Atos SE · EURONEXT:ATO
Atos — Atos Origin — H1 2008 Earnings Presentation
43 slides from Atos's earnings presentation, Jul 29, 2008
Slide 1: Atos Origin First half 2008 results
Atos Origin First half 2008 results Management Board Conference call Paris, 29 July 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. 28/07/2008 23:13 © 2006 Atos Origin. Private for the client. This
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. Actual events or results may differ from those described in this presentation due to a number of risks and uncertainties
Slide 3: Agenda
Agenda » H1 2008 business overview » H1 2008 Performance » Transformation Plan » 2008 Outlook 3 Atos Origin H1 2008 results / 29 July 2008
Slide 4: H1 2008 Financial highlights
H1 2008 Financial highlights » Strong revenue organic growth for the first semester » Statutory H1 2008 revenue including one month of Italy and six months of AEMS Exchange at EUR 2,864 M; organic growth at +6.4% » Excluding Italy and AEMS Exchange, revenue at EUR 2,745 M; organic growth at +6.8% »
Slide 5: H1 2008 business highlights
H1 2008 business highlights » Governance » New Supervisory Board elected in June 2008 » 11 Board members including two representatives from PAI Partners, one from Centaurus Capital and one from Pardus Capital » Strategic Committee implemented in June 2008 » Commercial activity » Order entry EUR 2.7
Slide 6: Commercial momentum confirmed: latest wins
Commercial momentum confirmed : latest wins Service Customers Country Deals line NHS Scotland UK SI/MO eCare National Managed Technical Service Ministry of Justice UK MO Non-live environment Telco Operator UK CO Procurement transformation ERDF / EDF France SI Information System for Smart meters Fren
Slide 7: Commercial dynamics confirmed: order entries growth of +14% vs H1 2007
Commercial dynamics confirmed: order entries growth of +14% vs H1 2007 (€ bn) 2,4 H1 2,7 +14% 1,2 Q2 1,4 +17% 1,2 Q1 +11% 1,3 1,0 1,5 2,0 2,5 NB: 2007 figures based on 2008 2007 future scope Systems Managed Book to bill Total Group Consulting Integration Operations H1 08 98% 102 % 102 % 95 % H1 07 8
Slide 8: Agenda
Agenda » H1 2008 Business Overview » H1 2008 Financial Performance » Transformation Plan » 2008 Outlook 8 Atos Origin H1 2008 results / 29 July 2008
Slide 9: H1 2008 revenue organic growth excluding Italy and AEMS exchange at +6.8%
H1 2008 revenue organic growth excluding Italy and AEMS exchange at +6.8% Exchange 2007 % organic In € Million 2008 2007 Δ% Disposals rates proforma growth Statutory scope 2,864 2,890 -0.9% (80) (117) 2,692 +6.4% Italy (1 month in H1 08 and 6 months in H1 07) (20) (134) 113 (21) Revenue excluding It
Slide 10: H1 2008 revenue organic growth excluding Italy and AEMS Exchange
H1 2008 revenue organic growth excluding Italy and AEMS Exchange +6.8% Organic growth (M€) 3,000 2,890 (134) (105) 2,745 2,800 +175 (76) 2,570 (4) 2,600 2,400 2,200 2,000 H1 07 Italy AEMS Exchange Other H1 2007 Organic H1 2008 reported Exchange rates disposal revenue growth excl. Italy revenue impac
Slide 11: Continuous improvement of organic growth
Continuous improvement of organic growth +7,7% 2006 IT Services market growth Western Europe (source Gartner) : +6.2% +6,6% +5,9% 2007 IT Services market growth Western Europe (source Gartner) : +5.9% +5,3% +3,2% +2,7% +2,5% +2,9% +0,4% -0,2% Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'
Slide 12: Strong momentum of organic growth in 2008 compared to the last two years
