The Codan Limited (ASX: CDA) share price has started the week strongly.
In morning trade, the metal detector focused technology company's shares are up 10% to $7.41.
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Why is the Codan share price rising?
The catalyst for the rise in the Codan share price on Monday has been the release of a trading update from the company.
According to the release, the company is expecting its record FY 2022 first half profit of $50 million to be matched in the second half of the financial year.
This would mean a record full year profit of ~$100 million for Codan, which represents a 56% increase on FY 2021's profit of $64 million.
Though, this guidance does come with a warning. Management advised that the timing of project sales or unforeseen challenges in supply chains could still impact revenues and profitability as it approaches the end of the financial year.
What is driving Codan's growth?
The release explains that this strong growth has been supported by its strategy to diversify revenues and profitability.
It highlights that the increased profitability of the Communications division has continued during the second half thanks to positive performances from the acquired DTC and Zetron businesses.
In addition, the company's Minelab business is on course for its second-best year on record. But even better, management expects the business to form a new base from which it will grow in future years. This is being underpinned by continued penetration of new geographic markets and new product releases that will drive further market share increases.
Finally, Codan revealed that its inventory management has been successful. It explained that its "decision to invest in inventory rather than let customers down has proven to be the correct one."
Notwithstanding its investment in inventory, this has led to $41 million of cash being generated from operating activities so far in the second half. This is a huge improvement on its operating cash outflow of $13 million during the first half.
