RNS Number:0690L
Alstom
14 May 2003
14 May 2003
For International Distribution
ALSTOM
FULL-YEAR RESULTS 2002/03
1st April 2002 - 31st March 2003
Results in line with guidance given on 12 March 2003:
* Orders received: Euro19.1bn, down 4% from fiscal year 2001/02 on a
comparable basis
* Sales: Euro21.4bn, up 1% from fiscal year 2001/02 on a comparable basis
* Operating margin before exceptional items: 4.1% (2001/02: 4.0%)
* Net income: Euro(1.38)bn
* Free cash flow: Euro(265)m, after cash outflow of Euro1,055m for GT24/GT26
* Economic debt reduced to Euro4.9bn at 31 March 2003 from Euro5.3bn at 31
March 2002
Key achievements since presentation of Action Plan on 12 March 2003:
* 50% of new Euro3.0bn target for disposals secured
* New credit lines confirmed
* Senior management renewed & new organisation implemented
* Restructuring & overhead reduction plans launched
Commenting on the results Patrick Kron, Chairman & Chief Executive Officer,
said:
"The past twelve months have been difficult, with a weakening global economy,
tightening financial markets and a sharp deterioration in the world-wide power
generation market. These adverse conditions were reflected in a slowdown in
orders, particularly during the final quarter of our financial year.
The Group faces many challenges. Our profitability is unsatisfactory, our debt
clearly remains too high, and we continue to pay the price of past problems
which we are working to close out, in particular in relation to the GT24/GT26
gas turbines. Due to the severe downturn in some of our markets, we need to
adapt our capacity and further reduce our costs.
The action plan I outlined in March was a decisive response to these challenges
and I am pleased to report that we have made good progress on the plan's key
actions. We have secured fifty per cent of the proceeds targeted from our
disposal programme, strengthened our financial base by ensuring our liquidity
and launched a number of initiatives to improve our operational performance.
We will continue to move with determination to deliver on our commitments, so
that ALSTOM's future performance better reflects both its leading positions in
power and transport and the sound fundamentals of these markets."
Full-year results 2002/03: Summary of Operating and Financial Review
Summary of results
Total Group Year ended March % Var.
Actual figures
(in Euro million)
2002 2003 March 03/
March 02
Orders received 22,686 19,123 -16%
Sales 23,453 21,351 -9%
Operating income 941 (434)
Net income (139) (1,381)
Free Cash Flow (a) (1,151) (265)
Economic debt (b) 5,290 4,918
Total Year ended March % Var.
Comparable figures (c)
(in Euro million)
2002 2003 March 03/
March 02
Orders received 19,959 19,123 -4%
Sales 21,051 21,351 1%
(a) We define Free Cash Flow to mean Net cash provided by (used in) operating
activities less Capital expenditures, net of proceeds from disposals of
property, plant and equipment (excluding proceeds from the sale of real estate
as part of our strategic plan) and Increase (decrease) in variation in existing
receivables considered as source of funding of our operations. However, this
measure is not a measurement of performance either under French or US GAAP.
(b) We define Economic debt to mean Net debt (or Financial debt net of short
term investments and cash and cash equivalents) plus cash proceeds from sale of
trade receivables ("securitisation of existing receivables"). Economic debt does
not represent our Financial debt as calculated under French GAAP, and should not
be considered as an indicator of our currently outstanding indebtedness because
trade receivables securitised are sold irrevocably and without recourse.
(c) Adjusted for changes in business composition and exchange rates
Trading impacted by difficult market conditions
Despite an unfavourable economic climate, markets remained generally buoyant in
rail transport and stable in both electricity transmission and power generation
service. Conditions were unfavourable, however, in large gas- and steam-related
plant and equipment activities in power generation, following the end of the '
gas boom' in the US market, and remained difficult in electricity distribution.
Our Marine market remained very weak.
Overall, Group order intake was down 4% on a comparable basis against the prior
year and sales were broadly stable (+1%). The order backlog amounted to over
Euro30.3 billion at 31 March 2003, representing approximately 17 months of sales.