Strong momentum of organic growth in 2008 compared to the last two years Organic growth excl. Italy and AEMS Exch. 8,0% +7.7% 7,0% +5.9% 6,0% 5,0% 4,0% +3.2% +2.9% 3,0% +2.7% +2.5% 2,0% Q1 Q2 Q1 Q2 Q1 Q2 1,0% 0,0% 2006 2007 2008 Year-on-Year organic growth Increase of revenue organic growth in Q2 by
Slide 13: Summary on H1 2008 revenue and operating margin
Summary on H1 2008 revenue and operating margin » Revenues organic growth +6.8% compared to H1 2007; up by EUR +175 M million » Operating margin before 3o3 costs up by +27% compared to H1 2007 with +0.9 point increase of operating margin rate On Future scope H1-07 Growth H1-08 % OG basis proforma vs
Slide 14: H1 2008 Performance by service line
H1 2008 Performance by service line Revenue Operating Margin Operating Margin % % organic In € Million H1 2008 H1 2007 Δ% H1 2008 H1 2007 H1 2008 H1 2007 growth Consulting 179 189 -5.5% -1.6% 8.0 11.5 4.5% 6.1% Systems Integration 1,116 1,069 +4.4% +7.5% 40.4 42.3 3.6% 4.0% Managed Operations 1,450
Slide 15: Consulting
Consulting % In € Million 2008 2007 Δ% Organic AP Revenue 179 189 -5.5% -1.6% 3% Operating margin 8.0 11.5 -30.6% France Operating margin rate 4.5% 6.1% -1.6 pt 15% NL 36% Headcount at closing (Jun / Dec) 2,683 2,632 +1.9% EMEA 23% UK 23% » Revenue organic decrease by -1.6% organic compared to -11.1
Slide 16: Systems Integration
Systems Integration % In € Million 2008 2007 Δ% Organic AP Revenue 1,116 1,069 +4.4% +7.5% Am.3% GCE 4% Operating margin 40.4 42.3 -4.5% 11% France UK 31% Operating margin rate 3.6% 4.0% -0.3 pt 14% Headcount at closing (Jun / Dec) 24,396 25,573 -4.6% EMEA NL 17% 19% » Acceleration of revenue growth
Slide 17: Managed Operations
Managed Operations % In € Million 2008 2007 Δ% Organic AP Revenue 1,450 1,392 +4.1% +7.4% Am.3% Operating margin 113.1 94.4 +19.8% 4% EMEA France 13% 28% Operating margin rate 7.8% 6.8% +1.0 pt GCE Headcount at closing (Jun / Dec) 23,330 23,244 +0.4% 14% NL UK 18% 20% » Revenue growth in all geograp
Slide 18: H1 2008 Performance by geographical area
H1 2008 Performance by geographical area Revenue Operating Margin Operating Margin % % organic In € Million H1 2008 H1 2007 Δ% H1 2008 H1 2007 H1 2008 H1 2007 growth France 779 731 +6.6% +7.0% 34.1 23.8 4.4% 3.2% United Kingdom 491 501 -2.1% +12.1% 30.3 10.8 6.2% 2.2% The Netherlands 538 546 -1.4% -
Slide 19: Subcontracting – impact on H1 performance
Subcontracting – impact on H1 performance » Recruitments more difficult from February to June 2008 » Increasing order entry during the first half of 2008 » Delivery on projects with short lead-time in Systems Integration but also in Managed Operations Increase of 1,000 subcontractors Margin effect f
Slide 20: Action Plan to improve significantly France SI profitability
Action Plan to improve significantly France SI profitability » External revenue growth in H1 2008 at +5.9% (in line with market growth) » Book to Bill H1 2008 at 110% » Significant Contracts won with standard profitability (ERDF/EDF in June, Michelin in July) » Break even at Operating Margin level »
Slide 21: Strong action plan to boost Consulting business in the United Kingdom
Strong action plan to boost Consulting business in the United Kingdom » External revenue increase Q2 vs Q1 with higher utilization rate at 60% and Q2 profitable » Significant Procurement Transformation Contract signed with a major telecom operator » Strategic direction re-aligned into two delivery s
