Hi Pioupiou, I agree, to me the H2 NPAT margins are the key...

Hi Pioupiou,

I agree, to me the H2 NPAT margins are the key uncertain item in the report coming up in terms of valuations from here.

Personally, I'll be a little more optimistic - they've managed 6% average ignoring outlier years (IMO - subjective of course). H1 was lower for sure - 4.6% my my calc, however it was not a normal period with the Golding onboarding and a lot of tendering as work expands without full revenue rewards yet. FY2017 was more than 6% even if you take the tax rebate out.

The idea that they are using more hired equipment or the client's equipment now and that will impact margins may have merit, I'm not sure - look forward to hearing from the agm how JP sees this. Even so, it is a 'mix of work' situation rather than a step change. Also, the expanding work available normally means margins expand and I'll assume that people are slow to allow for this when forecasting after such a lean period.

So my (more optimistic, admittedly) forecast now is for NPAT margin for H2 to be maybe 5.5% and overall more than 5% for the year. This is not a major change but it may then change forecasts for FY2019 to be more like 5.5% which would be a significant re-rate from what UBS are saying.

All IMO of course, and I'm not confident about this.

Cheers,
pb