Industry Summary Articles

Atos, a global leader in digital transformation, high-performance computing and information technology infrastructure, today announces its H1 2024 results.

Jean Pierre Mustier, Atos Chairman of the Board of Directors and Chief Executive Officer, declared:

“The opening of an accelerated safeguard proceedings by the Commercial Court is an important step in Atos’ financial restructuring process. We now have an agreement with our financial creditors that provides ample liquidity to run the Company and establishes strong foundations for the company’s future. This is the start of a new period of recovery and development for the Group, with reinforced focus on serving our customers through innovation and high-quality of service.

Our revenue and operating margin for the semester are in line with the business plan presented on April 29, despite soft market conditions in some of our key geographies. We are investing for our future and our free cash flow reflects increased investments for customers and reduction of one-off working capital optimization.

I would like to take this opportunity to sincerely thank our 92,000 employees for their ongoing commitment and to our customers and partners for their continued support.”

H1 2024 performance highlights

*: at constant scope and June 2024 average exchange rates

H1 2024 performance by Business

*: at constant scope and June 2024 average exchange rates

Group revenue was €4,964 million in H1 2024, down -2.7% organically compared with H1 2023.

Eviden revenue decreased by -4.2% organically.

• Digital activities decreased mid-single digit. While revenue grew in Southern Europe with public sector and utility customers, the business was impacted by the general market slowdown in Americas and by contract scope reductions in the UK.
• Big Data & Security (BDS) decreased low-single digit. Revenue in Advanced Computing was up slightly, with stronger activity in Denmark and in France. Revenue in Digital Security decreased, impacted by a delay in ramping up a large project in Europe.

Tech Foundations revenue decreased by -1.4% organically.

• Core revenue (excluding BPO and value-added resale (“VAR”)) decreased by low-single digit. Stronger contributions related to the Paris Olympic & Paralympic games and the UEFA contract were offset by slowdown with banking and manufacturing customers in Central Europe as well as by contract scope and volume reductions in Americas and Southern Europe.
• Non-core revenue grew low-single digit during the semester, reflecting a moderate growth in BPO activities in the United Kingdom and a strong demand for hardware and software products from European customers during the first quarter.

Group operating margin was €115 million representing 2.3% of revenue, down -100 basis points organically compared with H1 2023:

• This margin decrease comes mainly from the allocation to the business of SG&A costs previously allocated to Other expenses, as part of the separation project in prior year
• Eviden’s operating margin was €58 million or 2.4% of revenue, down -230 basis points organically. Beyond the allocation of SG&A costs, profitability was also impacted by revenue decrease and lower utilization of resources.
• Tech Foundations’ operating margin was €57 million or 2.2% of revenue, up +30 basis points organically. The business benefitted from the continued execution of its transformation program. There was also a positive impact from the accelerated reduction of under-performing contracts via renegotiation and improved delivery, which more than compensated the SG&A cost allocation.

H1 2024 performance by Regional Business Unit

*: At constant scope and June 2024 average exchange rates

Americas revenue was €1,108 million, down -6.9% organically, reflecting a general slowdown in market conditions.

• Eviden revenue was down low-double digit impacted by contract completions and volume decline in Healthcare and Finance. The delivery of a supercomputer project in South Americas in H1 2023 also provided a higher prior year comparison basis for BDS.
• Tech Foundations revenue declined low-single digit due to contract completions and scope reductions with select customers.

Operating margin was €99 million or 8.9% of revenue, down -60 basis points organically. Eviden’s margin declined, impacted by revenue decrease. Tech Foundations margin improved reflecting stronger productivity and costs improvements.

Northern Europe & Asia-Pacific revenue was €1,542 million, down -1.3% organically.

• Eviden revenue declined low-single digit. The revenue increase at BDS due to new business in advanced computing with an innovation center in Denmark was offset by the decline of Digital revenue, reflecting a lower demand from Public Sector, Healthcare and Insurance customers.
• Revenue in Tech Foundations was down low-single digit, with volume decline in the healthcare, in Insurance and Public sector.

Operating margin was €66 million, or 4.3% of revenue, up +40 basis points organically thanks to margin expansion at Tech Foundation, particularly in Asia with Banking customers and in the UK with BPO contracts.

