Welcome to the Alstom conference call. I now hand the call over to your host today, Mr. Henri Poupart-Lafarge. Sir, please go ahead.
Thank you, gentlemen. Good morning, ladies and gentlemen. Welcome to our annual results conference call. I will go through the classical agenda. I will review the 2020 strategy. Just to let you know, as you probably have seen, Marie-Josee Donzion has left, will leave the company. I'm today with Selma, that you all know, and Selma will take over the financial part of the presentation, as well as all the tough questions. As a global introduction on our results of this year, if I had to summarize our performance, I would say that this performance is totally in line with our strategy. If I had to even to say that we are one year in advance as compared to our plans. One year in advance in terms of growth, as our sales have grown by 10% organically.
You know that our guidance, we are more 5% per year. By doing 10%, it's like two years in one year. That, as you have probably noticed as well, we have given a new guidance in terms of EBIT margin of 7% already this year. This year meaning ending March 2019, rather than 2020, which was obviously the previous target. If you go line by line, the order intake at EUR 7.2 billion, which confirms a very wealthy backlog, a very good backlog of EUR 34.2 billion. Sales have commented 10% organic growth at EUR 8 billion. I think it's symbolically we have reached EUR 8 billion. I recall you that a few years ago, we were only at EUR 6 billion. There is a gradual year after year growth.
We are always insisting on the yearly performance. I think it's fair to step back a little bit and look at several years. For several years in a row, we have actually exceeded the 5% organic growth. EBIT at 6.5%, ahead of our expectation. Again, we saw that we will reach gradually the 7%. We had two years to do so. I think we'll, as I said, we'll reach it this year. Positive free cash flow. Therefore very healthy balance sheet with equity now at EUR 4 billion. All together, we are going to propose a dividend of EUR 0.35, which is a growth of 40% as compared to last year. I'll go now on the different items of the 2020 strategy. I just recall you the 2020 strategy, which was relatively simple.
The basic idea of the 2020 strategy was just to say that our market is growing worldwide on the back of very sound fundamentals, which is the mobility needs in the different countries and the different cities in the world. We have to see that this growth is higher in emerging countries, in Asia, in Middle East, or in Americas, rather than in Europe, even though it continues to grow in Europe. We had to deploy and to redeploy ourselves in order to capture this growth. That was the first element of the strategy. The second one was about the solutions. Both because this was required by the customer, and particularly the new customers, but also because it's a differentiator for us against other competitors which do not master the global railway systems.
When we talk about solutions, we talk about systems, we talk about automation, Signaling, and we talk, of course, about services. Innovation was also a key differentiator. We are not at all in a kind of commodity business. We are in a business which is innovating day after day. We want to be at the leading edge of this innovation. Of course, project execution, operational excellence, cost competitiveness. This has paid off, and if you look at our orders this year, of course, these orders are lower than the previous years, which were including very large orders each year, last year, the years before. This year, there is no gigantic order. It's partially a coincidence, and partially related to the fact that, as I mentioned it in the past, in the Middle East, a number of large orders have been postponed due to the oil price.
Hopefully with the oil price recovery, we'll see them coming back. The very good news is that we are entering into 2018, 2019, with a very strong pipeline. Actually, a number of orders which are being discussed, not yet booked. You probably have seen Montreal, what we call REM, which is a new line of Montreal. Interestingly, by the way, this is the only turnkey which has been large turnkey, I would say, which has been awarded this year. We are particularly proud of being awarded this turnkey, and this will come in our books only during this quarter. We are also discussing the Grand Paris. We are discussing on the TGV du Futur as well. We are discussing on a number of opportunities. The pipeline is much stronger than the one we had at the same time last year.
I think I was candid enough with most of you to tell that this year's order will not be as strong as the previous years, but I can tell you that this year being March 2018, but for March 2019, we have a much greater visibility. The second piece of good news is that we were also, I think, candid enough to say that last year we were a little bit disappointed by the Signaling order intake. This year, we are back to a much sounder level and we have increased our Signaling order intake by 30%, which is, of course, very good news after a year which was a lower year last year. Some examples of orders, again, nothing I would say particularly large in these orders. Some good success in Canada.
