Ladies and gentlemen, welcome to the Alstom conference call. Today's conference is being recorded. I would now hand over to Henri Poupart-Lafarge. Please go ahead, sir.
Thank you. Good morning. Henri speaking. Welcome to this H1 results conference call. Today, I am with Marie-José and Selma. We will be happy to answer your questions. Before going there, a few highlights on our H1 results. You have probably all had the press release. I will go relatively quick in the overview, and then I will hand over to Marie-José, 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. First, positively on the commercial front, and 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 EUR 6.2 billion, leading to a record level of backlog of EUR 33.6 billion.
Of course, as the book-to-bill remains much higher than one at 1.7. Sales are up 8% at EUR 3.6 billion, which is a record high, of course, after growth of last year. Continuous growth year after year of our sales, in line with our strategy as well as in line, of course, with market fundamentals. The adjusted EBIT is up 20% at EUR 200 million, leading to a margin of 5.6%, which is also in line with the perspective of moving up to our guidance of objective of 7% in 2020. What was remarkably good during the first half was the cash flow. Free cash flow of EUR 333 million. 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 payments.
The balance sheet is, I would say, the natural consequences of these results, with a net cash position at EUR 54 million, a symbolic net cash position and equity at EUR 3.4 billion. In this good context, needless to say, that we are confirming our 2020 objectives. This slide just to summarize 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. Good adjusted EBIT and net income, and I think I will let Marie-José to explain to you what is 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. 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 is urban or mainline, are growing nicely year after year. Of course, it could be some slight variation on one year to another one. Still, if you take an average growth 2007-2015, you have a very positive, very nice fundamental growth of the passenger traffic.
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. Now this urban congestion is on the top of the agenda of all decision-makers in the world. This is not a surprise that even in these times of difficulty from an economic standpoint worldwide, even on this time of political instability, still the infrastructure investment in cities is continuing to grow year after year. In the freight traffic, of course, is much more related to the macroeconomic environment, particularly regarding commodities. It is 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.
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 UNIFE at InnoTrans, beginning of mid-September. Again, it confirms that the growth is not only in emerging markets, but also in the Americas and also in Europe. In a way, in emerging markets, all the cities are facing congestion issues and need to invest into public systems. 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 fundamental trend in all the large cities in Europe to have policies against the cars for basic environmental reasons, but also because this is a quality of living. This is a kind of general policy to have soft means of transportation in these cities.
More and more, downtowns are taking cars out of the streets. By nature and by different types of products, urban trains, regional trains are going nicely. Services are going nicely. Here also, there is a general growth. Percentage could differ from one year to another one, but fundamentally, we have a general growth in all geographies and general growth on all activities of Alstom. One trend, which has also been confirmed by this study of UNIFE, which is the increasing portion of market which is addressed through turnkey. 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.
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. These are fundamentally the market trends, which have not 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 five 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 standpoint and supply chain standpoint. The second pillar is about the solutions and precisely our ability to combine Rolling Stock, service, Signaling, infrastructure, to propose to our customers the solutions that they need. The third pillar is the innovation.
We continue to invest. 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, fourth 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. Fifth pillar, around people and the culture of the company. Again, what I would just want to illustrate during these first 6 months is how these pillars have led to the results that you have seen. First, of course, the first pillar, which is to be close to our customer, to have a geographical organization, a geographical supply chain, is one of the first reason behind the commercial successes.
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. We should have a kind of long-term views on this contract, and long-term view of the performance of our regions. Basically all our regions, and particularly the emerging regions, are growing fast. Similarly, the orders per product or per activity is also showing 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.
Trains 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. Quite a nice geographical split of our contracts around the world. Just 1 example, and this is just to illustrate again, the customer intimacy. 1 example of contracts which has only been capable and has only been made possible because of this customer proximity. We had signed, in October 2015, a contract about new trains for NTV, a customer in Italy, a private customer in Italy. We have, in this last half year, extended this contract, both in terms of number of trains 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. That's how we, day after day, doing the maintenance, improving the reliability of the trains, improving the availability of the trains of NTV, makes their investment possible for the future. They have renewed their confidence in Alstom. It is clearly, I would say, a day-to-day partnership. To move to the second pillar, which is the solution. The main contract being awarded during this first half is Dubai Expo 2020. 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.
