On 11 December 2018, a CEO connect presentation of Codan Limited (ASX: CDA) was held. At the presentation, Donald McGurk, who is the managing director and CEO of CDA highlights the company’s global footprint, financial snapshot, its track record of strong growth and regular dividends, increase in base business, its business unit, its tracking solutions, its working partners and a positive outlook for FY2019.
The company provides technological solutions in the fields of communications, metal detection and tracking through its unique and protected intellectual property. Even in the harsh environment, the company has a record of giving a superior performance which is the reason that the company has customers from around 150 countries.
By 30 November 2018, the company has net cash of $12 million. There were around 178 million shares on issue with the market capitalization of $550 million. The net profit after tax for the FY2018 was approximately $40 million.
The company has a track record of strong growth and regular dividend. Regarding ordinary dividend, there is a year on year growth seen for the past five years. The compound annual sales growth sales have increased by 15%. There is an increase of 33% regarding the compound annual EBITDA growth. The average EBITDA margin increased by 25%. The average return on equity increased by 17%.
The base business of CDA comprises radio communications solutions, metal detectors for recreational markets, countermine and a repeatable level of gold detector sales as well as providing solutions for tracking underground mining. There is a growth in the base business of the company by 20%. The base business generated a sales revenue of $230 million in FY2018. The company also aims towards the growth of the base business of the company.
In radio communications, the company currently provides long-range digital radio (HF), with its key market in Africa and Asia for humanitarian, peacekeeping, public safety. A New cascade solution is under the development phase. Land Mobile Radio (VHF/UHF) is a robust and dependable wireless system with its key market in North America and Australia. For the police, fire and emergency services, the company will develop the land mobile.
The company expects that by FY20, they will be introducing tactical radio solutions with maximum reliability and ruggedness. Its key market will be in Africa, the Middle East, Eastern Europe, Latin America, Asia and will be used by military people. In metal detection, the company is developing a new product while entering into the new market. In Equinox, the company is under the process of major technological upgradation in the recreational market.
For its tracking solutions, the company has entered into a unique partnership with the Caterpillars. Under the partnership, the company will support Caterpillars in commercializing unique solutions for underground mining. The company has received an opportunity where it was able to secure a $200 billion of Australia defense equipment procurement for the next ten years.
The company’s outlook is positive in FY2019. They expect that their NPAT will be in the range of $20 to $22 million in the first half of FY2019. Further, it can increase base business sales and profit in FY2019. The market price of the share is A$3.040 with the stock holding a market capitalization of A$532.08 million.
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