Canada is moving very nicely in March 2019 and also in March 2019 because of REM already. Europe, again, continue to channel a number of orders, so fuel the growth. Interestingly, we talk about Senegal. I always say that Sub-Saharan Africa is probably one of the latest region of the world where we are not totally present. We are now filling this gap with Senegal, with the Dakar trains, but also we are discussing in Ivory Coast for the metro of Abidjan. There are some projects in Africa being developed as well. Asia continuing to be positive as well. A good mix of midsize orders, I would say. In terms of geographical reach, you know that we have continuously developed our workforce and resources, expertise, competencies in the world.
Now not only we are covering commercially the world, and we are in the top three of all the continents, depending on the year and large contracts, we can be number one, number two, or number three, but we are now consistently top three on all the continents. Now, I would say Europe represents 50%, we see, of our activities, so it's much more balanced than in the past. In terms of employees, we have now significant numbers of employees in all our regions. In terms of solutions, here as well, good balance of the portfolio. Very high growth of system this year, mainly due to two contracts, and we come back on that. Overall, we are close to our goal, which is to be 40% in rolling stock and 60% for services, signaling, and system, split 2020. We are more or less there.
Of course, depending on the year, it can change, but this is where we stand. In more details, we have some growth in rolling stock this year, but I would say in line with our global growth of the company. With some deliveries in Europe, the beginning of Amtrak, I will come back to the project, but it's going well. Some trains in Algeria, and of course, PRASA, which is also going on. Huge growth in system on the back of Dubai and Riyadh. Some still growth in service. As you know, service is growing relatively slowly because in terms of order intake, we have a very large order intake of service, including again this year. These are long-term maintenance contracts, and therefore, in terms of sales, it takes a lot of time to really fuel the growth of our service activities in terms of sales.
Signaling, yes, a slight decrease on the back of freight and mining market conditions, particularly in the U.S. Fair to recognize as well that last year we didn't have a very fantastic commercial performance, as I said, but which has been totally recovered this year. Two snapshot on our two contracts of systems. In Riyadh and in Dubai. I think this is again the sign of our nice project execution and the signs of our competence in system. Just one word to give you some flavor about that. Clearly in Riyadh, we are starting to test the metros, and we are proud. There are three consortia in Riyadh, and we have been the first one out of the three consortia to actually have some trains running in Riyadh, of course, on test, but still running in Riyadh.
As far as Dubai is concerned, I think that's going according to schedule. Again, these are extremely complex project, of course, but these are projects which are really at the heart of our know-how, and again, which explain why we have been awarded the REM contract in Montreal. Continuing to invest in R&D, of course. I mentioned it in the past, we had launched five years ago the complete renewal of our rolling stock ranges, starting from tram, then metro, regional trains, and of course, now we are on high speed with the famous TGV du Futur. Continuing to invest in smart mobility, and of course continuing to invest in digital technology, in particular on predictive maintenance. This year, there have been two remarkable events on innovation, which has attracted a lot of attention, and I think rightly so.
The first one, which is our hydrogen train, which has been awarded, by the way, GreenTech Mobility Award in Munich, and which has had its first service with passengers. It's not a normal service, but it has been authorized to carry passengers in Germany. We have also, I would say, launched a new hybrid vehicle, which is halfway between a bus and a tram, which is also attracting a lot of positive attention, and we have received for that as well, for I would say our first participation to the Busworld, the Innovation Award of the Busworld. I think this shows the nice innovation capacity of Alstom. I think as well that we were pretty lucky, because we have launched these two vehicles at a time where diesel is becoming really the evil of transportation. It took two years for diesel to become the really bad technology.
