TAM. Again, a very strong recovery was seen across the half. In the Q1, new units installed were up 17% compared with Q4 of FY 2020 when the majority of the COVID impacts were actually felt. Importantly, however, the number of new units installed that came in the Q2 of this half, they continue to recover and were up 35 percent compared with the Q1 of this half. So great results emerging in North America.
In Europe, as you know, over the last 18 months, we have increased our infrastructure as the fundamentals for adoption of Trow Farm continue to strengthen. And this investment is resulting now in excellent growth in the number of new units installed, which was up 31% in the 12 months and 18% in the last 6 months. And there's now 13 20 units in the EMEA region. The number of new units installed in Q1 of the half was actually up 60% compared to Q4. So recovering quite strongly from the major impacts in Q4 of FY 2020.
And that growth trend continued into Q2 with the number of new units also up 50% compared with Q1. So seeing good recovery and good momentum continuing to emerge in our European operation. And in Asia Pacific, the total installed base was up 6% in the last 12 months and 3% in the last 6 months to 1660 units.
While in
Q1 of this year. The number of new units was actually down compared to Q4. That I think is a reflection in some cases of the strict lockdown measures everybody here in Australia has experienced over that time period. But this recovery was experienced or recovery was experienced in the Q2 with new units installed up 50% compared with the Q1 of FY 2021. So overall, a very positive growth profile for new installed base across the half, which we're expecting to continue into the second half.
Moving on to revenue. From a total revenue perspective, the half year revenue of $43,100,000 That was down 11% compared to prior corresponding period. Now this lower revenue was primarily driven by the foreshadowed reduction in purchases by GE Healthcare as as a result of the impacts of COVID-nineteen on its ending inventory at June 30, 2020. So in addition, the water impacted a stronger Australian dollar. Everybody realizes the appreciation of the Aussie dollar in the last half.
And in constant currency terms, revenue was $44,600,000 versus the $43,100,000 reported, or down 8% on prior corresponding period in constant currency terms. But just a brief reminder on the foreshadowed reduction in purchases by GE Healthcare. We brought this up when we reported our FY 2020 full year results. And as you remember, Q4 of FY 2020 is where we felt the biggest impact of COVID-nineteen. In that quarter, new installed base was down almost 50% due to hospital department lockdowns, which also in themselves resulted in ultrasound procedure volumes being reduced in that period.
Now this had the effect of GE Healthcare's ending inventory at the end of FY 2020 being greater than anticipated with the knock on effect then, of course, of impacting capital and consumable purchases in the Q1. In the Q2, however, the global revenue recovered strongly. So it's up 48% compared with the Q1. So it's up to $25,700,000 in the second quarter. And that growth resulted from stronger installed base growth across all regions.
As I mentioned, it was 800 new installed base in that second quarter, which was higher than even the Q3 of last year, which was pre COVID. But not just the installed base, GE Healthcare have resumed purchases to all capital equipment in the second quarter as they've worked through their inventory overhang from COVID as well as an increase in consumables and service revenue. And it's also worth mentioning because back in November, we did announce a major upgrade deal that has been entered into with Imade for 200 plus Tropon upgrades from the EPRs to T2. And That is expected that revenue will be is expected to be recognized in the second half as those TROFON-2s are installed across their network. Accordingly.
There was no revenue associated with that particular deal in the first half, but expected to be fully recorded in the second half. So if I break the total revenue now down by consumables and capital. First of all, the consumables and service business, which certainly really demonstrates the resilience of the nanosonics business, I believe. Our half year consumables and service revenue was $33,700,000 That was up 1% on PCP, but actually up in constant currency terms. And as already explained, there were some temporary impacts on consumable revenue associated with ultrasound procedure volumes being impacted by COVID-nineteen, especially in that Q4 of last year and some of it into the Q1 of this year, but also some GE inventory overhang at the end of June 30.
But importantly, this was temporary and has since recovered well. In fact, revenue from consumables and service in the second quarter was up 29% compared with Q1 to $19,000,000 And if I take that in constant currency terms, that's almost close to $20,000,000 which is the company's highest quarter on record for consumables. So a very positive recovery happening in the consumables. From a capital revenue, Again, I think I've said enough that the impact on the capital revenue, which was 9,400,000 for the half was down 35% compared to prior corresponding period. But that was primarily felt in the Q1.
