Atos SE · EURONEXT:ATO
Atos — Atos Origin — FY2007 Earnings Presentation
57 slides from Atos's earnings presentation, Feb 15, 2008
Slide 1: Atos Origin Full-Year 2007 Results
Atos Origin Full-Year 2007 Results Paris, 15 February 2008 Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish symbol itself are registered trademarks of Atos Origin SA. 2/14/2008 7:24 PM © 2006 Atos Origin. Private for the client. This report or any part of it, ma
Slide 2: Disclaimers
Disclaimers » This presentation contains further forward-looking statements that involve risks and uncertainties concerning the Group’s expected growth and profitability for 2008 and following years. Actual events or results may differ from those described in this presentation due to a number of ris
Slide 3: Agenda
Agenda » 2007 Highlights & Strategy » 2007 Operational performance » 2007 Financial performance » 2008 Outlook 2 Atos Origin FY 2007 / Feb. 15, 2008
Slide 4: Highlights & Strategy
Highlights & Strategy » Highlights » Strategic vision – Focus & scale » Strong commercial dynamic » Return to organic growth » Acceleration of offshore momentum » 3o3 Transformation plan 3 Atos Origin FY 2007 / Feb. 15, 2008
Slide 5: Highlights: 2007 objectives fully achieved
Highlights 2007 Objectives fully achieved Actuals vs Objectives 5 February 2007 Objectives Actuals 2007 Revenue Revenue Top Top Line Growth Growth +8.5% +8.5% Revenue Organic Growth +4.0% +4.3% Operating Margin Operating Margin rate 5.4% before transformation costs above 2006, i.e above 4.6% Operati
Slide 6: 2007 Highlights
2007 Highlights Governance » New CEO, tightened Management Board and creation of the Group Executive Committee Transformation Plan » Launched and announced on 5 February 2007 » Significant achievements in 2007 mainly in Offshoring, Industrialization, Global Delivery, Purchasing » Full speed now in a
Slide 7: Strategic vision – Focus & scale
Strategic vision – Focus & scale We have a clear action plan to achieve our objectives » Atos Origin has reached critical mass in Europe through acquisitions and current integration » Atos Origin development outside Europe in selected high growth countries Our vision: “Be a leading IT services » Our
Slide 8: Atos Origin a major IT player in Europe
Strategic vision – Focus & scale Atos Origin a major IT player in Europe IBM 10,577 7.9% Capgemini 6,268 4.7% Accenture 5,863 4.4% T-Systems 5,674 4.3% EDS 5,084 3.8% Atos Origin 5,044 3.8% British Telecom 4,457 3.3% Logica 3,549 2.7% 2006 Revenues Western Europe (M€) x.x% 2006 Market Share (%) Sour
Slide 9: Strategic development based on our major strengths
Strategic vision – Focus & scale Strategic development based on our major strengths » Critical mass in Europe as a leading IT Service provider » End-to-end delivery with an integrated operating model (Design-Build-Operate) » Strong client relationships with 2/3 recurring activity » High technical co
Slide 10: Key strategic priorities
Strategic vision – Focus & scale Key strategic priorities Strengthening of core Focus on key geographies Readiness for growth business and activities opportunities » Delivery » Key markets » Geographies » Consolidation of » France » Across key markets » Netherlands operating centers » Other growing
Slide 11: Capitalize on mainstream, grow fast on distinctive offers
Strategic vision – Focus & scale Capitalize on mainstream, grow fast on distinctive offers Financial Manufactu- Public Sector Utilities Telecom Retail Services ring E-services Nuclear Intelligent SAP for / CRM SAP MMT Instrum. & Network / banking Public Control Other Distinctive offers Payments Ente
Slide 12: Distinctive offers to drive our growth
