H1 16/17

Nov 9, 2016

Ladies and gentlemen, welcome to the Aelstom Conference Call. Today's conference is being recorded. I would now hand over to Henri Poppeil Lafarge. Please go ahead, sir. Thank you. Good morning. Henri speaking. Welcome to this half year results conference call. Today, I'm with Marie Jose and Selma. We'll be happy to answer to your questions. Before going there, a few highlights on our half year results. You have probably all heard the press release. So I will go relatively quick in the overview, and then I will hand over to Marie Jose, who will detail some of the financial indicators. As a general comment, we see our first half results have been extremely good. We have entered into this new financial year very positively. And I would say positively on all fronts. 1st, positively on the commercial front. I mean, you know it and you knew it because of the new flow that you have seen over the recent quarters. The order intake is at a record level of 6.2 €1,000,000,000 leading to a record level of backlog of €33,600,000,000 Of course, as year book to bill remains much higher than 1 at €1,700,000,000 Sales are up 8% at €3,600,000,000 which is a record high of course after growth of last year. So continuous growth year after year of our sales in line with our strategy as well as in line, of course, with the market fundamentals. The EBIT adjusted EBIT is up 20% at €200,000,000 leading to a margin of 5.6 percent, which is also in line with our, I would say, perspective of moving up to our guidance of 7 objective of 7% in 2020. What was remarkably good during the first half was the cash flow, free cash flow of €3,000,000 This is, as you will see, due primarily to the large level of order intake, which in turn has led to a large level of down payment. The balance sheet is, I would say, the natural consequences of these results with a net cash position at €54,000,000 a symbolic net cash position and liquidity at €3,400,000,000 In this, of course, in this good context, needless to say that we are confirming our 2020 objectives. This slide just summarizes the main numbers. Nothing new if you compare with last year again, record backlog, order intake, which is very high for the first half, sales growing nicely above our guidance of 5% per year, a good adjusted EBIT. And net income, and I think I will let my associate to explain to you what's in between the adjusted EBIT and the net income. What I just want to illustrate now is the fact that these results are, I would say, the results of our strategy are related to our strategy. And I will explain to you why the different elements of our strategy have led to this kind of performance. So first, as a reminder, and because this is extremely important and this is, I would say, the basics on which we found our strategy is the fact that our fundamental drivers are positively oriented. As you can see on the charts, the passenger traffic, whether it's urban or mainline, are growing nicely year after year. And of course, there could be some slight variation on 1 year to another one. But still, if you take an average growth 2,007, 2015, you have a very positive, very nice fundamental growth of the passenger traffic. And as you know, this is basically related to the urbanization of the world and the fact that urban transportation has taken a lot of time and delays as compared to the growth of the cities. And now this urban congestion is on the top of the agenda of all decision makers in the world. And this is not a surprise that even in these times of difficulties from an economic standpoint worldwide, even on this time of political instability, still investment in cities is continuing to grow year after year. The freight in the freight traffic, of course, is much more related to the macroeconomic environment, particularly regarding commodities. So it's not a surprise that traffic has gone down after the commodity crisis, which has started last year and both in terms of coal and in terms of oil in the U. S. So these nice drivers naturally led to positive market trends. As you can see, these numbers, I will not detail them. You know them. These have been announced by UNIFI at Innodranche beginning of mid September. But again, it confirms that the growth is not only in emerging markets, but also in the Americas and also in Europe. Because in a way, in emerging markets, all the cities are facing congestion issues and need to invest into public systems. And in mature markets such as in Europe, we are creating artificially some congestion issues by taking the cars out of the cities. There is a very, very fundamental trend in all the large cities in Europe to have policies against the cars for, I would say, basic environmental reasons, but also because this is a quality of living, this is a kind of general policy to have soft ways soft means of transportations in these cities. So more and more, I would say, downtowns are taking cars out of the streets. By nature and by different types of products, urban trends, regional trends are growing nicely, Services are growing nicely. So here also, I would say there is a general growth percentage could differ from 1 year to another one. But fundamentally, we have general growth in all geographies and general growth on all activities of Astom. One trend which has also been confirmed by this city of Unifin, which is the increasing portion of market which is addressed through Tungi, which is as you know one of the main feature of our strategy and one of the main feature of Alstom competence and expertise, the system expertise and our capability to deliver full turnkey systems. And as you can see, there is a growing portion, of course, driven