Alstom SA (ALO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Alstom analyst call. Today's conference is being recorded. And now would like to hand over to Mr. Henri Poupart-Lafarge. Sir, please go ahead.

Hello. Good morning, everybody. Welcome to the annual results conference call from Alstom. Welcome everybody. I hope that all of you and your families are doing well during this specific period. So we'll go through the classical agenda. We'll start with the highlights of '19/'20. We'll do a short market update. Of course, we will cover the COVID-19 crisis and what we did to adapt Alstom to the crisis. Then we get back to our yearly results and yearly announcements. And then we will conclude by a short update on Bombardier and the financial results. So to start with the '19/'20 highlights. Just to -- this is a year finishing, which has been a very good year. As you may recall, we have announced our new strategy, Alstom in Motion, last June. And we can say that the first year is totally in line with our new strategy and as this new strategy has given the fruits that we were expecting. So first, in terms of commercial momentum, we have orders reaching close to EUR 10 billion, a book-to-bill greater than 1, particularly with large orders in Europe and Asia Pacific. We'll come back to that. The sales at 2% growth, in line with our expectations, actually slightly better if you take into account the negative impact of the COVID-19 and in line as well with the trends that we have described in the past with the ramp-up of the rolling stock, but also a slowdown in Systems, in particular, in the Middle East. The EBIT margin has continued to grow at 7.7%, so in line with our objective of 9% off '22, '23, which, by the way, we confirm and because we have necessary backlog to execute this margin. The cash flow was -- I mean, finally, I would say, not as slow as we were anticipating. We have managed to -- thanks to notably the cash-focused program, we have managed to mitigate the underlying trend. Remember that the increase of rolling stock activities and the decrease in System have a negative impact on our working cap, and despite that, we have managed to generate some cash flow at a higher level. So as I said, Alstom in Motion is now deployed. And finally, of course, the crisis will have a significant impact on 2021. However, we are extremely confident on the midterm market and on the midterm situation of Alstom. And therefore, we confer -- we confirm our '22/'23 objectives in terms of adjusted EBIT and in terms of free cash flow conversion. Of course, the sales growth could be slightly impacted by some tender delays, which we will describe. So solid market fundamentals overall. So just to come back on the numbers I've just mentioned, 9 point -- and I will come back later on, on the details, EUR 9.9 billion of orders, EUR 8.2 billion of sales, 7.7% margin, a little bit north of EUR 200 million of cash, EUR 446 million of net income, which is, I would say, for the first time, totally plain vanilla net income without any extraordinary impact and the EPS which is continuing to grow. So going to the next slide. On terms of market, just to remind you that before the crisis, just before the crisis, in 2019, we had an extremely, extremely positive momentum. And that's important to remember because that's a trend which we believe will come back after the crisis. All operators had record years in 2019. And this is on the back of all investment plans and all the movements, particularly in Europe, but as well in the world in favor of sustainable mobility. Public authorities have announced huge investment plans throughout the world and, of course, including in Europe. The crisis in 2020, basically, we have, of course, very short term, as you know, a sharp drop of passenger traffic all across the world, and in particular, in Europe, in the States, but -- India, but all across the world. A lot of containment measures have been taken by the operators. Also short term, we had the oil crisis, which is an indirect consequence of the COVID-19 crisis, which will impact particularly the Middle East region. Having said that, all measures which are being taken to relaunch the economy, relaunching the green economy and all the mega projects, including what you see on the slide, the HS2 in the U.K., are sustained. Amtrak is going to receive its fund is just one example. Most of the operators in the world will be backed by their states. And actually, we have not seen any cancellation of large orders to come, of course, not a large order in our backlog, but not also some large projects. We believe that there will be short-term deferral of a number of tenders because of particular reasons and because of the fact that some of the projects are slower to mature. However, we believe that the resilience of the markets midterm is extremely strong. And it's always very difficult to discuss about what will be the world after the crisis and everybody has his own idea. But I think there is a consensus to say that the sustainable -- the sustainability and the transition of the mobility as well as the transition of [ the energy ], by the way, is going to accelerate after the