Good morning, ladies and gentlemen, and welcome to the Siemens Energy's first quarter conference call in 2021. As a reminder, this call is being recorded. Before we begin, I would now like to draw your attention to the safe harbor statement on page two of the Siemens Energy presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions, and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Michael Hagmann, Head of Investor Relations. Please go ahead, sir.
Thank you, Yola. Good morning, everyone, and a warm welcome to the Siemens Energy Q1 analyst call. I hope you and your families had a good and healthy start into 2021. As you know, we published our preliminary figures for the first quarter already on January 24th, and we confirmed our outlook for the current financial year. Therefore, we would like to use this analyst call to give you some more details on the results. All the documents were out at 7:00 A.M. on our website this morning. Here with me, our President and CEO, Christian Bruch, and our CFO, Maria Ferraro. They will review the Q1 results. The duration of the call is limited to 60 minutes, and after that, Christian and Maria will be available for questions, or after they present, they will be available for Q&A. With that, I hand over to Christian.
Thank you very much, Michael. Good morning, everyone. Thank you for joining Maria and me to discuss our first quarter results today. I'm very happy to have you on this call. I hope that you and your families have been well, safe, and had a good start into the new year, despite the challenges we all have of the pandemic. As you know from our pre-release issued on January 24th, we had a solid start into fiscal 2021. Let me start with some highlights. I'm on the first page of our presentation. Revenue rose moderately with 3% on a reported base. SGRE achieved a significant increase while GP posted a moderate decline. I'm very pleased that adjusted EBITDA before special items returned into the black with EUR 366 million. As you know, in quarter one last year, we suffered a loss of EUR 74 million.
Both segments contributed to the significant improvement. Both segments are significantly positive. As expected and in line with our usual seasonal pattern, we experienced a cash outflow of EUR 388 million. We saw a decline in orders of 26% in the quarter versus the prior year, mainly driven by a sharp decline at Siemens Gamesa Renewable Energy. Our order intake at SGRE reached less than half the level of the strong prior year quarter. Let me highlight two important milestones. We are happy that as of the 21st of December, we have been members of the MDAX, and we published our first sustainability report at the beginning of December. As you know, ESG is a pillar of our strategy, and we will continuously work on improving the transparency of the reporting. Looking at our markets, not much has really changed since our quarter four call.
We see some stabilization in demands. Currencies remain a headwind. As you know, these play out more in the translation than in a transactional mode. We continue to experience impacts due to COVID-19, as we have seen some deferrals of projects and outages. Whilst we are coping well with the situation, we monitor the current resurgence in COVID-19 with some concern. Funding conditions in the energy market are changing, and we see more government initiatives to reduce emissions, which are leading to more green technology funding. As you can see on our quarterly results are solid, and we could improve the bottom line. Still, there's a long way to go before we are where we want to be in terms of profitability.
We have presented our levers to improve our profitability during the Capital Market Day in 2020. We are now entering the next phase of our improvement program and have initiated the discussions with the General Works Council for the regions where such a process is applicable. I will come to this specific topic in a minute. Let me first provide you an update on how we are managing the COVID-19 situation. As before, the key priority for us is the safety of our employees, our partners, our customers, and we have very diligently implemented all necessary precautions to secure health and safety in our work procedures. The good news is that all fabrication sites are in operation. Only roughly 20% of our sites have slightly reduced capacities. Most office staff, which is not urgently required on locations, is working from home following guidelines from local authorities.
As I already mentioned, there's still a continuing impact on our business due to some project delays, and we saw that outages were deferred. Overall, though, the impact of the pandemic on our business was limited, and we furthermore see opportunities for our digital services, what I also introduced during the Capital Market Day and in the last analyst call. Let's now talk about the progress on our strategy. Following the discussions we had on the Capital Market Day, where we outlined our strategy, Energy of Tomorrow, a journey where we flagged up two phases.
In phase one, what we called Accelerated Impact, we wanted to improve our business base step by step by 2023 and move into second phase , leading the energy transformation with an increasing focus to play a leading role in the global energy transition from a higher level of profitability. The cost improvement measures comprise several levers, such as procurement cost reduction, simplification of workflows, or reduction of non-conformity costs. A certain amount of the measures will also lead to a reduction of the workforce. For the implementation of these measures, we have now started the discussions with the employee representatives where this is required for implementation.
As outlined at the Capital Market Day, we are targeting to reach additional savings of at least EUR 300 million on top of the planned saving programs, PG 2020 and GP 2020+ , in order to achieve our margin targets as presented at our Capital Market Day. The new program targets a reduction of the global workforce by 7,800 employees worldwide by the end of fiscal year 2025. Of these, around 3,000 will be in Germany and around 1,700 in the U.S. The rest will be in other parts of the world. The majority of jobs affected are in administration, management, and sales. The reductions primarily relate to central functions and the Generation and Industrial Applications division. It represents obviously what we have presented as planned already back in September.
We expect that the cumulative expenses for restructuring at GP will be in the mid to high three-digit million euro range by fiscal year 2023. That is within the range also of what we had already guided for. This program is a necessary step, seeing also the development of the energy market. It is obviously also a very painful step for the whole organization. Another important topic on our transformation journey is in this regard, obviously, also never to lose sight also of the future activities and technologies we want to go into. In this regard, we also continue to push for co-creation with customers and partners in the market. In the last quarter, we have started a cooperation with the Russian gas company Novatek to reduce emissions and to increase energy efficiency in LNG plants. That's the plan for the production of liquefied natural gas.
