H1 15/16

Nov 5, 2015

Ladies and gentlemen, welcome to the Alstom Conference Call. I now hand over to Mr. Patrick Krones. Sir, please go ahead. Thank you very much, and good morning, ladies and gentlemen. I am talking from Saint Trois, which used to be Alstom Transport Premises and is from now on the company's headquarter. Present with me, Marie Jose Donsion, who is the CFO of the company Selma Bekeschi, who runs the IR wide team of Alstom as well as Emmanuel Jatland that a few of you know. She is VP, Communication, and so now reports to her. I will give you a few I will not I will give you a few information for those who don't know. Marie Jose has been in Alstom for a number of years. I will not give numbers, but she joined in 'ninety seven and had a number of responsibilities, starting with corporate, then in the power businesses, led the grid finance team and is Finance Director of Alstom Transport since the beginning of this year. And Selma joined us as VP as IR Director 2 to 3 years ago. Emmanuel, no need to present most of you. No. I also want to tell that in addition to the classical analysts' participation to this call, We also welcome a few journalists. So let's go now, please, on the issue. We are going to talk about the presentation of the first half results for the current fiscal year. It comes from April 1, 2015 till the end of September of the same year as well as matters related to the transaction with General Electric, which closed on November 2 this Monday. We published yesterday evening a press release on the share buyback program that I'm going to talk about in more detail later in the presentation. And we published this morning a press release relating to the H1 numbers as well as governance matter. I remind you as classically that all published element, presentation, financial report, including MD and A and accounts as well as the press releases are available on our website, www.alstom.com. If we go on Slide 2, what are the main takeaways of this presentation, these publications. On H1, Alstom achieved a sound operational performance in transport with order levels at €3,900,000,000 and the book to bill above €1,000,000,000 at €1,200,000,000 percent. The sales are up 8% at €3,300,000,000 The I4 after corporate costs reached 100 and 60 7%, 10% above the €152,000,000 that was recorded over the same period of last year. I remind you, as we did in the previous publications of our accounts, that in compliance with IFRS 5, Alstom Energy Businesses were classified as discontinued operations, and therefore, they are not included in the lines on the order sales IFRS and are only reported that under the line net income discontinued operation, obviously, as in the free cash flow data. I think it has not been unnoticed, but we definitely closed the transaction with General Electric this Monday on November 2. The Board of Directors has published yesterday evening, subsequently decided in its meeting that was held yesterday to launch a public offer to buy back €91,500,000 of its share at a unit price of €35 per share, which amounts to €3,200,000,000 And in order for this to happen, we will call for a shareholder meeting of Alstom shareholders where we are going to submit the share buyback, the Opera with a French acronym, nothing to do with music, but with share buyback to the vote of the shareholders scheduled on the which will happen on December 18, 2015. And you'll see in the further presentation that we confirm our midterm guidance. I suggest that we go now, please, on Slide 4, which summarizes our main KPIs for the first half of the current fiscal year 'fifteen, 'sixteen. As I just indicated, the orders were strong, were healthy at close to €3,900,000,000 They were fueled by small and midsized contracts across all regions. And you see compared to the sales just below that it gives a book to bill ratio of 1.2. I remind that the comparison with last H1 needs to take into account the fact that we had around €4,000,000,000 of contract with Praza in South Africa, which obviously boosted last year's number. Sales were up 8% at €3,300,000,000 I think it's a record level for sales over half year. Income from operation, which includes the corporate costs linked to Alstom transport activity, as we have done in the previous publication, increased by 10% with an operating margin of 5.1% after corporate costs. The net income from continued operation stands at €18,000,000 It's clear that this number includes a number of specific elements, separation cost, high transitory financial expenses as well as specific impairment charges. So it's obviously much more difficult to comment on these lines rather than the previous ones because, again, they include a number of specific and transitory elements. The free cash flow from continued operation before tax and financial outlook was close to 0, slightly negative, minus €5,000,000 It was negative by €85,000,000 last H1. Let's go in some of the elements I just described, starting with the orders. As I just indicated, the as some booked €3,900,000,000 of orders in the first half compared to the €6,400,000,000 which again included the €4,000,000,000 book to bill €1,200,000,000 I globally consider this is a very healthy another half year of healthy commercial performance with a number of successes in all geographies you have here. And interestingly, with no big elephant just boosting the numbers, so it means that we had quite a sustained level of successes over the geographies in most of our product lines as indicated in this slide. And obviously, the backlog at close to close to €28,000,000,000 gives us visibility on future revenues as it represents between 4 5 years of sales. On slide on the following slide, Slide 6, you see some example of our commercial successes that were in most of the cases published when the customers allowed us release the information. And you see here that, again, both in geography and in type of businesses, I think we had quite a nice flow of good news, and this allowed us to confirm that we are well positioned to capture opportunities in all continents and as we had the opportunity to discuss earlier, both in developed economies and in emerging markets. Moving to the Slide 7, which goes now to the P and L. Sales and operating income, they're both increased. As I mentioned, sales increased by 8%, 4% organically at 3.2 3%, sorry, with solid performance in Europe and continued growth in emerging countries. Without going into details, I would say that the deliveries in Europe include a number of ongoing execution programs in France, in regional, suburban and very high speed trains in France, suburban trains in Italy, maintenance contract in the U. K. And in Sweden. In emerging markets, we executed metro and tramway contracts in Latin America, and we are starting to ramp up the Praza contract in South Africa. Income from operation is at €167,000,000 up 10%. Volume impact as well