24 January 2023

Trading Update Codan Limited (ASX:CDA)

(Codan) is pleased to provide the market with a trading update for the half year ended 31 December 2022 (H1 FY23).

At the AGM in October 2022, the Codan Board expected that revenue for H1 FY23 would be in the range of $198 million to $215 million and this would generate a net profit after tax between $25 million and $30 million. 

The unaudited revenue achieved in H1 FY23 was $212 million and the net profit after tax may now approach $31 million.

Highlights: • Minelab unaudited revenue was slightly below the guided range at $74 million, however the business is still expected to deliver a segment profit margin of 30%, in line with guidance.

Communications unaudited revenue was $137 million, slightly exceeding expectations and the segment profit margin will improve to 25%.

Communications orderbook as of December 2022 has increased 16% from 30 June 2022 to $173 million.

Half year effective tax rate of 22%, with a higher proportion of profits coming from our UK operations.

Net debt of $61 million is lower than the expected $70 million.

Further detailed commentary regarding the H1 FY23 performance of the business and the outlook for the second half of FY23 will be provided on 16 February 2023. 

Just picked up the following from the FN Arena web site as I know there are a number of holders on Strawman.

CDA   CODAN LIMITED

Hardware & Equipment – Overnight Price: $4.01

Canaccord Genuity rates ((CDA)) as Downgrade to Hold from Buy (3) –

Following commentary from Codan at its annual general suggesting a significant deterioration of Metal Detection sales into Africa, Canaccord Genuity sees more uncertainty around future sales in the region. 

Codan's first half net profit guidance of $25-30m suggests a -40-50% decline on the previous comparable period, and is a sizeable miss to Canaccord Genuity's expected $48m. The broker lowered its forecast -45% accordingly. 

The rating is downgraded to Hold from Buy and the target price decreases to $4.45 from $10.05.

This report was published on October 27, 2022.

Target price is $4.45 Current Price is $4.01 Difference: $0.44

If CDA meets the Canaccord Genuity target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Decided to give Codan a call just to see what I could find out in regards to the languishing share price.

What came out of the chat we probably already know however the conversation kept returning to Africa and the on-going and in fact increasing disruption to the business as a direct result of military coups and the difficulty in gaining any clarity and/or certainty of what is exactly happening.

My take....based on the tone of the conversation and the fact they never provided guidance when results were presented back in August I'd be surprised if next weeks update and guidance didn't disappoint.

For those holding I hope I'm wrong but I've decided to opt out and wait for the release next week as the safer option.