Xtek Ltd - XTEK (ASX:XTE) Announces Operational Updates in Their Latest Investor Presentation
Xtek Ltd (ASX:XTE)

XTEK (ASX:XTE) Announces Operational Updates in Their Latest Investor Presentation

Published Mar 23, 2021

What happened?


What has happened?

XTEK (ASX:XTE) announced their latest operation updates in a Finance News Network (FNN) conference presentation released today. The FNN conference provides an opportunity for XTEK to showcase its recent achievements, key investment highlights, strategy and outlook. Notably, XTEK’s commercial-scale XTclave™ at the Adelaide Manufacturing Centre has successfully validated the production of armour plates/helmets and achieved the required level of ballistic performance. Additionally, XTEK has recently commenced a full commercial launch across the US.

What are the key highlights?

  • Despite a reduction in revenue for 1H FY21, XTEK’s shift to higher-margin products drove a record gross profit. XTEK hopes that the increased focus on investment and integration will set the Company up for increased future margins.
  • The presentation sites the completion of the Adelaide Manufacturing Facility (AMC) and the successful delivery of 3/4 of XTclave™ to the Finnish Defence Forces. The presentation also touched on strong US performance with HighCom fully integrated, illustrating robust demand and expanding sales channels, including new export licenses and a 5-year NASPO manufacturing contract.
  • The presentation also highlighted the actionable intelligence software that XTEK seeks to leverage via the C4 EDGE program for the Australian Army, with the first phase completed and a ~$1M contract secured as part of the next phase. Furthermore, the presentation highlighted that a commercial XTatlas order has been received and delivered to the Danish defence forces, paving the way for other NATO countries to start adopting the technology.
  • Lastly, XTEK covered their advanced composite space solutions and highlighted how the XTclave technology provides the Company with unique technical advantages that can be leveraged into other applications and applied in new sectors, with space applications presenting an attractive opportunity.

Analysts thoughts

SmallCapInsider from Mawson Graham provides perspective on this recent announcement.
SmallCapInsider
Written by SmallCapInsider
Published Mar 23, 2021

What does this mean?

There’s a lot to unpack in this latest announcement out from XTEK. Firstly, the Company highlighted its shift to a higher margin product mix which it believes largely contributed to its record 1H FY21 Gross profit, albeit revenue was down for the 1H FY21 period. The Company believes that its continuous focus on investment in the AMC and the integration of acquired subsidiary HighCom, may aid in increasing future margins as the Company continues its expansion across the USA.

file

The proprietary sales in the product mix mainly involve selling ballistics directly to the US market along with the sale of high margin ballistics solution (XTclave) and sales of actionable intelligence via XTatlas software. Some other higher-margin activities involve the repair and maintenance revenue streams, including servicing the ADF’s growing SUAS fleet.

file

Another significant recent development for the Company is the completion of the AMC, which can produce XTclave ballistic products on a commercial scale. The new facility successfully manufactured large batches, while the full commercial launch started in the US on 1 March 2021. The forecast revenue capacity for the facility is up to A$40m p.a. The AMC is designed to produce 80,000 plates or 40,000 helmets p.a. Along with the AMC update, the presentation also showcased XTEK’s growing global ballistics network.

XTEK also highlighted that its commercialisation strategy builds upon the Company’s capability to provide a complete system for comprehensive real-time actionable solutions. The XTatlas™ allows for the rapid production of real-time, accurate, geo-referenced 3D mapping from a video feed that enables the user to compare data feeds with previous data. The use of XTatlas in combat also ensures real-time situational awareness and targeting during a mission, critical to soldiers safety. The XTatlas software has the added benefit of interfacing with existing hardware, such as SUAS weapon systems or ground robots. XTEK’s established networks with access to broad customers channels, will hopefully provide significant opportunities to commercialise the XTatlas™ software applications, with demonstrations and discussions currently ongoing. A brief overview of the existing actionable intelligence market channels can be seen in the graphics below.

file

Lastly, XTEK also showcased its unique technical advantages when it came to space solutions. XTEK was able to demonstrate that XTclave™ technology can be leveraged into other applications and applied in new sectors, with space application potentially presenting an attractive opportunity. Some of the key advantages posed by XTclave technology for space applications is its ability to produce materials with a higher specific strength to weight ratio. The extreme pressures used in the XTclave process can reduce composite outgassing, an often limiting factor for the use of composites in space. XTEK’s commercial partnership in regards to the space applications can be seen below.

file

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