Welcome to the Alstom conference call. For your information, this conference is being recorded. I now hand over to Henri Poupart-Lafarge. 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 highlights and on the first slide, what you can see that we have recorded a strong commercial momentum and a strong operational performance this year. The order intake has reached EUR 10 billion for the third year in a row. Therefore, the backlog is now at a record level of EUR 34 billion. The sales were up 6% or 5% organically at EUR 7.3 billion with a book-to-bill therefore of 1.4 if you compare it with the order intake. The adjusted EBIT was up 15% at EUR 421 million. Therefore, the margin was standing at 5.8%.
In terms of balance sheet and free cash flow, the free cash flow was positive at EUR 182 million, which was leading to a stable debt at EUR 208 million and an increased equity at EUR 3.7 billion. On the back of these good results, we have decided to resume the distribution of dividends at EUR 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. Naturally, we are confirming our 2020 objectives. 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 five 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 leading edge of our technology. 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.
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 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, of the development of the economy in the world, of the congestion of the cities, of the environmental drivers or the environmental concerns in all the world. This year, as I said, for the third year in a row, we have more than EUR 10 billion 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 two large contracts, one for Riyadh and one for Prasa 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 renewed, I would say, growth in Europe, but also in the U.S. 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 1.4 leads to a record backlog of EUR 34.8 billion. 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. 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. 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? 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, as 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. 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 headcounts in Europe of a little bit more than 20,000 employees. In terms of ranking, as we have said, we had as an objective to be number one, number two on all continents, which we have reached this year.
Of course, it may depends on some large orders year after year. In the main, we are where we wanted to be, i.e., we are 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 that we have booked this year on all continents. In Canada, as you know, we have booked some maintenance for our LRV 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 trains, Metro for Paris, but also in the rest of Europe, in the U.K., and the two orders which were already communicated in Netherlands and in Italy for our new platform of regional trains. 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, I will not come back on the first half order, on the second half. The largest one is a new generation of suburban trains for Paris. It's a very important order. We book for EUR 780 million for Alstom. It's in consortium with Bombardier.
This represents only, if I may say, 71 trains, whereas the complete frame contract could go up to 255 trains. 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 SNCF. I just wanted to insist on some regional trains which are not so often communicated upon, because these are coming in small batches. In the last five years, we have managed to record a number of regional trains in Germany, and I think more than 200 EMUs. This is a proof of the excellent relationship that we have with the German operators and of course, in particular, with Deutsche Bahn.
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 trains. We have excellent relationship with Deutsche Bahn on all these trains. This commercial activities, this commercial momentum, of course, results progressively, takes time. You know that we are in a long lead time projects. Projects like Prasa, projects like e-loco takes a lot of time to be traded. Progressively, this fuel our growth, our growth is in sales, our growth in deliveries.
If you step back a little bit, which is always good to do from time to time, you see that in the last five years, basically, we have gone from EUR 5.2 billion to EUR 7.3 billion, mostly organically. The only large acquisition was the acquisition of GE Signaling in the meantime, but most of the growth was organic growth. It gives, I would say, a regular growth, which is also something which is good in order to sustain good execution of the contract. I think this 5% organic growth is not only in line with, I would say, what we can do on the market, but it also in line with our capability to sustain good contract execution, as we will see later on. 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. We are in line with this objective. We are already quite advanced on these objectives. Deliveries are of course more scattered than others. We have a number of deliveries in Europe on regional trains, as I said, high speed. Also we are starting to deliver in Prasa. 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 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.
We are now in Riyadh, and we come back to that in the middle of fast execution of the Riyadh contract. 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. Not to come back again with, I think, the very, very good success of our tramway in Rio for the Olympic Games. Infrastructure in U.K., we are talking about Crossrail. Signaling is continuing to grow on the back of a number of deliveries, and of course there is the contribution of GE Signaling included in this growth. Service, as for the first half, has slightly decreased, but this is mostly due to the FOREX 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 will not go in the details of the execution, of course, of our contracts, but I think it is important to give you some snapshot of the largest contract. The Riyadh contract is doing well, is progressing very in line with our objectives and in line with the planning. I recall you the contract itself. We have 69 trains. 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 three metro lines in Riyadh. 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. We are continuing our efforts in R&D, and our strategy is to keep this stable percentage of sales in R&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 five years ago, the complete renewal of our platforms, starting with the tramway then the metro. This year, we are launching the two latest, I would say, platforms, which are the Regional Trains for which we did get some orders again in Italy and Netherlands.
