Atos Market Update - September 2, 2024
Press release
Market Update
Atos updates its financial projections
for 2024-2027 to reflect H1 2024 results, the current business
environment in its key markets, and the expected impact on free
cash flow1
No impact on
the key terms of the financial restructuring plan agreed by a
majority of the financial creditors and on 2024-2027 liquidity
needs
- Lower cash interest expense
reflecting the terms and conditions of the financial restructuring
plan2
- Positive cash generation expected
in 2026, while lower than previously planned3
- Leverage ratio expected to be below
2.0x during 2027 vs by end-2026 previously
- Target to recover a BB credit
profile in the course of 2027, well ahead of end-2029 debt
refinancing milestones
Expected timing to implement
pre-arranged financial restructuring plan through the accelerated
safeguard proceedings remains unchanged
-
Meeting for the vote of classes of affected parties on the
accelerated safeguard proceedings expected on September 27,
2024
-
Court hearing for the approval of the accelerated safeguard plan
expected on October 15, 2024
-
Following Court approval, implementation of the plan through
several capital increases and debt issuances from November 2024
until January 2025
Implementation of the proposed financial
restructuring plan will result in massive dilution of Atos existing
shareholders
Paris, France
– September 2, 2024 – Atos SE (“Atos” or
the “Company”) announces today an update of the
financial projections for the 2024-2027 period to reflect H1 2024
results, the current business environment and the expected impact
on the Group free cash flow. Atos previously published its
2024-2027 business plan on April 29, 2024 as part of its financial
restructuring process.
The updated business
plan is based on the current Group perimeter.
20244
Group 2024 revenue of €9.7 billion compares with
€9.8 billion communicated previously and represents an organic
revenue evolution of circa -4.0% compared with 2023, and circa
-3.3% compared with the business plan communicated on April 29,
2024.
Group Operating margin of €0.2 billion, or 2.4%
of revenue, compared with €0.3 billion, or 2.9% of revenue,
communicated previously.
Change in cash before debt repayment of €-0.8
billion compared with €-0.6 billion communicated previously. It
excludes the full unwind of the working capital actions of circa
€1.8 billion as of December 31, 2023, which will be covered from
cash on the balance sheet.
20275
The Group’s revenue of €10.6 million in 2027
compares with €11.0 billion communicated previously and represents
a revenue CAGR6 of +1.2% over the
2023PF7-2027 period, compared with circa +2.3%
communicated on April 29, 2024.
The Group Operating margin of €1.0 billion, or
9.4% of revenue, compared with €1.1 billion, or 9.9% of revenue,
communicated previously.
Change in cash before debt repayment of €0.4
billion compares with €0.3 billion communicated previously.
On a like for like comparison basis8,
cumulated change in cash before debt repayment over the 2024 – 2027
period amounts to €-528 million compared with €-194 million in the
business plan dated April 29, 2024.
Key revisions to business plan hypothesis
The updated business plan takes into account
current business trends and softer market conditions in some of the
Group’s key regions, as evidenced as well across the industry. It
also reflects the impact of some contract terminations and delays
in award of new contracts and add-on work, as clients await the
final implementation of the Group’s financial restructuring plan,
which is expected, following the vote of classes of affected
parties and the Court approval on the plan, early 2025.
In particular:
- The updated
business plan for Digital & Cloud reflects the return of
positive organic revenue growth to July 2025 given the short
commercial cycle and the termination of two large accounts.
- BDS’ business plan
was revised downwards to align with the current business momentum;
the seasonality of change in working capital requirement was
updated to reflect the planned delivery cycle of HPCs
(High-Performance Computers).
- The updated
business plan for Tech Foundations includes the impact of contract
terminations or lower scope of work as well as future client
activity expectations.
- Cash interest
expense was decreased to reflect the financial terms &
conditions of the financial restructuring9.
The updated business plan is presented in Appendix 1 together
with a reminder of the business plan dated April 29, 2024.
Consequence of the updated business plan
adjustment on liquidity, cash flow generation and financial
leverage
Liquidity needs
Liquidity needs for
2024 and 2025 (cumulative) is €1.1 billion and within the New
Financings10 of €1.75 billion committed by a group of
banks and a group of bondholders as part of the financial
restructuring of the Company.
Cash flow recovery
The Group is expected
to turn free cash flow positive in 2026.
While 2026 Free Cash
Flow is expected to be c.€215 million lower than previously
planned, the Group still expects to turn free cash flow positive in
2026 with a change in cash position before debt repayment positive
at €138 million11.