The 2020 Expo will be held in 2020, we need to be definitely on time. 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. I would say this is also a proof of the ability of Alstom to deliver full projects, even in complex environment, with a very tight deadline and a very strict deadline. 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. Trains still represent 46% of our activities. Service, we see that later on, has decreased a little bit, mostly due to the exchange rate and the British pound.
Signaling has increased, basically due to the acquisition of GE Signalling , which was not there last year at the same period, system is growing nicely. If you look at the organic sales per activity and per regions. Again, we have a nice growth in standalone trains, nice deliveries of trains in Europe. We are starting also to deliver our trains in South Africa. There have been a good execution of our contracts, which have led to this nice growth of the activity of trains. Very strong growth in systems on the back of previous orders, and particularly the Riyadh. 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.
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 GE Signalling . In service, again, relatively stability of our service business, 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 growth of 7%, in line, if not better than anticipations. R&D, just a snapshot, just to tell that we are continuing our effort on R&D. We definitely believe that R&D is at the heart of our strategy.
We have a number of R&D programs, both in signaling, which is also very important from an R&D standpoint, of course, which requires a lot of investment, but as well as in rolling stock and in service. We are increasing as well our service investments, particularly in predictive maintenance. Overall, we want to go to 2.5% more or less of R&D investment per year. We are more or less in line with our expectations. Just one illustration of these R&D programs is this Amtrak project. If we have been awarded this contract of these 28 trains, which we call Avelia Liberty, it's precisely because of our technological leadership. The maintenance costs, the energy management, comfort for passengers, as well as the tilting technology.
Nevertheless, I've always said that signaling as well as system. Globally, the mix is moving in the right direction. 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. 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 very progressively, I always say 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, this is nothing new as compared to what I said last year. These are all our Operational Excellence programs, competitive offerings.
Nevertheless, I've always said that signaling as well as system. Globally, the mix is moving in the right direction. 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. 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 very progressively, I always say 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, this is nothing new as compared to what I said last year. These are all our Operational Excellence programs, competitive offerings.
We work on the cost elements of our different trains and systems and solutions, through sourcing, global footprint, to name a few. We also work in the excellence in delivery. In project execution, these are the two 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. Last but not least, we have put in place this Cash Focus program. 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. To illustrate the global footprint, we have now more than 2,000 people in India, which a few years ago, five years ago, we had a few tens of people. 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 had launched a few years ago a complete renewal of all our platforms, whether it's a Metropolis platform, tramway platforms, regional platforms, and very high-speed platforms. We have been awarded, I would say, contracts for all these new platforms.
The Metropolis, the new metro will be delivered, for example, to Riyadh. Dubai is also the best upon the new platform of our metros. Tramway, the tramway of Luzern is based upon our new platform. The tramway of Sydney is based upon our new platform. Regional trains, I will come back on it. Italy and Netherlands regional trains are based on these new platforms. The last is the Avelia, which is a very high-speed train, and the Amtrak project is based upon this new platform. We have a complete renewal of all our platform, which is something which we don't do very often. The very high speed, for example, the last time we launched such a platform was probably more than a decade ago. This is something that we have done progressively over the last five years.
Now we are at, I would say, the end of the process, and we can sell and offer all these new platforms. Again, to illustrate this point, I strongly believe that our success, both in Italy and Netherlands, has been made possible thanks to this common platform. Even though it looks like two 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. 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 reason behind the good cash performance is the high level of down payments received from order intake.
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 to Marie-José, who will explain to you more in detail the financial results. Thank you.
Thank you, Henri. I'll take you through some details regarding the financials of this first half year. First, moving straight to the items below adjusted EBIT till the net income. I'll comment some of the indicators. First, we had no restructuring charges during the first half, as you can read. Other charges include EUR 24 million of amortization of a PPA, of purchase accounting assets, mainly relating to GE Signalling acquisition. We would expect actually a very linear impact of this amortization over the coming years. I would say in average over the coming five to six years. The financial result stood at EUR 71 million 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 EUR 2 billion gross debt level that will progressively, in fact, disappear as we pay out the bonds till 2020. At September 16, the effective tax rate was at 33%, very close to the normative indication that we had given at 30%. We have two particularly positive effects in the production of the net income of the semester. The first line is the share in net income of equity investees, which contributes for EUR 47 million. 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%-3%, depending on the JV.
