ALSTOM 1998/1999 : A year of solid results

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Record order backlog

Strong improvement in operating margin

Increase in both operating income (+19%) and net income (+32%)
on a comparable basis

Proposed dividend : 0.5 per share (0.75 including
tax credit)

Key Figures






% chg

Pro Forma

% chg


Order backlog

Orders Received


Operating Income

Operating Margin

Net income

Earnings per share (

Dividend per share (

16 241

11 663

11 196


4.7 %




29 %

36 %

26 %

35 %




19 545

14 905

14 233


4.2 %




8 %

6 %

(1 %)

19 %


32 %

32 %

21 016

15 845

14 069


5.0 %




Commenting on the results presented to the Board on 25 May
1999, Pierre Bilger, Chairman and Chief Executive Officer of
ALSTOM, stated :

'1998/99 has been a year of solid results. Our performance
was marked by a continued strengthening of the order backlog.
The operating income and margin registered strong improvements,
as did the net income on a comparable basis. These results are
proof of the Companys ability to deliver strong growth
regardless of economic uncertainties, of the benefits of its
focus on the high-margin segments of its portfolio, and of the
success of company-wide cost efficiency programmes.

In addition, 1998/99 has been a period of intense strategic
activity taking the Company forward towards its ambition to
position itself as the solution provider of choice in
infrastructure markets world-wide (energy, transmission &
distribution and transport).

All of these elements allow the Company to confirm with
confidence the targets announced at the time of the IPO.

The Company will continue to build on 1998/99s solid
performance, reinforcing the momentum gained in the past period
which is expected to be carried forward, leading to further
improvements in performance starting in 1999/00.'

1998/99 will be recorded as a milestone year in
ALSTOMs development:

ALSTOM began the year as a 50/50 joint venture company and
became a fully independent, publicly quoted company renamed
ALSTOM at the time of our flotation on the Paris, London and
New York Stock Exchanges on 22 June 1998. This represents a
major step forward, bringing to ALSTOM more flexibility, more
visibility and greater access to financial markets ; the
integration of Cegelec, acquired in May 1998 has been completed
within a very short time-frame. Cegelec activities have
significantly reinforced the systems and service capabilities
within our main businesses: Energy, Transmission &
Distribution and Transport, as well as opening new market
opportunities in the field of electrical contracting and
systems integration ; acknowledging the continuing weak
performance of our Industry sector, the refocusing of our
industrial activities has been accelerated and businesses with
sales of 850 million have been identified for disposal
between now and the end of the financial year 1999/00; finally,
on 23 March, ALSTOM simultaneously announced its intention to
merge its Energy business with the corresponding power
generation activities of ABB in a 50-50 joint company, to be
called ABB ALSTOM Power, and its agreement to transfer 100%
ownership of its heavy duty gas turbine activities to GE.


* * *


Global Review

Orders and Sales

During 1998/99 ALSTOM received orders amounting to 15
845 million. On a comparable basis, this represents a further 6
% increase on the already high order intake recorded in
1997/98. On a historical basis orders increased by more than
one third.

On a comparable basis, sales have remained stable at
14 069 million. This is a direct result of the low level
of orders received during 1996/97 and a slight slowdown in the
Companys short-cycle activities offset by a marked
increase in Transport sales. On a historical basis, sales were
up 26%.


Breakdown by Sector


Order Backlog

Orders Received










Transmission and Distribution




Local Contracting


5 578

2 259

6 765

1 637

2 092

1 214

5 671

2 064

7 223

1 527

3 408

1 123

3 768

2 664

3 041

2 188

1 436

1 656


3 753

2 504

3 479

2 043

2 151

1 703


3 669

2 723

3 057

2 315


1 542


3 147

2 551

3 516

2 143


1 668



19 545

21 016

14 905

15 845

14 233

14 069

* pro-forma

Transport and Marine reported a particularly high order
intake (+14 % and +50 % respectively). The shorter cycle
businesses in ALSTOMs portfolio, Transmission &
Distribution and Industry, reported lower orders and sales than
in the previous year mainly as a result of global economic
trends which led to lower levels of tender activity in emerging