Financial leverage and
credit rating
Assuming a full take
up of the €233 million Rights Issue, as part of the implementation
of the financial restructuring plan, the Group now expects its
leverage ratio to be 2.95x at the end of 2026, versus circa 2.0x
previously.
- At the end of 2027, financial
leverage would be below 2.0x, meaning that the 2.0x target
originally planned for end-2026 would be reached in the course of
2027.
In view of the updated
business plan, the targeted re-rating of the Company (targeting a
BB credit profile) would still occur in the course of 2027, ahead
of the first maturity date of the new money debt (maturing
end-2029), which refinancing should take place during 2028.
Next
steps
The update of the business plan has no impact on
the financial restructuring calendar previously communicated:
-
The voting of classes of affected parties is intended to take place
on September 27, 2024.
-
The hearing before the Specialized Commercial Court of Nanterre for
the approval of the accelerated safeguard plan is intended to take
place on October 15, 2024.
-
Once approved by the Court, the plan is expected to be executed
from November 2024 until January 2025, and to lead to the
equitization of €2.8 billion of debt, the reception of the €1.5 to
€1.675 billion new money debt and the €233 million rights issue
already backstopped in cash by financial bondholders for €75
million and by the creditors participating in the new financings by
set off against a portion of their debts for €100 million, as
previously communicated.
-
Following Court approval on the plan, the Group is confident on its
ability to successfully close those transactions.
The Company will inform the market in due course
of the next steps of its financial restructuring.
*
Atos SE confirms that information that could be
qualified as inside information within the meaning of Regulation
No. 596/2014 of 16 April 2014 on market abuse and that may have
been given on a confidential basis to its financial creditors has
been published to the market, either in the past or in the context
of this press release, with the aim of re-establishing equal access
to information relating to the Atos Group between the
investors.
*
Appendix 1: Updated business
plan dated September 2, 2024 and reminder of the
Adjusted business plan dated April 29,
202412
Digital & Cloud updated business plan
(September 2, 2024)
Digital & Cloud, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
3,518 |
3,341 |
3,315 |
3,567 |
3,892 |
Growth (%) |
|
|
-5.0% |
-0.8% |
7.6% |
9.1% |
|
|
|
|
|
|
|
Operating margin |
|
237 |
62 |
224 |
311 |
415 |
OM% |
|
6.7% |
1.9% |
6.7% |
8.7% |
10.6% |
|
|
|
|
|
|
|
OMDA (pre-IFRS 16) |
|
|
88 |
250 |
341 |
442 |
OMDA (pre-IFRS 16) % |
|
|
2.6% |
7.5% |
9.6% |
11.4% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-102 |
26 |
239 |
377 |
Digital & Cloud
adjusted business plan (April 29, 2024)
Digital, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
3,476 |
3,347 |
3,443 |
3,729 |
4,070 |
Growth (%) |
|
|
-3.7% |
2.9% |
8.3% |
9.1% |
|
|
|
|
|
|
|
Operating margin |
|
233 |
95 |
254 |
349 |
458 |
OM% |
|
6.7% |
2.8% |
7.4% |
9.3% |
11.3% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
46 |
91 |
276 |
420 |
***
BDS updated business plan (September 2,
2024)
BDS, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
1,427 |
1,531 |
1,740 |
1,942 |
2,179 |
Growth (%) |
|
|
7.3% |
13.7% |
11.6% |
12.2% |
|
|
|
|
|
|
|
Operating margin |
|
33 |
87 |
157 |
212 |
259 |
OM% |
|
2.3% |
5.7% |
9.0% |
10.9% |
11.9% |
|
|
|
|
|
|
|
OMDA (pre-IFRS 16) |
|
|
163 |
364 |
262 |
313 |
OMDA (pre-IFRS 16) % |
|
|
10.6% |
20.9% |
13.5% |
14.4% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-29 |
248 |
191 |
215 |
BDS adjusted business
