Alstom: UK rail fails leave CEO racked and pinioned
Group’s shaky finances fuel talk of a fundraising which management denials cannot completely dispel
Late trains irritate British commuters. Investors in Alstom too: the company’s Aventra rolling stock projects in the UK have been delayed. Poor execution means less cash flow for the indebted French train maker.
Nervous traders knocked Alstom’s share price 35 per cent on Thursday morning. The group’s shaky finances fuelled talk of a fundraising which management denials could not completely dispel.
Alstom has a signalling problem. Analysts tuning into an Alstom conference call on Wednesday evening were greeted by chief financial officer Bernard Delpit. Chief executive Henri Poupart-Lafarge did not attend. Delpit only arrived at Alstom three months ago.
He had to explain why consensus forecasts of free cash outflows are ballooning. The predicted figure has widened from €152mn to €1.15bn in the first half, according to data service Visible Alpha. Analysts have been scurrying to increase their net debt estimates too.
Alstom will report interim results in mid November. Hopes that UK projects providing 443 trains would soon deliver better cash flow and reduce debt have been dashed.
Poupart-Lafarge and Delpit have much to do. Alstom’s share price, even before Thursday’s collapse, had trailed the MSCI European industrials index by 30 per cent over two years. Over the past three years, Alstom’s operating cash outflows have summed to minus €426mn. Optimists will highlight a timing problem caused by elevated inventories and point to the group’s net liquidity position (including credit lines) of €3.5bn.
Sceptics will rightly question any dependence on UK infrastructure projects for future cash flows. Net debt to forward ebitda, on Barclays estimates, looks high at over 5 times, even if that should fall in the next year or so. As global bond yields arc ever higher, the bears drive the sentiment train.
If you want credibility, stick to your timetable and front up any apologies when you miss them. That applies to running a train making company, as well as a train service.