Alstom Unsp/Adr

Hello, and welcome to the Alstom Fiscal Year 2024-2025 First Quarter Order and Sales. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded, and for the duration of the call, you'll be in listen-only mode. However, you'll have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you will be connected to an operator. I'd like to hand it over to your host today, Mr. Bernard Adepi, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you very much. Good evening or good morning, everyone, and welcome to this conference call to discuss orders and sales for the first quarter. Thank you. Starting with order intake, slide three, we recorded 3.6 billion euros of orders in the first quarter, and the backlog is broadly stable at 92 billion euros at the end of June. From a regional perspective, Europe is leading with large orders in Germany, the UK, and Italy. With regards to product lines, We continue to see good momentum in signaling and services with book to bill above one. Our continuous focus on base orders is paying off with a good flow in the first quarter, which is supportive for margins. A few additional remarks. First, market dynamics remain solid. The pipeline potential is around 200 billion of opportunities for the next three years. Second, and as announced in our full year results, we expect order intakes to gain momentum as we progress through the year. Quality of order intake in terms of margins is in line with mid-term trajectory. Margin in order intake continues to exceed margin in backlog, which in turn means largely exceeds margins in the P&L. Margins in ordering taking Q1 were particularly good. On slide four, some key orders in this quarter. It includes another success for 70 Trax Locos in Italy. a landmark contract from Hamburg Metro with a total value up to 2.8 billion, with a first call-off under this agreement of 670 million, including both rolling stock and signaling. and an additional 10 trains for the Elizabeth line in the UK associated with maintenance services, obviously with margins for those trains that have been updated and with different margins from the one we booked in the last years. Terms and conditions of all those orders have been carefully reviewed and negotiated, considering the size of certain of these orders, and they are in line with our objectives. I would like to add that since June the 30th, you've also seen strong news flow on signaling with OBB in Austria for around 100 million euros and Perth in Western Australia for approximately 650 million euros. This is encouraging for our signaling business and for the second quarter order intake. Last but not least, A major order will be disclosed tomorrow morning. I cannot anticipate on the client disclosure, but stay tuned. Turning to sales, they reach 4.4 billion in Q1, including 2.3 for rolling stock, 1.1 for services, 637 million for signaling, and 341 million for systems. Alstom delivered organic sales growth of 5.3% in Q1, which is in line with full year guidance. Rolling stock activity was quite high, notably in Europe, with deliveries relating to the Olympics in France. Of note, the good start of services, ramping up in all regions and delivering a 13.13% organic growth year-on-year. On slide six, regarding rolling stock production, 965 cars were produced in Q1. It came lower than the 1,122 production achieved over the same period last fiscal year. However, the contracts mix is very different and simply said better than last year. I'm talking here of the contracts mix, that is the combination of type of cars and type of contracts. With the end of the production of the Aventra program in the UK and of the ICX in Germany, with higher deliveries in France on programs such as RER New Generation and metros for Paris region. We will refine full-year outlook in terms of car production at the time of H1, but the message is the same as in May. We'll now stabilize production in a range between 4,500 and 5,000 cars per year with less swings in the mix going forward. We are talking here about cars production. Based on last year's experience, we are carefully monitoring to deliver more than what we produce, with about more than 1,000 cars delivered during Q1. On slide seven, just to emphasize a strong team's mobilization around the Olympic Games in Paris, with three metro lines, one commuter line, and two tramways lined, opened, or extended. Slide eight. It looks now like an old story, but it happened only a few weeks ago. The deleveraging plan is now executed. For those of you who were off in May, it's now done. During the first quarter, we announced and executed the successful completion of a €1 billion rights issue, as well as the issuance of a €750 million hybrid bond. This was achieved thanks to the strong support of our restaurant shareholders as well as a supportive market environment. We are also in the final stage of the sales process regarding our U.S. conventional signaling business. We are expecting the last closing conditions to be waived shortly, and as previously announced, the plan is to close the deal during the second quarter. Net proceeds from these transactions will amount to 2.4 billion euros, 1.7 billion already cashed in and 0.7 in September. The impact on deleveraging amounts to 2 billion euros due to the treatment of hybrid bonds as 50% equity and 50% debt by the rating agency. Proceeds are progressively used to repay short-term debt, including commercial papers and RCF, and will also fund short-term working capital requirements and free cash flow seasonality. Regarding the impact on credit rating, Moody's upgraded the outlook to stable on June 30. This was the aim of the plan, and Alstom fully implemented it in a timely manner. Turning now to guidance, let me remind you of the key assumptions that underpin our fiscal year 2024-2025 outlook. On the external factors, supportive market demand and level of down payments broadly in line with last year. As of today, these conditions are met and confirmed. The diverging plan being fully executed, key remaining action on our side is the end of the integration program with Bombardier. I can confirm that this condition will be met during the year as per plan. We therefore confirm the fiscal year 24-25 outlook that we provided at full year results in May, i.e., book to bill above 1, sales organic growth around 5%, adjusted EBIT around 6.5% with margin improvement to be more pronounced in the second half of the year due to structural seasonality, but also to the timing of the various self-help initiatives regarding cost savings. and free cash flow generation to be within a range of 300 to 500 million euros for the full year. And regarding the first half, we confirm the seasonality which we explained last May. We expect free cash flow for the first half to be negative with a range of 300 to 500 million euros. Regarding mid-term ambitions, there is no change to the framework that we provided back in May. Before we open for Q&A, let me share a few words of conclusion. Commercial momentum is sound, with auto-intakes to accelerate within the year starting in Q2. Mobilization around the rolling stock delivery is strong, as seen in France for the Olympics. And the leveraging plan has been executed and puts Alstom on solid foundation. So in a nutshell, we are in line with the plan unveiled in May. Thanks a lot for listening. I will now take your questions.

Thank you very much, sir. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star 1 on your telephone keypad and just make sure that your mute function is not activated in order to let your signal reach your equipment. Our first question today is coming from Delphine Beau of OWHF. Please go ahead. The line is open.