as ongoing action for project execution and cost control. And it includes corporate cost share of the corporate cost, which represents negative amount of €17,000,000 for the half year. This is not surprising. We have guided towards around 30% 30,000,000, sorry, on a yearly basis. And this is more or less the 30% of the 100,000,000 that we used to report for the global corporate numbers. If I go on the next slide, this I won't detail much just to say that we continue, obviously, our R and D programs to continue to fuel innovation, which is in Alstom DNA. We spent €58,000,000 in R and D on H1, which is in line with the level of last year. You have a few example indicated here. We have basically the same focus on developing new products and technologies and upgrading the range of existing ones. We also continue to invest in our in CapEx for both the modernization of the existing footprint as well as its expansion with a number that is in the ballpark of €100,000,000 So with 2 half years on average, the €50,000,000 on H1 is not a big surprise. Turning to the P and L on Page 9 and moving to the items below the HIFO line. You see that we have restructuring expenses this semester around at €14,000,000 Last year, it was substantially higher due to some restructuring ongoing in Alstom transport headquarters as well as some European facilities. And as we said at that time that it should not be considered as normative. This being said, when there is a need to restructure somewhere, we definitely do, but we gave you an indication of €30,000,000 doesn't per year, doesn't mean that it won't go higher at 1 point in time if necessary. But I mean this €14,000,000 is not totally unexpected. The non operating expenses at 52 percent include some impairment losses on assets, notably on some R and D capitalized one that we considered as wise to readjust. All in all, the EBIT is at slightly above €100,000,000 up to 60%. The net charges represented a cost of 80 €6,000,000 And obviously, this has this is by all means not representative of what will be Alstom's future balance sheet and therefore expenses due to the stronger financial structure that we expect to beat. The share in net income in Equity Investisse also a line which has includes some substantial numbers. Most of this line is based on the contribution of TMH. You know that the first half of last year of TMH was strong. We had more or less €30,000,000 out of the €39,000,000 which were related to TMH. H2, as we guided and as we indicated, was very low, was actually close to 0. And after the trough of Q4, we had from a kind of stabilization of the operation level and the TMH contribution of the 13 is at the level of 11, represents 11 out of 13%. So basically, the minus 20% plus is related to the difference between H1 last year and H1 this year contribution from our Russian participation in TMS. As a result, the net income from continued operation amounted to 18%. And again, this includes a variety of non recurrent elements. If we move now to the free cash flow on Slide 10. Let me try to sorry, on the free cash flow on Slide 10. The free cash flow from continued operation was close to 0. Had still over the period some negative impact of some the ramp up of some project. This is again and as I said repeatedly, there is some volatility in the cash flow that we had a negative cash flow substantially negative cash flow on the first half of last year, which was more than offset by the performance of the second one. In this case, we are close to 0 on H1, and we'll continue to strongly focus on cash management, all actions necessary being in place and continue to have a focus. I'm not going to comment the cash flow from discontinued operation because, as you know, through the locked box mechanism that was agreed with the as part of our general transaction, This cash flow from discontinued operation from April 1, 2014, is covered by GE. Moving on Slide 11. I'd like to spend a few minutes on our financial structure and give you a balance sheet as of September 30, knowing that September 30 is just below just before the closing of the GE transaction. And obviously, our liquidity situations has substantially changed over the weekend from Friday till Monday. You had the situation end of September where the liquidity position was sound with €1,850,000,000 of gross cash and €1,350,000,000 of undrawn credit line. We though used the €1,600,000,000 facility, which was mobilized in order to allow the transition till the completion of the GE transaction. This was fully drawn at that time. I also told you that we obtained waivers on our financial covenants for all facilities because, obviously, the covenants were no more reflecting the reality of the situation with the closing with the multibillion closing expected in the near future. And again, as I said, we have been negotiating new bonding and revolving credit facilities to replace the existing one after the completion of the GE transaction. We go on the next slide, which talks about debt and equity. You obviously, on Slide 12, the net debt standing at €4,800,000,000 3,100,000,000 over the previous closing period, the 31st March 'fifteen. Obviously, this increase being related to the free cash flow generated over the period, notably by the energy activities as well as the finance and tax spendings. On the right part of the slide, you see that the equity decreased slightly from at €3,700,000,000 for the reasons which are mentioned in the bridge that you can see in the slide. Let's go now after H1, if you don't mind. And obviously, we'll be happy to answer questions on the situation of the related to the JAL Electric transaction. And I'll try to explain a little bit what happens in terms of proceeds. And I just go to Slide 14, if I may. You see that the first thing is that we have and sorry because a number of these lines include rounded numbers. So I'm sorry to not to be able to detail the €50,000,000 within the €12,400,000,000 transaction. So we had the transaction, the sale of GE, as you know, at €12,350,000,000 initial price, and this included €1,900,000,000 of cash transferred to GE as of, again, 31st March 2014. And again, the evolution of the cash in the transferred entity is obviously taken into account by Baigee in its final price, but has no consequences for us as the lockbox mechanism offset any variation in this perimeter. So this is what is proceeds for us. We had some ups and downs in the discussions with some commercial deals that we generated positive €400,000,000 We had also to get a price reduction, as you remember, last summer of negative €300,000,000 All in all, it makes a positive delta slightly more slightly positive delta, €0.1 We include transaction costs of 0.3%. I indicated that this transaction cost include, among others, the direct cost of the transaction. We have to pay lawyers. We have to pay bankers. We have to pay a number of elements directly