Shares in Codan jumped back to the levels they were at in early February yesterday after it revealed a surprise upgrade for the June 30 year.
The company told the ASX that it now expects profits for 2021-22 will be another record.
That saw the shares leap more than 14% to $7.73 by the close, taking them back to where they were three months ago on the eve of the February 24 invasion of Ukraine by Russia.
That invasion saw investors lose confidence in tech type stocks (as they did around the world) as the invasion sent commodity prices higher with inflation quickly sparking higher and central bank rate rises accelerating.
On top of this Codan built inventory so as to have enough stock on hand to meet demand and offset any supply obstacles. Investors did not like that news (they never do) of the extra debt and lower cash flows – so that put more pressure on the shares.
Investors treat anything even remotely resembling tech stocks as being a weak reed in an environment of rising rates, so Codan shares dropped to a year low of $6.60 earlier this month.
That left them down more than 60% from the highs of 11 months ago when the stock was above $19.20.
Codan operates two core business segments – metal detectors and communications technology – and it seems both have been doing well despite the market slump.
“The Board is expecting the record FY22 first-half profit of $50m to be matched in the second-half of FY22. This will result in a record FY22 full-year profit,” Codan told the ASX on Monday.
The expected $100m net profit for FY22 will be up around 11% increase from 2021
The Board expressed its intentions to pay out 50% of profits as fully franked dividends.
Codan said the decision to hold a high level of stocks cost money and saw cash flows, drop to an outflow of $12.9 million compared to a net $49.8 million a year ago.
“Our decision to invest in inventory rather than let customers down has proven to be the correct one,” Codan management said in the statement to the ASX.
“Notwithstanding this investment in inventory, $41 million of cash has been generated from operating activities so far in the second half of FY22, this is a significant improvement over the first half, which had an operating cash outflow of $13 million.”