If you want to make a parallel with coal a little bit for energy, it took probably 10, 20 years for coal to really be banned from energy. Now, diesel is going to be banned much more rapidly. It happened that we come on the market precisely with solutions to replace diesel, whether it's hydrogen train to replace diesel trains, of course, the electrical bus to replace diesel buses. Two very nice innovations. All that can only, I would say, matter if we also execute and deliver our performance. Just to remind you the past years, since the last four years, we have moved nicely from EUR 300 million adjusted EBIT to more than EUR 500 million adjusted EBIT. Nice growth of the profitability.
What is important is that I remember when I talked to you in March 2015 when we launched the project, we said that there were three drivers for our margin improvement. One, which was the portfolio, one which was volume, and the third one, which was operational excellence. I think in terms of portfolio, as I told you, we are more or less where we want to be. In terms of volume, we benefited a lot from the volume, and we'll continue to do so. Now, what is really impacting the margin this year is the operational excellence, which is a combination of competitiveness, notably thanks to this renewal of our platforms, as well as good project execution. If we have delivered this year the level of sales that we have delivered, probably beyond some of your expectations, it is precisely because we have perfectly delivered our projects.
Therefore, all our milestones have been hit on time. The machine, if I may say, has delivered all what was supposed to be delivered, and this has fueled a lot of the growth. In terms of operational excellence, as you know, we are working a lot with our suppliers, global sourcing alliance. The idea is not just to have a kind of battlefield with the supplier, but to try to partner with them. As you know, India is playing a strong role in our global footprint in terms of competitiveness. We are continuing to ramp up our activities in India, with now more than 3,300 people, including 1,500 engineers in Bangalore. Very fast ramp-up of our Indian activities, which is bringing a lot of fruits. In terms of projects, as I said, extremely important to deliver our projects.
On our, I would say, flagships, in addition to Riyadh and Dubai, PRASA. PRASA is moving nicely. As you know, you have followed that year after year. We designed the trains, we produced the first trains in Brazil. This is all behind us. Now we are really in the South African industrial scheme. The first trains will be delivered by South Africa this year and will come in revenue service by the end of the year. The factory is completed. The production has started, both in Gibela and in our other factory, which we call Ubunye. The trains will be delivered from South Africa. We have really now de-risked, if I may say, this contract. We are starting to be in serial production in South Africa, which is the ultimate goal of this project. Madhepura, very nice achievement.
Frankly, a very nice achievement of all our teams. We have, 2 years after the contract, delivered our first locomotives from India, directly from a new factory in Madhepura, in India. This Indian project, I would say, combines all the competence of Alstom in terms of transfer of technology, in terms of localization, in terms of technology. This is an extremely nice achievement. On Amtrak, so far so good. Earlier stage, obviously, but we are starting to assemble the prototype. The engineering goes well. As I also explained in the past, this is a very high-tech product. There is no such localization, I would say, challenge, even though, because of the Buy American Act, this will be entirely produced in the U.S. The challenge is, of course, different. The challenge is mostly technological, and so far so good.
The engineering is progressing well, and we are on time. Other activities, continue to work on environment, continue to work on the energy consumption. Safety, here as well, I could say that, and I am particularly pleased about it, we are in advance as compared to our plan, 2 years in advance. Our 2020 goal was to reach IFR1 of 1 in 2020, and actually we have reached it this year, March 2018. We have moved in 4 or 5 years from 3.4 to 1. It is a remarkable, I would say, improvement of our safety at work. All that can only be, I would say, achieved thanks to our people and our teams. We are working on diversity. I am not saying here that I am totally satisfied with where we are.
We are improving a little bit, the gender diversity within Alstom, but we have a lot to be done. Thank you for your attention. Now I'll move to Selma, after having mentioned, of course, all our certification in Dow Jones, in what is the disclosure, anti-corruption, anti-bribery, and so forth. Selma, floor is yours.