We presented also relatively recently our project, Haru Oni in Chile. This is our project with several partners, amongst these, for example, Porsche, which will be an integrated plant to produce climate-neutral fuel based on green hydrogen. The synthetic fuel targets the mobility sector, and the project is supported by the German government as part of the National Hydrogen Strategy. We also launched a larger development and demonstration project to develop hydrogen production offshore with the participation of both segments of Siemens Energy, GP and SGRE. This project is also supported by the German government, and I will provide some more details in a few minutes over this project. A selection of important orders from the past few months testify the high level of customer trust in Siemens Energy.
In Latin America, we received an order for eight complete topside modules, allowing a more efficient and sustainable operations of a floating production storage and offloading unit. It is another good example where industrial applications support its customers on its energy transition and is fully in line with their strategy. In the U.K., our transmission business will supply 114 low loss transformers for the Seagreen offshore wind farm, which is Scotland's single largest source of renewable energy. In Germany, Stadtwerke Leipzig ordered the most modern equipment from us for the Leipzig Süd thermal power station. The order includes the delivery of two highly efficient gas turbines and two generators. The new facility is important for the decarbonization of the city's energy supply in two ways. On the one hand, the municipal utilities make themselves independent of a district heating from a lignite power station.
On the other hand, operation with 30%-50% green hydrogen is planned just a few years after commissioning. The long-term goal is to operate with 100% hydrogen, this would enable a completely CO2-free, climate-neutral operation of the system and is obviously in line also with what we presented before in terms of using really natural gas as a bridge in the energy transition, which we deem as extremely important. As I pointed out before, we have launched a new development program targeting offshore hydrogen production. Together with Siemens Gamesa Renewable Energy, we are planning to integrate an electrolyser that produces green hydrogen directly into an offshore wind turbine. The green hydrogen should therefore be produced directly at the wind turbine and transported to shore through pipelines for further use.
We believe that this solution can be more economical, particularly once hydrogen volumes increase, obviously also wind park volume in terms of amount of energy increase. Also to be very clear, this is really development work of new technology. We plan to implement the demonstration in 2025. At the end, the challenges of the energy transformation can only be resolved by innovations and engineers which turn ideas into reality. On this basis, as mentioned at the beginning, we see ESG a cornerstone of really our strategy and our development and innovations going forward. We have published our first sustainability report in December. This was the first step towards our long-term ESG strategy. We contribute to the 17 sustainability goals of the United Nations 2030 agenda with a focus on five goals, including gender equality, affordable and clean energy, and climate action.
We take ESG very seriously, which is why responsibility for ESG is anchored in the executive board. I have taken on the role of Chief Sustainability Officer, and Maria is Chief Inclusion and Diversity Officer. We have set ourselves clear goals, such as using only green electricity by 2023 and becoming a climate neutral operating company by 2030. We will gradually increase the proportion of women in management positions from just over 20% at present to 30% by 2030. Already today, we see more and more product developments in our product portfolio, which will support us to lead the energy transformation. Going forward, it is the intention to update you in the quarterly calls on the progress of our ESG activities.
I would like to pass over to Maria, who will give us some more insight with regard to the financial performance of the company, particularly in the first quarter.
Thank you very much, Christian. Hello, everyone. Pleased to share with you our Q1 results and what I think is important, as always, happy to answer any questions you may have. Before we start, I want to draw your attention to our new disclosure level. During my discussions with the capital market over the last couple of months, there was a recurring request from investors and analysts alike to increase our transparency. Today, I'm happy to share with you, in addition to the past, one, comparable numbers. Now we have comparable numbers on the top line for revenue and orders, i.e., adjusted for FX and portfolio effects. Two, a revenue split into service and new units at SE and GP level, and a disaggregation of revenue showing the nominal top-line development of our businesses within GP.
You will find this breakdown in the financial results section as a backup slide in our earnings release that was issued today. To be precise, it's the very last slide. For us, this is a major step in our communication. I trust you find it very useful in better understanding the dynamics within our GP segment. Let me take you back again to where I finished at the CMD. On my very last slide, I showed what we think is important to create shareholder value. Talked about things like our strong business foundation built on our large order backlog and our resilient recurring service business, or our path to margin improvement with our ongoing cost programs, as well as the announcing of the additional cost out program, our Accelerated Impact program.
Of course, lastly but certainly not least, spoke a lot about asset excellence and our rigorous working capital management. I will address all of these areas and will do so consistently and show you the progress we have made in the last quarter. As you know, some of our key figures were already released on January 24th. Now I would like to walk you through the overall Q1 financial figures for Siemens Energy and the Gas and Power segment. Now I'm on page 15. As Christian already mentioned, looking at Siemens Energy Group orders at the group level came in at EUR 7.4 billion, which was, as expected, substantially below the high basis of comparison in the first quarter of the prior year.
