Atos, a global leader in digital transformation, today announces its FY 2019 results.
Elie Girard, CEO, said: “We completed 2019 on a strong note exceeding +2% organic growth in the fourth quarter, led by an acceleration of our performance in Cloud, and in Big Data and Cybersecurity. The dynamic commercial activity throughout the year reflects our ability to drive our clients’ enterprise-wide and end-to-end digital transformation initiatives. We also improved our operational profitability in 2019 and delivered a solid free cash flow exceeding 600 million euros. I am proud of the dedication of the Atos teams in attaining such a performance.
With the acquisition of Syntel and the disengagement from Worldline, completed earlier this month under very favorable conditions, the Group has achieved a first step in repositioning itself towards a pure digital player, while enhancing shareholder return and keeping full financial flexibility. Atos is now ready to move forward to the next step.
2020 will be a year of exciting transformation, with further improvement in business and financial objectives for the year. The Group is moving to an Industry approach, developing and attracting the highest level of expertise in each Industry, reshaping its portfolio of offerings and go-to-market, to serve our customers even better and drive our culture of customer obsession even further.
This transformation initiated in 2020 also aims at addressing the latest and most prominent of our customers’ increasing digital needs, namely their cyber-protection and a step change towards decarbonization. With a renewed financial flexibility, the Group can now contemplate bolt-on acquisitions to support and accelerate this transformation, as demonstrated earlier this year with the acquisition of Maven Wave, a Cloud transformation leader based in North America. I will be delighted to present in further details our ambition and strategy for Atos, defined together with the Board of Directors, at our Analyst Day on April 22nd.”
Revenue was € 11,588 million, +1.4% organically, particularly led by the Cloud performance and Big Data & Cybersecurity.
Operating margin was € 1,190 million, representing 10.3% of revenue, compared to 9.8% in 2018 at constant scope and exchange rates. Each Division contributed to the operating margin increase, Infrastructure & Data Management benefitting from automation and the RACE program, Business & Platform Solutions from the cost synergies with Syntel, Big Data & Cybersecurity from the topline growth. Finally, corporate central costs were reduced thanks to continued efforts on expense optimization.
In a year with much less contracts coming for renewal, the commercial dynamism of the Group was particularly high in 2019 with order entry reaching € 12.2 billion, representing a book to bill ratio of 106% compared to 111% in 2018 at constant rate. During the fourth quarter, the book to bill reached 121%.
Net income from continuing operations Group share was € 414 million, and Normalized net income from continuing operations Group share reached € 834 million. Basic and diluted EPS both reached € 3.84 and Normalized basic and diluted EPS both reached € 7.74.
Free cash flow reached € 605 million in 2019, excluding € 37 million of one-off items related to the Optional Exchangeable Bonds (OEB)[3].
Net debt was –€ 1.7 billion at the end of 2019 reflecting the free cash flow generated during the year, the sale of Worldline shares in November 2019, the acquisition of IDnomic during the year, the dividends paid in cash and the share buy-back to deliver performance shares.
2020 objectives
In 2020, the Group targets the following objectives for its 3 key financial criteria:
Revenue: 2% organic growth
Operating margin rate: +20bp to 40bp vs 2019
Free cash flow: € 700 million
Commercial activity
The commercial dynamism of the Group was particularly high in 2019 with order entry reaching € 12.2 billion, representing a book to bill ratio of 106% compared to 111% in 2018 at constant rate. During the fourth quarter, the book to bill reached 121%.
Several large new contracts were signed over the period in Infrastructure & Data Management, which contributed to growth in Hybrid Cloud and Digital Workplace. In particular, large order entries were recorded in North America with a leading healthcare company, with National Grid, the NG911 contract with the State of California and with Entergy. In addition, Germany closed several major deals notably with BASF and Itergo, whereas Benelux & The Nordics concluded a large contract in the Public & Health sector. Business & Platform Solutions signed new contracts notably in Benelux & The Nordics such as Fortum within Manufacturing, Retail & Transportation and a Dutch insurance company within Financial Services. Big Data & Cybersecurity pursued its strong commercial dynamics, fueled by a large win in the United Kingdom with the European Centre for Medium-Range Weather Forecast and in France with Météo France as well as in Germany with Bayer.
Full backlog increased to € 21.9 billion from € 21.4 billion at the end of 2018, representing almost 1.9 years of revenue. The full qualified pipeline reached € 7.4 billion compared to € 6.9 billion at the end of 2018.
Operating income and net income
Operating income reached € 660 million in 2019, compared to € 630 million in 2018, resulting from the following items:
Staff reorganization amounted to €-100 million with the acceleration of the adaptation of the Group workforce in several countries. The increase in 2019 came mostly from the specific plan in Germany.
Rationalization costs were €-34 million resulting from the closure of office premises and data center consolidation, mainly in North America and France.
Integration and acquisition costs amounted to €-41 million and were mainly related to the integration costs of Syntel to generate synergies as well as migration and standardization of internal IT platforms from previous acquisitions.
€-157 million were recorded as Purchase Price Allocation amortization, compared to €-107 million in 2018. Syntel customer relationships and technologies amortization was €-67 million in 2019.
Equity based compensation plans amounted to €-73 million in 2019 compared to €-36 million in 2018, the small amount recorded in 2018 reflected the lower performance and the decrease in the number of shares granted in 2018.
In 2019, other items increased from € -40 million to € -125 million. Most of the increase came from:
the sale of Worldline shares in November 2019. From an accounting standpoint, the book value of the Worldline shares was the valuation at the time of the distribution of the shares on May 7 (stock price at € 54.7) plus the portion of Worldline net income from May to October. As the sale of Worldline shares was fixed at € 53, the Group recorded a loss of €-53 million in its consolidated financial statements net of costs of disposal;
the settlement signed with a large telco operator in Germany over H2 2019 led to the recognition of a one-time charge of € 23 million.
Net financial expense amounted to €-208 million for the period compared to €-67 million for 2018. The increase mainly came for circa €-50 million from additional interest expenses to finance Syntel acquisition, € -54 million related to the part of the Optional Exchangeable Bonds which is treated as a derivative from an accounting standpoint and €-27 million of lease liability interests further to the first time application of IFRS 16. Finally, foreign exchange was of €-4 million compared to a gain of €+4 million last year.
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