related to the execution. We have also a tax friction. I indicated when I started my communication on this deal that this was around 0 point €5 per share, it's €150,000,000 at the end of the day, slightly below that level. So all in all and then we had a number of separation costs, which include, among others, IT and others. So again, the ballpark is €300,000,000 as we assess it today, part of it being immediate down payments and part of it, that I mean what relates to separation, being split over the period as we have to rebuild some IT systems coming from a transitory period to the final one. But the cost of these will be generated over not over a couple of weeks, but over longer periods. That's the money which comes in. We have the reinvestments 2 reinvestments, 1 in the joint ventures with GE. The final amount is €2,400,000,000 The 3 JVs, you remember, grid, renewable and nuclear. We have also the acquisition of G Signaling around it's like above €700,000,000 And if you make the algebraic sum of all what is there, we get net proceeds of €7,100,000,000 percent. If you go to the next one, we indicated that we will return part of the cash to the shareholders. The Board will propose to the shareholders meeting of December a share buyback of €3,200,000,000 which is the low end of the €3,200,000,000 to €3,700,000,000 bracket that I gave you as an indicative element. This will be done through the repurchase and cancellation of 91, but subject to Stabec to shareholders approval, obviously. This will be done through the repurchase and cancellation of 91,500,000 of shares, which is slightly below 30% of the capital at a unit price of 35. This represents a premium of 17.6 percent over the closing price of the 3rd November, which was the date preceding the decision of the Board to move in this direction and propose to the shareholders and the 21%, 22% of last month's weighted volume weighted average price. This will be filed to the AMF with a notice in the coming future. I come back in indicative timetable and submit it, as I said, to the shareholders' approval through an AGM. Bouygues has the intention to tender a level or number of shares, which will allow him to remain at its current level post Opera. So we intend through this operation to keep the same level as the one he holds today. What is the impact of all this on the balance sheet? Again, if you look at the pluses and minuses, so we start with this net proceeds of €7,100,000,000 We had a net debt position before this lockbox came into place of around €3,000,000,000 We had what are the other elements which will impact the picture as we look at it on 30th September 2015 on a kind of pro form a, if I may, having all these elements coming into place. So we have the debt, €3,000,000 we have the proceeds, €7,100,000,000 we have the share buyback assumed to be achieved immediately. As you know, we have accepted to bear the price, the consequences of the fine we got from the DOJ, which represents a 0.9. Percent. And the last one is the free cash flow of the continued operation, which is the only element which impacts basically the balance sheet from the 1st April 2014 of Transport, more specifically, if we are on the continued operation, which is rounded at 0.2%. And this, at the end of the day, confirms that my original statement that we will look for a company which will be fully deleveraged again on this 30th of September basis. And obviously, this deleveraging is after reinvestment in notably after reinvestment in the JVs, which, as you know in which, as you know, has some as you put option with a guaranteed minimum price, which is our entry price, plus an escalation formula. We are talking about a deleverage company with a potentially reserve of cash should Alstom decide in due time that it makes sense for the company to exercise the puts, the liquidity and the minimum price being guaranteed by our agreements with the G. The indicative of our timetable is here. We will file early next week the note d'Operations to the AMS, the Financial Market Authorities of France. We expect to we'll call for shareholders meeting to be conveyed on December 18. The offer will be opened for from the 23rd December till the 20th January with a settlement and delivery scheduled by the for the 28th January 2016. And I indicated just a personal note, I indicated that after this completion of the transaction, I. E, at the end of January, I will resign and the Board will give the responsibility of running this company to Henri Poupees Par Lafarge. So if we go on the current situation of Alstom refocused on rail, the company is deleveraged, relies on the strong balance sheet. I just mentioned a few elements. We have seen and I think that the H1 number is another illustration that we have in Alstom the necessary ingredients to be successful because of our international position, because of our range of technologies, products, services and systems. I also would like to say that the acquisition of G signaling will allow to grow our signaling activities, something that, as you know, we were looking for, for a period of time, open the freight market to Alstom, strengthen our presence in North America. And I mentioned the order backlog. We had indeed a very nice set of successes, and I'm expecting we hope that more are going to come. There are a number of substantial projects in which we are in the final conversations, if I may, with the customers. So I hope this will unlock and give also some substantial good news. In the different geographies, again, I mentioned that the company, and this is not here insured, is benefiting from a skilled management team led by Henri Pouper Lafarge. I think that the transition will be done absolutely smoothly seamlessly. And I think it's another good news for the company and its shareholder. And the last slide being on the outlook where on Slide 20, I confirm here the guidance. This concludes the presentation, and we are now obviously ready to answer any questions. Sorry for I've been a little bit long, but I wanted to go through these elements in a little bit with some details. Thank We have a question from Mr. Frederic Stahl from UBS. Please go ahead. Good morning, Patrick, everyone. It's Frederic here from UBS. I was wondering if you could start maybe with GE signaling, if you could help us with the give us some pointers as to what we should put into our models for next year in terms of both sales and profitability, that would be good. And then secondly, I was wondering if you had anything in the first half in terms of Alstom Transport. Anything in the margin there that we should consider if it was if you had mix changes during the period or if you had any ramp up costs in the first half that we should think about when forecasting margins going forward? Look, on the first one, I have no intention to go into specific details on g signaling. I mean, the company has been integrated. We