Slide 22: Positive effect from the evolution of the contracts signed
Positive effect from the evolution of the contracts signed » Baseline : 200 largest contracts signed starting 2004 » Sample representing EUR 1.5 billion euros per year » Heavy weight on gross margin from contracts signed in 2004 and 2005 » New signatures from 2007 and 2008 above 20% margin » Recent
Slide 23: Revenue to Operating income
Revenue to Operating income In € Million H1 2008 H1 2007 Comments Revenue future scope 2,745 2,651 +6.8% revenue organic growth Operating Margin future scope 123 111 +11% increase / +15% at constant exchange rates % revenue 4.5% 4.2% Italy Operating Margin (1) (5) AEMS Exchange Operating Margin 2 12
Slide 24: Operating Income to Net income
Operating Income to Net income In € Million H1 2008 H1 2007 Comments Operating income 191 108 % revenue 6.7% 3.7% Average net debt EUR 489 M / Average interest rate Net cost of financial debt (14) (13) 5.5% EUR 11 M pensions income, EUR (3) M exchange Other financial income-expense 7 5 rates Net fin
Slide 25: Earnings per share
Earnings per share In € Million H1 2008 H1 2007 Net Income Group Share 124.7 57.3 Adjusted net income Group Share (*) 76.2 63.5 Weighted average number of shares (in millions) 69.7 68.9 Diluted weighted average number of shares (in millions) 69.8 69.1 Basic EPS (euros) 1.79 0.83 Diluted EPS (euros)
Slide 26: Balance sheet
Balance sheet 30 Jun 31 Dec In € Million Comments 2008 2007 Goodwill 1,819 1,868 Exchange rates difference on UK goodwill Intangible assets 80 75 Tangible assets 460 437 Compared to reduction of IT Operating lease by EUR 18 M Non-current financial assets 33 32 Net deferred tax assets 132 178 Tax ass
Slide 27: Cash flow statement
Cash flow statement In € Million H1 2008 H1 2007 Comments OMDA 211 201 Increase in operating margin Net Capital expenditures (141) (169) In 2008 includes EUR 20 M for AEMS and EUR 21 M for 3o3 Operating Cash Capacity 70 32 Change in working capital (106) (95) Bonus payments, increase of DSO from Dec
Slide 28: Net debt evolution
Net debt evolution (M€) 514 509 500 400 360 338 300 238 200 100 0 Dec'06 Jun'07 Dec'07 Jun'08 Dec'08 est » Italy: cash received in January 2008 » Pensions UK: cash out in Q2 2008 » CAPEX impacted by industrialization and datacenters H1 2008 » Bonus effect vs H1 2007 28 Atos Origin H1 2008 results /
Slide 29: Strong reduction of the financial liabilities
Strong reduction of the financial liabilities Dec 06 Jun 07 Dec 07 Jun 08 (M€) 950 97 746 76 630 540 493 161 53 35 239 360 509 338 514 -9 Net debt Pension liabilities Operating leases 29 Atos Origin H1 2008 results / 29 July 2008
Slide 30: Headcount evolution
Headcount evolution » Change in scope relates to Italy (2,443 staff) and transfers in the Group » Hiring: +5,600 new employees in H1 08 with +2,600 in Q1 and +3,000 in Q2 » Staff attrition pursue the decrease at 13.6% after 14.3% in Q1 2008 and compared to 14.6% for FY 2007 51,704 (2,443) 50,655 +5,
Slide 31: Staff by geographical area
Staff by geographical area Closing Jun Closing Change since opening 2008 Dec 2007 France 15,379 15,528 (149) -1.0% United Kingdom 6,356 6,179 +177 +2.9% The Netherlands 8,322 8,398 (76) -0.9% Germany + Central Europe 4,199 4,076 +123 +3.0% Rest of EMEA 8,658 8,186 +472 +5.8% Spain closeshore America
Slide 32: Attrition rate by Service line
