Codan (CDA) H2 2017 earnings summary

Executive summary

• FY17 revenue rose 33% to $226.1m; underlying NPAT increased 112% to $44.7m, driven by gold detector sales and large HF radio contracts.

• Profit margins expanded as Metal Detection gross margins strengthened and expense ratios improved on higher sales; the balance sheet ended debt-free with $21.4m net cash.

• $23m was returned to shareholders through ordinary and special dividends, alongside continued investment in sales capability, marketing and engineering.

Financial highlights

• FY17 revenue $226.1m, up 33%; EBITDA $75.6m, up 80%; EBIT $61.5m; underlying NPAT $44.7m, up 112%; statutory NPAT $43.5m.

• Underlying EPS 24.9c, up 109%; EBITDA margin 33% vs 25% in FY16; NPAT margin 20% vs 12%.

• Net interest expense declined to $0.8m from $1.7m in FY16 as debt was repaid; operating expenses were broadly in line with the prior year.

Outlook and guidance

• FY18 base-business guidance: revenue $160m–$180m and NPAT $20m–$25m; performance above base level recognized through special dividends.

• Growth initiatives include new product releases, adjacent markets, partnerships and collaboration; management said it was too early to assess whether gold detector demand or large HF projects would lift results above base.

• FY18 Radio Communications goals include Cascade delivery, broader communications solutions, military pipeline development and maintaining HF market share.

• FY18 Metal Detection priorities include new recreational products, establishing Gold Monster in Africa, maximizing GPZ 7000 sales and expanding retail distribution and support.

• FY18 engineering investment budget was similar to FY17, with heavy investment planned across all three divisions.