Atos SE · EURONEXT:ATO
Atos — Atos Origin — H1 2002 Earnings Presentation
44 slides from Atos's earnings presentation, 2002
Slide 1: H1 2002 results
H1 2002 results Bernard Bourigeaud
Slide 2: Agenda
Agenda • GROUP ACHIEVEMENTS • H1 2002 BUSINESS PERFORMANCE • YEAR 2002 OUTLOOK • STRATEGY 2 Turning Client Vision into Results
Slide 3: Group achievements
Group achievements • Operating profit of € 135M (9.1% margin) • All countries remain profitable • Organic revenue growth of 1.8% (constant scope) • Net debt reduced by 23% to € 181M at June 30, 2002 • Atos KPMG Consulting UK & NL • Disposal of non-strategic assets Highly focused on profitability 3 T
Slide 4: Atos Origin profile
Atos Origin profile End to end Global Balanced offerings presence industry mix Asia Pacific Public 2% Sector Americas 6% Financial Consulting & 5% Services France Managed Services Systems EMEA 26% 36% 43% Integration 27% Info. Comms & 45% Entertainment 41% Consumer Netherlands & Industrial Markets O
Slide 5: Agenda
Agenda • GROUP ACHIEVEMENTS • H1 2002 BUSINESS PERFORMANCE • YEAR 2002 OUTLOOK • STRATEGY 5 Turning Client Vision into Results
Slide 6: Financial performance
Financial performance In € Millions H1 2002 H1 2001 % change H2 2001 Revenue 1,486.7 1,518.0 -2.1% 1,519.6 Revenue (constant scope) 1,486.7 1,459.8 +1.8% 1,484.0 Income from operations 135.1 128.9 +4.8% 132.3 Operating margin 9.1% 8.5% + 0.6 pt 8.7% Net income 61.2 67.3 -9.1% 55.7 EPS before goodwil
Slide 7: Operating profit drivers
Operating profit drivers • Income From Operations – H2 2001 € 129M 8.5% • Impact of economic slowdown € (46)M – Systems Integration suffering – Price under pressure • Business increase in outsourcing € 12M • Operational optimisation € 25M – Resource restructuring – Actions to reduce subcontractors •
Slide 8: Quarterly results
Quarterly results Upward trend in profitability Q1 Q2 Q3 Q4 Q1 Q2 In € Millions 2001 2001 2001 2001 2002 2002 Revenue 757.0 761.0 722.8 796.8 749.2 737.5 Income from operations 62.1 66.8 61.0 71.3 67.8 67.3 Operating margin 8.2% 8.8% 8.4% 8.9% 9.0% 9.1% 8 Turning Client Vision into Results
Slide 9: Cash Flow
Cash Flow In € Millions Comments Gearing Net Debt, Dec 31, 2001 -235.1 49% Operating cash flow 125.4 8% of revenue Capital expenditure -52.1 -19% vs H1 2001 Free Cash Flow from operations 73.3 Reorganisation & restructuring -24.2 423 staff, 5 sites Origin FVA* cash commitment -6.5 Software licences
Slide 10: Balance sheet performance
Balance sheet performance In € Millions June 30, 2002 June 30, 2001 Dec 31, 2001 Goodwill 401.7 355.7 405.4 Other fixed assets 324.4 271.1 366.3 Working capital 212.1 246.2 193.3 Capital employed 938.2 873.0 965.0 Equity 538.3 420.3 478.7 Provisions 218.5 339.4 251.1 Net debt 181.4 113.3 235.1 Total
Slide 11: Provisions 2002
Provisions 2002 Provisions Variance analysis Release Charge / December June Release In € Millions Change with cash release Other 2001 2002 with cash in future operations FVA* Origin 75.2 56.9 -18.3 -6.5 -0.5 0.0 -11.3 Merger Integration 24.7 5.1 -19.6 -13.1 -6.2 0.0 -0.3 Reorganization 20.2 2.5 -17.