welcomed on Monday 1200 new colleagues in Alstom. We are working with them on the next steps and the way to successfully integrate and use all the complementarity that exists. At the end of the day, Henry will undoubtedly organize with you a session in order to explain the situation of the company, give some views, etcetera. And it will be a good opportunity to detail the situation. But at the current stage, there is nothing new that I would add. So we'll keep some elements for later in 2016. And on the I4, I think the I4 is going up. So we had also we had the margin going to 5% to 5.1%. It's an increase. It's a slight one. You have also, and you have seen that in the past, to accept some volatility, which is related to the mix on a specific quarter, depending on how much rolling stock we have, depending on what type of rolling stock we are trading. When you start a program, for instance, in the Regiolis contract in France, in which we are moving from the development stage towards the execution stage. So I would not overreact when at one point in time for a specific quarter or half year, in this case, there is a 0.1 delta up and down because this is the type of things that we are not surprised to happen. So there is no specific element. I mean, the backlog is big. We have had a very, very long period of book to bill above 1 where we have been building backlog. That has been the case for the many previous years. It's also the case for H1. So the good news is that at one point in time, this big backlog is not a platonic plateau. It's a backlog which turns into sales. And this is happening, and we see that going. The sales definitely has a positive impact on the iPhone because of the volume impact. But then you have to take into account, in addition, how the mix goes, etcetera, etcetera. So there is no specific warning, no specific element that I need to add to make the numbers explainable. I think there are. The next question comes from Andreas Willey from JPMorgan. My first question is on the cash return. You opted to go for the lower end. Maybe you could give us some explanation for that also in terms of what your M and A ambitions are within Transport and whether the joint venture investments are also by the rating agencies seen as an asset you can kind of borrow against it. So how they see and how you see the scope for M and A? And the second question for you, Patrick, you signed a new 4 year contract as Chairman and CEO in Q2 this year. Even though you kind of indicated before you're leaving, maybe you could give us a bit more background around that contract and what that means now and when you're going to resign next year. And on free cash flow expectations and the continued operations, We have seen the outflow in the first half of the year. Should we see a normal seasonal improvement in the second half of the year? And maybe you could give us some indication where you see the free cash flow, including interest and tax for the continued operations to end up for the year? On the first question, the cash return and the low end of the bracket is not a surprise. I guess, Andreas, you know us very well in my former communication. I indicated that we'd be in the low part of the bracket. So I think, again, we could very well have been slightly above this level, but this gives the company a deleverage situation. And again, keeping too much money piling on the balance sheet doesn't give the proper it's not the proper financial hygiene. Leveraging the company is probably not good. So I mean, the Board considered that it was wise to be in the low end. The doesn't mean that we have a pile of M and A activities in that we have a pile of M and A activities in the back door. This is not true. You know that our focus is for organic growth. We think that we have enhanced whatever is necessary. We don't exclude 2 Seize market M and A opportunities if it allows us to grow to boost our strategy, but it's absolutely not mandatory, and we are not in a must do or whatever. So and again, this is the low end. I wouldn't if I were you, I would not speculate on some big M and A coming. This is the other way around actually. It doesn't mean that we will not consider some small targets here and there. And we have done it, and we'll continue to do it. We'll continue to do it if it's possible and if it makes sense, if it's good for our health. On my contract, and I saw in your notes this morning that you were worried about that point. And I want to give you all comfort that you should not be worried. Basically, if the deal had been completed between before the last AGM in June, I would have resigned and I would have left because I said I'll go to the end of this project with GE and then give the helm to Henri. The problem is that we were far from being at the end of the process in last June. I thought it was my duty not to leave the boat in the middle of a very active and complex position, but to keep it to the end. So it has not been a secret to any of the 99% of the shareholders which voted for my reelection that I will not use the 4 years the other way around. And 99% again decided that it was making sense for me to be renewed. They probably also knew because I was clear there that although you must, by law, be reelected for a term, which in our companies, by law, these 4 years, they knew and they were very happy for probably to know that, that I gave up any termination package. And therefore, the company will not be liable versus me of anything when I will decide when I will resign, I. E, at the end of January 2016, if things moves as expected. So this is not a 4 years contract. I have no contract with the company, no labor contract with the company. And the day I resign, I leave smilingly and hoping that I've done a decent job over the 13 years in the company. If so, no worries. So it's not a big question mark. It's no question mark at all. So it's neither big nor a bigger question mark. If I go on the last point, which is your question on the free cash flow of continued operation, I'm not going to change the guidance we gave. We expect this company to generate cash. We think that on average, it should generate cash in line with the net income. There is volatility over the period, and there is nothing special, I would say, for H2 of this year. I burnt my fingers enough in the free cash flow forecast for a short period of time that I don't try again. But again, you have seen last year. Last year, we had a substantially we had a negative free cash flow before finance and tax over the over H1, and we had more than offset this with the double number positive on H2. So we'll see what happens this year, but the future is more difficult to predict than the past. Thank you very much, Patrick. Thank you. The next question comes from James Moore from Redburn. Please go ahead. Yes. Good morning, everyone. Good morning, Patrick. I also have a few questions, if I could. Maybe