XTEK (ASX:XTE) 1H21 results & outlook


by Rachael Jones

XTEK Limited (ASX:XTE) Managing Director Philippe Odouard talks 1H21 results, discussing the company's expanded operational capacity to meet demand for its high-value proprietary solutions in a favourable market environment for domestic and global defence industries.

Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me from XTEK (ASX:XTE) is MD Philippe Odouard. Philippe, welcome back to FNN.

Philippe Odouard: Yeah, good afternoon, Rachael.

Rachael Jones: Now, XTEK provides high-quality products to deliver tailored solutions to the government, law enforcement, military, space and commercial sectors. Can you tell us more about this?

Philippe Odouard: We used to be very much oriented towards distribution of products from overseas companies to Australia. We've changed that to doing our own products, developing our own products and selling them. The difference between the two is a very high margin for the products that you develop yourself. We have increased our gross margin from 18 per cent to 26 per cent, so you can see that it is a big jump in terms of this gross margin.

We have a new technology that we're launching on the world market, doing ballistics, which is really helmets and plates, armour plates for soldiers and law enforcement. These are up to a third lighter than anything that exists in comparison, with the same stopping capabilities.

The second product we launched recently is a device that can take a full-motion video from a UAV, an unmanned aerial system, and get you a 3D model and the 3D positioning of a particular area in real time, with very high accuracy, which allows you to target, and that goes for a UAV that is quite inexpensive to start with. So, both products, unique in the world. We've launched them to the world market. We've been quite successful in a number of countries already.

Rachael Jones: And can you tell us about the US subsidiary?

Philippe Odouard: So, the US is actually an acquisition we did about 15 months ago. They distribute our products into the US. But they have their own products on their own. They have the own manufacturing capability. And they've actually got about a 30 per cent growth in the last calendar year.

We have a large commercial machine that produces large quantities of plates or helmets. That is coming online now. So, that is a big event. The purpose is to be able to get a second machine in our factory in the US, to be able to serve the US defence market, that demands that the production should be done on-shore in the US.

Rachael Jones: And can you tell me about the focus on actionable intelligence solutions and unmanned systems?

Philippe Odouard: So, we're very strong on unmanned systems. We've been supplying UAVs to the Australian government now for several years. We signed about a $40m contract to supply those. The maintenance part of this is another $30m to $35m.

But UAVs is one thing. A lot of what we're doing is also on the ground. We have recently signed a UGV, an unmanned ground vehicle. You get video from the UAV. You process that with our actionable intelligence software called XTatlas. And you designate a target, typically carried on by a UGV with a remote weapon station, which will engage with the target. So, it's a complete chain of fire that we are now in a position to propose with those different products and the developments we've done.

Rachael Jones: Now to corporate matters. Can you provide an update on your recent capital raising, and also the appointment of Christopher Pyne to the board?

Philippe Odouard: Yes. In August last year, we raised around $12m on the market. Some of it was to relaunch what we're doing at the present time worldwide on our new products on the ballistic side. The other part of it is to be able to invest into the second machine that we want to install in the US. One of the key things that happened after that was we've beefed up a lot of our staff in selling on one side, but also in terms of visibility of the company, and that's how we approached Christopher Pyne and appointed him on the board, to help us raise our profile. We’re a small company. We need to get people to see us a bit more. Christopher is actually very good at that, as you probably know.

Rachael Jones: So, what's the outlook for the second half and further out?

Philippe Odouard: The products I've mentioned to you, both of them are ready. We are now very much in the promotion of those two on the international market. We have very good networks into this, and the next step is selling them and delivering them. And as a consequence on the stock exchange, we are growing the revenue and growing the profit in a substantial manner with that new strategy.

Rachael Jones: Philippe Odouard, nice to see you again, and thanks so much for the update.

Philippe Odouard: Thank you very much, Rachael.