and triggered by Middle East and Latin America, but a growing portion of activities, which is done through turnkey systems. So these are fundamentally the market trends, which have not, I would say, changed completely from 1 year to another one, but which has been confirmed through these last studies. You may recall our strategy, which is based upon the 5 basic pillars. The one which is to build what we call a customer focused organization, which is basically to have regional platforms capable of addressing the regional markets, both from a commercial standpoint, but as well as from an execution signaling, infrastructure to propose to our signaling, infrastructure to propose to our customers the solutions that they need. 3rd pillar innovation, we continue to invest. We are we see ourselves as one of the leader of the market, and we believe that we need to be not only the leader from a volume standpoint, but also a leader from a technological standpoint. Of course, 4th pillar about operational and environmental excellence in order to deliver the profit and the cash and also in order to be in line with sustainable challenges around the world. 5th pillar around people and the culture of the company. So again, what I would just want to illustrate during these 1st 6 months is how these pillars have led to the result that you have seen. So first, of course, the first pillar, which is to be close to our customer to have a geographical organization, geographical supply chain is one of the first reason behind the commercial successes. So the order intake has been strong in all regions. Of course, you have some fluctuation because of the large tickets. Clearly, this year, the ticket from Amtrak in the U. S. Has pushed a lot the America order intake. Last year it was in Asia. So we should have a kind of long term views on this contract and long term view of the performance of our regions. But basically, all our regions and particularly the emerging regions are growing fast. Similarly, the orders per, I would say, product or per activity is also following a good trend, particularly in service. You see the doubling of the service activity, signaling to anticipate maybe one of your question has gone down. It's clear that last year we had a number of very large tickets and which has not been repeated this year. System is going up, thanks to Dubai. I will come back to that. And France has also enjoyed a large amount of contracts. You have on the slide a few examples of our contracts being awarded this year in Europe, in Middle East and in the Americas, not only the famous Amtrak contract, but also in Canada and in Peru. So quite a nice geographical split of our contracts around the world. Just one example, and this is just to illustrate again the customer intimacy. One example of contracts which has only been, I would say, capable and has only been made possible because of this customer proximity. We had signed in October 2015 a contract about new trends for NTV customer in Italy, a private customer in Italy. And we have in this last half year extended these contracts both in terms of number of trends and also in terms of maintenance. Clearly, the NTV is, if I may say, a small operator, which today is entirely focused on Italy. And it's only a strong partnership between NTV and Alstom, which makes this kind of continuous improvement and continuous reinforcement of NTV fleet and continuous commercial success of NTV possible. So that's how we day after day doing the maintenance, improving the reliability of the trends, improving the availability of the trends of NTV makes their investment possible for the future. And they have renewed their confidence in ASTOM, which is clearly, I would say, a day to day partnership. To move to the 2nd pillar, which is solution. Of course, the main contract being awarded during this first half is Dubai Expo 2020. And here, I would say that the capability of Alstom to deliver a system on time, because again for Expo 2020, there is no way we can be late. I mean the 2020 Expo will be held in 2020. So we need to be definitely on time. And I want to illustrate that as well by the Rio Olympic Games. We have delivered our tram systems for the Rio Olympic Games on time. And I would say this is also a proof of the ability of Astom to deliver full projects even in complex environment with a very tight deadline and a very strict deadline. So this is I think one of the main argument why Dubai has chosen our consortium for this extension of the Metro of Dubai. If you look at our sales, no particular change globally on the profile of our mix of activities. Trends still represent 46% of activities. Service, you will see that later on has decreased a little bit due to mostly due to the exchange rate and the British pound. Signalling has increased basically due to the acquisition of G Signalling, which was not there last year at the same period and system is growing nicely. So if you look at the organic sales per activity and per regions, So again, we have a nice growth in standalone trends, nice deliveries of trends in Europe. We are starting also to deliver our trends in South Africa. So there have been a good execution of our contracts, which have led to this nice growth of the activity of trends. Very strong growth in systems on the back of previous orders and particularly the Riyadh. I mean, all that takes a lot of time. Riyadh orders have been booked a few years ago, but is now ramping up in terms of sales delivery. And of course, I was mentioning the Rio contract for the tramway of Rio as well as the tramway of Qatar. In signaling, as I said, the growth of signaling is mostly related to the acquisition of G