Atos, a global leader in digital transformation, high-performance computing and information technology infrastructure, announces its financial results for the first half of 2023.
Atos’ leadership team, Nourdine Bihmane, Diane Galbe and Philippe Oliva, declared: “Atos H1 results reflect our continued operational improvement and demonstrate the effectiveness of our strategy. Our robust H1 organic growth prompted an upgrade to our full-year outlook, and our operating margin more than tripled compared to H1 last year, thanks to strong execution of our transformative initiatives. While we improved our underlying operational cash generation by €144 million, our free cash flow reflects the intense pace of delivery on our major transformative actions carried out through 2023, including margin expansion through restructuring and tackling underperforming contracts, internal carve-out and working capital normalization. We have achieved key milestones in our strategic project, notably the successful completion of separating our internal operations into two entities, enabling us to sharpen our focus, enhance our agility and better serve our customers. Within a 12-month timeframe, we have also fully secured our €700 million disposal program of non-core businesses, which has streamlined our portfolio and contributed to the financing of our ongoing transformation. We would like to express our gratitude to all Atos teams for their unwavering dedication and commitment, which have played a decisive role in the results achieved so far.”
|
In € million |
H1 2023 |
H1 2022 |
|
Revenue |
5,548 |
5,563 |
|
Organic growth |
+2.3% |
-2.1% |
|
Growth at constant currency |
+0.5% |
-0.6% |
|
Operating Margin |
212 |
59 |
|
In % of revenue |
3.8% |
1.1% |
|
OMDA |
487 |
369 |
|
In % of revenue |
8.8% |
6.6% |
|
Normalized Net income (loss) |
-113 |
-119 |
|
Net income (loss) |
-600 |
-503 |
|
Free Cash Flow |
-969 |
-555 |
|
Net debt |
2,321 |
1,792 |
H1 2023 performance highlights
Strong commercial traction in Q2
Commercial traction improved significantly in Q2, with a 112% Book-to-bill at the Group level, compared to 73% in Q1. The implementation of distinct go-to-market strategies for the two perimeters is producing tangible results.
Eviden’s book-to-bill was 119% in Q2, well balanced between Digital, Big Data and Cybersecurity, with a solid order entry (+50% vs. Q1 2023) showcasing the strong differentiating factors that set Eviden apart, including unique secured cloud migration capabilities and deep expertise in selected industries. As an illustration Eviden won a contract with a major healthcare company in the US for public cloud migration combining application development and cybersecurity. In Q2, Eviden also continued to focus on short-term revenue generation contracts (48% of Q2 order entry was made of contracts with durations below 18 months).
Tech Foundations’ book-to-bill was 106% in Q2, exceeding 100% for the first time since the business line was created in Q2 2022, compared to 67% last year. Tech Foundations began reaping the benefits of its refocused go-to-market strategy, improving fertilization of its top 100 accounts and successfully driving revenue retention, notably in the US where Tech Foundations secured major long-term contract renewals in Q2, demonstrating its ability to foster long-lasting customer relationships. As an example, Tech Foundations renewed a contract with the Texas Department of Information Resources for private cloud and mainframe-as-a-service, delivering adaptative, resilient and cost-effective services to over 35 state agencies.
Robust organic revenue growth
Group revenue was €5,548 million in H1 2023, up +2.3% on an organic basis, as robust business trends continued into Q2. Eviden delivered +7.0% organic growth in H1 (+4.6% in Q2). Digital Security achieved strong growth, fueled by Eviden's leadership and innovation in cybersecurity. In June 2023, Eviden partnered with AWS to launch AIsaac Cyber Mesh, a cutting-edge cybersecurity detection and response solution powered by generative AI technologies. Advanced computing grew strongly, driven by HPC and high-end servers designed for artificial intelligence and machine learning. Despite some impacts from contract portfolio rationalization in H1 2023, Digital's organic growth improved significantly compared to the same period last year, driven by smart platforms and cloud transformation services, along with positive trends in the public sector in Europe.
Tech Foundations’ core business revenue[1] was broadly stable in H1 (-0.1% organic). The decline of Hybrid Cloud & Infrastructure continued to soften, while other core business lines posted moderate growth. Simultaneously, Tech Foundations remained committed to reducing non-core activities (BPO, hardware & software resale) as part of its ongoing portfolio reshaping efforts. UCC, in the process of being divested, grew its revenue in H1. As a result, Tech Foundations recorded a slight organic decrease of -1.6% in total revenue in H1 2023.
At the Group level, changes in perimeter accounted for -1.7%, primarily reflecting the divestment of Atos Italian operations, finalized on April 3, 2023, and of Russian activities in September 2022. Foreign exchange contributed -0.8%, mainly reflecting the depreciation of the Pound Sterling against the Euro over the period.
