Ladies and gentlemen, welcome to the Alstom Half-Year Results Conference Call. Note that this call is being recorded. [Operator Instructions] I now hand over to Henri Poupart-Lafarge. Sir, please go ahead. Henri Poupart-Lafarge: Good morning, everyone. Welcome to Alstom first half ‘22-‘23 results. I will start by giving you some highlights, then I will leave the floor to Laurent, which will give you some details on our financial results, as well as some data on our trajectory and outlook. And then I will come back for the conclusion. And of course, I will take the questions that you may have. But let's start by giving you the main messages of this first half. The first one is about the demand. The demand is being confirmed. We told you in May that we had a large pipeline, and I can confirm that this large pipeline is still there. It has even increased. And this is on the back of the long-term trendswhich are the economic growth, the urbanization, but also as you know, by the huge investments launched by a number of regions in the world in favor of high mobility on the back of the need of a transition of mobility towards sustainable mobility. The first half results are definitively solid and we have achieved all our targets. We are totally in line with our trajectory, but I will leave it to Laurent to give you more details on this one. These good financial results -- the sound financial results are backed by sound operational results. And I can tell you that the operational turnaround is totally in line with our plan both, as far as Alstom is concerned, but also as far as the integration of Bombardier is concerned, we are putting in place all the actions, which have been announced to you over the last period and which are bearing their fruits. This, in turn, allows me to give you a more detailed outlook for the financial year ‘22-’23, both in terms of adjusted EBIT, which we now estimate at between 5.1% to 5.3%, as well as for the free cash flow, which we expect it to be between EUR100 million to EUR300 million positive cash. Here are, as you can see on the slide, our main key performance indicators for the year. And I have to say, as you can see on the slide, that I have decided not only to give you the financial ones on this slide, but as well as the ESG indicators, which as you know, are extremely important for us as well. So the first one, the classical one, ordersEUR10.1 billion, book-to-bill of 1.25. We are continuously recording a good level of order fueling our future growth. And I want to insist on the fact that the quality of this order intake is extremely good and is totally in line with our current plan and our future targets. Sales have grown by 8.1% here as well, in line with our trajectory. And on the back of the last year's and last period order intake, sales amounts to EUR8 billion. EBIT margin -- adjusted EBIT margin at 4.9%, an increase of 40bps, as compared to the same period of last year, so we are progressively, as we have said, enhancing our profitability, recovering our profitability. Free cash flow, minus EUR45 million, so a small usage of cash, of course, as compared to last year, which as you may recall, was recording a very large cash outflow. So this is in line, again, with our anticipation with a good level of cash down payments, particularly a good level of cash flow in. One or two words on our ESG indicators, we make progress on all fronts, whether we talk about Scope 1 and Scope 2 emission, minus 6.5%, as compared to the baseline. Energy consumption, minus 5%, as compared to our baseline. We are increasing the electricity from renewable sources. And last but not least, we are improving our ratio of women in management. So we are going to continue to report to you on these indicators regularly from now on. So turning now to Demand, very strong market potential. We are portraying to you a kind of three-year rolling pipeline. We have above EUR190 billion, including a large portion of it in the next 18 months. So it's not only back-ended, but it's also front-loaded. And you can see on the slide that we have very large standards on all continents. I think, I said it in last May, all continents are positively oriented whether we talk about the Americas, North America, Latin America, whether we talk about Europe on the back, not only of the replacement of the existing fleet, but new lines increased capacity; AMECA with a number of large turnkey projects coming back; APAC, of course, Southeast Asia; Australia, very buoyant market in Australia as well. So a very sustained level. And we are aware of some of the macroeconomic challenges, but we don't see any slowdown of the demand despite of this global environment. As far as Alstom is concerned, so looking backwards on our first half results, so a good level of order intake, an increase as compared to last year. Record level backlog of EUR85.9 billion, close to EUR86 billion. On the back of book-to-bill, which is above 1, which has increased mechanically our backlog, but also the weakening of the euro has increased mechanically as well this backlog. As you can see on the right-hand side of the chart, we have a good level of order intake in all regions. Europe being our primary region, large market, but as well as Americas, APAC and AMECA. Of course, when you talk about AMECA or Americas, it can be influenced by one or two big tickets, but we have a sustained level of order in all these different regions. Similarly, in terms of activities, we have a large order in Rolling Stock and particularly for Germany, for Egypt as well, but we have a huge order intake in Services, Systems and Signalling as well. A few examples of these contracts, so you've seen on the Rolling Stock contracts, so the largest one for Baden-Wurttemberg, which is one of the largest regional trains ever ordered in Germany, double-deck trains together with their service maintenance activities. We have -- within this whole -- this family of Coradia regional trains, which is a very successful family, new orders in Romania, in Spain as well. Continuously recording some successes in high-speed, very high-speed in Sweden, in France. And as I was mentioning, a very sound level of order intake in Services with the 30-years maintenance on Baden-Wurttemberg maintenance as well in Romania and maintenance in Spain as well. So a lot of our orders are coming now bundled with Rolling Stock and Services together. Sales, I will not go into all the details, but we have a sound