conference call presenting its annual results for the fiscal year 2014-2015. I will now hand over to Mr. Patrick Kron. Sir, please go ahead.
Yes. Thank you. Good morning, ladies and gentlemen. Welcome to this conference call on our full year results for the fiscal year 2014/2015. I mean, accounts from the 1st of April 2014 till the 31st of March 2015. I like to remind you that all the published elements, the presentation, the financial report, including the MD&A and the accounts, as well as the press release, are available on our website, www.alstom.com. Let me first, on slide number two, give you the main takeaway of this publication on the full year numbers and where we stand with the deal with GE. To start with, I remind you that in compliance with IFRS 5, Alstom Energy has been classified as discontinued operation as we did for H1, and therefore is not included in orders, sales, IFO, and is reported under the net income discontinued operations line.
When I go to these numbers, my first message will be to say that we actually are fully meeting the full year 2014/2015 guidance that we gave you. More specifically, Alstom showed in transport a solid operational performance with orders up over 60% compared to the previous year, and an organic sales growth of 7%. You will see also that the IFO margin after corporate costs have improved by 50 basis points. The free cash flow from continued operation before tax and financial cash outs reached EUR 77 million, showing, as expected, a significant rebound in H2, thanks to better cash profiles of a few contracts as well as a strict cash flow management. Another critical step in the project between Alstom and GE has been completed, with Alstom shareholders approving the transaction last December, with over 99% of the vote in favor.
We'll also commence the process to obtain competition authorities and regulatory authorizations, which is ongoing with the closing of the transaction that we expect in the coming month. Finally, we'll confirm our midterm guidance for Alstom. I start with the key events of the year, and then Jean-Jacques Morin, our CFO, will present the detailed financial results before I come back with some additional remarks. We'll then share the floor with you on the Q&A session. Let's go together, please, to slide four. We summarize our main KPIs for the fiscal year 2014/2015. You see that the orders at more than EUR 10 billion were at a record high, up 63% compared to the same period last year, which showed also a good performance, a book-to-bill ratio over 1.6, thanks notably to the jumbo contract in South Africa of around EUR 4 billion, but also a number of interesting contracts elsewhere.
This will be detailed in a second. The sales are up 7% organically with EUR 6.2 billion. As previously announced, the fourth quarter was slightly down compared to a very high fourth quarter of last year because I remind you that Q4 2013/2014 was something like 27% up versus the previous year. We had somehow an unfavorable base of comparison. Globally, the sales over the year went up 7% on a for like basis. Income from operations, which now includes the corporate costs linked to Alstom Transport activity, increased by 17% from EUR 268 million to EUR 318 million. The corresponding operating margin went up by 50 basis points, reaching 5.2% again, after corporate costs.
Net income from continued operations was a negative EUR 823 million, notably impacted by the provision related to the agreement we passed with the U.S. authorities, U.S. Department of Justice last December, as well as some impairment of assets in Russia. Net income from discontinued operations reached EUR 104 million, leading to a group net income of -EUR 717 million, obviously hit by the exceptional elements that I just reminded you. Free cash flow, now from continued operations before tax and financial cash outs, reached EUR 77 million over the full year, with H2 more than offsetting the negative free cash flow of H1. This is in line with the guidance we gave you also.
Finally, the free cash flow from discontinued operations before tax and financial cash outs was slightly positive over the full year, with nearly EUR 1 billion of free cash flow generated over the second half. This performance was notably driven by more favorable cash profile of some project, as well as strict working capital management. Again, fully meeting the guidance we gave you on all the lines that we guided you. If I go back to the orders with a little more words, as you can see on slide five, I said that these orders were boosted by strong demand in urban transportation as well as in signaling and services. It also includes the booking of the large contract for suburban trains and associated maintenance in South Africa.
It's worth noting that Europe remains sound, with representing more or less half of our orders if we exclude this PRASA contract. That's more or less EUR 3 billion out of the EUR 6 billion outside of PRASA. This book-to-bill of 1.6, this strong order intake, gives us visibility for future revenues as it represents more than four and a half years of sales. I just want also to pinpoint that this is an exceptionally high level of orders, a record high level of orders. This 2014/2015 is also the fifth year in a row where we have had a book-to-bill above one. Fifth year in a row.