Central Europe revenue was €1,077 million, down -4.5% organically.

• Eviden revenue declined mid-single digit, impacted by a project delay in Mission Critical Systems and contract ramp downs in Manufacturing and in Defense
• Tech Foundations revenue declined mid-single digit, reflecting volume reduction in Manufacturing and in Banking sectors, and delays in public sector spending.

Operating Margin was €-4 million or –0.3% of revenue, down -130 basis points organically. Profitability was impacted by revenue decrease and lower utilization of Eviden employees.

Southern Europe revenue was €1,084 million, stable organically.

• Eviden revenue grew low-single digit. Digital activities grew, benefitting from the ramp-up of large contracts in Spain and with a major European utility company in France. Revenue in BDS grew thanks to HPC deliveries in France.
• Tech Foundations revenue declined low single-digit due to contract completions with select customers.

Operating margin was €46 million or 4.3% of revenue, slightly up by +40 basis points organically thanks to strong improvement of BDS profitability following ongoing contracts deliveries.

Others and global structures which encompass Middle East, Africa, Major Events as well as the Group’s global delivery centers and global structures.

• Revenue of Middle East, Africa, Major Events was €154 million, up +9.2% organically, reflecting stronger contributions related to the Paris Olympic & Paralympic Games and the UEFA contract.
• Operating margin of Middle East, Africa, Major Events was €-7 million and decreased by €17 million reflecting higher marketing expenses for Major Events as planned.

• Global delivery centers net costs were €-42 million, an improvement of €+6 million compared with H1 2023.
• Global Structures net costs were €-44 million and increased by €22 million, impacted by higher SG&A costs allocated to Operating Margin (rather than allocated to Other expenses).

Order entry and backlog

H1 2024 commercial activity

Order entry reached €3.6 billion in H1 2024. Eviden order entry was €2.0 billion and Tech Foundations order entry was €1.6 billion.

Book-to-bill ratio for the Group was 73% in H1 2024, down from 93% in H1 2023, reflecting delays in contract awards as clients await the final resolution of the Group’s refinancing plan.

Eviden reported a book-to-bill ratio of 85% for the first half, decreasing by -14 points compared with H1 2023. Book-to-bill slightly improved in Q2 2024 at 86% vs 83% in Q1 2024 Main contract signatures in the second quarter included a project to deliver a control room for a major European utility provider, the renewal of an application management contract with a German telecommunication provider and a new contract with a Spanish bank for application management services,

Tech Foundations reported a book-to-bill ratio of 63% for the first half, down from 87% in H1 2023 with a strong recovery in Q2 2024 at 79% vs 47% in Q1 2024. Main contract signatures in the second quarter included several renewals, notably a 4-year renewal to provide mission critical systems as well as hybrid cloud & security services to the European Organisation for the Safety of Air Navigation (Eurocontrol).

Backlog & commercial pipeline

At the end of June 2024, the full backlog reached €15.7 billion representing 1.6 years of revenue. The full qualified pipeline amounted to €5.4 billion at the end of June 2023, representing 6.4 months of revenue.

Human resources

The total headcount was 91,611 at the end of June 2024, decreasing by -3.7% compared with the end of December 2023. During the first half, the Group hired 5,819 staff (of which 94.1% were Direct employees), while attrition rate in the first half of 2024 was at 14.3% vs 15.0% in 2023.

Net income

Net loss group share was €-1,941 million, primarily reflecting a €-1,570 million impairment charge.

Normalized net loss[1] stood at €-124 million compared with a loss of €-113 million in H1 2023.

Free cash flow

Free cash flow was €-1,914 million for the half year reflecting the planned reduction by €1,320 million of working capital optimization compared to December 31, 2023. Also, decision has been made to prioritize clients capital expenditures and R&D, which will translate into future earnings and conversely to save on restructuring costs in order to manage our cash position. This translated in €+168 million higher capital expenditures in H1 2024 compared to H1 2023 and to €-103 million lower reorganization, rationalization and integration costs.

Finalisation of the process protecting the sovereign interests of the French State by end of October

On June 26, 2024, Atos announced, further to the agreement announced on April 9, 2024, that it has finalized negotiations with the French State of an agreement aimed at protecting the sovereign interests of the French State with respect to certain activities carried out by the Atos group. This agreement, approved on June 25 by the Atos Board of Directors, was signed on June 26, 2024.

