Codan: exceptional growth
Codan (ASX:CDA) is an Australian technology company that designs, develops, manufactures and markets communications and metal-detection equipment. Its two main operating segments are Communications and Metal Detection. Within those businesses sit brands and operations including DTC, Zetron and Minelab, giving Codan exposure to tactical and defence communications, unmanned systems, public-safety communications and gold detection.
Rarely does a company achieve a result in which almost every major part of the business accelerates simultaneously. Codan’s Financial Year 2026 (FY26) result comes close.
Group revenue increased 30 per cent to $875 million. Earnings Before Interest and Taxes (EBIT) jumped 67 per cent to $244 million and net profit rose 69 per cent to $175.2 million. The important point is that earnings rose much faster than revenue, demonstrating substantial operating leverage as margins expanded across both principal divisions.
The Communications division’s performance was outstanding. Revenue rose 22 per cent to $506 million, exceeding the company’s previous 15–20 per cent growth target, while segment profit increased 45 per cent to $156 million. The segment margin expanded from 26 per cent to approximately 31 per cent, reaching a target originally intended for FY27 well ahead of schedule. Meanwhile, the Communications order book rose 50 per cent to a record $380 million.
Drones
The engine within that engine is unmanned systems, or drones.
Revenue associated with unmanned applications more than doubled to approximately $215 million in FY26, accounting for about 41 per cent of Communications revenue. Momentum actually strengthened during the second half rather than slowing as the comparative numbers became larger. Demand is coming not just from active conflicts but from broader defence and security programs across the United States and Europe.
That distinction is critical and has helped with analyst enthusiasm. A boom caused solely by urgent battlefield demand might eventually vaporise. Analysts instead see signs that Codan’s technology is migrating into formal, longer-term military procurement programs. DTC has secured its first radio orders into multiple U.S. military Programs of Record. Such programs can turn today’s rapidly growing yet relatively short-duration order flow into more durable revenue sources.
There’s also plenty of territory left to win. Direct sales to U.S. defence remain relatively small, though Codan has begun to make progress in that market. The Adaptive Dynamics acquisition adds anti-jamming and interference-mitigation technology, strengthening Codan’s offering for unmanned systems and electronic-warfare environments. Zetron, meanwhile, experienced procurement delays during FY26 but finished the year with stronger order intake and an order book up 25 per cent.
Consequently, management expects Communications revenue to grow by around 20 per cent in FY27, considerably faster than its longer-term 10–15 per cent target. That guidance is a reason analysts have upgraded their earnings forecasts after the result.
Gold
Codan’s other major engine, Minelab, continues to benefit from generally rising and recently rising gold prices.
Metal Detection revenue increased 42 per cent to $362 million and segment profit climbed 65 per cent to $162 million. The margin reached a remarkable 45 per cent, compared with 39 per cent a year earlier. New products, particularly the Gold Monster 2000 and GPZ8000, have been important contributors. African revenue increased by around 60 per cent to approximately $184 million, while revenue from the rest of the world rose 32 per cent.
The product cycle still has momentum. FY27 benefits from a full year of contributions from recently launched detectors, while gold-market conditions and expanded distribution are additional supports.
Barrenjoey expects the strong second-half FY26 run rate to broadly carry into FY27, while consensus is positive on the division.
Cash
Perhaps the most striking feature of the rapid growth is Codan isn’t consuming cash to achieve it. Strong collections and working-capital management turned the balance sheet from $88 million of net debt at the half-year into roughly $36 million of net cash at June. Receivables and inventories both declined despite 30 per cent revenue growth.
That gives Codan another possible growth avenue: acquisitions. Management retains substantial debt flexibility for future deals in communications, defence technology, unmanned systems and public safety. Importantly, none of that acquisition upside is required for the current organic growth story to work.
Valuation & risks
Based on broker FY27 forecasts, Codan trades around 40–42 times earnings. This leaves relatively little room for disappointment, although structural growth and merger and Acquisition (M&A) optionality justify some optimism. The multiple is high in absolute terms but Codan’s growth, margins and returns compare favourably with global peers.
The risks are that unmanned demand could moderate, defence procurement can be unpredictable, Minelab is exposed to the gold cycle, new products must remain technologically competitive, acquisitions carry execution risk, and management has highlighted potential pressure on the electronics supply chain.
The question for investors is not whether Codan is currently performing well. It is whether the company can keep growing rapidly enough to justify a valuation that already assumes a lot.
For now, Communications is accelerating, Unmanned Systems enjoys expanding defence markets, Minelab benefits from both a strong product cycle and favourable industry conditions, margins are expanding and cash is pouring in.
Disclaimer:
The Montgomery Small Companies Fund owns shares in Codan. This article was prepared 4 September 2026 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Codan, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
