ALSTOM SA : Alstom to lead the way to greener and smarter mobility,
worldwide
Alstom to lead the way to greener and
smarter mobility, worldwide
- With the widest
geographical reach and most comprehensive portfolio of the
industry, Alstom is in a unique position to respond to the
unprecedented need for sustainable mobility
- Alstom in Motion
(AiM) 2025 strategic plan is built on proven AiM strategy and
significantly enlarged Group profile
- The Group aims
to further grow leveraging on its reinforced product lines and
geographical presence, commits to accelerate smart and green
mobility innovation with important R&D investments, and will
extend its operational excellence efforts to a new scale
- Bombardier
Transportation integration fully on track, synergies fully
confirmed
- Sales to grow at
over 5% CAGR during the period 2020/21 to 2024/25, strongly
outgrowing the market
- Adjusted EBIT
margin to reach best in class profitability level between 8% and
10% from 2024/25 onwards
- Net income1 to
free cash flow conversion ratio to reach over 80 % from 2024/25
onwards, yet short term focus on legacy Bombardier Transportation
projects stabilization to impact free cash flow in 2021/222
- ESG targets extended to the new
scale
5 July
2021 – The board of Alstom
approved on July 4 Alstom’s strategic plan “Alstom in Motion 2025”
(AiM 2025) and mid-term financial objectives.The expanded strategy
AiM 2025 will focus on capturing the strong market growth
opportunities and reinforcing further the innovation leadership of
Alstom as well as driving efficiency throughout the new
organisation and ensuring the successful integration of Bombardier
Transportation.
“Our Alstom in Motion 2025 strategy is our
answer to the historical acceleration of sustainability and green
mobility need all over the world. Alstom has become the leading
international rail actor in this exceptional context. This is a
unique responsibility we are ready to endorse and our focus is to
offer our solutions wherever they are needed on the planet. We have
a clear ambition, the most comprehensive and innovative portfolio,
and highly engaged teams across the world.By 2025 we will have
outgrown the rail industry significantly and set new industry
standards for smart and green mobility in terms of sustainability,
innovation, and profitability.”, said Henri Poupart-Lafarge, Alstom
Chairman and Chief Executive Officer.
Alstom enters in a new chapter of its history on
a solid base with an Alstom in Motion strategy launched in 2019
fully on track and following the Bombardier Transportation
acquisition, a significantly reinforced profile.
***
The “Alstom in Motion 2025” builds on
well-established strategic pillars
This fiscal year 2020/21 closes 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. It also
marks the beginning of a new chapter in Alstom history with the
acquisition of Bombardier Transportation closed in January 2021. In
this context and in the context of the Covid-19 crisis, the Group
continues to make good progress on the AiM priorities:
1. Growth by offering
greater value to customers
The Group expects to outgrow the market
significantly with a sales growth over 5% CAGR and expand its
global market share by 5 percentage points. This reflects the
positive commercial dynamics along with the unique position of
Alstom to fully capture market opportunities.
Regarding market presence, more than 70% share
of the Group sales are in North America and Europe, two regions
that will benefit from strong stimulus packages. Alstom has in
particular a very natural leadership position in Western and
Southern Europe. With the Bombardier Transportation acquisition, it
also strengthened significantly its industrial and commercial
assets in Germany, North America, United Kingdom and Nordics, and
plans to further develop in these geographies. The Group is the
only industry player which such a presence in emerging markets,
with 11 JVs in China, major manufacturing and engineering sites in
India. It also demonstrated strong track record in executing
complex projects in emerging markets and is uniquely placed to
capture growth in Asia, Middle East and Africa stemming from
economic growth and urbanization.
Alstom can also now build on its ability to
offer the best value proposition for its customers based on the
most complete and a high performing portfolio in the industry, with
Rolling Stock ranging from light rail to very high speed train,
parts, maintenance and operations services, and a complete
portfolio in Signalling.
Signalling and Services will continue to have
the fastest growth potential. Alstom aims to be market leader in
Signalling by 2025 benefiting from its technological leadership in
ETCS3, a presence in each strategic market and strong engineering
hubs in mature and emerging markets. In Services, Alstom targets to
grow at solid mid-single digit, leveraging on the widest installed
base of the industry with, 150,000 vehicles, the most extensive
depots network and 15,000 highly skilled service employees. In
Rolling Stock, Alstom comprehensive and best-in-class portfolio,
continuously fuelled with innovation, is positioning the Group
ahead of the game, and Alstom will focus most particularly on
increasing competitiveness and profitability.
2. Innovation by
Pioneering Smarter and Greener Mobility for All
Alstom has significantly reinforced his Research
and Development (R&D) resources and intends to expand its
leadership in rail innovation. With the new scale and combined
expertise, the Group now has more than 9,500 patents and a unique
scale and talent base in the industry. R&D investments will be
significantly reinforced - expected at €550-600 million per year in
2024/25 at around 3% of annual sales - to further advance
innovation in the key areas of smart, green, inclusive and
healthier mobility.