Nevertheless, we finished the quarter with a very strong order backlog of EUR 79 billion close to prior-year fiscal end, in spite of currency translation headwinds, which reduced our backlog by more than EUR 0.5 billion versus the end of Q4 fiscal year 2020. Book to bill for Siemens Energy was a strong 1.1, and it was even higher at the Gas and Power segment at 1.2. Revenue was moderately up on a reported basis. SGRE achieved a significant increase while GP posted a moderate decline. Excluding currency translation and portfolio effects, total revenue rose by 7.7%. As I mentioned, we have introduced a revenue split into service and new units. Service revenue came in slightly below the prior quarter due to a moderate nominal decrease at GP. Looking at adjusted EBITDA before special items, this came in at EUR 366 million, back in the positive range.
Q1 of fiscal year 2020 was -EUR 74 million with a margin of 5.6%. This is a substantial improvement versus the prior quarter. I will give you some more insights on this in just a moment. Free cash flow pre-tax was negative at -EUR 388 million as expected. This is in line with our seasonal pattern. We did have improvements at GP, which were more than offset by a strong decrease at SGRE. Please, moving on to the next page where we're looking at the quarterly development and some more insights on those developments. Orders were down 21% on a comparable base, which was, as mentioned, mainly driven by the sharp decline at SGRE.
Order intake at SGRE was more than 50% below the strong prior year quarter, which was due to very large orders that were booked, including large orders for offshore wind farms and service in Taiwan, the U.K., and the Netherlands. Orders in the GP segment showed a solid development despite COVID-19 shifts and FX headwinds. Revenue was 8% higher in Q1 on a comparable basis. At GP, we see a stable development with a return to moderate growth on a comparable basis of 3%. In SGRE, the significant revenue growth was driven by the offshore and service business. On a comparable basis, revenue for SGRE increased by 18.9%. Looking at EBITDA before special items, this was higher than expected, that was the reason why we published our preliminary results on January 24th.
The recent quarter benefited from operational improvements in both reporting segments and savings from restructuring measures driving lower costs. Included also positive temporary effects. Such effects are resulting in GP from lower discretionary spend, hedging gains, positive one-time customer settlements, as well as cost phasing. This is where costs do not develop in a linear fashion. Projects, for example in IT, that were shifted to the following quarters. In total, these effects have a magnitude of a very high double-digit amount. From SGRE's perspective, they benefited from provision reversals. This was driven by the positive effect of innovation and productivity gains on product failure rates and service costs relating to their warranty provisions. Even against this background, I am pleased with the development, and this does indicate a good start to reach our full year guidance. Moving on to special items, please, on page 17.
You see here for Siemens Energy in total, we ended up at EUR 123 million in special items in Q1. The increase compared to prior year's quarter was mainly due to standalone costs, which makes sense. Those expenses associated with the setup of the standalone company. Within, of course, GP and in SGRE, we had restructuring and integration costs. Just as a reminder, standalone costs pertain to those costs associated with the spin-off and include, for example, non-recurring costs for the spin-off incentive. The remainder are for things like various IT costs, as we're migrating across the organization to SAP to unify our systems and other similar items. In Q1, the standalone cost amounted to EUR 53 million, and we expect this number to gradually come down in the following quarters.
Restructuring costs, as well as strategic portfolio decisions, reflect the actions we have taken in order to deliver that step up that we've committed to in the CMD in operational performance. In Q1, we booked EUR 26 million related to the streamlining of our aeroderivative and small gas turbine portfolio. Moving on to the next slide, I'd like to cover the net income transition. As you know, a profit and loss statement does not stop with EBITDA. It stops at net income. Please let me take you through the below line items here on page 18. You see that PPA is slightly lower, driven by the impairments associated with the strategic portfolio decisions that we made in the prior year in our Gas and Power segment. If you recall, the write-downs of intangibles related to our AGT or aeroderivative gas turbines.
The financial result from operations is mainly driven by effects and is part of our adjusted EBITDA. Here we need to adjust it in the bridge from a P&L perspective because it is included in our financial result. Accordingly, our financial result in Q1 fiscal year 2021 came in at EUR 37 million, similar to prior quarter. The financial result is impacted by interest expenses, which were lower than prior year, and currency effects. In the current quarter, we had a negative currency effect in the magnitude of mid to high single-digit million euro amount. Last, but certainly not least, we had an effective tax rate of 22%. This is slightly below the expected medium-term rate of 25%-30%. If we move on, please, to the next slide, the cash flow for the group.
As indicated, asset management cash is at the top of my agenda. This is something that we really need to work on each and every month, every quarter. It's a marathon and not a sprint. The entire team continues to focus on this with diligence. Given the seasonal pattern that we inherently have experienced, Q1 did reflect a slow start in cash flow generation. I am quite satisfied with the result, as we really need to distinguish between our reporting segments here, and I'll get to this in just a moment. Just currently for CapEx, it rose from EUR 144 million in Q1 prior year to EUR 188 million in the current quarter. GP was flat, and the increase is exclusively driven by SGRE. In GP's cash flow pre-tax, it was above prior year's quarter level at EUR 101 million.