Breakdown by Region












Africa / MiddleEast

8 440

3 306

2 412


8 404

3 638

2 589

1 214

8 453

2 197

2 661


8 436

2 575

2 038

1 020


14 905

15 845

14 233

14 069

In geographic terms, orders in the European Union,
ALSTOMs strong domestic base, remained stable with
significant growth in the UK in Transport. The double digit
growth in the Americas comes mainly from strong growth in the
US offsetting the slight decrease in orders in South America.
The Africa and Middle East region continued to provide solid
growth in orders across all Sectors. The high growth in orders
in Asia comes primarily from Transport following the
Sectors commercial focus in the region and stable Energy
orders as a result of major power plant contracts awarded in
the region in the last quarter. Short-cycle businesses, T&D
and Industry, were negatively impacted by the poor economic
conditions in a number of Asian countries.


Operating Income and Margin



1998/ 99



% sales


% sales


Transmission and Distribution




Local Contracting








- 75

5.8 %

8.0 %

5.3 %

1.0 %

1.5 %

2.8 %







- 49

6.7 %

9.4 %

6.0 %

1.1 %

3.0 %

2.8 %



4.2 %



Operating income amounted to 707 million, an increase
of 19% on a comparable basis (35% on a historical basis).

Following the trend observed at the half-year, the operating
margin at 5.0% has increased significantly compared to the 4.2%
pro-forma margin for 1997/98 which incorporates the
lower-margin Cegelec activity, as well as in comparison to the
4.7% historical margin.

This strong increase in operating margin was registered
across all the main businesses with the exception of Industry
and Local Contracting. This is partly the result of the
Companys increasing focus on higher-margin activities
such as customer service as well as the continued success of
the Companys cost reduction programme, Stretch 30. This
programme has now been implemented in all operational units
world-wide with savings secured in 1998/99 of more than
200 million. The original pilot units with a first
full-year implementation under their belt, have already
achieved the target 10% reduction for 1998/99.

The Companys cost reduction efforts have been further
reinforced by the launch in 1998 of the Quality Focus programme
which aims to significantly reduce the cost of non-quality
based on long-term actions involving quality improvement in the
Companys products, product designs, industrial processes
and project management. The pilot programme is currently being
implemented in 12 operational units in four countries.

In 1998/99, the Company accelerated its programme of
on-going restructuring world-wide with 10 000 employees
(excluding disposals) leaving the Company as a direct result of
rationalisation initiatives.

Net Income

At 303 million net income increased by 32% on a
comparable basis (stable on historical basis).

Financial income decreased on a historical basis mainly due
to the payment of the special dividend associated with the IPO
and the acquisition of Cegelec. On a comparable basis the
financial income remained stable.

Following the acquisition of Cegelec and Sasib, goodwill
amortisation amounted to 121 million. Restructuring
charges remained stable on a comparable basis reflecting the
continuous restructuring initiatives undertaken by the Company
(116 million).

The tax rate decreased on a comparable basis from 42 % to 38
% as a result of the tax optimisation programme launched during
the year. In addition, the Company has benefited from the
reduction in the official French tax rate from 41.66 % to 40

Balance Sheet

The Company has started to rebuild its equity base and
shareholders equity which at 31 March 1999 amounted to
1 626 million. At 3 838 million, provisions
include 386 million for restructuring and redundancy in
order to support future rationalisation initiatives.

Working capital requirements (defined as inventories, work
in progress and accounts receivable less customer advances,
trade payable and other liabilities) remained stable at
1 179 million, reflecting a stabilisation in the terms
of payment for energy and transport projects as well as tighter
cash management within the Company.

Taking into account long-term deposits, the company had net
debt at the year-end of 24 million and therefore no

On a historical basis provisions increased by 345
million whilst on a comparable basis they decreased by
470 million. This decrease is entirely due to a reduction in
provisions in the Energy Sector whilst all other Sectors showed
stable or increased provisions. This decrease in Energy is
mainly due to the mechanical effect of the lower sales volume
leading to a decrease in accrued contract costs and warranty
provisions, as well as the application of provisions relating
to litigations and claims settled during the year and provided
for previously.

