• Group Revenue: Approximately $550 million, up 21% year-over-year.
• EBIT: $114 million, a 29% increase from the previous year.
• NPAT: $81 million, up 24% compared to last year.
• Communications Revenue: $327 million, a 19% increase from FY23.
• Minelab Revenue: $220 million, a 25% increase from FY23.
• Net Debt: Increased by $24 million to $75 million as of June 2024.
• Dividend: Fully franked dividend of $0.225 per share for FY24.
• Engineering Investment: $57 million, approximately 10% of revenues.
• Communications Segment Profit Margin: 25%.
• Minelab Segment Profit Margin: Increased to 35% from 32% in the prior year.

• Warning! GuruFocus has detected 6 Warning Signs with ASX:CDA.

Release Date: August 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Codan Ltd (ASX:CDA) reported a strong FY24 with group revenue of approximately $550 million, up 21% from the previous year.
• The company achieved an EBIT growth of 29% to $114 million, with organic EBIT growth of $22 million, up 24%.
• The communications segment saw a revenue increase of 19% to $327 million, with a forward order book growth of over 20%.
• Minelab's revenue increased by 25% to $220 million, driven by new product releases and expansion in North America and Europe.
• Codan Ltd (ASX:CDA) successfully integrated acquisitions Zetron UK and Wave Central, contributing $31 million in revenues and meeting year one expectations.

Negative Points

• Net debt increased by just under $24 million to $75 million, partly due to acquisitions and product development investments.
• Operating leverage in the communications segment was impacted by geopolitical issues in Africa and the normalization of a large project from FY23.
• The company incurred approximately $2 million in integration and acquisition-related expenses during FY24.
• The African market remains challenging, with Sudan still largely disrupted, affecting Minelab's regional performance.
• There is an elevated cost base due to acquisitions and business success, which may impact return on investment and future cost management.

Q & A Highlights

Q: Can you elaborate on Zetron's performance and its positioning in the US and UK markets? A: Alfonzo Ianniello, CEO, explained that Zetron has grown well above the overall communications business due to its full command and control solution, which is a competitive advantage. The market is fragmented at the lower end, and Zetron's integrated solution is appealing to customers. In the US, Zetron is well-entrenched, and in the UK, the focus is on converting opportunities as the market is addressed.

Q: Are customers preferring a full solution suite over modular options? A: Yes, customers are increasingly seeking a full solution suite. Alfonzo Ianniello noted that having a comprehensive command and control system is more convenient, especially with ongoing changes at the front end, leading to legacy systems being replaced by Zetron's solutions.

Q: With the integration of the UK business, should we expect margin improvements in line with the overall communications segment? A: Michael Barton, CFO, stated that margin expansion is expected as a growth story. The acquired businesses are anticipated to achieve margins within the target range of 25% to 30% contribution margin, aligning with the overall segment once past the initial integration year.

Q: What is the outlook for Africa and Countermine? A: Alfonzo Ianniello mentioned that while Sudan remains a challenge, there is steady business in Northwest Africa. For Countermine, geopolitical issues could provide tailwinds, and Codan is actively pursuing opportunities in key markets.

Q: How advanced are you on potential acquisitions, and does the increased facility size suggest larger acquisitions? A: Alfonzo Ianniello confirmed that acquisitions are in the pipeline, with a focus on communications in the Northern Hemisphere. The company is more convergent on acquisition targets than 12 to 18 months ago, indicating readiness for potential larger deals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.