A company I have covered many times for this publication, Vysarn (VYS:ASX) reported their FY 2025 earnings on Friday, with headline numbers looking relatively strong off the back of what was a partially weak H1 FY 2025 report. Revenue for the year was up 40% to $106.5m, while NPAT and EPS were also up 34% and 8.5% to $10.69m and 2.05c respectively. The growth in EPS was lower due to the capital raising that occurred throughout FY 2025 to fund the acquisition of CMP Consulting.
Vysarn reported H2 NPBT of $9.8m, which was a strong result, up 87% on H1 and slightly better than guidance of $9.6m given in March 2025. Both acquisitions made in the first half contributed a full half. Using H2 we can therefore extrapolate an annual run rate of $19.6m NPBT. This number increases to $20.6m NPBT if you exclude the one-off acquisition costs called out in the commentary by management.
This pleasing result was aided by a rebound in the industrial segment, which increased NPBT 112% from $2.5m in H1 to $5.31m in H2. As always, utilization rates are the key with this style of business, and judging by the linkedin headcount for Pentium Hydro increasing 12% over the last 6 months to what is close to an all time high number, I expect the utilization rate to remain high in FY 2026:
Waste water services (WWS), an acquisition that was made in September 2024 for $7.5m performed exceptionally well delivering $3,828,767 NPBT to the full year result, despite only contributing 10 months of earnings. Annualised, this result was 105% up on the prior year figure quoted in the acquisition presentation of $2.24m. Ultimately, this shows management’s ability to integrate smaller bolt on acquisitions well, as they have done in the past with Project Engineering.
On the other hand, Vysarn’s larger acquisition, CMP Consulting, didn’t fare quite as well, only contributing $2,738,723 NPBT from 7 months of trading, if this is annualised, this is roughly 22% short of the 2024 NPBT number that the acquisition was made on. 2 of these 7 months included December 2024 and January 2025, 2 months that are particularly tough for consulting businesses who rely solely on a high rate of recoveries to charge out to clients, so I am inclined to wait for a full period of results in order to judge this acquisition more critically.
The Hazen heads of agreement announced in July 2025, and the first Sydney Water scope awarded in late 2025 should help improve CMP earnings moving forward, however, it is something I will be keeping an eye on.
When it comes to Vysarn’s existing industrial business, evidence shows that it may have been in the midst of a cyclical downturn over the past 12-18 months, however, the impressive H2 NPBT result seems to indicate that this cycle may have rebounded, with earnings in this segment of the business up 112% from H1 to H2.
In 2025, total EPS of Vysarn increased 8.5%, while NPBT from the more cyclical industrial parts of the business declined 19.0%. This potentially justifies management’s decision to diversify the business and sets the platform for what could be some strong growth moving forward if the cycle has turned and the most recent acquisitions can deliver in unison.
On the face of it, H2 2025 cash flow looks weak compared to the first quarter cashflow, anyway. I suspect this pattern will continue over time due to the nature of Vysarn’s customers. Being large mining corporations, they may prefer to pay their bills on the 1st of July each year for their own reasons. Cash at 30 June 2025 was $12.96m, with less than $1m of debt. Conservatively calculated free cash flow (being cash from operations less total PPE and lease payments) across the year was $6.4m. This was up on the $2.5m for 2024. We should see this free cashflow figure increase as a proportion of NPAT, as the company continues to diversify away from the more capital-intensive parts of the business.
This cash balance and lack of debt gives Vysarn a strong balance sheet, with more than enough to cover working capital. I suspect some of that excess cash could be used to explore further inorganic growth, and management has stated in their commentary, that the company ‘…has identified multiple acquisition growth targets that have the potential to provide further scale and diversification’.
A number of developments in relation to Vysarn’s asset management (VAM) division occurred throughout the 2nd half of the year that shows the division is moving closer to reality, albeit with a lot of water still to go under the bridge (pun intended).
Vysarn’s progress on proving up the water source through a drilling program throughout H2 2025 has seen the project reach a point where the final part of Vysarn’s 5C application, the H3 hydrogeological report is due to be submitted by the end of the calendar year. This report will set out how much water can be sustainably extracted from the targeted aquifer per annum, which will be a key driver to any future financial metrics of the project. This should then be followed by the determination on Vysarn’s 5C application which ultimately gives the Joint Venture the right to extract water from the aquifer. In my opinion, these are 2 large de-risking events that would see the Kariyarra Water Scheme move from blue sky closer to reality.
Throughout HY2 2025 there were also various media outlets reporting disagreements between Northern Star (ASX: NST) and Vysarn’s Joint Venture in relation to their proposed Hemi Gold Project’s water reinjection into the same aquifer targeted for the Kariyarra Water Scheme. (Northern Star Resources: Kariyarra Corporation slams Hemi gold project approval over water contamination fears, Water worries flagged at De Grey’s Hemi gold project) Subsequently, late in HY2 2025, Northern Star’s Hemi Gold project Environmental Protection Authority (EPA) approval was released and it does mention the VAM project.
Source: EPA Report 1785 Hemi Gold Project.pdf
More recently, in relation to potential off-take customers targeted by the scheme, one potential off taker named by Vysarn in their investor presentation back in March 2025, POSCO, had their EPA for the Port Hedland Iron project approved on 19th August 2025. This project intends to use up to 3.5gl of Vysarn’s targeted 10gl p.a. ambition for the Kariyarra Water Scheme.
Looking at the EPA documents submitted, the Kariyarra Water Scheme is the only viable water source listed for this project.
Source: Port Hedland Iron Environmental Review Document Part 1 of 2.pdf
The next step for POSCO’s project on the way to final investment decision is the land use approval from the Kariyarra people. This should run smoothly given a relationship has already been formed over the potential use of water.
It certainly seems as though management is becoming more confident in the viability of this project, stating in the commentary ‘the Company is of the opinion that the early results from the drilling and testing program supports a commercial water supply project’.
With the market’s negative reaction to the result, Vysarn at 53.5c currently trades on a PE of around 21 times my estimated run-rate NPBT of $19.6m, assuming no growth and taking into account a 30% tax rate. While this does not scream cheap, the continued diversification away from the more cyclical capital intensive side of the business, potential for further inorganic growth with their large cash balance and the potential for a significant annuity style business in VAM that looks to be getting closer to reality means I am happy to continue holding this stock at the current price.
Disclosure: The author of this article owns shares in VYS. The editor of this article, Claude Walker does not own shares in VYS. They will trade VYS shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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