XTEK (ASX:XTE) Announce Their Half-Yearly Activities and Cashflow Report

What does this mean?

XTEK reported revenues of A$12.4M (H1 FY20: A$16.0M) and gross profits of A$3.2M (H1 FY20: A$2.9M) for the half-year ended 31 December 2020. A primary focus of the Company during the period was driving up profit margins through a shift in its product mix towards its proprietary products and services, with substantial progress demonstrated by the increase in gross profit margins to 26% compared to the prior corresponding period (PCP)(H1 FY20: 18%). The Company anticipates continued improvements in the gross profit margin over future periods as the mix to sales of proprietary products and services increases. The Company’s US ballistics business also performed well, with HighCom Armour Solutions increasing their turnover by 30% for CY2020 to USD$10M compared to CY2019.

The Company is expecting stronger second-half numbers in its Australian-based activities in-line with the typical seasonality of the business. The reported net loss of A$3.5M incorporates a substantial R&D investment which includes investments into XTEK’s proprietary technologies, the opening of its Adelaide Manufacturing Centre (AMC), integration around the HighCom Acquisition and the development of XTatlas™ technology. Despite the heavy capital expenditure throughout the period, XTEK finished the period with a strong cash position of A$10.1M.

XTEK also announced some exciting news over the period after unveiling their Adelaide Manufacturing Centre (AMC), which can produce up to 80,000 SAPI plates or 40,000 helmets p.a. During H1 HY20, the Company completed the delivery of the first tranche of XTclave SAPI plates to the Finnish Defence Force. With the additional capacity created by the AMC, the Company feels that it is in a strong position to secure further orders. During the reporting period, XTEK, through its subsidiary HighCom was awarded permanent export licenses for hard armour plate and helmet products to various Mexican government customers, with the order worth approximately USD$2.1M.

In regards to the sales of XTEK’s proprietary XTatlas™ technology, the Group delivered on an order received by the Danish Defence Forces in early February. The Company noted that European countries have shown major interest in XTatlas™ and its targeting capability, pacing the way for adoption of the technology and potentially expanding sales in the near future. Additionally, XTEK’s recent contract win with C4EDGE provides the Company with the opportunity to leverage the unique capabilities of its proprietary XTatlas™ software to enhance situational awareness of select frontline soldiers and pass on targets to weapons systems, substantially improving targeting in Army front line operations.