XRF saw flat revenue for FY20, coming in at $29.1m compared to $29m in FY19.

Net profit after tax, however, jumped 47% to $3.1m. Thanks to improved product mix and reduced costs.

Net cash improved to $2.7m with 10% growth in operating cash flows and repayment of debt.

Consumables again steal the show, with 11% more sales and an 18% lift in profit. Precious Metals saw a big margin improvement that saw its profit rise 50%.

Capital equipment sales and profit was down 113% and 7% respectively.  

Overall, a good result and in line with expectations. Great to see past investment paying off and there appears to be good momentum going into FY21.

Results detail here

Let me start by saying I like the business, and am adding it to my scorecard. (only wish I'd acted sooner). I think Wini has made a clear and well reasoned Bull Case which I agree with.

So rather than repeating the core investment case, I'm going to play devil's advocate and try and present a Bear case -- mainly to highlight to myslef the potential risks (even though I'm bullish on the stock).

Although the growth potential looks good, it's worth remembering that XRF capital sales will likely be lumpy -- these products have long replacement cycles, and customers can often delay purchase of new equipment if times are tough.

Consumables sales are also dependant on customer activity, and most are in highly cyclical industries.

XRF is susceptible to raw materials prices and FX changes (lithium is a major input to their consumables). Operating margins don't need to change a whole lot for profit to take a material knock.

They are pursuing M&A opportunities. With $2.7m in cash, they may need to do a capital raise or increase debt, with potential for shareholder dilution. A poorly executed or overpriced acquisition could erode shareholder value.

Also, upcoming product launches are encouraging, but may not sell as well as hoped. 

Finally, with trailing 12 month EPS of 2cps, the current PE of 13 seems undemanding, but XRF has never really attracted a high multiple, and has often been below 10.