H2 16/17

May 4, 2017

Welcome to the Alstom's Conference Call. For your information, this conference is being recorded. I now hand over to Henry Popolafar. Sir, please go ahead. Good morning. Welcome to Alstom Full Year Results Conference Call. Pleasure to be with you this morning to highlight our 2016, 2017 results. Starting with the headlights and on the first slide, what you can see that we have recorded a strong commercial momentum and a stronger operational performance this year. The order intake has reached €10,000,000,000 for the 3rd year in a row. And therefore, the backlog is now at a record level of €34,000,000,000 The sales were up 6% or 5% organically at €7,300,000,000 with a book to bill therefore of 1.4 if you compare it with the order intake. The adjusted EBIT was up 15% at €421,000,000 and therefore, the margin was standing at 5.8%. In terms of balance sheet and free cash flow, the free cash flow was positive at €182,000,000 which was leading to a stable debt at €208,000,000 and an increased equity at €3,700,000,000 On the back of these good results, we have decided to resume the distribution of dividends at €0.25 per share. Of course, as you can see, all these numbers are totally in line with our plan, are totally in line with our 2020 strategy. And naturally, we are confirming our 2020 objectives. So in a nutshell, 2016, 2017 has been a good year, a good year of execution of our strategy and a good year of execution of our portfolio. If you come back to this strategy, just as a reminder, we launched a few years ago our 2020 strategy. What was this 2020 strategy? The idea was to become the preferred partner for transport solution. This was our vision. And to do that, we defined 5 pillars: the customer focused organization, which means that we want to be close to our customer, not only in terms of commercial organization but also in terms of supply chain, in terms of engineering, manufacturing footprint a complete range of solutions, which also mean that we want to move away from a pure product provider to a product plus systems, plus solutions, plus maintenance, plus now more and more digital innovations provider. All that is fed with innovation, and we need to be at the lineage of our technology. And of course, to satisfy our customer, we need to have excellent operational and environmental performance. Finally, all our strategy is based upon our people, which have to be in line with our passengers and therefore, have to be diverse. So where do we stand in these different pillars? The first one, again, what we call the customer focused organization, was precisely to take advantage of the growth the worldwide growth of our market. As you know, we are on very sound markets, which are growing worldwide on the back of the growth of the cities in the world or the development of the economy in the world, of the congestion of the cities, of the environmental drivers and environmental concerns in all the world. This year, as I said, for the 3rd year in a row, we have more than €10,000,000,000 of order intake. I would say, as compared to previous years, of course, if you look geography by geography, it depends on very large orders. Last year, we had one very large order in Asia. You remember the locomotives in India. The year before, we had 2 large contracts, one for Riyadh and one for Praza in the Middle East. This year, it was a little bit more balanced. I will come back on some orders, but it was more balanced by geography with renewal renewed, I would say, growth in Europe, but also in the U. S. So not it was not due to one single contract, but to a larger number of contracts. In terms of activities, we still have and you'll see in terms of execution half of our activities in rolling stock and the other half in the other activities. In terms of backlog, this, of course, is book to bill of €1,400,000,000 leads to a record backlog of €34,800,000,000 We are building up our backlog year after year as we are growing orders faster than our sales. If you split the backlog, you have the split on the slide. Even though Europe today represents more than 50% of our activity, in the backlog, it's only 43% of the activity. And of course, the backlog of Middle East Africa or of Asia Pacific is heavily influenced by the very large contracts that we recorded in the previous years. And in terms of activity, you should remember that in Services, it always represents quite a large share of our backlog due to our very long term maintenance contract that can span around 15, 20 years of maintenance contracts. Where do we stand in terms of implementation of our strategy? So you see the results through this good commercial momentum. One of the driver of this strategy and one of the actions that we have put in place is the fact that I said that we have built a number of bases around the world in the U. S, in Latin America, in Middle East Africa, in Asia Pacific. So today, in terms of physical, I would say, implementation and employees, as you can see, we are the most global transport companies in the world with now 4,000 employees in Asia Pacific, close to 3,000 employees in Middle East Africa and more than 5,000 employees in Americas. While we have a stable headcount in Europe of a little bit more than 20,000 employees. In terms of ranking, as we have said, we had an objective to be number 1, number 2 on all continents, which we have reached this year. Of course, it may depend on some large orders year after year. But in the main, we are where we wanted to be, I. E, we have a critical size, continent by continent, and we are perceived throughout the different regions and markets as a leader on each single market. Some example of orders some examples of orders that we have booked this year on all continents. So in Canada, as you know, we have booked some maintenance for our LRD contracts in Ottawa. In the U. S, as mentioned, we have