Introducing Talgo
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talgo.com Introducing Talgo 0 Table of content 1. Global railway rolling stock market 2. Company overview 3. The Talgo proposition: Products and Technology 4. Business Model 5. Financial Overview 6. Four pillar development strategy 7. Appendix 1 Talgo positioning in the market The railway industry comprises four main activity areas: • Infrastructure: tracks, stations, electrical facilities, equipment for manufacturing and maintenance, etc. • Signaling: Control, management and security systems. • Rolling stock: trains (traction units and coaches) and their subcomponents (wheels, axles, breaks, etc). • Services: includes mainly the maintenance services provided after-sales, consulting and engineering. The rolling stock sector for passenger transportation is divided by different segments according to the product offered, with different levels competition, operational margins and work load implied. Talgo’s activity is mainly focused on the “high pyramid” segments where the product mix offered is narrow and the demand is not recurrent, resulting on a lumpiness business with limited competitions and high margins. Rolling stock segments Measuring market levels Competition Margins Contracts Vol. Talgo Presence Very low Very High Very Low VHS > 300 km/h Long High Speed Low High Low distance (HS) > 250 km/h Passenger 180-250 Medium Medium Medium coaches km/h 140-160 Regional trains Medium Medium High Medium km/h distance Commuters High Medium / Low Very High Urban Metros/undergrounds and light Very high Very low Very High rails rail and trams Source: Company information and UNIFE 2014 2 Talgo’s addressable market – niche products into selected sectors Favourable long-term underlying trends Opportunities identified over next four years Demand for Urbanization and mobility population growth Emerging market Replacement growth demand 60-70 €b 14% 8.5 €b UNIFE accesible Talgo Pipeline Market Environmental market Liberalization concerns Product segment Description Talgo’s products Identified pipeline1 AVRIL Trains operating at more VHS than 300m/h Talgo 350 3.8 €b Trains operating at more Talgo 250 HS than 250km/h Natural tilting Passenger railway vehicles Night & day Rolling Stock 1.3 €b passenger for day and night services Train tilting cars coaches Electric and diesel multiple Regional Talgo regional units that operate at speeds 1.9 €b Commuter trains commuter trains 120 km/h - 160 km/h (1) Talgo’s pipeline based on selected tenders potentially to be involved in, from the total accessible market. Source: Company information, UNIFE 3 Table of content 1. Global railway rolling stock market 2. Company overview 3. The Talgo proposition: Products and Technology 4. Business Model 5. Financial Overview 6. Four pillar development strategy 7. Appendix 4 Talgo – Spain-based pure play global leader in manufacturing and maintenance of VHS / HS and selected segments Innovative solutions for niche rolling stock markets Talgo is a leading specialized rolling stock engineering Company focused on designing, manufacturing and servicing technologically differentiated, fast, lightweight trains. Distinctive suite of proprietary technologies developed over several decades. A proven strategy of leveraging innovative technologies into niche markets (VHS, HS and natural tilting passenger coaches) and new geographies (Saudi Arabia and Kazakhstan) . #1 supplier in the HS¹ and regional train² rail markets in Spain3. Expanding addressable markets with new products in the VHS and regional commuter train segments. Diversified net turnover mix Order backlog evolution (€b) Net turnover by business Net turnover by geography 9.6x 4.5x 7.1x 8.1x 8.3x Backlog / Rev. line (average 2017-19) (2019) 3.7 2.6 2.8 2.6 3.3 Backlog Total: 13% 402 €m 23% 38% 67% 35% 30% 24% 42% 58% 33% 77% 65% 50% 70% 76% Manufacturing Spain International 2015 2016 2017 2018 2019 Maintenance Services International Spain Overhaul & Maint. Equipment Notes (1) >250 km/h as defined by Renfe (2) >220 km/h intercity as defined by Renfe (3) Largest European high speed market and 2nd largest worldwide 5 Source: Company information Defined phases of business development 1942 - 2000 2001 - 2006 2007 - 2016 2016 - 2019 2019 onwards 5 4 Leveraging capabilities 3 Leveraging into expanding capabilities 2 Internationalisation addressable markets into addressable 1 / Product and VHS capabilities markets Technological capacity expansion development & established product endorsement Development of In 1998 start to Internationalisation Strengthening Efficient delivery of proprietary develop Talgo’s strategy since commercial activity to contracted backlog technology (natural HS technology 2007: Russia, KZ, enhance tendering in Selective commercial