signaling. In service, again, relatively stability of our service business, and we have been impacted by the drop of the British pound. As you know, the service activity in the U. K. Is an important activity for us. Overall, organic sales of 7% growth of 7%, in line if not better than anticipations. R and D, just a snapshot to just to tell that we are continuing to our effort on R and D. We definitely believe that R and D is at the heart of our strategy. We have a number of R and D programs, both in signaling, which is also very important from R and D standpoint, of course, which requires a lot of investments, but as well as in rolling stock and in service. So we are increasing as well service investments, particularly in predictive maintenance. Overall, we maintain our we want to go to 2.5%, more or less, percent of R and D investment per year. So we are more or less in line with our expectations. Just one illustration of these R and D programs is this Amtrak project. If we have been awarded this contract of these 28 trains, which we call Avelia Libertie, it's precisely because of our technological leadership. The maintenance cost, the energy management, comfort for passengers as well as tilting technology. This is high speed trends, which will be a tilting technology. And as you probably know, Alstom is one of the few player controlling, if I may, mastering this tilting technology. So some contracts are mainly related to the localization and so forth. Of course, this contract will also require localization, but it has also a very high technological content, which explains why Amtrak has decided to award this contract to ASTAM. All that will have no value if we don't translate it into improvement, into EBIT and cash, and that's what we have shown. So we have increased our EBIT margin. I think it's on the back of the volume, of course, which is helping, but also on the back of the mix improvement. So even though Service has been relatively stable and you know that Service has a high, I would say, contribution to the profit. Nevertheless, I've always said that signaling as well as system. So globally, the mix is moving in the right direction. And I would say within our backlog and I also said that a number of times, I do believe that the new orders are better margin than the old one. So there is a kind of natural improvement of the mix. You have the mix of the activity, but you have also the mix of the projects themselves, which are progressively very progressively. I mean, as we said that we are in a very long term business for that point, very progressively improving. Of course, this improvement of our backlog and this improvement of our projects is fueled by all our internal programs of operational excellence. Just to name a few, I mean, this is nothing new as compared to what I said last year. I mean, these are all our operational excellence programs, competitive offerings. So we work on the cost elements of our different trends and systems and solutions, sourcing, global footprint, to name a few. But we also work in the excellence in delivery. So in project execution, these are the 2 basic components of our performance, the intrinsic cost of our products and the way we are delivering them and the way we are serving our customers. We have put more emphasis on the digitalization of our systems, particularly in engineering, but not only. And we are investing a lot. I think I said it also in the past, but we are investing a lot on our IS system, IT systems. And last but not least, we have put in place this cash focused program. So a few illustration on sourcing. We have launched a number of alliance with suppliers. We are changing the way we work with our suppliers in order to be more in a partnership mode with our suppliers to develop with our suppliers some common platforms. We are improving and increasing the global sourcing. And to illustrate the global footprint, we have now more than 2,000 people in India, which a few years ago, 5 years ago, we had a few tens of people. So this is a very steep ramp up, both in engineering and in manufacturing of our activities in India. I just wanted also to highlight one point, which cannot be seen like that, is that we have launched a few years ago a complete renewal of all our platforms, whether it's a metro platform, tramway platforms, regional platforms and very high speed platforms. We have now we have been awarded, I would say, contracts for all these new platforms. So the Metropolis, the new Metro has been will be delivered, for example, to Riyadh. Dubai is also the best upon the new platform of our metros. Tramway, the Tramway of Lusail is based upon our new platform. The Tramway of Cine is based upon our new platform. Regional trends, I will come back on it. Italy and Netherland regional trends are based on these new platforms. And the last is the Avelia, which is a very high speed trains. And the Amtrak project is based upon this new platform. So we have a complete renewal of all our platform, which is something which we don't do very often. I mean, the very high speed, for example, the last time we launched such a platform was probably more than a decade ago. So this is something that you have done progressively over the last 5 years. And now we are at, I would say, the end of the process and we can sell and offer all these new platforms. So again, to illustrate this point, I strongly believe that our success both in Italy and Netherland has been made possible, thanks to this common platform. So even though it looks like 2 different trains with different speed and requirements, these are based upon the same development, the same suppliers partnership, the same type of