Atos: the demerger effective July 1, 2023 at the earliest

(AOF) – Leading the SBF 120 this morning, Atos (+5.33% to 9.02 euros) has now slightly reduced its earnings after an update from the company on information from BFM TV. The latter claimed that the split of the group should be finalized at the end of June 2023 and would be followed by the departure of the president, Bertrand Meunier. The latter is the subject of criticism from minority shareholders because of Atos’ stock market setbacks.

Atos reacted by recalling that, as indicated during the investor day on June 14, “this process will take between 12 and 18 months, i.e. a demerger effective no earlier than July 1, 2023, and no later than December 31, 2023” .

“Today, the governance and the reinforced management team of Atos are fully mobilized on the execution of the strategic transformation plan of the company which is progressing well. ” underlined Atos.

For the French IT group, “the departure of Bertrand Meunier is really not the subject”.

The French technology group must split between on the one hand Evidian (digital transformation, big data and cybersecurity), for which it received and refused an offer of 4.2 billion euros from Onepoint, and the rest of the scope of Atos, which includes Managed Services, Digital Workplace and Professional Services.

“The new entity, Evidian, when the split will be effective, i.e. mid-2023 at the earliest, will have its own governance bodies, to be set up by then,” the company said. “The Atos entity, for its part, will remain and will therefore keep its governance bodies in place today”.

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Key points

– International leader in digital transformation created in 1997, European leader in cloud, cybersecurity and supercomputers;

– Activity of €10.8 billion, divided into 3 divisions: infrastructure, outsourcing and private cloud for 55% of sales, digital, IoT and cloud solutions for 32% and big data & cybersecurity for 13%;

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

– Value maximization business model through restructuring and the division, at the end of 2023, of the group into 2 separate entities – Atos for outsourcing and Evidian for digital and security;

– Open capital (9.96% for the Siemens pension fund and 2.2% for employees), Bertrand Meunier chairing the 13-member board of directors, Nourdine Bihmane having been managing director since July;

– Financial situation under control with €3.5 billion in gross cash and €2.3 billion in credit facilities at the end of June, covering needs estimated at €1.8 billion for restructuring (including €1.1 billion for the future TFCo) hence management’s exclusion of any capital increase but debt rating of €1.8 billion at the end of June, downgraded by S&P.

Challenges

– Strategy aiming at the end of 2023 to split the group into 2 companies, TFCo (Atos) for outsourcing (infrastructure) and connected work environments and Evidian for digital transformation, big data and security: TFCo (Atos): turnaround financed to the tune of €1.1 billion aiming for an operating margin of 6%, a return to revenue growth and free cash flow of €150 million in 2026 / Evidian: repositioning of the portfolio and strengthening of leading positions with high margins via a €400m plan to accelerate its growth to 7% per year until 2026, with an operating margin of 12% and free cash flow of €700m / end of 2023, distribution to Atos shareholders of 100% of the shares of TFCo and 70% of those of Evidian, which will then be listed on Euronext Paris in early 2023;

– 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 calculators, artificial intelligence, HPC, multicultural leadership, etc.), with alliances with other players (AWS, Dell, Google, Huma, Microsoft, OVHCloud, Sparkle, etc.) and with customers / 2 scientific communities of expert collaborators of the group / Scaler program of collaboration with + 50 start-ups;

– Environmental strategy supported by the Digital Transformation Factory, the Hybrid Cloud, the “Business Accelerators” solutions, the “Connected Intelligence” and the “Digital Workplace”: carbon neutrality in 2028 and halving of emissions by 2025 vs 2021 / sales of decarbonization solutions, reinforced by the acquisition of EcoAct / Investments in hydrogen supercomputers and quantum technologies / launch of the 1

er

“green” loan;

– Reinforcement in security with the British Cloudreach and the sovereign security center in Bulgaria;

– Continued contract wins, order intake on 1

er

semester equaling one year of income.

Challenges

– After stable revenues and a widening of the net loss in 1

er

semester, 2022 objective, confirmed, of stable revenues and an operating margin of +3%.

Maximum staff turnover

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

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Atos: the demerger effective July 1, 2023 at the earliest


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