crisis. Of course, as you know, train is the most appropriate mobility system to tackle these issues. So short term, the crisis, basically the philosophy of our adaptation to the crisis is twofold. One is to recognize that we have some difficulties -- we had some difficulties to produce in a number of our sites in the world. But two, at the same time, that we have a strong market in front of us. So there was no intention to limit the production. But on the contrary, we tried to keep our site as open as possible while, of course, preserving the safety of our employee and we managed to work as much as we could. So we put, of course, a crisis sale. We closed temporarily of the sites to adapt the sites to the new sanitary situations. And we launched remote working. To be fair, there were more than 24,000 employees working from home with a lot of good successes of this work from home. Basically, at the -- I would say, the peak of the crisis, we had 24,000 people working from home, 6,000, 7,000 people working on site in different sites and 6,000, 7,000 people which couldn't work. In terms of production, because it's true that even though only, I would say, 6,000, 7,000 of people could not work, these are the people who are assembling the trains. So as you can see on the -- we have tried to illustrate graphically the level of activity. Of course, rolling stock was the most impacted part because this is where the sites had to be closed, particularly, of course, in France, in Spain, in India, within the U.S. as well. So in most -- at one point in time at the peak, most of the sites were closed. We have recovered. System was also impacted because of the difficulty to work on site. Service has declined, of course, with closure of depots. But more importantly, most of the long-term maintenance projects, we are paid by mileage. So when the trains are stopped, we have stopped working. And signalling has been impacted less, but has been impacted because of installation. As you can see on the graph, we have started -- restart the manufacturing on all our sites worldwide, not to the nominal level yet as we speak. And we intend to come back to the nominal level beginning of June. In terms of orders, I said no cancellation of orders in our backlog, some slowdown in tender activities. And again, no -- we don't believe that there will be any negative impact midterm with some pluses of stimulus packages [ and maybe some minuses of some countries having to finance new projects ]. In terms of own adaptations or our own adaptation, we recognize, and we said it in the press release, that this will have some impact on the financials of Alstom this year. We have tried to mitigate and to weather this impact using holidays, part-time work. We are going to reduce discretionary spending. We are going to tighten the control on recruitment. And we're going to take a number of internal measures in order to limit the impact of this underactivity. Just now coming back to, I would say more classical agenda, Alstom in Motion. You may recall that the 3 pillars rose not only by geography, which we did during Alstom 2020, but also by enhancing our value proposal to our customers. Innovate definitely in favor of smart and green solutions. Sustainability, as I said, at the heart of our strategy. And of course, efficiency to deliver our backlog and to increase our global site efficiency. Starting with growth. Orders, as mentioned, EUR 9.9 billion. Last year, of course, we had some jumbo projects, so still a little bit of decrease as compared to last year, but the book-to-bill which is much greater than 1. As you can see, predominance of Europe this year, which has grown as compared to last year. While some regions, as expected, are more struggling, in particular, of course, Latin America, Asia, [ America ] and Middle East, Africa. Asia Pacific had a good year, particularly in Australia. In terms of activities, Service, as I said, particularly a good year with EUR 3.3 billion orders. Some nice pictures of our projects. In Australia, as I said, a very good year in Australia, a lot of activities in Australia. Europe, very -- a lot of regional trends. And by the way, there are still a lot of tenders going on, on regional trains. The market is buoyant in that respect following the traffic increase. Some Metros in Barcelona, some service activities in the U.K. and Metros in France as well as Marseille. In terms of sales, we have -- the growth -- as expected, I would say, we have huge ramp-up in rolling stock, in particular, in Europe but also with the ramp-up of our mega projects in the U.S. and in South Africa. Some decrease in service, which is not in line with the long-term trend, but due to some one-off projects in the U.K. last year. In a minute, we'll come back to that. A very good year of signalling, in line with our Alstom in Motion strategy. And finally, not surprisingly, the end of the execution of the projects, the System project, particularly in the Middle East, whether we talk in Dubai, in Qatar or in Riyadh. So signalling, just a snapshot on signalling, a very good year of signalling with more than EUR 1.7 billion order, which is a record high, and EUR 1.5 billion of