Codan share price jumps 10% amid guidance for 'record' FY22 profit

Codan shares are starting the week strongly…

| More on:
jump in asx share price represented by man jumping in the air in celebration

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Codan's shares are storming higher after the company revealed that it expects a record full year profit in FY 2022
  • Codan is guiding to a profit of ~$100 million, up from $64 million in FY 2021
  • Strong performances from across the business have underpinned this result

The Codan Limited (ASX: CDA) share price has started the week strongly.

In morning trade, the metal detector focused technology company's shares are up 10% to $7.41.

Why is the Codan share price rising?

The catalyst for the rise in the Codan share price on Monday has been the release of a trading update from the company.

According to the release, the company is expecting its record FY 2022 first half profit of $50 million to be matched in the second half of the financial year.

This would mean a record full year profit of ~$100 million for Codan, which represents a 56% increase on FY 2021's profit of $64 million.

Though, this guidance does come with a warning. Management advised that the timing of project sales or unforeseen challenges in supply chains could still impact revenues and profitability as it approaches the end of the financial year.

What is driving Codan's growth?

The release explains that this strong growth has been supported by its strategy to diversify revenues and profitability.

It highlights that the increased profitability of the Communications division has continued during the second half thanks to positive performances from the acquired DTC and Zetron businesses.

In addition, the company's Minelab business is on course for its second-best year on record. But even better, management expects the business to form a new base from which it will grow in future years. This is being underpinned by continued penetration of new geographic markets and new product releases that will drive further market share increases.

Finally, Codan revealed that its inventory management has been successful. It explained that its "decision to invest in inventory rather than let customers down has proven to be the correct one."

Notwithstanding its investment in inventory, this has led to $41 million of cash being generated from operating activities so far in the second half. This is a huge improvement on its operating cash outflow of $13 million during the first half.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Man with rocket wings which have flames coming out of them.
Technology Shares

Guess which ASX All Ords share is rocketing 16% on an asset sale

This share is catching the eye with a very big gain on Friday. But why is it rising?

Read more »

a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall
Technology Shares

Why are Megaport shares sinking 14% on Friday?

Why are investors hitting the sell button? Let's find out.

Read more »

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Why today is a big day for this ASX 200 AI stock

This company stands to benefit from 'one of the most profound transformations in the history of technology'.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why are WiseTech Global shares crashing almost 20% today?

Recent controversy has led to delays to an important launch and hit its revenues.

Read more »

Woman with speaker
Technology Shares

After falling 62%, this leading ASX 200 share could be gearing up for growth!

This industry-leading company looks like a turnaround opportunity to me.

Read more »

A man has computer-generated images rushing through his head indicating an AI (Artificial Intelligence) concept of a communication network.
Technology Shares

ASX investors are obsessed with Nvidia shares! Here's why

The global chipmaker reported a 94% increase in annual revenue in the third quarter.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

Own WiseTech shares? Here's what to watch at Friday's AGM

This could be one of the major events of the year.

Read more »

Woman and man calculating a dividend yield.
Technology Shares

This ASX tech stock is down 93% from its highs. Could Trump tariffs give it a boost?

The ASX tech stock could enjoy tailwinds from Trump’s threatened tariffs.

Read more »