introduced high speed in the U. S. With this very large contract for Amtrak. We have continued to record orders in Latin America despite the slowdown in Brazil, for example, with new cars in Peru. It has been a good year for Europe, both in France, where we have recorded a number of orders from TGV, regional trends, metro for Paris, but also in the rest of Europe, in the U. K. And the two orders which were already communicated in Netherland and in Italy for our new platform of regional trends. In Middle East, despite a certain slowdown of the region, we continue to record some successes in Egypt, for example, on signaling or in Dubai for the extension of the metro for the Expo 2020. One, of course, important order that we booked this half year, we not come back on the first half order, but the second half. The most the largest one is a new generation of suburban trains for Paris. It's a very important order. We booked for €780,000,000 for Alstom. It's in consortium with Bombardier. But this represents only, if I may say, 71 trains, whereas the complete frame contract could go up to 255 trains. So there are a lot of more to come. The contract has been signed in January 2017, and we have now launched the engineering and the development of the train. This is well managed in partnership with Essentive. I just wanted to insist on some regional trends, which are not so often communicated upon because these are coming in small batches. But in the last 5 years, we have managed to record a number of regional trends in Germany. And I think more than, for example, more than 200 EMUs. And this is a proof of the excellent relationship that we have with the German operators and, of course, in particular with Deutsche Bank. I want to illustrate that because I think in our customer focused organization, it's not only to be present worldwide, It's also to cultivate good relationship with our customers in Europe to be very close to them and to have regular orders one after the other by delivering on time and with the required quality our trends. And we have an excellent relationship with Dutchman on all these trends. These commercial activities, this commercial momentum, of course, results progressively takes time. And you know that we are in a long lead time project. I mean, projects like Prasad, projects like Iloco takes a lot of time to be traded. But progressively, this fuel our growth, our growth is in sales, our growth in deliveries. And if you step back a little bit, which is always good to do from time to time, you see that in the last 5 years basically, we have gone from €5,200,000,000 to €7,300,000,000 mostly organically. The only large acquisition was the acquisition of GE Signaling in the meantime, but most of the growth was organic growth. So it gives, I would say, a regular growth, which is also something which is good in order to sustain good execution of the contracts. I think this 5% organic growth is not only in line with, I would say, what we can do in the market, but it's also in line with our capability to sustain good contract execution as we will see later on. So moving to this year's sales. In line with our strategy, we have roughly stable rolling stock sales, which represents now 43% of our sales. You may recall that we have an objective to balance 60% non rolling stock, I. E. System services and signaling and 40% rolling stock. So we are in line with this objective. We are already quite advanced on these objectives. Deliveries are, of course, more scattered than orders. We have a number of deliveries in Europe on regional trends, as I said, high speed. But also, we are starting to deliver in Brazil. A number of tramways have been delivered in Algeria. It has been a year of execution in Algeria of a number of tramways. The growth has come mostly so from the other activities. System is growing extremely fast on the back of large orders being booked in the previous years and particularly in Saudi Arabia. So we are now in Riyadh, I will come back to that, in the middle of fast execution of the Riyadh contract. So it's as you know, classically, we are starting by a slow delivery and then there is an acceleration of deliveries and then a slowness at the end. Mexico was also delivered in system. A number of Tramway in Brazil. I mean, not to come back again with, I think, the very, very good success of our Tramway and Hiyo for the Olympic Games. Infrastructure in U. K, we are talking about cross sell. Signaling is continuing to grow on the back of a number of deliveries. And of course, there is the contribution of gs Signaling included in this growth. Service as for the first half has slightly decreased, but this is mostly due to the forest impact on the U. K. You know that the U. K. Is a strong platform for service activities. And of course, it is impacted by ForEx and the decrease of the value of the pound. Coming back to Riyadh. We'll not go in the details of the execution, of course, of our contracts, but it's I think it's important to give you some snapshot of the largest contract. So the here the contract is doing well. It's progressing very in line with our objectives and in line with the planning. I recall you the contract itself. We have 69 trends. We have the signaling system and we have also the full infrastructure as we are doing this contract in consortium with Civil Works Company to deliver 3 metro lines in Riyadh. So the event, I would say, of the last period was the delivery in February of the first train on-site. Of course, this growth can only be fed through innovation. The strategy is not just to be present on the market. It's also to offer to our customers the latest technology and the latest innovation. So we are continuing our efforts in R and D. And our strategy is to keep the stable percentage of sales in R and D, which, of course, fueled by the growth, will enable us to increase our investment year