one on the free cash flow, if I may. I think your 18 month conversion in transport before interest and tax is 14%, fifteen percent. And I understand the volatility point and that the first half tends to be light. But do you have any concerns that the 100% conversion is going to prove a challenge? Do you see any change in the terms of trade within that? Or is it just timing and volatility? Secondly, now that the deal is finalized, could you perhaps give us some idea of the GE joint venture net income? Because obviously, disclosure on that has thinned a lot over the last year. And what we could expect in, say, the 1st 12 months or the 1st full year to 'seventeen or some period, some have talked about 120,000,000, some have talked about 180,000,000. Just trying to get a sense for what magnitude that's running at. And then finally, could you help us a little bit understand of the outstanding bonds in the company, what you might retire early? I guess your asset and liability match later dated bonds with the joint ventures. But if you were to retire some earlier bonds, it might bring a cost of €100,000,000 or something. And I'm just wondering if you could help us with your plans on that. Thank you very much. On the free cash flow conversion, you it's your 16%, 17%, this is fine, just but again, you know well as you know that there is some volatility. Is the 100% conversion a challenge? Yes. When we gave the midterm guidance, I said that the free cash flow conversion is not the easiest part of the global picture. We have been we are working for that. The only thing I can add without being more specific on that point, James, is that we have not seen recently any element which is changing our ability to do or not to do. So I mean, there is no deterioration, nothing that I have to report to you because I'm not aware of any such. The second one is on the JVs. I'm not going to give a guidance on the net income of the JVs. We are working on the accounting of these JVs in Alstom's account. We indicated that's likely that will be an equity based accounting. At the same time, as you know, we have something which is extremely valuable. It's got a liquidity and a minimum price. So I mean so this will have to be included in the way we will report on these JVs because the reality the economic reality of these JVs is we are protected from any type of if any, again, there's no reason to believe there will be underperformance whatever. But for us, it's clear that the flow of what the JVs will do has to take into account the fact that we have this minimum price given in the put options. So we have a put. We have a minimum price. This minimum price is escalated at 3%, close to 3%. If you take the average of the different numbers, which escalates this minimum price, it's the 2.4 plus the escalation I just mentioned. So frankly, we'll have to check the way we give the most fair representation of all this. But again, you know that these JVs are under GE's operational management. We have obviously the rights associated to being participant in these JVs. But at the end of the day, GE runs the show. And it's logical, and it was structured like that. That GE runs the show. We had no competitive we were not the critical size in the energy business. That's why we moved in this deal. Obviously, don't imagine that we have the critical size by cutting something which had not the critical size into pieces. So it's important that these energy activities rely on the are backed by a strong group with all the necessary means to be successful. That's the way it is. And again, the puts is a formula, future EBITDA based classical formula, but with a floor. The EBITDA, I cannot give a guidance on something which basically is going to be run operationally by GE. But I know that I have this floor, which is, in my view, something which is important in the balance sheet of Alstom as well Because I mean, this is something which is pleasurable. Should we need to pledge, which obviously is not the case today. The questions on the bonds is the last one. At the end of the day, indeed, post Opera, we will be with debt on our end, debt that we got from the markets, financial markets on one hand with not with reasonable coupons, etcetera. So that's something which had been negotiated under the circumstances of the time. So we have these bonds. And at the other end, we'll have cash. So we will have or hope my successors will have to take a view on what is the best option and what is the consequences of buying or not buying. And my intuition and that this will not be based on theoretical concepts but on the economics under which some bonds can be repurchased or not. If we get swept because of the terms that are suggested in order to be able to repurchase and keep the bonds. If it makes sense, then maybe the situation will be looked at. That's more or less what I can say on that. The way the agencies the rating agencies considered the JVs, they have different views on that. For me, it's absolutely clear. We have a put on these JVs. We have the full ability to exercise the put should we decide to exercise it. So I don't imagine that this will not be taken into account by rating agencies. At the same time, should we, at one point in time, decide not to exercise, then maybe the situation will change and the agencies will review. But currently, what we have is €2,400,000,000 invested in JVs with liquidity rights and minimum price guarantee. Now I'm not a rating agency. I don't understand necessarily all what they write, but you'll get a view and we'll try to explain. The next question is from Andrew Carter from RBC. It's Andrew with RBC. The I had 3 questions. 1 is sort of a big picture one and then just 2 financial ones, for which I apologize. Just big picture, I wondered if you could just talk about the how you sort of see the rail industry at the moment. And I wondered, I guess sort of just big picture, do you think that some consolidation is required in the industry? And I guess if you think it is, do you think it is actually likely with how the players are positioned at the moment? The second was just in terms of pensions, which wasn't mentioned, I don't think, in the presentation. Are there any cash contributions required to any of the group's pension funds following the transaction? And then just finally, I apologize for this one, but obviously not so aware of taxation in France. But is there any consideration when you're receiving back the cash proceeds from the Opera. Is there any tax required to be paid by a French shareholder following that? Thank you. Look, thank you very much. I will thank you, Andrew. On the first questions, which is the general picture of the rail industry, I said that we are a company, as Alstom, which is among the top players in this industry. We have the most international base. We have the broadest range of technology. We have the broadest range of products, services and systems. We have the experience of partnership in different geographies. We have the ability to accompany the customers with services, etcetera. So to catalog story, Andrew, whether you address that or not, we believe that we have a nice path ahead of us as we are, 1. 