“Atos Origin – 3rd Quarter Results 2002 – Outsourcing strong in a difficult market”
Atos Origin, a leading European information technology services provider, today announced its results for the third quarter of 2002. Revenues amounted to EUR 734 million, an increase of just under 2% compared with the third quarter of 2001, including a first-time contribution from Atos KPMG Consulting in September. The group's operating margin was 8.0% for the third quarter overall, including the summer vacation period, but profitability in the base business rebounded strongly in September and is expected to be close to 9% during the last quarter of 2002. Net debt fell by EUR 51 million in Quarter 3, to EUR 605 million.
The appendix to this statement gives revenues by service line and geographic area:
The Consulting and Systems Integration market remained weak in the third quarter. Excluding Atos KPMG Consulting, revenues were EUR 289 million, 17% lower than in the same quarter last year. In addition to the general reduction in project volumes, pricing pressure has continued in most parts of Europe. We have responded to market conditions with a program of continuous and pro-active restructuring which has enabled the company to stabilize profitability, although this remains below target levels.
The acquisition of KPMG Consulting in the UK and The Netherlands was completed in the second half of August 2002 and revenue of EUR 41 million has been consolidated for the month of September. The consulting market remains tough, especially in the UK, and it is for this reason that we initiated a further restructuring plan immediately after closing. Nevertheless, we remain confident that the strategic objectives of the acquisition are sound and that the quality of staff at Atos KPMG Consulting will enable the company to deliver strong revenue growth as market conditions improve.
Managed Services again reported like-for-like revenue growth at over 20% in Quarter 3 - to EUR 313 million - largely driven by the major order signings with KPN. We continue to place great emphasis on strategic contracts with our key client account base. Consequently, profitability in this service line remains strong.
On-Line Services revenues were 2% higher in the third quarter on a constant scope basis, with a continuation of the quarter by quarter improvement in profitability.
Nearly 60% of the group's revenues were generated by the Managed Services, On-Line Services and application management activities, which are based on multiple-year contracts and are recurring in nature. These businesses in total continue to grow at a double-digit rate.
The group recorded a further strong cash inflow during the third quarter. Net debt fell to EUR 605 million at September 30th, 2002, compared with EUR 656 million at the end of June on a pro forma basis, assuming that the acquisition of Atos KPMG Consulting had been closed at that date.
The Consulting and Systems Integration market remains weak, with little sign of any substantive recovery at the present time. We therefore expect the Group's reported revenues for the full year, including an initial four-month contribution from Atos KPMG Consulting, to be at about the same level as in 2001.
The Group is continuing to manage staff resources and other costs on the basis that current conditions in C&SI will prevail throughout much of 2003, although we have delayed our budgeting process to allow more time to assess our client's needs. Due to vigorous on-going management controls, the profitability of the base business in September was significantly better than in July and August. As far as Atos KPMG Consulting is concerned, we expect the current restructuring program to improve the level of profitability significantly by the end of the year. The Group's operating margin for 2002 as a whole should therefore be slightly above the year-to-date level at the end of Q3, which was 8.7%.
Bernard Bourigeaud, Chairman and Chief Executive, commented:
"We are operating in the most difficult market conditions for many years. In spite of this, our highly visible Managed Service and On-line Services businesses provide stability and a valuable counterweight to the current weakness in Consulting and Systems Integration. By also continuously reviewing our cost base, we have been able to sustain a reasonable, though not yet adequate, level of profitability and we will be in much better shape as the market recovers.
We are well advanced with the integration of Atos KPMG Consulting, which will produce good commercial synergies as the market recovers. We will also profit from the current situation through our efforts to focus on the development of market and key account management, leading to much stronger relationships with our clients. The most important task is to ensure that we continue to give those clients excellent service, to help them become more efficient in their operations and thereby carry them through the difficulties that they too are experiencing in current economic conditions.
We have a clear strategy, based on a well-balanced mix of service offerings in carefully chosen industry sectors. We also have a strong client base and a stable international management team, and remain confident that the company is well positioned to benefit when the market recovers."
With effect from today, the Euronext ticker for Atos Origin has been changed from SAX to ATO, and the Reuters ticker from SEGN to ATOS.
About Atos Origin
Atos Origin is a leading international information technology services provider. Its business is turning client vision into results through the application of consulting, systems integration and managed operations, including outsourcing and on-line services. In August 2002, Atos Origin acquired KPMG Consulting in the UK and The Netherlands, which now trade as Atos KPMG Consulting. The company generates annual revenues of EUR 3.3 billion and employs 30,000 staff in 30 countries. The Group's client list includes major companies such as ABN-Amro, Akzo-Nobel, Alstom, BNP Paribas, British Petroleum, Euronext, Fiat, ICI, ING, KPN, Lucent, Philips, Renault, Royal Bank of Scotland, Saudi Aramco, Shell, UBS-Warburg, Unilever, Vivendi Universal, Vodafone and Wolters Kluwer.
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