If I go to slide six, slide six gives you more example of our commercial successes during this fiscal year, and you see that beside the South African one, we booked several major orders, such a large metro contract in Paris, tramway system in Qatar, Sydney Metro, and tramways, among others. You have here a full set of examples. We saw commercial successes in the five continents, and this confirms that we are able to capture opportunities and that there are such opportunities both in emerging markets and developed economies. Moving on to slide seven. Sales increased 7% organically, fueled by delivery of suburban, intercity, and very high speed in France, Italy, and Germany, as well as very high speed trains in Morocco and tramways in Dubai. Emerging markets represented around a third of the sales, 30% plus during the fiscal year.
Income from operation increased by 17%, EUR 318 million, as I said, and include a share of corporate costs allocated to Alstom Transport activity, which represented EUR 27 million negative, a charge of EUR 27 million in the 2014/2015. The operating margin went up from 4.7% to 5.2%, improving by 50 basis points, thanks to sound project execution, tight cost control, partly mitigated by ramp-up costs associated with new platforms such as the Regional One, as mentioned in our previous communication. A word that you can see on the following slides in the cost improvement program or performance program called Dedicated to Excellence, which we are moving in line with the various elements and guidance we gave you in the past. The numbers that you see here are run rate numbers, but this is what we are gradually implementing, starting end of 2013, where we first presented to you our plan.
You see in slide nine some example of the initiatives which are ongoing and have been fruitful so far and continue to do so. They basically cover all the areas of our cost base, starting with sourcing, very important, but covering also manufacturing, footprint, industrial footprint, as well as overheads. On the next slide, on slide 10, you also see a couple of numbers, a few numbers on our investment for future growth, both on R&D. Innovation is clearly in our DNA, and we're investing for the future growth. The R&D represented EUR 116 million during the fiscal year, and we also invested EUR 100 million in modernization and expansion of our industrial footprint. The slide gives you also a few example of our main research and development as well as CapEx programs.
Now I leave the stage to Jean-Jacques for the detailed presentation of our financial results, which we published today. You have the floor.
Thank you, Patrick. Good morning, ladies and gentlemen. Turning to the P&L on page 12 and moving to exceptional item below the IFO line that impacted the EBIT of the company. You have restructuring charges this year, which amounted to EUR 106 million. This relates mainly to restructuring at Alstom headquarter and in some European facilities and should not be considered as normative. It has already been mentioned that we expect a recurring level of restructuring for Alstom in its present scope of around EUR 30 million a year. Other non-op expenses include our agreement with the U.S. Department of Justice, as well as some asset write-off. As already mentioned, the cash out linked to this agreement with the DOJ will occur after the close of the transaction with General Electric.
Financial results stood at -EUR 137 million, which reflects a high level of charge in this transitory period and is not, again, representative of Alstom expected financial structure. The decrease versus last year reflected reimbursement of EUR 722 million bond back in September 2014. Tax result was a positive EUR 8 million. Share in net income of equity investees amounted to EUR 18 million, with a lower operational performance of Transmashholding over the period, largely amplified by the impact of the severe drop of the ruble. Consequently, we made an impairment of Transmashholding value on March 31st, 2014. Net income from discontinued operation decreased to EUR 104 million, mainly as a result of lower sales, which impacted profitability. This net income also includes a number of specific item, positive and negatives, and amongst other, capital gain on disposal of auxiliary business, a deal cost, as well as restructuring and some exceptional charges.
As a result of all the above, the net income group share amounted to a negative EUR 719 million. Let's move now to the next slide 13, which deals with the free cash flow. The free cash flow from continued operation, which I remind you is before tax and financial cash out, was a positive EUR 77 million, for the fiscal year. And with an H2 that more than offset the negative figure of H1, as we expected. While over H1, the free cash flow was affected by temporary negative cash profile of a few contracts, this phenomenon partly reversed in H2. We have mentioned that several times. The volatility is to be expected from one quarter to the other one in working capital, and in that sense, this year has been no exception.