This was supported by project-related cash inflows and, of course, the ongoing focus on asset management. In SGRE, free cash flow pre-tax was significantly down year-over-year as the prior quarter strongly benefited from customer advance payments due to its high order intake. There's nothing more that I wanted to point out here. I think it's quite clear. Now we can just move on to the net cash position slide, please. Next slide. It is logical, given what I just said, we had a negative cash flow in the quarter, so our net cash position is somewhat weaker at the end of the quarter than it was at the end of September. Here you see we have EUR 4.4 billion in cash and equivalents and EUR 119 million receivables from Siemens Group for a total liquidity of EUR 4.5 billion.
We also have EUR 2.7 billion of financial debt, and of that, EUR 1.6 billion is long-term. We owe Siemens EUR 133 million for a net cash position, as you see here in the right-hand side of the screen, of EUR 1.7 billion. During the quarter, SE's provision for pensions and similar obligations decreased from EUR 1.057 billion as of the end of September to EUR 1.026 billion mainly due to positive plan asset performance. I think that comprehensively wraps up the SE Group's financial overview. Please, let's take a look now at the financial segment Gas and Power on page 20. In GP, orders showed a solid development and were moderately down compared to prior year, but this is only due to headwinds from currency translation. Otherwise, it was better. Excuse me. Revenue was down nominally year-over-year, but up 3% comparable.
Service revenue was down 2%, while new units revenue was down 4% nominally. However, excluding negative currency translation effects of 5.5 percentage points, revenue was up by 2.6%. Service revenue was down, but also slightly up, excluding currency translation effects to approximately 1%. It's important to note also that we do currently continue to experience impacts both on new units and service due to COVID-19 disruptions. It has led to deferral of projects, site closures, as you know, prolonged site closures in some cases, and outages. Orders exceeded revenue, resulting in a positive book-to-bill of 1.2 and leading to the order backlog of EUR 49 billion. This is slightly above prior year's fiscal end including negative currency translation effects. Adjusted EBITDA before special items was sharply up. I will discuss this further in the next slide. We had a significantly improved free cash flow pre-tax of EUR 101 million.
Looking now at the quarterly development of the GP figures, please, on slide 21. Here you see the quarters, last five running. We see a slight comparable growth in orders, + 0.3% versus prior quarters, and a sequential improvement versus quarter three and quarter four. The order development was supported by a significantly higher volume from large orders, including an industrial applications project in Brazil and a generation project in Libya, which totaled more than EUR 500 million combined. All three businesses posted a reported order decrease with prior year Q1 fiscal year 2020, with the strongest decline at transmission, given very high comps or a very high basis of comparison. In our rotating equipment new unit business, we were in Q1 at a low level for our large gas turbines. Those are greater than 100 MW with three booked units.
Whereas for our industrial-sized gas turbines, we were able to confirm again our strong competitiveness with 23 gas turbines sold in the range between 10 MW and 100 MW. For revenue, this was moderately down year-over-year as a slight increase at Generation could not offset decreases at the two other businesses. Negative currency translation effects impacted the top line with 5.5 percentage points. This is mainly due to the U.S. dollar. If you exclude the negative currency translation effect, revenue for GP was up by 3%. Adjusted EBITDA before special items, this increased across all of our three businesses year-on-year, Generation, Industrial Applications, as well as Transmission. As I mentioned before, it is really a combination of operational improvements such as savings from restructuring measures, ongoing programs, et cetera, leading to lower costs, as well as positive temporary effects, as I mentioned.
In terms of the temporary effects, for example, one, we have hedging transactions, two, lower discretionary spending, which was prominent in Q1 because remember, it compares to a pre-COVID quarter in 2020. We see a decrease accordingly of travel and entertainment due to ongoing travel and overall restrictions. Four, one-time customer settlements, which again, to mention they're one time in nature, and again, cost phasing. This again relates to timing differences in internal spend to come later, which are costs to come but not necessarily linear in nature. Before I hand over to Christian, please let me summarize all aspects which I think are in the three key focus areas. In SE, we had a strong book-to-bill of 1.1 in Q1 and finished with a strong order backlog of EUR 79 billion with a strong balance sheet providing our solid business foundation.
Both at the group level and in the Gas and Power and SGRE segments, we showed a strongly improved profitability even when you adjust for temporary effects. We continue to take measures to improve our margins, as Christian explained earlier. We made further progress in our asset management initiatives, notably in the Gas and Power segment. Overall, once again, I'd like to point out this I think was a very solid first quarter, is another signal that we deliver on what we promise, even in a market environment that does remain challenging. With that, I'd like to say thank you for your attention and hand it back over to Christian. Thank you.
Thank you, Maria. To close it out for today, so what is important really for the fiscal year 2021, and just leave you with a couple of key messages. Key message obviously is also we confirm our targets for 2021. As you pointed out also in the earnings release, that we did not account for COVID-19 recovery nor deterioration. We look on the situation as it is today, more or less, and this is what we take into account. This is also on how we judge bears on our guidance. We will execute our Accelerated Impact program and take the respective necessary measures to achieve the step change in operational performance. This follows really everything what we have explained to you on the Capital Market Day. This goes step after step. I always said it.
It's really a long-term process. I have to say, I'm very pleased on how the organization is coping with this very challenging situation, managing so many different things, driving for profitability. It will take time. I'm very confident that step after step, we really built here a fantastic company, we are committed to keep the lights on. With this, I would hand back to Michael.