level of sales on all our segments. Rolling Stock plus 2% may seem relatively low, but we have a number of rolling stock, which are included in our System business, which has increased a lot. So we have a ramp-up of our Rolling Stock activities. Services with a significant step up, particularly in Europe and in the Americas, on the back of a number of large contractswhich are being executed. Signalling, growing smoothly. Here as well, this is only the external part of Signalling, but we have larger growth if we take into account Signalling, which is included in our Systems because, as you can see, there is a huge jump in our Systems activity. There was a slowdown in the previous years, because of the end of some contracts in the Middle East, Dubai, Riyadh, for example. Now we have the ramp-up of the new contracts, whether it's in Cairo, in Montreal -- in Thailand, sorry, and still in Montreal with the REM. Quite significant trade this half year, so really a nice ramp-up of our Systems activities. Execution of our projects, I would say it's exactly in line with our trajectory. First, because we mentioned that, in the past, we have a level of what we call non-performing sales. So all the order intake mainly inherited from Bombardier, which had zero gross margin, EUR1.3 billion of sales generated by this backlog. We said that it would be EUR2.6 billion, EUR2.7 billion for the year, so we are in line with this trajectory. It represents today 16% of our sales and this will go down progressively to a much lower level as we are executing this backlog. This is translating into some decrease in our provisions, of course, as we are consuming the provisions, because of this contract and again, this is in line with our trajectory. We have not changed our level of provisions since day one, and we are keeping this level and things are in line with our plan, not only in terms of global amount of provision, but as well in terms of timing. And I'm pleased to tell you, for example, that the last two settlement negotiations are now being finalized and there is no more uncertainty on this backlog of negotiations, which we had to manage after the integration of Bombardier. Talking about Bombardier integration, just a few points. So it's now 1.5 years. We have converted our processes, all our processes. And we are now, of course, focusing on deploying common and standard processes throughout the group. Our digital suite that we have withinAlstom, that we have developed within Alstom, is being now deployed throughout the group. It took us some time, becausefirst, of course, you need to change the processes and when the processes have been adopted, then you can deploy the full suite of tools. We have deployed seven countries, and we intend to deploy all countries by December 2024. We can only confirm the synergies. And as compared to last year, we want to -- which was around EUR100 million, we want to double this number for this year. So overall, I've always said that it will take three to four years to fully integrate Bombardier and the date of December 2024 is definitively in line with this plan to three to four years. So we are very satisfied by the way this is being managed. Operationally, I think during the Capital Market Day, we had this opportunity to tell you a little bit more operationally what it means and how we need to turn around some of our operational indicators. So we wanted to tell you to -- for you today where we stand at the end of September, as compared to the graphs that you have seen again last May. We are pleased to tell you that on all fronts, we have made some further improvements whether it's the gate review, which is an engineering indicator, which is stabilizing but at a decent level. Where we've done a lot of progress, defect per unit, so all the quality indicators have improved tremendously. And I can say as well that we have now excellent customer relationship. We are back to a normal customer relationship, because the quality of what we deliver is in line with customer expectations. We still need to work on delivery on time and we still have some target to improve the delivery on time. We have improved, but we need to continue to improve this one. As you can see, open quality issues have decreased tremendously. Manufacturing throughput have to improve engineering on time is improving. So globally, without going into the details of each and every operational indicators, we are in line with our trajectory to put back the operational performance of the group at the level where it was before the integration. This has been done, I would say, despite a challenging environment. But despite the electronic component and all kind of supply chain crisis, and I have to say that the group is very well managed this crisis, because we have not been impacted on any of our projects by these electronic component shortages, which I think if you compare with other industries, it's quite an achievement. Coming back to innovation and coming back to one of our key highlights. As you know, Alstom is pioneering the hydrogen technology. We made a lot of progress in the last semester with the first fleet in commercial services in Germany with the record of autonomy on fuel cells. But one thing which has not been announced is that we have received around EUR350 million of subsidies from different countries in Europe to support our R&D development in hydrogen. This is a significant amount of money, which is really not only I would say, showing the importance of the hydrogen economy for Europe, but also showing the importance of Alstom as being the leader in this technology for rail transportation, and Europe counts Alstom to develop future trains -- future hydrogen trains. Second part of our innovation on what is autonomous mobility, we are continuing to develop both for passenger trains and for freight trains a number of projects with ATO, so with Automatic Train Operations, which is something which is quite usual and conventional for Metro, but which is not yet developed for mainline. And we are also pioneering this technology for mainline both in France and in Germany, as well in other countries. We have some different type of pilots and we are, period-after-period, achieving a milestone to secure these technologies. So these were a little bit the highlights of the first half. And now I'm pleased to hand over to Laurent, which will comment on our financial results and financial trajectory. Thank you. Up to you, Laurent.