Cash Flow

Cash decreased in 1998/99 by 1 588 million primarily
due to the special dividend and capital increase associated
with the IPO and the acquisition of Cegelec. Discounting these
three effects, the Company had a cash outflow of 200
million. Actions taken by the Company have helped to improve
the cash flow situation during the year, with around
230 million of cash generated during the second half. Capital
expenditure amounted to 385 million.


It is ALSTOMs policy to pay a dividend of
approximately 35 % of consolidated net income for the year.
Accordingly, the Board of Directors proposes a dividend for
1998/99 of 0,5 per share ( 0,75 per share
including tax credit). This dividend is subject to approval of
shareholders during the Annual General Meeting on 7th September
and should be paid from 1st October 1999.

Human Resources

As at 31 March 1999, ALSTOM employed a total of 113 707
people world-wide compared to 85 841 at 31 March 1998. This
increase is primarily the result of the acquisition and
integration of Cegelec, Sasib (Italy/USA) and Wessex Traincare
(UK) as well as limited new recruitment particularly in the
Transport Sector in the UK and USA to deal with the increased
workload brought about by the growing service activities in
these countries.

Research and Development

In 1998/99, the Company continued to pursue its strategy of
research and development which aims to develop new products, to
improve the performance, quality and reliability of existing
products, to reduce design, engineering and manufacturing costs
and to improve the environmental impact of the Companys
products and industrial processes.

R&D expenditure remained stable at 515 million,
representing 3.7% of sales.

Significant advances during the year include new models of
industrial gas turbines, the launch of the MICOM product range
of T&D protection equipment based on a common product
platform, the successful testing and validation of a new
tilting train concept and improvements to the ALSPA control
systems used in Energy, T&D and Industry applications
incorporating new technologies such as the internet, optic
links and intelligent instrumentation. In addition, in the UK
the Company received the 1999 Queens Award for
Technological Achievement for the development of 3-dimensional
steam turbine blades which are amongst the most advanced in the


Year 2000 Compliance

The Company has put in place a formal Company-wide Year 2000
compliance programme which aims to ensure compliance of its
product, system and solution offering as well as its internal
systems and supply chain provisioning with the objective of
full compliance no later than November 1999. The Company
estimates the cost related to this issue to be in the order of
100 million which are covered by normal operational
expenses from 1997/98 to 1999/00.


* * *



The energy and transport infrastructure markets in which
ALSTOM operates are characterised by steady growth created by
the need for new equipment in developing countries as well as
an important replacement market in the industrialised

In addition, the current privatisation and deregulation
process under way in a number of the Companys geographic
markets will create new opportunities for ALSTOM particularly
in the service segment with an increase in customer
requirements for maintenance and rehabilitation of equipment as
well as support for plant and equipment operations and network

Uncertainty in certain emerging economies is likely however
to continue to affect short- cycle businesses, although to a
lesser extent than last year. In particular the Company does
not expect a full recovery in Asia before 2000/01.

Profitability remains a key focus for management. Actions
already in progress :the kick-in of longer-term cost-reduction
actions within the Stretch 30 and Quality Focus programmes,
continued acceleration of rationalisation actions and
restructuring of the Industry portfolio, the focus on
high-margin segments (services and core technological
components) as well as the creation of ABB ALSTOM Power should
trigger a continuous improvement in ALSTOMs

All the above elements allow the Company to confirm with
confidence the targets announced at the time of the IPO. The
Company will continue to build on 1998/99s solid
performance, reinforcing the momentum gained in the past period
which is expected to be carried forward, leading to further
improvements in performance starting in 1999/00.


* * *


Comments by Sector


In Energy, order intake remained stable. A slight decline in
orders in the Americas and in Western Europe was offset by an
increase in orders in the Middle East and Asia where Energy
succeeded in securing two major orders for power stations in
Taiwan (Ho Ping 2 x 600 MW coal-fired plant) and Singapore
(Sakra 700 MW combined-cycle plant). In addition ALSTOM was
awarded several large maintenance contracts, including the
maintenance of the first 824 MW phase of the Dabhol power plant
in India, as well as a significant number of steam turbine
retrofit orders in the USA.

The 14% decrease in sales in the Energy Sector was primarily
due to the low level of large orders received in 1996/97, as
well the transfer of the motors business to the Industry Sector
and discontinued operations in the area of electrical machines
and environmental systems.

