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"Atos Origin first half results for 2004"

Merger Integration Well on Track. Strong Second Quarter

Atos Origin, a leading international information technology services provider, today announced that revenues for the six months ended June 30th, 2004 amounted to EUR 2,653 million, an increase of 72% compared with the first half of 2003, following the acquisition of Sema Group in January 2004. Operating margin for the period was 6%, in line with our expectations. Earnings per share before non-recurring items and goodwill amortization were EUR 1.68, showing accretion of 2%. Net debt at the period end was EUR 676 million.

The integration of Sema Group has progressed rapidly, and successfully, and the Group has confirmed its financial targets for the full year.

FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED JUNE 30TH, 2004

Euro Millions
6 months ended June 30th 2004
6 months ended June 30th 2003
% change
Revenue
2,653
1,543
+72%
Income from operations
158.3
122.6
+29%
Operating margin %
6.0%
7.9%
Net income before non-recurring items & amortization of goodwill
112.2
78.3
+43%
Net income group share
(22.6)
24.3
Earnings per share (EPS) before non-recurring items & amortization of goodwill (a)
1.68
1.64
+2%
Basic EPS (a)
(0.34)
0.51
Diluted EPS before non-recurring items and amortization of goodwill (b)
1.65
1.57
+5%
Diluted basic EPS (b)
(0.32)
0.49
June 30th 2004
Dec 31st 2003
Net debt to equity ratio
44%
46%
+2pts
Employees at period end
45,576
26,473
+72%


(a) In euros, based on a closing number of shares
(b) In euros, based on a diluted closing number of shares

Extract from the Half Year Review by Bernard Bourigeaud, Chief Executive:

First Half Results
Group revenues for the first half of 2004 were slightly ahead of our expectations at EUR 2,653 million, an increase of 72% compared with the results we reported at this time last year, prior to the acquisition of Sema Group. The result represents a small organic decline of 1.3% compared with the pro forma results of the combined Group for the same period in 2003 on a constant scope and exchange rate basis. Encouragingly, there was a 3.3% increase in the second quarter of the period, compared with the first. This performance came largely from France, The United Kingdom and The Netherlands, each of which generated organic growth. As a percentage of total Group revenues, recurring business increased from 55% in 2003 to more than 60% in the first half of 2004.

The performance was particularly impressive in the light of the fact that the market in Europe remains variable. We have also been engaged in an extensive merger integration process throughout the first half and, furthermore, revenues from two of our major clients – Philips and Euronext – declined significantly in the period. In spite of the declines, I believe that there are good opportunities to grow revenues with both of these clients in the future and I am confident of maintaining a strong partnership with each of them.

The operating profit for the period was 6.0%, which again was in line with our expectations, with a strong positive trend from 5.0% during the first quarter to 7.0% in the second. The integration of Sema Group is progressing well and we expect the benefits of the acquisition to flow through strongly in the second half. Net profit before goodwill amortization and non-recurring items was EUR 112 million, representing earnings per share of EUR 1.68. This is an increase of 18% in comparison with the same period last year on a pro forma combined basis and an accretion of 2% compared with the reported first half earnings for 2003 (pre Sema).

Net debt declined yet again, to EUR 676 million, and we expect a sharper decline in the second half. Having completed several disposals early in the second half, net borrowings should now be on course to fall below EUR 550 million by year-end.

Integration of Sema Group
The integration of Sema Group is nearly complete. The work carried out subsequent to announcing the acquisition ensured that our new organization was fully in place by January 1st, 2004, when the transaction was completed. We were therefore immediately up and running and consequently there has been little disruption to our commercial activity and no loss of client business.

During the course of the first half we have been engaged in many operational tasks aimed at merging the country activities, improving our client-facing effectiveness and reducing costs. Our commercial program is now focused on 30 major accounts, with a further 70 key accounts where we believe there is also strong sales development potential. In total, these accounts comprise more than 60% of total Group sales.

We have created “global” Consulting & Systems Integration and Managed Operations organizations to coordinate service line activity across geographies, focus our offerings and capture best practice. These organizations have an important role to play in helping our clients to globalize their business activities. As part of this reorganization, we are today announcing the re-branding of our consultancy activities under the Atos Consulting name, which will provide a consistent global profile.

We have also launched Atos Worldline, which brings together our activities in card payment and multimedia processing under a single management structure and common brand. This is an exciting business, with good profitability and excellent growth prospects in the coming years.