Moving to free cash flow from discontinued operation, again, before tax and financial cash outlay, it was slightly positive at EUR 19 million. The second half showed a strong cash generation of about EUR 1 billion, thanks to a more favorable, again, cash profile from projects executed over this period, as well as a very strict cash management from the operations. We now move to slide 14. On slide 14, we'd like to spend a few moments on our financial structure and give you an update on the balance sheet items. The liquidity position remains sound with EUR 1.6 billion of gross cash at the end of March, and EUR 1.35 billion of undrawn credit line. As mentioned before, we did reimburse EUR 722 million bonds, which matured back in September 2014. This liquidity position is also backed by a new bridge facility of EUR 1.6 billion, until the GE deal completes.
This was put in place to address working capital volatility, which as you've seen, has been pretty strong over the year. We did obtain a waiver on our financial covenants for all facilities until the completion of the GE transaction. The covenants were no longer reflecting the reality of the current situation, considering the expected closing of the deal in the coming months. Finally, on this section, we are currently negotiating new bonding and revolving credit facilities to replace the existing one after the GE deal completion, and we expect from those negotiations better conditions. Moving now to slide 15. As at March 2015, the net debt was stable year on year at about EUR 3.1 billion compared to EUR 3 billion last year. It is substantially down compared to the EUR 3.9 billion that we had experienced at the end of H1.
This overall stability resulted mainly from the negative free cash flow over the period on one hand, and the proceeds from the sale of the steam auxiliary business on the other hand. On the right side of the slide, you see the equity development, which decreased over the period at EUR 4.2 billion, and it is mainly the combined effect of net income as well as pension liability valuation. Once again, the net debt level you see is obviously reflecting a transitory period for Alstom and is not significant of the future financial structure that Alstom will have after the deal with General Electric. We now move to the next slide, the slide 16, which deals with pension.
You see on the chart that the pension underfunding position increased to EUR 2.2 billion, impacted by the lower discount rate assumption, as well as some foreign exchange effect coming from Swiss franc and British pound. Out of the EUR 2.2 billion of underfunding, the portion that relates to continuing operation was EUR 450 million. We now move to a summary slide on discontinued operation and some key figures for information. You see on that table on the upper left corner that orders went down 12%, remaining affected by the lack of big tickets. Main bookings related to a coal plant in Thailand, steam turbines in India, and over the years, three gas turbines were sold, as well as a number of important HVDC contracts and wind turbine in Brazil. As expected, the sales decreased, consequently reflecting this slower intake in recent quarters.
Profitability has been behaving in line with the trend shown in H1. As for net income, as Patrick already indicated, it was impacted by the decrease of sales, which has an impact on profitability as well as a specific item, both positive and negative, such as the deal on the disposal of the auxiliary business, some deal costs related to the GE transaction and the financial charges. The free cash flow from a discontinued operation, before tax and financial again, was slightly positive at EUR 19 million, and it showed hence a strong generation of EUR 1 billion in the second half. Thanks again to a more favorable cash profile on some projects, as well as a very strict cash management from our business. Thanks.
Did you finish, Mr. J.J.?
Yes, I'm done. Please, Patrick.
I take over to say a few words on generic. Thank you, J.J. As you can see on slide 19, the process regarding the projects with GE on the energy activities is on track. We had, over the last six months, a number of key steps achieved. We are currently, as indicated there, but you all know that, it's just a reminder. We have filed a number of filings in a number of jurisdictions, 27. We already got something like 10 approvals, and it was cleared on 10 areas, and we're actively working with GE on all the remaining ones. The timing of the closing will obviously depend on the positive completion of these regulatory and antitrust approvals. We expect it to happen in the coming months.
As you also know, we intend, after the closing, to call for a shareholders' meeting for a vote on a public share buyback offer, OPA, which is the option favored at this stage to move part of the proceeds towards the shareholders. Turning to this use of the proceeds on slide 20. What we already said and confirmed is that we obviously expect these proceeds to provide the group with a solid balance sheet, headroom for future growth. We plan to maintain strong liquidity to reimburse progressively a part of the outstanding debt, and depending on the opportunities to do so, accelerate if it makes economic sense, don't if it doesn't. Should the company decide in due time to exercise its put options in the energy JVs, this will provide additional financial flexibility, notably for the reimbursement of the remaining outstanding debt.
