Atos, a global leader in digital transformation, today announces its financial results for the first half of 2017.

Thierry Breton, Chairman and CEO said: “Our customers are more than ever facing massive interconnections and data flows. This brings multiple challenges but also significant opportunities to leverage the digital transformation of our customers, to help them reinvent their own business models, improve their own customers’ experience, and optimize their operations. By mastering all critical technologies, either on our own or through key partners, we are fully organized to provide the best scientific and business outcomes to our customers out of their massive data flows, while protecting them from very fast growing and multiple cyber threats.

During the first semester, to answer our customers’ end-to-end new requirements, we continued to invest significantly in Big Data technologies. This reinforces Atos’ positions in Data Management and Automation, in Digital Transformation and Cognitive Solutions, in Big Data and Artificial Intelligence, in Predictive Cybersecurity, and also in Quantum Computing Simulation. I am proud to have recently celebrated with our scientists the 5,000th patent of the Group.

Atos’ technology leap creates a strong momentum within all our markets and has materialized into the strongest H1 ever. This makes us very confident to deliver our 3-year plan and we confirm all our objectives for 2017.”

H1 2017 performance by Division

Revenue was € 6,311 million, up +11.6% at constant exchange rates and +2.2% organically. The Group reached +2.4% organic growth in the second quarter of 2017, strengthening the positive trend already performed in the first quarter. All the Divisions contributed to revenue organic growth thanks to a strong commercial momentum and to the investment strategy in innovation and technology.

Operating margin was € 538 million, representing 8.5% of revenue, an improvement of +190 basis points fueled by Infrastructure & Data Management (+240 basis points), Business & Platform Solutions (+120 basis points), and Worldline (+240 basis points).

 

Revenue Operating margin Operating margin %
In € million H1 2017 H1 2016* Organic
evolution
  H1 2017 H1 2016*   H1 2017 H1 2016*
Infrastructure & Data Management       3,589       3,556 +0.9%   329 243   9.2% 6.8%
Business & Platform Solutions       1,608       1,567 +2.6%   98 77   6.1% 4.9%
Big Data & Cybersecurity          357          313 +13.8%   43 43   12.2% 13.6%
Corporate costs     -46 -48   -0.8% -0.9%
Worldline          757          740 +2.3%   114 93   15.0% 12.6%
Total      6,311        6,177   +2.2%   538 408   8.5% 6.6%
* At constant scope and exchange rates

 

Representing 57% of the Group revenue in the first half of 2017, Infrastructure & Data Management (IDM) revenue was € 3,589 million, up +0.9% at constant scope and exchange rates. The business continued to be led by the deployment of Orchestrated Hybrid Cloud solutions and the reinforcement of Atos leadership in Digital Workplace. In particular, growth materialized in the United Kingdom & Ireland and in Benelux & The Nordics thanks to the successful ramp up of new contracts and higher volumes with long-standing customers, as well as in Asia-Pacific led by strong activity in Financial Services.

Revenue in Infrastructure & Data Management was up +1.0% organically during the second quarter of 2017.

Operating margin was € 329 million, representing 9.2% of revenue, up +240 basis points compared to H1 2016. This strong improvement came from cloud-based infrastructures, automation and robotization, and industrialization. Profitability improved in all geographies. The Division benefitted from the execution of the Unify restructuring plan, completed at the end of 2016, as well as continuous operational cost optimization.

Representing 25% of the Group, Business & Platform Solutions revenue was € 1,608 million, up +2.6% at constant scope and exchange rates, confirming the positive trend recorded in the last quarters. The Division increased its competitiveness thanks to a more efficient workforce management and the industrialization of its global delivery centers. The Division is also shifting to high value digital transformation projects and revenue growth was led by the Digital Transformation Factory in particular with the implementation of Industry 4.0 solutions for large manufacturers. The Division growth materialized in Germany, Middle East & Africa, and in Central & Eastern Europe.

Revenue organic growth reached +2.7% in Q2 2017.

Operating margin was € 98 million, representing 6.1% of revenue, an improvement by +120 basis points at constant scope and exchange rates. This was mainly attributable to the industrializing of application services, the successful global workforce management, and the implementation of robotization.

Revenue in Big Data & Cybersecurity was € 357 million in the first half of 2017, up +13.8% organically. The Division is facing a much stronger demand due on one side to very fast growing cyber threats and on the other side to massive interconnections and data flows requiring Big Data capacities. In this context and thanks to its tier one positioning, the Division pursued its fast development with new customers in the United Kingdom and North America and also in the research area in France.

