XRF SCIENTIFIC LIMITED — AGM Information 2013

Nov 13, 2013

2013 AGM CEO Presentation

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2013 Annual General Meeting, 14 November 2013, Perth:

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Good morning ladies and gentlemen. I’m pleased to report to you our 2013 financial year in review.

2013 completes a third consecutive year of record profits for shareholders. A 10% increase in underlying profits before tax to $5.6m has been generated, before expensing $200k in business acquisition and research & development costs.

Although sales revenue declined 11% to $22.5m, this was mainly the result of the exit of a low margin OEM contract, with a European customer, early in the financial year.

The dividend payout ratio increased from 54% to 59% via the payment of a fully franked dividend of 1.7 cents per share. This is in line with our commitment to shareholders, to increase payout returns on a sustainable basis.

There was an incremental increase in the number of shares on issue, following the exercise of the options issued to the vendors of the Sigma Flux business. The exercise added $667k to XRF’s cash reserves.

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2013 AGM CEO Presentation

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Looking at our results closer, we will first commence with our Consumables division. The division supplies mining laboratories with analytical chemicals and consumables, both in Australia and overseas.

Although revenue declined by 3%, net profit before tax increased by 4% to $2.8m. This excellent result confirms the strong link of sales to production mining based clients.

Exploration related analysis suffered a significant decline in activity from January 2013 onwards. Since then it has remained weak, although there are some early signs of a possible improvement.

In relation to the outlook for 2014, trading conditions have marginally improved over the June 2013 half. Sales revenue to 31 October decreased by 8% on the previous corresponding period to $2.4m.

In September of this year, XRF increased its shareholding in Canadian flux manufacturer Scancia, from 29.99% to 49.99%. The investment provides local manufacturing capability in the growing X‐ray fluorescence markets of the Americas. It contributes towards cementing XRF’s presence in North America, with additional technical and management staff, to co‐operate with the newly acquired Kitco Labware business.

The division continues to push forward with its plans to expand into South America. Work is being done to improve sales into the region, both via the Kitco Labware business, and existing distribution channels.

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2013 AGM CEO Presentation

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It was a year of mixed success for the Precious Metals division, delivering a result that was down on the prior year, generating a profit before tax of $1.4m. The first half of the year was extremely buoyant, as lab operations expanded, and a large amount of new products were sold. Such capital equipment related sales slowed from January 2013 onwards. The repeat income stream from remanufacturing services, continued to provide a steady base load of work.

We were extremely pleased to announce the acquisition of Kitco Labware for $1.7m, which has been trading under XRF’s ownership since August 2013. Kitco Labware is a supplier of platinum labware and precious engineered products, from its office in Montreal, Canada. Founded over 10 years ago, the business currently has sales into Canada, USA and Latin America.

The business provides broader access to key markets in the Americas and a strengthening of XRF’s distribution and customer network. As part of XRF’s international expansion strategy, the business provides significant sales into Latin America. We intend to leverage off this new and expanded customer database through the sale of additional products.

Thus far the integration is progressing well. Our team on both sides of the globe are to be congratulated for the commitment put forward to make the acquisition every possible success.

Looking forward into 2014, sales revenue to 31 October is down 17% to $3.2m, of which Kitco Labware contributed towards this amount $1.1m. The decline is largely related to lower margin new product sales, as opposed to remanufacturing services, which continue to provide a steady income stream. Additionally, the division will seek to expand product revenue organically, through the introduction of new products.

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2013 AGM CEO Presentation

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The Capital Equipment division again improved in 2013, which was a key driver of our group’s strong result. A profit before tax of $1.14m was achieved, a 59% increase over the previous corresponding period. The division has rolled out numerous initiatives that have reduced overhead costs and streamlined new product developments.

Moving into 2014, conditions for Capital Equipment sales have remained difficult. Sales revenue to October is down 34% on the previous corresponding period to $1.7m. As the year progresses, it is expected that conditions will improve, following the recent launch of the xrFuse6. Initial inquiry and quotation levels have been strong for our new flagship machine. I’m pleased to report that sales have commenced, of which the first unit was sold to one of the largest mining companies in the world.

To complement the xrFuse 6, further new products are currently under development, for release in the first half of 2015. These new products will diversify our product range and allow us to capture a greater proportion of market.

Lastly, I would like to thank all of our shareholders for their ongoing support. I would also like to thank all of our loyal employees, who through their hard work make it possible for shareholders to enjoy the excellent returns that are delivered. Although conditions have remained challenging, we are using this opportunity to prepare the business for the future. As I mentioned last year, it is important to keep in mind the strong link of our sales to production mining. This is a key differentiating factor between XRF and many other companies in our sector.

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