Thank you, Henri. Good morning, everyone. So let's start with the P&L, so we basically 8.1% sales growth in H1, of which 5% organic on back of a positive project execution and in line with our trajectories. In terms of gross margin, we have uplifted by 40 basis points to 13.2%. Similar to last year, we have some phasing on R&D expense and you should expect some increase during our second half of our fiscal year. S&A represents 6.3% of -- in H1, stable versus last year. Finally, sound contribution of our JVs in China at EUR75 million to be compared with EUR77 million last year, thanks specifically to a positive contribution of CASCO, our signalling and as well our rolling stock JV in China as an export base to Asia and Europe. Altogether, as you see, EBIT at 4.9% improved by 40 basis points, compared to last year. Moving to the main drivers behind the change in adjusted EBIT for the first half. Number one, on the synergies with ramp-up developing as planned, representing 60 basis points of margin improvement. Second, lower contribution from nonperforming sales with a positive impact of around 10 basis points in H1. And third, higher volume and favorable project mix helped by margin driving a 50 basis point uplift in H1. Last not least, effect on the macro headwinds, mainly inflation, accounted for negative 80 basis point impact on our margin and reflecting lower margin at completion from the part of the backlog that is not covered by indexation clause. Let's look at the dynamic of these subjects on the next slide. So for Alstom, as we indicated, the current macro challenges are essentially about inflation since we have been able, as Henri explained, to mitigate fully the challenges caused by supply chain, including electronic components in H1. A number of action allows us to mitigate this inflation headwind. Number one, we took strong cost-out measures on a project-by-project basis. Second, 35% of our cost base is labor and these costs are fixed for this fiscal year. Third, energy cost, even if they represent less than 1% of our cost baseare subject to high increase. Still, they are hedged at 90% for this fiscal year, 50% for next fiscal year and around 20% for our fiscal year ‘24-’25. Fourth, on the commercial side, 90%-plus of our order pipeline is covered by indexation, this reflecting our selectivity. Looking at the backlog in more details. First, contract with indexation formula accounts for two-third of our backlog and 50% of our sales in H1. Indexation formula, as you know, covers all our cost natures, raw material, energy, labor and supplies. In addition, 60% of our suppliers are with fixed price or limited indexation. As a result, margin completion for this contract have slightly gone up, leading to a marginal positive impact on H1. Second category, contract result indexation for one-third of the backlog and representing 50% of our H1 sales, out of this 50%, 10% are short-term therefore not impacted by inflation as price are revised on a regular basis. For the remaining 40% of sales, higher share of our suppliers, actually 80%have price fixed on our indexation with a cap, mitigating hence inflation impact. So we have reflected all of these cost factors in our cost to complete based on our central inflation scenario resulting in, as I explained, lower margin at completion for this non-indexed contract, leading overall to a net impact of 80 basis points as we anticipated in our fiscal year ’22. Turning to net profits. Briefly, restructuring charge low in H1 with a Phase 2 of our general restructuring, which probably will be implemented in second half. In terms of integration costs, I remind that we have announced EUR400 million for integration cost over the next three or four years. We are now ramping up this integration cost with an investment of EUR64 million in H1, an effort, which will be, of course, continuing in both H2 and the next two fiscal years. In addition, we booked EUR50 million of one-off costs related to final non-cash remedies accounting impact and legal fees. Below adjusted EBIT, financial results stable with some increase expected in H2. ETR stable at 27% leading to an adjusted net profit of EUR179 million, broadly stable versus last year. So let's move to the free cash flow. Clearly, on our trajectory to reach a positive cash generation for our full-year ‘22-‘23 with a few drivers limiting our net impact to minus EUR45 million in H1. Number one, discipline on CapEx and R&D spend; second, working capital, very much in line with our expectation, I will come back on that in a minute; and third, good performance of our Chinese joint ventures with EUR97 million dividend received during our first half. So moving into some details on the working capital, a number of moving parts. Number one, we analyze inventories together with contract assets and liabilities as it represents our supply chain and production cycle. This net increase is very much in line with the translation of the ramp-up during H2 and next year and as well some stock anticipation to manage current supply chain challenges. Related to contract liabilities, continuous healthy down payment that we are expecting to follow up for the second half. Just want to flag as well that our specific down payment scheme related to German customers has decreased from EUR471 million to less than EUR300 million in H1. Secondly, increase in rate payable essentially related to the increase of inventories and as well some currency impact. In terms, train payable are now pretty much aligned with the level we've seen in Alstom pre-acquisition. Third, pleased to report a decrease in trade receivable thanks, in particular, to an effective cash collection in H1 and a reduction in overdues. Finally, stability in terms of other current assets and liabilities. Just to be very precise on a few specific points on the other liabilities, other payables are stable as announced in fiscal year ‘22 at EUR1,534 million versus around EUR1.5 billion in March 2022. Good stability of suppliers with extended terms at EUR348 million versus EUR324 million. And tax and VAT receivables reducing from EUR167 million in March ‘22 to today EUR128 million. All things considered, working capital before provision is, therefore, standing at 9% from 10% last year, absolutely in line with the expected trajectories we announced in May. Related to provision, here again, EUR144 million of provision consumption, very much in line with our consumption trajectory. A few words on net debt with the usual evolution driven by free cash flow dividend and lease contribution, together with some one-off on remedies and ForEx impact. This is developing as planned with a low point for this half year, which will be uplifted in the second half with the expected cash generation in H2. Looking at liquidity, very strong liquidity at EUR4.6 billion as of end of September, our EUR4.25 billion FCF being the backbone of this liquidity and which has not been known as of end of September ’22. Short-term commercial papers and bank facility are used to cover our working capital seasonality. I want to stress that we monitor our gross cash proactively, and considering that we manage all our liquidity centrally at group level, EUR800 million of gross cash is more than enough to drive our treasury operations. A few words on our long-term debt. As you know, no change, compared to the last half year for sure with a very favorable maturity profile under current market condition with no refinancing before October ‘26 and an average fixed rate at 0.22%. On the right-hand side, you see a positive evolution driven by interest rate on our pension with a decrease of the underfunded plan by EUR200 million and an increase on the surplus overfunded plan by EUR50 million. So altogether, net liability reducing by EUR250 million. Overall, we are delivering in accordance with our plan. We are confident in our deleveraging trajectories driven by cash and profit generation, and therefore, expect no rating action from Moody's following this H1 results. Let's turn now briefly to the trajectories for the second half with the key drivers first in terms of adjusted EBIT. Synergies, as I explainedis developing as planned with an expectation of 60 basis point contribution for the full-year, in line with H1. Non-performing salesconsistent with H1 with an accretive impact of 10 basis points. Third, I would like to note that by March ‘23, more than 50% of our backlog will have been renewed. Margin and order intake is in line with our profit trajectories, and margin backlog is improving since the acquisition. On this basis, we expect higher volumes, favorable business mix to help margin by 30 basis points for this full year. Finally, we expect inflation to still weigh on the margin generated by our nonindexed contract during H2 with a net impact consistent with H1, i.e., 70 to 90 basis points. To end on the trajectories and on the cash generation, we expect to generate positive free cash flow between plus EUR100 million to plus EUR300 million for the full-year, driven by positive momentum on EBIT, strict management on R&D and CapEx, and as expected, offset by working capital change driven by provision consumption and normalization in working capital before provision. Thank you. I will now hand over to Henri for the conclusion. Henri Poupart-Lafarge: So thank you, Laurent. Focusing on this yearly outlook and regarding our targets, which I've announced at the beginning -- guidance, which I've announced at the beginning of this presentation. So ‘22-‘23 book-to-bill to be above 1, againon the back of a good market, good commercial momentum as you have seen during the first half. Sales growth, consistent with our guidance, our mid-term guidance, so we continue to grow progressively, again, as expected. Adjusted EBIT, so that we are detailing or precising to be between 5.1% to 5.3% range. And free cash flow, which is expected in the plus EUR100 million to plus EUR300 million range. So we are giving to you a more precise range that we are using to give you in the past. This is so definitively confirming our trajectory, which we had planned, and this is in line with our mid-term targets for ‘24-‘25, which you all know, which are put on the right-hand side of the slide here. So now I think we can turn now to the Q&A. But before the Q&A, I just want to remind you some of the key features of Alstom. The first one is, of course, to be the leader in a very dynamic market. A dynamic market, which is not being impacted by the current macroeconomic situation, but in the contrary, which is impacted by very long-term drivers as, I saidurbanization, sustainable development and so forth, so very solid drivers. We have a solid backlog today, which offers us long-term visibility and we are improving the quality of this backlog period after period as we are improving the execution of this backlog, and we are improving the quality of the order intake. As you know, our strategy is to have a global footprint with multi-local supply chain in order to better serve our customers, but also to take advantage of this global situation. And I can tell you that in the current uncertain environment, particularly in the current uncertain supply chain environment, it has been of great help to have been able to use this global supply chain. Last but not least, we have a very large portfolio of activities, but I just want to outline, of course, our strong service. We are, by far the -- we are having, by far, the largest installed base, but we have a strong franchise in Service, as well as a strong franchise in Signalling, which is more digital driven. So thanks for your participation. All that is in line with our plan, and I'm happy to now take your questions. Thank you.