after year. The main programs today, as you know, we had launched 5 years ago the complete renewal of our platforms, starting with the tramway and the metro. And this year, we are launching the 2 latest, I would say, platforms, which are the regional trains for which we did get some orders again in Italy and Netherlands and the very high speed for which we had a contract in the U. S. And we are working with SNCF on what we call the TGV, the future. We have launched as well some efforts on the simulating programs and particularly our new generation of CBDC, which is progressing well as well as the alignment of our ER TMS on the latest baseline, which we call the baseline 3, which is also being developed. More recently, we made a number of efforts in the digital technologies and we come back to that. Last week, we have announced a number of new innovation, among which we have the predictive maintenance. We have launched what we call HealthHub, which is a way to make a complete diagnosis of trains, digital diagnosis of our trains and to start to really implement predictive maintenance. And this has been used internally for our own maintenance contract, but also now sold to customers. 2 quite disruptive technology this year, which we have launched. It's quite unusual. So I wanted just to outline these 2 step change in our portfolio. The first one concern trends, but it's a new generation hydrogen trends, what we call the ILINT, which has now which is now being tested successfully, I have to say. And we have now a number of commercial activities on this contract because this has been developed in Germany with help of lenders, which we are interested, of course, by this trend, which is a good alternative to the electrification of infrastructure, which is, of course, extremely costly. And more recently, we launched a new vehicle, which looks like a tram when you are inside, which has the same kind of passenger experience as a tram, but which is on tire, on wheel and therefore can compete in the bus market. We launched it quite recently. It is now attracting a lot of attention from the market and we are testing it in Paris. And you will welcome to use it during the month of June in Paris. On the digital front, what was announced last week is actually the results of the efforts of the last 2 years. We have a number of digital tools to help both the passengers and the operators, which are, for example, a map, what we call Optimate Urban Map, which is an intelligent metro map. And this gives real time information on not only, I would say, on the traffic in the metro, but also on any event which are occurring in the cities. We have also some digital tools to help the passengers to decide where he wants to stand to wait his train and to stand in front of the cars which are empty. It also, of course, fluidify the traffic of the metros. I would say importantly very importantly, what we have launched is the 1st multimodal supervision solution. What it is? It's a system which comes as an overlay to all single systems, I. E, to all control centers for metro, for cars, for bikes, for boxes. So we have developed a complete system, which is fed by all these subsystems to allow public authority to manage in real time the complete mobility of their cities. Last but not least, we have acquired a company called Nomad Digital, which is the leader on its market, which is an onboard connectivity for passengers, but not only also to connect the trains to the operators and therefore to give a number of important information on the operations. Of course, all that has no, I would say, no value if it does not bring the profit and it's not fed the profitability of the company. And we are, on that front as well, in line with our objectives. The adjusted EBIT has grown by 15% at €421,000,000 after a growth last year of more than 20%. So over the last few years, 5 years, we have more than doubled the profitability the activity. And this is, as you know, on the back on the volume increase. So we are increasing our activity while keeping our structure under tight control. The portfolio improvement, as you know, if we are moving towards system signaling services, it's because it's required by the market, but it's also because it has a higher margin inside. And of course, as I will detail, we have a number of performance initiatives, which we have launched because again, I think we have now reached a stage whereby our globalization is more or less done. We are completed. We are present on a number of markets in the world. And now we have to make sure that this network of manufacturing sites, engineering sites are working efficiently with 1 each other. These are the list of initiatives. We are working, I would say, both on the competitiveness of our products and solutions, so kind of cost driver, but also on the delivery. And this is a project execution driver and to make sure that we have a flawless execution. In addition, we are introducing internally more and more digital technology to help in either decreasing the cost or improving the execution of our program. Last but not least, we continue to work a lot on cash. And as you have seen, we have improved our working capital this year, which of course is a very good news. So in terms of cost, there are of course large number of actions. One of them has been the redesign of all our platforms in the kind of redesign to cost. But we are also working on the sourcing lever with 2 classical levers. The first one is to work differently with our suppliers in partnership in order to improve the competitiveness of their solution and improve our ways of working and also to improve our global sourcing. And now we have 40% of our purchase, which are done in low cost countries. We are, as you know, ourselves using our global footprint. So to be close to our customers, as I said, but also to take advantage of the competitiveness