sales, as well a record high. With some key milestones achieved in Europe, notably Paris-Lyon ETCS, which is the start of the conversion of the various speed lines in France to ERTMS where we are also confirming our onboard successes. Some CBTCs across the world from Marseille to Sydney, I would say. Freight and mining, we have a number of, I would say, success in freight and mining. I have to say that freight and mining will be impacted by the COVID probably more sharply than other segments. Services, I think this is something where -- I think I said it last time during our strategic presentation that we were lagging behind, and we have doubled the revenues. It's still not at the level where it should be, but clearly, we have taken a good momentum in Services. Innovation. We were well-known and we are well-known for our hydrogen train, which we have launched in Germany 2 years ago, as you may recall, and which is working properly. And we have now a number of commercial contracts. This year has been marked by the first contract in battery electric trains. You know that we believe that hydrogen train is the solution for, I would say, long haul or relatively long distances. Battery could be the solution for short distances. I'm talking, of course, about nonelectrified line. We have also developed a number of predictive tools for maintenance, for traffic analysis, and we have been the first one to deploy ERTMS Level 3. So we are continuing both in terms of digital and in terms of green innovation to progress towards our AiM objectives. In terms of operations, we are continuing to work steadily. It's really a day-to-day work to improve the project management to stabilize the footprint. And as I said, Alstom 2020 was really the expansion of the footprint worldwide with a number of new sites. Alstom in Motion, there will be fewer new sites as we are already covering the 5 continents. But more stabilization, more efficiency within the site. And also, we are continuing to allocate, I would say, engineering workload to India with now 24% of our full engineering of Alstom is being done in Bangalore, in our site in Bangalore. We are automatizing our sites, notably in Europe, with some welding robots everywhere and some high-capacity welding robots. And of course, we are digitalizing our systems. We have now one car model of SAP worldwide, which enables us [ it's not ] the SAP which is the most important part, enable us to have the full suite from engineering, manufacturing, quality on one system. And the EBIT has increased in line with our objectives. One snapshot on ESG, which is part of our strategy, increasingly part of our strategy. As I said, we are definitely at the heart of the sustainable mobility. And we need to be also exemplary in terms of decarbonization, in terms of caring for the people and, of course, creating a positive impact on society. And we have to develop our supply chain. We believe that increasingly, again, train is covering these full aspects. But nevertheless, we should strive to improve each pillar. In terms of mobility solutions, sustainable solutions, we are developing green tractions, as I said, batteries, hydrogen, signalling system for better efficiency of the networks. In terms of rolling stock, we are decreasing the energy consumption while increasing the capacity. So of course, the energy per seat is decreased tremendously. And if you add a new signalling system, then you can increase a lot the capacity of the line. Just to take one example, on Carillion, we are going to move from 13 trains per hour to 16 train per hour, which is a 20%, 25% increase. The trains themselves will increase by more than 20% their capacity, meaning that the full capacity of the line will increase by more than 40% or 40% to 50% without touching the infrastructure. Of course, from [ an Alstom ] standpoint, this is, I would say, a very, very nice solution. Our own operations are decarbonized. And we have a goal of having 100% electricity from renewable sources by 2025, and we are implementing that the whole year side by side. We have, of course, engaged ourselves in the fight against COVID-19 through donation of masks, through financial donations. We have some foundation, which by the way, we are going to increase the budget from EUR 1.5 million to EUR 1.9 million for that and through 3D printing. We've also worked with our supply chain in order to supply masks, for example, to our suppliers for them to start earlier. A word on Bombardier transaction. Nothing to say. To be fair, we are fully engaged in this transaction. We are working extremely well with Bombardier. We have engaged our discussions with the European Commission. We have engaged our discussions with our labor representatives in the European Works Forum. We have managed to secure the financing, the bridge facilities. So now we are waiting for the next steps, which is to sign actually the share purchase agreement. Today, we are still in the MOU phase to have the approval of the deal during the Alstom AGM targeted October 2020 and to close the deal first half of 2021. Now I will move over the floor to Laurent, who will explain to us the financial results '19/'20. Laurent?