The rights granted to the French State will initially result from the agreement and will be supplemented by the issuance by Bull SA of a preferred share (action de preference) for the benefit of the French State.

The French State will benefit from governance rights at the level of Bull SA, in particular rights of representation on corporate bodies (without voting rights at this stage) and prior authorization and approval rights (droits d’autorisation préalable et d’agrément) designed to protect sovereign sensitive activities.

The agreement also provides for a right for the French State to purchase sovereign sensitive activities if a third-party has acquired 10% or a multiple of 10% of Atos’ or Bull SA’s share capital or voting rights and that the parties have not reached a reasonable agreement on how to protect national interests in relation to these sovereign sensitive activities (without prejudice to the application of the French FDI regime).

The issuance of this preferred share is expected in the course of the second semester of 2024.

Contemplated disposal of BDS’ Advanced Computing, Mission-Critical Systems and Cybersecurity Products businesses to the French State

On June 14, 2024, Atos SE announced that it had received a non-binding confirmatory offer letter from the French State regarding the potential acquisition of 100% of the Advanced Computing, Mission-Critical Systems and Cybersecurity Products activities of its Big Data & Cybersecurity (“BDS”) division.

This non-binding confirmatory offer is for a total enterprise value of €700 million.

Atos’ Board of Directors, under the aegis of the Conciliator Maître Hélène Bourbouloux, and the Company’s management are discussing this proposal with the French State, noting that no assurances can be made that the parties will successfully negotiate and enter into a definitive agreement.

Binding offer received from ALTEN for Worldgrid

On June 11, 2024, Atos announced it has entered into exclusive negotiations with ALTEN SA (“ALTEN”) for the sale of its Worldgrid business unit for a binding enterprise value of €270 million.

The Group confirms that the transaction is expected to close before the end of 2024 and is subject to the consultation of the relevant employee representative bodies and other customary regulatory approvals.

Liquidity, financial restructuring and continuity of operations

The Group’s half-year interim condensed consolidated financial statements for the six months ended June 30, 2024 have been prepared on a going concern basis. The Group’s cash flow forecasts for the twelve months following the approval of the 2024 half-year interim condensed consolidated financial statements by the Board of Directors result in a cash situation that meets its liquidity needs over that period.

The cash forecasts, which take into account the latest business forecasts, have been prepared in particular based on the following assumptions:

• The interim financing of €800 million has been secured, thus providing the liquidity necessary to fund the business until the close of the financial restructuring plan;
• The short-term interim financing to be refinanced with the €1,750 million new money debt in an amount from €1.5 billion to €1.675 billion, as well as €75 million in the form of backstop in cash of rights issue;
• The proceeds from the sale of the Worldgrid business unit to ALTEN for an enterprise value of €270 million.

At June 30, 2024, cash, cash equivalents, and short term financial assets of the Group amounted to €881 million, including the benefits of working capital optimization at June end. Borrowings amounted to €5,098 million, of which €2,400 million of bonds and €2,600 million of bank financing. As a result, the total net debt for the Group amounted to €4,218 million at June 30, 2024. In addition, the Atos SE’s leverage ratio applicable to the multi‑currency revolving credit facility and the Term Loan A amounted to 7.32x at June 30, 2024.

Atos SE wishes to draw attention to the maturity of Atos SE’s borrowings and the risks associated with its refinancing. The coming maturities of its borrowings are as follows:

• the €1.5 billion Term Loan A, which expired on July 29, 2024, since the extension request shall be considered as being without effect because of the opening of the accelerated safeguard procedure on July 23, 2024;
• the €500 million bond (Optional Exchangeable Bond) maturing in November 2024;
• the €750 million bond maturing in May 2025;
• the €900 million revolving credit facility maturing in November 2025;
• the €50 million NEU MTN maturing in April 2026;
• the €350 million bond maturing in November 2028; and
• the €800 million bond (Sustainability‑Linked Bond) maturing in November 2029.