of some of our footprint. And one classical example is the ramp up of India. We have now 2,700 people in India, including 1500 engineers, and we are going extremely fast in India, again, to serve the Indian market, to serve the Asian market as we are delivering the Metro of Sydney from India, but also to be a back office for the rest of the world. In South Africa, we have acquired this year a company called Hubunier, which is to deliver our products and projects in South Africa in terms of components. And we are creating a new site to deliver all the Praza trends. On the slide, you can see Madelepora. So this is gives you a way to see that we are progressing on our new sites for locomotives. As you know, we have signed the contract 1 year ago, so it grows quite fast. Talking about the projects and Madepura in particular. We have submitted the design in February 2017, so totally in line with the timing. So we are respecting our commitment vis a vis Indian Railways. So this is a very large contract, very important contract for us, as you know, which is doing well, both, I would say, in terms of development and physically, as you have seen on the slide. Praza, which is another very important contract that you monitor closely. We have delivered 18 trains in Brazil. I remind you that in this contract of 600 trains, 20 of them should be delivered from Brazil. So we are already at 18 and the last two ones will come soon. And what is important is that the first trends are actually in service. So this is confirming something which I've said a number of times. We see that the trends have been well designed. There have been absolutely zero issue in the revenue service, in the operations of the trains, which were designed in Europe, manufactured in Brazil and I would say, exported in South Africa, which I think is a good view, is a good sign of our ability to manage these complex projects globally. Last, Riyadh, but I've already talked about it, also in line with our expectations. Cash. Cash for us is a number of, I would say, initiatives. There is no one silver bullet. It's a question of standards, so it's a question of Ts and Cs. It's a question of culture, so to make sure that everybody wherever it stands looks at cash as a first priority, inventory, over dues, cost income management, a number of trainings. So it's not something which comes overnight. It depends also on the activities. It depends on where you are. But it bears some fruits. And we have stabilized, if not improved, our working capital over the recent years, which I think is one of our main target and one of our main objectives in the years to come. We are also looking at the environmental excellence, both because it's required by our customers, but also because I believe that this is one of the goal of the company, which is to improve its own processes. So we are looking at our own environmental footprint, and we have an objective to reduce the energy intensity by 10%, and we have already reduced it by 9%. So we are very much in line with our objectives. We are also looking at the energy consumption of our products. And for that, we have even greater objective of reducing it by 20% and we are at 11% in 2016. Of course, this takes some time because it needs to replace our old platforms, but new platforms. And as you know, we have long project, long lead time projects, so it takes time to be really implemented. But we are on our way to achieve our global footprint. Safety, global objectives. Safety is, of course, of utmost importance. I think this has been also a good achievement over the last 5 years. We have moved from 3.4 to 1.4 in terms of IFRS 1 as we call it, which is one indicator, but it gives you a view of the improvement within the company and the decrease of accident within the company. And by the way, we had no occupational fatalities in the last 5 years. Diversity, important. On that front, I have to say that we have some rooms of improvement. We have still at 20% of gender diversity of women in management. We have an objective of 25%, which is not yet reached, and we need to continue to work on that. But to illustrate what I've just said, I will give the floor to Marie Jose, which will illustrate the financial results for you. Okay. So good morning, everyone. I'll take you first to the bottom part of the P and L. So this year basically EBIT stands at EUR 358,000,000 mainly impacted by the amortization of the PPA for €35,000,000 as well as some integration costs from GE Signaling. Of course, compared to last year, we have pretty limited restructuring or asset impairment effects this year. Then basically, the financial results stood at EUR 127,000,000 compared to last year. This decrease is the consequence of the reduction in the gross financial debt. As you could see, this gross debt now settles at €1,500,000,000 after the repayment of a €500,000,000 maturity in Feb 2017. This result should progressively decrease to a normalized level of around €100,000,000 as I stated previously, and as we basically pay out the bonds, last bond basically maturing in March 2020. The tax rate of this year was at 33%, leading to a tax result of EUR 76,000,000 Moving smoothly basically towards the effective tax rates of 30%, as indicated previously as well. We had a positive contribution in terms of share of net income of our equity investors at €82,000,000 positive contribution. And this is mainly linked to the put options that we have on the energy JVs, which obviously first allow us to offset the result of the JVs and as well, let's say, contribute in terms of interests to the results of the group. So overall, this results into a net income of continuing activities of €223,000,000 which, in terms of earnings per share, corresponds to €1 per share and actually supports the proposed dividend distribution of €0.25 per share. We still add, as you could read in the slide, euros 