The Group is the only rail player that today
offers the entire scope of green traction solutions and in-house
fuel cell technology. Hydrogen trains have been running in Germany
since 2018 and the Group has been awarded firm contracts in
Germany, France and Italy for 59 trains and has multiplied other
partnerships with other countries in Europe. For Smart Mobility,
the Group aims to have fully autonomous trains prototypes for
freight and passengers ready by 2023. Alstom will also be able to
leverage data from the 35,000 vehicles currently maintained and can
count on its 7,500 software engineers and systems architects
working on digital mobility solutions to further advance its
offering to enable fully connected metros, trams as well regional
trains.
3. Efficiency at scale,
Powered by Digital
The continued transformation and efficiency
gains combined with the successful integration of Bombardier
Transportation will be a key focus to deliver on the Group’s
ambitious profitable growth targets. The Group will continue to
deploy its proven ability in operational excellence and project
management, leverage its balanced global footprint, drive the
digitalization of its value chain to optimise sites and projects
and transfer its expertise throughout the new organisation.
This will be achieved on a basis of clear
strategic initiatives supported by a set of dedicated targets by
2025:
The Group will drive the transformation by
deploying its digital suite to reach 100% Group wide, leverage its
scale to invest and accelerate and increase digitalization of its
processes by 20%.
The Group will drive continued project
management excellence in order to achieve a Net Promoter Score of
8.3, implement systematic cash focus in projects, and extend best
practices to lower hard inventories by 20%.
The Group will grow its sites in Best Costs
Countries, leverage its combined locations to optimize its
industrial strategy and optimize its supply chain to increase
global manufacturing work by 20% in Best Costs Countries and
increase manufacturing productivity by 10%.
4. One Alstom Team
Agile, Inclusive and Responsible
The Group reiterates its Corporate Social
Responsibility convictions to aim for carbon neutrality in
transport and increase social equity and inclusion by increasing
the availability and efficiency of public transport. These
convictions are driven by one Alstom team with one set of values:
Agile, Inclusive and Responsible.
The Group extended its ESG 2025 targets and will bring this to
the scope of the new organisation. Its priorities are: Enabling
decarbonisation of mobility, Caring for our people, Creating a
positive impact on society and Acting as a responsible business
partner.
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Enablingdecarbonisation of
mobility |
- 25% energy
reduction in solutions4
- 100% of newly
developed solutions eco-designed
- 100% electricity
supply from renewables
- Alstom committed to science-based
CO2 emissions reduction targets within the frame of the Paris
Agreement5
|
Creatinga positive impact on
society |
- 250,000
beneficiaries per year from local actions and Alstom
foundation
|
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Caringfor our people |
- Total recordable injury rate at
2
- 28% Women in
management, engineering & professional role
- Global Top Employer
certification
|
Actingas a responsible business
partner |
- 100% of suppliers
monitored or assessed on Corporate Social Responsibility and Ethics
and Compliance standards according to their level of risk
|
Most recently, Alstom has signed in June 2021 a
€400 million Green guarantee facility with BBVA for the issuance of
bank guarantees in support of Alstom’s commercial contracts which
recognizes the Group contribution to Sustainable Development Goals
SDG 9 “Industry, innovation and infrastructure” and SDG 11
“Sustainable Cities and Communities.
***
Integration of Bombardier
Transportation
The integration of Bombardier Transportation is
on track and has received strong employee support and customer
endorsements. Five months after closing, the organisation is
deployed as per target; the product and process convergence
roadmaps are secured, and the organisation is now operating under
one unified IT system. The Group also achieved its first
significant commercial wins from the combined strength of the
portfolio and expanded geographical footprint resulting in around
€6 billion of orders in the first quarter of the current fiscal
year.
A clear integration roadmap and timeline has
been set to complement the Group’s strategy:
- Stabilisation of
challenging Bombardier Transportation legacy projects based on
Alstom’s proven expertise and execution track record in 2 to 3
years with a strong focus on 2021/22;- One
operating model with best-in-class converged processes and product
portfolio in 3 years;- Full leverage of
the significant geographical, industrial and product scale and
complementarities for synergies, enhanced value proposition and
growth from 4-5 years onwards.
***
Project stabilization
impacting fiscal year 2021/22
Free Cash Flow
The current fiscal year 2021/22 will be a
transition year, focused on the stabilization of the Bombardier
Transportation challenging legacy projects. During H1 2021/22 free
cash flow is expected to be between (€1.6 billion) and (€1.9
billion) impacted by working capital consumption due to phasing,
industrial ramp-up and project stabilization efforts. In H2
2021/22, the Group expects positive free cash flow driven by
increased deliveries and operations stabilization. Overall, this
should result in significant negative free cash flow in
2021/22.Thereafter, the Group expects to see yearly positive free
cash flow generation towards its mid-term target6, driven by
progressive working capital stabilization.
