Codan’s defence and gold engines set up another growth year

FY27 Growth Target Rests on Unmanned Systems Demand

Codan Limited (ASX:CDA) is forecasting approximately 20% Communications revenue growth in FY27 after delivering its strongest financial year on record. The target is being set against a $506.2 million Communications base and a $380 million orderbook at 30 June, but the company has tied it to continuing order momentum and the ability of the electronics supply chain to keep pace.

The FY26 numbers provide plenty of momentum. Group revenue increased 30% to $875.0 million, EBIT rose 67% to $244.1 million and net profit after tax climbed 69% to $175.2 million. Basic earnings per share reached 96.5 cents, compared with 57.1 cents a year earlier, while the fully franked full-year dividend rose 70% to 48.5 cents a share.

Communications Orderbook Expands as Defence Mix Shifts

Communications revenue grew 22.4%, slightly ahead of Codan’s FY26 target range, while segment profit rose 45% to $156.0 million. The margin reached 31%, exceeding the group’s 30% end-of-FY27 target 18 months early. Defence customers accounted for 58% of Communications revenue, up from 38% in FY25, as demand for unmanned radio systems gathered pace across multiple geographies.

DTC’s unmanned sector generated approximately $215 million, more than double the prior year, and the business secured initial radio orders for multiple US military programs of record. Zetron, meanwhile, reported a temporary slowdown in US federal procurement during the first half, but finished with a 25% year-on-year increase in its orderbook. Contracts included a $19 million US utility win and an $11 million UK Emergency Services Network contract.

Minelab Delivers a Second Engine of Growth

Metal Detection supplied the other half of the result’s appeal. Revenue rose 42% to $362.0 million and segment profit increased 65% to $162.4 million, lifting the segment margin to 45% from 39%. Codan attributed the performance to product mix, operating leverage and demand for new products including the GPZ8000 gold detector and Gold Monster 2000.

Minelab’s Africa business generated approximately $184 million of revenue, up 60%, while its rest-of-world business grew 32%. The company says early FY27 conditions have remained positive, with Africa and the rest-of-world business tracking broadly in line with their second-half FY26 revenue run-rates. That provides a useful near-term indicator, although it does not guarantee that demand or gold-market conditions will persist.

Balance Sheet Rebuilds Acquisition Capacity

Codan ended the year with $35.7 million of net cash, reversing the $88.2 million of net debt reported at 31 December 2025. Operating cash flow reached $249.3 million, helping fund product development, dividends and debt repayments while leaving the group with a $250 million debt facility and a further $150 million accordion facility subject to bank approval.

The balance-sheet improvement has already supported a step into adjacent communications technology. Codan completed its acquisition of US engineering company Adaptive Dynamics on 31 July 2026 for upfront consideration of $17.1 million and deferred consideration of about $4.3 million, plus potential royalties. The transaction is excluded from FY26 results, so its contribution will need to be judged in future reporting periods rather than inferred from the record year just ended.

Supply Chain and Climate Disclosures Add Caveats

The main operational constraint identified in the report is not demand but supply. Codan says constraints are emerging in parts of the global electronics chain and has highlighted components and contract manufacturing in locations including Taiwan, South Korea and Malaysia. It maintains roughly three months of buffer stock and uses alternate sourcing, but the FY27 Communications target remains explicitly subject to supply-chain capacity.

Codan’s first mandatory climate report found total FY26 emissions of 70,708 tonnes of carbon dioxide equivalent across its broader ESG reporting boundary, with Scope 3 accounting for 97.7%. The statutory Sustainability Report used transition reliefs, including no comparative information and no Scope 3 disclosure, and Codan has not set group-wide emissions targets or a transition plan. KPMG provided limited assurance over specified Scope 1, Scope 2 and climate disclosures, rather than the full ESG report.

The next hard test arrives at the 20 October AGM, when Codan plans to provide a further business update. By then, the question will be whether the enlarged orderbook is converting into shipments quickly enough to support the 20% Communications target without allowing supply constraints, Zetron’s US recovery or the Adaptive Dynamics integration to dilute the operating leverage delivered in FY26.