The last line is the positive contribution is the discontinued operations net income, where we have a EUR 24 million positive contribution. 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. This all results into this exceptional net income level of EUR 128 million for the first semester. I propose to take you through the cash flow generation indicator.
As Henri mentioned, the group free cash flow was exceptionally high this semester at EUR 333 million, benefiting from a high contribution from the operating activity, not only in terms of operating profit, but also in terms of working capital evolution. Also benefiting from the favorable phasing of both CapEx and financial cash out. 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 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 EUR 43 million 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 EUR 10 million of this CapEx. 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.
We flagged to you an exceptional additional EUR 300 million transformation CapEx over the next three 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 EUR 2.3 billion cash and cash equivalents at end of September, which together with the EUR 400 million revolving credit facility, which is fully undrawn, gives us an improved liquidity position at EUR 2.7 billion. 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 EUR 2 billion outstanding gross debt, where you see the maturities are flagged in the chart.
In particular, the next maturity that we intend to repay in February 2017 is close to a half a billion euro in February 2017. This results into a net cash position at end of September of EUR 54 million, coming from a position at end of March 2016, negative EUR 200 million. Obviously, this evolution results mainly from the positive cash generation over the period. We add also EUR 43 million negative cash coming from acquisitions and disposals, which included the completion of some acquisitions, namely CTLE in South Africa and Cabliance in Morocco, as well as the GE-related separation impact, and namely some IT cash out. Equity increased to EUR 3.4 billion at end of September, and is obviously mostly impacted by the net income from the first half at EUR 128 million.
Also impacted by the variation of the actuarial hypothesis on pensions, where we have a net underfunding increase of EUR 85 million net of tax. This is mainly related to the U.K. pension schemes, where we see an increase of the underfunding of EUR 65 million. Currency translation impacts were minimal, resulting into the, as I said, into this nice equity evolution over the period.
Thank you, Marie-José. 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-José, 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. If you would like to ask a question at this time, please press star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. We will now take our first question from Akash Gupta from JP Morgan. Please go ahead.
Morning, Henri. Morning, Marie-José. 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 it consists 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? 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 then 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 cash interest was quite low, and the restructuring was also quite low.
Just wondering if you can split out impact of legacy item in H1, and what should we expect for second half.
Thank you. Thank you for your question, Akash. I will hand over to Marie-José. Globally, of course, it's not only too early to say what would be the consequences of the U.S. election. 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. 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. I would not take that into account today. It's too early to say. As a general rule, as you know, we are extremely decentralized and local. 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., the fluctuations of the currencies should not have any major impact. Maybe Marie-José can say more on that.
Okay. After checking this morning, I have to say, we can say U.S. volumes are pretty modest in our portfolio so far. We are, in terms of turnover, U.S. market represents roughly 6.5% of our total turnover for the first 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, this will happen, let's say, progressively over the coming years. So far, let's say the volume exposure is pretty modest. 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 Signalling business and service. Amtrak also contains a high level of localization.
If you remember well, we have a 70% content to be made out of the U.S. At this point, I see no specific impact coming from the U.S. market. Regarding the cash flow, maybe I can-
Yes
go through this question as well. 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, back-loaded, let's say, in the year. All maturities of bonds happen to occur in the second semester. The payment of the interest, the annual interest on those bond lines, takes place only in the second semester as a coincidence. 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 to be flagged there.
Thank you, Marie-José. Next question, please.
The next question comes from Gaël de-Bray from Deutsche Bank. Please go ahead.
Thanks very much. I have three questions, please. The first one is, 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. 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 EUR 333 million in H1, and that the EUR 150 million outflow you had previously guided for in the next 18 months remains a valid number? The third question is on the tendering activity. How do you judge the pipeline right now?
Between rising political uncertainties on the one hand, but also the opportunities for some more infrastructure related stimulus packages on the other hand, for example, in the U.K. or in the U.S., in your view, what could be the net impact on transport demand? Thank you.