Thank you. [Operator Instructions] Our first question today comes from Andre Kukhnin of Credit Suisse. Please go ahead.

Hi, it’s actually Calvin Chen here from Credit Suisse asking on behalf of Andre. Before I go into my questions, just want to quickly double check on one number because you guide revenue growth consistent with midterm guidance. Does that mean it's 5% for fiscal year ‘23 or fiscal year ‘22 will contribute to the 5% CAGR trajectory going into fiscal year ‘25. Henri Poupart-Lafarge: Hello, yes. Thank you for your question. Indeed, we have guided to a 5% average per year in terms of compound annual growth and we anticipate to do that and actually a little bit more than that during this year.

Okay. Got it. Thank you very much. And yes, so my first question will be on cash, for sure, because you've given, kind of, more detailed guidance this time, EUR100 million to EUR300 million. So this guidance looks better and what is -- what do you see as the positive development here? And do you think this guide is conservative or not? Henri Poupart-Lafarge: Yes, yes. First of all, I mean, there are two questions in your question. The first one is, indeed, the fact that we are giving a kind of range and a more precise range of cash flow, I think this was something which was asked by a number of investors. I think as well, as we are normalizing our situation, getting back to a more classical conventional situation after the integration of Bombardier, we have more visibility to give you a more precise guidance. And indeed, it's slightly better in terms of guidance than what we said back in May. But at that stage, you have seen during the first half that we had a good cash performance so it's on the back of this performance, which has been driven by a number of factors, but including a good cash-in coming from down payments. So we have good terms of payments in our order intake. And actually, we see on the market sustainable level of down payments. So we don't see huge pressure on the terms of payment. So this is on the back of that, that we have slightly improved our cash guidance.

Thank you very much for that. Very clear. And my second question is on cash management. So we see some of your peers are tightening cash and payment management. So any implication on your net working capital, and in particular, account payables in the next few quarters or also in -- probably in the mid-term, please? Henri Poupart-Lafarge: Yes. I think we have given some analysis on any of the working capital lines so that you can look at that. So we can -- maybe Laurent can come back to some of these lines. We don't expect a major move going forward. Of course, in terms of turns because the growth of the company is leading to some growth, for example, in payable because of the growth of the activity. On the other hand, we have improved the receivable and we've decreased, for example, the overdues and I put that on the back of stabilization of a number of our projects. So we have improved our customer relationship, and this is one of the main features actually of the first half is the way we have stabilized our projects. This, in turn, has improved the receivables. But maybe I will turn to Laurent, which can repeat some of the highlights on the working cap, in particular, on payables.

Yes. So looking ahead in terms of the second half in terms of free cash flow moving part to get to your point, Calvin. On a step-up on profitability as we anticipate in H2 versus H1, you have seen our guidance. Indeed, as Henri mentioned, continuous healthy down payment, which will be helping our contract liabilities; continuation of a strict control in CapEx, where we see some acceleration in second half versus first half; and looking at the working capital globally, an overall stabilization of our overall working capital from -- on the second half. So that's basically the key drivers, which will be leading to the plus EUR100 million to plus EUR300 million of free cash flow that we are confirming on the back of solidity of execution.

Thank you, very much. A couple of questions, but I'll go back with you. Thank you very much. Henri Poupart-Lafarge: Thanks a lot.

Thank you. Our next question now comes from James Moore of Redburn. Please go ahead.

Yes. Good morning, everyone, Henri, Laurent. I've got three questions, if I could. The first two are really about your backlog reescalates some indexation. And I just wondered if you could help us a little understand away from that number that you've given for the group, that two-thirds of the backlog is covered with indexation, how that looks divisionally and by region, first of all. My understanding is maybe Signalling is almost no cover, Services almost 100% cover, maybe trains is 50%. Maybe I've got that wrong, but if you could help us understand that. And I also understand regionally that Germany has a very different picture to France, or again, maybe I'm wrong there, but if you could clarify that? The second point -- question is the macro inflation impact to margin of 80 bps in the first half and for the full year. And by the way, thanks for all the extra detail today. It's very, very helpful. And on that number, just trying to think how it should progress as we look into FY ‘24 and FY ‘25 as hedge starts to come down and we start to see more of the impact of inflation coming through. Would we expect that number to increase? And is there any way you could help us think about how that should progress going forward and how you think price will play on the other side? And then the third question is just R&D capitalization and CapEx, quite low in the first half. Is that the start of something more sustainably low? Or should we still think about 2% CapEx to sales as a good guide? Henri Poupart-Lafarge: Thank you for your questions. A lot of questions. I will hand over as well to Laurent for more details. But just as a general picture, what you say is correct on the indexation on our backlog i.e. Service is quite entirely with indexation clauses, and in particular, of course, the long-term maintenance projects. Signalling, if you talk about small contracts, they have no indexation clauses. If you talk about long-term projects, some of them have and it depends on the market. And as I said, Rolling Stock is more or less half-half. In terms of markets, I will not go into the details because, of course, these are commercial negotiations. But in the main, what you say is also correct, the indexation clauses quite traditionally in France, they were not in Germany. Some countries with -- even at some regulations, which were forbidding indexation clauses like in Spain, we are moving that. So the market is now moving. As you know, in the pipeline, we have 90% of the projects, which are -- which will have indexation clauses. So even in countries which had no indexation clauses in the past, they are putting some new ones progressively. But it's true that some markets have traditional indexation clauses, others not. But you have to, again, to look at both Rolling Stock and maintenance, for example, in the U.K. There is no indexation clauses on the Rolling Stock contract, but the maintenance contracts have all indexation clauses. So it's not like black and white. But in the main, you are correct. On all what is R&D and CapEx, I will not draw any midterm, long-term conclusions on the first half. It's true that it's relatively slow -- low during the first half, but nevertheless, our guidance for the full year remains the same in terms of R&D intensity and CapEx intensity. Maybe you can come, Laurent, for the question of the inflation and the bps.

Yes. Just to give you a bit more color on the backlog by product line. So 50%-plus, as Henri said, on the Rolling Stock. On Services, we are 85% and 90%, and the remaining is only the short-term sales where we are revising the price on a very regular basis. So we are not impacted by inflation, and Signalling we are a bit less than half indeed in terms of coverage. So to the point on how all of this will be evolving by ‘24-‘25. If I look at our current sales, which are not covered by inflation. As I say, we are at 40% for this year and we will be reducing that by around half by ‘24-‘25. So around 20% of our sales, which will be exposed by inflation. So as you see, basically, this inflation headwinds will be reducing over time as we are now signing quality order intake with inflation protection. And as we say, 90% of our pipeline in terms of tenders is covered by inflation mechanism, hence, reducing the exposure over time.