Where despite new installed base recovering, because there was no capital units sold to GE Healthcare for the reasons already explained, and then there was a major impact in capital. In actual fact, in the Q1, it actually resulted in a reduction in capital revenue of 64% between Q4 of FY 2020 and the Q1 of FY 2021. But as GE Healthcare resumes, capital purchases in the Q2, coupled with increasing sales by our direct operations in North America as well as positive performance of both Europe and Asia Pacific. The capital revenue grew 148% over Q1 to $6,700,000 in Q2. So again, a great recovery happening and underway on the capital side of things.
In terms of the other financials for the business, well, during the half, we continued to make significant investments in our broader growth strategy across our global infrastructure, capacity and capabilities as well as geographical expansion with a particular focus on Japan and China. In addition, we continue to invest in our product expansion strategy through our internal R and D program as well as our new business development function that's been set up to identify and assess potential strategic acquisition opportunities. And overall, operating expenses for the half were $33,000,000 which was up 8% on the prior corresponding period. The operating profit before tax was $200,000 for the half. That's compared to $6,700,000 in the prior corresponding period.
And the operating profit really is a tale of 2 quarters being quite negative in the Q1, reflecting the impact of the COVID-nineteen on the overall on revenue but much more positive in the Q2. Our free cash flow for the half year was a net outflow of $2,400,000 compared with a net cash inflow of $10,000,000 in the prior corresponding periods, and that's due to the amount and timing of customer receipts and the timing of supplier payments. And as at the 31st December, Cash and cash equivalents totaled just under $88,000,000 so $87,900,000 compared with the 91,800,000 at June 30. And this cash balance, coupled with negligible debt, really does continue to provide ongoing strong foundation for the continued investment and growth of the company. Briefly from a product Expansion perspective, as reported at the FY 2020 AGM, We continue to invest in a number of exciting innovations aimed at addressing a broader range of infection prevention requirements.
Our primary interest span a number of areas across instrument cleaning, instrument disinfection, storage solutions, environmental decontamination and compliance and traceability. And in the first half, $7,600,000 was invested in R and D. That's up 12% on prior corresponding period. And the R and D team continued to make significant progress across our late stage development projects, including a new platform technology as well as a new solution for superior digital traceability and reporting. And in addition, the company is exploring a number of other product opportunities through our own internal R and D capabilities as well as through ongoing investigations into potential strategic acquisitions and our product licensing and collaboration opportunities and all of that through our newly established business development function.
So regarding our expectations for the second half, But first and foremost, the positive growth trend and improving market conditions experienced across the half, they are expected to continue. Subject, of course, I think as everybody says to the acknowledged inherent risks and uncertainties associated with the COVID-nineteen pandemic. But as such, based on all the current indicators and market improvements, the company is anticipating ongoing growth in total revenue and profitability into the second half. And that will be driven by installed base continuing to grow, increased usage of consumables across all regions. GE Healthcare now purchasing capital equipment again and back to normal levels of purchases for consumables also.
And of course, there's the revenue from the EyeMed upgrade program here in Australia. And with the COVID-nineteen vaccination programs underway, the company is certainly optimistic that the overall market conditions, in particular access to hospitals, are likely to improve. The underlying fundamentals for the business, they do remain strong and the company certainly remains optimistic about the future for both the trophon ecosystem, but also broader opportunities across infection prevention. As such, we do maintain our commitment to continue to invest in the strategic growth priorities of the business through market expansion, R and D and infrastructure and capability growth. And our total operating expenses for the year are now expected to be at the lower end of the 75 to $78,000,000 range that we had indicated previously.
So with that, I'll now hand over to any questions. Thank you.
Thank you. Your first question today comes from Josh Kanakas with UBS. Please go ahead.
Hi, Michael. MacGregor, can you hear me okay?
Yes, Josh. Very good morning.
Good morning to you. First question, just with regard to the outlook statement, obviously, you're talking around growth into this period. I just wanted to clarify, when we're thinking about the base of growth to look at, should we be looking at the sort of the Q2 FY 'twenty one run rates? Or are you just talking to the broader first half? Thanks.
Yes. Look, I think it's the we're not giving specific guidance as to the rates and whether you can use the blended across the first half or the Q1 to Q2. But what we can say is we expect the installed base will continue to grow and on a quarterly basis greater than what we saw in Q2. From that, and we would certainly expect more purchases from GE in the second half than we saw in the first half. And with that growing installed base and procedure volumes continuing to recover quite strongly.
