Atos - comment

The headlines are dominated by a non-binding letter of intent from the French state to acquire 100% of a subset of BDS business for c. €700-1,000m subject to due diligence, but the meat of Atos’ announcement this morning is the revision of their objectives regarding the financial restructuring.  An additional €500m of fresh cash is required, bringing the total to €1.1bn combined with the €600m in credit facilities (unchanged).  Separately, the Company has reduced its guidance for both this year and the coming years, reducing top-line organic revenue growth by 3.3% versus previously guided 2% down.  

The lower guidance is driven by a combination of factors, all negative, including a delay in the inflection point of organic growth, lower utilisation, higher costs both restructuring and operational, and more worryingly lower revenue and operating margins in Tech Foundations due to higher risk of contract terminations and the delay in award of new contracts and add-on work as customers await the outcome of the restructuring plan