66,000,000 coming from discontinued operations, mainly linked to the staggered and delayed assets that we disposed off this year, and there is no additional gain to be expected on this concept. I propose now to move to the cash flow generation. So the group free cash flow was positive at EUR 182,000,000 this year, benefiting from a combination of several factors. First, obviously, the good level of our operating results. Then as I mentioned by Henri, we had positive evolution of the working capital. Obviously, we collected during the year several down payments, which had a positive impact on the cash generation and also a good execution of our project portfolio as well as a good effect of the cash focused program that we can start seeing on our activities. As always remembered, let's say, we have volatility on short term periods on working capital. So basically, this is this remains a trait of this business. We also benefited from the phasing of the CapEx, which you can see reached €150,000,000 and that I can now comment on the following slide. So this €150,000,000 CapEx actually include an amount of transformation CapEx for nearly €50,000,000 and let's say recurring CapEx, which are in line with the normative level we communicated at €100,000,000 per year. This basically supports the execution of the projects that we have in the portfolio. And basically, this additional transformation CapEx that we flag to you for a total amount of €300,000,000 over a 3 year period, basically, are at 20% spent so far in the group. We this is basically linked this year to the beginning of the site constructions in South Africa and in India. So you've got here the picture of South Africa, and you could see earlier the the In terms of net cash position for the group, So the group has a gross cash in hand of €1,600,000,000 which together with the credit revolving facility, which is fully undrawn, of course, leads us to a €2,000,000,000 liquidity position. And obviously, the put options on the energy JVs with General Electric provide us with additional flexibility. As a reminder, the exit value of those put options correspond to a €2,400,000,000 plus escalation formula, as you know. In terms of gross debt, we have now €1,500,000,000 outstanding bonds at the end of this year after we reimbursed the last maturity in Feb 'seventeen. And as you can see in the slide, you've got the progress of the maturities till March 2020. This good cash performance actually leads us to a stable net debt position of €208,000,000 And you can see, in fact, we benefited from the free cash flow generation and we which allowed us actually to complete some acquisitions. We had the capital increase in speeding off. The acquisitions of CTLE in South Africa, as mentioned already by Henri and as well as Nomad Digital in the UK and a stake we took in IZMILE in France. And we also, of course, have the cash out effect of the GE related IT separation costs, which were flagged to you earlier. So we expect 150,000,000 euros total cash impact on this concept. And we are now at 60% spent already on this item. Last, equity reached €3,700,000,000 end of March versus €3,300,000,000 last year. And this obviously benefits from the good net income generation this year at 289 €1,000,000 as well as some positive currency translation adjustments, which are positive this year. Thank you, Marc Jose. As a conclusion, as said at the beginning, I think this year results are totally in line with both our strategy and with our objectives. And therefore, I confirm firmly our 2020 objectives, which is to continue to grow sales at 5% organically as we have done in the recent years to continue to grow adjusted EBIT to reach around 7% at that time and to reach 100% conversion from net income to free cash flow, which basically will mean that we stabilize the working capital and that the exceptional CapEx would be behind us. Of course, as always, we said some volatility on the free cash flow. But as you have seen this year, there are still some volatility, but we have managed to produce positive free cash flow as well. So thank you for your attention for this short presentation. And now, of course, we will hand over the floor for questions. Thank you. We will now open the first question from James Moore from Redburn. Your line is open. Please go ahead. Yes. Hi, everyone. Henri, Marie Jose, Selma, thanks for taking my questions. If I can just do one, perhaps I could ask a little bit about the pricing environment and whether pricing in new order intake is of a comparable level to the previous years and whether the margin in the EUR 10,000,000,000 of order intake in the year was similar to the margin in the order intake in the previous year or a bit above it? That's really my question on order margin, Rick. Thank you, James, for your question. The commercial activity this year has been quite good. As I said, this was not achieved at the expense of the margin in the order intake. Of course, it depends on the mix and it depends on the different type of orders. But globally, the margin, which has been booked this year, is totally in line with our objectives. And actually now starts to be beyond in terms of time frame 2020. So we are building a very sound backlog for the years to come. In terms of pricing, we still see a price pressure, which is depends on market from market. Of course, as we know, it depends on the regions, it depends on the product. We have some type of price pressure. But as I said, we have managed this year, if I may say again, to more than offset this price pressure, thanks to our cost efforts. Thank you very much. I'll get back in the queue. Thank you, James. We will now move to our next question, comes from Martin Ricchi. Your line is open. Please go ahead. Yes, good morning. Thank you. It's Martin Wilkie at Citi. Just a question on cash flow, particularly the CapEx phasing. It looks