Consumables will continue to be to grow. And of course, then you've also got the EyeMed upgrades that will come through in the second half. So we're expecting to see a
subject, of
course, to what I said, the inherent risk associated with COVID, that we're expecting to see a much stronger second half.
Got it. And just in terms of the consumable side of things as well, obviously, it's picked back up quite strongly. But in terms of the ultrasound volumes and what you're seeing in terms of end market cycles and trends, there were Few data points have sort of showed probably from November. There was a little bit of a rollover and potentially a bit of a pickup year to date. I'm just interested in what you're seeing in terms of maybe the trends you're seeing in market as of today?
Yes. That's a great question, Josh. And I think I'll just Remind everybody that when we came out with our update in November, What we the consumables that we were talking about there were the in market. So end user use of consumables as opposed to the total consumable purchases, which would include what we sell to the distributors. And we there's a national tracker on various medical procedure volumes that we're tracking in the United States in particular.
And it has shown that there has been a good strong recovery in the overall in ultrasound and imaging procedures in general. I think other companies and reported have come out and said that. The other part that we track is we look at the our installed base, our direct installed base pre COVID. And we looked at what the average daily shipments of consumables toward just to that cohort and has that now recovered back to the pre COVID levels and it's back over 90%. So We're seeing good strong recovery in that procedure volume and don't really see any reason why that would reduce moving into the second half.
And just following on to that very quickly, last question. In terms of the inventories, therefore, in the channel for both capital goods and also on the consumables, could you give us An update on that. Thanks very much.
Yes. I think the inventory overhang that GE had going into the Q1. By and large, it's worked its way out. It's we would not consider now to be any major inventory overhangs.
Thanks, guys.
Thank you.
Thank you. Your next question comes from Shane Story with Wilsons. Please go ahead.
Thanks very much. Good morning, Michael. Good morning, MacGregor. Thanks, James. Hi.
Maybe I'll start with a more strategic question around the U. S. Capital sales situation. I'm sort of interested in whether there's been Any difference in how GE's team or your team are approaching the back half of that market with the product sort of past 50% penetrated now. And I guess specifically there, I'm interested in anything you can share on CapEx versus OpEx acquisition models developing in the U.
S? And then finally, an observation on any EPR replenishment activity that you've observed, that would be very interesting. Thanks.
Yes. So in terms of the first part of your question, really The uptake in T2, we've got a lot of existing hospitals to originally purchased a number of troll bonds. We're now purchasing more as we're expanding into more and more departments within those hospitals. In terms of the model, it still seems to be primarily driven by a capital purchase model as opposed to a fundamental shift over to rentals or leasing. So the model really has not changed.
Likewise, in the U. K, it's still primarily in MES model. On the upgrades side of things, As you can imagine, the with limited hospital access, especially over this first half. And we have adapted quite well in terms of being able to interact remotely with our customers, which resulted in a really good result, in particular, in Q2. And that is despite the fact that hospital access was still only at about 40%.
And but As you can imagine, our main focus has been on new installed base. And so The Troughon upgrades have not been outside of the EyeMed deal that you saw in the in November and that revenue would come through in the second half. The upgrades has not been a major focus for us in this first half. As the markets open up and hospital access now improves and vaccinations coming through, etcetera, Well, then it'll come back very much onto the agenda. And there's a significant number of units now that have reached 5, 6, 7 years of age that we believe are very much right for upgrade.
And we'll certainly be talking to those customers.
Thanks. The last question I had was really on Europe where you beat our numbers, notwithstanding sort of matching us there on volume. So I'm interested to know what the sort of principal moving components that was in Europe for quite nicely.
Yes. Well, I mean Europe is and it really is a reflection of the investments that we have made over there and the fact that we've geographically expanded a bit. But putting the right people on, increasing sales force and infrastructure in the U. K. And in Germany, putting clinical resources on, marketing resources on.
All of that timed when the fundamentals for adoption are strengthening and continue to strengthen. I think we're all very pleased with the direction that Europe is going.
Your next question comes from Piyitng Leng with JPMorgan. Please go ahead.
Hi, Michael. Hi, Michael. Thanks very much for taking my question. I just wanted to ask quickly on ordering patterns from here. I mean, going forward, do you expect to see any sort of more lumpiness in the sales Demand going forward.
Is there any reason why we can't use installed base as a more of a normalized proxy for capital revenues now?
