Ann: Preliminary Final Report, page-10

"focus on half-years, given the inherent seasonality in ARB's business (at the EBIT level June halves are typically around 10% stronger than Dec halves...in the FY2015 year, the June half was 15% higher the Dec half)"

I've had a bit of a look at this. I've looked at the revenue breakdowns for each half-year. Very roughly, it seems that June half revenues are typically stronger than December half revenues, to the tune, very roughly, of about 3%.

If we assume an approximate gross margin of about 55%, and an operating-cost-margin of about 38%, doing the numbers will indicate that a 3% increase in revenue, without a proportionate increase in costs, will roughly deliver a 10% increase in EBIT (operating leverage effect).

So this accords with your observation.

"So while growth in Pre-Tax Profits and NPAT for the full-year look acceptable under the circumstances, at 3.6% and 4.8%, respectively, this masks the underlying operating momentum, is, that the growth actually accelerated in the June half, (something that the full-year numbers, on their own, tend to mask)."

I'm in two minds about this observation. My numbers indicate two distinct stories, with respect to revenue momentum. Overall sales in the June 2015 half were approximately 3% stronger than in the Dec 2015 half, yes. However if we breakdown sales according to exports and the key domestic segments, we see a diverging story:

	Column 1	Column 2	Column 3	Column 4	Column 5
0		Domestic aftermarket sales increase (H2 vs H1)	Domestic OEM sales increase (H2 vs H1)	Export sales increase (H2 vs H1)	Total sales increase (H2 vs H1)
1	H2 Jun 2015	-3% (drop)	-7% (drop)	+27%	+3%

A similar thing happened in the prior financial year (2014), where domestic after-market sales actually dropped in the June-half compared to the Dec-half (that time to the tune of -1.6%). This has been masked in both financial years due to overall growth compared to the previous corresponding period (ie the Dec half revenues for each year grew strongly compared to the prior year), and also due to strong export growth. Both these factors played out particularly strongly in the Dec-half 2015.

I'm all for exciting export opportunities, and the recent growth looks very promising. However with domestic after-market still representing about 65% of revenues, and perhaps still being the goose that lays the golden eggs, I'm a little more cautious about what the apparent "momentum" may be telling us.