Thank you, Henri. Good morning, everyone. So let's start with our income statement for '19/'20. So on the adjusted EBIT, we propelled by 4%, up to EUR 630 million driven by volume and execution. Going straight below the adjusted EBIT, we had minus EUR 18 million restructuring charges mainly in Latin America and in Germany. We also classified the COVID-19 incremental and inefficiency costs for an amount of EUR 24 million. Other item that you see reached EUR 43 million, which includes the CASCO mechanical reversal to EBIT at EUR 38 million -- minus EUR 38 million and minus EUR 5 million, which includes the usual amortization of our intangible assets, some deal costs related to Bombardier acquisition, asset impairment and offset by positive impact from some legal proceeding outcome. As a reminder, last year, we booked on this specific line Siemens deal cost for EUR 74 million. On this basis, you see our EBIT steps up by 34% versus last year, reaching 6.6%, and our net income reached EUR 466 million (sic) [ EUR 446 million ]. Moving to adjusted EBIT. During this year, we lifted our operational margin at 7.7% versus 7.5%. This increase was chiefly steered by the quality in our project execution and step-up of our Alstom in Motion efficiency plan. Selling and administrative costs remained roughly stable at 7.2%. And our net R&D reached 3.7% versus 3.6% last year, this in line with our objective to maintain a constant and sound R&D investment. '19/'20 was a year of acceleration for our Avelia very high-speed platform and also as well on the signalling solution, this in line with our strategy. On backlog, we are pleased to see this year, again, a continuous improvement of our backlog average profitability. This is driven by our increased competitiveness and, as Henri explained, our positive order intake momentum. Moving to the bridge on the net income versus last year. Our EBIT stood at EUR 545 million, up EUR 137 million versus last year. Financial items results decreased by EUR 12 million, consistent with the repayment of our bonds, include as well some subsidiary debt and hedging costs. We had income tax charge up by EUR 46 million (sic) [ EUR 48 million ], pertaining to an effective tax rate of 25%. Reminding that last year, it was 22%. And this is very much in line with our target tax rate in the 25% to 30% range. Finally, on the share of net income from equity, decreased by EUR 93 million, which benefited last year from the GE joint venture specific item at EUR 106 million, which we did not have this year. This year, the main contribution comes from CASCO, EUR 38 million; and TMH, which benefits from a good momentum in Russia, stable at EUR 65 million. So all in, as a result, net income at EUR 446 million compared to EUR 433 million, including the specific GE JV item. So to the free cash flow. We achieved EUR 206 million versus EUR 153 million last year. And we see this activity as a positive given the working capital required for our major project ramp-ups and as well in the COVID context. Relative to CapEx, transformational CapEx are behind us. And we stabilized at EUR 195 million, which is 2.4% of sales with a clear focus on our site in Europe, India and in the U.S. As planned, on the working capital, working capital impacted negatively our free cash flow by EUR 249 million as anticipated. And this, as you have seen, mainly during the first half of the year with the expected ramp-up of the major projects, such as PRASA in South Africa, e-Loco in India and our Coradia regional trains in Netherlands, Italy and Germany. And this has been, I would say, offset in certain parts by a strong level of cash collection and cash focused actions outcome. We'll come back on these subjects. Financial cash-out stands at 95 -- minus EUR 95 million as a result of mechanical coupon payments and the net cost of hedging. Finally, dividend inflows were positive in '19/'20 mainly from TMH and CASCO and recorded in the line other item that you see on this slide. For reference, last year, this line was impacted by change of consolidation of EKZ and TMH capital gain elimination. So moving to the cash focused program. Our free cash flow performance demonstrates that this program is bringing tangible results. First of all, we embedded free cash flow generation, but as well, specific local cash driver targets in the objectives of 10,000 of our employees and our staff and this to foster cash performance across the board. Second battlefield is on the tender. This is where the cash performance is formed for our commercial team. And we clearly enjoyed this year an improved profile, thanks to specific targets that we have set on downpayments, but as well on progress payment profile. We improved as well our cash collection cycle, resulting in days sales outstanding reduction of 13%, which is a very positive achievement. On the operational side, we moved on testing and commissioning, addition (sic) [ reduction ] by 20% on pilots with success, together with a tight monitoring on project working cap. Last, we decreased our CapEx spending by 6% while we are managing rolling stock project ramp up. Overall, pleased to say that our cash focus is moving on successfully down to shop floors and on all key drivers. So moving to the liquidity status. We have, as of end of March '20, a stronger liquidity position amounting to EUR 2.6 million, including undrawn EUR 400 million RCF. In the context of C '19, we're deciding at fill to secure an additional EUR 1.7 billion RCF, aiming at stepping in for our usual EUR 1 billion commercial paper program and providing us extra liquidity buffer. Concerning bonds, as we know, you have -- we have reimbursed our past expensive bonds and issued a new one in October at a record position of 0.25% fixed rate. So all in, group liquidity pro forma end of March is above EUR 4 billion, which is a very strong position. Our target remains, in terms of rating, obviously, to stay in the Strong Baa2 rating. Related to shareholder distribution this year and in the context of the current crisis, the Board of Directors will propose a suspension of dividends to the next shareholder meetings, which would take place on July 8. I now leave the floor to Henri for the conclusion. Thank you very much.