As far as our infrastructure is concerned, in the first six months we have disentangled Sema’s IT infrastructure from Schlumberger and started the process of consolidating premises and datacenter capacity. A significant number of staff have transferred location during this period, yet the disruption to client operations has been minimal. We have also started to reduce the proportion of indirect and non-billable costs and reduced corporate costs to less than 2% of total revenues. Our aim is that the Group should have corporate costs of less than 1.5% this year and no more than 1% in 2005.

Disposal Program
At today’s date we have announced the disposal of three activities under our disposal program, including a small logistics consulting business (Convergent) in June, Cellnet in July and Priority Call Management, an intelligent network applications services provider, in August. These businesses were all located in North America and represented more than one-third of the planned disposal program in terms of annual revenues. The cash inflow linked to these transactions has positively impacted our net debt position early in the second half, particularly our leverage ratio (Net Debt/Ebitda) which was 1.57 at the end of June and is today very comfortably below the financial covenant of 1.75 in our borrowing agreement.

Shareholder Structure
Schlumberger received just over 19 million shares as part-consideration for the sale of Sema Group to Atos Origin, representing 29% of the issued share capital immediately after closing in January 2004. As expected, those shares were subsequently placed in the market in February and April, and Schlumberger therefore no longer holds any of the issued equity of the Group. However, we are pleased to have been able to secure a long-term business relationship with Schlumberger and Schlumberger continues to be represented on the Supervisory Board. Philips still holds 32% of the Group’s equity and the number of shares in the free float has increased by more than 70%.

We have announced the terms of an offer to purchase a small number of outstanding shares in Sema SA. Atos Origin already owns 99.9% of Sema SA and acquiring the minority interest will simplify the merger process in France.

Outlook for the remainder of 2004
We remain optimistic that a modest but sustainable recovery in the market will occur next year. However, since the start of this year we have been cautious about the prospects for IT services in Europe in 2004 and we continue to believe that reported revenues will be stable this year on a constant scope and exchange rate basis. We have won a number of contracts that have good development potential, especially in Consulting & Systems Integration, and the pipeline is steadily improving. The outsourcing deal with KarstadtQuelle that was announced last week is the largest single contract award in Atos Origin’s history.

The integration of Sema is proceeding well and we therefore also reconfirm our target of achieving an operating profit margin this year in excess of 7%.

Net debt, including the Sema Group acquisition, has fallen from just over EUR 700 million at the start of this year to EUR 676 million at the end of June. With strong cash flow management, and in spite of the current costs of restructuring, we now expect net debt to fall to below EUR 550 million by December 31st, 2004, including the positive impact of business disposals.

In summary, we have integrated Sema more quickly than previous large acquisitions and this has been due in large part to the management experience that has been built up within the group during previous transactions. We are executing the strategy that we have set out and maintained consistently over a number of years and I remain confident about the progress that the Group is making.

Success of the Olympic Games
Finally, I am very proud of our success at the Olympic Games in Athens this summer. Atos Origin was responsible for managing all IT activities at the Games, across more than 60 competition and non-competition venues. That responsibility included consulting, systems integration, operations management, IT security and software applications development. The task involved training and leading more than 3,400 IT professionals, integrating 10,500 workstations and 900 servers, and handling more than 200,000 accredited attendees.

Atos Origin’s contract with the International Olympic Committee is the world’s largest sports-related IT deal, covering Olympic Games over an eight year period – Salt Lake City in 2002, Athens in 2004, Turin in 2006 and Beijing in 2008. We believe that it is a great example of what the management and staff of this Group achieve each day for our clients

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About Atos Origin
Atos Origin is an international information technology services company. Its business is turning client vision into results through the application of consulting, systems integration and managed operations. The company’s annual revenues are more than EUR 5 billion and it employs 45,000 people in 50 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and its clients include ABN AMRO, Akzo Nobel, Alstom, BNP Paribas, Ericsson, EDF, Euronext, Fiat, France Telecom, ING, KPN, Philips, Renault, Royal Bank of Scotland, Saudi Aramco, Schlumberger, Shell, Standard Chartered Bank, Telecom Italia, UK Department for Work and Pensions, Unilever, Vivendi Universal and Vodafone.

Atos Origin is quoted on the Paris Euronext Premier Marché and operates under the trade names Atos Origin, AtosEuronext, Atos Worldline and Atos Consulting.

Contact for Press:
Marie-Tatiana Collombert
Tel: +33 (0) 1 55 91 26 33
marie-tatiana.collombert@atosorigin.com

Contact for Investors:
John White
Tel: +33 (0) 1 55 91 26 32
john.white@atosorigin.com