The Debutantes

1998 was a bumper year for IPOs. If only the stock-market newcomers knew then what they know now.

In any case, it’s nice finally to be out of crisis mode. Rhodia can now get on with doing what it meant to do after its IPO, Bouchiat says. “It’s a new start for the company.”

Alstom: Train Wrecks

Even without its pre-IPO entertainment, Alstom wins the prize for the most dramatic 1998 debutante. As a spinoff of the UK’s GEC and France’s Alcatel that year, the company was faced with untangling various ownership structures, setting up an entirely new organisation independent of its former parents (which remained major shareholders), and integrating two recent French and German acquisitions, recalls CFO Henri Poupart-Lafarge, who was hired from the French government’s privatisation team to lead investor relations at Alstom shortly before its IPO.

But plans were swiftly thrown off course. Within months of listing, CAC-40 member Alstom was hit by the Asian financial crisis, sending its share price tumbling to around €15, less than half of its listing price, before quickly climbing back up to about €34 following the news of a 50:50 joint venture with ABB. But the relief was short-lived.

By the early 2000s, “we had bad news coming in all directions,” says Poupart-Lafarge, who had moved from IR into finance at Alstom’s transportation and distribution division in 2000. Among the bad news: delayed train contracts, the bankruptcy of Renaissance Cruises, a key customer, and faulty gas turbines that it inherited in the ABB deal, which would cost some €1.6 billion to repair.

How did Alstom get itself into this “almighty mess?” asked one newswire journalist at the time, noting that “slack financial controls, opaque disclosure and technical problems have proved as humbling for Alstom’s management and as disastrous for the company’s shareholders as the internet and telecommunications bubbles have been for so many European companies in those sectors.”

The company certainly had a mountain to climb in restoring investor confidence as bankruptcy threatened in 2003. After warning that it was expecting to record a loss of €1.3 billion that year, its announcement of a sweeping turnaround plan failed to impress the markets, leaving its share price to trade at a dismal €1.36 in March. By the end of the year, all that stood between Alstom and bankruptcy was a €3.2 billion refinancing plan, including a controversial state bailout covering nearly a third of the total. Further European Commission-approved financing took place during the first half of 2004.

It was then that Poupart-Lafarge stepped into the CFO job, joining new CEO recruit Patrick Kron. Alstom’s balance sheet immediately got Poupart-Lafarge’s attention. To avoid the costs of a major refinancing deal, Poupart-Lafarge “took a kind of step-by-step approach, taking advantage of each improvement in our operational situation so that we had no high-yield debt.”

By 2006, Alstom was back in the black, turning a €628m loss the previous year into a profit of €178m, while meeting targets on free cash flow (€525m) and operating margins (5.6%). The good news continued in 2007, with profit of €430m on revenue of €14.2 billion. As for its shares — which were delisted from London in 2003 and New York in 2004 — they hit a post-2005 reverse split high of €165 last November.

So what lessons does Poupart-Lafarge believe the CFOs of 1998′s IPO companies can offer their counterparts in 2008? The first involves “people management.” One of his first jobs as CFO at Alstom, he says, was to rebuild confidence internally, an area that often gets ignored during a crisis at listed companies. He started with his finance staffers, rolling out new training programmes, global job rotations, networking groups and several other HR initiatives.

His refreshed team, he says, formed a key part in Alstom’s new management culture, using finance to instil better rigour and discipline throughout the company. “The lesson is that there is no contradiction between putting in place extremely tight controls and the growth of the company,” he notes.

The other lesson: “We never, ever cut the dialogue with investors, no matter what happened to the company,” says the former IR executive, who organised a series of road shows as soon as he was appointed CFO. Wooing investors might eat up a lot of a CFO’s time, he concedes, “but it pays off.” Better late than never.

Tim Burke is senior staff writer at CFO Europe.

View Class of ’98: The biggest IPOs by European companies that year.

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