ALSTOM SA : Alstom first half 2020/21 results
Alstom first half 2020/21 resultsOrder intake level linked to anticipated shift in tender activity towards H2, with robust backlog at €40bnSales at €3.5bn after a Q1 impacted by lockdown, operations back to normal level in Q2Resilient aEBIT margin at 7.5% supported by continued improvement of gross marginFree Cash Flow at €(253)m impacted by the Covid-19 crisisMajor milestones achieved in Bombardier Transportation acquisition projectSolid outlook for H2 and confirmed 2022/23 outlook, supported by strong commercial pipeline and positive mid-term rail market perspectives
10 November 2020 – During the first half of fiscal year 2020/21 (between 1 April 2020 and 30 September 2020), Alstom booked €2.7 billion of orders and sales reached €3.5 billion. Book-to-bill ratio stood at 0.8. Adjusted EBIT reached €263 million leading to an adjusted EBIT margin of 7.5%. Net income (from continued operations, group share) amounted to €161 million. Free Cash Flow amounted to €(253) million.At €40 billion on 30 September 2020, the current backlog provides strong visibility on future sales.Key figures1 aEBIT including CASCO contribution in both periods“During the first semester, the Group’s commercial activity was impacted as anticipated by the shift in tender activity towards H2 in the context of the sanitary crisis. Yet we managed to secure some large orders notably in Central and East Asia. We are confident that the various stimulus plans together with the increasing demand for sustainable mobility solutions will lead to a solid market recovery, which reflects in our strong tender pipeline for the second semester. Production in the second quarter was back to a normal level. We were proud to deliver some flagship projects such as metro systems in Dubaï and Mexico. Finally, we achieved major milestones in the Bombardier Transportation acquisition process in recent months and we are looking forward to closing the transaction in Q1 2021.” said Henri Poupart-Lafarge, Alstom Chairman and Chief Executive Officer.***Strategic and business updateThis half year 2020/21 opens the second year of the Alstom in Motion strategy (AiM) announced by Alstom on 24 June 2019 which sets a clear ambition: be the leading global innovative player for a sustainable and smart mobility. The Group continues to make good progress on the AiM priorities:
1. Growth by offering greater value to our customers·Orders and salesThe Group booked €2,652 million in orders in the first half of fiscal year 2020/21. This compares to €4,618 million in orders over the same period last year. This decrease was expected, as a consequence of the shift in tendering activity from the first half towards the second half in the Covid-19 context.Alstom was awarded projects mainly for Rolling Stock and Services, including orders for the Nantes tramway in France, rolling stock and maintenance follow-on orders of currently active projects in AMECA, and the renewal of a full maintenance contract in Mexico. Alstom also booked a metro system in Taiwan, a new-generation digital interlocking project in France, and signalling and infrastructure order as part of a modernization project in Romania.The backlog amounted to €40 billion on 30 September 2020, providing strong visibility on future sales. The book-to-bill ratio stood at 0.8, reflecting the impact of the Covid-19 crisis.In the first half of fiscal year 2020/21, Alstom’s total sales reached €3,518 million, down 13% organically. This decrease is a consequence of the Covid-19 crisis, in particular during the lockdown period in Q1 when some of our production units and suppliers had to slow down temporarily operations. Operations in Q2 were back to a normal level with sales of €2,011 million, up from €1,507 million in Q1.In H1 2020/21, rolling stock sales reached €1,713 million (down 8% organic) as sales recognition was affected during the containment period, particularly in Europe. Signalling sales reached €691 million (down 2% organic), with a moderate decline due to a shift in installation during containment followed by a recovery during the second quarter. Services sales reached €662 million (down 5% organic) due to train traffic reduction during the first quarter followed by a normalization of train traffic during the second quarter and the execution of the growing service backlog. Systems sales decreased at €452 million (down 42% organic) with an expected ramp-down on Dubai and Riyadh systems projects, a fully traded contract in Panama and the impact of containment measures.In Q2 2020/21, all product lines experienced positive organic growth compared to Q2 2019/20 except Systems which is continuing its anticipated ramp down at -35%. Between Q2 2019/20 and Q2 2020/21, Rolling stock grew at +10% organically with ramp up in large projects, Services at +8% organically and Signalling at +3% organically.·AcquisitionOn 30 June 2020, Alstom acquired IBRE (since renamed Alstom IBRE), a company specialised in the development, manufacture and supply of cast iron or steel brake discs for high-speed, intercity, regional and suburban trains, trams and metros. With this acquisition, Alstom reinforces its internal capabilities regarding railway braking systems, which are essential to the overall dynamic performance of trains. IBRE had a turnover of approximately €10 million in 2019.·Stock market indexIn September 2020, the Steering Committee of the Euronext Indices decided to include Alstom in the list of the 40 stocks making up the French CAC40 index; this took effect on Monday 21 September 2020.
