Can you please comment on the new format of the Interim Report, specifically on the replacement of the production outlook table and the section related to the deferred tax asset?


Shareholder, name withheld

With the start of a new year, the management and the Board decided to revise the format of the Interim Reports. The most significant change is that the forecast information (previously provided at the top of page 2) has been moved to the first paragraph of the report. There are two reasons for this. First, based on feedback from investors and analysts, it was clear that many people found it difficult to understand the format and content of the volume outlook table. Second, we have frequently been told that most investors do not read beyond the bullets and the first paragraphs of the report, so many potential investors never saw the table on page 2. It was therefore decided to change to a simpler narrative format and to put the important outlook information at the very beginning of the report. The intention for future reports is to simply update the first paragraph so the outlook information is available up-front, in an easily understood format.

The information previously provided in the outlook table is maintained in the first paragraph of the report. The only difference is that the ‘development pipeline’ is provided as a single number rather than as separate volumes for ‘secured orders’ and ‘development’. We feel that this change helps to simplify the report, as the previous table anyway didn’t provide a timeframe for the secured orders to be announced or launched into production. Indeed, it was common that programmes in the ‘development’ category could leap-frog programmes in the ‘secured’ category, depending on changes in OEM planning. As SinterCast has evolved from the development phase to a profitable company, we feel it is better to combine the two categories, and to rely on press releases to announce when specific programmes enter series production. Again, this should result in clearer information being provided to the market.

The other change is that the potential revenue is not included in the first paragraph. However, the revenue per Engine Equivalent is a well-known and frequently reported figure in SinterCast’s literature. Accordingly, it continues to be an easy extrapolation to monetise Engine Equivalent outlook. The revenue per Engine Equivalent is included in the ‘Business Model’ section of the Annual Report, and a new section has been added to the Interim Report to explain the business model and the clearly state the revenue per Engine Equivalent.

Finally, with regard to the deferred tax asset table, we will continue to provide the deferred tax asset information in future reports. However, because the total pool of 4.35 million Engine Equivalents presented in the 1Q11 Report had not changed relative to the 4Q10 Report, there was no change in the deferred tax asset for the period. This was simply noted in the concluding sentence of the “Results” section, rather than devoting an entire section to an unchanged result.

We realise that the revised format of the quarterly report represents a change, but we hope that the format is improved and that the outlook information will be more accessible and easier to comprehend for a wider audience.