"Atos Origin 2008 annual results"

REVENUE ORGANIC GROWTH +5.6 per cent
OPERATING MARGIN UP BY +11 per cent

TOTAL OPERATIONAL PERFORMANCE (TOP) PROGRAM AND NEW ORGANISATION TO INCREASE MARGIN IN 2009

• Group revenue organic growth at +5.6 per cent
• Operating margin at EUR 261 million and 4.8 per cent of revenues up by +11 per cent organically compared to last year
• Adjusted net income of EUR 181 million, representing EUR 2.59 per share
• Net debt reduction to EUR 304 million at the end of 2008 
• Fast implementation of the TOP Program 
• New organisation for the Group

Atos Origin, a leading European IT services company, today announced full results for the year ended 31 December 2008, its new organisation and a TOP Program aimed at accelerating margin improvement by increasing efficiency and operating globally.

 

Convened on 17 February 2009 by Thierry Breton, Chairman and CEO of Atos Origin, the Board of Directors examined and approved the accounts of the Group for the year ended 31 December 2008.

 

Thierry Breton said: “Despite a solid growth especially of our recurring activities, and an 11% increase of our operating margin, Atos Origin’s operational performance remained at 4.8%, below the benchmark of our competitors. With its new organisation and the immediate implementation of the TOP Program, Atos Origin has taken the decisions and the actions in order to face the very strong economic slowdown but also to increase significantly its operating margin in 2009. This is the clear mandate I have received from the Shareholders and the newly elected Board of Directors".

 

(In EUR million)	FY 2008	FY 2007	% organic growth
Revenue new scope (*)	5,479	5,188	+5.6%
Operating margin new scope (*)	261	235	+11%
Operating margin rate	4.8%	4.5%	+0.2 pt
Operating income	100	137
% of revenue	1.8%	2.3%
Net income – Group Share	23	48
% of revenue	0.4%	0.8%
Adjusted net income – Group share (**)	181	140
% of revenue	3.2%	2.4%
Net debt	304	338

(*) 2008 and 2007 revenue and operating margin at same perimeter and exchange rates i.e. excluding Italy and AEMS Exchange and at 2008 exchange rates
(**) Defined hereafter

 

Revenue

 

As communicated on 5 February 2009, based on the new scope excluding Italy and AEMS Exchange which were disposed of during the year, full-year 2008 Group revenue reached EUR 5 479 million which represented an organic growth of +5.6 per cent.

 

All service lines contributed to the revenue organic growth with +1 per cent in Consulting, +5.4 per cent in Systems Integration and +6.4 per cent in Managed Operations. Growth on recurring activities, including Managed Operations and Application Management which represent 68 per cent of total revenue, reached +6.5 per cent.

 

All major geographical areas reported organic growth except, as expected, The Netherlands which were affected by the re-insourcing of desktop services by KPN.

Operating performance

 

On the scope which excludes Italy and AEMS Exchange disposed during the year 2008, the operating margin was EUR 261 million or 4.8 per cent of revenues representing an organic increase of +11% compared to EUR 235 million last year at same scope and exchange rates.

 

In the last quarter 2008, the Group focused on executing the cost saving plan: reduction of hirings, decrease of subcontractors, reduction of G&A. These actions allowed achieving a strong improvement in the operating margin of the fourth quarter of the year compared to the third quarter.

 

Consulting reached an operating margin at 4.8 per cent of revenue. In The Netherlands, the operating margin remained at double digits. The United Kingdom continued on its recovery trend (+3 points compared to 2007) whereas France had a more difficult year with a reduced margin at 2 per cent of revenue.

 

In Systems Integration, the operating margin reached 3.9 per cent of revenue. Except The Netherlands, all the major geographies improved their operating margin. Group utilization rate in Systems Integration remained steady at 79 per cent.

