Talgo S A : recovers activity and obtains a net profit of 27.5 million euros in 2021

• Talgo's revenues grew by 14% to 555.4 million euros 2021, due to increased industrial activity and the recovery of maintenance services.
• Adjusted EBITDA increased by 93.7% to €66.2 million in 2021, partially offset by the inflationary context and supply chain interferences.
• The company was awarded contracts worth €519 million in 2021, consolidating a backlog of up to €3,249 million that guarantees industrial activity until 2024.
• Talgo will launch a new €10 million shareholder remuneration program, scheduled for the first half of 2022.
• Talgo Vittal-One will become the world's first dual hydrogen-electric train.

Talgo S.A., a leading company in the design, manufacture, and maintenance of high-speed light trains, registered a revenue of €555.4 million in 2021, up by 14% compared to the €487.1 million registered in the same period of the previous year. The revenue growth was driven by increased manufacturing activity, led by Renfe's VHS project and overhaul projects in Spain and the United States, as well as by the full recovery of maintenance services in all international markets, and gradually in Spain.

Net profit increased last year to €27.5 million, compared to a negative result of EUR 17.4 million in 2020. This increase in profit is underpinned by improved operating and financial results.
Talgo registered an adjusted EBITDA of €66.2 million in 2021, up 93.7% compared to €34.2 million in the same period of the previous year, with operating margins of 11.9% in line with the progressive recovery of margins. However, the current context of rising raw material prices and delays in material supply chains is having an impact on the company's project margins.

Among the actions carried out by the company, Talgo remains on the right track to meet the target set to reduce overhead costs by 15% in the period 2021-2022, in order to improve competitiveness and flexibility, within the framework of the proactive adoption of measures to adapt its cost structure to the current inflationary environment. As at today, it has achieved two-thirds of the target, having reduced its costs by 10% compared to 2020.

At the end of 2021, working capital amounted to 156 million euros, maintaining a stable conversion over revenues at 25%. Cash generation was better than expected for the year, reaching 16 million euros in terms of free cash flow.

Talgo improved its financial profile in 2021 after refinancing debt to extend the average maturity to 3.4 years and reduce the cost of debt to 1.0%. As a result, net financial debt fell to €35.9 million, or 0.5 times adjusted EBITDA. Additionally, it should be noted that, in January 2022, Talgo signed a long-term green loan with the EIB for €35 million to finance R&D and Capex projects, in line with its commitment to new development and the SDGs in the 2030 agenda. In conclusion, the company has a solid balance sheet with a strong financial capacity to successfully execute the projects in the backlog and continue to grow.

Strong international backlog and commercial visibility

Talgo has a solid and diversified backlog of €3,249 million, which guarantees a high level of industrial activity for the period 2022-2024, backed by more than €800 million of manufacturing and overhaul projects with a strong international presence, as well as long-term revenue visibility thanks to steadily growing maintenance contracts. This backlog includes contracts awarded in 2021 worth €519 million, including the manufacture and maintenance of up to 40 VHS powerheads for Renfe and the extension of the number of cars in the manufacturing contract with Danish operator DSB, rolling stock overhaul projects in Spain, as well as maintenance services in Spain, Saudi Arabia, Uzbekistan and the United States.

In this sense, the full recovery of the maintenance activity in all international markets, as well as the recovery of up to 85% maintenance services in Spain, provides recurrence and stability, supporting the revenue generation and cash flows of the business. In addition, the current manufacturing portfolio with associated maintenance already awarded guarantees strong growth for the coming years, with the expectation of reaching 3,600 vehicles by 2023.

With regard to the pipeline projects, it is worth highlighting the high degree of execution of the Spanish VHS project for Renfe, which is already in the dynamic testing phase, or the project for Deutscshe Bahn in Germany, which are expected to be the main revenue generators from 2022 onwards. It is worth highlighting the start of the manufacturing phase of the projects for DSB (Denmark) and ENR (Egypt), among others.

In addition, manufacturing projects in Spain, Germany and Denmark offer room for improvement with possible extensions totaling more than €2 bn. In addition, maintenance contracts also have significant room for improvement as a result of potential extensions in all geographic areas, in line with the remaining service life of the fleets.

In terms of commercial activity, Talgo is currently working on various projects to be awarded in the 2022-2023 period with a total value of €9.4 bn. 72% of these corresponds to opportunities in Europe and 45% corresponds to long distance and intercity product contracts, although the company also focuses its commercial activity on another of its strategic segments, high speed, where it is an international benchmark. The company's commercial strategy combines geographical and product diversification with a selective approach to opportunities and continues to be a fundamental pillar for consolidating a high-quality portfolio that guarantees sustainable growth in the long term.

Outlook 2022

The objectives for 2022 are to continue the proper execution of the projects in the portfolio, the efficient use of financial resources and selective growth, thus ensuring the long-term sustainability of the business.

By 2022, Talgo expects a strong manufacturing activity and a full recovery of maintenance services in Spain, underpinning a strong level of revenues. In line with its commitment to sustained and selective growth, the company maintains a target of achieving a book-to-bill ratio of approximately 1.0x by 2022.

In terms of profitability, the company forecasts an adjusted EBITDA of 13% or higher for 2022, derived from a progressive recovery in profitability, subject to mobility restrictions and their potential impact on the maintenance activity, as well as the evolution of the current inflationary and supply context.

Also, during this year, Talgo forecasts Capex investment for 2022 of up to €25 million, in line with 2021 investment.

In terms of shareholder remuneration, Talgo will launch a new €10 million Remuneration Program, scheduled for the first half of 2022, preliminarily implemented through a scrip dividend and share buyback program, thus offering shareholders the possibility to choose between shares or cash, without their equity position being diminished in the case of preferring cash.

Finally, in line with its commitment to sustainable and socially responsible management, and in a favorable investment outlook in terms of the global decarbonization of transport in the coming years, Talgo aims to become a reference in the market as a provider of more sustainable solutions for medium and long-distance trains. In this sense, the company will use its Talgo Vittal platform to position itself in the commuter/medium distance segment, with the Vittal-One product through which it is developing its green hydrogen technology as the most environmentally friendly solution to contribute to the process of decarbonization of transport and which will be the world's first dual hydrogen-electric train.

Note to editors

Talgo S.A., is the leading company in the design, manufacture and maintenance of high-speed light trains with industrial presence in nine countries: Spain, Germany, Kazakhstan, Uzbekistan, Denmark, Egypt, Russia, Saudi Arabia and the United States. The Company is recognized worldwide for its innovative capacity, unique and distinctive technology and reliability. Talgo is the train supplier for the "Haramain" high-speed rail project between Mecca and Medina in Saudi Arabia.

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