2. Innovation in smarter and greener mobility solutionsDespite the Covid-19 context, Alstom preserved its innovation capabilities with a sustained level of research and development net costs at €125 million, i.e. 3.6% of sales, in the first half of 2020/21.During the first semester, Alstom entered into several agreements in Europe to shape the mobility of the future with hydrogen trains. The Coradia iLint hydrogen train has performed successful extensive testing phase in Groningen, in the Netherlands, obtaining the authorization to run on the national railway network and perfectly fitting the commercial service of the current timetable. In addition, after successful trial operations in Germany, the Coradia iLint will now demonstrate its worth in Austria over three months during which it will transport passengers on geographically challenging routes. In the United-Kingdom, Eversholt Rail and Alstom announced a bold plan to fast-track the hydrogen train industry with investment in Breeze hydrogen trains. To make it, Alstom will rebuild Eversholt Rail’s Class 321 electric trains to use hydrogen power. In May 2020, in Germany, the Federal Ministry of Economics has awarded Alstom with the “Innovation Prize for Regulatory Sandboxes”, related to a planned test project to implement Automatic Train Operation (ATO) in daily passenger operation of regional trains. The project will begin in 2021 together with the Regional Association of the greater area of Braunschweig, the German Aerospace Center (DLR) and the Technical University of Berlin (TU Berlin) and the first test of automated train operations is expected beginning 2023.In June 2020, Alstom has launched a new version of the multimodal control system, Mastria. Using artificial intelligence, the solution allows operators to adapt, easily and in real time, their offer to the various social distancing and public gathering requirements that have arisen due to the Covid-19 pandemic. It enabled Panama Metro to limit the occupancy rate to 40%, as recommended by the country’s health authorities.In July 2020, Alstom introduced a new portfolio called “Healthier Mobility™” creating solutions and products for customers in 4 domains: Cleaning & disinfection, Contact surfaces, Air treatment, and Contactless & Passenger flow. It gathers all the key expertise, knowledge and resources needed to develop solutions allowing its customers to operate while ensuring a high standard of the sanitary conditions for the passengers. 3. Efficiency powered by digitalAlstom delivered an adjusted EBIT1 of €263 million corresponding to a 7.5% margin in first half 2020/21 compared to €319 million corresponding to a 7.7% margin over the same period last yearThis resilient adjusted EBIT margin despite the volume impact linked to the Covid-19 crisis results mainly from an increase in gross margin. The cost of sales ratio improvement was achieved through the optimisation of production capacities, enhanced industrial efficiency, and control over overhead production costs. The increased signalling and services share within the overall company sales mix also had a positive impact.Moreover, the contribution of the CASCO joint-venture increased due to sustained Signalling activities in China.To mitigate the impact of the sanitary crisis on volume, Alstom optimized selling, tender and administrative costs across all regions and controlled the level of R&D investments while preserving commercial and innovation capabilities.Below adjusted EBIT, Alstom booked a €68 million charge related to Covid-19 incremental costs and inefficiencies resulting from the implementation of all necessary sanitary measures in all Alstom sites. In addition, it booked €44 million in costs related to the Bombardier Transportation acquisition and one-off gains such as the reversal of asset impairments and provisions.As a result, net income from continued operations (group share) reached €161 million compared to €213 million the previous year, primarily impacted by the Covid-19 crisis effect on volumes and one-off items below adjusted EBIT. 4. One Alstom team, agile, inclusive and responsibleAcknowledging that the value Alstom adds to its customers strongly relies on its employees, Alstom is committed to providing employees with the best working environment and employee experience. In October 2020, this commitment was rewarded by the Wall Street Journal sustainable management rating which ranked Alstom 1st in the Human Capital category and the 34th globally.In July 2020, Alstom received another subsequent 3-year renewal of its accreditation ISO 37001 anti-bribery certification. The ISO 37001 is an international standard ensuring organisations prevent, detect and tackle bribery through rigorous assessment in order to achieve this anti-bribery certification. This renewal constitutes another important milestone in Alstom’s continued efforts to improve the efficiency of its integrity programme.***Solid balance sheetDuring the first half of fiscal year 2020/21, Group Free Cash Flow was negative at €(253) million. This cash outflow was driven largely by decreased profitability, drift in cash-in due to the sanitary situation, anticipated inventories increase linked to the ramp-up of large Rolling Stock projects as well as lower down payment level due to order intake shift from the first to the second semester.The Group had gross cash in hand of €1,953 million at the end of September 2020. It also had a credit line of €400 million and an additional €1,750 million Revolving Credit Facility2 put in place in April 2020, both fully undrawn. Consequently, its liquidity resources stood at €4,103 million as of 30 September 2020. Alstom’s bond debt amounted to €700 million as of 30 September 2020.Alstom’s net cash amounted to €843 million on 30 September 2020, compared to €1,178 million on 31 March 2020. Lastly, equity reached €3,341 million at 30 September 2020, compared to €3,328 million on 31 March 2020.***Bombardier Transportation acquisition update and indicative timetable
On 31 July 2020, the European Commission cleared Alstom’s acquisition of Bombardier Transportation. The Commission’s approval for the transaction is conditional on the proposed engagements (cf. press release dated July 31st 2020).