Thank you, Gaël. Just as a general comment, we have given a 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. 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 over three years. The good performance of the first half does not change our views on the global model. There will be volatility as well at the end of this first year. We'll see exactly what will be the number at the end of the year.
In terms of tendering activity, I think the market remains quite sound. 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. I don't expect any huge, I would say, impact on the market itself. Having said that, our own successes on the market can fluctuate from one 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 a greater volatility of our order intake. Q1 was very low, Q2 has been very high. 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 mid-term, we are booking and we are increasing our backlog regularly to fuel our future growth. 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. There is no change on that matter. Again, both successes of Alstom on one hand and the timing on these successes are by definition highly uncertain. On the IT, I will hand over to Marie-José for the IT free cash flow.
IT cash flow, as I mentioned to you, this transformation cash flow is linked to the rebuild up of the IT infrastructure of Alstom exiting from GE. I confirm the total amount of EUR 150 million, we're roughly at 30% progress, so one third in terms of progress of the spending of this item. 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-José. Next question. Thank you. James, I think.
Our next question comes from James Moore from Redburn. Please go ahead.
Yes. Thank you, Henri and Marie-José. I've got three topics if I could. Just on the free cash flow, could you help us a little bit with the down payment? I'd love to get a number for the first half. 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? 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?
Where are we with other things like Philippines, Egypt, Mecca, North Korea, France, Netherlands? Finally, on your strategy, I wondered if you could please help us understand how you plan to move from 1/3 to 60% of your train making outside of Europe, and where that footprint will be.
Okay. Thank you, James. On down payments, you can read it directly through our balance sheet. The fact that I think our down payment level has increased by more than EUR 200 million over the half-year. Typically, as you have said, the down payment varies quite significantly from one contract to another one. We have, I would say, an average between 5%-10% of down payments, of early payments in the contract. Of course, I'm talking more about the systems and I'm talking more about the trains, rather than service contracts, which are more regular cash flow. You can see that in total volume, the down payment on our balance sheets have increased by more than EUR 200 million during the first half. On the tendering activities, you are mentioning RER, and it's true.
It has been said in the press because I have no other official information. We have just submitted our last offer. In the press it has been said that we are the only one to be invited to submit this offer. 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. Mecca, for example, has been discussed for a number of months. I have to say that after Riyadh and Dubai, I'm not crying to the fact that Mecca 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 day and night to secure it. You are mentioning Egypt.
We have a number of contracts in Egypt being discussed. It's difficult to point out one or the other ones. There are a number of, I would say, tenders which have been placed in the U.K. particularly. U.K. market is quite buoyant. Some countries, the large contracts are always attracting the attention. In Germany, the tradition is to go more in small batches. There are a large number of small batches. Our German performance has been quite good, but you see it a little bit because it's sometimes announced, but it's more small batches of EUR 100 million, EUR 150 million, rather than huge contracts. As far as Grand Paris is concerned, you were mentioning it. It's a little bit further downstream. We have submitted already the offer for the Rolling Stock. We are today answering to questions and so forth.
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. 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 particular, where we are expanding our footprint, and it will have an end. I think in two to three 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 Sri City, with the factory of locomotives in Madhepura, with a 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.
It will be the base for serving the Asia-Pacific region. And this will be it. I think, of course, South Africa will be the base to serve sub-Saharan Africa. We have as well in Algeria, some trams. It's a 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 world. 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 bases to their market. It's a very, I would say, specific phase, which is, I think I mentioned it, which is not only Alstom strategy, but it's also related to the market. It happens that the transportation market has globalized over the last five 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. Again, in a few years, this will be done. Thank you. Next questions?
James.
Next question comes from James Stettler from Barclays. Please go ahead.
Thank you, and good morning, all. Looking at your margins, you achieved 5.6%, even though service wasn't that strong, relatively speaking. You're saying the backlog quality looks even better. 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 one. Just a technical accounting question. Can you just talk a bit more about what's going on in the associate line? As we understand it, you're looking to basically neutralize the impact from the three GE joint ventures, and how does that work with this special item you have on the put option? Thank you.
