Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on ATOS SE. We currently have 6 research reports from 1 professional analysts.
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2017-19 targets: positive trend forward
21 Nov 16
At its Capital Market Day on 8 November 2016, Atos presented its financial targets for 2017-19. They include organic revenue growth of +2-3%/year (from €12bn expected in FY2016), an operating margin of 10.5-11% of revenue in 2019 (vs 9.2-9.5% estimated in 2016), an operating margin conversion to FCF of c.65% (vs c.50% in 2016 or FCF >€550m) and a pay-out ratio of 25-30% in the form of dividends in cash and/or in shares and/or share buy-backs. In addition, Atos will continue external growth with the same discipline on acquisition price as up to now. All business lines should contribute to future revenue growth and the improvement in operating margin except for Big data & cybersecurity (stable double-digit margin). The breakdown of the financial goals is as follows: 1) Managed services: organic revenue growth of +0-1%/year, operating margin up +50-100bp in 2019. Organic revenue growth is based on the cloud and digital workplace. The margin improvement should come from automation, standardisation, higher productivity and the transformation of the workforce with higher-skilled employees. 2) Consulting & systems integration: organic revenue growth of +3-4%/year, operating margin up +200-250bp in 2019. Organic revenue growth is based on the migration of customers to SAP HANA, the transformation of applications and the development of analytics and cognitive solutions. North America is a key geographic area for growth. The margin improvement should come from higher headcount offshore, mainly in India. 3) Big data & cybersecurity: organic revenue growth above +12%/year (revenue of €1.0bn expected in 2019), stable operating margin at 16% of revenue in 2019. The promising growth trend should be driven by growing demand, the geographic expansion and cross-selling with the other IT businesses. 4) Worldline: organic revenue growth of +5-7%/year, operating margin up +350-400bp in 2019. Organic revenue growth is based on the increase in transactions, the changes in banking regulation, higher mobility/connectivity and geographic expansion. The margin improvement should come from volume growth, the cost synergies related to the merger with Equens. The TOP programme which is dedicated to generating cost savings is continuing and is focused on procurement, the industrialisation of application management, automation in Managed services, and various initiatives such as the rationalisation of premises, the launch of a training programme to work in a lean manner, the outsourcing of HR and financial tasks, and IT optimisation.
Organic revenue growth, strong order intake
20 Oct 16
Atos had a positive Q3 16 in terms of organic revenue growth and new orders, and it confirmed its 2016 guidance. Brexit apparently has no real impact on its activities at this stage. Q3 16 figures: Revenue reached €2,777m (+2.5%, +6.3% at constant exchange rates and including the change of perimeter). The change of perimeter corresponded to the integration of Unify (€152m), the reduction in acquired Xerox ITO’s scope (€23m) and the disposal of the Occupational Health business (€11m). Organic revenue growth was satisfactory (+1.8%) and similar to that in Q2 16 (+1.8% following +1.6% in Q1 16). This was attributable to all service lines in IT: +1.2% in the Managed services, +1% in the Consulting & Systems integration, and +19.1% in the Big data & Cybersecurity which is the smallest service line within the group (4.8% of total revenue). Worldline gave a stable contribution to organic revenue (€283m as in Q3 15). By geography, organic revenue growth was driven by North America (+5.2% attributable to new contracts in private cloud and Big data & cybersecurity services), the UK/Ireland (+4.2% sustained by the public sector and telecommunication/media), Germany (+3.7% attributable to Managed services and the Consulting & Systems integration) and France to a lesser extent (+2.4% reflecting a strong activity in Big data & Cybersecurity services and the recovery in Managed services). New orders were strong at €2,845m representing a book-to-bill ratio of 102%. This positive achievement was mainly attributable to Managed services and Big data & Cybersecurity services with book-to-bill ratios of 112% and 107% respectively. Conversely, the Consulting & Systems integration had a lower book-to-bill ratio (95%).
Improved organic growth, higher operating margin and cash conversion
27 Jul 16
Atos had a good H1 16. Organic revenue growth improved progressively and the operating margin rate increased by 0.6pt. Finally, Atos is benefiting from a signficant net cash situation (€412m on 30 June 2016). H1 16 earnings. - The change of perimeter included the integration of Xerox ITO, Unify Services. - New orders were €6,309m (+24%), representing a strong book-to-bill ratio of 111% (o/w 120% in Q2 16). - Revenue surged to €5,697m (+15%). Organic revenue growth (+1.7%) was mainly driven by the Big data & Cybersecurity services (+12.8%) and Worldline (+5.9%). Organic growth was moderate in the Managed services and Consulting & Systems integration services (respectively +0.6% and +0.5%). By geographic area, organic growth in IT services was attributable to North America (+4.4%), Germany (+4.9%, France (+3.4%) and Other business units (+2.2%) to a lesser extent. Conversely, organic revenue decreased in the UK/Ireland (-4.6%) and Benelux/the Nordics (-5.5%). - The operating margin increased to €444m (+23% and +11% organically) corresponding to an improvement in the margin rate to 7.8% of revenue (+0.6pt). - The operating result surged to €324m (+64%) after lower reorganisation, rationalisation and integration costs (a total of €97m vs €116m in H1 15), higher PPA amortisation (€45m, +45%) and an operating income of €43m, which included a gain of €51m related to the sale of the share of Visa Europe to Visa Inc. by Worldline. - Group net profit surged to €205m (+67%) including the group share gain of €36m related to the Visa transaction. Free cash flow surged to €181m (+74%) thanks to lower reorganisation, rationalisation and integration costs paid (-32% to €96m) and lower capex to a lesser extent (-6% to €202m). Cash conversion (FCF/operating margin) – low in the past or 29% in H1 15, 23% in H1 14 – jumped to 41% in H1 16. On 30 June 2016, Atos had a net cash position of €412m.
