Potential capital increase weighs on the share price

Alstom released H1 FY23/24 results largely in line with the preliminary update provided a month ago. However, the share price is down by >16% (at the time of writing) as the group is now considering a capital increase (among other options such as asset sales and quasi-equity listings) to improve the balance sheet to maintain an investment grade rating. The outlook for FY23/24 was reiterated. We are likely to maintain our positive stance with our model currently under review.

Persistent FCF issues drag down Alstom

Alstom released preliminary H1 FY23/24 figures yesterday which were below the street and our expectations. While sales increased by 6.2% yoy on an organic basis, the order intake declined by c.17% yoy due to a tough comparable base. Notably, the FCF (which has been a pain point since the Bombardier Transportation acquisition in 2021) came in at -€1.15bn vs the -€193m consensus, owing to increased working capital, delay in the Aventra project and lower-than-expected down payments. We will reduce

Lackluster Q1 trading but near-medium term drivers intact

Alstom reported a weak Q1 FY23/24 trading update, with sales below consensus and our expectations. Moreover, the order intake also decreased by c.30% due to a tough comparable base. The share price reacted negatively (-1.86% at the close). We will revise our sales estimates slightly down but maintain our positive stance on the stock.

Strong close to FY22/23 but the mid-term outlook weighs

Alstom reported a mixed close to FY22/23, with the full year performance largely in line with the guidance but the mid-term targets getting postponed by a year. Citing uncertain macroeconomic environment, the management pushed the FY24/25 sales and profitability targets out to FY25/26. While the consensus was already below the previous guidance, the postponement of the timeline confirms the street’s conservative view on the group’s earnings. No wonder the share price reacted negatively (-2.4% at

On the right track

Alstom provided a positive Q3 trading update, with sales slightly ahead of consensus and our expectations. Order intake remained robust driven by a strong performance in the Systems and Signalling segments. On the back of the resilient performance, the management reiterated the outlook for FY22/23 and reaffirmed the mid-term targets. We will revise our estimates slightly upwards and retain our positive view on the company.

Strong H1 FY22/23 performance; reassuring outlook

Alstom reported robust H1 FY22/23 figures, which were ahead of consensus and our expectations. The strong execution of the order backlog, synergies from the Bombardier integration and a favourable sales mix, drove the beat on profitability and FCF. The management also provided additional colour on the FY22/23 guidance for the adjusted EBIT margin and FCF, which were ahead of consensus estimates. Clearly the share price reacted positively (closing at +7.2%). We maintain our positive stance on the

Q1 trading in line; outlook marred by supply chain and inflation

Alstom reported Q1 FY22/23 sales in line with consensus. Order intake decreased 13% yoy due to tough comparables. Management reiterated the outlook for FY22/23, which includes inflation weighing on margins and component shortages delaying deliveries. While the risk was mitigated in Q1, the uncertain macro environment is weighting on consensus estimates. No wonder the share closed c.-3%. We will trim our estimates but are likely to maintain a positive stance on the stock.

Decent FY22 performance but FCF disappoints

While Alstom’s FY21/22 performance was fully in line with the outlook, the low quality beat on FCF overshadowed the decent close. FCF continues to be a pain point for the stock which remained choppy throughout the day – up c.9% in the morning before falling c.11% around mid-session and finally closing at -5% – as investors unpacked the moving parts of working capital. Notably, the mid-term targets were confirmed with synergies being raised from FY25/26 onwards, and the BT backlog delivery timeli

Q3 update with no frills

Alstom reported Q3 sales and order numbers in line with our and street estimates. The company reported revenue growth across all product lines and an improved order intake. Management has reiterated the FY21/22 outlook and mid-term guidance. While the share price has remained choppy following this update, we do not see anything alarming in the figures. We reiterate our positive stance on the stock’s valuation.

Strong H1 results; sustainability is the key

Alstom’s H1 FY21/22 performance was ahead of market expectations. The c.10% surge in the share price (at the time of writing) was mainly a factor of the strong order intake and better than expected free cash flows, re-affirming our conviction on the structural strength of the business model. Management has reiterated the mid-term guidance for FY24/25, as the BT integration is fully on-track. We maintain a positive stance on the stock’s valuation.

Contracts wins star in a strong Q1 update

Alstom’s share price jumped c.3% today after the group reported a better-than-expected Q1 FY21/22 trading update, with both order and sales figures coming in ahead of the street’s expectations. After a disappointing CMD earlier this month, the strong performance in terms of commercial wins reinforces our positive stock recommendation. We will tweak our estimates slightly to incorporate the reported figures.

CMD an underwhelming affair

Alstom’s CMD was disappointing with the financial guidance coming in weaker than our estimates, particularly on profitability and FCF generation — attributable to the challenging legacy BT projects. The group expects ‘significant’ FCF outflow in FY21/22 on account of the higher working capital consumption in H1 to deliver these projects. Unsurprisingly, the stock price collapsed c.8% today; with investors’ focus shifting to FCF generation and project stabilisation. We will reduce our estimates b

Strong operating results; now focus on orderbook execution and BT integration

Alstom reported its FY20/21 results following the integration of BT – with standalone results meeting management guidance and the combined group’s results exceeding street expectations. While reported net debt was much higher-than-expected – with Alstom recognising additional provisions (>€600m) associated with BT contracts, the industry fundamentals remain intact and support the case for long-term profitability/cash flow growth. Importantly, dividends were resumed. Our positive recommendation s

Emerging scope for brighter days ahead

Alstom delivered a positive Q3 FY20/21 update with organic revenue growth and an improved order intake. Management maintained its FY and mid-term outlook, raising the scope for a robust Q4 in terms of order intake. With all necessary regulatory approvals received, the Bombardier Transportation acquisition is expected to be completed by the end of this month.

Despite soft H1 FY20/21, mid-term targets confirmed

Alstom reported a 15% yoy decline in the H1 FY20/21 top-line (mainly impacted by the Q1 FY20/21 lockdowns), but its operational efficiencies/better project execution restricted the fall in the operating margin. However, the FCF generation was weak. While the order-intake was also soft, management remains confident about a recovery in demand, and has maintained its >1 book-to-bill target. The mid-term guidance has also been reiterated. Moreover, it now expects to close the acquisition of Bombardi

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Morning Note – 15 April 2024

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

FY results: strong cash flow

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

Warns on brine supply costs

Clean and competitive fertiliser

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Windar Photonics - Major order, successful net £4m fund-raise, target fair value price raised

WPHO's announcement last week of a major new contract award with a North American customer represented an encouraging step forward in building the group's presence in this crucial market for wind power; and has been followed by news of the over-subscribed fund-raise which has strengthened the company's balance sheet to the tune of £4m net (£4.4m gross). The company is a pioneer in the field of wind turbine optimisation and continues to grow through innovation based on its unique IP. Following th

LIBERUM: Gattaca: Resilient contract performance, perm tough

Norcros - FY24 trading in line with expectations

FY24 trading underpins Norcros’s compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares a

Trading report in-line with sector peers

The results for the six-months to January are robust against a backdrop of declining confidence in both clients and candidates generally. With an improvement in the contract book during early Q3 we think this highlights that the tide is starting to turn and likely to feed through to demand for permanent hires ahead of the CY24 end. With net cash accounting for over 70% of the current market capitalisation, the operating business appears undervalued. H1 results were broadly in line with expectat