Thank you, Christian. Thank you, Maria. Y ola, as you know, we would like to open for questions now. Please, everybody, if you could limit yourself, at least at the beginning, to two questions. With that, I would hand over to Gael de-Bray.
Thanks very much. Good morning, everybody. Two questions, please. The first one is really on the cost-cutting program. If I do some simple math, I think the 7,800 job cuts alone should probably deliver about EUR 400 million, maybe EUR 500 million of savings. I was wondering why the group's cost-cutting objective is not bigger than what you officially announced in total. In addition to the personnel reduction, that would be great if you could help us to quantify to a degree the growth savings potential you see in areas like optimized logistics, centralized purchasing, portfolio streamlining, all what you've been talking about, and also including the reduction of non-conformance costs. The second question is about the one-offs you mentioned for the quarter. It seems that you perhaps had about EUR 50 million, EUR 60 million of lower discretionary spend this quarter.
How, firstly, does it compare to the prior quarter? How much of that would you expect to come back once the traveling environment gets back to normal? Is this really a one-off, or have you been able to learn new ways of working and interacting with customers during the pandemic? Thank you.
Thanks, Gael, for the questions. I will take the first one. Maria will take on the second one. On the reductions with the 7,800, obviously, we accounted for these measures when we were planning also for the guidance also back in the Capital Market Day. We detailed now all the plans. Never forget there's obviously also headwinds in the industry, which we need to compensate. What we communicated on the Capital Market Day is that we have from the additional programs, EUR 300 million impact really on the bottom line straight go through. This obviously requires that the cost measures are higher than this because we also have to compensate for additional headwinds. However, as you rightly also indicated, there's a lot more actions that we do. Procurement is one, the non-conformance costs are the others.
Roughly rule of thumb, you could say that the personnel measures roughly represent 20%-25% in terms of the overall cost-reducing measures, and which we now bring to deliver. just to remind you from the discussion we had at the Capital Market Day, we said we going to deliver EUR 500 million from the old programs and EUR 300 million from the new program. this does not change. This is really what we reflected also in the current improvement program. Maria, do you want to take the second part?
Sure. Thank you. Hello, Gael, and thank you. Let me unmute myself now. Thank you for the question regarding the one-offs for the quarter. As I mentioned, there's multiple facets to that. Of course, there is, as you said, the lower discretionary spending. I'll get to that in a minute. Of course, as I mentioned, we did have a positive customer settlements, hedging gains, and also costs that are going to come, just didn't come in Q1 as expected, and that were shifted into two next quarters. Talking about specifically the discretionary, I think, Gael, your estimate is a little high, but certainly we do see two things. One is, of course, the comparison to Q1 of last year, where it was pre-corona and everything. We do have a high basis of comparison.
We see that essentially pretty much half of what we saw, if you'd like, for last quarter in terms of those discretionary costs. However, this is something that goes to your second part of the question in terms of learnings and assumptions based on that. You're absolutely correct. I think now, in terms of how we are, the ways of working within Siemens Energy is working very well in a virtual environment. Some of those assumptions were taken into this year knowing that we would come out of COVID, let's say, in a stagnated manner. This is what we also said both at the Capital Market Day and last time we spoke. Of course, Q1 was anticipated that this would happen, but I think the fact that certainly prolonged closures, additional travel restrictions, this was something that, of course, was a bit of a positive surprise.
However, I do want to state that we do not expect this to continue. We don't think this is sustainable also for us as a company. Travel for us is not just customer related. It's actually driving revenue on the service side. This we foresee increasing in the next quarters, and certainly also to take into effect that, or an impact that, of course, in December, we have Christmas, et cetera. I hope that answers your question. Thank you for the question.
Good.
Thank you.
Yeah. Thanks very much.
Thank you, Maria. The next question goes to Ben Uglow. Ben?
Good morning, everyone. Thank you for taking my questions. I had a couple. The first one was for Christian. First of all, we very much appreciate the revenue breakdown. If I look at service, if we exclude FX and Gas and Power, it's basically stable to slightly up at about EUR 1.7 billion. I was hoping that you could give us a little bit more color, as you did at the Capital Market Day, in terms of utilization rates and unit growth in the thermal generation area. How have those been trending over the quarter? If there's any sense you can give us on the service margin, I would appreciate that very much. For Maria, I guess my question is really in terms of just qualitatively understanding working capital, and I guess the working capital issue this time is around SGRE.
I take on board the fact that there is seasonality here. At the same time, we've got this issue of customer prepayments and then a ramp-up of work in progress at Siemens Gamesa. In simple terms, Maria, is this going to be the sort of peak working capital requirement over the year? How should we think about the cadence of working capital over the balance of the year? Thank you.
Thanks, Ben, for your questions. Good morning also from my side. We do the same procedure. I take the first question, and Maria takes the second one. Thanks, first of all, to your comment with the further disclosure. As we always said, we want to give you greatly more transparency that you understand the businesses. We are working on this and to provide you more insight. With regard to utilization on our fleet, slightly up in every region except Europe. That is more or less a key statement on how I would put it. In this regard, obviously, for us, a positive development. In terms of the unit count, I think I said it also in the last analyst call that we have still currently, obviously, unit count going up, and which obviously also supports the service.
The service margins turn out to be stable, also in line with what I said in the recent calls. The team is doing an outstanding job, really, on compensating for headwinds and keeping the margins stable currently. Maria, if you would tackle the working capital.
