Pinned straw:
Discl: Held IRL and in SM
SUMMARY
FY25 was another boring, steady-as-she-grows year for XRF. My takeaways:
- Record profit, strong demand from mining and industrial customers, international sales growth, recurring revenue from consumables of installed machines - pretty boring, of the good kind, really
- Revenue was down 1% but NPAT was up 17% to $10.4m YoY - the revenue drop not a concern at all given the cost plus model that XRF has in place for Precious Metals and Consumables which impacts revenue as the price of precious metals and lithium compounds fluctuate, but XRF retains the margins, which is the key parameter to focus on
- Capital Equipment revenue up 4%
- Consumables up 2%, but margin went up 8% YoY from 30% to 38% - very nice uplift
- Precious Metals 0%, but margin stayed flat YoY at 16% vs FY24 17%
- The Orbis Crusher acquisition continues to deliver - revenue up 20% YoY, NPBT up 39% - that was a really nice sensible acquisition paying off
- Liked the update on new equipment being readied for FY26 launch
- Only thing new in the FY26 strategy was “Expand our portfolio of gold sector analysis products (M&A and internal product development)” - first time seeing this item appear
- Cash at end $12.2m, with $1.1m debt - not huge, but enough for the cautious, smallish and smart M&A’s that Vince chases after
- Expenses grew 8.69% YoY
- Germany office returned to profitability - NPBT of $0.14m vs loss of ($0.18m) in FY24
Nothing to not like really. Hence, did not quite understand the 5% drop today, a reaction to the headline revenue number, as it did last half and last year, presumably.
This is a nice summary of how XRF has grown over the years - a steady, unassuming grower of wealth.
Quarterly Segment Revenue
- Sharp spike in Capital Equipment revenue in Q4, similar to Q4FY24 - could be the start of a seasonal pattern
- Otherwise, no concerns
Half-Yearly View - Segment NPBT
All trending nicely upwards to the right, HoH - no concerns.
Great summary @jcmleng - you've saved me the write-up. I think $XRF continues to be a well-managed, quiet compounder and I am hapy to hold my 6+% RL position.
On yesterday's initial SP reaction, I think there might have been a few shareholders scared off by the revenue headline - I guess it's conceivable that some don't understand that short term revenue movement is the wrong thing to track for this business. (At time of writing that seems to have come back today, already.) However, perhaps some are noticing the flattening of capital sales, which is needed to expand the global fleet that then drives the high margin consumable spend? In this context, you also have to consider that Orbis did more than its fair share of heavy lifting, so it is proving to be a good acquisition, but of course that underscores the weakness of the other product lines.
Capital sales will, however, be more lumpy from year to year. And clearly we passed the peak sales for xrFuse machines. So, over the longer term, I think we do need to see capital sales advance.
Another positive was hearing that the German office is now paying its way. Woohoo.
I've added my own chart of revenue, gross margin, PBT and NPAT.
The flattening of revenue growth over the last couple of years is clear, and you can see it at the gross margin line too. Eventually, that will feed through to PBT, but it would be premature to "call it" now.
What I love about this business, is that I don't spend a lot of time on it every year. I'm confident that Vance will drive both the innovation and sales machines.
And with EPS growing 15.6% and DPS also by 15%, I'm certaintly not complaining.
I am happy with this at about a 6% weighting in my RL portfolio. Not looking to add or lighten. Just a HOLD from me - again.
Disc: Held in RL and SM
Hopefully it's a short term blip with the lack of revenue growth @actionman. It does show you how powerful the business model is (big up front sales with healthy tail end recurring revenue)