Thank you, Laurent. Just as a conclusion, again, '19/'20 has been a year totally in line with our Alstom in Motion strategic plan, both in terms of numbers, but as well as in terms of action and evolution of the company, the position of the company. The Bombardier transaction progressed as planned. I think there is no -- again, no particular element. We are in line with our objective there. The crisis, the COVID-19 crisis will impact negatively in '20/'21. I mean that's clear. But at the same time, the objective for '22/'23 are maintained, notably the 9% adjusted EBIT and the free cash flow conversion with the annual growth rate being impacted mechanically. We, and that would be the final say, I think Alstom is extremely well placed to weather the crisis, and we are proving that we can go through the crisis. We have -- it's always important to enter into short-term crisis as such in very good position and health, both financially and operationally, and this is the case. So we are weathering the crisis. And we are extremely positive on our ability to capture opportunities whenever they come. And I can tell you that the tendering pipeline is still extremely, extremely buoyant, which is in line with the sustainable mobility condition. So thank you. Thank you all of you. And now I think operator, Julia, we can take the questions, move to the question. Thanks.

[Operator Instructions] We will now take our first question from Daniela Costa from Goldman Sachs.

I wanted to follow up, maybe a 2-part question, sorry. But on the growth and on the 5% average and understand a little bit better why did you have to change that. Understand that you see a slight deceleration on tendering activity, but how shall we tally that with your 5 years of visibility of sales in the backlog? And also with, I guess, as you mentioned, Green Deal, fourth railway package, the European Commission saying '20/'21 is the year of rail and how do you see sort of -- when will that stimulus hit, if ever? Is that post your 2022 to 2023 horizon? Yes, that's my questions.

