While Australia makes the driest inhabited continent in the world, finding an adequate supply of water is an essential part of running the daily operations of 800 mining sites across the country. Historically, the water used in mining sites contains high amounts of toxins, which other than creating a significant volume of wastage also negatively affects farming and agriculture industries and can destroy the wildlife. For this reason, the Australian Government has been actively (and strictly) placing environmental policies to regulate water usage and prevent wastage, which have changed how dirty or contaminated water should be dealt with within the industry. 

Capitalising on demand from miners for water management and recycling to meet environmental regulation requirements, the first half of FY23 has been smooth sailing for integrated water service provider Vysarn (ASX: VYS). Among some of its financial achievements are $29.1 million revenue from operations, an approximately 21% increase compared to $24m revenue in the previous corresponding period (pcp). EBITDA and Net Profit Before Tax (NPBT) also increased by 19% and 62% to $4.24m and $1.59m, respectively. 

The company has successfully executed the early stages of a diversification strategy during the half, transitioning the business away from being a sole service provider in hydrogeological drilling to a multi-faceted water service provider, simultaneously repositioning the drill rig fleet to service tier 1 clients primarily in iron ore. With operational cash flow of $5.35 million, the Company ended with $7.13 million cash at bank at the end of the quarter.

However, there is a slight hiccup in its NPAT (Net Profit After Tax) result, in which it observed a 112% decrease from $463k in H1 FY22 to a loss of ($55k) in H1 FY23. There is a non-cash income tax expense of $1.65 million in the period which primarily reflects the Company’s increase in existing deferred tax liability due to a change in the Company’s corporate tax rate and utilisation of the ATO’s instant asset write-off. As a result, the Company continues to carry tax losses of $11.63 million that can be used to offset future income tax liabilities.

In accordance with its strategy to become an industry leading vertically integrated whole of life, end to end water service provider, Vysarn remains confident stepping into the second half of FY23, having published an earnings guidance to deliver Net Profit Before Tax (NPBT) of $6.0m to $6.5m in FY2023. Previous guidance was $5.1m NPBT. Its wholly owned subsidiary Pentium Hydro Pty Ltd is forecast to deliver second half FY23 EBITDA of $7.5m. Previous guidance was $6.1m EBITDA.

Vysarn continues to maintain that one of the largest and growing impediments to ongoing iron ore production is the removal and disposal of water. Based on this and the demand and outlook for the Company’s current suite of services, the opportunities that underpin Vysarn’s strategy of building a vertically integrated water services business have been strong, supported by ongoing operations across its wholly owned subsidiaries Pentium Water (specialised water management consulting services in hydrogeology, hydrology and environmental planning), Pentium Hydro (a dedicated hydrogeological drilling and dewatering business) as well as Pentium Test Pumping (a dedicated groundwater management service provider).