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 du futur. We have launched as well some efforts on the Signaling programs, and particularly our new generation of CBTC, which is progressing well, as well as the alignment of our ERTMS 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.
This has been used internally for our own maintenance contract, but also now sold to customers. Two quite disruptive technology this year, which we have launched. It's quite unusual, so I wanted just to outline these two step change in our portfolio. The first one concern trains, but it's a new generation hydrogen trains, and what we call the iLint, which is now being tested successfully, I have to say. We have now a number of commercial activities on this contract because this has been developed in Germany with help of Länders which were interested, of course, by this train, which is a good alternative to the electrification of infrastructure, which is of course extremely costly.
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 months of June in Paris. On the digital front, what was announced last week is actually the result of the efforts of the last two 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 Optimet OrbanMap, which is an intelligent metro map.
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 first 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 buses. 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. 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. We are, on that front as well, in line with our objectives. The adjusted EBIT has grown by 15% at EUR 421 million, after a growth last year of more than 20%. Over the last five years, we have more than doubled the profitability of the activity. This is, as you know, on the back on the volume increase.
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. 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 one 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 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. You, as you have seen, we have improved our working capital this year, which of course is very good news. In terms of cost, there are, of course, large number of actions. One of them has been the redesign of all our platforms in a kind of redesign to cost. We are also working on the sourcing level with two 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, also to improve our global sourcing. Now we have 40% of our purchase which are done in low-cost countries. We are, as you know, ourselves, using our global footprint. To be close to our customers, as I said, but also to take advantage of the competitiveness of some of our footprint. One classical example is the ramp-up of India. We have now 2,700 people in India, including 1,500 engineers. We are growing 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 Ubunye, 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 Prasa trains. On the slide you can see Madhepura. This gives you a way to see that we are progressing on our new site for locomotives. As you know, we have signed the contract one year ago, so it goes quite fast. Talking about the projects and Madhepura in particular, we have submitted the design in February 2017, totally in line with the timing. We are respecting our commitment with the Indian Railways. 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.
Prasa, 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. We are already at 18, and the last two ones will come soon. What is important is that the first trains are actually in service. This is confirming something we have said a number of times, which is that the trains 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, 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 T's and C's. It's a question of culture. To make sure that everybody, wherever he stands, looks at cash as a first priority, inventory, overdues, cost income management, a number of training. It's not something which comes overnight. It depends also on the activities. It depends on where you are. 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. 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. For that, we have an 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 lead time projects, so it takes time to be really implemented.
We are on our way to achieve our global footprint. Global objective. 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 IFR1, 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. By the way, we have 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 are 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.
To illustrate what I've just said, I will give the floor to Marie-José, which will illustrate the financial result for you.
Good morning, everyone. I'll take you first to the bottom part of the P&L. This year, basically, EBIT stands at EUR 358 million, mainly impacted by the amortization of the PPA for EUR 35 million, 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. Basically the financial results to that EUR 127 million 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 EUR 1.5 billion after the repayment of a EUR 500 million maturity in February 2017. This result should progressively decrease to a normalized level of around EUR 100 million, 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 million, moving smoothly basically towards the effective tax rate of 30%, as indicated previously as well. We had a positive contribution in terms of share of net income of our equity investors at EUR 82 million 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. Overall, this results into a net income of continuing activities of €223 million, 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 had, as you could read in the slide, EUR 66 million coming from discontinued operations, mainly linked to the staggered and delayed assets that we disposed of this year. There is no additional gain to be expected on this concept. I propose now to move to the cash flow generation. The group free cash flow was positive at EUR 182 million this year, benefiting from a combination of several factors. First, obviously, the good level of our operating results. Then, as 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. Also, a good execution of our project portfolio as well as a good effect of the cash focus program that we can start seeing on our activities.
