Atos targets bottom of its 2022 range of operating margin targets – 27/07/2022 at 08:43

(AOF) – IT services group Atos is more cautious about its operating margin and free cash flows for 2022 after a sharp drop in first-half results. It is now aiming for an operating margin in the lower range of 3% to 5% and free cash flow, also in the lower range of -150 million euros to 200 million euros. On the other hand, Atos still expects revenue growth at constant exchange rates between -0.5% and +1.5%.

In the first half of the year, the operating margin was 59 million euros, or 1.1% of sales, compared to 302 million euros and 5.6% a year earlier.

Free cash flows amounted to DKK -555 million. EUR in the first half of 2022, directly linked to the level of the operating margin for the period, as well as the seasonality of the working capital requirement and extraordinary restructuring costs and reorganizations planned at the beginning of the year and quickly implemented. It was -369 million euros in the first half of 2021.

Sales amounted to 5.563 billion euros, down 0.6% at constant exchange rates. On an organic basis, it fell by 2.1 per cent.

Atos clarifies that the financing of the transformation plan has been secured.

AOF – READ MORE

Central points

– International leader in digital transformation established in 1997, European leader in cloud, cyber security and supercomputing;

– Activity of €10.8 billion, divided into 3 divisions – infrastructure & data management for 54% of sales, business and platform solutions for 34% and big data & cyber security for 10%;

– Geographic balance of revenue: 23% of sales in North America, 25% in Northern Europe, 23% in Central Europe and 22% in Southern Europe;

– Sustainable digital transformation business model;

– Open capital (9.96% for Siemens pension fund and 2.2% for employees), Bertrand Meunier as chairman of the board of 13 members, Rodolphe Belmer is CEO;

– Solid balance sheet with a debt/equity ratio of 28% and a leverage of 1.9, which is why management rules out any capital increase.

Challenges

– New strategy: refocusing on digitalisation, decarbonisation, security and the cloud, which should contribute to 65% of revenue in the medium term / recovery plan in Germany / against a sale of on-site infrastructure and traditional data center activities, i.e. 1/5. of income;

– Innovation strategy developed in 18 R&D centers with a portfolio of 3,000 patents: open innovation via partnerships with university centers (quantum computing, exascale computing, artificial intelligence, HPC, multicultural leadership, etc.), with alliances with other actors (AWS, Dell , Google, Huma, Microsoft, OVHCloud, Sparkle, etc.) and with customers / 2 scientific communities of expert collaborators in the group / Scaler program for cooperation with 50 start-ups;

– Environmental strategy supported by the Digital Transformation Factory, Hybrid Cloud, the “Business Accelerators” solutions, “Connected Intelligence” and “Digital Workplace” and aims to meet 3 major challenges: CO2 neutrality from 2028 and halving emissions by 2025 vs 2021 / sale of decarbonisation solutions, reinforced by the acquisition of EcoAct / investments in hydrogen supercomputers and quantum technologies / launch of the 1st “green” loan;

– Reinforcement of security with the purchase of the British company Cloudreach and the opening of a sovereign security center in Bulgaria;

– Visibility of the activity with an order book corresponding to 2.1 years’ turnover.

Challenges

– Decrease in order intake and reduction of the duration of new contracts;

– Russia-Ukraine war: low income impact (0.4%) but high in terms of workforce, services previously provided from Russia have been transferred to India and Turkey;

– Expected rapid recovery from the loss in 2021 on the back of rumors of takeover bids from Airbus, Orange, etc. and the IPO of BDA and security activities;

– After a start to the year marked by a drop in sales, the 2022 target was confirmed, of revenues from +0.5 to +1.5%, an operating margin of 3 to 5% and free cash flow between +€150m . and € 200 million.

Maximum staff turnover

Companies in the IT services sector have seen more than 20% of their workforce shed in twelve months. This trend is not unusual in the sector, but it reaches an unprecedented scale in a context of strong growth and good recruitment dynamics. In addition, employees have new demands and expectations. The main criterion is the flexibility of the work and the way it is implemented in the company. US-Indian company Cognizant saw around 35% of its 330,000 engineers leave the company in one year. Capgemini, which groups 32,000 French employees, recently suffered its first strike since 2008 to demand a collective increase in pay.

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