manufacturing processes and delivery centers. So that's a good illustration of the platform strategy. Cash focus. It will be wrong to say that our cash focus program has led to the good cash performance of this half year. Clearly, the main impact of the or the main reason behind the good cash performance is the high level of down payments received from order intake. But having said that, there are a number of efforts throughout the companies to improve our cash conditions, whether it's through the sourcing and the terms of condition of our suppliers, all the cash improvement in the different sites from the supply chain standpoint, inventory standpoint, overdue and all the kind of actions, which are day to day actions in order to put cash at the heart of the priorities of all our managers. Now I will hand over detail the financial results. Thank you. Thank you, Henri. So I'll take you through some details regarding the financials of this first half year. So first, moving straight to the items below adjusted EBIT till the net income. I'll comment some of the indicators. So first, we had no restructuring charges during the first half, as you can read. Other charges include €24,000,000 of amortization of PPA of purchase accounting assets, mainly relating 2 gs signaling acquisition. We would expect actually a very linear impact of this amortization over the coming years, I would say in average over the coming 5 to 6 years. The financial result stood at €71,000,000 negative, decreasing versus last year as a consequence of the gross financial debt reduction that took place obviously in the second half last year. However, as you know, this level is not yet representative of the normative financial structure, so to speak, since we still have close to €2,000,000,000 gross debt level that will progressively, in fact, disappear as we pay out the bonds till 2020. At September 16, the tax rate effective tax rate was at 33%, so very close to the normative indication that we had given at 30%. And we have 2 particularly positive effects in the production of the net income of the semester. The first line is the share in net income of equity invested, which contributes for €47,000,000 And this is mainly relating to the remeasurement of the put option on the energy alliances that we have with General Electric, which not only protect the group against adverse results coming from those alliances, but also remunerate us at 2% to 3% depending on the JV. The last line is the positive contribution is discontinued operations net income, where we have a €24,000,000 positive contribution. And this relates mainly to the capital gain on the staggered assets that we still had in our portfolio. Since you know at end of March last financial year, we still had a number of activities in Russia and Brazil that were pending to be transferred to GE and this has taken place in the first half this year. There is no additional gain to be expected down the road. So this all results into this exceptional net income level of €128,000,000 for the 1st semester. I propose to take you through the cash flow generation indicator. So as Henri mentioned, I mean, the group free cash flow was exceptionally high this semester at 333,000,000 benefiting from a high contribution from the operating activity, so not only in terms of operating profit, but also in terms of working capital evolution and also benefiting from the favorable phasing of both CapEx and financial cash out. So during this first half, as Henri mentioned, Alstom collected several large down payments and was positively impacted by the cash generation from the project portfolio. As indicated during the Analyst Day last March, there is some volatility of the working capital on short periods in our business that can be both, I mean, positive or negative. And clearly, we have had a positive volatility effect on this first half year. If I look a little bit more in detail at the CapEx developments, Alstom invested €43,000,000 in capital expenditure on the first half year in order to strengthen its global footprint in the emerging markets, while we modernize the existing facilities in Europe. Clearly, this is a low level of capital expenditure, which reflects both, I would say, the strong control on the recurring CapEx that we have in our legacy sites as well as the slow ramp up of the transformation CapEx, which is illustrated in this slide with the start of the construction of the site in South Africa, which contributed over the period to €10,000,000 of this CapEx. So as indicated during the Analyst Day, we have a need to reinforce the network as well as the local competencies to deliver a number of projects in the emerging countries. And we flagged to you an exceptional additional €300,000,000 transformation CapEx over the next 3 years that is required for the group. I would say so far, we have spent roughly 10% of this transformation CapEx. If we look at the net liquidity position of the group, we have in hand a €2,300,000,000 cash and cash equivalents at end of September, which together with the €400,000,000 revolving credit facility, which is fully undrawn, gives us an improved liquidity position at €2,700,000,000 Obviously, the put options that we have with the energy JVs brings additional flexibility down the road. I also wanted to flag to you that we still have this close to €2,000,000,000 outstanding gross debt, where you see the maturities are flagged in the chart. And in particular, the next maturity that we intend to repay in February 'seventeen is close to €500,000,000 in Feb 2017. This results into a net cash position at end of September of €54,000,000 coming from a position at end of March 2016 negative €200,000,000 So obviously, this evolution results mainly from the positive cash generation over the period. And we had also €43,000,000 negative cash coming from acquisitions and disposals, which included the completion of some acquisitions, namely CTLE in South Africa and Cableence in Morocco as well as the GE related separation impact and namely some IT cash out. Equity increased to €3,400,000,000 at end of September and is obviously mostly impacted by the net income from the first half at €128,000,000 and also impacted by the variation of the actuarial hypothesis on pensions, where we have a net underfunding increase of €85,000,000 net of tax. And this is mainly related to the U. K. Pension schemes where we see an increase of the underfunding of €65,000,000 Currency translation impacts were minimal, resulting into the as I said, into this nice equity evolution over the period. Thank you, Mario Jose. Just to conclude on the objective, which you know we are confirming our 2020 objectives. Sales growth, of course, per year. Adjusted EBIT, where we are moving nicely towards our goal of 7%. And the cash conversion with, again, as reminded by Marie Jose, illustrated with the volatility illustrated by this half year results. This now, I would say, completes my presentation, and we can hand over to the questions. I think the operator will open up the questions. Thank you. We will now take our first question from Akash Gupta from JPMorgan. Please go ahead. Yes. Good morning, Andrew. Good morning, Marie Jose. I have a couple of questions, please. My first question is on U. S. Exposure and how much of that as a percentage of group sales now? And what does it consist of? Is it mainly signaling and suburban that I can figure out from your numbers? Or is this more has to do with other transport areas? And then potentially if you can talk about how your U. S. Business could see impact from presidential election results that we have seen this morning? I know it may be a little bit early, but still in, if you have any initial thoughts. And then my second question is on cash flow, where if you can split out legacy item in H1 cash flow because it seems that interest expense was quite cash interest was quite low and restructuring was also quite low. So just wondering if you can split out impact of legacy item in H1 and what should we expect for second half? Thank you for your question, Akash. I will hand over to Mario Jose. Globally, of course, it's not only too early to say what would be the consequences of the U. S. Election. And by the way, I thank all of you to be on the phone this morning because you may be also, I would say, busy doing also other type of analysis. But clearly, I don't see any immediate impact. If you look at the programs of the different candidates and of Trump, he was mentioning a huge investment in infrastructure. So but I will not say that I will not take that into account today. So it's too early to say. As a general rule, as you know, we are extremely decentralized and local. So I would say the same general comment as we did for Brexit applies to the U. S. As well. I mean, we are very much local in the U. S. So the frequency or the fluctuations, sorry, of the currencies should not have any major impact. But maybe Marisol, you can say more on that. Okay. So after checking this morning, I have to say, so we can say U. S. Volumes are pretty modest in our portfolio so far. So we are in terms of turnover, U. S. Market represents roughly 6.5% of our total turnover for the 1st semester. Obviously, we expect a progressive growth of this contribution of the U. S. Market since right now, obviously, Amtrak project doesn't impact this volume of revenue recognition, but this will happen, let's say, progressively over the coming years. So, so far, let's say, the volume exposure is pretty modest. And as Henri mentioned, we are pretty localized in the U. S. In the same way we were actually in the U. K. Since the activities that we make there are mainly signaling with GE Signaling business and Service. Amtrak also contains a high level of localization. If you remember well, we have a 70 percent content to be made out of the U. S. So at this point, I see no specific impact coming from the U. S. Market. Regarding the cash flow, maybe I can go through this question as well. So you're right. As I mentioned, the phasing of the legacy cash out on both the financial expenses and the CapEx is pretty downloaded in the year backloaded, let's say, in the year. Actually, all maturities of bonds happen to occur in the 2nd semester. So actually, the payment of the interest, the annual interest on those bond lines takes place only in the 2nd semester as a coincidence. So the phasing is clearly, let's say, the explanation for this low cash out level you see on H1. In terms of CapEx, as I mentioned, it's a low progression of the CapEx transformation plan. Nothing particular, let's say, to be flagged there. Thank you, Maize Jose. Next question, please. And the next question comes from Gael DeBries from Deutsche Bank. Please go ahead. Thanks very much. I have three questions, please. The first one is, I mean, do you still expect the free cash flow generation to be negative this year? Or if I say differently, after the outstanding performance in H1, do you expect it to fully reverse out in the second half? The second question is on the legacy IT cash outflows. So could you give us an indication of the magnitude of these IT related cash outflows in the first half? Can you confirm it was booked below the free cash flow of €333,000,000 in H1 and that's the €150,000,000 outflow you had previously guided for million outflow you had previously guided for