Thank you, Henri. Good morning, everybody. Starting with the P&L on page 22, and moving straight to the items below the adjusted EBIT lines. We had EUR 47 million restructuring charges, driven by footprint rationalization and competitiveness initiatives, notably in the United Kingdom, the USA, and Brazil. Other charges of EUR 86 million included amortization of intangible assets and integration costs related to business combinations, such as SSL, GE Signaling, Nomad, that were reduced to EUR 25 million this year. In other charges, as well some transaction costs related to the Siemens Alstom deal amounted to EUR 39 million. The financial result decreased to EUR 91 million compared to EUR 127 million last year. This is consistent with the decrease in the gross financial debt resulting from the repayment of bonds which have matured.
On the income tax rate, the group recording a tax charge of EUR 73 million this year. It corresponds to an ETR of 25% compared to 33% last year. This improvement came mainly from a favorable environment in France and the USA. We expect to maintain a stable level in the tax rate in the future. Share in net income of equity investees amounted to EUR 260 million, mainly as a result of the remeasurement of the put option in the Energy JVs. We also benefited from the improved performance of TMH and CASCO. Net income of discontinued operation amounted to EUR 52 million, mainly due to a remeasurement of certain tax risks. As a result, the net income group share amounted to EUR 475 million this year compared to EUR 289 million last year. Moving to slide 23 on free cash flow.
The group free cash flow was positive this year at EUR 128 million, benefiting from the impact of our cash focus program. The working cap was globally stable, variation being within the classical short-term volatility. The free cash flow was also impacted by the ramp-up of the transformation CapEx that we will detail just right now on page 24. Alstom invested EUR 202 million in CapEx this year in order to strengthen its global footprint in the emerging market while modernizing its existing facilities. This including transformation CapEx at EUR 108 million. The group has continued the construction of the manufacturing site, notably in India, Madhepura, in South Africa, Dunnottar, as well as the extension of the Orlando site in the USA to serve the Amtrak project.
As end of March 2018, the cumulated amount of transformation CapEx already spent represented EUR 159 million out of the EUR 300 million envelope we've indicated you during the Analyst Day. Moving to liquidity and gross debt on slide 25. The group had a gross cash in hand of EUR 1.6 billion at end of March 2018. In addition to this available EUR 1.2 billion cash and cash equivalents, Alstom can access a EUR 400 million revolving credit facility maturing in June 2022, which is obviously fully undrawn. In addition, the put options in the Energy JV with GE provide additional flexibility. On 9th of May 2018, Alstom signed an agreement with GE relating to the implementation of the agreements of 2015 regarding the exit of Alstom from the Energy Joint Ventures.
The transfer of all interest will occur on 2nd of October 2018 for a total amount of EUR 2.6 billion. Regarding the gross debt, Alstom outstanding bonds amounted to EUR 1.2 billion at end of March. The October 2017 maturity of roughly EUR 300 million has been reimbursed, and the next maturity is now in October of this year for almost EUR 400 million. On slide 26, the Alstom net debt remained roughly stable over the period at EUR 255 million end of March, compared to EUR 208 million last year. This evolution resulting mainly from a positive free cash flow of EUR 128 million generated over the period. EUR 104 million acquisition and disposals, including notably some GE-related separation impact, the IS&IT cash out. As well as an advance payment on the EKZ shares. EUR 47 million increase, including the Indian Railways contribution to Madhepura Capital, as well as some stock option subscription. Dividends of EUR 60 million.
Lastly, Forex and others of EUR 58 million. Moving now to the equity on slide 27. The equity reached EUR 4 billion at the end of this fiscal year from EUR 3.7 billion last year. It was mostly impacted by a net income of EUR 475 million group share. Variation of pensions of EUR 55 million, net of tax. Dividends paid to shareholder of EUR 55 million. Share-based payment of EUR 55 million, and Forex and other of EUR 220 million. Last, moving to slide 28, an update on IFRS 15 implementation, the new standard for revenue recognition. It will be effective for Alstom from the fiscal year 2018-2019, and we have elected the full retrospective method. There is no impact on the cash position and no impact at completion on the economics. However, there is a change in percentage-of-completion methods. Currently, Alstom is trading revenues on milestones.