Yes, please. Hello, Ben. Good morning. First, relating to your question regarding SGRE, I think you're right. Of course Q1 of last year versus Q1 of last year, this was expected for SGRE with the order decline, of course, quarter-over-quarter. Your thought on whether we see this as a peak, I would say no, we don't see this as a peak as such, but rather that this is something they're executing through, and this will be stable for the year. Remember, I just want to remind everybody, our guidance in the annual report was regarding free cash flow. We foresaw some of this for the entire group, SGRE included, that we would be sharply down from last year in free cash flow. With respect to GP, I think also we expect to remain stable or in line.
Of course, we continue to work on the regulars, if you'd like, AR, AP, and inventory. I have to say, we've made really good progress, as has SGRE, by the way, in terms of overdues. I know that SGRE, for example, is working on payment terms on their payables, and they're making good progress as well. In both cases, contract assets and liabilities, they work against us, but this is something that is part of the business model. I do not see a peaking as such. I just see that this is, as anticipated, this is the stability that we see for the year in working capital.
Understood. Thank you. I'll pass it on. Thank you.
Thank you.
Thank you, Maria. Next question goes to Simon Toennessen. Simon?
Yes. Good morning, everyone. I was wondering if you could talk a bit more about the development in the transmission business. Orders were down double digits. I am sure there was a comp effect here. From a capital markets perspective, transmission was always seen as a kind of structural growth area for you around grid connections, smart grid, et cetera, and wondered what are the drivers been in the quarter and whether there has been any development around orders and why they have been down at this level. Secondly, Maria, on cash, and obviously, I appreciate the comments on working capital so far. Obviously, Q1 was down a lot more than last year.
You mentioned last year already that inventories might come back and some working capital movements. Is it fair to assume that free cash flow could still be positive for the year? Is that going to be quite an ambitious target from a Q1 perspective?
Thanks, Simon, for your question. We stay with the work pattern here. I start. Maria then continues. On transmission, always keep in mind, our business is a project business, which obviously is not running exactly stable over the quarters. There is a volatility in this. You recall that by the end of 2020, we had in transmission some larger orders. I stay positive really on the total fiscal year 2021 in terms of the transmission business. We have currently biddings in the making where the question is, okay, when it's finally going to be decided. I think this is rather a normal development, which is classical in the project business.
You should keep in mind that in transmission particular, obviously the orders, especially if it comes now to the high voltage direct current, so the big renewable parks and so forth equipment are bigger orders. Obviously this is a little bit more bumpy. Transmission, I stay confident on. It is more than the quarterly distribution of the order intakes. Maria?
Yeah. Thank you. Of course, relating to free cash flow and yes, you're correct, Q1 versus of last year, and hopefully I gave some color around the working capital, as you mentioned. We see it as we guided in our annual report. We do see that free cash flow will sharply decline versus last year. Everything we see at this point confirms that guidance.
Thank you.
Thank you. The next question goes to Alex Virgo. Alex, if you go ahead, please.
Thanks, Michael. Good morning, Christian. Good morning, Maria. I wonder if you could talk a little bit just around the headcount and the phasing, I think, more than anything else. I'm just trying to understand. If I look at the headcount numbers end of 2019, end of 2020, and today, it doesn't look like there's an awful lot of movement, if I've got my numbers correct. I'm just wondering how we can see the phasing out of the original 9,000 or so, originally started in the context of the first EUR 1 billion of savings, and then the new 8,000 that you've outlined this morning. Just so we get a better idea, I suppose, of the trajectory of the margins, because it feels to me like the margin strength that we've seen so far is being very much driven by the underlying margin improvement in equipment, generation equipment in particular.
Just wondering if you could give us a little bit more color around the dynamics of that, would be really helpful. Thank you.
Yeah. I start, and Maria, if you want to add anything. Thanks for the question. You're absolutely right. If you look on the numbers 2019 versus 2020, you see that the total headcount number has been relatively stable, impacted obviously by the carve-out and transitions, obviously also of people of what have been not flagged up really there before. This is also why with the headcount reductions, and you may have seen it in the press release, we also tackle particular the administrative areas in this regard, where we obviously try to get a cost competitive setup. You will see, that is our expectation, the largest impact of the programs until 2023. That is really the target by and large.
Obviously really as a net impact, there are at the same time, obviously, yes, in certain areas happening, relocations of work that is definitely happening to better cost regions. This is the smaller amount of this. I do expect the net number on a same business level to reduce. That is our current assumption. Maria, anything to add?
No, nothing to add. That was perfectly stated.
Thank you. The next question comes from Supriya Subramanian. Supriya, if you go ahead, please.
Thank you, Michael, good morning. Just a couple of questions from my end as well. One is on the growth trends, especially on the sub-divisional basis for Gas and Power. In the 2%-11%, let's say revenue guidance for FY 2021, how do you see contributions from the transmission generation and industrial application business, as well as maybe over the next two to three years, how do you see these markets trending? Second was on raw material costs. Given the inflationary trends we've seen in underlying materials, any impact on costs or margins, or is it all hedged out for this fiscal? If so, any implications for margins for next fiscal? Thank you.
