(AOF) – Yielding 3.17% to 22.09 euros, Alstom closes the march of the CAC 40 index after having postponed by one year, to the fiscal year 2025/26, its adjusted operating margin objectives and medium-term free cash flow. The railway specialist made this announcement on the occasion of the publication of its annual results. Following this announcement, Moody’s downgraded its credit rating from Baa2 to Baa3.
Its outlook changes from negative to stable. The rating agency underlined “the still uncertain pace of restoring credit indicators to levels compatible with a Baa2 rating”.
To justify the shift in its objectives, the railway specialist mainly blamed the new macroeconomic environment, and in particular the effect of inflation. Alstom is targeting an adjusted operating margin between 8% and 10% by this horizon and a conversion of adjusted net income into free cash flow above 80%.
In fiscal year 2022/23, Alstom generated an adjusted net profit of €292 million compared to a loss of €173 million a year earlier. Alstom’s adjusted operating profit increased by 11% to 852 million euros, equivalent to an adjusted operating margin of 5.2% against 5% in the previous financial year.
“This increase is the result of synergies, a favorable evolution of low-margin contracts, an increase in the favorable volume / mix effect, partially reduced by the negative impact of inflation”, specified the rail specialist.
Revenue grew organically by 5% to 16.51 billion euros.
Alstom recorded 20.7 billion euros in orders, up 5% on an organic basis, and the “orders to sales” ratio stood at 1.25.
The Board of Directors has decided to propose a dividend distribution of €0.25 per share, at the next general meeting to be held on July 11, 2023, which corresponds to a payout ratio of 33%. of adjusted net income.
Over the current financial year, Alstom forecasts an adjusted operating margin of around 6% and a significantly positive free cash flow generation. Sales growth should be in line with the medium-term objective: above 5%.
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Key points
– World leader in rail transport, from trams and metros to TGVs, reinforced by the acquisition, in 2021, of Bombardier Transport;
– Activities of €15.5 billion at the end of the 2021-2022 financial year carried out 62% in Europe, 17% in the Americas, 14% in Asia-Pacific and 7% in the rest of the world;
– Offer covering all railway construction trades: rolling stock for 56% of sales, signaling for 15%, systems for 7% and services (maintenance, remote control of vehicles, networks, passengers, etc.) for 22%;
– Business model based on:
– the complementarity of geographical areas between Alstom -France, Italy, Spain, India, South-East Asia, North Africa and Brazil- and Bombardier Transport -United Kingdom, Germany, Scandinavia, China and North America,
– the creation of value ranging from the design and construction of a railway system to maintenance;
– Open capital, 17.48% owned by the Caisse de dépôt et placement du Québec, Henri Poupart-Lafarge, Chief Executive Officer, chairing the 13-member Board of Directors;
– Solid balance sheet: €9 billion in shareholders’ equity and €4.6 billion in cash compared with $2.3 billion in net debt.
Challenges
– Alstom in Motion 2024/25 growth strategy with confirmed objectives:
– annual increase of +5% in revenues, operating margin of 8 to 10% and industrial investments at 2% of revenues,
– conversion of 80% of the result into free cash flow t,
– distribution to shareholders between 25 and 35%;
– Innovation strategy supported by 3.4% R&D and 9,400 patents with 3 axes:
– full range of green traction, ownership of fuel cell technology and, soon, fully connected transport fleets,
– innovation ecosystems: industrial partnerships (Engie, DeutscheBann, etc.), with start-ups via the Aster fund, with suppliers via the Alliance program, participation in 30 European programs, including Shift2Rail, and, internally, entrepreneurship with I move you,
– roll-out of the digital suite to 100% of the group;
– Environmental strategy for the decarbonization of the activity:
– integrated into the innovation strategy – eco-design of the main solutions from 2025, and aimed at strengthening natural capital – use of renewable electricity, waste recovery, recycling,
– aiming for a 10% reduction in energy intensity and a 25% reduction in CO2 emissions by 2025 (vs 2019);
– ecocircularity: waste recovered at 98%,
– launch of the 1st green guarantee facility;
– Control of portfolio rotation – disposals constrained by the merger with Bombardier and strengthening of holdings, particularly in Cylus, in Kazakhstan and in South Africa;
– Good visibility, with order intake of 15.2 billion at the end of December, of which 55% in Europe, ie more than 1 year of revenue.
Challenges
– After the loss incurred in 2021-22 due to provisions related to the acquisition of Bombardier Transportation, execution of the synergies of the merger with Bombardier -€200m in 2022/23, €400m per year in 2024/25 and 475- €500m thereafter – but positive impact on 2023 profit;
– Uncertainties on the outcome of the investigation into the February rail accident in Greece;
– Negative impact of inflation on the 2022/23 margin but almost total control of component supplies;
– After an 8% increase in revenues over the first 9 months of the financial year, confirmed outlook for 2022-23 of an operating margin of 5.1 to 5.3% and free cash flow between 100 and 300 M€.
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