With the new standard, Alstom will apply cost-to-cost to recognize revenues. We expect some timing effects on the revenue and profit recognition. The estimated impacts are reduction of equity at transition of roughly EUR 450 million, while the order backlog is expected to increase of more than EUR 2 billion and reach around EUR 36.9 billion at 1st of April 2017. Again, there is no impact on cumulative profit or cash generation recognized over contract life cycle, just some timing effect. Thank you, everyone.
Thank you, Selma. In terms of outlook, I think I mentioned it already. We are upgrading our guidance, and we are, of course, including all consequences of IFRS 15 changes by having a new guidance of around EUR 8 billion of sales in 2019. This year, we have a growth of 10%, so I would say we have done two years in one year, so we should see this EUR 8 billion, I would say, number as in line and consistent with our global trajectory. Again, the adjusted EBIT is expected at 7% in March 2019 rather than March 2020. In the medium term, of course, now, if I may say, this is the next chapter, we are projected this merger with Siemens, the medium term is just a global guidance on our positioning on the market.
This medium term is to continue to outperform the market growth, as we have done consistently in the last six years, always above the market growth, continuing to improve our profitability as we have done consistently in the last six years. Of course, continue to improve the cash generation. Nice transition to the Siemens Alstom project. Where do we stand? Things are moving according to plan, to schedule. We have, of course, signed first memorandum of understanding. You recall on September 26th. We signed the contract itself, what we call the BCA, on March 23rd. This BCA has to be approved by Alstom shareholders on July 17th, and we target to close the operation by the end of 2018. In the meantime, of course, we need to get all antitrust clearances in the world in a number of jurisdictions, of course, including Europe.
We have announced yesterday night the new future board, of course, subject to the completion of the deed, I will not go into the details of each member. We have six independent members. We have five women out of the 11 members, if you take me out of the board, it's a perfect match. I think this is a group of people which are combining a wealth of experience, global experience, also, I would say by activities, industrial, finance, HR, compliance experience. I'm extremely pleased with this new board, I'm looking forward to working with all of them. We are also progressing in terms of targeting our ways of working. As you know, this is extremely important.
We are competitor up until the day one of the new company, we can work on the organization a little bit on processes, certainly not on business-related matters. We have decided to adopt an organization which is based upon the three main pillars. First, the intimacy with customers and with the new scope will be even more intimate and closer to all the customers in the world with our large footprint and extremely diverse footprint. We want to put a strong emphasis on digitalization. If we do this merger, as you know, this is primarily to address the new mobility and the new digital technologies. We put some emphasis on this digitalization with a strong organization in charge of this particular matter.
Of course, all that makes only sense if we adopt the same ways of working, the same processes, and if we have standard platforms. We have also two main functions which will be in charge to drive platforms and operational excellence, which basically are the two functions which will be in charge of driving the synergies between the two groups. In a nutshell, I think, if I had to look back at 2017, 2018, this has been a fantastic year for Alstom. I think we have achieved or close to complete our 2020 strategy, which had been launched a few years ago, which was one very important phase for the group, which was the globalization of the group, which was to put some sound base for worldwide in order to take advantage of this sound market.
At the same time, we launched an extremely exciting and positive strategic move, together with Siemens, and we are projecting this merger. I think 2017, 2018 will probably remain in Alstom history as one of the key year for Alstom. Thank you very much, and now I'm available for your questions.
Thank you much, sir. Ladies and gentlemen, as a reminder, if you wish to ask any questions, please press star one on your telephone keypad. Also, please limit yourself to only one question each. Thank you. This first question is coming from James Stettler , calling in from Barclays. Please go ahead.
Yes, good morning, all. I guess my one question just is on the time schedule. You look like you're doing everything you can from your side to get the merger done. Is there anything you see out there which could delay the process? Can you maybe talk about in terms of the antitrust approval process from here? Thank you.