in the next 18 months remains a valid number. And the third question is on the tendering activity. I mean, how do you judge the pipeline right now? I mean, between rising political uncertainties on the one hand, but also the opportunities for some more in structure related stimulus packages on the other hand, for example, in the U. K. Or in the U. S. I mean, what's in your view, what could be the net impact on transport demand? Thank you, Gail. Just as a general comment, we have given kind of model for the next year's free cash flow. I've also said that it was extremely volatile depending on the order intake notably, but depending also on some advanced payments, which can occur not only at the beginning of the contract, but also during the execution of the contract. So we had a good first half. We are not going to give any guidance on the full year. We are not changing our views on the global model. The global model was a model of over 3 years. The good performance of the first half does not change our views on the global model. Now there will be volatility as well at the end of this 1st year. So we'll see what exactly what will be the number at the end of the year. In terms of tendering activity, I think the market remains quite sound. And as I said, it's quite remarkable to see that even in countries where you have some political instability or financial challenges, the public transportation and urban transportation remain very high on the agenda of all decision makers. So I don't expect any huge, I would say, impact on the market itself. Now having said that, our own successes on the market can fluctuate from 1 quarter to another one. We have booked a large number of orders this first half. As well, I would say, it's even more than for the cash flow. I would say there is even greater volatility of our order intake. Q1 was very low. Q2 has been very high. And that illustrates, I would say, on a quarterly basis, the fluctuation of our orders. What I want to reiterate is our confidence that on the midterm, we are booking and we are increasing our backlog regularly to fuel our future growth. But I'm not going to give indication. We're still answering to a number of tenders around the world. So there are still commercial activity, which is quite sustained. So there is no change on that matter. But again, both the successes of 5 storm on one hand and the timing on these successes are, by definition, highly uncertain. On the IT, I will hand over to Marie Jose for the IT free cash flow. So IT cash flow, as I mentioned to you, this transformation cash flow is linked to the rebuild up of the infrastructure IT infrastructure of Alstom exiting from GE. So I confirm the total amount of €150,000,000 were roughly at 30% progress, so 1 third in terms of progress of the spending of this item. And you are correct, it has mostly impacted, let's say, the cash on acquisitions and disposals, therefore, not the cash flow metric. Thank you, Marie Jose. Next question. Thank you. James, I think. Our next question comes from James Moore from Redburn. Please go ahead. Yes. Thank you, Henriette. Marie Jose. I've got 3 topics, if I could. Just on the free cash flow, could you help us a little bit with the down payments? I'd love to get a number for the first half. And if not, maybe you could help us with the sort of percentage of orders. And how does that percentage number change or has it changed over the last decade? Has it been quite stable? Because I've got the sense with example, Prasa in India, where we didn't really see a big working capital cash inflow that maybe contract terms do differ contract to contract and how we should think about this also going forward. The second topic is tenders. We saw some speculation about RER, which sounds positive. Could you remind us when Grand Paris might be tendered or ordered? And where are we with other things like Philippines, Egypt, Mecca, North Korea, France, Netherlands? And then finally, on your strategy, I wondered if you could please help us understand how you plan to move from onethree to 60% of your train making outside of Europe and where that footprint will be? Thank you, James. On down payments, I mean, it's you can read it directly through our balance sheet. The fact that I think our down payment level has increased by more than €200,000,000 over the half year. Typically, and as you have said, the down payment varies quite significantly from one contract to another one. But we have, I would say, an average between 5% 5% to 10% of down payments or repayments in the contract. Of course, I'm talking more about the systems and I'm talking more about the trends rather than service contract, which are more regular cash flow. But you can see that in total volume, the down payment on our balance sheets have increased by more than 200,000,000 euros on during the first half. On the tendering activities, so you are mentioning ARIA, and it's true. I mean, it has been said in the press because I have no other official information. We have just submitted our last offer. And in the press, it has been said that we are the only one to be invited to submit this offer. So this smells good, but we need to finalize the tender and the offer definitely. There are a number of tenders which are today being submitted. Some of them are well known, and you have mentioned it. Maca, for example, has been discussed for a number of months. But I have to say that after Riyadh and Dubai, I'm not trying to the fact that Maca has been postponed a little bit. I think in terms of workload and in terms of momentum, it's not bad for us. Having said that, we are working days and night to secure it. We have a number. You are