Slide 12: Provisions 2002 Variance analysis: other
Provisions 2002 Variance analysis : other • Fair Value Adjustments Origin – Write back of excess software licence provisions to goodwill (€ 4M) – Adjustment of provisions for employees and tax risk due to exchange rate in Brazil recorded against equity (€ 7 M) • Pensions – KPN contracts (€ 28 M) as
Slide 13: Consulting & Systems Integration
Consulting & Systems Integration Difficult market conditions H1 H1 H2 • Netherlands and Belgium In € Millions % change 2002 2001 2001 suffered Revenue 659.3 775.5 -15.0% 714.0 Revenue (constant scope) 659.3 767.2 -14.1% 714.0 • France and UK stable Income from operations 49.5 66.3 -25.3% 67.4 • Germ
Slide 14: Managed Services
Managed Services Leadership confirmed H1 H1 H2 In € Millions % change 2002 2001 2001 • Good market trend to outsourcing Revenue 645.0 528.0 +22.2% 591.8 Revenue (constant scope) 645.0 525.0 +22.9% 519.8 • Netherlands and France grew by Income from operations 81.8 60.8 34.6% 67.1 56% and 25% Operatin
Slide 15: On Line Services
On Line Services On track to meet targets H1 H1 H2 In € Millions % change • 19% growth in payment processing 2002 2001 2001 Revenue 182.4 214.5 -15.0% 213.8 - Sustained activity in France Revenue (constant scope) 182.4 167.6 +8.8% 178.3 Income from operations 21.7 23.4 -7.1% 21.4 - New clients in Ge
Slide 16: Global presence
Global presence All countries remain profitable Revenue Revenue Operating Average In € Millions % change H1 2002 H1 2001 margin headcount France 543.3 492.7 +10.3% 10.6% 8,555 Netherlands 440.6 381.3 +15.6% 14.0% 7,654 EMEA 396.9 438.8 -9.6% 6.9% 7,815 Americas 75.5 117.3 -35.6% 5.3% 1,440 Asia Paci
Slide 17: Country highlights: France, Netherlands
Country highlights • France – Outsourcing up by 25%, – C&SI decline limited to 2% – On Line Services grew by 9% – Recurring revenue > 50% • Netherlands – Outsourcing soars 56% with the KPN success story – Tough impact from the market for C&SI, including Philips – Well balanced operations : recurring
Slide 18: Country highlights (Continued)
Country highlights (Continued) • EMEA – Difficult market environment hits C&SI – Buoyant payment processing in Germany – Large ERP rollouts in the Middle East for oil & gas companies – Priority on profitability, with further actions in Germany, Italy, UK, Spain • Americas & Asia Pacific – Focused US
Slide 19: Focus on vertical markets
Focus on vertical markets • Slight decrease in Financial Services • KPN contracts greatly offset overall Telco market slowdown • High-Tech impacted by Philips decline • Industries : strong growth in oil sector • New contracts in Retail & CPG, especially in the UK • Promising foothold in Public Servi
Slide 20: H1 2002 business performance
H1 2002 business performance • Top 42 global accounts represent 58% of revenue • Global accounts (excl. Philips) grew at >20% • Philips : – Revenues 23% lower at € 220M – Improved market share • KPN’s additional contracts • Euronext’s cost reduction program 20 Turning Client Vision into Results
Slide 21: KPN: Building-up a strategic alliance
KPN Building-up a strategic alliance Staff Assets Revenue Consolidation Price Comments transferred taken over Datacenter € 1,100 M Oct 1, 2001 > 1000 7 datacenters € 163 M - Revenue guaranteed : € 1.1 B 6 years - DSO 30 days End User € 300 M Jan 1, 2002 > 800 25,000 € 12 M - Revenue guaranteed : € 3
Slide 22: Headcount
Headcount Headcount at December 31, 2001 26,278 Operations taken over (e.g. KPN) + 1,007 Hiring +1,660 Leavers - 1,189 Reorganisation & restructuring - 423 Other out* -681 Headcount at June 30, 2002 26,652 • Hiring policy aligned with the economic environment • Turnover : 8.9% • Subcontractors reduc
Slide 23: Staff restructuring actions
Staff restructuring actions 2001 Plan Actions (#) (#) H1 H2 Beyond 2002 2002 2002 Plan December 528 423 2001 1,504 Additional plan 466 Q1 2002 814 Additional plan 293 50 Q2 2002 Cumulative total 1,287 423 1,237 1,287 Staff restructuring -P&L impacts (M€) 54 7 43 4 -Cash flow impacts (M€) 72 21 37 14
Slide 24: Agenda
Agenda • GROUP ACHIEVEMENTS • H1 2002 BUSINESS PERFORMANCE • YEAR 2002 OUTLOOK • STRATEGY 24 Turning Client Vision into Results
Slide 25: KPMG Consulting UK & NL
KPMG Consulting UK & NL Direct Consulting staff Performance Partners 144 In Millions € H1 2002 Senior Revenue 298 Managers 516 Income from operations 26.8 Senior Consultants 697 Operating margin 9.0% Consultants Total staff 2,765 and Juniors 642 Industry Key solutions Highlights (% of revenue) WC Fi
Slide 26: Atos KPMG Consulting: A major strategic move
Atos KPMG Consulting A major strategic move • Excellent platform of consulting operations in Europe • Strong brand recognition in the UK and NL • Significant presence in the UK • Market leadership in the Netherlands • Atos Origin was selected as the best partner 26 Turning Client Vision into Results
Slide 27: Transaction structure and shareholder dilution
Transaction structure ? Total consideration : € 659 M – Cash : € 424 M financed by long term debt – 3.66 M new shares @ € 64.2 : € 235 M – Shares will be issued as ORA’s, converted 1 year after closing ? Shareholder dilution – Issued share capital will increase by 8.3% – Earn out : max 1.4 M new sha