That's very helpful. Just to clarify, I get that it goes down over time, and by time, I mean, two to three years. I just wondered whether it got worse in ‘24 before getting better. But are you trying to signal that you think that it could come down from the 70, 90 bps this year next year?

Yes. The exposure on 40% will be reduced progressively from 40% this year of sales exposed to 20%, that will be a marginal decrease step by step.

I understand that, sorry to belabor it, but if the degree of inflation more than doubled, that would more than offset that. So I'm just wondering whether because of hedging contracts, derivatives, et cetera, that you're not seeing the full impact of what spot markets have done this year. So I wondered if the inflation piece could more than offset the halving of the exposure.

No, no. To be clear, 80 basis points is the peak at -- for the 40% of sales. And these 80 basis points will be reduced progressively next year and the following year.

Great. Thanks, Laurent. Thanks, Henri.

Thank you. We now move on to our next questioner, which is Ben Uglow of Morgan Stanley. Please go ahead.

Hello, thanks very much. Good morning, everyone. I hope that you are all well? I guess two follow-ups really to the proceeding questions. Very, very helpful color on the 80 bps inflation adjustment or inflation headwind. And Laurent, could we dive in a little bit into the components. I may have mistakenly written this down, but did you say that wage costs were something like one-third of that -- of your costs? And if so, can you give us a sense of those wage negotiations what is going on in different regions and how are you sort of managing the workforce? And when might -- when would we see those inflationary impacts from the wages actually begin to come in? Is that a first half of calendar next year event? So that was my first question. The second question was really pushing back on the free cash flow. I really -- if I look at that EUR100 million to EUR300 million, that is essentially 1% to 2% of sales. And in the past, Alstom has done much better numbers than that. So what I'm really trying to understand is, in the second half, when normally we would see seasonal, kind of, benefits from working capital, what is it in your working capital that is going to be, kind of, resistant to coming down more? Is it to do with inventory levels? Is it to do -- are there other things going on in terms of potential restructuring? But what why would we not see a better inflow of working capital or reduction in working capital in the second half? So if you could just split out the components a bit, that would be helpful. Henri Poupart-Lafarge: Thank you, Ben. So just to be clear on the inflation and the wage inflation, we are doing our salary negotiation in the main because it can vary from one country to another one, but in the main, starting in January. So what we have recorded today is our estimate on the impact of the wages. That will have to be confirmed during the negotiation. We'll see, of course, because we are -- as you know, with the financial year, which is starting later than the other ones, we'll see what the other ones are doing, the other industries are doing. So that -- some countries have also, as you know, like Belgium have mechanical, I would say, inflationary adjustments for the wages. But these are the assumptions. So we'll confirm to you in May, basically at our yearly results, whether these inflation -- these assumptions have been confirmed or not. But these are our today's assumptions on the wages. Now on the cash flow, I see two questions. The first one is the absolute level is still relatively low in terms of cash flow generation. And this is, of course, on the back of provision that we are going to use. As you know, we are still in this delivery of non-performing projects and we are using a provision for that, and we are also paying some of the penalties related to our negotiations and so forth. You were probably mentioning as well the sequence between H1 and H2. And it's true that usually H2 is better than H1, and it has been the case quite considerably last year, of course, for specific reasons. This nevertheless can vary from time-to-time, because of the phasing of some projects, phasing of down payments. As I said, we had a particular good first half in terms of down payments. So these are -- I mean I would not qualify it as totally abnormal. We have a certain phasing, which is, again, classical. It is at the level where it is. It's maybe a little bit less than what we have experienced over years, but this is mostly the phasing of our projects. But in terms of absolute level, this is due to, again, the provision consumption that we still expect during the second half.

Understood. I get the point on the free cash flow. Just one quick follow-up, just -- and thank you for the timing, I guess, issue of these wage negotiations, which I think most companies in Europe are going to have, and it's going to be a different type of environment. In terms of the way you price contracts, are you -- when you are in a customer discussion, is the labor component part of that discussion? And I guess the reason why I'm asking is to what extent are your customers willing to pay for your wage increases? Is that something that people look at or not really? Henri Poupart-Lafarge: Yes. I think, it's one element of our costs. And indeed, when we have indexation clauses, one of the index is labor cost. Then, of course, when it's a new costing, then we take into account our expected wage increase. And basically, the expected increase in all our type of -- all the elements of our cost base. But indeed, labor cost is considered as one of the index to be taken into account.

Thank you very much. I’ll pass it on.

Thank you. Up next, we have Gael de Bray of Deutsche Bank. Please go ahead.

Good morning, everybody. I have two questions, please. The first one is about the last two settlement agreements that are being finalized. Could you just provide an update on this in terms of both timing and the potential magnitude as well as an update on the expected cash usage of provisions for the second half and perhaps for next year as well? And then the second question is more around the 2024-‘25 margin objective of between 8% to 10%. Many things have obviously happened since the integration of Bombardier, including pretty negative external factors such as the war in Ukraine, the lockdown, much higher-than-expected inflationary pressures and so on and so forth. So I'm curious to see if there was any significant buffer in this objective when it was originally set, or is it fair to assume that the very low end of the targeted margin range is now probably more likely than the midpoint? Henri Poupart-Lafarge: Thank you, Gael. First question on the settlements, difficult to go into the details of these settlements. They will not lead, by the way, to any strong cash outflow short-term. It's more a mid-term. In a settlement, from time-to-time you pay in cash. From time-to-time, you pay in kind, so through services that you provide, extra warranty, for example, spare parts or other type of services. So it's not something, which necessarily translate into a cash out day one. So that's -- that was the two settlements, which have been finalized are of this nature. So they are in line and totally in line with our estimates in terms of size of the settlement and cost of this settlement from a P&L standpoint, and therefore, the provisions which were set aside are, I would say, adequate, appropriate. But in terms of cash outflow, it will take some time. In terms of provision usage. Globally, as you know, we are continuing to trade nonperforming contracts according to pay. So I don't expect any significant difference during H2, as compared to H1 in terms of provision usage in general, but again, not necessarily related to these last settlements. More global question regarding the ’24-’25. There are several angles to your question. First of all, when you look at the macro environment, it's fair to recognize that you have a number of headwinds. These headwinds, some of them are short-term, some of them are more longer terms. But we are -- and you have seen that, we are either navigating through these headwinds like electronic component crisis or we are not necessarily impacted by these headwinds. On the contrary, we have positive news since we have announced the guidance. In particular, on the market side, where the demand is still strong, the competitive landscape is also relatively stable. So we have a good demand environment. The headwinds are more on the supply chain. And we don't expect that -- as we told you at the beginning of the presentation that we don't expect any slowdown in the market. On the contrary, our customers are confirming their investment plan. So in the main, you have pluses and minuses. I will not give any detail on -- we just confirm our guidance and I will not detail if it's on upper part or lower part of this guidance. But I would just want to outline that everything is not black and white. Not everything which has happened since we have announced the guidance are negative, we have positive impacts and negative impacts. That's when you look at the macro. And then when we look internally, what we have seen during the first half is a very good quality of our order intake. So the -- I mean, to make it simple, the gross margin of the order intake is totally in line with our guidance of '24-'25. So the orders that we are recording are confirming this guidance. And therefore, it gives us some good internal, I would say, and micro as compared to the macro things, micro points to confirm the guidance.

