Break even figures28 Nov 2011 11:30
If we take the first 1,888 tonnes produced from the last update, revenue of £38,000 was recognised with a cost of sales of £23,000. This implies that there is a £7.94 GP for each tonne which if admin expenses are around £1m per annum, the company would break-even after 127,707 tonnes or after 64% of capacity. If the company ran at full production there would be a profit of £575k. At a p/e of 10 times expected profit this values the business at £5m, i.e. valued correctly at its current share price. The trick is to improve margins above its current 40% as any improvement will significantly affect its value and share price.