Strategic vision – Focus & scale Distinctive offers to drive our growth Criteria to identify areas Distinctive areas of expertise 9 » Financial services - building on card payment Business outcome focus 3 industry know-how and SAP in banking domains » Manufacturing - building on end-to-end SAP 9Cros
Slide 13: Group's strong commercial dynamics confirmed: latest wins in 2007
Strong commercial dynamics Group’s strong commercial dynamics confirmed Latest wins in 2007 Consulting France SNCF, French ministries United Kingdom Department for International Development, large bank Iberia Telefonica, Social Security Systems Integration France French Social and Health, Telecom op
Slide 14: Reduction of client exposure and risk through diversification
Strong commercial dynamics Reduction of client exposure and risk through diversification of client base Increase of win-rate, driven by new customers and medium size deals Top client weight in Group revenues % EUR 5,459 M EUR 5,397 M EUR 5,855 M 37% 38% 38% 38% 43% Other & New logos Top 50 clients 6
Slide 15: Significant new orders with strong commercial momentum
Strong commercial dynamics Significant new orders with strong commercial momentum (€ bn) Q4'07 2.4 Q3'07 1.3 Q2'07 1.2 Q1'07 1.3 Book to bill Systems Managed Consulting 2007 Integration Operations 96 % 105 % 108 % » In line with the growth assumptions taken in the 3O3 plan 14 Atos Origin FY 2007 / F
Slide 16: Focus on profitable organic growth
Return to organic growth Focus on profitable organic growth 6.0% +5.9% 6.0% 5.2% 4.9% 5.0% 5.0% 4.2% 4.1% 4.0% 4.0% +2.9% 3.0% 3.0% +2.7% 2.0% 2.0% 1.0% 1.0% +0.1% 0.0% 0.0% H1'06 H2'06 H1'07 H2'07 Operating Margin (%) Year-on-Year Organic Growth (%) The focus on organic growth and costs savings del
Slide 17: Strengthened mainstream activity a solid ground for organic growth
Return to organic growth Our strengthened mainstream activity is a solid ground for organic growth Examples of Continuous improvements Organic growth new wins Systems » 3o3 Integration +5.3% 40% » Increasing staff productivity » CMMI certifications and constant focus on quality Managed improvement +
Slide 18: 2007 revenue growing in all geographical areas
Return to organic growth 2007 revenue growing in all geographical areas In € Million FY 2007 FY 2006 % Organic growth (*) H1 H2 France 1 685 1 652 +0.3% +5.1% United Kingdom 1 042 1 035 -4.2% +6.9% The Netherlands 1 083 1 051 +5.6% +0.6% Germany + Central Europe 607 592 +3.2% +6.3% Rest of EMEA 1 06
Slide 19: Hirings in Offshore / Nearshore, on track with targets
Acceleration of offshore momentum Hirings in Offshore / Nearshore, on track with targets » Average net staff increase by +120 per month during H2 07 as expected in the plan » Offshore / Nearshore: from 3% of total staff in December 2006 to 6% in December 2007 in line with the objective of 15% target
Slide 20: Headcount evolution
Headcount evolution Extensive qualitative recruitments, in line with target » Staff increase in 2007: +1,863 of which 80% offshore and 20% onshore » Hiring: +11,000 new employees in 2007; +9% increase compared to 2006 » Staff attrition decreased regularly from 15.3% in Q1 2007 to 13.7% in Q4 2007 La
Slide 21: Staff evolution in low cost countries
Staff evolution in low cost countries India Brazil Morocco » More than 5,000 staff at 31 December 2007 Poland » Objective to double from 2007 to 2009; 10% to 20% of total staff in low cost countries China » Staff increase in 2008 and 2009 will be mostly Malaysia in low cost countries South Africa Ar
Slide 22: Major Milestones of the 3O3 plan