Energys operating income remained stable in 1998/99
at 210 million, despite the lower sales volume. This situation
is primarily due to the Companys strategy to focus
increasingly on higher-margin customer service activities, the
first positive results of the Stretch 30 cost reduction
programme, and the continuing price stabilisation effect
observed in the industry.

Transmission & Distribution

The 6% decrease in orders received by the T&D Sector was
directly translated into a 6% decrease in sales in this
short-cycle business. This decrease was due to a lower level of
tender activity caused by general economic conditions
particularly in Asia, primarily affecting the high voltage
transmission and protection businesses as well as in the UK
where the market has remained flat as a consequence of the
Government moratorium on gas-fired power stations. By contrast,
orders received have significantly increased in the Americas,
the Middle East and Africa. Major orders received include
substations in the United Arab Emirates, Peru, Egypt, and
Brazil, a 400 kV high voltage transmission line in Mexico, 137
MV integrated circuit-breaker and disconnector cells for oil
pumping stations in Romania, 59 switchgear cubicles for
Railtrack plc in UK and network dispatching systems in India,
Bahrain and Korea.

Despite this decrease in orders and sales, T&D
significantly improved its operating margin (from 8.0% in
1997/98 to 9.4% in 1998/99) as a result of wide-spread product
rationalisation around common product platforms and headcount
reductions following the integration of the recently-acquired
T&D activities of AEG, Cegelec and Marconi Automazione.



1998/99 was another successful year for Transport which
recorded a further 14% increase in orders received on top of
the 72% increase of last year. Recent orders include 53 tilting
trainsets to be supplied in consortium with Fiat Ferroviaria to
Virgin Rail for the UK West Coast Main Line, 25 six-car
trainsets for the Singapore metro with maintenance options
extending up to 30 years, 108 metro cars for the Warsaw metro
system (Poland), a turnkey transport system for the Fortaleza
Metro in Brazil, light rail vehicles for the French cities of
St Etienne, Montpellier and Lyons, 40 double-deck coaches for
Amtrak for the San Diegan Corridor in Southern California and
signaling contracts in Singapore, New York, Italy, Morocco,
Turkey and Brazil.

The high growth in Transport sales (+15%) includes the
effect of the addition of recent acquisitions, notably Sasib
(Italy/USA), Wessex Traincare (UK) and De Dietrich (France). In
line with Transports strategy to penetrate new
geographic markets, sales increased strongly in USA and Brazil.
Maintenance and service activities also registered satisfactory
sales increases. Major deliveries during 1998/99 include
trainsets for the Stockholm-Arlanda airport link, metro
trainsets for the Athens, London and Paris and TGV trainsets
for the Korean High Speed Line.

The operating margin in Transport rose from 5.3% in 1997/98
to 6.0% in 1998/99. This was a result of the continuing effect
of cost-reduction efforts and the first deliveries of standard
trainsets, as well as the Companys focus on higher
margin activities such as signaling and customer service.


1998/99 was a disappointing year for the Industry Sector,
with 7% decreases in both orders and sales. Order intake,
particularly in the handling systems, painting systems and
diesel engines businesses, was impacted by lower levels of
tender activity and delayed order prospects particularly in
Asia and South America. In addition, the low price of crude oil
has led to a decrease in the number of projects in the oil and
gas industry, impacting order intake for subsea robotics,
diesel power plants and pumping stations.

Major orders received include the supply of a baggage
handling system at Ataturk Airport (Turkey), a large automotive
paint shop in Brazil, diesel engines for locomotives in Sri
Lanka and Syria, a number of conventional electrical and podded
propulsion systems for cruise ships, a turnkey pumping station
in Morocco and the revamping of instrumentation and control
systems for oil refineries and a gas plant in Abu Dhabi.

The accelerated restructuring programmes within the Industry
Sector which resulted in an approximate 12% reduction in
headcount and other cost-reduction efforts were insufficient to
offset this decrease in sales and orders. Consequently,
Industry registered a lower-than-expected improvement in
operating margin (1.1% compared to 1% in 1997/98).

