Market Update - April 9
- Atos announces the parameters of its
refinancing framework, based on its full business perimeter of Tech
Foundations and Eviden:
- €600 million of
cash needed to fund the business over the 2024-25 period. Funds to
be provided in the form of debt and/or equity by existing
stakeholders or third-party investors
- €300 million in new
revolving credit facility and €300 million in additional bank
guarantee lines
- Targeting BB credit
profile by 2026, which assumes a financial leverage1 below 3x by
year-end 2025 and below 2x by year-end 2026 and implies a gross
debt reduction of €2.4 billion
- Remaining debt
maturities extended by 5 years
- Existing
stakeholders of Atos SE and third-party investors can submit
financing proposals including new money by April 26, 2024. Given
the Group’s needs, a global refinancing agreement will trigger
significant dilution of existing shareholders.
- Targeting to reach
a refinancing agreement with financial creditors by July 2024
- Agreement
in-principle with a group of banks, a group of bondholders and the
French State on interim financing of €450 million for additional
liquidity until refinancing agreement is reached
- Refinancing
framework based on a new long-range business plan, with the
following assumptions:
- For 2024: revenue
of circa €9.9 billion, with organic revenue evolution at circa -2%;
operating margin at circa 4% and free cash flow of €-0.4 billion
before the unwinding of about €1.8 billion working capital actions
as of December 2023
- In 2027: revenue of
approximately €11.4bn, with an operating margin of around 10% and
free cash flow of about €0.5 billion
Paris, France – April 9, 2024 -
Further to its press release dated April 2, 2024, and as part of
the discussions initiated by Atos SE with its financial creditors
under the aegis of the conciliator appointed on March 25, 2024,
Atos SE presented its updated business plan and the parameters of
its refinancing framework to its financial creditors on Monday
April 8, 2024.
2024-2027 business plan of the Atos
Group
Atos SE provided key strategic and prospective
financial information about the Group’s 2024-2027 business plan,
the details of which can be found on the Company’s website2.
The 2024-2027 business plan has been analyzed by
the independent consulting firm Accuracy.
Key highlights 20243
The Group 2024 revenue of €9.9 billion
represents an organic revenue evolution of circa-2% compared with
2023:
- Eviden revenue of
€5.0 billion represents an organic growth of about +2%, reflecting
the current market slowdown notably in Americas and the uncertainty
facing the Group, with Digital revenue of €3.5 billion and BDS
revenue of €1.6 billion.
- Tech Foundations
revenue of €4.9 billion represents an approximately -6% organic
decline, reflecting the impact of the financial situation of the
Company on its sales momentum, which may include a slow-down of
contract renewals and new client acquisitions, as well as potential
termination or rescoping of existing contracts. The revenue decline
also reflects the deliberate reduction of non-core activities such
as Business Process Outsourcing (BPO) and Value-Added Resell
(VAR).
Operating margin of €0.4 billion or 4.3% of
revenue:
- Eviden operating
margin of €0.3 billion represents 6.0% of revenue, a slight
improvement compared with 2023 pro forma and consisting in Digital
operating margin at €0.2 billion and BDS operating margin at €0.1
billion.
- Tech Foundations
operating margin rate of €0.1 billion represents 2.5% of revenue,
slightly below 2023 pro forma, reflecting the impact of lower
revenues.
Free cash flow after interest and taxes of €-0.4
billion 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.
Free cash flow after interest and taxes for 2024
based on the Accuracy analysis is expected to be €-0.6 billion.
Key highlights 20274
The Group’s revenue of €11.4 billion in 2027
represents a revenue CAGR5 of +3.1% over the 2023PF6 - 2027 period,
in line with the market and reflects a recovery in commercial
activities starting from the end of 2024.
- Eviden’s revenue of
€6.6 billion in 2027 represents a revenue CAGR of +7.8% over the
2023PF - 2027 period reflecting notably:
- Strong market
demand for generative AI solutions and cloud HPC computing
capabilities;
- Increased demand,
including for AI-powered cyber offerings, due to regulatory
compliance and greater cyber threat intensity;
- Growth from
indirect channels and marketplace for SaaS sales;
- Demand driven by
continued cloud adoption and hyperscaler platform consumption;
- New controlled,
trusted or sovereign cloud offerings boosted by increasing
regulatory compliance and data security focus;
- Accelerated demand
for digital transformation;
- New industry
solutions powered by generative AI and big data analytics;
- Digital revenue
growth of 5.9% CAGR and BDS growth of 12.0% CAGR.