Thank you, Daniela. Yes, we, as you know, we have a very large backlog, more than EUR 40 billion, 5 years of sales. Having said that, as you know, it's not 5 years and then nothing. It's the impact of our backlog on year 1 is quite the 90%. So 90% of the sales of Tier 1 are in the backlog. But then it moved to 60%, 40%. So in '22/'23, we, of course, we need to record a number of orders in order to achieve our objective in '22/'23. And even though we believe that the market is still extremely buoyant, and I think, as I said, and this is your second question, the stimulus packages will eat very quickly in -- I think at the end of this financial year, we'll see. However, in the next 6 months, we'll have a short drop in tendering activities and, therefore, in orders. And this will have an impact, dilutive impact on the sales growth for year -- a little bit for year 1, more for year 2 and year 3. So that's why we need to put this small warning on our sales growth. Because all that is being averaged. It's not an order. This year, we'll have a mechanical impact in '22/'23. That is averaged over 2 to 3 years. But overall, in terms of annual growth, average annual growth, we have this slight impact about the tender delays.

We'll now take our next question from Akash Gupta from JPMorgan.

My question is more specific towards what should we expect for FY '21 or the next financial year? I know it's maybe a bit early, but I think if you look at the current stage of how -- what is happening in the industry, then most of your customers are having very little sales and they're running out of cash, and we see headlines every day that one of the rail operator is looking for state bailout. So I want to understand how should we think your sales in the next 12 to 18 months on that backdrop where basically your customers need bailout and some of them may need to reduce spending as part of bailout package?

I think we have not seen today any impact from the customers. So there is no request from the customers to delay contracts. On the contrary, we are working on the customer to see how we can accelerate the deliveries of our projects to catch up the delays, which have been, I would say, experienced during the crisis. So I read what you read. And there are a number of customers, of course, not a large number of customers that have been directly impacted by a loss of revenues. But in terms of project delivery, they need the trains, so I don't see -- we have not seen any direct impact of that. For the moment, the full impact is a question of production. As I showed on the slide, we have an impact on our production. And because we are running full speed, it's not -- it's quite impossible to catch up what has been lost. We try to do that to some extent, but it will not be possible to fully catch up. But if we don't catch up, it's not because of the customer. It's because of our inability to double the production line. Just for 6 months, for example, we have production line for one train, impossible to do a second production line just for -- to catch up 1 or 2 months of production.

Our next question comes from Gael de-Bray from Deutsche Bank.

Yes. Can I ask about the cash flow situation? I was -- I mean, first of all, what's the true underlying operational cash flow performance in the full year, if you could perhaps quantify the impact of IFRS 16, the impact of factoring and of the dividends you received? But I was also interested about your comments about the cash flow battlefields happening at the level of tenders with a better financing profile being secured right now. Is there some kind of industry push for these better financing terms? Or is it really Alstom-specific?

I think I will leave the floor maybe to Laurent to answer to this question. We are pushing a lot on the payment terms. So I guess we are -- it's not as specific to Alstom. Clearly, an Alstom battle as well. But Laurent, maybe you can take the question.

Yes. Gael, thanks for your question. So just complementing on the tender, I mean, there is no industry standard into it. This is something that we have been tailoring within Alstom in terms of guidelines toward our commercial team to respect certain payment profile, both in terms of down payment and profit profile. And this is something which is negotiated on a case-by-case basis with our customers. So this is a stronger focus and stronger tight monitoring and targets on the payment profile. This is what we have been implementing in cash focus. So to your first question, Gael, IFRS 16 impact is EUR 84 million in our notes and in the slide as well, and we didn't have any factoring in the second half nor in the full year of '19/'20.

There was no receivables being derecognized in the full year?

No. No. Yes, there was in H1 as described, but as I said, it was a one-off. So we did not have [ receivable ] repaid in H2, and there is nothing left in the full year '19/'20.

We'll now take our next question from Simon Toennessen from Jefferies.

Yes. Henri and Laurent, I've got a question on the service performance. You probably have heard one of your key European competitors talking about a very, very strong service business in the last quarter. And looking at your business, which I think was down year-over-year, do you think it's a timing issue? Or do you see anything else? Because in theory, one would expect that both of your businesses are impacted by, let's say, less rolling stock running, and therefore, less mileage, et cetera. They talked a lot about digital services being a very key driver for performance. I have to ask kind of whether we think technology might be different in the performance here. So yes, any color on service in the quarter, but also maybe how you see this in the first half of your fiscal '21?