***
Mid-term financial trajectory and
objectives
- Sales: Between 2020/21 (proforma
sales of €14 billion) – and 2024/25, Alstom is aiming at sales
Compound Annual Growth Rate over 5%, supported by strong market
momentum and unparalleled €74.5 billion backlog securing ca. €30
billion of sales over the next three years. Rolling stock should
grow above market rate, Services at solid mid-single digit path and
Signalling at high single digit path;
- Profitability: The adjusted EBIT
margin should reach between 8% and 10% from 2024/25 onwards,
benefiting from operational excellence initiatives, the completion
of the challenging projects in backlog while synergies are expected
to deliver €400m run rate between 2024/25 and 2025/26;
- Free Cash Flow: From 2024/25
onwards, the conversion from net income7 to free cash flow should
be over 80%8 driven by mid-term stability of working capital,
stabilisation of CAPEX to around 2% of sales and cash focus
initiatives while benefiting from volume and synergies take
up;
- Alstom will maintain its
disciplined capital allocation focusing on maintaining its
investment grade profile while keeping flexibility and ability to
pursue growth opportunities through focused bolt-on M&A.
- Alstom is committed to delivering
sustained shareholder returns with a dividend pay-out ratio of
between 25% and 35%9. For fiscal year 2020/2021, on the dividend
announced on May 1110, Alstom’s board of directors decided to
propose, in its meeting of July 4, to the General Shareholder
Assembly a dividend in share or in cash, which will be detailed in
the notice for the shareholders’ meeting.
Note to investors and editors:
The presentations of the Capital Markets day will be available
online at 8.45 am Paris time and a replay of the meeting will be
available during the day at Capital Markets Day 06/07/2021 |
Alstom.
Orders & Sales of first Quarter of Fiscal
year 2021/22 will be released on 20 July 2021.
1 Adjusted net profit - see definition in
appendix2 During H1 2021/22, free cash flow is expected to reach
between (€1.6 billion) and (€1.9 billion) impacted by working
capital consumption due to phasing, industrial ramp-up and projects
stabilization efforts. In H2 2021/22, the Group expects positive
free cash flow driven by increased deliveries and operations
stabilization. Overall, this should result in significant negative
free cash flow in 2021/223 European Train Control System4 Compared
to 20145 Target on Alstom legacy perimeter covering emissions from
operations (scopes 1 and 2) consistent with reductions required to
keep warming to 1.5°C, the most ambitious goal of the Paris
Agreement. Target on Alstom legacy perimeter for emissions from
value chain (scope 3) meeting the SBTi’s criteria for ambitious
value chain goals, in line with current best practice. As part of
the Bombardier Transportation integration program, CO2 reduction
targets will be reviewed by the end of FY2021/226 Subject to short
term volatility7 Adjusted net income8 Subject to short term
volatility9 Of adjusted net income10 Dividend distribution of €0.25
per share, which corresponds to a 31% payout ratio from the
adjusted net profit group share
Alstom is a trademark of the Alstom Group
Alstom™ and XXX™ are protected trademarks of the Alstom Group
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About Alstom |
|
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Leading societies
to a low carbon future, Alstom develops and markets mobility
solutions that provide the sustainable foundations for the future
of transportation. Alstom’s product portfolio ranges from
high-speed trains, metros, monorails and trams, to integrated
systems, customised services, infrastructure, signalling, and
digital mobility solutions. Alstom has 150,000 vehicles in
commercial service worldwide. With Bombardier Transportation
joining Alstom on January 29, 2021, the enlarged Group’s combined
proforma revenue amounts to €14 billion for the 12-month period
ended March 31, 2021. Headquartered in France, Alstom is now
present in 70 countries and employs more than 70,000 people.
www.alstom.com |
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Contacts |
Press:Coralie COLLET - Tel.: +33 (1) 57 06 18
81coralie.collet@alstomgroup.com Samuel MILLER - Tel.: +33
(1) 57 06 67 74Samuel.miller@alstomgroup.com Investor
relations:Julie MOREL - Tel.: +33 (6) 67 61 88
58Julie.morel@alstomgroup.com Claire LEPELLETIER –
Tel.: +33 (6) 76 64 33 06claire.lepelletier@alstomgroup.com
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This press release contains forward-looking
statements which are based on current plans and forecasts of
Alstom’s management. Such forward-looking statements are relevant
to the current scope of activity and are by their nature subject to
a number of important risks and uncertainty factors (such as those
described in the documents filed by Alstom with the French AMF)
that could cause actual results to differ from the plans,
objectives and expectations expressed in such forward-looking
statements. These such forward-looking statements speak only as of
the date on which they are made, and Alstom undertakes no
obligation to update or revise any of them, whether as a result of
new information, future events or otherwise.