like the ramp up on your transformation CapEx slowed slightly in the second half relative to the first half. And I appreciate it's lumpy, but just to understand, was that planned? Or are there any delays in that program? And just so we can understand, are the remaining roughly €250,000,000 of that transformation CapEx, is that quite back end loaded over the next couple of years? Or should we expect quite a big step up as we go into the next financial year? Thank you. Thank you, Martin. No, there is no particular slowdown in the second half. So it's some kind of lumpiness there is phasing. On your second point, we have, as you can see, I would say, physically on the slide, we are now in the full speed. So it will not be back loaded. You should expect for the $250,000,000 remaining, a large portion next year already. We are really in the to give you, I should have said as well. I mean, last week, there was an important event in South Africa, which was the start of production. So even if the factory is not totally completed, we are starting to actually weld some primary parts in South Africa. So we are really now full speed, full speed in South Africa. And in India, it's ramping up nicely. So next year should be or next year, I mean, the year in which we are today should be an important year for that. We will now move to our next question come from Gupta from JPMorgan. Your line is open. Please go ahead. Yes. Hi, good morning, everybody. And my first question or my only question is on IFRS 15 impact on your 2020 objectives, particularly on organic growth target and margins. So maybe if you can provide any update on that one. So in fact, Akash, we are starting to disclose in the accounts this year, in fact, a series of impacts that we see in the timing of sales recognition. As you know, we trade according to milestones, therefore, events rather than cost as they are incurred. So there is a phasing impact on all activities, actually, be it rolling stock, signaling service or systems. This is being assessed. So far, it's a bit of an early stage to really give you a financial impact of these changes. Overall, I don't expect a massive effect on the yearly accounts. We are assessing the impact potential impact on the restatement at the opening of the implementation. And as we progress with the simulations, we'll come back to you on that. Obviously, in terms of cash flow, there is no impact at all on the cash flow profile of the projects themselves. We will now move to our next questions come from Gurren Moor Pringles from UBS. Your line is open. Please go ahead. Hi, good morning. It's Guillermo Penger from UBS. I just wanted to ask about industry consolidation. We saw articles and about talks between one of your competitors here in Europe and other companies within North America. And I was wondering whether you could kind of define or in a way help us understand whether Alstom in the future will be more focused on rolling stock or more focused on signaling when it comes to the potential that you can create from inorganic growth? Thank you for your question. Of course, you are referring to mention the names of the company on the rumors between Siemens and Bombardier. We have said, I think, a number of times that this industry will go through some kind of consolidation. There is no do or die type of activities in that respect. I think our first goal and our first priority is to implement our strategy and actually to speed up our strategy, thanks to external growth. To make it simple, there are 2 ways of speeding up the strategy. 1 is yet to participate to some kind of consolidation, so to enlarge our geographical scope, to enlarge some of our portfolio through consolidation or to speed up our new innovation and to speed up our digital know how and expertise through acquisition of midsize small or midsize companies, which are bringing to us some particular solutions, particular technology. And that's what we have done this year with the acquisition of Nomad, with a partnership with Isimail. And I will put in the same category the very nice partnership that we have signed with Airbus on cybersecurity. Cybersecurity is one of the theme for the future of our solutions. And of course, to team up with Airbus on this SIEM is extremely important. So we are not privileging, I would say, one route or the other. The two routes will be followed. But again, there is nothing which is like do or die. There is no vital move. We need to progressively implement and our strategy day after day. Thank you. We will move to our next questions comes from James Taylor from Barclays. Your line is open. Please go ahead. Thank you. Good morning all. My one question today is, can you give us some numbers on what we should expect for restructuring and other integration charges for the current year? Thank you. Thank you, James. If you are if you want numbers, I will let Marius the answers. So on restructuring, as you could see this year, actually, we had limited impact in the P and L. Though in the cash flow statement, actually, you can see the amount of spending that we have on the plans that were announced previously. So we have a continuous effort, let's say, to adapt our footprint to the load that we have in our factories. And as you know, we've got a good visibility on this load. The P and L is very much impacted by the announcement capability or the announcement effect in terms of IFRS rules. The recording is therefore quite bumpy versus, let's say, the actions or 1 on 1 actions that we can achieve to do on the various sites that we have. So as always indicated, I count on a kind of normative €30,000,000 restructuring effect, both in P and L and cash flow, and this can move slightly up or down depending on the announcements. Thank you. Thank you. We will now move to our next question, comes from Alfred Gresser from ODDO Securities. Your line is open. Please