mentioning Egypt. We have a number of contracts in Egypt being discussed. So there it's difficult to point out one or the other ones. A number of, I would say, tenders which have been placed in the U. K. Particularly. U. K. Market is quite buoyant. But some countries, it's also the large contracts are always attracting the attention. In Germany, the tradition is to go more in small batches. And there are a number a large number of small batches. So our German performance has been quite good, but you don't you see it a little bit because it's sometimes announced, but it's more small batches of €100,000,000 €150,000,000 rather than huge contracts. As far as Grand Paris is concerned, you are mentioning it, it's a little bit further downstream. We have submitted already the offer for the rolling stock, and we are today answering to questions and so forth. So it's a technical evaluation of our offer. And we have yet to submit the offer in terms of signaling. But I don't expect any practical award before at least the next 12 months. So it's a long process. On the industrial footprint, which was your last point, as I said, I think this phase in which we are today in Alstom strategy is very, very particular where we are expanding our footprint. And it will have an end. I think in 2 to 3 years, we'll have globally in the world what is required to serve our markets. And when you look at India, for example, with the factory of Metro in 3 City, with the factory of locomotive in Madepura, with the factory of components in Coimbatore. We are not going to add new factories. Maybe the load of this factory or the capacity of these factories will fluctuate, but it will be the base for serving the Asia Pacific region. And this will be I think, of course, South Africa will be the best to serve Sub Saharan Africa. We have as well in Nigeria some trams. So it's I think it's a question of what we have done in the recent past is to put some new setup, a little bit covering the different regions of the world. And then the next phase, if I may, would be to optimize this setup to make it work together and to adapt the different capacities of these different base to their market. But it's a very, very, I would say, specific phase, which is I think I mentioned it, which is not only Astom's strategy, but it's also related to the market. It happens that the transportation market has globalized over the last 5 years and is continuing to globalize. Now there are projects in all cities in the world, and this is what we are accompanying through our strategy. But again, in the few years, this will be done. Thank you. Next questions, James? Next question comes from James Stetler from Barclays. Please go ahead. Thank you and good morning all. Looking at your margins, so you achieved 5.6%, even though service wasn't that strong, relatively speaking. You're saying the backlog quality looks even better. I mean, how are you thinking about the 7% medium term margin? And really, what are the big offsets that we need to worry about that will keep you from going beyond that level? That's question number 1. And then just a technical accounting question. Can you just talk a bit more about what's going on in the associate line? And as we understand that, you're looking to basically neutralize the impact from the 3 GE joint ventures and how does that work with sort of this special item you have on the put option? Thank you, James. We are today in a kind of virtuous circle where we are taking orders at higher margin than the one we are trading As execution of the portfolio is globally satisfactory, this translates into a progressive improvement of margin. What we know is that what we take is in line with our objectives of 2020. There is, I would say, no ceiling, no cap, but that's what we see today. And we are in a long term business, and I think it gives us some visibility. We'll see the next phase and how we can optimize further. But at the same time, as you have said, it's the mix impact can depend. I mean, last year, we had a huge mix impact. The improvement was mostly done through the mix impact. This year, service has not been so buoyant, but we have this improvement in systems, in signaling as well, as I said, project by project. So it's a very gradual improvement that we will see going forward. So no the only I mean, today, we are as I said, the 2 main components of this performance is, 1, the cost of our solutions, the differentiation, the cost and the technology of our solutions and our way to execute the contracts. So as long and this is the main challenge is to keep this high level of execution at the high level of quality of execution, while we are putting in place our globalization strategy so that we are monitoring very closely the expertise, monitoring the quality of what we do in the new facilities, in the new setup. And that's the day to day challenge. But I would say that the growth, which is very good growth, but it's 5%, 6%, 7% is totally manageable from this standpoint. So this is how it Now Jose, maybe on the accounting question? So regarding the associates, as I mentioned, it's a positive contribution that we get. So I'll detail a bit further. First, from the operational JVs that we've got with TMH in Russia and Casko in China. So those JVs have a positive contribution in terms of profit for the first half year, roughly €15,000,000 And then basically, the main impact, €30,000,000 come from the revaluation of the put options, which as I said, not only net off the loss generated by the JVs, but in fact is remunerated 2% to 3 percent depending on the JV. And the contribution of this revaluation has been roughly €30,000,000 for the first half year and