Ann: Appendix 4D - Half-Year Report, page-8

Noting a few comments of bemusement at the result not being as strong as some might have been expecting, I can see some countervailing points that suggest it was actually not at all a bad result under the circumstances.

It must be remembered that DH2020 saw numerous headwinds all blowing simultaneously, the most obvious one being Covid which did disrupt not only activity of XRF's customer base, but it it also disrupted XRF's own ability to market to, and serve, those customers.

And then there's the matter of the meaningful strengthening of the A$ over the course of DH2020, given exports make up around 40% of XRF's sales which, presumably are invoiced in US$ terms even if they don't end up being sold in the US.

So to end up with Sales down just 5% on DH2019 (and, notably, 12% higher than JH2020) is not all a bad outcome, I don't believe.

But the most noteworthy aspect to this result, in my view, is how well the Gross Margin held up:



(Part of me says that they could have ceded on price to some degree, which might have resulted in a lower GP Margin, but could have driven disproportionately higher sales and hence, Gross Profit).

Nonetheless, that good GP Margin outcome, combined with tight control on Cost of Doing Business ($3.5m in DH2020, compared to $3.91m in DH2019 and $3.78m in JH2020), resulted in a half-yearly Operating Profit figure last seen in 2012, during the last commodity boom:



So, all-up, while it may not have "felt" like a particularly good result at first glance, I actually think it was pretty decent, and one which sets the business up well for a normalised business conditions.

I think its a 6 out of 10 business being valued like a 3 out of 10 business, at a time when it is about to embark on a once-a-decade cyclical upswing.


[Note:  All figures quoted in this post exclude Non-Recurring Items, including Jobkeeper subsidies in DH2020]

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