tilting, independent First VHS contract USB. European and USA approach with proven wheels and award for 16 trains Mecca-Medina markets. technology and benefits variable gauge) in Spain (2001) project awarded in New product and to worldwide operators service development 2011, first VHS Long-term commitment greenfield project (Regional and with clients through worldwide Commuter trains and maintenance services overhaul activity) Source: Company information 6 Addressing market trends and customer needs on a global basis Milwaukee (not owned) Rivabellosa Las Matas II Source: Company information 7 Investment Highlights (2019 figures) Backlog by geography VHS market share Spain 1 2 Technology as differentiating factor: 40% Unique proprietary Spain-based pure play +20% lighter than competitors’ trains 58% technologies underpin High capacity due to the exclusively wider car body 42% global leader high innovative and cost- c.25% higher speed on curves for non HS tracks 60% speed segments Fully automated gauge compatibility effective products Low floor => Best accessibility in the market Spain International Talgo Other EBIT margin 3 4 Resilient business Lean asset-light model based on 12.3% Constant track-record design/engineering and outsourcing… model based on asset- of delivering best-in- 5.8% light operations to Talgo’s involvement in the rolling stock value chain class operating margins reach high efficiency Design Manufacturing Commissioning Maintenance and returns and productivity ratios Talgo Main Peers Leverage benchmark (NFD/Ebitda) 5 6 1,8 x 60-70 €m Continued Financial profile in line Attractive growth internationalisation 0.0 x Avg: c.14% 9.4 €m Pipeline with peers and a opportunities in both addressable Selective product (0.1x) range smooth debt maturity new geographies and market diversification (0.8x) (1.3x) profile products UNIFE Talgo's pipeline Expansion of Talgo Alstom CAF Stadler Acces. Market 2020-2022 mainten. operations Backlog by business line 7 8 6% Strong performance +140 years of combined experience in the industry c.100% Talgo fleet 36% Experienced +20 years on average in Talgo maintained since 1952 58% with robust backlog management team with Supported by an industry-leading Board, including Additional third party cars supported by a long- a defined strategy and the former CEOs of Alstom Transport and Dutch also maintained by Talgo term and stable strong track-record Railways and the former Chairman of MotivePower Manufactur. maintenance activity Industires Maintenan. Maint. Eq. & Overhaul Source: Most recent reported available figures 8 Table of content 1. Global railway rolling stock market 2. Company overview 3. The Talgo proposition: Products and Technology I. Product offering II. Talgo Technology III. Case Studies: Spain, Arabia, Kazakhstan 4. Business Model 5. Financial Overview 6. Four pillar development strategy 7. Appendix 9 I. A dedicated product offering for each target market Talgo’s Talgo Description Key historical markets presence products Avril: Trains to be operated at 300 - Established AVRIL1 To be marketed worldwide 350 km/h VHS T-350 Trains operating at 250 - 300 Established Talgo 350 Spain / Saudi Arabia km/h HS T-250: Trains operating at 160 - 200 Established Talgo 250 Spain / Uzbekistan km/h (Intercity) Rolling stockRolling Natural tilting passenger Passenger railway vehicles for day Established Night & day Spain / Germany / coaches and night services train tilting Denmark/ United States / cars Egypt / Kazakhstan / Russia Regional Talgo Commuter VitTal: EMU/DMU to be operated at Nascent To be marketed selectively Commuter trains speeds between 120-160 km/h trains Light Spain, Germany, Light maintenance operations to Maintenance Established Services Kazakhstan, Saudi Arabia, both Talgo’s and third party trains services Russia, USA, Uzbekistan Heavy maintenance services, Services Overhaul Refurbishment, renewal and Established Services Spain, USA overhaul Source: Company information Notes Pending final certification in Spain 10 II. Unique proprietary technologies underpin innovative and cost- effective products and services (I) Talgo Differentiation Infrastructure Operations Maintenance Unique of Talgo 1 Aluminium-based lightweight construction – 2 Natural tilting system 3 Articulated and mono axle 4 Wide body, short coach concept / – – improved accessibility 5 Automatic variable gauge system – – 6 Independent guided wheels 7 Hybrid Technology – – Higher energy Reduced track Unique Lower investment efficiency, reduced and train technology requirement journey time and maintenance adapted to client increased capacity needs Source: Company information 11 II. Unique proprietary technologies underpin innovative and cost- effective products and services (II) 1 Lightweight construction