Shares in Adelaide-based electronics group, Codan were in the green yesterday, a rare event on the day when the overall market fell by well over 1%, or 79 points.
Codan (CDA) shares jumped 3.6%, or 5c, to $1.53 after directors provided a sharp upgrade to 2010 earnings guidance, despite also breaking the news of an asset impairment.
As well, the company revealed that its long time CEO, Mike Heard, would retire as planned in November (see below).
Even after the asset impairment, net earnings are expected to be up more than 20% on 2009’s $12 million.
That’s due to the resources boom, as the company reports strong sales and profits in its Minelab metal detection business with strong demand from small prospectors in Africa.
The company said in the statement it was upgrading sales and earnings for the second half of the financial year and for the full year as well.
"Sales and underlying net profit after tax are now expected to exceed the levels achieved in the first half of FY10.
"This would deliver full year net profit after tax of approximately $30 million before impairment charges, from revenue of approximately $180 million, both the highest ever achieved by Codan Limited by a substantial margin.
"As a result of this profitability, cash flow is also very strong and debt is being significantly reduced.
"Not all areas of Codan’s business have been experiencing strong demand; satellite communications products have continued to experience difficult business conditions at least in part caused by the Global Financial Crisis.
"Therefore the Board is considering the carrying values of some assets related to satellite communications. It is likely that a non-cash impairment charge of approximately $15 million, relating to goodwill associated with a satellite communication technology acquisition made in 1997, will be written off in the full year accounts.
"Even after this non-cash impairment charge, the statutory full year net profit after tax is expected to be around $15 million compared to $12 million last year.
"The business has met a significant challenge in the second half of the year in achieving supply of products sufficient to meet the high levels of orders on hand and the ongoing high demand, particularly for Minelab metal detection products.
"The Minelab business overall has been strong. The exceptional sales being achieved in FY10 are to a significant extent being driven by a boom in the use of our metal detection products in the artisanal gold mining market in Africa.
"Future prospects for Minelab from the artisanal mining market globally are very good. However, sales arising from this market in FY11 may not approach the boom conditions of FY10."
And in a separate statement, the company said CEO, Mike Heard, would retire after 19 years as company leader.
"Mr. Heard will be succeeded by Mr. Donald McGurk who has been a Codan executive for over 9 years. Mr McGurk presently has business responsibility for the company’s high frequency (HF) radio products.
"Mr. Heard joined Codan as managing director and chief executive officer in September 1991. He presided over the growth of the company from $20 million annual turnover, primarily in high frequency radio products, to today’s highly profitable diversified business, with annual turnover expected to approach $180 million in 2010."
Based in Adelaide, the the company has sales offices in six countries and 85% of revenue comes from exports to more than 150 countries.