Thank you, James. We are today in a kind of a 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 objective of 2020. There is, I would say, no ceiling, no cap. 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. At the same time, as you have said, the mix impact can depend. 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. It's a very gradual improvement that we will see going forward. As I said, the two main components of this performance is, one, the cost of our solutions, the differentiation, the cost, and the technology of our solutions, and our way to execute the contracts. The main challenge is to keep this high level of quality of execution, while we are putting in place our globalization strategy. That we are monitoring very closely the expertise, monitoring the quality of what we do in the new facilities, in the new setup. That's the day-to-day challenge. I would say that the growth, which is very good growth, but it's 5%, 6%, 7%, is totally manageable from this standpoint.
This is how it works. Marie-José, maybe on the accounting question.
Regarding the associates, as I mentioned, it's a positive contribution that we get. I'll detail a bit further. First, from the operational JVs that we've got with TMH in Russia and CASCO in China. Those JVs have a positive contribution in terms of profit for the first half-year, roughly EUR 15 million. Basically, the main impact, the EUR 30 million, 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%-3%, depending on the JV, and the contribution of this revaluation has been roughly EUR 30 million for the first half-year, and again, should be linear as we go forward.
Thank you, Marie-José. 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. Please go ahead.
Good morning. It's Martin from Citi. Just a quick question on restructuring, and apologies if you've answered this already. There was a couple of problems with the line. Obviously, no charges in the half. If you could just comment a little bit about both the P&L as well as the cash impact you expect from restructuring over the next couple of years. Obviously, 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. I just wanted to check also if we should expect the cash impact of restructuring to pick up as well as the P&L impact. Thank you.
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 outflow. Of course, the P&L impact depends on the announcements of plan. There was no plan clearly announced during this first half, there is no P&L impact. Having said that, does not change our views on the regular cash outflow and does not change our views on the P&L impact, which varies from one quarter to another one. On the full year, we said and we confirmed that there should be roughly EUR 30 million impact per year, which corresponds to the cash flow and which corresponds to the P&L, but with fluctuation, of course, depending on the announcement of plans. Okay, next questions.
Our next question comes from Guillermo Peigneux from UBS. Please go ahead.
Hi. Good morning, Henri. Good morning, Marie-José. I wanted to ask on the transformation CapEx, the EUR 300 million, I think you alluded in the past, on whether these changes with Amtrak, or any needed investments in the localization there. The same with the situation in Belfort, in which you need to invest EUR 40 million. 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 Amtrak, in a matter of EUR 20 million-EUR 30 million, not extremely high, and this is part of the project itself, there is no CapEx for Belfort. The announcement of investment in Belfort, which are not investment in Belfort itself, in Belfort site, are more engineering investments related to the very high-speed trains and related to the locomotive platform. These are investments which have no CapEx elements. Next, maybe you had a follow-up question, you said.
Next question comes from Christophe Quarante from Societe Generale. Please go ahead.
Yes. Good morning, everybody. Christophe Quarante, Societe Generale. Two question, 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. 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 objective, where are you on your operational excellence, where it seems that you have better results for it than what you expected there. Thanks a lot.
Thank you, Christophe. On your first point, it's not going to detail our commercial strategy. You are probably referring in Spain to the high-speed trains, and this is well known, a tender currently being analyzed in Spain for very high speed. In India, maybe you are referring to that, there has been a pre-qualification on a very large regional train contracts, and we are pre-qualified. This is a similar type of contract than the one of Madhepura for the locomotives, but for regional trains, and we have been pre-qualified with CRRC. In Turkey, there have been some talks about various speed as well, but here the tender is not out, so I cannot comment on this one. Again, it's an illustration that we have some projects a little bit everywhere in the world. On the profitability, 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. 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. If you want to have just maybe a snapshot, Marie-José.
In fact, you could say, by currency translation adjustment, we had a 10 basis points negative impact coming from the Forex. Mainly, let's say the pound impacting us negatively on this. We have a volume effect, which would be positive 20 basis points compared to last year. Thanks to the significant organic growth we show on our turnover. We have a positive mix effect, compared to last year, mainly coming from signaling, and as you noticed, not so much from service. This is a 10 basis points positive contribution from the mix. We have a 30 basis points contribution from the operational excellence initiatives. You're right, I think those actions are delivering some fruits as we progress in the year.
Thank you, Marie-José. All these numbers are, again, very rough numbers. 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 thank all of you for your attention, particularly on this very special day, and I'll 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.