In Q2 2017, Big Data & Cybersecurity Division recorded a revenue organic growth at +14.2%.

Operating margin was € 43 million, representing 12.2% of revenue. The Division achieved to maintain a high-level of profitability while continuing to record strong organic revenue growth, to invest in innovative solutions and products, and to extend its international footprint.

From a contributive perspective to Atos, Worldline revenue was € 757 million, growing by +2.3% at constant scope and exchange rates. Financial Processing revenue grew by +6.1% organically, notably led by Issuing Processing (issuing transaction volume increase, high-level of fraud management services in Belgium, and continued strong growth in authentication services) and Acquiring Processing with increased volumes and more projects in France and in Italy. Merchant Services was up by +5.2% organically, benefiting from higher Commercial Acquiring volumes in Continental Europe as well as from the strong momentum in India following the Demonetization Act. In Mobility & e-Transactional Services, on-line activities such as Trusted Digitization, e-Ticketing, Connected Living and Educational Cloud, mitigated the effect of the Radar contract in France, which will not affect Worldline growth any further as of Q3 this year.

Revenue increased by +2.6% organically in Q2 2017.

Operating margin was € 114 million or 15.0% of revenue, improving by +240 basis points compared to the first semester of 2016 at constant scope and exchange rates, largely fueled by the strong revenue growth in Financial Processing, coupled with the fast delivery of equensWorldline costs synergies.

A detailed presentation of Worldline’s performance during the first half 2017 is available at worldline.com, in the investors section.

H1 2017 performance by Business Unit

 

Revenue Operating margin Operating margin %
In € million H1 2017 H1 2016* Organic
evolution
  H1 2017 H1 2016*   H1 2017 H1 2016*
North America       1,162       1,141 +1.8%   124 116   10.7% 10.2%
Germany       1,080       1,069 +1.0%   70 23   6.5% 2.1%
United Kingdom & Ireland          880          852 +3.4%   83 84   9.4% 9.8%
France          847          847 +0.1%   59 43   6.9% 5.1%
Benelux & The Nordics          536          546 -1.8%   46 35   8.7% 6.4%
Other Business Units       1,049          983 +6.8%   89 70   8.5% 7.1%
Global structures**     -46 -56   -0.8% -1.0%
Worldline          757          740 +2.3%   114 93   15.0% 12.6%
Total      6,311        6,177   +2.2%   538 408   8.5% 6.6%
* At constant scope and exchange rates
** Global structures include Global Divisions costs not allocated to the Group Business Units and Corporate costs

During the first half of 2017, revenue grew in most of the Business Units:

  • North America with the roll-out of the Orchestrated Hybrid Cloud model, the deployment of the Digital Workplace offering, and with an increasing business in Big Data & Cybersecurity;
  • Germany with the delivery of several projects, notably the implementation of Industry 4.0 solutions in the automotive sector and mobile applications in Financial Services;
  • United Kingdom & Ireland confirming the positive trend recorded since the second semester last year. The Infrastructure & Data Management activity remained strong in most of the verticals. The strong revenue growth in Big Data & Cybersecurity was driven by HPC activity, including the delivery of two Sequana supercomputers in the defense and research sectors;
  • France where revenue was stable thanks to IDM contracts ramp-up in the defense sector and several HPC projects in the automotive and public sectors;
  • in Benelux & The Nordics, revenue continued to recover in IDM benefiting from higher volume and contracts ramp-up in Manufacturing and in Financial Services. While revenue of B&PS was stable in Benelux, the Division was affected in Q2 by a comparison basis on a contract delivered to the Polish administration last year;
  • Other Business Units significantly contributed to Group revenue growth thanks to a strong performance in Asia-Pacific and Middle East mainly, and notably within Business & Platform Solutions;
  • and in Worldline with the continued dynamic of Merchant Services, Financial Processing, and new activities in Mobility.

During the first semester of 2017, the Group executed its transformation programs through industrialization, automation and robotization, and continuous optimization of SG&A. In addition, the Group benefited from the Unify restructuring plan and from synergies with Equens. Almost all Business Units showed a profitability improvement, notably Germany benefiting from the Unify integration, Benelux & The Nordics with a better business mix, and France thanks to actions to improve operational efficiency. North America recorded 10.7% becoming the most profitable geography of the Group.

Commercial activity

During the first quarter of 2017, the Group order entry reached € 6,869 million, representing a book to bill ratio of 109%, of which 120% in Q2.