plan (April 29, 2024)
BDS, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
1,438 |
1,553 |
1,836 |
2,054 |
2,253 |
Growth (%) |
|
|
8.0% |
18.2% |
11.9% |
9.7% |
|
|
|
|
|
|
|
Operating margin |
|
35 |
87 |
189 |
237 |
269 |
OM% |
|
2.4% |
5.6% |
10.3% |
11.5% |
11.9% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-71 |
152 |
331 |
97 |
***
Tech foundations updated business plan
(September 2, 2024)
Tech Foundations, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
5,185 |
4,857 |
4,497 |
4,486 |
4,538 |
Growth (%) |
|
|
-6.3% |
-7.4% |
-0.2% |
1.1% |
|
|
|
|
|
|
|
Operating margin |
|
150 |
89 |
27 |
205 |
326 |
OM% |
|
2.9% |
1.8% |
0.6% |
4.6% |
7.2% |
|
|
|
|
|
|
|
OMDA (pre-IFRS 16) |
|
|
282 |
232 |
384 |
504 |
OMDA (pre-IFRS 16) % |
|
|
5.8% |
5.2% |
8.6% |
11.1% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-203 |
-299 |
13 |
211 |
Tech Foundations
adjusted business plan (April 29, 2024)
Tech Foundations, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
5,179 |
4,857 |
4,637 |
4,670 |
4,724 |
Growth (%) |
|
|
-6.2% |
-4.5% |
0.7% |
1.1% |
|
|
|
|
|
|
|
Operating margin |
|
148 |
101 |
87 |
243 |
368 |
OM% |
|
2.9% |
2.1% |
1.9% |
5.2% |
7.8% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-160 |
-238 |
51 |
253 |
***
Atos Group updated business plan (September 2,
2024)
Atos Group, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
10,130 |
9,729 |
9,552 |
9,996 |
10,609 |
Growth (%) |
|
|
-4.0% |
-1.8% |
4.6% |
6.1% |
|
|
|
|
|
|
|
Operating margin |
|
420 |
238 |
408 |
728 |
999 |
OM% |
|
4.1% |
2.4% |
4.3% |
7.3% |
9.4% |
|
|
|
|
|
|
|
OMDA pre-IFRS 16 |
|
|
533 |
846 |
988 |
1,260 |
OMDA % |
|
|
5.5% |
8.9% |
9.9% |
11.9% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-334 |
-25 |
444 |
802 |
|
|
|
|
|
|
|
Taxes |
|
|
-61 |
-54 |
-82 |
-129 |
Separation costs & other |
|
|
-169 |
-79 |
-42 |
-42 |
Interests |
|
|
-219 |
-170 |
-182 |
-186 |
|
|
|
|
|
|
|
Change in cash before before debt repayment |
|
|
-783 |
-328 |
138 |
445 |
Atos Group adjusted business plan (April 29,
2024)
Atos Group, in € million |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
Revenue |
|
10,093 |
9,757 |
9,915 |
10,453 |
11,046 |
Growth (%) |
|
|
-3.3% |
1.6% |
5.4% |
5.7% |
|
|
|
|
|
|
|
Operating margin |
|
417 |
282 |
531 |
828 |
1,095 |
OM% |
|
4.1% |
2.9% |
5.4% |
7.9% |
9.9% |
|
|
|
|
|
|
|
Free cash flow before interest and taxes |
|
|
-185 |
5 |
659 |
770 |
|
|
|
|
|
|
|
Taxes |
|
|
-61 |
-67 |
-92 |
-134 |
Separation costs & other |
|
|
-169 |
-79 |
-42 |
-42 |
Interests13 |
|
|
-219 |
-170 |
-182 |
-186 |
|
|
|
|
|
|
|
Free cash flow before debt repayment |
|
|
-634 |
-311 |
343 |
408 |
Appendix 2: FY23 actual – FY23 pro forma
revenue and operating margin reconciliation
The tables below present the reconciliation
between the FY 2023 actual revenue and operating margin and the
2023 pro forma revenue and operating margin, for the Group, Eviden,
Tech Foundations and the two components of Eviden, Digital and BDS.
Elements in reconciliation correspond mainly to businesses disposed
in 2023.
External revenue |
2023 FY Actuals |
Scope and FX impacts |
2023 FY PF
(July 24 Rates) |
Digital |
3,630 |
-112 |
3,518 |
BDS |
1,459 |
-32 |
1,427 |
Sub-total Eviden |
5,089 |
-144 |
4,945 |
Tech Foundations |
5,604 |
-419 |
5,185 |
Total Group |
10,693 |
-563 |
10,130 |
Operating margin |
2023 FY Actuals |
Scope and FX impacts |
2023 FY PF
(July Rates) |
Digital |
257 |
-20 |
237 |
BDS |
38 |
-5 |
33 |
Sub-total Eviden |
294 |
-25 |
270 |
Tech Foundations |
172 |
-22 |
150 |
Total Group |
467 |
-47 |
420 |
Pro forma information consists in adjusting
historical published information from scope changes but shall not
be considered as pro forma information as defined by the EU
Prospectus regulation.