- Tech Foundations’
revenue of €4.8 billion in 2027 represents a revenue CAGR of
-1.9% over the 2023PF - 2027 period.
- Negative organic
growth in 2024 and 2025 with a turnaround from 2026 onwards;
- Redefined core
portfolio addressing key customer priorities, including
sustainability, and capitalizing on market trends such as
distributed workforce post-Covid, fast move to multi-cloud and
hybrid configurations, and heightened importance of sovereign cloud
and AI.
The Group’s operating margin of €1.2 billion in
2027 represents 10.3% of revenue.
- Eviden operating
margin of €0.8 billion in 2027 represents 12.1% of revenue
benefitting from following levers:
- Shift to
higher-margin activities, including generative AI solutions,
digital cyber offerings and technology consulting;
- Increased share of
subscription and maintenance revenue;
- Value based
pricing, particularly on generative AI platforms, sovereign cloud
capabilities and IP differentiated offerings;
- Improvement in
workforce management, with labor pyramid optimization, best-shore
delivery model and span of control optimization;
- Productivity
improvements driven by notably to higher utilization and
billability of resources, reduction of indirect support costs and
tighter supply chain management;
- Digital operating
margin of €0.5 billion represents 12.2% of revenue and BDS
operating margin of €0.3 billion represents 12.0% of revenue.
- Tech Foundations
operating margin of €0.4 billion in 2027 represents 7.8% of
revenue, with profitability improvement coming from:
- Delivery
modernization, including restructuring in high-cost locations and
data-driven autonomous operations;
- Turnover of
under-performing accounts and deployment of AI-based contract
management;
- Supplier
consolidation and renegotiation;
- Rationalization of
SG&A, including increased self-service and automations.
Free cash flow after interests and taxes of €0.5
billion in 2027 reflects a €0.9 billion improvement compared
with 2024 from:
- €0.7 billion
operating margin improvement;
- €0.3 billion
reduction in capex;
- €-0.2 billion
negative contribution from change in working capital
requirements;
- €0.2 billion
reduction in cash out related to other operating expenses,
acquisition and separation costs;
- €0.1 increase in
interests and taxes.
Group Free cash flow after interest and taxes
based on Accuracy analysis is €0.3 billion in 2027.
The evolution of the Group’s revenue, operating
margin, and free cash flow is summarized in the table below:
in € millions |
|
2023PF |
2024E |
2025E |
2026E |
2027E |
|
|
|
|
|
|
|
External revenue |
|
10,093 |
9,900 |
10,182 |
10,817 |
11,420 |
Growth (%) |
|
|
-1.9% |
2.8% |
6.2% |
5.6% |
|
|
|
|
|
|
|
Operating margin |
|
416 |
427 |
639 |
930 |
1,176 |
OM% |
|
4.1% |
4.3% |
6.3% |
8.6% |
10.3% |
|
|
|
|
|
|
|
OMDA pre-IFRS 16 |
|
|
754 |
1,102 |
1,209 |
1,455 |
OMDA % |
|
|
7.6% |
10.8% |
11.2% |
12.7% |
|
|
|
|
|
|
|
Free cash flow after interest and taxes |
|
|
-391 |
-202 |
405 |
504 |
Free cash flow may vary based on interest expense related to the
new refinancing solution. Please refer to the disclaimer in this
press release.
Parameters of Atos’ refinancing
framework
As indicated in its press release of March 26th,
2024, Atos SE has entered into an amicable conciliation procedure
in order to frame discussions with its financial creditors. This is
to facilitate the emergence of a global agreement regarding the
restructuring of its financial debt within a short and limited
timeframe of four months, which could be further extended by one
month if needed.
In this context, Atos SE presented on Monday
April 8, 2024 to its financial creditors the Company’s key
parameters of its refinancing framework, which included:
- €600 million of
cash needed to fund the business over the 2024-25 period. Funds to
be provided in the form of debt and/or equity by existing
stakeholders or third party investors;
- €300m revolving
credit facility, and €300m of guarantee lines;
- Targeting a BB
credit profile by 2026, which implies a financial leverage7 below
3x by year-end 2025 and below 2x by year-end 2026 and a gross debt
reduction of €2.4 billion;
- A 5-year
maturity extension for the residual financial debt.