Yes. I think installed base, that might not be a bad proxy moving forward. We don't necessarily see lumpiness. Sometimes things happen at the end of our quarters or at the end of our halves, which coincide with GE's end of half or end of year, that there may be a little bit of lumpiness there. But Fundamentally, I think the most important thing here is the overhang associated with the impact of COVID in Q4 and the subsequent impacts that had on Q1.
We believe that based on there growth of installed base that, that has been fundamentally worked through. And of course, GE, when we as access improves as well. Remember, a lot of the units that are out there that are aged our GE existing GE customers. So there's an opportunity moving forward from in this second half, but more so even further into FY into the next year that the upgrade opportunity for GE is quite significant, which obviously then has a very positive impact on the number of units they would be ordering from us.
Thanks for that. And just following on that, you mentioned number of units age in the right for upgrading. Are you able to give the percentage of your installed base and an update on that, the units that are eligible for upgrading?
It's really what I'd be able to provide, I don't have the numbers off the top of my ahead, but it's an aged distribution. But for example, units, there'd be units well over 5,000, 6000 units that we would consider to be targets for upgrades. And if you look at the EyeMed opportunity where there's over 200 units going into EyeMed, those units in EyeMed were approximately to 7 years old or so. So we think it's the big issue for us on upgrades at the moment is just hospital access and wear wears because I think it's more important for spending our time to drive the installed base growth. But the value proposition associated with the Troll Point 2, in particular with the superior traceability elements of Tropon 2, which now is becoming more and more important.
And also the fact that we're now selling a lot like 100% of our sales now are Tropon 2. And the fact that we're selling a lot of Tropon 2s now into hospitals that already have EPRs, but we're selling them into different apartments. We believe moving forward, the hospitals will actually standardize their SOPs across their departments, which again further supports the upgrade of the T2.
Thanks. And I just wanted to also ask on the pattern of hospital CapEx Going forward, are you hearing anything or seeing any sort of impact from potentially lower levels of hospital CapEx given the reduced surgical procedures that we've seen kind of over the last 9 months as a result of COVID?
Yes. Look, we've not Certainly, that hasn't been explicit for us as we've been talking to the hospitals. I think It's more a question of the hospitals understanding even better the importance of infection prevention. And on the CapEx side of things, we're not at $40,000, $50,000, dollars 100,000 piece of equipment. We're down at the $8,000 So it's not a huge overhang on the CapEx, albeit it has to go through the appropriate approval processes.
But at the moment, we're not seeing CapEx constraints being a limiting factor for ongoing adoption.
Right. And just one more, if I could. I noticed that there's no mentioning about kind of the Part of the time frame of launch for the second product. I think previously you're saying FY 'twenty two. Just wondering if you've from this kind of timeline or it's still applicable.
And has COVID changed your strategy with regards to launching new products, Would that be the target itself or the timing?
No. Look, we're still aiming for FY 'twenty two, subject to all the usual caveats around that. And in addition to the new platform technology as anticipated. We also have a new traceability and compliance solution. It could in actual fact over time have very important implications beyond Troughton and really is potentially our entry into the IoT space.
And we also aim to have that in FY 2022 as well. So there is a lot of activity happening as you can appreciate in the R and D area of the business. And of course, with our business development group. They actually have been very active in the last 6 months and have identified a number of potential opportunities and reviewed those in that time frame, but none of those have ultimately come to fruition after we've done the appropriate diligence. But that continues to be an activity as well.
So no, nothing really has changed, nothing to read into the announcement here with respect to new products.
Your next question comes from Joshua Ting with Bank of America. Please go ahead.
Good morning, Michael and MacGregor, and thanks for taking my question. I certainly just wanted to
talk a little bit about GE Healthcare
and the dependence of some of the sales from Nanosonics on that. Are you able to give us some color on what sort of proportion of revenue is coming from GE Healthcare? And if you could sort of split that between the capitals and the consumables line, that would be really helpful.
Yes, we don't break it down to the capital and consumables, but overall, the proportion of revenue on GE Healthcare is decreasing. It accounts now for approximately 45% all the revenue in that first half compared to the prior corresponding period where it would have been about 54%. So They still remain a very important partner for Nanosonics, still very engaged, and We look forward to continuing with our partnership for them for years to come.
Okay. Terrific. And if I could just ask Couple of questions around the sales team engagement and what the current access to hospitals has been like. I know you sort of referenced it had been improving in your prepared remarks. But are you able to give us any idea of how the engagement has been and whether hospitals are a bit more used to dealing with the sales teams coming in now that they're a bit more under control with COVID?