Thank you, James. You are right to point out that the main, and actually the only remaining process to be completed is the antitrust process. Up until this is not done, it's not done. We target to complete this transaction by end of December. We have a fruitful and a rich conversation with a number of jurisdiction in the world. There are still some uncertainty, classically in these kind of processes. Today, we are in line and with our plan, which was announced at the beginning of the project.
Okay.
Thank you, sir. I'll go to Gaël de-Bray , calling in from Deutsche Bank. Please go ahead.
Thanks very much, everybody. Good morning. Could you perhaps elaborate on the group's operating leverage, please? Because the incremental margin was only about 13% in the second half, despite a very strong growth achieved over the same period of time, probably around 15% organically. I'm asking the question because you're now guiding for an additional 50 basis points margin increase on relatively flat sales. I'm just trying to reconcile a little bit, what's going on there. If I can add up a little bit to this question, also on the guidance, but this time for the EUR 8 billion revenue guidance. Is the implicit lack of growth mainly due to the difficult comparison basis after the exceptionally strong Q4 performance, or is it more related to IFRS and perhaps a bit due to FX? Thanks.
On your first question, I think, you need to look at year-on-year comparison. If you look at year-on-year comparison, you will see that As I said, it's now a mixed impact, but also it's operational excellence. Therefore, we have less probably leverage on the growth, and we see more, I would say, gross margin, if I can put it like that, impact. Yes, with what we have put in place, and your analysis is correct, if you look year-on-year with what we put in place, the drivers for margin enhancements is more related to competitiveness, is more related to operational excellence rather than pure growth. That's why we can anticipate continuous growth in profit, even though the sales will be around EUR 8 billion. On your second question, I don't have the complete answer to your question.
Let me tell you something. First, yes, the comparison is very high and higher than what we anticipated, and that you anticipated as well, and that we anticipated as well, because our sales are higher than our own expectations. Yes, the basis of comparison is probably higher. If we had done 5% this year, then you would have seen five and five, and you would have been happy with that. Here it's 10-0, and this is, in a way, it's more demanding than five and five. You're right by outlining the fact that the base is higher than what we anticipated. On IFRS 15, and there may be some questions about that, we will never know, because we have worked internally on IFRS 15 projection. What would that have been on the old rules? Nobody would ever know. There are some elements.
That's a little bit of accounting technicalities. Normally, there is no impact, because at the end of a contract, of course, your sales are your sales, and therefore, there is no impact. There is a phasing impact, because usually at the beginning of a contract, IFRS 15 is less aggressive. Let's say it delivers less sales than IAS 11, and at the end of the contract, it's the reverse. If you look at the global portfolio of Alstom, you would say that as we were growing, probably IFRS 15 would have had a negative impact in the previous years. I would say that for 2018, 2019, that would have no significant impact. Maybe a little bit. We would, again, never know, because we never published any IAS 11 sales this year. Maybe a small negative impact, but insignificant.
I would say the answer to your question is first the base, maybe some impact of IFRS 15. I don't know, and I don't estimate it as being significant.
Thank you much, sir. We'll go to Mr. James Moore calling from Redburn. Please go ahead. Your line is open.
Yeah. Hi, Henri. Hi, everyone. I wonder if I could go back to the December timetable you mentioned. I think your lawyers presented in a general forum, not regarding you, but general topics earlier this year, that phase 1s are taking three to five months. Phase 2's about a year. Is there anything that gives you confidence on December? It seems quite a short timeframe, as I don't think you've yet filed with the European Commission. Correct me if I'm wrong. Can you explain why you haven't filed yet, and when we should expect it?
I will not go into the details of our conversation with the European Commission. I don't agree with. I don't know which lawyer have given that, but the idea, there are some official deadlines for phase 1 and phase 2, which are much shorter. I think phase 1 is 35 days or something like that, so it's much shorter. The question is to complete the file. I think regardless about these official dates, it's more important that the European Commission is satisfied with the information that we are giving to them. Whether we give them pre-filing or during the filing or between phase 1 or in phase 2, that does not really matter. Phase 2 is not one year. It's also down in, I think it's four months. I think the timing is shorter than what you are mentioning.