Major Milestones of the 3O3 plan 2007 2008 2009 Career path Global Market 40 courses of available for all Managers in Sales University sales force place Clients/ executed Sales Offer Common Tools processes Deployment Tools Full deployment defined started defined implemented completed Industrializati
Slide 23: Achievements 2007
Achievements 2007 » Doubling offshore staff in 2007 at 3,000 » New sites opened in Mumbai, Pune and Bangalore » Additional capabilities built in Morocco, Brazil, Armenia, Poland, Malaysia » New center opened in Curitiba (Brazil) for offshore (Europe and US) and closeshore opportunities (Brazilian cu
Slide 24: Achievements 2007
Achievements 2007 » Common Software Factory model in all countries with 6,000 staff involved » Common Industrialization tools implemented for: Project Management, Productivity Management, Requirement Management, Testing Factory » Common tool center fully operational » Roll-out of first standardized
Slide 25: Achievements 2007
Achievements 2007 » Under a new CPO, 60 globally driven actions in process: » PCs, servers, maintenance, professional services, real estate, travel expenses, office supplies » Selected and started to implement a second source of routers and switches » One worldwide software reseller » Renegotiation
Slide 26: Achievements 2007
Achievements 2007 » First pool of top talents completed: 400 staff » Candidates for the new international development program (Relay) identified » Training and career framework for Project Managers and Technical Architects implemented » Finance and HR Shared service centers designed and business cas
Slide 27: Agenda
Agenda » 2007 Highlights & Strategy » 2007 Operational performance » 2007 Financial performance » 2008 Outlook 26 Atos Origin FY 2007 / Feb. 15, 2008
Slide 28: Consulting
Consulting % In € Million 2007 2006 Δ% Organic France Revenue 360 406 -11.2% -8.7% 13% UK 29% Operating margin 17.5 36.5 -52.0% EMEA 21% Operating margin rate 4.9% 9.0% -4.1 pt NL Headcount at closing (Dec) 2 632 2 698 -2.4% 37% » Revenue decrease due to restructuring in the UK, contract ramp downs
Slide 29: Unfolding of the Consulting Action Plan
Unfolding of the Consulting Action Plan France » New Management hired in first semester 2007 » New Partners have been recruited to strengthen practices and end-to-end offerings » Strong sector focused Go-To-Market jointly with Systems Integration and Managed Operations; book to bill at 118% United K
Slide 30: Objective of the Consulting Action Plan in 2008
Objective of the Consulting Action Plan in 2008: restore growth and profitability » Standardization of the Operating Model in all countries; sector focused Go-To-Market » Working closely with Systems Integration and Managed Operations on sales and delivery » Consistent service portfolio across geogr
Slide 31: Systems Integration
Systems Integration % In € Million 2007 2006 Δ% Organic AP Revenue 2 338 2 243 +4.3% +5.3% Am.3% GCE 5% Operating margin excl. 3o3 costs 111.3 69.0 +61.2% 9% France UK 29% 3o3 operating costs (15.7) 13% Operating margin 95.6 69.0 +38.6% NL EMEA Operating margin rate 4.1% 3.1% +1.0 pt 18% 23% Headcou
Slide 32: Managed Operations
Managed Operations % In € Million 2007 2006 Δ% Organic AP Revenue 3 157 2 749 +14.9% +5.4% Am.3% 4% Operating margin excl. 3o3 costs 279.1 234.4 +19.1% EMEA France 14% 30% 3o3 operating costs (4.8) GCE Operating margin 274.3 234.4 +17.0% 12% NL UK Operating margin rate 8.7% 8.5% +0.2 pt 20% 17% Head
Slide 33: UK plan follow-up
UK plan follow-up » The UK business has executed its “turn around” 2007 objective and is now on a profitable growth track: operating margin growing from 2.3% in 2006 to 7.3% in 2007 » 2007 Highlights include: » Settling of the four difficult contracts in Systems Integration, » Securing a total contr