2, there is no industry in the world. There is no company in the world who can say that they will never look around. Will there be at one point in time some consolidation? Consolidations, possibly, possibly. Is it coming tomorrow? Not necessary. Are we going to be part of? I hope if there are opportunities of consolidation, which makes sense for us, we're not considering. But I will not speculate that it's going to come as a massive wave tomorrow. And again, it's not necessarily decremental for us the other way around. There were debates and look, the consolidation is ongoing because the Chinese are combining. Yes, 2 Chinese companies are combining. Is it a threat? I never under I never underrated the threat of Chinese competitors. CSR was a threat. C and R was a threat. The combination of them is a strong competitor, but they were already strong competitor. In other terms, I mean, I don't see why the combination of the 2 creates something which is a game changer compared to the situation before. Yes, they benefit from a very strong local market. Yes, they try to go abroad. Yes, they do. They have been doing that for a long time. And the €28,000,000,000 of back load that we got, we got it around all the competition of the planet, including the Chinese. That's one. Yes, okay. Yes, Itachi has bought Anzalto. But at the end of the day, they are half of our size. So it's not an earthquake at all. And as you know, we know about Anzalgo. We looked at it and considered that we were not in a position to give a future to these activities. If others do, great for them. Look, so that's my point. I mean, yes, there are some small players. You know that this industry is composed of more or less pure players, very different to the situation of the energy. If there are opportunities, we look. But we are absolutely not on the kind of must do mode. There were speculations about Bombardier. I'm obviously not going to comment about the strategy of a specific competitor, but we have no plan, no ongoing discussion with them. So if one point in time, they want to explore their strategy and their options in Rail, But then we'll see. And if it makes sense, we'll talk. But again, don't we are focused on developing organically, and we'll only look at acquisitions and M and A if it's a way to boost our strategy and to boost our development. Not at all in the do or die or a must do mode. 2nd, on the pensions, Andre, there is no specific and I'm looking at Marie Jose, who knows and I don't, but my she confirms that there is no upcoming funding requirements that are in the horizon. And the third one, concerning the shareholders, I don't think it's the appropriate time to detail. We are going to publish the detailed note for make public the detailed note on the operation next week. And this note include the tens of pages, which will relate to the tax situation of the various shareholders depending on their geography, their status, etcetera. So you'll get the full understanding of that rather than me giving you the partial view and probably not totally sound one. So I ask a little bit of your patience on the second on the third point. Welcome. Thank you. The next question comes from Mr. William Mackie from Kepler Cheuvreux. Please go ahead. Good morning, Patrick. Thank you for the questions. A couple, please. Firstly, can you share with us your view on I come back to the market conditions. We've seen shifts in a number of emerging markets in terms of their behavior and propensity to spend on infrastructure projects. So how is the tender backlog evolving? And then rolling on to the backlog, what soft discussion can you offer us or color with regard to the quality of that backlog? And how, as you execute the revenues and the volume, you mentioned the benefits of operational leverage, but how that may play out in terms of the margin range? Because specifically, I guess, what I'd like to understand is what are the necessary conditions that would drive the Transport business margin into the middle or towards the upper end of your 5% to 7% midterm target band? And lastly, on a detailed question, you mentioned some volatility on the corporate expense. But can you give us a range of where we think now you've got a visibility on the decoupled transport business, what the ongoing level of corporate expense should be? Thank you. Look, on our first question on the activity on the tender activity, I think that, yes, in some geographies, there may be a shift of some projects because of some budget constraints. But don't you think that it has happened over the last years in Europe, for instance, very substantially? Yes, I mean, overall, I think that we have had an incredible positive sequence in commercial activity. I think that the backlog I mean, the pipeline remains active. We have a few elephants in the backlog in the pipeline, which I hope we move from the backlog to from the pipeline to the backlog. You heard some very high speed stories in North America. You heard some urban transportation stories in the Middle East. You may have heard also some substantial opportunities in Asia. So again, we are moving ahead not only with the ongoing flow, which remains active, but also with some big elephants that we hope we are going to capture and move from pipeline to backlog. So there are all the good reasons for bad news, but what we have been able to do is turn these good reasons for bad news into good news. I mean, yes, there are budget constraints in a number of geographies, but this has not changed. And we have, again, been able to keep a book to bill above 1 for more than 5 years, if I'm not totally wrong. So in my view and in summary, it's very difficult to give because you say shift, but shift compared to what? It's very difficult to give a specific timing for prospects to turn into contracts, but we see the pipeline active as a British understatement. The backlog, yes, the backlog is healthy. Why wouldn't we have an unhealthy backlog? What is the assuming that we act logically, why would we take bad contracts, not to say shitty contracts on board? Is it because we need to fill our backlog? It's a record level of backlog. If we don't apply hygiene in our backlog today, in the order intake today, we'll never do. So assuming we have a minimal rationality, which I hope we are beyond this threshold, you should assume that we apply hygiene, and we have been applying hygiene for a long time and that therefore, the quality of the backlog is improving and has gradually improved. So the answer is yes. The backlog is a good backlog. The backlog is going, is gradually improving as we take orders and we execute, and the