Industry remains the focus of the Companys portfolio
restructuring. Businesses with sales of 850 million
have been identified for immediate disposal. In March 1999, the
Company sold its industrial valves activity to the American
group, Tyco.


Orders in Marine have increased by 50 % during the year. Ten
cruise ships were registered in the order book during 1998/99
as well as two high-speed ferries and fourteen tugs. As a
result of re-design to cost efforts and the phenomenon of
repeat sister ship orders, the shipyard is able to deliver
ships today in a much shorter time-frame than previously and
this strong increase in orders will begin to translate into
sales from as early as next year. Sales in 1998/99 increased by
7%, mainly as a result of the integration of ALSTOM Leroux
Naval acquired in December 1997, as well as the delivery of 3
cruise ships and a seismic research vessel.

This strong growth in orders leading to a full order backlog
through to 2001 as well as the continued success in the CAP 21
cost reduction programme has led to a doubling of the operating
income and significant improvement in the operating margin (3%
compared to 1.5% in 1997/98).

Local Contracting

In Local Contracting, orders increased by 3% and sales by 8%
as a result of the general economic improvement in Western
Europe during the year leading, in particular, to increased
activity in France and the Benelux countries.

Major orders received in 1998/99 include the supply of over
400 km of very high voltage lines to the Moroccan electricity
utility as well as a contract for the electrification of 180
villages throughout the country, the supply of air-conditioning
systems for a major exhibition centre and two hospitals in
Paris and the European Parliament Building in Strasbourg as
well as contracts to upgrade infrastructure for a heliport in
Egypt and for the sea port of Balboa in Panama.

Operating income increased by 9% to 47 million as a
direct result of the increased sales volumes and stability of
overheads as well as an improvement in the performance of the
former AEG-AAT activities in Germany acquired by Cegelec in
1996. The operating margin remained stable at 2.8%.

Notes :

ALSTOMs accounts are presented on the basis of 6 Sectors
(Energy, Transmission & Distribution, Transport, Industry,
Marine and Local Contracting).

Full Year 1997/98 ' Actual ' figures refer to the
consolidated accounts of the former GEC ALSTHOM.

The ' pro forma ' results 1997/98 are the consolidated
accounts of the former GEC ALSTHOM adjusted to include the
acquisition of Cegelec, the payment of an extraordinary
dividend to GEC and Alcatel and the capital increase associated
with the IPO. Details of these accounts are given in the IPO

The pro forma net earning per share for 1997/98 is
calculated on the basis of the pro forma net income and of the
number of shares as at 31 March 1999 i.e. 213 698 403.

Operating margin is defined as operating income over sales.

All figures by Sector for 1997/98 are pro forma figures and
therefore include the split of Cegelec into the present
6-Sector configuration.

All figures by Region for 1997/98 are pro forma figures and
therefore are the consolidation of ALSTOM and Cegelec
geographic figures.

Press Enquiries : S. Michel (Tel. 01 47 55 23 45)

Investor Relations : H. Poupart-Lafarge (Tel. 01 47 55 23

Internet : http ://


* * *

'Safe Harbor' statement under the United States Private
Securities Litigation Reform Act of 1995:

Except for the historical information, the
statements set forth in this press release may constitute
'forward looking statements' within the meaning of the United
States Private Securities Litigation reform Act of 1995.
Without limitation, the statements under the headings
' Outlook ', and comparable statements elsewhere in
the press release, all constitute such 'forward looking
statements'. Such 'forward looking statements' are based on
managements current plans and expectations are subject
to a number of risks that could cause actual results to differ
materially from those referred in the forward looking
statements. These include without limitation the inherent
difficulty of forecasting inherent costs and/or cost savings at
certain times and/or in certain markets and the risks and other
uncertainties listed from time to time in ALSTOMs public
filings, including but not limited to the 'Risk factors' set
forth in ALSTOMs Prospectus dated June 22, 1998 included
in its registration statement on Form F-1 filed with the United
States Securities and Exchange Commission in connection with
ALSTOMs initial offering.



1 : Key figures per Region

2 : Key figures per sector 'pro-forma'

3 : Key figures per sector as reported

4 : Consolidated Profit and Loss

5 : Consolidated Balance Sheet

6 : Consolidated Cash Flow