$XRF reported their 1Q FY25 trading performance this morning.

• Revenue of $13.1m, down 3% compared with pcp
• PBT of $3.2m, up 15% compared with pcp
• Consumables of $4.6m compared with $4.4m, driven by volume increases, with selling prices reduced due to lower lithium prices being passed on to customer, but unit profits remaining steady
• Capital sales of $4.3m compared with $5.1m in pcp, with $0.8m of sales referred to Q2,
• Precious metals sales of $4,3m were up from $4,0m in pcp, with the much vexed German office reportedly "improved".

My Analysis

As shown below in the trend chart this was by any measure a soft quarter, with both revenue and PBT falling below growth trend lines. Given everything that's happened in bulk metals and lithium in the quarter, a pullback - focused on capital sales - from the overall trend is perhaps not surprising. Even so, the market has reacted negatively with shares down around 5% at time of writing. This is probably because of expectations of improved capital sales from the new products being introduced this year. Even with the delayed sales, these would be flat.

Looking at SP progression over the last year, the SP has advanced very significantly (up some 45% YTD at the open), and arguably well ahead of might be justified on fundamentals. So, today's pullback has to be understood in that context.

Today's results aren't great, but with this quality microcap, I can't moditfy my generally positive view off one report. Let's see how the rest of the year unfolds. Capital sales in 2Q will be of particular interest.

Disc: Held in RL (4.2%) and SM

Mining analytical equipment manufacturer $XRF released its FY24 results today.

ASX Release

Their Highlights

• Revenue up 9% to $60.1m from $55.3m
• Net Profit After Tax up 16% to $8.9m from $7.7m
• June Q4 Profit Before Tax of $3.3m and Sales Revenue of $16.2m
• June Q4 Profit Before Tax and Non-Controlling Interests (Orbis) of $3.9m
• Final fully franked dividend of 3.9 cents per share 

My Analysis

$XRF provides quarterly revenue and PBT updates, so there was little room for any overall surprises.

In July 2024, the acquisition of the outstanding 50% in Orbis became effective. Without the previous NCI, PBT for Q4 was $3.3m. Including the NCI, PBT rises to $3.9m. Future periods will now enjoy the full contribution of Orbis.

The main driver of the result was %GM expansion from 41.6% to 44.2%, leading to gross margin increasing by 15.5% on revenue up 8.8%.

Performance was primarily driven by capital Capital Sales, up 16% with an NPBT margin of 21% up from 18% in FY24. With the initial sales of xrTGA (thermogravimetric analysis) equipment, capital sales are expected to continue to grow strongly into FY25. Management noted "Sales growing in numerous markets worldwide". Capital sales are also expect to benefit in FY25 as the company launches new products that have been in development.

Consumables revenue was up 11%, albeit with PBT margin compressing slightly to 30% from 31% in FY24. Falling Lithium prices were called out as impacting both selling prices and production costs, and will lower working capital requirements into FY25.

Precious metals was the only underperformer, with revenue down 1% on PCP. The problematic German Office was called out as reducing profit from FY23 by $0.8m "due to economic conditions. This is expected to improve in FY25.

The final fully franked dividend of 3.9 cps represents a +18% increase on last year, and a grossed up yield of 3.8%,... not so impressive in this high interest rate environment, but this is primarily a capital growth play.

Free cash flow was $5.7, down from $7.1m in the PCP due to investment in manfuacturing facilities, however, cash on the balance sheet increased to $12.0m from $10.4m.

My Key Takeaways

The results represent good - if unremarkable - progress.

NPAT growth of 16% was strong albeit bringing the 3-year CAGR down to 23%.

Strong capital sales helped cover a weak performance in precious metals.

$XRF continues to be a steady performer.

Disc: Held in RL and SM

$XRF has exercised its option to acquire the remaining 50% of Orbis. No surprise here, as this has been a good bolt-on acquisition for reasons discuss here previously.

At a pro rata 5x mulitple of the average of FY23 and FY24 EBIT, this is a good price and should be immediately accretive.

There's also a note to say the overall sales conditions in the June Quarter "were positive as expected", so I don't expect any surprises when the FY is announced in August, although the remarks say nothing about the cost environment.

ASX Announcement

$XRF has some flexibility around cash and shares in the transaction, and there is a potential earnout payment based on FY25 profits.

Good news.

Disc: Held in RL and SM

$XRF issued their 3Q trading update.

ASX Release

Keeping it brief, all segments contributed with a positive outlook for the final quarter. Reference made to strong gold prices driving demand, as well as low Lithium price driving lower selling prices and production costs.

One new product was launched - the next generation of weighing device - xrWeigh-S-FL, with other new products on track for FY25.

In short, nothing of note that I can see in the release.

Looking to the numbers, in the context of history, both PBT and Revenue are a whisker below the 2-3 year growth trend, but certainly well within the q-on-q variation to not be a significant departure from steady growth.

No real market reaction - low volumes on either side of the trade.

Disc: Held in RL and SM

Figure 1: XRF Quarterly Revenue and PBT ($m)