Codan Oct 2023 Investor Report

[Steve Herschbach]

This is the biggie each year as Minelab tells investors why they should buy the stock or not sell it in the coming year. Main issue for Minelab subsidiary - collapsing African gold rush. But offset by good sales of new coin detectors. And nothing to really hint at any new models in 2024, just expanded marketing efforts. Though this is just a PowerPoint presentation from the actual meeting. Maybe more can be gleaned from an actual transcript if one is released.

Last tidbit - Minelab gets a new General Manager, Ben Harvey. Will he stay the course, or maybe bring some changes in the way Minelab does business?

https://codan.com.au/wp-content/uploads/2023/10/Codan-Limited-AGM-2023-Investor-Presentation.pdf

 

[phrunt]

They do a fantastic job of spinning their reports to be favourable from an otherwise negative report.  

RoW recreational detectors remained resilient, growing 9% verses HY22.  - then the fine print - After adjusting for the ceased Russian market.  The Russian market was a large percentage of their world sales in previous reports.   

In FY21 the Russian market was equal to their home market Australia at 54m.  A significant market to lose entirely.

I can see their focus becoming more and more on the coin and jewellery detector market, following the money.  Maybe that means there will be a new CTX one day.    No mention of their new pinpointer, insignificant really, a bug fixed Pro-Find 35 but the damage was already done with that line by releasing the 35 in its current form and running with it.

I hope the new head honcho changes how the business is run to focus more on customers, building better quality products, resolving product availability issues and maybe just maybe improving communication with customers in general, seeing them more than just dollar signs.   I felt the business has been run very poorly over the past couple of years, in a way that has damaged the brand significantly with product availability and quality problems.  We shouldn't have to wait over a year to get new coils for a new detector that's basically their flagship like the Manticore, that's just embarrassing that they can't supply coils at the time of release.

[Aureous]

3 hours ago, phrunt said:

 I felt the business has been run very poorly over the past couple of years, in a way that has damaged the brand significantly with product availability and quality problems.  We shouldn't have to wait over a year to get new coils for a new detector that's basically their flagship like the Manticore, that's just embarrassing that they can't supply coils at the time of release.

Minelab's biggest problem is that they don't have an actual product end-user on the board. Just like politicians, 'they don't live in the real world'. No concept of just how poorly the 'biggest detector manufacturer in the world' is regarded by PR standards. No concept of customer expectations either. Their ignorance and indifference will allow other players to etch away at their market dominance....look at Nokta for an example. There are a couple of other minor players who are developing new designs in the prospecting arena also. It only takes one super successful design and Minelab suddenly have a problem. With their decline in revenue, anyone would think that now is the time to announce and release a replacement for the GPZ..... we now have to wait until 3rd quarter of 2024 I suspect. By then, it might be too late.....

[phrunt]

They don't have a significant dominance with VLF detectors, they did for a while with the Equinox while others played catch up or over took them, as it stands now competition is pretty fierce when it comes to VLF's with some brands even significantly cheaper for detectors very similar in performance and often better build quality.

It's good for us as customers, not so good for them seeing the extremely high margin gold detector market is fizzling off a bit so they are putting a lot of effort into coin and jewellery machines where there is very active and highly competitive alternatives from many brands such as XP, Nokta, Rutus and now even Quest.

Every brand has their positives and negatives however, if they want to arguably remain the market leader in thiese coin machines they need to up their game a bit with coil releases and ensuring the product that hits the market is ready, especially when it comes to quality control.

They make the most expensive detectors in the world by a significant margin however these detectors are no better build quality than a cheap low-end detector worth 1/50th the cost and to me that's not acceptable.   Something like a Simplex has better build quality and reliability than a GPX 6000.    You buy a Mercedes you expect much higher build quality than you do if you buy a Chinese discount car brand such as Chery or Haval. 

I really hope new leadership brings them back to the Minelab of days gone by with rock solid detector quality like on the older GPX models.   I'm sure if they're actually reading the reports by customers on social media and forum's they will easily be able to see the majority of complaints are all focused on certain aspects of their business that they could work on improving - stock availability, coils released as soon as possible after new detector releases ideally at the time of release would be ideal for them and for us, and last but not least build quality.

[phrunt]

This maybe of interest.