backlog is consistent with our forecast statements in order. So that's and then the improvement of margins. The improvement of margins by the way, okay, the margins move from 5% to 5.1%. You say limited, I'm disappointed, Patrick. That's not good. But at the same time, the I4 is moving by 10% up. So that's not totally negligible as well. But again, looking at the income from operation and the way it will move forward, it will be a combination of volume, quality of the exit backlog is backlog. So volume I mean, what we'll be able to continue to take to the backlog because we cannot stop, then volume, then quality of execution, then continued actions on costs. And then it includes some volatility. You know that if we increase the signaling, the and if we increase the service part, that means the mix between the various categories of activities go up, then it goes up. And within a given category, take rolling stock, the mix is not absolutely uniform. So on a period, we can have some product executed in rolling stock. We are not exactly at the same level of life and therefore, not necessarily the same level of performance. So yes, it's volume, mix and performance, performance being execution and cost. Corporate expenses. I'm sorry if I said that there is volatility. In fact, there is no really volatility. We are I told you that we were expecting corporate expenses. We guided around €30,000,000 per year. We are at €17,000,000,000 So okay, you may have a debate for €2,000,000 Last year, it was €15,000,000 But I wouldn't consider that as volatility. Otherwise, everything is volatile, including my humor. If I can just go back to the You initiated a number of footprint related measures a number of almost 2 years ago, some of which was related to transport in terms of direct cost reduction. How much of that is left to achieve? And when you look at the footprint of transport, supply versus demand across the various countries, is there additional need to make adjustments to the underlying production base? Well, this is moving. It has been moving in transport as well as elsewhere. We didn't give a quantitative number this time. I think that this is an ongoing process, which is going to continue. There will be new action taken everywhere in order both at the level of the operational in all the categories that I mentioned, which are the manufacturing performance, the optimization of the footprint, the overhead in general, notably in the operations, the corporate costs and I mean, the overheads at the central level, etcetera, which we have been able to improve through the operation, what we call the D2E program. It's on track. It's moving ahead. And we continue. But again, we don't need our guidance doesn't assume that we the world starts spinning the other way around. We are on a continuous process rather than a revolutionary one, evolution rather than revolution. Thank you very much. Thank you. The next question comes from Mr. James Stedler from Barclays. Please go ahead. Yes. Thank you. Good morning, all. James Stetler from Barclays. Just following on looking at the backlog, if we look at the mix development, what can you say over the next 3 years in terms of the percentage of service and indeed signaling with what you've got in the backlog? And just any more color on what the key execution challenges are? And maybe talking about, for example, PRASA is a very large deal, how risky is that going to be to execute? Well, I think Well, I think obviously, when James, first one is when you look at the backlog, basically, you have a content of service, for instance, is larger than what you may have on rolling stock because typically the length of the service contract may be longer than the length of the rolling stock 1. So this is not per se, a pertinent to assume the mix of the sales because they tend to be executed over a longer period by nature. That's what I said. What we think what we want to do is basically grow the non rolling stock areas faster than the rolling stock one. That has been the stated strategy, and we keep there. And really, when he will detail what he intends to do, we'll probably come back more on that. GE signaling will obviously give a boost of the Signalling sales and increase the mix in Signalling. So this will this will this move. We have not given a detailed guidance, and I'm not prepared to give one today. But that's what we want to do. In terms of execution, what needs to be done in terms of execution is nothing real. I think we are getting better in the execution compared to where we were a number of years and expect to continue to improve. You know that in contracting business, and we have a contracting business, it's important execution is the key driver. Given backlog, it can turn into very substantially different P and L depending on the way it's executed. So it remains a key focus of the company and its management. You talked about PRAZA. PRASA is the starting point. We already delivered some trends from Brazil as part of the contract. And now the work is to gradually contract which is a difficult contract in term of execution because we basically have to meet the factory to train more than 1,000 workers to be able to ramp up this factory. We have to stabilize the supply chain. We have started already because some of the trains we are delivering already include some local supply because we need to go there. So this is but this is the type of things that is our job to do. Our job is to be able to do that. And if we have been able to successfully tender on this contract, which is a good contract for us, subject that it is properly executed, and your point is well taken, is because of our history in the country, our ability to all the black empowerment criteria, etcetera. So in other terms, the experience we have. We have not been, at that time, very when we took the contact, very exposed to rolling stock experience, but we have a very broad energy one, which has been useful at that time to help us ramp up in Rail. So look, this is something which will be scrutinized in the management of the coming period as a large contract, not necessarily risky. And all large contracts by nature are risky because if they turn bad, they turn bad in bigger numbers even though the program is to be executed over a long period. But that's the point I can make. If we are unable to take large contracts, we have a fundamental problem. Again, our ability is to be able to take a combination of contracts in all geographies to be able to rely on local partners, to put an installed base. And that gives us a clear competitive advantage against a number of competitors, notably Chinese, who are unable to do so, so far. So again and so therefore, we should turn that into opportunities. It's all large contracts are scrutinized. We have in place all the, I would say, the reporting and the sensors that are needed to check because indeed, they never go in