I'm so sorry, Supriya. There was a technical issue. We couldn't hear your questions. If you can please repeat. I do apologize. I only caught the tail end of your second question regarding the raw material cost. We do apologize. Can you repeat?
No worries at all. Look, the first question was around end market trends, especially for Gas and Power. In the 2%-11% guidance for the year, how do you see trends within the transmission, industrial applications, and generation businesses? Also the same over the next two to three years, let's say through to FY 2023. The second one, as you said, is basically, given the underlying movements or inflationary trends that we've seen in raw materials over the past few months, how do you estimate that it can impact your costs or margins, or is it all hedged out? If so, potential implications for FY 2022. Thank you.
Thank you. Okay. Christian, you take the first one, I'll take the second.
Yeah, I take the first. I hope that we understood your question correctly because it continuously interrupted the connection. It is very difficult to hear. I heard that you asked for the trends in the different businesses, in terms of transmission, industrial applications, and generation. This actually, from what I can say today, very much follows what we had said on the Capital Market Day and what we also had said in the last analyst call. We do see, obviously, let's say going forward the slight, growth in the transmission business. We see a stable business also in generation. They have started well into the year. Industrial applications, if you recall, this is the business with the largest service portion. It will obviously depend on how is now the service piece coming back. I think in general, I would also be positive on a stable development in industrial applications.
I think there's a lot of signs, also what you hear from others, that the industry itself is intact. We obviously have a transformation there, but the order intake level will depend very much on how the service business now develops, dependent on the pandemic going forward. Maria, on the second question?
Yes. On the second question, I hope I got it right as well. It's regarding the trend that we see in the raw material costs or the underlying, let's say, conditions there. We see a bit of a mixed picture. High level, I'd say, in terms of things like copper prices, this is impacting us, and the increase in copper prices, this affects our hedging. On the other hand, we're seeing some good progress made in terms of e-auctioning. If I can, perhaps I'll defer that to Michael and his team to get a bit more detail for you and get back to you on that. Thank you for the question.
Thank you.
Thanks. Next question goes to Jonathan Mounsey. Jon, if you please go ahead.
Hello. Good morning. Thanks for letting me ask a question. I wonder, just, I think we talked in the past about the relationship with China. Obviously, you have a partner there. If you could just give us an update on how that's going? Have you got any kind of feeling or outlook for what the new unit opportunity might be over the next three years or so? More broadly on generation, I think at the CMD you talked of 70-80 units per year for large gas turbines. Obviously, the world's still stricken with COVID-19. Against that backdrop, are you still sticking to that, or is this year, this next 12 months or so, likely to be a weaker year because of COVID? What are your thoughts there?
Thanks, Jonathan. To China, no actual development what we could announce in this regard. You know that we discussed the joint venture, what we had in China and so forth. There's nothing really as an update. Discussions are ongoing. Obviously, pandemic and COVID does not accelerate these type of discussions and processes, unfortunately. Really, no news compared to before. On generation, in terms of LGTs and number of that, our current planning is slightly less, slightly more conservative. Let's say roughly around 70 units per year. I n this order of magnitude. It was around 80 units last year. Let's say the flight level, as I said, I believe is stabilizing now on this lower level, and this is still our assumption. Also, let me be crystal clear with regards to the efficiency program, what we do.
We do these efficiency programs because we want to stay in the gas turbine business, right? We believe we have great products which can defend this business, and we want to earn money with this. This is why we do it. I still see it as a business which will be there for a long time and required as an interim technology in the energy transformation.
Thank you.
Thanks, Christian. Next question goes to Sebastian Growe. Sebastian, please.
Good morning. Thanks for taking my question. The first one is on GP and the order trend in the quarter one. You mentioned that there were some deferrals of orders on projects. Can you quantify the related impact in the quarter, and which types of business within GP were affected the most? The second question is more when looking ahead and then looking at the pipeline. How has the pipeline recently developed, both from a volume perspective and if you can also comment on sequential pricing trends, both for new units and service, please.
Do you want to do? I can do the first one if you'd like.
Yeah. Go ahead.
Thank you, Sebastian. Good morning. With respect to the order trend in Q1, yes, we mentioned that there were some deferrals, and let's just say, as Christian mentioned, COVID doesn't help, let's say, in terms of some of the discussions. So far, I would say that deferrals on the service side, for example, have been to future quarters. We have had that. Some of that is business as usual, by the way. However, I would say 20% of that is related to COVID, but that's been shifted to future quarters. I think it's still a little early to say whether that's going to shift further into 2022 and beyond. This is the assumptions that we have at this point. On the second part of the question, Christian?
Yeah. In terms of the outlook, I can only repeat myself. We see it, let's say, relatively stable as before. There's really not a lot of news we can bring at this point in time. To both sides, not more negative, not more positive. It's really, as we have said before, relatively stable in terms of the outlook.
That goes for both for the volume and for pricing, if I may just follow up on this?
Yeah. I think I said it before on the pricing. There you have to really differentiate on what part of the product you're looking at. We obviously have, and you see it in the numbers if you look, for example, on the gas turbines. We have some very successful areas where also the pricing looks stable and is good. I do see, obviously, and I think I said it before on the very large gas turbines, always this, how shall I say, volatile price environment, sometimes good, sometimes not so good. This is why we also deliberately said in certain bits we will not, let's say, fight to the very end. I think the large gas turbine business is always more challenging than the mid-size. This is the same, as I said in the quarter four last year. I still see the same.