That's why we are still on track for the end of December closing. Now, as I said to James, it's clear that I need to be cautious. These processes are long and complex, and I'm not ruling out any hurdles during these processes, time-wise, of course. Today, there is no reason to project differently than what we did in the past.
Thank you much, sir. With that, move to Mr. Ben Uglow calling in from Morgan Stanley. Please go ahead.
Morning, everyone, and thank you for taking the questions. First of all, Henri, I wanted to make sure I understood your answer to a previous question. In terms of the organic growth that you are thinking about this year, is it correct for us to assume that you are thinking of around zero? I know that's implied in the number, but is that actually correct, that you're not really expecting significant organic growth this year. That was the first question. Secondly, could you quantify a little bit, and maybe be a bit more specific about the Operational Excellence issue? You've had 70 basis points year-on-year margin expansion, roughly EUR 90 million. Are we correct to assume that the majority of that increase has come from Operational Excellence specifically?
Thank you, Ben. Sorry, it may sound a little bit complex, and that's why we have tried, but apparently unsuccessfully, to try to simplify the work by giving an absolute number in terms of sales rather than organic growth. Why is that? Because we are talking IFRS 15 for next year, and you want to compare with a number this year, which is not under IFRS 15. The question is, what kind of growth do you want to, I would say, to input in your model? If you want to compare EUR 8 billion with this year being retreated, first, we have not given any number because we have not finalized the treatment of the flow of the current year. Therefore, I'm not the one having launched this IFRS 15, but to talk about organic growth is a little bit complex at that stage.
We'll see what could be the right treatment of 2017, 2018 under IFRS 15, and we'll see what will be the comparison. My gut feeling at that stage, as I said, is that EUR 8 billion is the absolute number for next year, as we project it internally under IFRS 15. There may be a slight negative impact this year, as I said as well, under IFRS 15 as compared to March 2018, so you will see some kind of growth. Again, I'd rather now start from a fresh start and look at our EUR 8 billion as being the year for next year. There are some accounting impacts, I would say, destroy a little bit the logic of the organic growth itself. That's why, again, the comparison between IFRS 15 and IAS 11 is not equal year after year.
It would be simple if you had EUR 200 million difference between IFRS 15 and IAS 11 year-on-year, this is not what's happening. The growth under IAS 11 is not the same as the growth under IFRS 15. That's why I think then you don't know what is the kind of absolute growth. It's not the same growth if you discuss it under one accounting standard and the other accounting standard. In terms of operational, I would say that this year, the 70 basis points, it's most half-half between Operational Excellence and growth. It's half-half, so let's say 35%/35%. As I told you, next year, we think that we are going to continue to increase more the operational level, so we move between 35% to 50% in rough numbers to reach between 6.5% to 7%.
Okay, thanks.
Thank you, sir. The next question is coming from Mr. Jonathan Mounsey, calling in from Exane BNP Paribas. Please go ahead.
Hi. Good morning. Thanks for taking my questions. A couple, please. Just on the CapEx, I think we still have the balance of the EUR 300 million of transformation CapEx. I don't know about other people's numbers, but it feels like the figures for that came in a bit lower this year than I was expecting. Can we expect then that CapEx is maybe a little higher than we previously thought this year? Secondly, just on the pipeline, it does look very strong, particularly in the case of TGV du Futur. Have you got any comments on what maybe the first tranche of that may look like? I think overall it's something like 100 train sets, but how much of it are we likely to get in the first order, please?
On the CapEx, we are more or less in line with our expectations. We announced at the time that we have three years of exceptional CapEx. We are in the second year of this exceptional one, and we have still next year some exceptional CapEx to come. We'll reach our targets. You remember that it was EUR 300 globally, and we are today at around EUR 160 exceptional. We have a little bit more than EUR 100 remaining to come, most of it next year, but I think we are on track. In terms of TGV, there have been some numbers floating around in the press. We are still finalizing the contract, of course, with SNCF and discussing the technical details. The numbers which have been announced in the press were around 100, and this is one tranche. Those will be one contract.