That’s great. Thanks, very much, Henri.

Thank you. We now move on to Nancy Ni of Goldman Sachs. Please go ahead.

Yes. Good morning and thanks for taking my question. I've just got a quick one. So I hear you that you don't expect any slowdown in the market. So I was expecting if you could maybe elaborate a bit more on sort of the large tenders that you're expecting to be awarded in the coming quarters. Henri Poupart-Lafarge: No. We have -- so in the pipeline, there are a few large projects. We are not expecting on the next quarter extremely large projects. There are some tenders in India, which are well known by the market, so a very large tender in India, which are coming, that's one. There are some large tenders in Germany, which are coming as well. But I don't know whether the results will be announced before this -- the end of this quarter. We have one or two tenders in Philippines, which we are waiting. Then, of course, apart from these tenders, we have a number of options, which are coming in the next few months particularly in France where we have very large frame contracts. So these are the main. So it's a bit -- there is no one very, very large projects that we are waiting for, but a number of projects throughout the world. We are also waiting for -- in Australia, for example, as well, a relatively large contract in Australia.

Okay, great. Very clear. Thank you.

Thank you. We're now moving on to Martin Wilkie of Citi. Please go ahead.

Yes, thank you. Good morning. It's Martin from Citi. One question that has -- obviously been going to many companies over the last few months has been the risk of energy costs and shortages in Europe. And that risk seems to have been taken off the table, at least for this winter. Are you worried about that going into next year? Many companies building inventory of components that could be high-energy intensity, whether it's in metals or glass or ceramic or these kind of things. Does that cause you in Europe to carry a higher level of inventory going into next year to protect you against energy shortages 12 months from now? Keen to understand how you're thinking about your German footprint and protecting against any risk around that? Thank you. Henri Poupart-Lafarge: Yes. Thank you. Your analysis is correct. We are not expecting any shortages of energy this year clearly. And we have -- and we had in this part of our debate on inflation, we have recorded some, of course, energy cost increases and we have done -- we have put in place a number of measures to limit the consumption of energy. We don't expect to be directly impacted. As you know, we are not a heavy energy consumer, but some of our suppliers are in terms of primary parts. We have looked at that. We have looked at Plan B and how we can weather a potential crisis. But I cannot say that we have done any safety stocks at that stage. We'll see during the spring, I would say, if things are getting well. But this is -- as you said, it's more for next year than for this year, and therefore, we'll see in spring if we need to do so. But so far, we have not done any type of safety stocks.

Thank you. And then just a follow-up question to a previous question on tendering. Obviously, a year or so ago, there was a lot of talk about the U.S. infrastructure bill and a lot of money there is being allocated to refurbishing and renovating, replacing some of the aging infrastructure in North America passenger rail. Any sort of signs of imminent progress there? Or is that something that's still sort of on the distant horizon in terms of how the U.S. market could develop? Henri Poupart-Lafarge: No. It's a fair point. There is immense amount of money, which has been put on the table. Most of it will go to infrastructure, i.e., bridges and tracks and things like that. Some of it will go to rolling stock as well, and we see some of the agencies developing some projects, it takes time. So I will not -- I don't think we will have a pickup of order intake this year. In the U.S., it would be more for ‘23-‘24. But the second half, we are discussing some of the orders among the tenders which we are awaiting. So there is U.S., which we are also waiting for a tender in Canada, for example, in Quebec, so there are some tenders in the U.S. -- or in North America, sorry. We are discussing some tenders in the U.S. as well, but there may be -- I mean, all that takes a little bit of time, so maybe more for Q1 of next year.

Great. Thank you very much.

Thank you. Our next question now comes from Alasdair Leslie of Societe Generale. Please go ahead.

Good morning. And just a couple of questions really. Just to follow-up, you had quite a cautious message at the Q1 stage relating to component shortages. It seems to have turned out better than expected. Just wondering how you kind of assess the risk now ahead of H2 in terms of potential delays on deliveries? Are you kind of past the point of peak risk now in that sense? And I was also wondering as a kind of follow-on there, just whether it would be possible to share with us the growth in deliveries in Rolling Stock in H1 and what we should maybe be expecting in H2 at the comps in that respect, tougher in the back half of the year? And then the second question is really on Slide seven, the EUR108 billion of opportunity in the next 18 months you flagged. Can we still assume you're kind of sort of targeting winning a 35% share of that pipeline? Or maybe due to greater selectivity, would it be a little lower than that now? And is there still a healthy outlook for Systems orders in that 18-month pipeline as well? Thank you. Henri Poupart-Lafarge: No. Thank you very much. In terms of electric component, I don't know it's because we are getting used to it, we are getting better because the market is sort of stabilizing a little bit. But it's true that the situation today is more -- I'd say, a little bit more comfortable than it was back in July. We have a little bit more visibility on a number of components. But having said that, we are still struggling, i.e., we are still in a kind of crisis mode and we are following extremely closely all our requests, all our needs of electronic components in order to ensure the availability of these components as early as possible. And in terms of price, unfortunately, I have to say that the prices have not gone down yet. So still a complex situation, but probably better control, better visibility, and hence, probably more optimism that you hear from -- definitively from us. In terms of market share, we don't intend to, indeed, to massively change our market share. Fair to recognize that during this period we have been relatively selective. So we are not -- as I said, we are privileging the quality of our order intake and quality of the order book. We have a very large backlog, as you know. So I don't expect any major moves, but if there was something, it's probably going more towards the selectivity. But 30%, 35% market share is in line with our current standard and which is in line with our -- more or less our order intake as compared to the EUR100 billion basically. In terms of turnkey, we don't expect large, large turnkey to come. We still have the gigantic turnkey in Toronto, which you know we have been selected for the full electrification of the Toronto network. So this has been -- it's a multibillion project, but which have not yet been recorded and which will be recorded by tranches. And that's one of the large turnkeys. We are working on -- we have been awarded as well a turnkey in Tel Aviv for tram, which we are going to book only when it's financed so probably not before next year. So we have a few turnkeys, which are being developed in the Middle East, like Bahrain, for example, which is also being discussed. So you have a few -- the turnkey pipeline is relatively robust at that stage.