We anticipate, as I already said, the cash return to shareholder to be in the range around EUR 3.5 billion-EUR 4 billion, taking the form of a public share buyback. Thus, if confirmed in this line, which I expect will be the case, lead to a shareholders' meeting after closing to ask our shareholders to vote on this cash return. I will just conclude this presentation with an update on our outlook. We provided last November a new guidance for both this year, which is fully met, and for the medium-term guidance. When I said fully met, you have here the comparison of the guidance given for 2014/2015, and what are the actuals. We have achieved all our forecasts there. The medium guidance, we confirm it.
We expect the sales to grow over 5% per year organically, the operating margin to gradually improve within the 5%-7% range, and the free cash flow of the group to be in line with the net income before any JVs' results. That means stability of the working capital, which is the underlying assumption. We also know that there is volatility of this working capital impacting, as you have seen in this recent period, and is always possible, some volatility on short periods. Okay, this is the conclusion of our presentation. I thank you for your attention. With Jean-Jacques and Delphine, we are now ready to answer your questions. Thank you very much again.
Thank you.
Ladies and gentlemen, if you wish to ask a question, please dial zero and one on your telephone keypads. We have a question from Andreas Willi from J.P. Morgan. Please go ahead.
Good morning, gentlemen. My first question is on the outlook for the continued operations for the year 2015-2016. You have maintained the longer-term guidance but not said anything specifically on the year. Is there anything you can say about the pace of organic growth and the margin improvement? Should we expect a relatively linear improvement over time, or is there anything specific about the current financial year in terms of margin progression? The second question on your cash distribution to shareholders, the EUR 3.5 billion-EUR 4 billion. Is that number set in stone, or could that change, given that there's quite a lot of potential consolidation going on in the industry, in which you may want to participate?
The last question, what's your outlook and expectations for some of the large high-speed orders that are currently in the market as potential tenders such as Turkey and Spain? Thank you.
On the outlook, we don't see anything specific in 2015-2016, which justifies a specific outlook and specific guidance. We told you that we expect the top line to grow by over 5% per year. This is in line with what we expect to happen. We say that we'll have a gradual improvement. We just don't see the medium-term guidance, which will be the sales going up 20% a year and -10% the next year, and then up 20% again. This is why we think that we are in the gradual in this mode of having the sales growing 5%+, having the income from operation gradually improving, and the free cash flow moving towards this cash flow equal net income target. No really details which need to be specifically plugged in the 2015-2016 year.
On the EUR 3.5 billion-EUR 4 billion, nothing is engraved in stone, but at the same time, we confirm this indicative number. There is nothing which has changed compared to the previous indications. We'll see within this bracket where it makes sense to stand. Again, my view is that the company in the future will be a pure play in transport with some JVs in energy, and will have a strong balance sheet. I said that one of the priorities is to make sure that this company has the means to move. I don't think that this level of distribution of share buyback is going to impact the future ability of the company to move. Again, I don't want to speculate on the speed of any industry consolidation. As I said, we are not in a must-do mode.
Our priority is to continue to grow organically, I think that the year we are just closing gives some credibility to this strategy. If there are opportunities, we will look, the company will have the means of take actions in order to be able to move. Therefore, there is no specific reason to change this outlook of the distribution of the OPRA level. Concerning the tenders, as you can expect, Andreas, I'm not going to comment specifically a tender here and there. We are interested by high speed by nature, but no specific comments.
Thank you.
Thank you. We have a next question from Olivier Esnou, Exane. Please go ahead.
Yes, hello. Good morning, Patrick.
Good morning.
I'd like to start with the update on the payment for GE Signalling. With the FX change, can you maybe update us on if there's any change on the amount you have to pay for it? If you happen to have an update on the performance of that business in 2014, that would be great. I noted you would have preferred to keep the financial statement confidential, but I have some questions on the account as well. It mentioned that, and that's on the cash, actually, and the interest charge. GE is supposed to carry the risk of the free cash flow variation since March 2014, Alstom carries rail. What about the share between you and GE of the interest and tax charge, which is actually the most significant amount in the cash flow statement? That's number 2. I give you a number 3 as well.
The accounts, they mentioned that the business plan has been revised for Transmashholding. I guess it's not just the ruble which is driving the revision of the asset value, but also the new business plan. I wonder if you could share a little with us what you see, how the business plan has been revised for Transmashholding. Thank you.
