The Codan Limited (ASX: CDA) share price has today jumped following an impressive full year report. The Codan share price has risen 16.14% on the news to $10.43 at the time of writing.
FY 2020 highlights
Codan reported that it has delivered the highest full year profit in the info tech company’s history. Net profit after Tax (NPAT) was disclosed as $64 million, a huge 40% increase on last year’s result.
Driving this record profit was impressive growth in sales for the company, up to $348 million. Codan achieved a 29% growth in sales compared to FY 19. This growth was mainly driven by the company’s metal detection and communications segments which make up 68% and 30% respectively of Codan’s sales. The huge surge in gold mining indirectly aided the company as it saw a 42% increase in its metal detection services for use in the sector.
Codan now boasts customers in over 150 countries to which it exports around 90% of its sales, representing impressive diversification. The company derived $161 million of its sales from Africa which remains its largest contributor.
As mentioned above, the largest segment of Codan’s business is metal detection. The company invested in excess of $30 million over the year and, as such, has five key products currently under development. These products are expected to be released throughout FY 21.
In terms of the company’s cash generation, Codan generated $78 million in free cash flow for the year. This contributed to its strong balance sheet of $93 million in net cash. However, Codan noted that it does have a large FY 20 tax bill to be payed in the first half of FY 21.
Strong dividend
As a result of Codan’s strong performance, the company was able to report a final dividend of 11 cents per share. Codan’s increasing dividend reflects the growing strength of the business and takes its annual dividend to 18.5 cents. The Codan board maintains its commitment to paying 50% of profits as dividends.
Outlook for Codan
Thanks to a number of strategic initiatives, Codan appears poised to deliver a decent year in FY21. Nevertheless, the board declined to provide an outlook for FY 21, stating that a further update will be given at the annual general meeting. The board also maintained that Codan is well positioned for a strong start to the year. The Minelab product will likely benefit from a full year of Vanquish sales and the release of a new gold detector. Minetec is also expected to return to profitability for the company.
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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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