So In America, it really is state by state dependent. And A lot of our clinical applications people that go in and do site assessments, they certainly are getting more access now. Over on an overall scale, when I assessed and even talking to other medical device companies, It's we're probably at about 40% of what we ordinarily would be at when it comes to physical access. Obviously, we're compensating for that with other mechanisms of customer engagements, which seems to be working because as I mentioned in the overview I provided in the 3rd or the Q2, there was 800 new installed base installed and that was higher than the number installed in the Q3 of FY 2020, which was pre COVID when we had total set. So at the moment, it's a marriage between physical access and other mechanisms.
But as The hospitals are managing things better as vaccinations and a number of our staff have got vaccinations now. As vaccinations are underway, we just expect that to continue to improve.
Your next question comes from John Hester with Bell Potter. Please go ahead.
Yes. Good morning, Michael. Just want to take a minute to go back and examine that statement around the new product. Since you've sort of just indicated that FY 2022 is still on the cards. Can you describe in relation to the first one or At what stage are they now?
Are you have you finished the development and are now waiting for approvals? Or are you now sort of still in the throes of doing working in the field with these products?
No. The I think as I said at the half year, John, that there were a number of technical enhancements that we were working on in one of the especially the new platform technology, and there was some good significant investments in that in this half. So it's I would consider that quite an advanced stage. The other traceability and compliance type IoT product as well. That's also a very advanced stage.
So we're still haven't come out and reported to the market exactly what stage and what regulatory status is, etcetera, with the exception of stating that we are have FY 2022 as a target for rollout for new products.
And Michael, at what point would you think that these revenues from these products would Sort of reach materiality as in like maybe 10% of the revenue base?
I'll have to come back to you on that one. I mean, obviously, we believe that the new platform technology is a transformational technology. There obviously will need to be a ramp up period. It's not just a flick of the switch, and it's a global launch immediately. We'll have to deal with individual regulatory jurisdictions.
So the timing across different markets will change. And at the same time, we'll become continuing to grow the Trollfon franchise. So to get to a specific goal, when it's going to make up 10% of our overall revenue. But we do expect that the uptake, in particular, in the new platform technology, may be a bit faster than what we saw when we launched Troughton because ultimately, I believe that the underlying fundamentals for its adoption are stronger for compared to what the Waragua and Troughon was launched.
And just perhaps one additional follow-up. Would you expect a Pilot launch in Australia or would you go straight into the U. S. Market?
Again, the timing of launch and where launches will happen can be regulatory dependent. We've never come out and said the U. S. Market is the 1st market. That will be very regulatory dependent.
It could be Australia. It could be Canada. It could be somewhere in Europe. A lot of that will be regulatory dependent.
And in relation to Japan, you've made a number of really positive statements in your Release this morning about Japan, and you expect that to be doing some good things pretty soon. Can you elaborate on your to timing for
Well, I'm not sure I mentioned doing that on Japan except that it's a core part of our there was a main focus on and in China. We do have 5 distributors, and we have built an infrastructure up in Japan, and we are now getting units into some key hospitals up in Japan. Guidelines are still outstanding. And I think the guidelines, what's going to hopefully trigger an inflection point up in Japan. That's still outstanding, but we are working with the various societies up there on that.
Japan, unfortunately, has been in a state of lockdown since January, and that lockdown doesn't it doesn't come out of that till the middle of March. But we are still engaging with customers up there, but we don't have physical access into the hospitals at the moment. So ultimately, the Japan, we still are quite bullish on opportunity for the business in Japan. And we work towards as fast as we possibly can in Japan. In addition, on China, we're now establishing our WUFI and all of those sort of things and have pretty set on our regulatory strategy for China.
It will be a bit behind Japan, but another important market for us to enter into Asia Pacific. We did get some regulatory approvals in this last half in Thailand. And we are expecting further Indonesia and Thailand, and we are expecting further regulatory to approvals in this half in Malaysia as well. So our regional president in Asia Pacific is in discussions with some potential partners for those markets as well. So we whilst we've all experienced impacts of COVID and I think when you step back and look at the revenue impact are fully explainable.
To me, the most important takeaway for today is at that installed base. Growth momentum has returned that the overhang with GE Healthcare in terms of their inventory has been worked through and they're now purchasing. And we enter into the second half in a much stronger position. And we will continue to invest because we do believe those opportunities in Japan, in China and geographical expansion in general are still there, hence why we are continuing to invest strongly even though we've got these temporary COVID impacts on our revenue and profitability.