Well, on the first point, the signaling business, there is nothing new under the sky. The price of the deal is fixed. There is nothing new. I will comment on the signaling in the next steps when we will get that closing level, but there is nothing that I should report here. I would say that this business, we have not changed our position as far as how interesting this business is for us. It's a good complement, both geographically and in terms of technologies. There is nothing to add on that position, on that point. This is a very strong business in North America. It remains a very strong business in North America, and again, no specific comments in terms of Nothing fundamentally new under the sky.
If we look at the free cash flow, you know that the deal includes some cash, which is transferred to GE, and there is, as you know, also a locked box mechanism which makes the consequences of the free cash flow of the energy business, global free cash flow of the energy business, taken over by GE. There is good news for GE, which is that after a very negative H1, H2 has largely reversed the cash outflow that we have in H1, which has been positive in H2. We have, obviously, the cash and the tax and the financial costs are associated to some businesses. We pay taxes because of what happens in the specific business. We have these financial costs in relation to what happened. I would say that the split is done by entities.
I would say that the financial and tax cash-out is probably something like 80% in the energy side and 20% in the transport one. Last question on Transmashholding. Yes, indeed, what we face in Russia, and this is something I mentioned clearly, I think, in our H1 report, is the fact that Transmashholding is exposed, one, to a slowdown of the Russian economy, implying a slowdown of its activity, and two, the devaluation of the ruble. Which even if it recovered from a very low point that was reached by the end of the fiscal year, still there is a depreciation of the ruble against the euro of something like 30% from the start to the end of the year. This combination of a slowdown and this ruble led us to take a write-off.
To be fair, I think that we'll remain with a low tide for a limited period of time, which is obviously difficult to quantify, but we have not changed our view on the potential of the Russian market, the ability to seize opportunities in this market through our partnership with Transmashholding, and I personally am extremely positive on the medium prospects of both the market and our position in this market. I may add that in spite of this write-off, it confirms that our strategy, which has been a partnership strategy in this market, is the right one, and not only for political reasons, I would say, but also for economic ones. Okay, yes, we'll have, for a couple of half years, a contribution which would be substantially lower than what it has been last year or the year before.
It doesn't change our expectation of a rebound in this market and new opportunities taken by Transmashholding and ourselves.
Thank you.
Thank you. We have a next question from Gael de-Bray, Societe Generale. Please go ahead.
Hi. Good morning, everyone.
Good morning.
Maybe two questions on the financials and one on the outlook. Firstly, how do you explain the 100 basis points decline in the gross margin this year, despite the pretty good sales growth? Secondly, maybe could you give us an indication in terms of what proportion of the backlog should be executed in the coming two years, in theory? The third question is on the maintenance business. Generally, how do you see the demand for maintenance and services, particularly in Europe? It seems there is an increasing trend towards more outsourcing of the maintenance and services activities amongst some of the rail companies in Europe. Maybe could you elaborate on the potential for you to benefit from services market growth here? Thank you.
On your question on the gross margin, the evolution of the margin. I start by telling you that as you can see, basically on the bottom line, the IFO line, our margin increased by 50 basis points. If you look at our margins, I think that there are several factors which can explain the gross margin evolution that you mentioned. The first one is that we have a mix which includes, during the year, we had the growth which was more in rolling stock than the rest of the activities this year. Our rolling stock has been up at a higher level than the average growth. The mix is in a kind of relatively diluting, offsetting some of the positives of the mechanical impact of the volume growth. That has been one.
The second one is we also have some ramp-up costs on some new platforms, notably Regionale, which is a platform in which we have a very ambitious Program of development of seven new trains within the global platform. This is basically what explained the point. Your question around services in Europe. Well, again, Gael, yes, it is true that we have a number of customers looking for outsourcing, and we have been working on that. This is a slow trend. Basically, it is a priority. I think we are well-positioned, and I think that we will seize opportunities. Again, my view is that when we look medium to long-term, we should grow and will grow the signaling and the service at a higher speed than the rolling stock one. On the backlog question, and how fast will the backlog flow through the P&L? Just to summarize your question.
Gael, I don't have the number on my head right now. I would say that I think that we are in a classical situation where we expect the sales of this year, the current year, to be something like 80% plus or 90% within our backlog. That is what happens this year. I would say that the number for next year is probably around 60%, 70%, that type of 60% is probably the level I would say. You say we have 85%, 90% in the backlog for this year and probably 60% for next term. If I am grossly wrong, I will correct it towards you.