Metal Detection (Minelab) Minelab is the world leader in handheld metal detection technologies for the recreational, gold mining, demining and military markets. For more than 30 years, Minelab has introduced more innovations than any of its competitors and has led the metal detection industry to new levels of technological excellence. Minelab delivered revenues of $176 million (FY22: $262 million). Notwithstanding, the reduction in Minelab revenues against FY22, which is a direct result of continuing disruption in the Northeast African market, Minelab delivered a stronger second half across all its key markets, being RoW recreational detectors, Countermine and also in the African market. Minelab’s FY23 segment profit margin remained stable from H1 at 32%. Despite the global trend of increasing inflationary pressures affecting consumer sentiment and discretionary spending, the revenues from RoW recreational detectors have remained remarkably resilient, growing 9% versus pcp after adjusting for the ceased Russian recreational market. This sector continued to expand, exceeding the record FY22 levels which were driven by government stimulus and unprecedented COVID-related demand. The newly released products Manticore, X-Terra Pro, Equinox 700 and 900 detectors have been well received and the products delivered exceptional results driving the FY23 RoW recreational revenue growth. The Company anticipates a full year benefit from these products in FY24, although we continue to closely monitor the impact of global macroeconomic conditions.

Within Africa, significant disruptions experienced in the Northeast African region have persisted throughout FY23 and these are continuing with no signs of any improvement in that disrupted market. Importantly, revenues from other parts of Africa have stabilised and are largely returning to pre-COVID levels. Consistent with previous years, the African market benefited from seasonal conditions in the second half. Looking forward, the Company does not anticipate improvements in trading conditions within Northeast Africa in FY24. In light of this, the Company considers FY23 to represent the new revenue base for Africa going forward. Following record Countermine sales in FY22 several large project awards contributed to another strong result in FY23 albeit slightly down on FY22. The focus for FY23 shifted towards supporting humanitarian efforts to de-mine in countries such as Ukraine. In summary, through Minelab’s continued focus on expanding its technologically superior product range and through further geographic expansion, Minelab’s RoW recreational detectors are well placed to continue high single digit growth in FY24. Outlook There are a number of key considerations regarding the Company’s outlook for FY24: · After normalising for the impact of the large Communications project delivered in FY23 (approximately $20 million), the Communications business (excluding Eagle) is targeting to deliver 10% to 15% revenue growth in FY24; · Minelab’s RoW recreational market is targeting to continue high single digit growth, with a full-year benefit from newly launched detectors; and · Regional geopolitical issues persist and global macroeconomic conditions remain uncertain. Looking forward, there is a continued focus on investing in our product development pipelines, and in our people, systems and processes to support the future growth of the Company. These initiatives will see an increase in Codan’s operating costs in areas such as IT systems and the required resources to deliver our future acquisition strategy. The business believes this investment in the right structure and foundations is essential to build a stronger Codan and deliver the Company’s strategic growth plan. The Board will provide a further business update at the Annual General Meeting on October 25, 2023, which will again be a hybrid meeting with in-person and virtual attendance, to provide as many shareholders with the ability to participate as possible

Source: Codan Limited - Annual Report 2023

I think for those waiting on the GPZ 8000 being a release in the near future.  

I think we will see a CTX 4040 long before a GPZ 8000.

 

[Steve Herschbach]

The deeper message I am reading is that Codan, while touting metal detector sales numbers as holding up well at the moment, sees the writing on the wall. The tech has matured to the point where competition is now a race to the bottom - who can sell the most bang for the least dollars. Minelabs long years of getting ever higher prices for detectors is at an end. The big plan is to reduce reliance on detector sales by diversifying into other areas though acquisitions.

"Looking forward, there is a continued focus on investing in our product development pipelines, and in our people, systems and processes to support the future growth of the Company. These initiatives will see an increase in Codan’s operating costs in areas such as IT systems and the required resources to deliver our future acquisition strategy."

[phrunt]

Yes, they don't seem interested in metal detecting acquisitions, with communication the big focus from recently with these three that a quick google pops up from the past couple of years.

Codan (ASX:CDA) subsidiary Zetron to take control of US-based GeoConex | The Market Herald

Codan puts aside more than $100 million for a tactical US acquisition (smartcompany.com.au)

Codan Limited - ASX Announcement - Acquisition Announcement

Hopefully if technology has reached its limits, they don't become a First Texas releasing paint jobs over and over again for decades to come 🙂