Appendix 3: Free cash flow
reconciliations
|
In € billion |
|
|
Reported 2023 Free cash flow |
-1.1 |
Less: working capital actions |
-1.8 |
Free cash flow assuming no working capital actions |
-2.9 |
|
|
2024E change in cash before the unwinding of working capital
actions14 |
-0.8 |
Unwinding of the working capital actions |
-1.8 |
2024E change in cash after the unwinding of working capital
actions15 |
-2.6 |
Disclaimer
This document contains
forward-looking statements that involve risks and uncertainties,
including references, concerning the Group’s expected growth and
profitability in the future which may significantly impact the
expected performance indicated in the forward-looking statements.
These risks and uncertainties are linked to factors out of the
control of the Company and not precisely estimated, such as market
conditions or competitors’ behaviors. Any forward-looking
statements made in this document are statements about Atos’s
beliefs and expectations and should be evaluated as such.
Forward-looking statements include statements that may relate to
Atos’s plans, objectives, strategies, goals, future events, future
revenues or synergies, or performance, and other information that
is not historical information. Actual events or results may differ
from those described in this document due to a number of risks and
uncertainties that are described within the 2023 Universal
Registration Document filed with the Autorité des Marchés
Financiers (AMF) on May 24, 2024 under the registration number
D.24-0429 and in the June 30, 2024 half-year financial report
published by Atos SE on August 5, 2024. Atos does not undertake,
and specifically disclaims, any obligation or responsibility to
update or amend any of the information above except as otherwise
required by law.
This document does not contain or constitute an offer of Atos’s
shares for sale or an invitation or inducement to invest in Atos’s
shares in France, the United States of America or any other
jurisdiction. This document includes information on specific
transactions that shall be considered as projects only. In
particular, any decision relating to the information or projects
mentioned in this document and their terms and conditions will only
be made after the ongoing in-depth analysis considering tax, legal,
operational, finance, HR and all other relevant aspects have been
completed and will be subject to general market conditions and
other customary conditions, including governance bodies and
shareholders’ approval as well as appropriate processes with the
relevant employee representative bodies in accordance with
applicable laws .
About
Atos
Atos is a global
leader in digital transformation with c. 92,000 employees and
annual revenue of c. € 10 billion. European number one in
cybersecurity, cloud and high-performance computing, the Group
provides tailored end-to-end solutions for all industries in 69
countries. A pioneer in decarbonization services and products, Atos
is committed to a secure and decarbonized digital for its clients.
Atos is a SE (Societas Europaea), and listed on Euronext Paris.
The purpose of Atos is
to help design the future of the information space. Its expertise
and services support the development of knowledge, education and
research in a multicultural approach and contribute to the
development of scientific and technological excellence. Across the
world, the Group enables its customers and employees, and members
of societies at large to live, work and develop sustainably, in a
safe and secure information space.
Contacts
Investor relations:
David Pierre-Kahn | investors@atos.net | +33 6 28 51 45 96
Individual
shareholders: 0805 65 00 75
Press contact: globalprteam@atos.net
1
Updated business
plan is based on the current Group perimeter
2 Cash interest
expense does not include payment in kind of some interests
expenses
3 Cash interest
expense does not include payment in kind of some interests
expenses
4 Please refer
to the disclaimer of this press release
5 Please refer
to the disclaimer of this press release
6 CAGR: Compound
annual growth rate
7 PF: Pro
forma
8 Using the same
cash interest expense as stated by the terms & conditions
agreed upon in the lock-up agreement
9 Cash interest
expense does not include payment in kind of some interests
expenses
10
As defined in June
30, 2024 press release: provision of secured new money debt in an
amount from €1.5 billion to €1.675 billion in the form of new
secured financings (the “New Secured Financings”)
as well as €75 million in the form of backstop in cash of the
Rights Issue (the “Equity Financings Backstop”,
together with the New Secured Financings, the “New
Financings”).
11 Updated
business plan is based on the current Group perimeter
12 Please refer
to the disclaimer of this press release
13 Using the
same cash interest expense as stated by the terms & conditions
agreed upon in the lock-up agreement
14 Before debt repayment
15 Before debt repayment
- PR - Atos - Market Update - 2 September 2024
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