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

Supreme (SUP LN) - Record performance, EBITDA ~doubled

Supreme’s FY24 trading update confirms a record performance in the 12 months to 31 March 2024. Organic revenue and profit growth across all four divisions has driven Group revenue +45% YOY to £225m, with FY24 adj. EBITDA almost doubling to ‘at least £38m’, driving record levels of cash generation. Supreme is actively exploring complementary M&A, supported by a debt free balance sheet. Trading on an undemanding FY25 PE of just 6.7x, with a 3.4% yield, we believe downside risks are more than price

Morning Note – 22 April 2024

Supreme+ (SUP, House Stock at 125p) - Supreme, Supreme!

Morning Note – 25 April 2024

Vianet Group: FY24 trading update, strategic contract win

Vianet has published a positive trading update for FY24 with turnover up 7.6% to £15.18m, a 3.5 percentage point increase in gross margin YoY, and adjusted EBITA ahead of market expectations. Net debt continues to fall and closed FY24 at £1.52m (£2.1m at 30 September 2023), demonstrating strong free cash flow generation, even without the benefit of the £0.9m tax receipt received in 1H24, which augers well for a final dividend. The company reported a new contract with Wilcomatic Wash Systems, the

SP Angel Spec Sits: FY Trading Update (LTHM)

Vianet - FY24 ahead, strategic forecourt customer win

Vianet’s FY24 trading update shows FY24 revenue +1% ahead of our previous forecast, adjusted EBITA +2% ahead, EFCF and net debt +£0.6m ahead, and a strategic new customer win with prominent forecourt operator Wilcomatic. A robust FY25 pipeline and outlook leads us to reiterate our FY25E forecasts at this point, with the update highlighting: strong progress renewing and winning new customers on 3-5 year contracts as they migrate from 3G to Vianet’s advanced 4G LTE solutions; the successful integr

Headlam Group - Strategy for growth in tougher market

Headlam Group has laid out an ambitious long-term revenue target of between £900m and £1bn, as it seeks to grow its share of the UK floor coverings distributor market. Despite a challenging backdrop due to the low level of residential housing transactions, management is seeking to expand each of its sales channels: Trade Counters, Larger Customers, Regional Distribution and Europe & Other. The FY23 results reflected the more challenging environment and the group trades at a discount to its long-

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

Norcros (NXR LN) - Sale of Johnson Tiles UK streamlines the business and improves operating margin

Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028.

Renewi - Solid trading and better cash generation

Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value,

SP Angel Morning View: Copper prices hit $9,700/t as China smelts concentrates for zero charge Tc/Rc

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

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