Thank you.
Up. Your next question comes from Matthew Chevrier with Citi. Please go ahead.
Good morning, Michael. Good morning, MacGregor. Thank you for taking my question. Very well. Thank you.
First of all, just on North American penetration rate, you mentioned 55%. How high do you think that could potentially go?
Well, we don't necessarily put a cap internally as to how high we can go. We're going after the whole market. And that TAM of 55% or the 55% is based on a TAM of 40,000 units, which is a number that we've had been talking about historically. Personally, I believe the TAM is probably a bit greater than that. But at this stage, whether it's 40,000 units or 45,000 or 50,000 units, it doesn't really matter.
There's still a large opportunity to continue to penetrate. And in the past, we were pre COVID, we were certainly on track to delivering about 3,000 units per annum, and we would have come out and said the exact same again about this year, 3,000 if COVID hadn't happened. But once we could get back to steady state, I think we're committed to those sorts of numbers, which means in the next 3 years, you'd be getting up to 70%, 75% of the TAM, but no real reason for us to stop there.
Thank you. And just again on that penetration rate and I guess really Relating it to Europe, when do you think Europe could get to, I guess, revenue levels similar to North America, if ever?
Well, the goal, the time over in Europe is similar and the goal is to get to similar levels. And now as remember, America started way ahead of Europe in terms of the strength of the fundamental for adoption. It already had requirements for high level disinfection. How it was doing it, people were doing it over there was quite antiquated, just soaking in toxic chemistries, etcetera, whereas Europe is very different. There are many countries that didn't even have guidelines or requirements.
So that's why you see Europe behind where we are in North America at the moment. But over the last number of years, just like what we're doing in Japan now. We did in Europe and worked with the authorities, demonstrated to the need and the requirements. All the data is certainly there to support that. And then you start seeing various countries emerging with their actual requirements and guidelines.
And as such, you're now seeing those fundamental strengthening and our installed base beginning to grow. So the complexity with Europe, of course, is you're dealing or the beauty, I should say, with North America is you're dealing with 1 large homogeneous market, albeit some nuances state to state. But the complexity with Europe is every country is very, very different. And the requirements in every country are very different. So The rates may not be as similar as the United States, but the opportunity and our conviction to actually penetrate it similarly to the United States is very, very high.
In fact, I'm not sure you'll find because if you look at the United States as well, we're currently in over 5,000 hospitals in the United state. And a decent percentage of our sales today are now back into existing customers, but just going deeper into those hospitals, into more departments. And I don't think there's many pieces of medical technology that can have such penetration in the U. S. Hospital system and certainly across all the luminary hospital sites in the United States that ultimately doesn't some successful in Europe.
So we continue to invest in that region and remain confident in the overall growth story for that
reaching. That's
great. Thank you. And just to finish, speaking of APAC, Have you quantified the I MED revenue opportunity for,
I guess, the second half?
We have, but we have not disclosed this. I mean, we know that we will there will be 200 units going out, and that will be recognized in the second half.
Thanks very much.
Thank you.
Thank you. Your next question
I think there's maybe just time for one more question, if we can, please.
Of course. Your next question comes from John Copely with Evans and Partners. Please go ahead.
Good morning, Michael, and good morning, MacGregor. Could you please give us a bit more commentary around the gross margin expansion seen this half and your expectations for second half? Thank you. Yes. I mean, the gross margin, I think what you see in the What you saw in the first half was really a reflection of the capital consumables mix.
And that should revert back to the sort of gross margin levels that you were used to seeing in the first half or on the PCP perspective, maybe a little bit higher because of the consumables mix and the pricing of consumables. But I think it will revert back to what you had seen previously. Okay. Thank you. And just in relation to gross margin as well, what have you seen in terms of freight costs?
Did that impact this half? And is that going forward? Yes. No, good point. And it certainly impacted us dramatically actually in all companies during the peak of the COVID period in Q4 quite significantly.
Our supply chain has done a fantastic job in managing supply, but also freight. And we see our freight costs being back to more normal levels of cost that we were experiencing pre COVID. Great. Thank you very much.
Thank you. I'll now hand back to Mr. Kavanagh for closing remarks.
Okay. Well, thank you all very much again for joining the call this morning. And we'll continue to work very hard as we always do, now that we're in the second half. And I look forward to catching up with many of you over the coming weeks. So thanks all very much.
Bye bye.
That does conclude our conference for today. Thank you for participating. You may now disconnect.