Okay. Thank you, Patrick.
Thank you.
Thank you. We have a next question from William Mackie from Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Three questions, please, Patrick. First of all, detailed on financials. With regard to the corporate costs for the transport business, should we take the bookings that you've taken in the last year as a fair value of the centralized costs for transport, or were there any particular transition charges in there that might affect that going forward? Secondly, on restructuring, I hear that you reiterated the level of ongoing expense at around EUR 30 million. The charges last year were high. I'm sure some linked to the D2E program. How should we think about the level of expenses into the 2015, 2016 year, given that you have about another EUR 150 million of cost objective linked to D2E? Lastly, on the financials, perhaps coming back to the level of the deferred tax asset, which is sitting at about EUR 720 million in the accounts.
How should we think about the effective tax rate of the transport business, given the opportunity to realize the benefits from those tax assets on the balance sheet in future years? Thanks. That's the three detailed ones.
Thank you. On the first question, which are the corporate costs. We told you we have this year something like EUR 27, if I'm not wrong, of corporate costs impacting the transport activity. This is both the fair share of our current cost allocated to transport, but also a good assessment what can be the future one of the Alstom standalone, which we guided in the past at being around 30%. It's not something which is impacted by transition. We may have a few EUR millions, which instead of being here, are already embedded in the number of Alstom Transport itself. Basically, the corporate cost, which is current transitory, but will remain at the end of the day, the functions which are currently provided by Alstom will have to be done by someone, and the one will have to be paid. Basically, this will remain.
I think that this is not creating any disruption to consider the current situation as the future one. EUR 30 million is around that. We are on the EUR 30, EUR 30% in all your question. I'm sorry. The second one is a EUR 30 million again. Again, I told you that this is a kind of recurring level that I have in mind when you talk about restructuring of transport. It's not impossible that this 2015, 2016 number will be above this EUR 30 million, because we have still some adjustment to do here and there, and we have this D2E program which will continue. We have seen October. I don't necessarily say that it's going to be at the present year level. At the same time, it will be above EUR 30, somewhere in between, probably. The third question, it's also 30%.
We guided you in the past that because of the geography of the profits, et cetera, it would be wise to consider tax rates somewhere in the range of 30%. 30, all your points.
Perfect. That 30 vision. Thanks.
A follow-up briefly, if I may. Just relating to the mix of the business, you alluded to the strength of revenue growth in the rolling stock segment during 2014/15 as being above your group average. Could you provide a bit more color as to how the revenues developed in service and signaling and maintenance, please?
We have signaling and services, both rolling stock signaling and services increased. Again, I don't want to overstress one point or another. There is volatility. You reach milestone at one point in time, which implies a higher point here and there. We have the signaling going up, services going up. It's not very relevant. The rolling stock represents something like 50% of our total sales. You have turnkey, you have signaling, and you have services. That's more or less the split.
Got you.
Thank you. We have a next question from James Moore, from Redburn. Please go ahead.
Yes. Good morning, everyone. I've got two on margin issues, I'll try a hopeful one on antitrust. In terms of the savings progression, I see that the annualized run rate has done well, gone up from EUR 150 million to EUR 300 million. I wonder if you could help us a bit with how much was actually realized in the P&L in the last year out of the EUR 300 million. I'm really trying to understand whether the year-on-year effect in the P&L last year was higher than it's going to be in the coming years or a bit lower, and how that's going to progress. The second question is on mix. You mentioned rolling stock growing faster than service and signaling. You also mentioned ramp-up costs. I know that no one issue is that important, there is volatility.
As we move forward into the 2015/2016 year, could you give us some idea as to whether you see continued ramp-up costs, continued faster growth in rolling stock, or whether you see any change to that effect? I'll try a third one if I can. Can you say anything at all about whether the questions from the European Commission have centered around investment in R&D concerns, or whether there have been greater questioning on issues of market shares and the impacts they may have on turbine prices and ultimately consumer electricity prices? My sense from press commentary is that innovation and investment seem to get mentioned, nobody's talking about electricity pricing, which makes me feel hopeful. Is there anything you can say on that debate?