These parameters are based on the Group’s
current perimeter, which includes the assets of Eviden and Tech
Foundations without taking into account the impact of any potential
asset disposals.
These parameters act as guidelines for all
interested parties who will ultimately present their proposals to
the company and the conciliator.
The Group’s refinancing framework aims to
achieve the following objectives:
- To protect the
social interest of the Company, including its employees, clients,
suppliers, shareholders, and other stakeholders and preserve the
strategic interests of the French State
- Secure operational
stability:
- Ensure business
continuity of the Group and its long-term sustainability;
- Reassure clients,
employees and suppliers on Atos’ counterparty credit
worthiness;
- Ensure ample
liquidity to execute the Group’s business plan:
- Provide adequate
time to implement Atos’ strategic plan and deliver results;
- Have a fully funded
business plan over the 2024-2027 period;
- Establish a
sustainable capital structure:
- Align capital
structure with Company’s future cash flow generation;
- Implement a debt
structure that will support future successful refinancing;
- Regain a BB credit
rating profile by 2026:
- Consistent with
Atos’ quality of assets;
- Enhance access to
capital markets.
The main figures of Atos’ financial debt and the
coming maturities of Atos SE’s borrowings are detailed in Appendix
1 of this press release and in the presentation.
Interim financing
Atos has reached an agreement in principle with
a group of banks and a group of bondholders regarding an interim
financing in the amount of €400 million, consisting of:
- €300 million
factoring facility provided by the banks;
- €100 million
revolving credit facility provided by the bondholders.
In addition, provided the Group’s financing
banks grant a waiver, the French State has agreed in principle to
extend a €50 million loan through the FDES (Fonds de Développement
Economique et Social) to a subsidiary of Atos, Bull SA, which
controls sovereign sensitive activities. This loan shall be
reimbursed in full at the closing of the refinancing.
Atos will commit, in return, to sign an
agreement at the level of Bull SA for the benefit of the
French State which together with the issuance of a preferred share
(action de préférence) by Bull SA will give the French State
protection rights on such sovereign sensitive activities, under a
legal documentation to be finalized. This agreement in principle
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’ share capital or voting rights and Atos
and the French State 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). It also provides for governance rights for the
French State at the level of Bull SA (with no voting rights at
this stage).
With these new facilities, Atos believes it has
adequate liquidity until its long-term refinancing plan is set
up.
Next steps and refinancing discussions’
process
Existing stakeholders of Atos SE and third-party
investors can submit proposals for new money by April 26, 2024 in
order to allow a global agreement on the new capital structure of
the Company to be finalized by July 2024.
Atos will evaluate all proposals, under the
aegis of the conciliator Maître Hélène Bourbouloux in the best
corporate interest of the Company including its employees, clients,
suppliers, shareholders, and other stakeholders, while maintaining
an attractive business mix. Atos will also take into consideration
the sovereign imperatives of the French state.
Atos will inform the market in due course of the
progress of the refinancing discussions, which will result in a
change in its capital structure arising from a final global
refinancing agreement, including the potential issuance of new
equity which will result in a dilution of the existing
shareholders.
Shareholders and financial creditors will be
consulted in compliance with French legal requirements.
*
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 in
the context of the presentation held on Monday April 8, 2024 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.
***
Conference call
Atos’ Management invites you to an international
conference call on Tuesday, April 9, 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/r4mhigey
- 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/BIbb8cac21bc124265adae510d10eeb672
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.
Appendix 1
The debt structure of the Group as of 31
December 2023, taking into account drawings on the remaining
available RCF (drawn in January 2024) is as follows:
Debt Structure as of 31 Dec. 2023, Pro
Forma(1) |
€ in million |
|
Maturity |
Outstanding |
|
|
|
|
Term Loan
A |
|
Jan-25 |
1,500 |
RCF |
|
Nov-25 |
900 |
Bank loans |
|
|
2,400 |
|
|
|
|
Sustainability linked Bond 1% |
Nov-29 |
800 |
OEB
zero coupon |
Nov-24 |
500 |
Senior Bond 1.75% |
May-25 |
750 |
Senior Bond 2.5% |
Nov-28 |
350 |
NEU MTN |
|
Apr-26 |
50 |
Bonds & mid-term notes |
|
2,450 |
|
|
|
|
Other
debt |
|
|
85 |
|
|
|
|
Total debt |
|
|
4,935 |
(1) Pro Forma €320M RCF draw
and maturity extension of Term Loan A to January 2025
(2) Excluding accrued interest
on LT Borrowing
Note: the €1.5 billion term loan A, maturing in
July 2024, provides for another 6-month extension option until
January 2025 available to Atos SE under standard conditions
(notably no event of default and payment of an extension fee); it
should be noted that under French law, any events of defaults
triggered by the opening of mandat ad hoc or conciliation
proceedings are considered void.