Okay, that's helpful. Thanks.
Thank you. We now have to really limit ourselves to one question, if that's okay. The next question comes from Andreas Willi. Andreas, if you go ahead, please.
Yeah. If I can have one, please. Thank you very much for letting me on. In terms of your Large Gas Turbine business that you just mentioned, your market share has declined quite a bit in 2020. Is it sustainable to run this business at current market share levels, or do you expect the market shares to normalize again, and it was just a function of basically large projects and timing of those in 2020? Do you believe that the market share should be still relatively similar to what we have seen historically, or has your strategy to be more selective basically meant that we should look more at 15%, 20% market share rather than the 30%+ that we have seen in the past?
Good morning, Andreas. Thanks for your question. Very clearly, if you look on 2020, this is a low for us in the Large Gas Turbine, and this is nothing what I would aspire going forward. In this regard, if you compare to 2020, I do expect our market share getting back up again, and this is what we fight for. This is why we do these programs. I'm confident that, let's say, we have the right products and the right teams to really get this market share up again. Very clearly, 2020 was, for us, a disappointment on the Large Gas Turbine, and we all fight for changing this in 2021. It has to come up.
Is the disappointment in terms of just timing of larger projects where you may have had an edge versus somebody else, or is the disappointment that you couldn't, with your margin criteria, win these orders?
Well, you have seen probably the total numbers of gas turbines throughout the years. You know that in the row, if I see 2018, 2019, 2020, they have been all in the 80-ish, in terms of total global numbers. Our, let's say, portion of this went down. In this regard, I'm let's say obviously disappointed with our success rate, and we want to win more. This requires to make sure that we pull every lever to get competitive in terms of pricing levels and close to the customer. In this regard, this is what we want to drive up now going forward to get back to a reasonable market share.
Thank you very much.
Thank you. We've got two more questions lined up. First one goes to Iris Z heng. Iris, if you would go ahead.
Thank you for squeezing me in. Can I have just one question on maybe energy storage business? You've announced a new kind of pilot project just last week. If we think about your business portfolio, then it makes a lot of sense. You have renewables, you have gas, you have storage, and you have hydrogen to have all of those businesses bundled all together. Fluence is one of the biggest players, but it has stayed with the Siemens Group. I want to know a bit more of your plans around your business portfolio, around storage business, and how it can develop into maybe next three, five year view.
Yeah. Thank you for the question. I also said on the Capital Market Day, and I would repeat it, that we are interested to really explore the opportunities in storage. As you rightly said, through the Siemens Group, we have ability to tie in Fluence into our projects. We would integrate, we would do the stuff around it, and Fluence would provide the storage. We also have, let's say, the BlueVault systems, which we also provide as storage systems on the battery side there. We are exploring also, obviously, certain thermal storage opportunities. We continue to do this, and we look into this field. We believe particular our contribution is really also on the overall integration and load management piece. As I said, storage will be a key piece. For me, grid stability belongs also to storage and load management.
This is something where we continue to explore what type of either technologies we can develop ourselves or what type of partnerships we can drive. Could even obviously go into terms of where you would say, could there be potential inorganic growth opportunities, but this is too early today. At the moment, we are really working along these partnerships in terms of integrating storage into our systems.
Thank you, Christian. The very last question comes from Will Mackie. Will, if you go ahead, please.
Yes. Hello, good morning. Thank you for the time. My question turns to your longer-term plans for development of the innovation sort of structure for the group. I noticed that you recently expanded your hub of innovation centers in China, in Shenzhen. Could you perhaps describe what the longer-term pathway is for the transfer of technologies and capabilities, and what transfer of technologies and capabilities are expected to take place in the next three to five years in the partnership that you've established?
Thank you very much for the question. Obviously, we aspire to drive innovation closely to our customers and closely in the markets. That is why we inaugurated the innovation center in Shenzhen, which is obviously focusing also on the technologies which will be required locally in the market. It's about also hydrogen-driven gas turbines, efficiency improvements and so forth. In principle, what we are building up at the moment in Siemens Energy is a limited amount of what we call customer innovation centers, where we're trying to bundle our innovation activities. We obviously want to drive a regional setup and then have different technology satellites if it comes to specific technologies. The idea is really to be present in the most important energy regions, and once again, driven by the factor of collaboration.
I believe I said it on the Capital Market Day, the key change for us is really collaboration. We want to continue to spend roughly, as a company, Siemens Energy, the EUR 1 billion in R&D. We identified five obviously field of actions in terms of the energy transition around storage, decarbonized heat and power, Power-to-X, service business and digital, and resilient grids. This is what we're driving forward at the moment. As I said, bundling this also then more and more going forward in regional development centers close to customers.
Right. With that, thank you all for dialing in. Thank you, Christian, and thank you, Maria. As always, if you haven't been able to ask a question, but we did take all that were visible, please call on us at the IR team. We're obviously available and as you know, very approachable. Thank you very much. Bye bye.
Thank you everyone. Bye bye.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the investor relations section of the Siemens Energy website. The website address is www.siemens-energy.com/investorrelations. Thank you.