Thanks for the comprehensive analysis, and another bit of data...

Thanks for the comprehensive analysis, and another bit of data to throw into your equations, the impact of the FX rate on their PL.

The company sources most of their product from overseas and in invoiced in USD. Further, the company advises they cover their forecast USD needs six months forward.

Allowing for this 6 month lag factor, the average AUD/USD FX rate used for the 1st half of 2009/2010 would have been 0.7120, and for the 2nd half 0.8680. Hence their import costs would(should) have been approx 22% lower in the 2nd half.

This is some way explains the reduction from 53% to 49.5% in the ratio of the cost of materials & consumables as a % of sales.

The further good news on the exchange rate front is that for the 1st half of this fiscal year the company should be covered at 0.8935. In other words their cost of goods is about 25% lower than the pcp, and all things being equal should provide for a very good 1st half result.