Results affected by exceptional provisions
Operating income was Euro(434) million, after the impact of exceptional provisions
of Euro(1,300) million, primarily to cover additional costs relating to our GT24/
GT26 gas turbines and, to a lesser extent, additional costs associated with our
UK trains issues.
Excluding these provisions, the Group's operating income was Euro866 million and
the operating margin was 4.1% (4.0% in fiscal year 2001/02).
Restructuring charges increased from Euro(227) million in 2001/02 to Euro(268) million
in 2002/03. Pensions charges increased from Euro(139) million to Euro(214) million due
to the increase in amortisation of the difference between benefits and market
value of pension assets. Financial income improved from Euro(294) million to Euro(270)
million. Due to the negative pre-tax result, a tax credit of Euro241 million was
recorded in fiscal year 2002/03. Goodwill amortisation remained broadly stable
at Euro 284 million.
Net income, after exceptional provisions, was Euro(1,381) million for fiscal year
2002/03.
Improvement in free cash flow
Free cash flow improved to Euro(265) million, from Euro(1,151) million in fiscal year
2001/02, reflecting a substantial improvement in working capital. Excluding cash
outflows relating to the GT24/GT26 gas turbines, free cash flow was Euro790 million
positive.
Economic debt reduced by Euro372 million
Economic debt was Euro4,918 million at the end of March 2003, compared with Euro5,290
million at the end of March 2002, a reduction of Euro372 million. This primarily
reflects the impact of the capital increase in July 2002 and the disposals,
partly offset by the negative free cash flow.
Sector Review
Power
In difficult conditions linked to the new equipment market downturn,
particularly in the US, orders fell by 16% on a comparable basis, with a
pronounced decline in the final quarter. Sales on a comparable basis declined by
10%, with growth in boilers, environmental services, hydro and customer service
partially offsetting a sharp decrease in gas segment sales and a reducing
backlog of large turnkey steam projects.
Margins improved in the Boiler & Environment, Steam Power Plant and Industrial
Turbine segments, although these were offset by the negative impact of the GT24/
GT26 problems and the related exceptional provisions.
As reported on 12 March, the difficulties with the GT24/GT26 gas turbines were
reassessed and an additional gross provision of Euro1,160m was taken in fiscal year
2002/03. Good progress is now being made on the recovery package and of the 80
units sold, 71 are now in service. Excluding this GT24/GT26 provision, the
operating margin of the Power Sector was 4.3%.
Transmission & Distribution (T&D)
The T&D market declined year-on-year, principally due to uncertainties over
deregulation in the US. The Chinese and North African markets remained strong.
Against this background, orders on a comparable basis increased by 4%,
reflecting sound activity levels in transmission, contrasted with weak demand in
distribution. Sales on a comparable basis grew by 1%.
T&D's operating margin improved from 5.9% to 6.3%, reflecting better monitoring
of overhead expenditure and the effects of cost-reduction programmes, partly
offset by continuing price pressure in some market segments.
Transport
Transport took advantage of a generally buoyant market: orders were up 17% and
sales up 27% in fiscal year 2002/03 versus the prior year, on a comparable
basis.
A gross provision of Euro140 million was taken in fiscal year 2002/03 to cover
additional costs on the regional trains and West Coast Main Line (WCML)
contracts. Excluding this exceptional provision, the margin in the Transport
Sector was 3.7%, still adversely affected by low workload in UK, Canada and
locomotives businesses.
Marine
Sales grew by 26%, reflecting the strong workload in fiscal year 2002/03 which
will continue through fiscal year 2003/04. But due to the weak marine market,
order intake was very low at Euro163 million, creating uncertainty as to the
workload for fiscal year 2004/05 and beyond.