Thank you, sir. We'll now move to Mr. Christophe Quarante , calling in from Societe Generale. Please go ahead.
Yes. Good morning, everybody. Christopher Caron, Societe Generale. First, congratulations with your performance in fiscal year 2017-2018. Three question, if I may. First one is about the orders. Could you give us your view about As you gave us last year a good indicator, could you have just an idea or color of what's going on here and what could be the landing point for this fiscal year, 2018 or 2019? Second question, if I may ask, could you come back, please, on the mix that has maybe also has an impact on your profitability? If I am correct, due to the signaling coming back, is it fair to assume that you may also reserve good surprise for this fiscal year? Lastly, did you see any change into your competitive environment currently? Thanks a lot.
No, in terms of order intake, we don't give any guidance because, of course, we were discussing TGV du Futur because of the events in SNCF and so forth. This has been a little bit delayed. If we had to book that before end of March, this would have had a tremendous impact on our order intake. We had three years at around EUR 10 billion. Each of these three years were including one very large contract of more than EUR 2 billion, EUR 2.5 billion, EUR 3 billion. This year, we don't have it, and it goes to EUR 7 billion. I don't know if we can draw a conclusion that it's EUR 7 billion plus very large contracts. I don't know. We have a strong pipeline, and we have a sustained activity. I don't think we can give any guidance there. Again, the pipeline is good.
On your second point of mix. No, there have been a very strong growth of systems. All in all, I would say the share of rolling stock has remained roughly the same. Last year, there were three-year systems. We did more signaling. This year, a little bit less signaling, more systems. Maybe next year it would be the reverse. We don't expect any more, any mix impact. We are where we should be. That's, yeah, signaling will come back, as you said, but at the same time, as I said, system was particularly high this year, so it may compensate in the future. In terms of competitive environment, frankly, I don't see any major move. We discussed a number of trends in the past. They are still there. We still have a global competition, globalization.
We have been the one, Siemens and Alstom, to have moved or to project to move. In terms of competitive behavior, frankly, no major evolution. Okay?
Thank you much, sir. We'll now go to Mr. Alfred Glaser calling in today from ODDO BHF. Please go ahead.
Yes, good morning. I wanted to come back on free cash flow. You've had a very strong first half and a negative second half. Could you give us a bit an outlook on free cash flow generation going forward and on the transformation of earnings into free cash flow, please?
Yes. I mean, this illustrates the volatility of the cash flow. One element of that is, of course, the order intake. I mean, we have a three-year down payment when we have a lower level of order intake, of course. This can go up and down. We still have, and this explains, I would say, the structural difference between our cash flow generation and our profitability, is the transformation CapEx. Of course, we have a high CapEx this year of more than EUR 200 million, which is much higher than our recurring level. This explains also partially. Finally, we still have also some, I would say, exceptional expense due to our deals, particularly on the new one. This explains also a little bit. Overall, I think what is mostly important for me is the working capital evolution.
Frankly, in the last years, including this year, we have managed to stabilize the working capital. Which is, as you know, my goal, so that when we have finished with the exceptional CapEx, this is our guidance and this is our target. We will deliver in cash our profitability. We have done that, the fact that we have improved last year a little bit our working capital, that we have deteriorated a little bit this year our working capital. When we talk about EUR 50 million, frankly, with the size of our working capital, this is extremely small number. I think overall we have, in these last years, achieved our target, which is to have a stable working capital. I think this was ending our conversation. Thank you very much for your time. I'll be happy to meet some of you soon.
We have the shareholder meeting on July 17th, for those of you who are interested. We have on 19th, July 19th, the Q1 orders and sales. Of course, in the meantime, Selma and Julia are here to answer to all your requests. Thanks a lot. Have a nice day.