As always remembered, let's say we have volatility on short-term periods on the working capital. Basically, this remains a trait of this business. We also benefited from the phasing of the CapEx, which you can see reached EUR 150 million, and that I can now comment on the following slide. This €150 million CapEx actually include an amount of transformation CapEx for nearly EUR 50 million and, let's say, recurring CapEx, which are in line with the normative level that we communicated at €100 million per year. This basically supports the execution of the projects that we have in the portfolio. Basically, this additional transformation CapEx that we flagged to you for a total amount of €300 million over a 3-year period, basically are at 20% spent so far in the group.
This is basically linked this year to the beginning of the site constructions in South Africa and in India. You've got here the picture of South Africa, and you could see earlier the picture of the progress on the site of the e-locomotives in India. In terms of net cash position for the group. The group has a gross cash in hand of EUR 1.6 billion, which together with the credit revolving facility, which is fully undrawn, of course, leads us to a €2 billion liquidity position. 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 EUR 2.4 billion plus escalation formula, as you know.
In terms of gross debt, we have now EUR 1.5 billion outstanding bonds at the end of this year after we reimbursed the last maturity in February 2017. 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 EUR 208 million. You can see, in fact, we benefited from the free cash flow generation, which allowed us actually to complete some acquisitions. We had the capital increase in SpeedInnov, the acquisitions of CTLE in South Africa, as mentioned already by Henri, as well as Nomad Digital in the U.K., and a stake we took in EasyMile in France. We also, of course, have the cash out effect of the GE-related IT separation costs, which were flagged to you earlier.
We expect a EUR 150 million total cash impact on this concept. We are now at 60% spent already on this item. Last, equity reached EUR 3.7 billion end of March, versus EUR 3.3 billion last year. This obviously benefits from the good net income generation this year at EUR 289 million, as well as some positive currency translation adjustments which are posited this year.
Thank you, Marie-José. 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. 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 would 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. As you have seen this year, there are still some volatility, but we have managed to produce positive free cash flow as well. Thank you for your attention for this short presentation.
Now, of course, we will hand over the floor for questions.
Thank you. To ask a question, please press star 1 to enter the queue. Please clearly announce your first name, surname, and company name. As a reminder, you are allowed to ask only 1 question. We will now pause for a moment to allow everyone an opportunity to signal for questions. We will now open the first questions from James Moore from Redburn. Your line is open. Please go ahead.
Yeah. Hi, everyone, Henri, Marie-José, and Delphine. Thanks for taking my questions. If I can just do 1, 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 billion 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.
Thank you, James, for your question. The commercial activities 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. Globally, the margin, which has been booked this year, is totally in line with our objectives. Actually, now starts to be beyond, in terms of timeframe, 2020. We are building a very sound backlog for the years to come. In terms of pricing, we still see a price pressure, which depends from market. Of course, as we know, it depends on the regions, it depends on the product.
We have some type of price pressure, 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 questions come from Martin Wilkie. Your line is open. Please go ahead.
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. I appreciate it's lumpy, just to understand, was that planned, or are there any delays in that program? Just so we can understand, are the remaining roughly EUR 250 million 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. It's some kind of lumpiness. There is a phasing. On your second point, we have, as you can see, I would say physically on the slides, we are now in full speed. It will not be back-loaded. You should expect for the 200 and 250 remaining, a large portion next year already.
Okay.
To give you, I should have said as well, last week there was an important event in South Africa, which was the start of production. Even if the factory is not totally completed, we are starting to actually weld some primary parts in South Africa. We are really now full speed in South Africa. In India, it's ramping up nicely. Next year, I mean the year in which we are today, should be an important year for that.
Thank you.
Thank you. We will now move to our next question, come from Akash Gupta from JP Morgan. Your line is open. Please go ahead.