 

In Managed Operations, the operating margin was 8.2 per cent of revenue, mainly led by the profit improvement in the United Kingdom and in all geographies of Atos Worldline. In France, excluding Atos Worldline, the profitability remained almost stable. Germany had a contrasted profit evolution with an improvement in the systems development area and a decrease in IT outsourcing mainly with its first customer. The Netherlands were affected by the expected revenue decline with KPN desktop re-insourcing.

Net income

 

The Group made a more conservative business plan for the French operations which according to the IFRS rules did not include the future positive effect from the TOP Program. As a result, EUR 226 million impairment charge was booked mainly for France.

 

The restructuring and rationalization costs were EUR 103 million.

 

The profit made from the pensions in the United Kingdom with the Plan amendment has been partly offset by a depreciation of EUR 39 million of the Dutch pension prepaid assets.
The disposal of AEMS Exchange to NYSE Euronext in August 2008 generated a capital gain of EUR 135 million. Other capital gain on sale of assets and activities amounted to EUR 7.5 million.

 

As a result, the operating income reached EUR 100 million in 2008.

 

After net financial expenses at EUR 23 million, tax charge at EUR 48 million and minority interests at EUR 7 million, full-year 2008 net income Group Share was EUR 23 million compared to EUR 48 million at the end of 2007.

 

The adjusted net income Group share reached EUR 181 million increasing by +29 per cent compared with last year and representing an adjusted earning per share of EUR 2.59.

 

Group restated effective tax rate for full year 2008 reached 23.6 per cent compared to 37.5 per cent last year. The effective tax rate decrease resulted from the effect of the Italian operations disposal early 2008.

Net debt

 

The net debt was reduced to EUR 304 million at the end of December 2008 compared to EUR 338 million at the end of December 2007. This performance takes into account on the one hand proceeds received from the disposals of AEMS Exchange and Italy during the year for EUR 201 million and on the other hand cash outflow for the United Kingdom pensions and dividend payment to shareholders for EUR 92 million. The net capital expenditures decreased from 5.1 per cent of revenue in 2007 to 4.2 per cent in 2008. Additional working capital requirement was EUR 86 million during the year. Working capital was EUR +15 million at the end of 2008 and the DSO was reduced from 67 to 63 days during the year.

Dividend

 

During its meeting held on 17 February 2009, the Board of Directors decided to propose at the next Ordinary Shareholders Meeting not to pay a dividend in 2009 on the 2008 accounts.

New organisation

 

A new organization is set up to transform Atos Origin into a global and integrated Group.

• Charles Dehelly is appointed Senior Executive Vice President in charge of the Operations;
• Gilles Grapinet is appointed Senior Executive Vice President in charge of the Global Functions.

This new organisation is notably based on:

• The reinforcement of responsibilities and authority of transversal divisions (Consulting, Systems Integration and Managed Operations) in order to move the Group to a decisive stage in terms of globalisation, industrialisation and standardisation of its delivery;
• The reorganization of the Group sales and marketing by setting-up a strong Group Sales Function that will directly manage from now the relations with large accounts, international contracts and all of the offerings;
• The alignment of internal operations of the Group, ensured by all operational units support functions (Human Resources, Finance…) reporting hierarchically to the corresponding Group Functions.

TOP Program

 

Building upon achieving the recurring savings which are mandatory to sustain the competitiveness of Atos Origin, the Total Operational Performance (TOP) Program will act upon new levers, with more ambitious goals and a faster pace of execution to achieve its main objectives: to face the tough economic environment while closing the existing operating margin gap versus the Industry.

 

TOP is built around four major transformation levers supported by twenty transversal initiatives across the organisation.

 

1. Leveraging the “Global Atos Origin” concept to better serve our customers and generate synergies through simplification and standardization across the organization: five initiatives such as cross-border deal process simplification, global SAP, global Consulting ;

 

2. Closing the gaps with industry benchmark operational performance: nine initiatives looking at metrics such as offshoring rate, office sqm/person, G&A ratios, etc ;

 

3. Developing “Lean management” to close the productivity gap and to generate permanent efficiency progress: four initiatives in areas like helpdesk management, customer services, infrastructures ;

 

4. Implementing sustainability initiatives focusing on people development and protecting the environment: two initiatives.