Thank you. On the D2E Program, you know that I've been, over the years, reluctant to give this type of data, because I wanted you not to be misled on the consequences of the data which would be released. I was right to be shy in giving the numbers, because we are currently talking about run rates. These are actually savings that we are doing. That means that when we look at our cost base today and compare it to what was our cost base two years ago when we started the program, this is the difference. This difference of cost first gets into the backlog in elements which are not going to be externalized immediately. It also goes to the customers, because we are under price pressure across the portfolio because of the competitive environment that you know.
At the end of the day, we have the volume impact, we have the mix impact, we have the cost impact, we have the execution impact, we have the ramp-up cost impact, and all this gives ups and downs. That's why, at the end of the day, the EUR 300 million, you don't find them in the P&L day one, and you will not find them in the P&L day two. This goes into this crushing machine that I just described. At the end of the day, what we expect is the bottom line to move up. Two, we said, look, we are in a market where we don't see discontinuity. We don't see our operating income to go to hell. We don't see it going to the sky next year, et cetera. We are on this medium-term guidance that we gave you.
I'm not going to go in a guidance per product line because I don't think it's realistic to do. I'm very happy to see the rolling stock growing. I hope it's going to continue to grow. I hope also that signaling and services are going to grow as fast, if not faster. That's where we are, because typically you have better margins in the signaling and service business than you have in rolling stock. Again, my job and our efforts is to grow the rolling stock as we grow the rest, because all this is globally value creative, but I'm not going to give you a guidance per product line, et cetera. Is the pressure from ramp-up of new platform going to continue? Yes, because we are going to continue to ramp up new products.
When the ramp-up of one platform will be over, we start the ramp-up of a new one. This is part of the game. At the end of the day, we say that we will expect to improve the bottom line. On the EC. Look, you don't expect me to comment on ongoing regulatory processes. I'm not going to take the decision. GE, with our help, are providing the necessary data to all the regulatory authorities. This is true in Europe as elsewhere, and I can say very candidly that we are working constructively through all the regulatory processes in all the geographies in which this is happening. I also tell you that our deal is structured on the basis of very complementary technologies and very complementary geographies, and nothing that we have looked at over the recent period changes our mind on that.
I am very positive on what will be the outcome of all these processes. At the same time, I recognize that it is a large and complex deal, and I recognize it's not something that is great because transitions are painful by nature. People like stability and predictability. Therefore, I hope this will be completed as soon as possible. Basically, I fully understand, and this is a surprise, neither for GE nor for us, that these reviews take time as they are very analytically addressed. Will the regulatory authorities, and notably the European Commission, look not only on the competitive environment, but its consequences on the industry in Europe, innovation in Europe, et cetera? I expect them to do, but I'm not the guy taking the decision. What we do, is we provide elements.
I think that this deal is good for the customers, is good for innovation, is good for industry, and is good for jobs in Europe.
Okay. Thank you. We have a next question from Fredric Stahl from UBS. Please go ahead.
Yeah. Hi, good morning, everyone. It's Fredric here from UBS. I just want to go back to the product launches and the cost relating to that. It's not clear to me that Well, the question is: are the product launches and the associated costs in the fiscal year that you just closed, have they been higher than normal? If so, how long does it take for them to normalize again? That's the first two questions. The second question is, I was wondering if you could give us some help with the FX impact on your P&L in the new fiscal year here. Thank you.
On the first one, look, no, we are probably in a period where we have probably more launches than the normative level. You expect us to keep on developing new products and launching them. I would say, I probably think that we are currently in a situation where the launch of products is above a kind of normative level. Will this continue next year? My answer is yes. I don't see a discontinuity there. We have, both in Signaling, in Rolling Stock, we have a number of very good and innovative products. Again, I mentioned that this is not something new under the sky. When we start a program, the profitability of the program is impacted by the fact that there's a ramp-up in industrial efficiency, and that we include in our margin recognition, a number of precautions on the way the overall contract is going to be executed.
Classically, we have a better performance at the end of a program than at the start of the program. This is not something new. To cut a long story short, yes, we have a significant ramp-up cost. Are these going to disappear next year? No. Normatively, should they be a bit lower? Possibly. On Forex, I would say that on Forex, you have the impact of the Forex, which was somehow quite limited between you and me. 8% pre-published growth, 7% organic growth. The numbers are not massive, and they are not massive because of our industrial footprint. No specific guidance that we will give you on that.
That's clear. Thank you.