there. So whenever there is a variation, we have to step in and correct. So that's so look, I mean, we are moving in this contract. We are at a very initial stage. I think we are just at just it's a long contract, as I said, and it will ramp up. So we'll have the opportunity to talk about this contract regularly. The next question comes from Mr. Martin Wilkie from Citi. It's Martin from Citi. I could come back to the free cash flow. I understand you don't want to give guidance. But in your balance sheet impact, you do talk about a negative transport free cash flow when you calculate the estimated net debt position post the transaction. I understand there's probably a slight definitional difference here because, obviously, the transport free cash you talk about is before interest and tax. I suspect this one is after interest and tax. But I just want to check that, that slide on slide It is. Definitely, it is. So the difference in that slide is not implied guidance for the second half. It's more interest and tax is bringing that down. No. Thank you for I'm probably, as I said in explaining this slide, we should have talked about continued operation rather than transport because this definitely includes all what is not related to GE and not taken in the lockbox. And obviously, we are not talking about the future, but we are talking about the past because we are going giving a kind of pro form a picture on the 30th September 2015. Last but not least, this is rounding numbers, so don't try to extrapolate. We have been trying to give the big picture rather than the detailed number to explain why the 3.2 was making sense. So it's so sorry for this lack of clarity. Good to clarify. So thank you for that. Thank you. The next question comes from Mr. Alfred Glaser from ODDO. Please go ahead. Yes, good morning. I just wanted to follow on GE disposal. Could you give us a more precise idea of the capital gain that you might book in the P and L this year at Alstom? And then on the revenues reporting, you have now a clearly positive foreign exchange impact. What would be your guidance for the full year in terms of foreign exchange impacts on revenues in transport? Yes. It would be rich if I were to be able to answer you on the second part of your question, Alfred. No, look, I cannot disclose an accurate estimate of the ForEx as we move forward. So that's the second one. On the first one, yes, there will be a capital gain. We will communicate on the capital gain after all the accounting job has been done, and this will be done with the full year number. So I don't want to give presently a figure. I hope it's going to be substantial, but I don't want to give a figure. There are a number of things that we have to look. I'll give you an example among others. We have tax assets. We need to make sure that these tax assets are fully valid and that the new perimeter will give us a fair position at the corporate level, this is at Alstom SA level. So we need to make sure that tax assets here and there, for instance, are giving we have enough comfort that these are going to be used. That's why we may have an impairment issue. That's the type of things we want to look at. And therefore, there is some work which is going to be done by the finance team or Marie Jose and her team. And then we'll come back with the numbers. If the closing is done so close to the half year numbers, we need some times to review, and we'll comment with the full year. The next question comes from Jessica Khour from Goldman Sachs. I only have a couple of questions left. The first one is about your net debt. What do you consider as the ideal or the comfortable net level for your business over the medium term? And my second question relates to your M and A strategy, and apologies for coming back to this one. But I guess I understand that you're not in a must do more when it comes to M and A. But I wanted to clarify that you said you will still be looking at opportunities. So do you by that, do you mean you'll be looking sort of opportunities that will be of the bolt on nature? And secondly, is there any gap in your portfolio where you think those opportunities can arise? No. I think you Ideal debt, this is an issue we have been an issue that we have been addressing endlessly, and there is no ideal debt. I mean, you know that basically, we are somehow financed by our customers in the system business, and we don't want to have customers having headache on our balance sheet. This being said, with post opra, we have 1 still have 1 of the best balance sheets of the industry. So I don't imagine anyone has a worry. So look, a company such as Alstom can be leveraged. It cannot be aggressively leveraged in my view. So I am not in a I don't think it's appropriate to give a debt target. But again, by taking the conservative part of the Opera in the Board's recommendation to the AGM, we gave the signal that we don't want to be crazy in terms of balance sheet of the company. On the M and A, you are fairly representing my point when you say that we are not in a must do mode. That's exactly my view. We are not in the must do mode means that we believe that we have a sound portfolio. It doesn't mean that there are no opportunity to boost the portfolio on bolt on acquisitions. Typically, G signaling is a nice bolt on acquisition because it covers some holes that we had. We are very much focused on passengers' signaling, while GE allows us to be globally on freight signaling. If you look at our signaling business, we are quite broadly present, but I wouldn't say that U. S. I mean, North America is a stronghold of our signaling activities. It boosts, therefore, our signaling activities in this geography. That's typically the type of acquisition we like. And when we look for some well, we have been. I mean, there is no I mean, we have been with not a lot of money to do, so a little bit more contemporary than active. But we'll continue with the idea that we'll apply the toughest hygiene and make sure that we don't do mistakes. But definitely, in my view, we are talking of bolt on. And bolt on means giving something in terms of cost base, giving something in terms of commercial presence, giving something in terms of technology additions, etcetera. That's where we are. But again, there is nothing cooking. So we'll have plenty of time. And again, that's the thing. Good. From the screen, I see that there are not so many additional questions. I've been with you a long time. So thank you for your interest. Selma is obviously at your disposal to give you additional elements and cover your curiosity and you know the next steps. And as far as I'm concerned, in addition to the shareholders meeting, I look forward talking to you on the 14th January on the Q3 orders and sales. So thank you very much, and have a good day. Thanks. Ladies and gentlemen, this concludes today's call. Thank you all for attending. You may now disconnect.