Yeah. Hi, good morning, everybody. My first question, or my only question is on IFRS 15 impact on your 2020 objectives, particularly on organic growth target and margins. Maybe if you can provide any update on that one.
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 our milestones, therefore events, rather than cost as they are incurred. There is a phasing impact on all activities, actually, be it Rolling Stock, Signaling service, or whole systems. This is being assessed. 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 potential impact on a restatement at the opening of the implementation. As we progress with the simulations, we'll come back to you on that. Obviously, on terms of cash flow, there is no impact at all on the cash flow profile of the projects themselves.
Thank you.
Thank you. We will now move to our next questions, coming from Guillermo Pena from UBS. Your line is open. Please go ahead.
Hi, good morning. It is Guillermo Pena from UBS. I just wanted to ask about industry consolidation. We saw articles about talks between one of your competitors here in Europe and other companies within North America. 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 two ways of speeding up the strategy. One is yet to participate to some kind of consolidation, so to enlarge our geographical scope, to enlarge some of our portfolio through consolidation. To speed up our new innovation and to speed up our digital knowhow and expertise through acquisition of small or mid-size companies, which are bringing to us some particular solutions, particular technology.
That is what we have done this year with the acquisition of Nomad, with the partnership with EasyMile. 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. Of course, to team up with Airbus on this theme is extremely important. We are not privileging, I would say, one route or the other. The two routes will be followed. Again, there is nothing which is do or die. There is no vital move. We need to progressively implement our strategy day after day.
Thank you. We will move to our next questions, coming 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 Moore. If you want numbers, I will let Marie-José the answers.
On the restructuring, as you could see this year, actually, we had limited impact in the P&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. We have a continuous effort, let's say, to adapt our footprint to the load that we have in our factories. As you know, we've got a good visibility on this load. The P&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 one-on-one actions that we can achieve to do on the various sites that we have.
As always indicated, I count on a kind of normative EUR 30 million restructuring effect, both in P&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 questions, coming from Alfred Graesser 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 have finished the investment on the new IT system? When do you expect to have spent the EUR 300 million on the new factories, please?
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. I definitely intend to have it completed in the current financial year 2017-2018. As you know, we had a service agreement with GE for a two-year period, which will end early November 2017. Therefore, all this cash will be actually spent before that date. Regarding the CapEx.
Some of the orders we took in new geographies. As I mentioned, we have this year roughly EUR 50 million included in the CapEx related to that item, out of the EUR 3 million envelope that we flagged to be spent over a three-year period. This three-year period, for me, still remains. We definitely see an acceleration of this spending in the current financial year, so 17/18. I don't see any delays, let's say, on this program. Thank you. Marie-José.
Thank you. We will now move to our next question, coming from Christopher Quarles from Societe Generale. Your line is open. Please go ahead.
Yes. Good morning, everyone. Just one question, if I may ask, Christopher Quarles from Societe 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 mention here, through this redesign to cost new platform? Or is there any still to do? 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 on and so forth. Thanks a lot.
Thank you for your question. As I said, we have started the redesign of our platforms four or five years ago with the tram. Of course, the stages of maturity of these different platforms depends on the date of their new launch. On trams, we launched it four years ago. There is no trams in revenue service of the new platforms, but there are now a number of contracts from Sinai 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 platforms. On time, 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 trains, this is more recent, and actually the first orders were the ones in Italy and in Netherlands, which means that what I've shown in Germany, for example, or 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. Then we expect some orders actually this year for the new trains in France. Typically, what we are looking at is an improvement of the total cost of ownership for a new platform between 15%-20%. That's what we are looking at.
It includes all the levers. It's not only a redesign to cost per se. It's not only the design. It's a design, 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, where we built it, how we built it. We revisit a number of levers. 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 questions, coming from Gael de-Bray 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 Transmashholding. Can you elaborate on Transmashholding's performance and remind us what the strategy behind the 33% stake you have? 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 EUR 80 million this year. 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, well, in this year on the back of the remaining IET and transformation CapEx to be cashed out, and also on the back of potentially negative working capital swings. Thank you.