The debt principal schedule of the Group from 31
December 2023, taking into account drawings the remaining available
RCF and assuming TLA second extension option exercised would be as
follows:
Maturity Profile of Gross Debt as of 31
Dec. 2023, Pro Forma(1)
€ in million, FYE Dec. |
|
H1-24 |
H2-24 |
H1-25 |
H2-25 |
2026 |
2027 |
2028 |
2029 |
|
|
|
|
|
|
|
|
|
|
Term Loan
A |
|
- |
- |
1,500 |
- |
- |
- |
- |
- |
RCF |
|
- |
- |
- |
900 |
- |
- |
- |
- |
Bank loans |
|
- |
- |
1,500 |
900 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Bonds |
|
- |
500 |
750 |
- |
- |
- |
350 |
800 |
MTN |
|
- |
- |
- |
- |
50 |
- |
- |
- |
Bonds & mid-term notes |
|
- |
500 |
750 |
- |
50 |
- |
350 |
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
- |
500 |
2,250 |
900 |
50 |
- |
350 |
800 |
(1) Pro Forma €320M RCF draw and maturity
extension of Term Loan A to January 2025
Appendix 2 : expected guarantee
needs
€ million, FYE
Dec. |
|
Dec-23 |
Dec-24 |
Dec-25 |
Dec-26 |
Dec-27 |
|
|
|
|
|
|
|
Guarantees beginning of period |
|
504 |
573 |
407 |
453 |
562 |
New lines |
|
280 |
164 |
226 |
214 |
199 |
Releases |
|
(211) |
(330) |
(180) |
(105) |
(114) |
Outstanding end of period |
|
573 |
407 |
453 |
562 |
647 |
Appendix 3: FY23 actual – FY23 proforma
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 to businesses disposed in
2023.
(in € million)
External revenue |
2023 Actuals |
Scope effects |
2023 PF |
Digital |
3,630 |
-154 |
3,476 |
BDS |
1,459 |
-21 |
1,438 |
Sub-total Eviden |
5,089 |
-175 |
4,914 |
Tech Foundations |
5,604 |
-425 |
5,179 |
Total Group |
10,693 |
-600 |
10,093 |
|
|
|
|
|
|
|
|
Operating margin |
2023 Actuals |
Scope effects |
2023 PF |
Digital |
257 |
-23 |
234 |
BDS |
38 |
-2 |
36 |
Sub-total Eviden |
295 |
-25 |
270 |
Tech Foundations |
172 |
-25 |
147 |
Total Group |
467 |
-50 |
417 |
Appendix 4: Free cash flow
reconciliations
|
In € billions |
|
|
Reported 2023 Free cash flow |
-1.1 |
Less: working capital actions |
-1.8 |
Free cash flow assuming no working capital actions |
-2.9 |
|
|
2024E free cash flow before the unwinding of working capital
actions |
-0.4 |
Unwinding of the working capital actions |
-1.8 |
2024E free cash flow after the unwinding of working capital
actions |
-2.2 |
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 competitor’s 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 2022 Universal
Registration Document filed with the Autorité des Marchés
Financiers (AMF) on April 21st, 2023 under the registration number
D.23-0321 and within the 2023 Consolidated financial statements
published by Atos SE on March 26, 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. 95,000 employees and annual revenue of c. €
11 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 Ratio net debt pre-IFRS16 over EBITDA pre-IFR16; EBITDA
computed as OMDA pre-IFRS16 minus anticipated RRI (restructuring,
rationalization, interagtion) costs and Other changes2 Investors -
Atos3 Please refer to the disclaimer of this press release4 Please
refer to the disclaimer of this press release5 CAGR : Compound
annual growth rate6 PF : Pro forma7 ratio net debt pre-IFRS16
over EBITDA pre-IFR16; EBITDA computed as OMDA pre-IFRS16 minus
anticipated RRI costs and Other changes
- PR-Atos-Market Update - April 9 2024
Atos (EU:ATO)
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