Referring to EU regulation No. 596/2014, which provides that issuers shall inform the public as soon as possible of inside information directly relevant to them, Atos announces the adjustment of its 2021 annual objectives. The first semester figures are not finalized nor audited, the detailed first semester accounts will be published as planned on July 28, 2021.
During the second quarter, revenue growth at constant currency came back to stability. However, organic growth remained negative at c. -1.5% due to an accelerated decline of legacy infrastructure business in a context of a much stronger demand for post-COVID cloud migration. The Group anticipates that this business shift will persist during the second semester. The other Group businesses benefitted from the economic recovery driving a booming digital demand. In this context, the Group adjusts its objective of revenue growth at constant currency for the full year to stable.
Although for this year the Group had anticipated a higher seasonality between the first and second semester, operating margin was lower than expected in the first semester at c. 5.5%. Considering the revenue adjustment over the full year, impacting legacy activities with a low short term cost flexibility, the Group adjusts its operating margin objective to c. 6.0% for the full year. As a consequence of this unprecedented impact on the business, several exceptional items (write-off of assets, loss provisions) have been booked under “Other Operating Income and Expenses”. This line amounted to a total of c. €-160 million in the first semester.
During the first semester, free cash flow amounted to c. €-364 million compared to €-172 million during 2020 first semester. Free cash flow was mainly impacted by working capital and in particular by a reduction in cash in advance from customers. Moving forward, the Group decides to reduce cash in advance from customers. The adjusted objective for 2021 is a positive free cash flow, to reflect the impacts from the operating margin objective reduction, and working capital, more specifically on client advance payments. The new objective also assumes the entire one-off € 180 million cash outflow in 2021 for the German turnaround plan (see below).
Transformation agenda and mid-term targets
In this context, the Group has decided to accelerate its transformation -both organically and inorganically- by expanding its achievements in, and focusing on, Digital, Cloud, Security, and Decarbonization.
In particular, the strategic portfolio review of non-core assets is being finalized and the Group will communicate on its conclusions on July 28, 2021, so as to move to execution swiftly.
Negotiations with social partners regarding the necessary turnaround of the German infrastructure business have concluded to a restructuring plan of c. 1,300 people, providing an additional 1% operating margin at Group level mid-term. The plan will be detailed on July 28, 2021.
After a year of transition in 2021, the Group expects to improve on all its KPIs in 2022 and maintains its mid term targets of revenue growth at constant currency from +5% to +7%, operating margin rate from 11% to 12% and free cash flow conversion above 60%.
North America Audit Follow up
Regarding the audit of the US legal entities, the Group decided in April this year to perform a full accounting review of those entities as of December 31, 2020, supported by external advisors.
This work is being finalized and at this stage misstatements identified are not material. The auditors’ work is also ongoing as part of their half year review.
The completion of this process is targeted to be achieved at the time of H1 release on July 28, 2021.
Besides, the remediation and prevention plan has been finalized and is being rolled out.
Appendix
|
Adjusted Objectives (July 12, 2021) |
Initial Objectives (February 18, 2021) |
|
|
Revenue growth at constant currency |
Stable |
3.5% to 4.5% |
|
% Operating Margin to revenue |
c. 6.0% |
9.4% to 9.8% |
|
Free Cash Flow |
Positive |
€550 to €600 million |
Conference call
The Management of Atos invites you to an international conference call, on Monday, July 12, 2021 at 08:00 am (CET – Paris).
You can join the webcast of the conference:
- via the following link: https://edge.media-server.com/mmc/p/cvgjqzz9
- by telephone with the dial-in, 10 minutes prior the starting time. Please note that if you want to join the webcast by telephone, you must register in advance of the conferenceusing the following link: http://emea.directeventreg.com/registration/9249267
Upon registration, you will be provided with Participant Dial In Numbers, a Direct Event Passcode and a unique Registrant ID. During the 10 minutes prior to the beginning of the call, you will need to use the conference access information provided in the email received upon registration.
After the conference, a replay of the webcast will be available on atos.net, in the Investors section.
The press release will be issued on Monday, July 12, 2021 at 07:30 am (CET – Paris).
Forthcoming events
July 28, 2021 First semester 2021 results
October 21, 2021 Third quarter 2021 revenue