This press release does not constitute or form
part of a prospectus or any offer or invitation for the sale or
issue of, or any offer or inducement to purchase or subscribe for,
or any solicitation of any offer to purchase or subscribe for any
shares or other securities in the Company in France, the United
Kingdom, the United States or any other jurisdiction. Any offer of
the Company’s securities may only be made in France pursuant to a
prospectus having received the visa from the AMF or, outside
France, pursuant to an offering document prepared for such purpose.
The information does not constitute any form of commitment on the
part of the Company or any other person. Neither the information
nor any other written or oral information made available to any
recipient or its advisers will form the basis of any contract or
commitment whatsoever. In particular, in furnishing the
information, the Company, the Banks, their affiliates,
shareholders, and their respective directors, officers, advisers,
employees or representatives undertake no obligation to provide the
recipient with access to any additional information
APPENDIX - NON-GAAP FINANCIAL
INDICATORS DEFINITIONS
This section presents financial indicators used
by the Group that are not defined by accounting standard
setters.
1.1. Orders
receivedA new order is recognised as an order received
only when the contract creates enforceable obligations between the
Group and its customer. When this condition is met, the order is
recognised at the contract value.
If the contract is denominated in a currency
other than the functional currency of the reporting unit, the Group
requires the immediate elimination of currency exposure using
forward currency sales. Orders are then measured using the spot
rate at inception of hedging instruments.
Order backlog
Order backlog represents sales not yet
recognised from orders already received. Order backlog at the end
of a financial year is computed as follows:
- order backlog at the beginning of the year;
- plus new orders received during the year;
- less cancellations of orders recorded during the year;
- less sales recognised during the year.
The order backlog is also subject to changes in
the scope of consolidation, contract price adjustments and foreign
currency translation effects.Order backlog corresponds to the
transaction price allocated to the remaining performance
obligations, as per IFRS 15 quantitative and qualitative
disclosures requirement.
Adjusted EBIT
Adjusted EBIT (“aEBIT”) is the Key Performance
Indicator to present the level of recurring operational
performance. This indicator is also aligned with market practice
and comparable to direct competitors.
Starting September 2019, Alstom has opted for the inclusion of
the share in net income of the equity-accounted investments into
the aEBIT when these are considered to be part of the operating
activities of the Group (because there are significant operational
flows and/or common project execution with these entities).This
mainly includes Chinese joint-ventures, namely CASCO joint-venture
for Alstom as well as, following the integration of Bombardier
Transportation, Bombardier Sifang (Qingdao) Transportation Ltd.,
Bombardier NUG Propulsion System Co. Ltd. and Changchun Bombardier
Railway Vehicles Company Ltd.
aEBIT corresponds to Earning Before Interests
and Tax adjusted for the following elements:
- net restructuring expenses
(including rationalization costs);
- tangibles and intangibles
impairment;
- capital gains or loss/revaluation
on investments disposals or controls changes of an entity;
- any other non-recurring items, such
as some costs incurred to realize business combinations and
amortisation of an asset exclusively valued in the context of
business combination, as well as litigation costs that have arisen
outside the ordinary course of business;
- and including the share in net
income of the operational equity-accounted investments.
A non-recurring item is a “one-off” exceptional
item that is not supposed to occur again in following years and
that is significant.Adjusted EBIT margin corresponds to Adjusted
EBIT in percentage of sales.
Adjusted net profit
Following the Bombardier Transportation
acquisition and with effect from these Fiscal year 2020/21
consolidated financial statements, Alstom decided to introduce the
“adjusted net profit” indicator aimed at restating its net profit
from continued operations (Group share) to exclude the impact of
amortisation of assets exclusively valued when determining the
purchase price allocations (“PPA”) in the context of business
combination, net of the corresponding tax effect. This indicator is
also aligned with market practice.
Free cash flow
Free Cash Flow is defined as net cash provided by
operating activities less capital expenditures including
capitalised development costs, net of proceeds from disposals of
tangible and intangible assets. Free Cash Flow does not include any
proceeds from disposals of activity.
The most directly comparable financial measure
to Free Cash Flow calculated and presented in accordance with IFRS
is net cash provided by operating activities.
Alstom uses the Free Cash Flow both for internal
analysis purposes as well as for external communication as the
Group believes it provides accurate insight into the actual amount
of cash generated or used by operations.
Pay-out ratio
The payout ratio is calculated by dividing the
amount of the overall dividend with the “Adjusted Net profit from
continuing operations attributable to equity holders of the parent,
group share” as presented in the management report in the
consolidated financial statements.
- 05072021 - PR Capital Market Day 2021 - VA
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