Thank you for the questions. No, in terms of number, for us, it's totally related to the end of the renovation projects in the U.S. So the underlying service activity is still very strong. And you've seen the order intake in service is EUR 3.3 billion. It's huge. Yes, digital services play a stronger part. When you talk about digital services, we can talk about predictive maintenance on classical rolling stock. We talked also about signalling activities. And on this one, as I mentioned, we were lagging behind, and we are growing extremely fast on signalling services. So I agree. Now on the short term, there is an impact of COVID. And it's maybe true, if I had to have a slight differential with the COVID that you are mentioning. But probably in Germany, trends have grown a little bit more than in Western Europe. So you may have a slight different impact on the very short term. But overall, I fully agree with my COVID comment that service is going extremely strong.

Our next question comes from Alexander Virgo from Bank of America.

Just -- I wanted to touch a little bit on cash conversion in 2020. And you touched a little bit on tendering. You've touched a little bit on COVID impact. I guess my question was really, you had a stronger-than-expected cash conversion I think in 2019/'20. So how do we think about the lower tendering, the prepayment balance, et cetera, in '20/'21 as a function of COVID, I suppose? So just trying to understand the trajectory. I guess you've guided in the past that the first couple of years of AiM would be a little bit weaker in conversion before we get up to that 80% target. I think this year came in a bit better. So I'm just thinking does '20/'21 come in a bit worse because of the virus?

Laurent, you take it?

Yes. Thanks for your question. So the cash '20/'21 will be a complex equation in the framework of the COVID-19 impact. So the trends that we've been describing remains, i.e., the working capital will continue to ramp up. We'll have headwinds related to our project rolling stock ramp-up as we had in '19/'20. So that is one fundamental trend will remain. And the CapEx, we'll be prioritizing and monitoring that carefully for sure. The other part of the equation will be, of course, the tender developments and dynamics. As Henri said, the pipeline is buoyant. We may expect, however, some shift, so that would be a key part of the equation of cash. So all in, in H1, we probably will have some headwind pull together and recovery in H2 while the tenders and the deliveries will be accelerating and getting to a full steam status. It’s difficult to say more at this stage, Alexander.

We'll now take our next question from Guillermo from UBS.

Guillermo Peigneux from UBS. I wanted to ask a question on the outlook for working capital expansion. I think in the past, you guided to, obviously, an expansion in this fiscal year that just ended. But now thinking about the fiscal year '21, do you still have the same prognosis as to the working capital increase that is needed given the impact actually from COVID? And that's the first question.

So I'll take it as a follow-up of the previous one. So as I said, yes, there will be still a working capital headwind in '20/'21 relative to the ramp-up of our rolling stock projects. So the fundamentals do not change. On the positive side, as you have seen, cash focus, positive actions is kicking in, in '19/'20 and will kick in, in '20/'21 to offset a part of it. So I would say the fundamental evolution of the working cap for '20/'21 is unchanged versus our Capital Market Day. The only impact we may have indeed is rephasing of the deliveries with, of course, a deceleration in the first quarters or the first few months and an acceleration in the second half.

Our next question comes from Jonathan Mounsey from Exane BNP Paribas.

I wanted to talk about the Bombardier Transportation news in Q1. So I think CDPQ injected some extra capital into Bombardier Transportation. I just wonder does that change anything in terms of the deal from your point of view following that cash injection. And sort of as part of that, the fact that Bombardier Transportation needed a cash injection in Q1, I mean, what does that mean for the order intake of Bombardier going forward? I would have thought that customers would be very nervous giving significant orders to a company that was needing to have money pumped into it as recently as a month or 2 ago. And if the order intake then does disappoint at Bombardier over the coming 12 months, how does that change your attitude towards the deal as obviously it would change the outlook for the business just as you inherit it?