again should be linear as we go forward. Thank you, Marie Jose. Next question, we'll try to be a little bit quicker because we're running out of time. Our next question comes from Martin Wilkie from Citi. It's Martin from Citi. Just a quick question on restructuring. And apologies if you've answered this already. There's a couple of problems with the line. Obviously, no charges in the quarter sorry, in the half. If you could just comment a little bit about both the P and L as well as the cash impact you expect from restructuring over the next couple of years, Because in the past, you've talked about some legacy cash costs. I know a lot of that was to do with tax and to do with the financial income. But I just wanted to check also if we should expect the cash impact of restructuring to pick up as well as the P and L impact. Thank you for the questions. No, I would say there is no concept of legacy for restructuring. We have ongoing adaptation of our sites, particularly in Europe. This translates into a very regular cash flow, cash outflow. But of course, the P and L impact depends on the announcements of plan. So there was no plan clearly announced during this first half. So there is no P and L impact. Having said that, it does not change our views on the regular cash outflow and does not change our views on the P and L impact, which then varies from 1 quarter to another one. But on the full year, we said and we confirmed that there should be roughly €30,000,000 impact per year, which corresponds to the cash flow and which corresponds to the P and L, but with fluctuation, of course, depending on the announcement of plans. Okay, next questions? Our next question comes from Guillermo Peigneau from UBS. Please go ahead. Hi, good morning, Andre. Good morning, Maria Jose. I wanted to ask on the transformation CapEx, the $300,000,000 I think you alluded in the past and whether these changes with Amtrak or any needed investments in the localization there and the same with the situation in Belfort in which you need to invest €40,000,000 So is this resulting in higher transformational CapEx going forward? That is the first question. And I have one follow-up. No, just on this one, the easy answer is no. There is a limited CapEx for anthrac, but in a matter of €20,000,000 to €30,000,000 so not extremely high. And this is part of the project itself. And there is no CapEx for BELFOR. The announcement of investment in BELFOR, which are not investments in BELFOR itself, in BELFOR sites, are more engineering investments related to the very high speed trends and related to the locomotive platform. So these are investments which have no CapEx elements. Next, maybe you had a follow-up question, you said. Next question comes from Christophe Garanti from Societe General. Please go ahead. Yes. Good morning, everybody. Christophe Galante, Societe General. Two questions, if I may ask. First one, could you give us the current tenders where it seems that you are interested in, in Turkey, in Spain and maybe in India, if I'm right? And second question is about profitability. Could you give us some metrics in terms of profitability, mainly related to the evolution of the gross margin, the savings that you have also into your 2020 objectives, where are you? On your operational excellence, where it seems that you did better, you do better you have better results, sorry, than what you expected there? Thanks a lot. Thank you, Christophe. On your first point, I mean, it's not going to detail our commercial strategy. You are probably referring in Spain to the high speed trends and this is well known tender currently being, I mean, analyzed in Spain for very high speed. In India, maybe you are referring to that, there have been a prequalification on a very large regional train contracts, and we are prequalified. This is a similar type of contract than the one of Madepura for the locomotives, but for regional trends. And we have been prequalified with comment on this one. But again, it's an illustration that we have some projects a little bit everywhere in the world. So on the profitability, I mean, we have not done we have not given precise metrics on this contribution. I think, as you know, I believe that our results are meaningful only on the long term. So we'll do we'll give you more precisions at the full year on the different contribution of the different element on the mix and the different operational performance. But if you want to have just maybe a snapshot, Marie Jose? So in fact, you could say the by currency translation adjustment, we had a 10 basis point negative impact coming from the ForEx, mainly, let's say, the pound impacting us negatively on this. Then we have a volume effect, which would be positive 20 basis points compared to last year with thanks to the significant organic growth we show on our turnover. We have a mix a positive mix effect compared to last year, mainly coming from signaling and as you noticed, not so much from service. So this is a 10 basis point positive contribution from the mix. And we have a 30 basis point contribution from the operational excellence initiatives. And you're right, I think those actions are delivering some fruits as we progress in the year. Thank you, Maggie. All these numbers are, again, very rough numbers as, again, from one quarter to another one. This, of course, can fluctuate depending on the project's contribution project by project. I think this is ending our conference call. I again thank all of you for your attention, particularly on this very special day. And I'd be happy to meet all of you during the coming weeks. Thanks a lot. Bye bye. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.