Action Plan Update
On 12 March 2003 ALSTOM's new Chairman & CEO, Patrick Kron, launched an Action
Plan. The plan has three main objectives:
1. Focus the Group's activities through an extended disposal
programme
2. Strengthen the financial base
3. Improve operational performance
Several steps have already been achieved:
1. Disposal programme: 50% secured
The targeted total proceeds from the extended disposals programme of Euro3 billion
by March 2004, are already 50% secured following the sale of the Industrial
Turbines businesses for Euro1,100 million (Euro950 million of net cash proceeds)
announced in April 2003 and a further Euro138 million received in April 2003 from
real estate sales. Together with the Euro418 million of proceeds realised in
fiscal year 2002/03, this brings proceeds secured to date to Euro1.5 billion. The
remaining part of the programme is progressing: additional real estate sales
should be finalised over the next few months and the sale of the Transmission &
Distribution Sector is proceeding according to schedule.
2. Strengthen financial base: liquidity secured; capital increase planned
Liquidity secured
The Group's current liquidity requirements have been secured with the formal
agreement of banks to amend covenants on existing facilities. A new bridge loan
of Euro600 million and the extension of credit lines totalling Euro475 million have
been obtained pending the disposals.
Capital increase planned
The non-consolidated losses in the Company's Statutory Accounts encompass an
exceptional write-off reflecting current accounting values of its subsidiaries.
Such losses will be applied to reduce the Company's share capital by a reduction
of the nominal value of each existing share of the Company from Euro6 to Euro1.25.
ALSTOM will seek to raise up to Euro600 million of additional funds at the
appropriate time through a capital increase by way of a rights issue.
Resolutions authorising the reduction of nominal value and the capital increase
will be submitted for approval at the Company's Annual General Shareholders'
Meeting on 2 July 2003. If shareholders do not approve the autorisation to
increase the capital, the banks will be entitled to require repayment of the
Euro600 million bridge loan and Euro475 million extended credit lines.
3. Operational performance: improvement underway
Management & organisation: renewed
ALSTOM's top management has been renewed: five new members joined the Executive
Committee, with changed management in the Power and Transport Sectors.
A more efficient organisation is being implemented: the Power Sector has been
delayered and split into three Sectors: Power Turbo-Systems, Power Service and
Power Environment. A Corporate Risk Committee chaired by the Chairman & CEO is
now operational.
Cost-reduction: programmes launched
The restructuring and cost-reduction programmes have been launched. These
programmes should lead to recurring annual savings of Euro500 million within two
years.
Industrial restructuring is being accelerated and the planned reduction of 3,000
employees out of the current 11,000 in the Power Turbo-Systems Sector has been
announced. Overhead reduction programmes have also started with the announcement
of a planned 40% reduction in employee numbers at Corporate and Power
headquarters.
Commercial activity: encouraging successes
Activity at the end of the fiscal year was impacted by the downturn in some of
our markets and uncertainties as to ALSTOM's future following the announcements
of 12 March. Through strong marketing efforts, however, the Group has been able
to maintain the support of its customer base and secure new, good-quality
contracts in its various sectors over the past few weeks, including the Euro179
million 25-year maintenance contract with the Barcelona metro; a Euro315 million
contract for the supply of Coradia trains in Italy; and a Euro320 million contract
for the supply of a gas-fired combined-cycle power plant in Bahrain.
Outlook
Whilst we expect overall demand to be generally low over the next few months due
to the depressed power generation market, we are confident that market
fundamentals will lead, in the medium to long-term, to growing demand for both
new equipment and service.
The timing of recovery in the power generation equipment and cruise-ship markets
is uncertain. The Transport market, however, should remain sound, even if
activity may be slightly lower than last year's exceptionally high level.
Given the progress in our operating margin before exceptional provisions in
fiscal year 2002/03, coupled with the extensive restructuring plans now
underway, we are confident of achieving our target of 6% operating margin by
fiscal year 2005/06. In view of the current free cash flow, we foresee the
Group to generating positive free cash flow, once the GT24/GT26 gas turbine
problem is resolved.
We also anticipate our economic debt will be reduced from Euro4.9 billion in March
2003 to a level in the range of Euro2.0 - 2.5 billion by March 2005, depending on
the quantity of additional funds raised through the planned capital increase.
* * *
- ends -
A full copy of the Operating and Financial review and prospects and a full set
of accounts and notes is available on ALSTOM's website (www.alstom.com).
