Café de la Bourse is interested in Atos, a French leader in digital transformation and cyber security. The group continues its disappointments and continues its descent into stock market hell that began in 2021. We return to the misfortunes of Atos: poor financial performance, strategic incoherence or management crises. Can Atos share still recover on the stock market after losing 90% of its value since January 2021?
Since 2020, Atos has been reporting financial shortfalls
The numbers no longer exist for Atos in a context that is nonetheless buoyant. Although the pandemic has contributed to the digital transformation of companies, Atos has not benefited from it as much as the market expected.
For the full year 2020, Atos’ revenue was €11.8 billion, down 3.5% on an organic basis and down 2.3% at constant exchange rates. At the same time, its rival Capgemini reported a 12.2% increase in turnover compared to 2020… Atos’ operating profit also fell sharply, falling 14% to 1 billion euros, compared to 1.16 billion euros the previous year. fiscal year.
In 2021, things are not better for the Atos group.
The IT services company posted a heavy loss of €2.96 billion (reflecting asset write-downs and provisions for bad debts on some contracts), while Atos’ annual revenue fell 3.1% to €10.84 billion.
“Atos faced significant challenges in 2021, which is reflected in the group’s results. Financial targets were not met, and the extensive analysis of assets and contracts carried out at the beginning of the year in light of recent changes in the group’s strategy led to significant value impairments,” commented its CEO, Rudolf Bellmer, in a press release.
Nothing happened in the first half of 2022.
Atos revenue was €5.56 billion, down 0.6% at constant currency. Operating margin for the first half of 2022 was €59 million, compared to €302 million for the first half of 2021. Atos made a net loss of €503 million in the first half of this year, compared with a loss of €129 million in the first half of 2021.
Finally, Atos’ forecasts are not encouraging, with the company predicting a change in turnover of -0.5% and free cash flow of -150 million euros.
Investors are worried about management crises and a lack of clarity in Atos’ strategy
Investors have had doubts about Atos for several years, particularly regarding the coherence of its strategy and management.
Indeed, Atos investors were first surprised in 2021 after announcing a $10 billion takeover bid for US consulting firm DXC.
This offer called into question the group’s strategic orientation, contrasting with the acquisition strategy publicly announced before: specific verticals, strong technology bricks and a special focus on cyber security.
This year, Atos announced its intention to split into two separate companies, with the proposed departure of its chief executive, Rudolf Bellmer. The decision will echo strong tensions within the group’s board of directors. The news was badly received in the stock market because Rudolf Bellmer took the helm of Atos in early January, reaffirming his determination to carry out a major reorganization to improve the group’s commercial performance and return to growth.
The split project will see the consolidation of the historic data center activities under the new Atos, as well as the creation of a new company called Evidian, which will bring together Atos’ cybersecurity, digital transformation and big data development activities.
This separation should enable the Atos group to better manage its financial performance. However, such a strategic transformation has thrown a chill in an uncertain macroeconomic context, especially in terms of project financing.
It’s an opportunity that makes the Onepoint Group, in particular, interested in Evidian’s development activities. A French IT consulting group linked to Anglo-Saxon investment fund ICG is poised to buy Evidian for an enterprise value of 4.2 billion euros.
However, the letter of intent was initially rejected by the Atos board, much to the dismay of retail investors. OnePoint founder David Laigny confirms his desire to create a new French champion in strategy, consulting, technology and data. He also assured that it was a “completely friendly offer”.
Atos Shares: What to Expect After a Disastrous Stock Market Growth?
Atos shares have lost 90% of their value since the start of 2021. Atos shares are trading at 0.24x 2022 earnings, a significant discount to its rival Capgemini, which is paying 1.30x 2022 earnings.
Poor financial results and a lack of visibility at all levels weigh heavily on Atos’ valuation. Nevertheless, the company has certain strengths. For now, however, the market seems more likely to sanction the name while ignoring the company’s strong elements.
This separation of activities is indeed an opportunity for Atos to adapt the financial management of its activities to maximize cash flows from historical activities (new Atos) and to invest heavily in its prospective future activities (Evidian). Onepoint group’s interest in this organization also supports the idea of this division.
Atos Group also expects to recover its results in the second half of 2022, expecting a return to positive growth at constant exchange rates and an improvement in operating margins and cash flow.
It will certainly take more to bring back investors who fled Atos shares for months. The macroeconomic context is fragile and leaves no room for hesitation, be it strategic, financial or managerial.
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