Okay. Thank you. And just to follow up on the deliveries in H2, should we expect on the Rolling Stock side, should we expect a sort of sequential acceleration versus H1? Henri Poupart-Lafarge: We are ramping up now. So as I said, my first priority was by far to stabilize the projects. First, in terms of quality, to make sure that we have -- we are delivering good quality products, that we are increasing the reliability of our products. And indeed, I mean, if I had to outline one of the key achievements of the teams operationally, it's definitively this marked improvement in terms of quality, and therefore, marked improvement in terms of customer relationship. We are now moving up to a progressive ramp-up of our industrial capabilities. And yes, we are going to continue to ramp up. But progressively, there is nothing like a kind of change in slope during the second half. This first half, again, there was some ramp-up in our Rolling Stock activities. You need to add some of the ramp-up in our Systems activity, which concern actually rolling stock equipment to see the good growth rate. And there is nothing like an acceleration, but a continuous growth to achieve a more sustainable level.

Okay. Thank you, Henri.

Thank you. Akash Gupta of JPMorgan has our next question. Please go ahead.

Yes. Hi. Good morning, HenriLaurent, and everyone. Thanks for your time. I have three short ones as well, please. The first one is on underlying free cash flow both for first half and the full year. I mean even we have a lot of moving parts in terms of integration costs, in terms of provisions, zero gross margin. But if we just strip out all these type of one-offs, which are basically going to fade away in two, three years, can you tell us what is the underlying free cash flow coming from the good projects or basically 84% of your revenues in both first half and where you expect that underlying free cash flow to be at the full-year. The second one I have is on Service growth, which was at 16%, was quite strong and perhaps supported by indexation given where inflation is. Shall we expect this type of growth in the second half as well? Any commentary on that would be great also given high inflation likely continuing next year. So how do we see Service growth outlook in that context? And third one is on Moody's. You say explicitly that you don't expect any rating action from Moody's. Have you already had any engagement with them? And this is based on the proactive dialogue with Moody's or this is based on your assumption that given where the numbers are, Moody's will not likely to take any action? Thank you. Henri Poupart-Lafarge: Thank you, Akash. I will leave the floor to Laurent for these questions and most of them is tough.

So Akash, on the underlying free cash flow for H1 and H2, it's a complex question. What I can just say and confirm is that our overall full year free cash flow is driven by our positive EBIT evolution compared to last year and the normalization of our working capital, as we have explained back in May, driven by the provision consumption. EUR144 million in H1 will go around double of it in the second -- in the full year and a normalization in terms of the operational working capital as expected. We were at 10% of working capital before provision over sales last year. We are 9% so that is, again, in the trajectories we are expecting. So that's on providing some color on the free cash flow. On the Services, indeed, plus 16% for H1. We continue to be very positive in terms of evolution for the second half and moving forward. And you know that in terms of profitability, this is something which is extremely interesting in terms of our bottom line. Your third point on Moody's, it's a good point. So we had a very positive dialogue with Moody's in the very last days. They definitively are looking at us on the midterm, as you know. We are very confident on our deleveraging trajectory which is driven by profit, first, and cash. So I expect, indeed, on the basis of the very detailed discussion I had and feedback from Moody's in the last days that they will be confirming our current rating.

Thank you. And maybe just a follow-up on the cash flow bridge. So you said provision is going to be roughly double of first half or around EUR300 million. I mean you also are having integration costs. How much cash outflow from integration costs are you expecting in the full year, so we get a good sense of where the underlying cash flow is for the company?

Yes. So we had EUR64 million, Akash, of integration costs in H1. We'll have a step-up of integration costs in the second half as well deploying our digital suite, as you've seen that we have made some good progress in the first half. So that's a bit of acceleration. And in terms of the restructuring cost, we will have a bit of headwinds in the second half in terms of restructuring costs in Germany. Probably, by the way, booking on the second phase of the working cost. But the cash outflow in terms of restructuring will be more for next year and a bit of the following.

Thank you.

Thank you, Akash. Next question, please.

Thank you. Our next question comes from Vlad Sergievskii of Bank of America. Please go ahead.

Yes. Good morning, gentlemen and thank you for taking my questions. I will have three and I will ask them one by one, if you don't mind. Starting with the margin. Could you discuss the impact of increasing R&D capitalization and a meaningful increase in provision release on your profitability during the period. I think both lines actually contributed positively to March. And also separate to that, do you expect margin to improve year-over-year in the second half in a material way? Henri Poupart-Lafarge: Thank you. I'll let it to Laurent to answer to the first question on R&D capitalization. But let me be very firm on that, Vlad, there is no -- I mean there is nothing particular on that respect, neither on our policy of R&D capitalization, which remains exactly the same, nor on its impact on the margin,so -- but Laurent, you can --

I confirm, Vlad, this is only related to the phasing on the R&D in terms of the maturity of the activities where we are just improving this ratio for the first half, so something which is very much in line with our very strict policy in terms of R&D capitalization.

That's great, Laurent. And would you be able to comment on the margin trajectory in the second half. Is it significantly up year-over-year in U.S.?

So we are indeed expecting a margin evolution from this half year to the next -- to the following half year. This will be driven as well by the incremental synergies, the project mix. So we do see indeed a step-up of gross margin H2 versus H1.

