About Talgo

1.1

Letter from the chairman

In 2023, we reached a record commercial momentum, with new orders worth over €2.1 billion.

Dear shareholders,

It’s my pleasure to write to you to share Talgo’s outstanding achievements in 2023. This year has been extremely significant for our company, marked by strong financial and commercial performance, technological advances and an ongoing commitment to sustainability and social responsibility.

The data therefore reveal, in terms of financial results, growth of 39% in revenues and 55% in EBITDA in 2023, reaching a record commercial momentum, with new orders worth over €2.1 billion.

Denmark, Germany and Egypt are some of the large-scale projects from 2023. The expansion of the orders from the Danish state railway operator, DSB (Danske Statsbaner), and from the German federal railway company Deutsche Bahn represent new orders, which also contribute to production schedule stability and leave room for industrial improvement. We are also proud to have successfully delivered long-distance trains to Egypt, once again demonstrating our ability to execute large scale projects in diverse environments.

This commercial momentum has been backed up with measures to optimise and increase our industrial capacity, allowing us to more efficiently meet growing market demand. In addition to these efforts, the maintenance service has played a solid role, with stable revenues and margins throughout the year. Both segments reflect the strength and diversification of our business, which remains balanced, providing us with revenue visibility for the short and medium term.

But at Talgo, we always want to provide more and go the extra mile. That’s why we move forward and every day we commit to a global approach to business success, not only measured in financial terms, but also in terms of positive impact on society and the environment. Therefore, we have made significant progress in our sustainability strategy, reducing our greenhouse gas emissions and promoting more responsible practices throughout our value chain.

Our activity, rail transport, is a clear example of our commitment to caring for the environment and sustainable development. We are proud that Talgo’s long-distance train solutions make a significant contribution to reducing carbon emissions and are highly energy efficient compared to other transport options. But, in particular, Talgo’s cutting-edge technology and its know-how place the company as an international benchmark in the decarbonisation of passenger transport.

If we are serious about our impact on society, people must play an essential role at Talgo. This is why I am delighted with everyone’s work towards the safety and well-being of our people, who drive our success.

In short, 2023 was a year of outstanding achievements and strong financial performance for Talgo. We’re committed to continuing to work tirelessly to maintain and exceed these standards for years to come.

We sincerely appreciate your continued support and trust in our company.

Warm regards,

Mr Carlos Palacio Oriol, Chairman of the Board of Directors

1.2

Significant events of the year

Subsequent events

1.3

Main financial results

Main 2023 results (Revenue M€)

2021

2022

2023

+ 0 %

Var. 2022 - 2023

During 2023, despite the supply chain disruptions experienced in 2022, Talgo achieved an increase in the manufacturing rate for ongoing projects, and recorded a turnover of 652 million euros in 2023, representing an increase of 39% compared to 469.1 million euros obtained during the previous year. The revenues mainly reflect the increase in industrial activity in line with manufacturing project schedules.

The company also recorded an EBITDA of 76.3 million euros in 2023, 55% higher than the 49.3 million euros obtained in the previous year. This growth is attributed to increased industrial activity, and also includes extraordinary revenues derived from the extensions of manufacturing contracts with the German company DB and Danish company DSB. Net profit reached 12.2 million euros, representing an eight times increase year on year. However, this increase was offset by the negative impact of interest rate hikes, which resulted in an increase in the Group’s financial expenses.

Operating fund requirements reached 380.5 million euros, reflecting the current phase of the manufacturing cycle and resulting in an increase in net financial debt, which reached 241 million euros. Talgo has a solid financial profile backed by various sources and over 200 million euros available in cash and lines of credit. In addition, in February of this year, the company launched a promissory note programme in the Alternative Fixed Income Market of the Spanish Securities and Exchange Commission with a maximum limit of 150 million euros.

CAPEX investments amounted to 26.4 million euros, in accordance with the initial projections for this period announced at the beginning of the year. Of the total, 74% was allocated to research and development (R&D) activities.

In 2023, Talgo reaffirmed its commitment to shareholder compensation through a flexible dividend programme or ‘Scrip Dividend’, together with the repurchase of shares for a total of 12 million euros, completed in January 2024. 83% of the shareholders chose to receive the dividend in the form of shares instead of cash, thus strengthening their participation in Talgo’s share capital. This decision reflects strong shareholder support and confidence in the company’s future.

Historical order intake record

Talgo closed 2023 with a solid order intake of 4.223 billion euros, representing an increase of 54% compared to 2022. The Company also achieved record highs in new orders worth over 2.1 billion euros.

This strong commercial drive has supported the increase in manufacturing activity, mainly driven by projects in Germany, which include the design and manufacture of 79 Intercity Talgo 230 trains for Deutsche Bahn; in Denmark, with the development of 16 sets of Intercity Talgo 230 cars for DSB; and in Spain, where the contract involves the production of 23 very high speed tractor units and the maintenance of 13 trains, with an additional option of 12 units for Renfe.

Most of the new contracts are extensions of current contracts with Germany’s DB and Denmark’s DSB, as well as the extension of Renfe’s maintenance contract for the Talgo 250 high-speed fleet. These new orders minimise execution risks, while contributing to the stability of manufacturing schedules and leaving room for industrial improvements.

On the maintenance side, Talgo maintains a solid base of contracts in seven countries that provide long-term revenue and activity visibility with a consolidated and constantly growing portfolio.

2024 Outlook

Talgo has confirmed its outlook for 2024 in terms of revenues, supported by the execution of portfolio projects.

In terms of business profitability, Talgo forecasts an EBITDA of 11.5% for the year. Also in 2024, Talgo is establishing a Capex investment forecast of up to 30 million euros. For Net Financial Debt, the company expects to maintain it at 3 times the EBITDA for the year, in line with the expected project cash needs.

Talgo is actively working on commercial opportunities in various markets, including the European continent, for a total value of approximately 5 billion euros for the 2024-2026 period. The company is also studying global projects with a commercial fit and where Talgo technology could find a market on a preliminary basis, worth approximately 20 billion euros.