Okay. Thank you, Gael. As we are starting the second round of questions, you're allowed to ask two questions. On the first one on Transmashholding, the performance of Transmashholding, as you can see, is quite remarkable, because despite the downturns of the Russian market in the recent years, Transmashholding has always managed to keep a profitability and a decent profitability, I have to say. They have adapted very well to the new environment. That's their operations day to day. Today, they are mainly focused on Russia and on CIS, as you probably know. Our strategy remains the same. Today, the idea is to work together as partners. We are helping them to modernize their footprint. We are helping them to address their markets. We are benefiting from their platform as well.
We are working on sourcing from their platform to benefit from, first, their global size, but also some cost competitiveness. Progressively, we work better and better together. There is no pre-designed ultimate goal. As you have seen, we have moved from 25% to 33%. The idea is to progressively reinforce our partnership, there is no planning in terms of shareholding structure. We are happy with what we have today, we'll see what life will say. In terms of cash flow, let me, I would say, give two points. There is a global and the long-term objective. The global and long-term objective is to stabilize our working capital. We've managed to do it in the recent past, the recent period, we have managed to do it this year.
I consider this year that the EUR 80 million improvement of working capital is part of what I call, in short-term now, the volatility of our working capital. 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, you have to figure out that we have EUR 35 billion of backlog with a number of contracts which are generating cash or absorbing cash depending on their situation and their phasing. The good goal and the really important goal is to stabilize working capital. As we have said a number of times, there could be some volatility in the short term, 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. It comes from James Moore from Redburn. Your line is open. Please go ahead.
Yeah, thanks. If I could follow up on the margin, my phone line cut out during your speech, Henri, apologies if you've already mentioned it. In the second half, your adjusted EBIT margin lifted 30 basis points, if I'm not mistaken. In the first half you lifted 50 basis points, at the time you said currency was -10, volume +20, mix +10, excellence +30. I wondered if you could help split the margin development in the second half or in the full year, if you have one to hand, in that same way, please.
James, I'll hand over to Marie-José. Reaffirming nevertheless that the split is, I would say, indicative split as we are not in a process industry, it's not as precise as you can do if you were in a steel or aluminum industry. We've done a similar exercise to illustrate the point. Marie-José, maybe you can illustrate.
Yes. James, in fact, we have a similar split for the full year. We have also improved 50 base points the adjusted EBIT compared to last year, from 5.3% to 5.8%. This includes close to 20 base point adverse effect from Forex, mainly driven by the pound evolution on our activities in the U.K. As you know, it's a translation effect, principally. We have roughly a positive 30 base point contribution coming from the volume for this year. We consider it's a volume 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 base point I would say, which is more limited considering, in fact, the evolution of Signaling, which is the main impact that we have in this positive mix effect. We have a 30 base 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 GE 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, Marie-José. Maybe last question, I think from Akash.
We'll move to our next question to come from Akash Gupta from JP Morgan. Your line is open. Please go ahead.
Hi. Thanks for my follow-up. My question is on cash conversion. For FY 2017, we had more than 50% cash conversion, and you are guiding around 100% by 2020. 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.
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. On the rest, maybe Marie-José, you can elaborate on the tax, the financial income, and so forth.
We've given some indication on the cash effects of the financial items and tax items, I believe. Really, if you look at the continued net result this year, which is EUR 220 million versus the cash generation of EUR 180 million, it's actually very significant cash transformation, if you like. The reality is, again, that the working capital and the cash profile of the project is actually not a linear profile. 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 three, four years, you would have the full translation of the net profit into cash.
Year-on-year, you have volatility effects coming from the mix of the portfolio.
Thank you, Marie-José. 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. I will be pleased to talk to you again in July for Q1 orders and sales. We have the shareholder meeting July 4th, and then we'll have the November 14th H1 result, but I may meet some of you before, of course. Thank you a lot, and see you soon.
This concludes today's conference. Thank you everyone for your participation. You may now disconnect.