Thank you very much for that. Can I also ask on working capital? You are talking about working capital normalizing. But when I look at working capital balances, they continue to rise. Until receivables or contract assets up by EUR300 million, would you be able to give some color on what drove that? Is it linked to any particular project, perhaps underperforming project. And also would you be able to comment on a very sizable increase in working capital liabilities? I mean between payables that other current liabilities, they were up by EUR700 million. So that would be very helpful. Thank you.

On the contract asset, Vlad, we have indeed an increase of around EUR300 million. This is driven by the ramp-up of our system activities, and we have seen a massive ramp-up by 40%. Cairo, to name an example. But as well on the Rolling Stock, Kazakh, Coradia Stream, Amtrak. All of these projects are in full swing in terms of ramp-up and is driving the contract assets element. I'm not sure to have understood your point [indiscernible] on the liabilities. If you can rephrase, Vlad?

Yeah. [indiscernible] Laurent and thank you for the answers. So I was talking about on the balance sheet, the increase between trade payables and other current liabilities was about EUR700 million in the first half, which presumably supported the cash flow in the first half. I was asking more about what drove such a significant increase.

Okay. No, that's clear, Vlad. So on the trade payable, as I explained, this is driven very much by the inventory uplift and the ramp-up of our activities, and we have some FX. So very much in line with our activity and execution. On the other current assets and liabilities, you need to look at the net of the two, and you see the key drivers on other current liabilities is driven by hedging and there is a counterpart on the asset. So the net of other current operating assets and other current operating liabilities only EUR75 million with a net. And by the way, you see that other payables are very much in line and stable versus where we stood in March '22.

This is great, Laurent. And the final one from me. Looking at Rolling Stock revenues, it looks like they didn't grow organically in this first half despite book-to-bill staying above 1 times and obviously you're perhaps ramping up Bombardier contracts. Any reason for lack of growth there? And is there a time line when we should expect this growth to accelerate more in line with order intake? Henri Poupart-Lafarge: I think -- thank you, Vlad. The growth of Rolling Stock, it's also a question of phasing of a number of projects. So yes, you will see growth accelerating. Again, don't forget that there are some rolling stock components within the System, which are going quite fast. For example, the monorail in Cairo, which is going quite well. So in terms of production, we are ramping up definitively. And in terms of sales, yes, you will see continuous growth going forward.

That’s all clear. Thank you very much. Henri Poupart-Lafarge: I think we need to take one or two questions Max after that we have to close down. Go ahead.

Okay. Thank you. Our next question comes from Jonathan Mounsey of BNP Paribas. Please go ahead.

Thanks very much, Henri and Laurent. So there was already a question around wage negotiations, but I wanted to talk more specifically about the risk of strike action. I know IG Metall probably seems to be from a rhetoric quite close to calling single-day strikes. I think you had some action in France, at least gains or warning strikes maybe in Belfort and staff out complaining about the negotiations and how they're progressing. So first of all, your guidance talks about the risk of electronic component shortages in H1, but does it also include the risk of some loss days from strike action?And more than that, you talked about 80 basis point drag from inflation as being the peak. Where we only talking about purchase price inflation there? What about higher wages? Could we see cost base inflation actually become more of a drag once you do negotiate higher wage payments and then push that through the P&L? Thank you. Henri Poupart-Lafarge: As always, thank you for the question. Otherwise, it's, of course, complex to anticipate any negotiations. We have contained, I would say, in France, any so full impacts of these negotiations. Of course, it's probably a little bit more tense than it is usually because of the current inflationary context, no doubt. But so far, we have not been impacted on our deliveries, and we don't expect to be impacted going forward. So we -- again, in our guidance of inflation, we take into account what we believe would be the outcome of all these negotiations. And we don't expect major disruptions during these negotiations. There have not been major disruptions in the past in Alstom, and we believe that our social climate is definitely a good one.

Thank you. Henri Poupart-Lafarge: Thank you. May be the last question. Thank you.

Thank you. Our last question today comes from William Mackie of Kepler Cheuvreux. Please go ahead.

Good morning. Thank you, privilege to squeezing there. Two questions then. Just firstly, could you walk us through again how you expect the backlog of zero margin to trade. It looks -- you said EUR2.6 billion of revenue for this year. I think that's slightly more than you initially anticipated. So maybe you're expediting that faster and how you think the backlog will flow into the next two years? That would be the first. And the second, just thinking about the backlog of orders you have in rolling stock in the U.K. and Germany. What are you thinking about capacity utilization at this moment? And what potential measures you may need to take in the next 12 months to 18 months to perhaps align capacity with backlog in those markets? Henri Poupart-Lafarge: Thank you for the questions. Yes, Indeed, we are mentioning EUR2.6 billion offset. This is probably -- and you are mentioning it, this is probably the max that we can have. It may be a little bit lower than that, depending on the, as you said, the speed of execution of contracts. So between EUR2.4 billion, EUR2.6 billion that's what we can have. In terms of measures, we have launched already a restructuring plan in Germany to adapt to the current backlog. So that is in line. We are not going to take new measures and it takes some time, by the way, to be implemented. So we have launched the negotiations. We have agreed on what should be done and how we are doing it. In the U.K., there will be a slowdown of the activities in our site in Derby following the execution of our Aventra projects. But this will come progressively next year. There are no plans at that stage, but it will go -- I would say, calm down progressively next year. Henri Poupart-Lafarge: Okay. So thank you, ladies and gentlemen, for your attention. As a conclusion, two things. First, as you have probably seen on the agenda, we are going to launch ESG Day on March 29. That's the first time we will do it since a while. We have managed to re-baseline all our indicators following the integration of Bombardier. So we'll have a good set of numbers to give you as well as a good set of policies and targets. Just again, as a conclusion for this first half. My take on the first half is, first, that we confirm a very strong market. That we are totally in line with our plan from an operational standpoint with, again, the first year being devoted primarily to quality, being devoted primarily stabilization of the projects. And you are not hearing bad news externally in terms of new delays and so forth. Things are really being stabilized with excellent customer relationships, stabilizing as well by finalizing all the negotiations with the customers. We are now working more and more on the efficiency of our systems, efficiency of our deliveries to be able to ramp up quicker. And that's what we're doing. So this good operational, I would say, setup and trajectory translates quite automatically into the confirmation of all our financial targets with some detail, which has been provided to you for the first year and the confirmation for the mid- to long term. So thanks a lot, and looking forward to visiting all of you soon. Bye-bye.