Slide 34: France (1/2)
France (1/2) » Acceleration of organic growth: +2.8% full year with +0.3% in H1 growing to +5.1% in H2 2007 » The three-year Strategic Plan finalized in Q3 2007, with detailed Go-To-Market by sector and strong focus on business offerings to reinforce organic growth » Strong hiring performance in 200
Slide 35: France (2/2)
France (2/2) » In Systems Integration: » Full year organic growth at +2% with acceleration from -0.5% in H1 to +4.6% in H2 2007 » Transformation of the Delivery Model with 50% staff close-shore and increasing off-shore in India and Morocco on track » Industrialization and close- / off-shoring progra
Slide 36: Agenda
Agenda » 2007 Highlights & Strategy » 2007 Operational performance » 2007 Financial performance » 2008 Outlook 35 Atos Origin FY 2007 / Feb. 15, 2008
Slide 37: 2007 Revenue organic growth above guidance at +4.3%
2007 Revenue organic growth above guidance at +4.3% In € Million 2007 2006 Δ% Revenue reported 5 855 5 397 +8.5% Acquisition (281) Disposals (25) Exchange rates and other (28) Organic growth 5 574 5 343 +4.3% 36 Atos Origin FY 2007 / Feb. 15, 2008
Slide 38: 2007 Performance by service line
2007 Performance by service line Revenue Operating Margin Operating Margin % % Organic In € Million 2007 2006 2007 2006 2007 2006 growth Consulting 360 406 -8.7% 18 37 4.9% 9.0% Systems Integration 2 338 2 243 +5.3% 111 69 4.8% 3.1% Managed Operations 3 157 2 749 +5.4% 279 234 8.8% 8.5% Corporate Ce
Slide 39: 2007 Performance by geographical areas
2007 Performance by geographical areas Revenue Operating Margin (*) Operating Margin % % Statutory % Organic In € Million FY 2007 FY 2006 2007 2006 2007 2006 growth growth France 1 685 1 652 +2.0% +2.8% 81 105 4.8% 6.4% United Kingdom 1 042 1 035 +0.7% +1.0% 77 24 7.3% 2.3% The Netherlands 1 083 1 0
Slide 40: Increased staff productivity, reflecting efficiency of 3O3
Increased staff productivity, reflecting efficiency of 3O3 Average Average Change 2007 2006 Total FTE direct in units 46 732 44 042 +2 690 +6.1% Full-year revenue in MEUR 5 855 5 397 458 +8.5% Full-year revenue by direct FTE total increased by +2.3% 39 Atos Origin FY 2007 / Feb. 15, 2008
Slide 41: Operating Income to Net income
Operating Income to Net income In € Million 2007 2006 Comments Revenue 5 855 5 397 OMDA 505 446 Assets depreciation EUR 223 M % revenue 8.6% 8.3% Operating Margin 272 247 % revenue 4.6% 4.6% Restructuring and rationalization (98) (31) Italy, UK, France, other 3o3 Capital gains and losses on disposal
Slide 42: Reorganization and rationalization
Reorganization and rationalization » In 2007, the restructuring and rationalization charges in the income statement were EUR 108 M of which EUR 10 M in Operating Margin and EUR 98 M in Operating income » Out of the EUR 98 M below the operating margin, restructuring costs relate to rightsizing of loc
Slide 43: Operating Income to Net income
Operating Income to Net income In € Million 2007 2006 Comments Operating income 137 (160) % revenue 2.3% -3.0% Average net debt EUR 514 M / Net cost of financial debt (29) (23) Average interest rate 5.5% Other financial income-expense 15 12 EUR 18 M pensions income Net financial expenses (14) (11) E
Slide 44: Earnings per share
Earnings per share In € Million 2007 2006 Net Income Group Share 48 (264) Adjusted net income Group Share (*) 140 110 Weighted average number of shares (in millions) 68.9 67.6 Diluted weighted average number of shares (in millions) 69.1 67.9 Basic EPS (euros) 0.70 (3.91) Diluted EPS (euros) 0.70 (3.
