Ann: 2021 H1 results announcement and conference call details, page-7

The Ceo said the book build will be 2.9b and I put a question mark there. Do you trust him?

@equityma

2.9bn$ is the existing order book, as of 31 Dec 2020. An easy way of checking that is by adjusting the order book as of 30 June 2020 by the move in the FX rate and subtracting 1H2021 Revenue:

4.3bn$ * 0.69/0.77 - 0.84bn$ = 3.0bn$ (which is pretty close to 2.9bn$)

During the call, the CEO did mention that some variable components of contracted revenue also contributed to the decline in the order book during 1H2021, so that explains the residual difference between 3.0bn$ and 2.9bn$.

When prices rise then who will receive all the benefits and profits margin?

With regard to the exposure to raw material prices, my understanding is that aluminium prices are fixed/hedged at the time when each new contract is awarded (or, for multi-year programmes, when each milestone payment is determined); thus, Gross Margins are preserved to the extent allowed by competitive dynamics.

More generally, with regard to today’s result and earnings call, I thought the main positives were a) strong EBIT margin, confirming an established trajectory of margin improvement, b) OCF (before interest and tax) well in excess of EBIT, thanks to the ongoing reduction in working capital (to be expected in the late stage of a multi-year delivery programme), and c) a generally constructive tone in relation to the ongoing US regulatory investigation; in particular, the lack of significant additional provisioning against further legal/regulatory costs indicates a degree of confidence that material financial liabilities will not be incurred.

On the negative side, beside the obvious headwind from the FX rate, I personally found the drop in Support Revenue slightly disappointing, as well as the risk associated with the triggering of potential cancellation rights in relation to the delivery of two vessels (see page 27 of the half-year report). Also, comparing today’s announcements with the earnings guidance update released in October 2020, it would appear (having adjusted for the FX movement) that the reduction in throughput experienced so far in FY2021 is going to extend into FY2022.

Other than that, I thought everything was broadly in line with expectations.