So thank you. On Bombardier, to be frank, the injection of cash from CDPQ does not change at all the deal. And by the way, this was a short-term injection to allow Bombardier to stabilize, improve its liquidity position, and it may not be there when closing will be done. We have not seen -- I mean there's commercial momentum of Bombardier. They have recorded some orders recently. So I have not seen any impact of what you are saying. So as I said during the presentation, we are fully engaged in the transaction. We are still extremely -- and we are very positive and optimistic on the midterm future and the resilience of the market. And so the strategic rationale is still there. So we are totally committed to the deal.

Our next question comes from Alfred Glaser from ODDO.

I just want to get back on the business outlook for the new fiscal year. Could you give us a sense of how the business is evolving in rolling stock compared to service compared to signalling in terms of activity reduction due to the crisis environment?

So it's difficult to give you some precise numbers on the different activity. Rolling stock has been the one, the most impacted because of the difficulty to produce trains. Definitely, we're not only coming from our own sites, as you can imagine, but from the full supply chain. I mean you need to have all the parts in order to produce your train. So even if only 20% of your supply chain is missing, then you cannot produce a train. Rolling stock was the most impacted. I would say system was second. But overall, for the year, projects like Dubai, or if they were a little bit delayed by the crisis, at the end of the day, they will be completed during the year, so it will not change. And then service and then signalling. So in this order. Service has been impacted, but it will recover soon. So that's the color.

[Operator Instructions] Our next question comes from William Mackie from Kepler Cheuvreux.

My question would relate to how you're phrasing the situation. I mean you very much framed everything here as a supply-side issue rather than a demand-side issue over the next 12 months and beyond. And I wanted to go back to the Slide 12 where you have provided an indicative view of the production system across the group and how it is performing. So against that backdrop, could you walk through how you see the production system today and how quickly it will catch up in each of the relevant countries, particularly South Africa and India, and against the comment that you made earlier that you expect to be back to normal levels of production by this fiscal Q2?

Thank you. I think you said it very well. I mean our crisis is a supply crisis and not a demand crisis. That's how we see it here and how we see our customers. And this is, by the way, I think, in line as well with the comments of our competitors. So I think this is how the market sees it. Yes, if you go back to the slide, you see the shape of the curve, which illustrates the shape of the production on our site, on our production sites. So basically, the situation today is that all our sites worldwide have reopened. We are not at full speed on all the sites. The last ones to reopen, as you have rightly said it, were in India, in South Africa as well as in Kazakhstan, by the way. And we will -- when we say catch up, as I said, I want to be also fully transparent. We will go back to a normal activity, as I said, during the month of June. However, we are not going to catch up the sales, which would have been lost during this period. We are going to try to do it on some occasions and on some sites. But at that stage, we have no plan to fully recover the sales which would have been lost. As you may recall, Alstom was full speed and the production of Alstom was full speed. So it's quite impossible to accelerate even more than what we are anticipating. So with the -- as you said, South Africa is starting again. India is starting again. We need to have a specific operation in there to start, which we did get, so we are starting again. And things are going smoothly. We are also adapting the sites to minimize the loss of productivity because we need to take some sanitary measures, which could impact the productivity. So that will be back, as I said, in June.

We have no further questions. And I'll turn the call back to the speakers for any additional or closing remarks.

So thank you. Thank you very much for your attendance, for your attention. I think the last question was the concluding question. We are facing a supply crisis, which we are weathering within Alstom. And I think it's fair to recognize that a lot of agility was there. I have not mentioned some extraordinary things that we have done just for the anecdote, but I think it illustrates the full thing. As you know, we are testing our new very high-speed train in the U.S. as we are introducing the various speed in the U.S. And this test has been conducted from the room, from [ Le Creusot ] in France where the people would test it remotely from their home, which shows the agility that Alstom can have during this crisis to adapt itself. And we're, as you have seen, extremely confident on the future and on the resilience of our market on the back of sustainability transition. So thank you a lot. I'm sorry that we will not meet in person this year, but we'll have new opportunities in the future. Thanks a lot.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.