Strong improvement in operating margin
Operating margin was €212 million, or 3.8% of revenue, a strong improvement compared to H1 2022 (€59 million or 1.1% of revenue). Eviden’s operating margin was € 138 million, or 5.3% of revenue, a substantial increase compared to 3.5% in H1 2022. Despite continued cost inflation, Eviden demonstrated improvements across all activities, resulting from effective cost take-out actions, portfolio rationalization, and higher fixed costs absorption in Advanced Computing.
Tech Foundations’ operating margin amounted to €73 million, or 2.5% of revenue, compared to -1.0% in H1 2022. Tech Foundations is making steady progress on its comprehensive margin expansion plan targeting €1.2 billion in gross benefits by 2026. As of June 2023, 32% of this target has already been achieved, translating into a € 230 million gross increment in operating margin in H1 2023 alone, partly offset by cost inflation, backfills and revenue decrease. This achievement was primarily driven by 900 headcount reductions in high-cost countries during H1, bringing the total to c. 1,600 since the plan’s inception.
Free cash flow and net debt
Atos’ adjusted cash flow from operations[2] showed a notable €144 million improvement, at €-200 million in H1 2023, compared to H1 2022 (€-344 million), demonstrating the tangible progress made in enhancing the Group’s underlying operational cash generation through better OMDA and strict control of capital expenditure and leases. Including the impact of transformative actions and associated costs (€-274 million), as well as a one-off working capital normalization impact in the context of the Group’s transformation (approximately €-250 million), free cash flow was €-969 million in H1 2023.
Net debt was €-2,321 million at the end of June 2023, compared to €-1,792 million at the end of June 2022.
2023 full-year outlook
In 2023, Group revenue organic growth is now expected between 0.0% and +2.0% (previously: -1.0% to +1.0%), with an acceleration of Eviden’s organic growth compared to 2022 and a managed reduction of Tech Foundations’ revenue resulting from portfolio reshaping.
Group operating margin[3] outlook remains unchanged, at 4% to 5%. Eviden’s operating margin is expected to increase compared to 2022, while Tech Foundations’ operating margin is expected in positive territories.
Free cash flow for the full year is expected to remain broadly similar to that of H1.
Major achievements in strategic transformation project
Completion of operational carve-out
Atos announces the completion of its internal operational carve-out within a 12-month timeframe. This is a decisive step in the execution of Atos’ strategic transformation project.
Primary local carve-outs and underlying separation activities have been successfully executed in all countries[4]. These include legal entity operationalization, and the transfer of employees, contracts, assets and liabilities to new legal entities where legal and regulatory laws allow.
As a result, Tech Foundations and Eviden are now fully operational as separate entities within the Atos Group. Each entity has a distinct operating model, go-to-market strategy and a focused portfolio, enabling them to cater to specific customer needs. Atos has therefore completed the rollout of its new client-centric organization fostering innovation, performance and consistent value delivery to all of the Group’s stakeholders.
€700 million divestment program fully secured and expanded by an additional €400 million
On July 3rd, 2023, Atos announced it had entered into exclusive negotiations with Schneider Electric for the sale of 100% of EcoAct. This proposed transaction, combined with the other divestments already successfully closed or secured, would allow Atos to complete its non-core businesses divestment program of €700 million set during the Group's Capital Markets Day on June 14, 2022. This achievement highlights Atos' determination to swiftly execute this program, which streamlines the Group’s portfolio and contributes to the financing of its ongoing transformation.
When devising its divestment program and refining the scope of its two future entities, the Group identified additional opportunities to rationalize its portfolio, which have already garnered expressions of interests. As a result, the divestment program is expanded by an additional €400 million.
Human resources
Total headcount was 107,013 at the end of June 2023, down -3.4% compared to 110,797 at the end of December 2022 (-1.9% organically).
In H1 2023, Atos hired 8,431 new employees (gross), effectively offsetting voluntary attrition, which stood at 18% at the end of June on a trailing twelve-month basis, and 15% in Q2 alone. The reduction in Group headcount was due to restructuring and performance-related terminations, resulting in 2,404 exits in H1. Additionally, the divestment of Atos Italia in Q2 2022 accounted for a reduction of 1,647 employees.
Analyst and investor conference call
Atos’ Management invites you to an international conference call on the Group first half 2023 results, on Friday, July 28, 2023 at 09:00 am (CET – Paris).
You can join the webcast of the conference:
- via the following link: https://edge.media-server.com/mmc/p/asskej2s
- 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 conference using the following link: https://register.vevent.com/register/BIc37aebd991a74fd0841095e7843f6e9f
Upon registration, you will be provided with Participant Dial In Numbers, a Direct Event Passcode and a unique Registrant ID. Call reminders will also be sent via email the day prior to the event.
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.
