Ann: LBL 2016 AGM - Board Address to Shareholders-LBL.AX, page-4

@ozy944 haha - just took me a while to write about it!

My guess is second half incremental revenue of $1.6m is largely explained by this which was quoted as being worth $1.45 million in the announcement on 20 September. However, my reading is that this doesn't include ongoing training and support fees to be paid over the following five years which I guess will be a couple of hundred thousand per year.

I wonder if they will maintain gross margins on this contract. I suspect upfront equipment sales might be lower margin with higher margin training and support coming later on.

Regardless of the licensing contract which may turn out to be one-off (although they sound confident of securing others) you have the OEM production going gangbusters with their new cladding technology. I suspect the strength of this business influenced the decision to invest in new production capacity. Therefore, even without a repeat of the Chinese contract, the future looks pretty rosy.

And that's without even mentioning possible sales of their own DTH hammer and any other new products down the track which you would expect to be higher margin.

I also like the fact that when you look at the last couple of disappointing profit results the reasons were purely related to growing the business and do not represent any underlying deterioration of the core.

Also, gross margin jumping from under 50% in 2016 to 56% in Q1 2017 demonstrates the operating leverage at play with manufacturers. I wouldn't be surprised if they can't improve this further with increased throughput once the new laser is up and running.

I guess it depends on the increase in R&D and sales costs to achieve the above but it seems to me that these guys know what they're doing.