• Atos Market Update - September 2, 2024

    Source: Nasdaq GlobeNewswire / 02 Sep 2024 01:30:00   America/New_York

    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.

    1. 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 2023PF2024E2025E2026E2027E
           
    Revenue 3,5183,341 3,315 3,567 3,892
    Growth (%)  -5.0%-0.8%7.6%9.1%
           
    Operating margin 23762 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  -10226239377

    Digital & Cloud adjusted business plan (April 29, 2024)

    Digital, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 3,4763,3473,4433,7294,070
    Growth (%)  -3.7%2.9%8.3%9.1%
           
    Operating margin 23395254349458
    OM% 6.7%2.8%7.4%9.3%11.3%
           
    Free cash flow before interest and taxes  4691276420

    ***

    BDS updated business plan (September 2, 2024)

    BDS, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 1,4271,531 1,740 1,942 2,179
    Growth (%)  7.3%13.7%11.6%12.2%
           
    Operating margin 3387 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  -29248191215

    BDS adjusted business plan (April 29, 2024)

    BDS, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 1,4381,5531,8362,0542,253
    Growth (%)  8.0%18.2%11.9%9.7%
           
    Operating margin 3587189237269
    OM% 2.4%5.6%10.3%11.5%11.9%
           
    Free cash flow before interest and taxes  -7115233197

    ***

    Tech foundations updated business plan (September 2, 2024)

    Tech Foundations, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 5,1854,857 4,497 4,486 4,538
    Growth (%)  -6.3%-7.4%-0.2%1.1%
           
    Operating margin 15089 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  -203-29913211

    Tech Foundations adjusted business plan (April 29, 2024)

    Tech Foundations, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 5,1794,8574,6374,6704,724
    Growth (%)  -6.2%-4.5%0.7%1.1%
           
    Operating margin 14810187243368
    OM% 2.9%2.1%1.9%5.2%7.8%
           
    Free cash flow before interest and taxes  -160-23851253

    ***

    Atos Group updated business plan (September 2, 2024)

    Atos Group, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 10,1309,7299,5529,99610,609
    Growth (%)  -4.0%-1.8%4.6%6.1%
           
    Operating margin 420238408728999
    OM% 4.1%2.4%4.3%7.3%9.4%
           
    OMDA pre-IFRS 16  5338469881,260
    OMDA %  5.5%8.9%9.9%11.9%
           
    Free cash flow before interest and taxes  -334-25444802
           
    Taxes  -61-54-82-129
    Separation costs & other  -169-79-42-42
    Interests  -219-170-182-186
           
    Change in cash before before debt repayment  -783-328138445

    Atos Group adjusted business plan (April 29, 2024)

    Atos Group, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 10,0939,7579,91510,45311,046
    Growth (%)  -3.3%1.6%5.4%5.7%
           
    Operating margin 4172825318281,095
    OM% 4.1%2.9%5.4%7.9%9.9%
           
    Free cash flow before interest and taxes  -1855659770
           
    Taxes  -61-67-92-134
    Separation costs & other  -169-79-42-42
    Interests13  -219-170-182-186
           
    Free cash flow before debt repayment  -634-311343408

    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 ActualsScope and FX impacts2023 FY PF
    (July 24 Rates)
    Digital3,630-1123,518
    BDS1,459-321,427
    Sub-total Eviden5,089-1444,945
    Tech Foundations5,604-4195,185
    Total Group10,693-56310,130


    Operating margin2023 FY ActualsScope and FX impacts2023 FY PF
    (July Rates)
    Digital257-20237
    BDS38-533
    Sub-total Eviden294-25270
    Tech Foundations172-22150
    Total Group467-47420

    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

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