Thank you. We have a next question from James Stettler from Barclays. Please go ahead. Mr. Stettler just hung up, so we will take a next question from Andrew Carter, RBC. Please go ahead.
Morning. Most of my questions have been answered, if I could just ask two quick ones. Firstly, thank you very much for providing the continuing share of the net pension deficit, so the bit that goes with Alstom Transport. Are you able to provide us with the same number for net debt, so the net debt that will continue with Alstom Transport based on the year-end? The second one was just, I did notice that the net working capital in the ongoing business continued to increase. I just wondered if you could talk about that a little bit. My impression was that Alstom Transport was a business that operates with negative net working capital, so I would've thought when the business was growing, you'd actually get a cash flow in for net working capital.
I recognize things can be a little bit volatile, but I was wondering if you are seeing any change in any of the sort of the terms of trade that the business is doing.
No. Thanks. First question is on the debt that you mentioned, the pensions and the funding, et cetera. Yeah. On the net, the debt of the business is basically the net debt of the start of the year, plus or minus the free cash flow of transport. You can see that the free cash flow of transport over the period was not very significant. We had a positive free cash flow before interest and tax. This is more or less offset by the tax and financial expenses related to the continued operation. Basically, the net debt is more or less stable. On the second question, which is related to changes in trade, no, I'm not aware of any substantial or any material change of anything over the recent period.
Thank you. We have a next question from Alfred Glaser from Oddo. Please go ahead.
Yes, good morning. Alfred here. I was wondering on CapEx, first of all, the numbers are in fact going down over the last two years, despite the ramp-up of new product ranges. Should we expect these numbers to slide further in the coming years, or do we have reached some kind of floor here on CapEx numbers? Then I also wanted to ask you on Transmashholding and Russia. You said previously that you're targeting more export business from Transmashholding, benefiting from the weak ruble. Is this progressing? Do you have any tangible elements here that you could share with us? Regarding also Transmashholding, currently you're holding 25% of this business. Do you think that with the cash you're going to get from the GE deal, you might increase your stake in Transmashholding?
Thank you, Alfred. On the CapEx, frankly, as you know, we had a large number of very large projects which are ongoing, typically a brand new rail factory in India, et cetera. Really, the fact that we went at EUR 110 and we go to EUR 100 doesn't mean that we are going to be EUR 90 this year and EUR 80 the next year. I must admit piteously that I don't monitor the CapEx ± EUR 10 million. It's not a trend. CapEx at EUR 100 million plus is a normal level that we expect is as necessary to modernize and expand our manufacturing footprint. Okay, it could have been EUR 110 or EUR 95 without me changing the way I described the situation. Concerning TMH, I told you this is a good investment. We hold 25% in this business.
I will not speculate on whether we are going to increase or decrease this level. We are happy with our investment in TMH. We suffer as an investor from the current slowdown of the Russian economy. We took a write-off. It doesn't change, in my view, the possibility to develop this business, both on Russia and on other geographies. As you know, one of the developments of our JV in Russia has been to possibility to develop a position in Kazakhstan by a joint venture between TMH, Kazakh Railways, and ourselves. This is one example. We will also, as we move forward, use more what is done in Russia to support some projects in nearby countries. Kazakhstan is one example. I hope that I'll be able to provide you with others, but I don't change my mind.
TMH is a good base to develop business in Russia, when the business in Russia will resume. It's a good base also to develop business in a broader geography. That's the comment I can do on TMH. It's fair to say that the current contribution of TMH in our P&L has been in H2 and will be this year, lower than what it has been in the past. That's a given. Ladies and gentlemen, I think it's time to discontinue. Thank you very much for your interest. J.J., Delphine, and if necessary, myself, remain obviously at your disposal to answer any additional concern or questions you may have after looking at our results. Again, to cut a long story short, I think that we have shown during this fiscal year, a strong performance in our transport activity.
We expect this to continue, we have a great business here, supported by a great backlog in a business which is not an easy business because we are in a competitive environment, but well-placed within this competitive environment. As far as the GE deal is concerned, we are in the transitory period. We have moved through a number of key steps. We are in the regulatory stage, I hope that this will come to an end in the coming months, allowing the deal to be closed and to move in the next steps. Thank you again, looking forward to your potential additional questions. Thank you.