Press enquiries: G. Tourvieille/M. Dowd
(Tel. +33 1 47 55 23 15)
internet.press@chq.alstom.com
Investor relations: E. Chatelain
(Tel. +33 1 47 55 25 33)
investor.relations@chq.alstom.com
Forward-Looking Statements:
This press release contains, and other written or oral reports and
communications of ALSTOM may from time to time contain, forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of such
forward-looking statements include, but are not limited to (i) projections or
expectations of sales, orders received, income, operating margins, dividends,
provisions, cash flow, debt or other financial items or ratios, (ii) statements
of plans, objectives or goals of ALSTOM or its management, (iii) statements of
future product or economic performance, and (iv) statements of assumptions
underlying such statements. Words such as "believes", "anticipates", "expects",
"intends", "aims", "plans" and "will" and similar expressions are intended to
identify forward looking statements but are not exclusive means of identifying
such statements. By their very nature, forward-looking statements involve risks
and uncertainties that the forecasts, projections and other forward-looking
statements will not be achieved. Such statements are based on management's
current plans and expectations and are subject to a number of important factors
that could cause actual results to differ materially from the plans, objectives
and expectations expressed in such forward-looking statements. These factors
include: (i) the inherent difficulty of forecasting future market conditions,
level of infrastructure spending, GDP growth generally, interest rates and
exchange rates; (ii) the effects of, and changes in, laws, regulations,
governmental policy, taxation or accounting standards or practices; (iii) the
effects of currency exchange rate movements; (iv) the effects of competition in
the product markets and geographic areas in which ALSTOM operates; (iv) the
ability to increase market share, control costs and enhance cash generation
while maintaining high quality products and services; (v) the timely development
of new products and services; (vi) the impact of our high levels of
indebtedness; (vii) the ability to renegotiate or renew our existing credit
lines and to meet the financial and other covenants contained in these credit
lines; (viii) difficulties in obtaining bid, performance and other bonds with
customary amounts or terms; (ix) the timing of and ability to meet the cash
generation and other initiatives of the new action plan, particularly, the
ability to dispose of the Transmission and Distribution business and certain
real estate assets on favourable terms or in a timely fashion; (x) the
availability of external sources of financing on commercially reasonable terms;
(xi) the inherent technical complexity of many of ALSTOM's products and
technologies and the ability to resolve effectively and at reasonable cost
technical problems that inevitably arise, including in particular the problems
encountered with the GT24/26 gas turbines and the UK trains; (xii) risks
inherent in large contracts and/or significant fixed price contracts that
comprise a substantial portion of ALSTOM's business; (xiii) the inherent
difficulty in estimating future charter or sale prices of any relevant cruise
ship in any appraisal of the exposure in respect of the Renaissance Cruises
matter; (xiv) the inherent difficulty in estimating ALSTOM's exposure to vendor
financing and other credit risks which may notably be affected by customers'
payment defaults; (xv) the ability to invest in successfully, and compete at the
leading edge of, technology developments across all of ALSTOM's Sectors; (xvi)
the availability of adequate cash flow from operations or other sources to
achieve management's objectives or goals; (xvii) the effects of disposals and
acquisitions generally; (xviii) the unusual level of uncertainty at this time
regarding the world economy in general; and (xix) ALSTOM's success at adjusting
to and managing the risks of the foregoing.
The foregoing list is not exhaustive; when relying on forward-looking statements
to make decisions with respect to ALSTOM, you should carefully consider the
foregoing factors and other uncertainties and events, as well as other factors
described in other documents ALSTOM files or submits from time to time with the
U.S. Securities and Exchange Commission ("SEC"), including reports submitted on
Form 6-K. In particular, we expect our Annual Report on Form 20-F for the
fiscal year ended 31 March 2003 (including our audited financial statements for
fiscal years ended 31 March 2003, 2002 and 2001) to be filed with the SEC in
late May 2003. 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 is not an offer to sell securities or the solicitation of an
offer to buy securities, nor shall there be any offer or sale of securities in
any jurisdiction in which such offer or sale would be unlawful prior to
registration or qualification under the securities laws of such jurisdiction.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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