Attrition rate by Service line » All service lines reduced attrition rate compared to H1 07: Consulting down by 3.1 pts, Systems Integration by 1.2 pt, Managed Operations by 1 pt 29,0% 28% 26,0% 26,9% 26,7% 23,8% 24,7% 23,6% 23% 23,3% 21,4% 18% 16,2% 15,9% 15,9% 15,8% 15,3% 13,2% 13,4% 14,7% 12,4% 1
Slide 33: Staff evolution in low cost countries
Staff evolution in low cost countries India » Total staff at 30 June 2008 reached 6,000; up by +840 staff compared to end of 2007 Brazil representing 12% of total staff Morocco » Objective to double from 2007 to 2009 confirmed; 10% to 20% of total staff in low Poland cost countries China » Accelerat
Slide 34: Offshore momentum
Offshore momentum Hirings in Offshore / Nearshore, on track with targets » Average staff increase by +100 per month during H1 08 to be accelerated in the second half of 2008 » Offshore / Nearshore: from 3% of total staff in December 2006 to 7% in June 2008 in line with the objective of 15% targeted
Slide 35: Agenda
Agenda » H1 2008 business overview » H1 2008 Performance » Transformation Plan » 2008 Outlook 35 Atos Origin H1 2008 results / 29 July 2008
Slide 36: 3o3 key achievements end of June 2008 (1/3)
3o3 key achievements end of June 20008 (1/3) Initiatives Key achievements » Tooling designed, built, roll-out for the Software Production Line (Requirement, configuration, testing,…) » SSC organization in place with governance rules Industrialization » New SI country organization designed and alignm
Slide 37: 3o3 key achievements end of June 2008 (2/3)
3o3 key achievements end of June 20008 (2/3) Initiatives Key achievements » Local datacenter closures country by country (Dusseldorf, Woodbum, Groningen, Bussum…) » Mainframes transferred to Essen completed for NL & Italy and transition in progress for France » Restructuring for overstaffing and ind
Slide 38: 3o3 key achievements end of June 2008 (3/3)
3o3 key achievements end of June 2008 (3/3) Initiatives Key achievements » New global, centralized purchasing organization with strong category management Purchasing » Close monitoring of all purchasing actions for all countries » KPI Spend coverage: BL 2006: 45% - Actual June: 88% - Target 2008: 90
Slide 39: Agenda
Agenda » H1 2008 business overview » H1 2008 Performance » Transformation Plan » 2008 Outlook 39 Atos Origin H1 2008 results / 29 July 2008
Slide 40: Backlog coverage on 2008 revenue
Backlog coverage on 2008 revenue 2008 revenue coverage as of June 08 2007 revenue coverage as of June 07 5% 6% 9% 10% Backlog Backlog Pipe Pipe To find To find 86% 84% +2 points Higher backlog coverage compared to last year on the basis of the +4% guidance revenue organic growth 40 Atos Origin H1 20
Slide 41: 2008 Revenue Organic Growth objective
2008 Revenue Organic Growth objective (on future scope) H1 revenue organic growth: +6.8% Full year 2008 guidance for revenue organic growth H1 order entry growth: +14% increased from +4% to above +5% Better coverage by +2 points at 86% 41 Atos Origin H1 2008 results / 29 July 2008
Slide 42: Outlook
OUTLOOK 2008 Objectives » Excluding Italy and AEMS Exchange: - Full year revenue organic growth increased from +4% (initial guidance) to above +5% - Improvement of the operating margin rate to reach 5.6% after operating costs of Transformation Plan compared to 4.6% in 2007 - Net debt reduction of EU
Slide 43: Questions
Questions Paris, 29 July 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. 28/07/2008 23:13 © 2006 Atos Origin. Private for the client. This report or any part of it, may not be copied, circulated, q