go ahead. Yes, good morning. I just wanted to ask about the timeline of the exceptional cash spending. When do you plan to finish the investment on the new IT system? And when do you have spent when do you expect to have spent the €300,000,000 on the new factories, please? So regarding the exceptional items, as I said, we are, in terms of IT separation costs, pretty well advanced. As I mentioned, we have spent probably already 60% of that amount, And I definitely intend to have it completed in the current financial year, 'seventeen, 'eighteen. As you know, we had a service agreement with GE for a 2 year period, which will end, therefore, early November 2017. And therefore, all this cash will be actually spent before that date. Then regarding the CapEx that supports the some of the orders we took in new geographies. As I mentioned, we have this year roughly €50,000,000 included in the CapEx related to that item out of the €3,000,000 envelope that we flagged to be spent over a 3 year period. So this 3 year period for me still remains. We definitely see an acceleration of this spending in the current financial year, so 'seventeen, 'eighteen. And I don't see any delays, let's say, on this program. Thank you, Joseline. Thank you. We will now move to our next question comes from Christopher Quaran from Societe Generale. Your line is open. Please go ahead. Yes. Good morning, everyone. Just one question, if I may ask. Christophe Khounfersiiete Generale. Could you give us an update on what you have done in terms of redesign to cost to all your platforms? Is everything ready, I. E, is all the new orders that you have on which you have been awarded are sold, if I may, sold mentioned here through this redesign to cost new platform? Or is there any still to do? And what could be on the cost of ownership, the benefit of such redesign to cost, if you can give more details products by products, I. E, metros, tram, very high speed commuter trains and so far and so forth? Thank you for your question. As I said, we have started the redesign of our platforms 4, 5 years ago with the tram. So of course, the stages and of maturity of the different platforms depends on the date of their new launch. So on trams, we launched it 4 years ago. There is no trams in revenue service of the new platforms, but there are now a number of contracts from Cine to Lusail to the last one in Paris, for example, which are using this new platform. On the metro, we launched it a little bit later on. And Riyadh and Dubai are metros of the new prem, it will concern, I would say, the vast majority of our projects. On metro, of course, you continue to have some particular metros for particular infrastructure, which is not totally what we call the standard platform, but which takes some of the elements which have been developed for the new platform. On regional trends, this is more recent. And actually, the first orders were the ones in Italy and in Netherland, which means that what I've shown in Germany, for example, our past orders in France are still of the old platforms. Finally, on the new very high speed, also the only, I would say, the order of the new platform is the Amtrak order. And then we expect some orders actually this year for the new trends in France. Typically, what we are looking at is an improvement of the total cost of ownership for a new platform between 15% to 20%. So that's what we are looking at. It includes all the levers. So it's not only redesigned to cost per site, not only the design. It's a design, but usually we take this opportunity to revisit our sourcing policy, as I said, both in terms of partnership and in terms of globalization of the sourcing policy. We revisit the industrial platforms, so where we built it, how we built it. So we revisit a number of levers. So it's not just, I would say, a pure engineering game. It's a complete review of the way we work. Thank you. Thank you. We will now move to our next question, comes from Guiller de Bries from Deutsche Bank. Your line is open. Please go ahead. Thanks. Good morning, everyone. Can I have two questions, please? Pretty quick ones. The first one is on TMH. Can you elaborate on TMH's performance and remind us what's the strategy behind the 33% stake you have? And then the second question is on the cash flow side. You said you expected a neutral effect on working cap in the coming years, but we've actually seen an improvement of around €80,000,000 this year. So do you expect some sort of reversal in the year to come? Overall, I guess what I'm trying to judge here is if the free cash flow could turn significantly negative or not in well, in this year on the back of the remaining IT and transformation CapEx to be cashed out and also on the back of potentially negative working capital swings? Thank you. Thank you, Gael. As we are starting the second round of questions, so you are allowed to ask 2 questions. On the first one on TMH, I mean, the performance of TMH, as you can see, is quite remarkable because despite the downturns of the Russian market in the recent years, TMH has always managed to keep profitability and a decent profitability, I have to say. So they have adapted very well to the new environment. So that's their operations day to day. Today, they are mainly focused on Russia and on CIS, as you probably know. So our strategy remains the same. Today, the idea is to work together as partner. So we are helping them to modernize their footprint. We are helping them to address their market. We are benefiting from their platform as well. So we are working on sourcing from their platform to benefit from their global first, their global size, but also some cost competitiveness. And progressively, we work better and better together. There is no pre designed ultimate goal. We'll see you've seen as you have seen, we have moved from 25% to 30 3%. The idea is to progressively reinforce our