Slide 28: Integration plan
Integration plan • Set-up the new organisation – New organisational structure in place from day 1 – Consultants involved in Market, Account and Solution management – Budget review in Q3 2002 – Disentanglement of shared services during 2002/2003 • Synergies – Joint client visits – Joint commercial pr
Slide 29: Syndicated loan
Syndicated loan A € 840 M loan facility in place from August 6, 2002 Allocation In € M Tranches Conditions Acquisition KPMG Consulting UK & NL 424 n°1 5 years Acquisition costs 20 € 475 M Redeemed debt 31 Existing debt refinanced 100 n°2 4 years KPN Software House 32 € 150 M KPMG Consulting UK & NL
Slide 30: Debt calendar August 2002
Debt calendar August 2002 Repayment term Total Beyond In Millions € August 2002 2003 2004 2005 2005 2002 Convertible bonds -173.0 173.0 Finance leases -19.3 3.3 9.3 6.1 0.6 Long-term borrowings -622.7 0.0 100.0 150.0 150.0 222.7 Other borrowings -12.5 0.5 1.3 1.9 3.2 5.6 Total Borrowings -827.5 3.8
Slide 31: Gearing evolution
Gearing evolution Strong operational cash inflow M€ 1,000 Including KPMG 800 Consulting UK & NL 798 600 656 Equity 538 400 373 200 Net debt 139 181 0 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q2 2002 pro forma KPMG Gearing 37% 27% 71% 49% 39% 34% 82% Net debt / Ebitda 0.4 0.3 0.7 0.6 0.5 0.5 1
Slide 32: Management Board
Management Board • Bernard Bourigeaud, CEO French • Wilbert Kieboom Dutch • Dominique Illien French • Tim Lomax Canadian • Jeremy Anderson English • Eric Guilhou, CFO French • Jans Tielman, HR & C Dutch 32 Turning Client Vision into Results
Slide 33: Business model
Business model Market Managers Information, Financial Consumer & Communication & Public Sector services Industrial Markets Entertainment Key Account Managers International International Consulting Consulting SI SI Global Global MS MS Global Global OLS OLS Global Global Competencies Competencies & &
Slide 34: Global clients
Global clients Inform, Comm. & Entertain. Financial Services Philips (Worldwide) Alstom (6 countries) ABN Amro (Frce, Brazil, Nl, UK) Lucent (8 countries) FIAT (France, Italy) BNP Paribas (France) France Telecom (France, UK) Novartis (4 countries) Credit Lyonnais (France) KPN (Netherlands) ICI (6 co
Slide 35: The Joint-Venture model
The Joint-Venture model Group's Joint-Venture Nature control stake Atos Euronext (France, Benelux) Financial services IT processing 50% Atos Origin Middle East IT services 75% AOPS services gmbh Payment transaction processing 52% A2B Desktop services outsourcing 85% Atos TPI Remote IT management 51%
Slide 36: 2002 business outlook
2002 business outlook Total group backlog Dec 2001 June 2002 Total Revenue Order entry Change Total Backlog Backlog H1 2002 H1 2002 of scope (M€) (M€) (M€) (M€) (M€) (Year) Consulting 99 99 0.2 Systems Integration 830 -659 587 758 0.6 Managed Services 3,320 -645 662 3,337 2.6 On Line Services 760 -1
Slide 37: Profit improvement plan
Profit improvement plan Launched in the aftermath of the merger • Matching of staff resources to demand – 2,800 staff involved since late 2000 (10% total workforce) – 70% achieved as of June 2002, of which 423 occured since January 2002 • Building efficient business support organizations – Indirect
Slide 38: Cash-Flow management
Cash-Flow management • Established a syndicated loan • Broadening our European cash pooling system worldwide (end 2002) • Tightened capital expenditure – 3.5% of revenue in H1 2002 vs 4.3% in H1 2001 • Non core assets and businesses disposal program – € 120 M cash generated • Working capital managem
Slide 39: FY2002 financial outlook
FY2002 financial outlook • 3-5% revenue growth • Operating margin aligned with our H1 2002 performance at 9.1% • Including Atos KPMG Consulting from September 1, 2002 39 Turning Client Vision into Results
Slide 40: Action plan
Action plan • Action plan for Operating Margin • Action plan for Cash/Debt • Integrate KPMG Consulting UK & NL • Leverage market, Global account, solution management 40 Turning Client Vision into Results
Slide 41: Agenda
Agenda • GROUP ACHIEVEMENTS • H1 2002 BUSINESS PERFORMANCE • YEAR 2002 OUTLOOK • STRATEGY 41 Turning Client Vision into Results
Slide 42: Backdrop for 2002
Backdrop for 2002 • Macroeconomic environment still flat • IT industry in consolidation phasis • No signs of recovery in Consulting & Systems Integration • Critical size in outsourcing makes the difference 42 Turning Client Vision into Results
Slide 43: Vision
Vision • End to end service offerings • Balanced mix of consulting, build and run • Capitalize on industry sector knowledge • Develop a focused management consulting practice • Focus on clients • Leverage strong HR management Build on global presence 43 Turning Client Vision into Results
Slide 44: Atos Origin: A client centric company with global operations
Atos Origin A client centric company with global operations … powered by people 44 Turning Client Vision into Results