It should be noted that in the context of the opening of the accelerated safeguard procedure announced on July 24, 2024, a debt freeze is now in effect, prohibiting the payment of assigned receivables arising prior to the opening of the accelerated safeguard and of certain debts arising after the opening relating to assigned receivables that are not useful for the restructuring – this rule does not apply to creditors who are not affected by the accelerated safeguard procedure.

As stated in its press release of February 5, 2024, Atos SE has entered into discussions with its banks and bondholders with a view to reaching a global agreement on the restructuring of its financial debt. These discussions, that were held under the aegis of the CIRI (“Comité Interministériel de Restructuration Industrielle”) and the mandataire ad hoc appointed since the beginning of February 2024, continued under an amicable conciliation procedure in order to frame these discussions and facilitate the emergence of a global agreement within a short and well‑defined timetable. These discussions led to an agreement on the terms of the financial restructuring between the Company and a group of banks and bondholders, as announced on June 30, 2024 by the Company, and to the conclusion of a Lock-Up Agreement with a majority of the Company’s financial creditors, as announced on July 15, 2024 by the Company.

In this context, on July 24, 2024, the Company announced the opening of an accelerated safeguard proceedings in order to implement and obtain the approval of the Nanterre Specialized Commercial Court on the terms of the financial restructuring plan agreed in the Lock-Up Agreement. The main features of the financial restructuring plan agreed in the Lock-Up Agreement consist of €1,750 million of new funding, a debt reduction of €3.1 billion and no debt maturing before year-end 2029.

The plan should be implemented through several capital increases and debt issuances from November 2024 until January 2025, as well as the provision of €800 million short-term interim financing available to the Company secured until closing and to be refinanced with the €1,750 million New Financings to be put in place before year-end 2024.

Considering the interim financing, the Group has sufficient liquidity to operate business until the financial restructuring plan is implemented.

As indicated in its previous communications, the Company reminds that the implementation of the contemplated financial restructuring plan will result in massive dilution for existing Atos shareholders, who should, if they do not participate in the envisaged share capital increases, hold less than 0.1% of the share capital.

The implementation of the financial restructuring remains subject to the fulfilment of several conditions precedent, including in particular:

• Finalization and conclusion of the long form financial restructuring documentation, including the accelerated safeguard plan;
• Approval by the AMF of the securities notes (note d’opérations) relating to the contemplated capital increases;
• Receipt of a report from an independent expert confirming that the terms of the proposed financial restructuring (including in relation to the capital increases) are fair from a financial perspective in accordance with the AMF General Regulation, as customary for transactions of this nature;
• Judgment of the specialized Commercial Court of Nanterre (Tribunal de Commerce spécialisé de Nanterre) approving the accelerated safeguard plan implementing the definitive financial restructuring agreement; and
• Obtaining regulatory approvals, if applicable.

However there remains an uncertainty upon the ability of the Group to continue as a going concern in the event that the Group is unable to implement the envisaged financial restructuring plan. In that case, Atos SE may not be able to realize its assets or settle its liabilities within the ordinary course of its operations, and the application of IFRS accounting standards in the ordinary context of going concern, in particular with regards to the measurement of assets and liabilities, may not be appropriate.

Appointment by the Board of Directors of Sorgem Evaluation as Indepent expert for the purpose of providing an opinion on the financial restructuring

As announced in the Company’s press release dated June 30, 2024, the Board of Directors of the Company has appointed, on a voluntary basis pursuant to Article 261-3 of the AMF’s General Regulation, and on the proposal of the Company’s ad hoc Committee, the firm Sorgem Evaluation, represented by Mr. Maurice Nussenbaum and Mr. Florent Myara, as independent expert, for the purpose of providing an opinion on the financial restructuring. The independent expert will assess the financial conditions of the financial restructuring for shareholders and issue a report containing a fairness opinion, which will be made available to shareholders prior to the consultation of the shareholders class and in accordance with applicable legal and regulatory provisions.

Conference call

Atos’ Management invites you to an international conference call on the first half 2024 results, on Thursday, August 1^st, 2024 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/zhqvn6mm

• 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/BI5cd807d79f3647af929cb468aa6e0026

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.

The press release will be issued on Thursday, August 1st, 2024 at 07:30 am (CET – Paris).

To view the original press release, please click here.

Search for Atos on CIMdata.com