XTEK Limited (ASX:XTE) has confirmed a revenue guidance of $42+ million (unaudited) for the financial year ended June 30, 2020, representing a +10% growth from FY19 revenue of $37.9 million.
FY20 revenue growth was driven by strong performance in the newly acquired HighCom Armor Solutions Inc in the US, and ongoing SUAS (small unmanned aerial vehicle) supply and support.
In addition, a shift towards proprietary products in FY20 has also supported improvement in gross margins.
Given the focus on higher margin proprietary products, further substantial improvements in margin trends are expected going forward.
Optimisation increases manufacturing efficiency
Following the installation of the commercial scale XTclave equipment in the manufacturing facility in Adelaide, XTEK has progressed the optimisation of the XTEK armour manufacturing capability.
This production capacity provides the opportunity for XTEK to generate up to ~$40 million per annum in Adelaide, which represents a significant increase from the previous production forecast capacity of ~$20 million per annum revenue.
$100 million business
In addition to the Adelaide XTclave facility, XTEK plans to install a second machine in the US in the medium term, which together with other armour manufacturing systems could potentially contribute a further ~$40m per annum.
Two fully utilised XTclaveTM based facilities provide a revenue potential of up to ~$80 million from XTEK’s XTclave manufactured products alone and underpins the company’s medium term objective of becoming a $100 million business.
XTEK managing director Philippe Odouard said: “We are delighted with our strong financial performance in FY20, especially given the increased volatility and uncertainty in the recent trading period.
“In addition, we have also progressed the optimisation of the XTclave™ manufacturing capability, which has efficiently unlocked significant value by increasing our production capacity and revenue generation potential.”
“We have the key pillars in place internally to build towards a A$100m business in the medium term, with a growing pipeline supported by our active and advanced discussions with potential customers, distributors and suppliers.”
Further order expectations remain high
As global defence spending continues to grow with governments’ focus on soldier survivability, XTEK remains well placed to capitalise on these market trends.
Given the continued increase in demand, both locally and internationally, XTEK is leveraging its advanced production, its existing domestic and international orders and market position to further drive ongoing discussions and negotiations with potential customers and distributors.
Further order expectations remain high, with XTEK receiving positive feedback on multiple products to date.
Odouard added: “The multiple ballistics opportunities on the horizon in the near to medium term, is further underpinned by the global market trend towards soldier survivability and expected increase in defence spend in key markets.”