Pinned straw:
A slightly weaker than hoped result from XRF, revenue up 9% and PBT up 8%, two numbers I'd like to see in the mid-teens given the trading multiple. Digging a little deeper the thing to watch from this result was the core Consumables segment reporting it's lowest half year revenue since 1H23:
The commentary was that "certain customers purchased lower volumes of products during the half, which mainly relates to the timing of export orders. There has been a strong level of incoming orders in the first part of the second half."
I've seen XRF go through slightly weaker periods before and in general when management points to lags or build ups of demand we have seen recoveries in future periods. The sell off since results doesn't surprise me, the stock wasn't cheap at $2 but XRF is still a very good business and I expect it can find that higher growth profile soon.
@Wini nice summary. @Lewis characterised the result as "Meh" and I kind of agree with this.
$XRF it is a steady performer, which never shoots the lights out, but just trundles along. And the ebbs and flows in any pcp comparison I think need to be understood in this context.
My approach is to take the long view on this one. That said, I have to ask the question whether the progression of half-yearly PBT shown over the last 3 reports (graph in @Lewis post) is representative of a maturing business? For example, I had hoped the greater contribution from Orbis would nudge things along a bit, and the story about weak consumables doesn't seem to square all that well (from my perspective) with the overall current strength of the mining sector.
My own conclusion is to give this more time to show what it can do, and in any event, I certainly wouldn't consider selling in the middle of a sell-off.
Additionally, in the current environment, it is nice to have a solid, tangible industrial microcap to give the portfolio some balance.
Held (RL 4.2%)
Disc: Held IRL 4.6% and in SM
Adding my notes and updated trend charts. "AI" appeared nowhere in the pack- have to ask Vince why the hell is not using AI to turbocharge the business (and the share price)!
OVERALL
Meh is a good word to describe the earnings, but this “fits” what seems like a seasonal pattern that has been in play in the last 2 FY’s of a weak 1H following a strong 2H, then recovery in 2H
Other than a weaker than expected Consumables result, flagged as a timing issue, I didn’t find anything worrying.
I also wonder if there was some forward buying of Consumables at play throughout FY2025 as miners ordered forward to ensure supply - the Revenue and NPBT from those 2 half’s standout quite sharply. Is the fall back to “normal pre-2025 levels” in this half, the subsequent drawdown and a reversion back to the mean potentially?
REVENUE
Not a flash result - vs pcp, it was not bad, but vs 2HFY25, it was pretty average - Consumables was clearly a drag.
Quite key though, in the last 3 FY’s, there seems to be a clear/emerging revenue pattern of (1) 1H being weaker than 2H (2) 1H is mostly flat/marginally higher than the previous 2H (3) recovery in 2H has been noticeably sharper - the 1HFY26 result seems to be following this seasonal pattern quite nicely.
Otherwise, Total Revenue was on-trend, and not concerning, also noting @Winicomment above.
Never paid too much attention to Precious Metal revenue as that is pegged to base metal prices, NPBT for Precious Metals is what is more important.
EXPENSES
Cost of Sales rose lower than the increase in revenue. Total Expenses rose on trend - the sharp increase vs 1HFY25 is more than offset by a reduction from 2HFY25.
Does not look concerning to me.
PROFITABILITY
- Precious Metals is going gang-busters
- Consumables dragged
- Capital Equipment bounced around as usual
BALANCE SHEET AND CASH
- Net cash position of $11.0m
- No concerns with Cash - Cash balance $12.1m vs $12.2m in 2HFY25, cash inflow from operating activities was $6.4m, higher than 2HFY25 $5.7m, 1HFY25 $4.4m, all healthy
SEGMENTS
- Consumables is looking to be a timing issue - need to check is this is a recurring seasonal issue in previous FY’s.
- Precious Metals went gang busters this halof but is likely to moderate in 2HFY26
- Capital Equipment is bubbling along with no concerns
FY26 GROWTH STRATEGY
No change from previously