 

The TOP Program management has been built to allow fast implementation and quick resolution of issues. The TOP Program leader reports directly to the Chairman and CEO of Atos Origin and manages twenty TOP Leaders from the countries, the service lines and the support functions. Already, more than two hundred initiatives’ team members from Atos Origin are involved in all these projects.

2009 Objectives

 

In a tough economic environment, the Group’s priority is the improvement of the operational performance.

Revenue

 

The revenue objective for 2009 is a slight decrease compared to 2008 at constant scope and exchange rates. This objective takes into account a backlog coverage (strong in the recurring activities) at 1 January 2009 representing 58 per cent of total revenue (vs 55 per cent at 1 January 2008) but also a slowdown expected in the cyclical businesses.

 

Operating margin

 

The Group has the ambition to improve by 50 to 100 basis points its operating margin in 2009. With the ramp-up of the TOP Program throughout the year, the Group expects that most of the operating margin improvement will be generated during the second half of the year. For the first half of the year, the Group considers that the first positive effects of the TOP Program should allow maintaining the same level of operating margin than in 2008.

 

Free cash flow

 

Despite expecting higher restructuring, rationalisation and training costs than in 2008, the Group targets to generate in 2009 a positive free cash flow coming from an improved OMDA and a tight control of the capital expenditure.

 

Forthcoming announcements

 

29 April 2009	First quarter 2009 revenue
26 May 2009	2008 Annual Shareholders Meeting

 

Disclaimer

 

Revenue organic growth is presented at constant scope and exchange rates

 

The document contains further forward-looking statements that involve risks and uncertainties concerning the Group’s expected growth and profitability in the future. Actual events or results may differ from those described in this document due to a number of risks and uncertainties that are described within the 2007 annual report filed with the Autorités des Marchés Financiers (AMF) on 9 April 2008 as a Document de Référence under the registration number: D08-218.

 

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 revenue is EUR 5.5 billion and it employs 50,000 professionals in 40 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and has a client base of international blue-chip companies across all sectors.
Atos Origin is quoted on the Paris Eurolist Market and trades as Atos Origin, Atos Worldline and Atos Consulting.

 

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

 

Investor contact :
Gilles Arditti, Tel. : +33 (0) 1 55 91 28 83, gilles.arditti@atosorigin.com

 

 

FINANCIAL PERFORMANCE IN 2008 (STATUTORY)

 

In EUR million	2008	2007
Revenue	5,623	5,855
OMDA (*)	477	505
% of revenue	8.5%	8.6%
Operating Margin	266	272
% of revenue	4.7%	4.6%
Operating Income	100	137
% of revenue	1.8%	2.3%
Net Income (Group share)	23	48
Adjusted net income (Group Share) (**)	181	140
% of revenue	3.2%	2.4%
Earnings per share (in euros)
Basic EPS	0.32	0.70
Adjusted basic EPS	2.59	2.03

(*) Operating Margin before Amortization and Depreciation
(**) Adjusted net income: Group share of net income before unusual, abnormal and infrequent items (net of tax)

Net debt	304	338
Gearing (net debt / equity)	20%	18%
Leverage (net debt / OMDA)	0.64	0.67

 

 

2008 PERFORMANCE BY SERVICE LINE

 

(click on image to enlarge)

 

(*) At same scope and exchange rates i.e excluding Italy and AEMS Exchange and at 2008 exchange rates.
(**) Corporate costs exclude Global Service Lines costs allocated to service-lines

 

 

2008 PERFORMANCE BY GEOGRAPHICAL AREA

 

(click on image to enlarge)

 

(*) At same scope and exchange rates i.e excluding Italy and AEMS Exchange and at 2008 exchange rates.
(**) Corporate central costs and Global service lines costs not allocated to the countries