For IT services activities, book to bill ratio was 112% for IDM, 103% for B&PS, while Big Data & Cybersecurity reported a strong 121%.

In Q2, new deals were signed on the 4 pillars of the Atos Digital Transformation Factory, mainly in North America with a Digital Workplace contract with Enterprise Rent-A-Car, in Benelux & Nordics with Orchestrated Hybrid Cloud solutions for a European industrial equipment manufacturer, as well as several contracts with Siemens in Germany. New projects were signed, such as with Northern Ireland Electricity Networks in the United Kingdom and with Nokia in Germany. Big Data & Cybersecurity pursued its strong commercial dynamic while Worldline managed to sign new contracts in the Public Sector and in Financial Services.

Renewals in Q2 included large contracts in Infrastructure & Data Management such as the renewal of BBC in the United Kingdom, Allscripts in North America and a contract with a very large energy provider in France. Worldline renewed several Issuing Processing contracts notably with Belfius.

In line with the dynamic commercial activity and taking into account the integration of Unify S&P, the full backlog at the end of June 2017 amounted to € 22.2 billioncompared to € 21.4 billion at the end of December 2016, representing 1.8 year of revenue. The full qualified pipeline was € 7.0 billion, compared to € 6.5 billion at the end of December 2016 and representing 6.7 months of revenue.

Operating income and net income

Operating income for the first half of 2017 year was € 327 million, +1.1% year-on-year and +20.1% excluding the gain on the sale of Worldline’s share in Visa Europe to Visa Inc. in H1 2016, resulting from the following items:

Costs for staff reorganization, rationalization, and integration amounted to € 82 million compared to € 97 million in H1 2016, as a consequence of the adaptation of the Group workforce in continental Europe, North America, and the United Kingdom, the related closure of office premises, and data centers consolidation. This amount also encompasses external costs linked to the continuation of Worldline’s TEAM program, costs related to the execution of Unify, Equens and Paysquare post-acquisition integration, and the migration and standardization of internal IT platforms from last acquired companies.

The amortization of the equity based compensation plans amounted to €-45 million, compared to            €-22 million in H1 2016. The increase was related to the Group scope expansion, the stock price evolution, as well as the achievement of performance conditions.

€-62million were recorded as Purchase Price Allocation amortization compared to €-45 million in H1 2016. The increase being mainly related to Unify S&P, Equens, and Anthelio.

Other items amounted to a charge of € -22 million compared to €+43 million in H1 2016 which included the gain on the sale of Worldline’s share in Visa Europe to Visa Inc. for € 51 million.

Net financial result was a charge of €-32 million, at the same level as H1 2016.

Total tax charge was €-56 million, representing an effective tax rate of 18.9%, down compared to 19.8% in H1 2016.

As a result, net income was € 239 million, +2.2% year-on-year and +30.8% excluding the sale of the Visa share.

Non-controlling interests amounted to € 28 million and were mainly related to the minority shareholders in Worldline. Therefore, the net income Group share reached € 211 million, +2.9% year-on-year and +24.7% excluding the sale of the Visa share.

Basic EPS Group share was € 2.01 in H1 2017 and diluted EPS Group share was € 2.00.

Free cash flow

Operating Margin before Depreciation and Amortization (OMDA) was € 712 million representing 11.3% of revenue, compared to € 586 million in H1 2016 (10.3% of revenue).

During the first half of 2017, capital expenditures totaled € 235 million, representing 3.7% of revenue, compared to € 202 million in H1 2016 (3.5% of revenue).

Contribution from change in working capital was negative at €-37 million, compared to €-24 million in H1 2016.

Total cash-out for reorganization, rationalization, and integration was €-101 million compared to €-96 million in H1 2016, in line with the full year 2017 objective of 1% of Group revenue plus the cost to generate synergies with Equens. A larger portion of reorganization and rationalization costs was pulled forward into H1 in order to optimize the impact on the full year operating margin.

Tax paid was €-64 million, a decrease by €-10 million compared to H1 2016, mainly thanks to the use of tax losses carried forward. Net cost of financial debt paid was €-13 million (€-8 million in H1 2016).

Finally, other items totaled €-20 million, compared to €-3 million in H1 2016.

As a result, the Group free cash flow generated during the first half of 2017 totaled € 242 million, up by +35% compared to H1 2016.

Net cash evolution

Net acquisitions/disposals in H1 2017 amounted to €-12 million, mainly related to the acquisition of zData.

Capital increase totaled €+31 million compared to €+21 million in the first semester of 2016, mainly reflecting the Group shareholding plan for employees SPRINT, more than compensating the decrease of the number of stock options exercised.