Slide 45: Cash flow statement
Cash flow statement In € Million 2007 2006 Comments Cash from oper. activities bef. restr. & rationalization 469 427 Income tax paid (48) (39) Change in working capital 30 (43) 1 day DSO improvement Net cash from oper. activities bef. restr. & rationalization 450 345 Datacenters consolidation (30),
Slide 46: Balance sheet
Balance sheet 31 Dec 31 Dec In € Million Comments 2007 2006 Goodwill 1 868 2 046 France EUR 535 M , UK EUR 522 M, NL EUR 298 M Intangible assets 75 118 Mainly software Tangible assets 437 382 IT equipment EUR 260 M, land & buildings EUR 137 M Non-current financial assets 71 45 Pension surplus EUR 38
Slide 47: Net debt evolution
Net debt evolution » Leverage ratio (net debt / OMDA) End 2007: 0.7 covenant < 2.5 » Interest cover (operating margin / cost of debt) End 2007: 9.5 covenant > 4x (M€) 509 492 500 400 363 360 338 326 300 200 180 100 0 Dec '04 Jun '05 Dec '05 Jun '06 Dec '06 Jun '07 Dec '07 46 Atos Origin FY 2007 / Fe
Slide 48: A strong financial flexibility
A strong financial flexibility » Credit lines and leverage ratio - EUR 1.2 billion credit lines until May 2011; EUR 1.05 billion already renewed until May 2012 - Current leverage (Net debt / OMDA) below 0.7 vs. covenant below 2.5 » Performance objectives - Focus on operating margin and free cash flo
Slide 49: Pensions agreement in the UK
Pensions agreement in the UK » Strategy to move schemes from defined benefit obligations to defined contribution plans: to get a predictable future cost versus unpredictable » MOU signed with Trustees on 21 December 2007 after one year negotiation » Pension plan for 1,500 employees (2,300 already in
Slide 50: Agreement to sell the 50% stake in AEMS
Agreement to sell the 50% stake in AEMS » Decision from NYSE Euronext to regroup the software and technical platforms and to control the intellectual property rights » Negotiations finalized with an agreement on 12 December 2007 on the future sale in Q3 2008 of 50% stake in AEMS for EUR 275 M repres
Slide 51: Disposal of Atos Origin Italian operations
Disposal of Atos Origin Italian operations » Transaction finalized on 31 January 2008 with the disposal of Atos Origin Italy to Engineering and the signature of an alliance agreement to serve Italian and international customers of the two companies » IT market in Italy remains in a difficult environ
Slide 52: Agenda
Agenda » 2007 Highlights & Strategy » 2007 Operational performance » 2007 Financial performance » 2008 Outlook 51 Atos Origin FY 2007 / Feb. 15, 2008
Slide 53: 2008 Outlook
2008 OUTLOOK Key priorities » Continuous investments in Industrialization, Global Sourcing, Sales and Innovation through the 303 transformation plan » Acceleration of off-shoring / near-shoring / close-shoring strategy » Execution of Consulting action plan for a profitable growth and an increased pr
Slide 54: Backlog coverage on 2008 revenue
Backlog coverage on 2008 revenue » Full backlog growth in 2007 : +7% of which backlog growth for next year : +11% 2008 revenue coverage 2007 revenue coverage as of Dec 07 (new scope) as of Dec 06 Backlog 27% Pipe 28% To find 54% 57% 16% 18% 2008 starts with a better backlog coverage 53 Atos Origin F
Slide 55: Atos Origin sensitivity to general economic environment
Atos Origin sensitivity to general economic environment Weight of the Consulting business » 6% of 2007 total revenue Presence in the United States » 2% of 2007 total revenue made in the United States Exposure to Investment Banking sector » Less than 5% of 2007 total revenue Weight of recurring busin
Slide 56: Operating Margin improvement
Operating Margin improvement 2007 2008 2009 3o3 Plan Investments Break-even Full benefit Distinctive offerings Investments Growth acceleration Sales program Investments Investments Break-even +250 basis points of improvement from 2007 to 2009 of which +100 basis points in 2008 55 Atos Origin FY 2007
Slide 57: Questions
Questions Paris, 15 February 2008 Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish symbol itself are registered trademarks of Atos Origin SA. 2/14/2008 7:24 PM © 2006 Atos Origin. Private for the client. This report or any part of it, may not be copied, circulat