partnership, but there is no planning in terms of shareholding structure. We are happy with what we have today, so we'll see what Life will say. In terms of cash flow, let me, I would say, give 2 points. There is a global and the long term objective. And the global and long term objective is to stabilize our working capital. And we've managed to do it in the recent past, in the recent period, and we have managed to do it this year. I consider this year that the €80,000,000 improvement of working capital is part of what I call in short term now the volatility of our working capital. So there is no structural improvement there or structural reversal next year of the improvement of this year. I think this is part of the volatility. As you know, we have I mean, you have to figure out that we have €35,000,000,000 of backlog with a number of contracts which are generating cash or absorbing cash depending on their situation and their phasing. So the good goal and really the important goal is to stabilize working capital. And as we have said a number of times, there could be some volatility in the short term. And therefore, I have no particular indication for this year nor on one side nor on the other. We will now move to our next question, which comes from James Moore from Redburn. If I could follow-up on the margin and my phone line cut out during your speech, Henri, so apologies if you've already mentioned it. But in the second half, your adjusted EBIT margin lifted 30 bps, if I'm not mistaken. And in the first half, you lifted 50 bps. And at the time, you said currency was minus 10, volume plus 20, mix plus 10, excellence plus 30. I wondered if you could help split the margin development in the second half or in the full year, whatever you if you have one to hand in that same way, please? I'll hand over to Marie Jose, reaffirming nevertheless that the split is, I would say, indicative split as we are not in the process industry. So it's not as precise as you can do if you were in a steel or aluminum industry. But we have done a similar exercise to illustrate the point. So Maisole maybe you can illustrate. Yes. So James, in fact, we have a similar split for the full year. So we have also improved 50 basis points the adjusted EBIT compared to last year, so from 5.3% to 5.8%. You can I mean, this includes close to 20 basis point adverse effect from ForEx, mainly driven by the pound evolution on our activities in the U? K. So as you know, it's a translation effect principally. Then we have roughly a positive 30 basis point contribution coming from the volume for this year. We consider it's a volume kind of a net of price effect. As you know, the volume we have in the sales this year is not impacted by the price effect of this year, but comes from a mix of a combination of previous year's orders that are actually traded in this financial year. We have also a positive contribution from the mix, 10 basis points, I would say, which is pretty I mean, more limited, considering, in fact, the evolution of signaling, which is the main impact that we have in this positive mix effect. And then we have a 30 basis point positive contribution coming from the execution and all the actions that we have implemented previously to improve the profitability of the project as well as actually the synergies that we are delivering on the integration of G signaling within our business, which if you look at the cost structure, we have maintained pretty flat cost structure, while we actually delivered significantly higher volume. Thank you, Marjose. Maybe last question, I think, from Akash. We'll move to our next question to come from Akash Gupta from JPMorgan. Your line is open. Please go ahead. Yes. Hi. Thanks for my follow-up. My question is on cash conversion. I mean for FY 2017, we had more than 50% cash conversion and you are guiding around 100% by 2020. So how should we expect the development from last year to 2020, if you can help with that given the lot of moving parts in between? Yes. I mean, again, the first part, which is the most important one, is the working capital stabilization. The second one is probably the phasing out of the exceptional CapEx. Then on the rest, maybe Marisa, you can elaborate on the tax, the financial income and so forth. Yes. So we've given some indication on the cash effects of the financial items and tax items, I believe. Really, it's if you look at the continued net result this year, which is €220,000,000 versus the cash generation of €180,000,000 it's actually very significant cash transformation, if you like. The reality is, again, that the working capital and the cash profile of the projects is actually not a linear profile. And therefore, it's as I said, year on year, it's difficult to measure. And it's not because you have a negative variance on a year. It's a bad performance. It's actually just a reflection of the execution of certain projects, which lead to that consequence. Overall, if you take, let's say, accumulated vision of 3, 4 years, you would have the full translation of the net profit into cash. Now year on year, you have volatility effects coming from the mix of the portfolio. Thank you, Marie Jose. I think this concludes our presentation and our call. Thank you for your attention. Thank you for your time. I just want to conclude by confirming once more our 2020 objectives, which I think if there is one takeaway of this call is that we are totally in line, both in terms of financial numbers and in terms of physical implementation of our strategy. And I will be pleased to talk to you again in July for Q1 orders and sales. We have the shareholder meeting July 4. And then we'll have the November 14 H1 result, but I may meet some of you before, of course. So thank you. Thank you a lot, and see you soon. This concludes today's conference. Thank you, everyone, for your participation. You may now disconnect.