore unless the issues in Sudan subside, we think it’s unlikely there will be much of a skew, if any,” they wrote. Sudan is a key market for Codan’s gold detection products.