In H1 2017, €-8 million were cashed-out for share buy-back notably to deliver performance shares with no dilution.

The cash-out for dividends paid amounted to €-168 million (€ 1.60 per share) compared to €-47 million in the first half of 2016 (€ 1.10 per share). The option to receive dividend payment in shares was not offered in 2017.

Finally, mainly due to the US dollar decrease versus the euro, foreign exchange rate fluctuation effect on debt or cash in foreign currencies totaled €-72 millioncompared to €-49 million in H1 2016.

As a result, Group net cash position as of June 30, 2017 was € 342 million, compared to € 430 million on December 31, 2016.

Human resources

The total headcount of the Group was 98,480 at the end of June 2017 slightly reduced compared to the end of 2016. Hiring is anticipating the implementation of automation and focused on digital transformation skills. The Group pursued the digital training and reskilling of its teams. The total headcount included entities acquired during the first quarter 2017, Engage ESM in the United Kingdom and zData in the US.

Attrition remained stable at 11.8% at Group level, and at 17.8% in offshore countries.

2017 objectives

The Group confirms all its objectives for 2017 stated in the April 24, 2017 release:

Revenue growth: circa +9.5% at constant exchange rates, above +2% organically.

Operating margin: circa 10% of revenue.

Free cash flow: operating margin conversion rate to free cash flow between 55% and 58%.

 

Appendix

Revenue and operating margin at constant scope and exchange rates reconciliation

 

In € million H1 2017 H1 2016 change
Statutory revenue 6,311 5,697 +10.8%
Exchange rates effect -44  
 
Revenue at constant exchange rates 6,311 5,653 +11.6%
 
Scope effect 518  
Exchange rates effect on acquired/disposed perimeters 5  
 
Revenue at constant scope and exchange rates 6,311 6,177 +2.2%
 
Statutory operating margin 538 444 +21.2%
Scope effect -34
Exchange rates effect -3
Operating margin at constant scope and exchange rates 538 408 +32.0%
as % of revenue 8.5% 6.6%  

 

From H1 2016 statutory, currency exchange rates negatively contributed to revenue for a total of €-38 million, mainly coming from the British pound depreciating versus the Euro, partly compensated by the American dollar and the Brazilian real increasing versus the Euro.

Scope effect amounted to €+518 million for revenue. This was related to the contribution of Unify Software & Platforms (6 months), Unify Services (January 2016), Anthelio (6 months), Equens, Paysquare, and Komerçni Banka Smartpay (6 months), Engage ESM and zDdata.

Effects described above are reflected in the operating margin at constant scope and exchange rates. In particular, scope effect amounted to €-34 million, mostly due to the loss making Unify S&P operations in H1 2016 (before full completion of the restructuring plan).

H1 2017 revenue performance by Market

In € million H1 2017 H1 2016* Organic
evolution
Manufacturing, Retail & Transportation       2,388       2,347 +1.8%
Public & Health       1,781       1,717 +3.7%
Telcos, Media & Utilities       1,016       1,042 -2.5%
Financial Services       1,126       1,071 +5.1%
Total      6,311        6,177   +2.2%
* At constant scope and exchange rates

Q2 2017 revenue performance by Division

In € million Q2 2017 Q2 2016* Organic
evolution
Infrastructure & Data Management       1,792       1,774 +1.0%
Business & Platform Solutions          821          799 +2.7%
Big Data & Cybersecurity          194          170 +14.2%
Worldline          392          382 +2.6%
Total Group      3,200        3,126   +2.4%
* At constant scope and exchange rates

 

Q2 2017 revenue performance by Business Unit

In € million Q2 2017 Q2 2016* Organic
evolution
North America          573          569 +0.6%
Germany          543          536 +1.4%
United-Kingdom & Ireland          443          425 +4.1%
France          437          436 +0.1%
Benelux & The Nordics          263          276 -4.7%
Other Business Units          549          501 +9.6%
Worldline          392          382 +2.6%
Total Group      3,200        3,126   +2.4%
* At constant scope and exchange rates

Q2 2017 revenue performance by Market

In € million Q2 2017 Q2 2016* Organic
evolution
Manufacturing, Retail & Transportation       1,205       1,168 +3.1%
Public & Health          928          886 +4.7%
Telcos, Media & Utilities          506          536 -5.5%
Financial Services          561          536 +4.7%
Total Group      3,200        3,126   +2.4%
* At constant scope and exchange rates