Good start to 2016
21 Apr 16
Q1 16 revenue Revenue reached €2,757m (+14%, +15% at constant currency). The perimeter effect was substantial and corresponded to Xerox ITO and Unify integrated respectively in H2 15 and February 2016. Atos had pretty good organic revenue growth (+1.6% vs +0.2% in Q1 15). The Big Data & Cybersecurity services (5% of total revenue) and Worldline (10% of total revenue) were the most dynamic (respectively +12.2% and +6.7%). The Managed services and Consulting & Systems integration (respectively 56% and 28% of total revenue) increased slightly (both +0.4%). By geography, organic revenue growth was attributable to most business units and decreased in the UK/Ireland (16% of total revenue) due to a challenging basis of comparison last year (-7.7% vs +15% in Q1 15) and in Benelux/the Nordics (9% of total revenue) which continued to be a difficult market (-4.4% vs -7.8% in Q1 15). A return to growth is expected in Benelux/the Nordics during 2016. Finally, good news came from Germany (16% of total revenue), where the IT activities rebounded helped by a low basis of comparison last year (+7.4% vs -9.1% in Q1 15). Atos also had good figures on the commercial side with the order intake up 27% (including the change of perimeter) to €2,794m leading to a higher book-to-bill ratio than last year (101% vs 91% in Q1 15). The headcount increased to 96,298 employees on 31 March 2016 (+5.4%) due mainly to the integration of the Unify workforce (5,199 employees, o/w c.3,300 employees in Unify Software & Platforms which are discontinued operations). Excluding the perimeter effect, the headcount was relatively flat (-0.2%).
A series of positive announcements related to Siemens and at Worldline.
04 Nov 15
Although there was no surprise for Q3 15 revenue, which was in line with expectations, there is a series of positive news apparently with Siemens and at Worldline except the fact that the pension commitments will increase through the acquisition of Unify. Q3 2015 figures: Revenue reached €2,708m (+22.6%), including a significant impact of the change in perimeter (Bull and Xerox ITO principally) and a positive currency effect. The low organic growth improved slightly (+0.5% vs +0.3% in H1 15). New orders were €2,531m, corresponding to a B2B ratio of 93% which is the expected achievement. Q2 15 was particularly high with a B2B ratio of 115%. Organic revenue growth was driven by Big data & cybersecurity (+4% vs +4.2% in H1 15), which is a small-sized activity (€113m in Q3 15, 4% of group revenue), and Managed services to a lesser extent (+0.8% vs +0.8% in H1 15), thanks to the ramp-up of various contracts in the UK, Asia-Pacific, and IMEA. Weak activities continued in the Consulting & Systems integration (-2.6% vs -2.4% in H1 15) due to the end of some contracts in the UK and the reduction in scope of some application management contracts. Conversely, Worldline performed well (+6% vs +3.9% in H1 15) driven by all business lines. By geographic area, the UK and French activities were the most dynamic (respectively +2.2% and +2.5% organically). A series of positive announcements in IT services: Firstly, the IT contract signed with the customer Siemens is extended until December 2021 (3.5 years longer) and the scope (initially for the IT infrastructure of Siemens) is enlarged to include cloud services, industrial data analytics and cybersecurity in Siemens' divisions. The minimum committed volume is increased from €5.5bn to €8.73bn (2011-2021). Secondly, the joint innovation investment programme with Siemens is reinforced in data analytics and cybersecurity. The funding is increased from €100m to €150m. Thirdly, Atos aims to acquire 100% of the shares of Unify which is specialised in communication solutions for €340m plus net debt of €50m and a pension deficit of €200m mainly in countries where there is no funding requirements (actually). There is also a potential cash tax savings of €250m through a significant amount of tax carried forward in Germany mainly. Finally, the lock-up period for the shareholder Siemens is extended to 30 September 2020 vs 30 June 2016 initially. A positive agreement between Worldline and Equens including two operations: Firstly, the merger of the financial processing activities of the two companies with Worldline as the main shareholder of the joint company (63.6% of the shares). Worldline has call options to acquire 100% of Equens Worldline in 2019. Secondly, the acquisition of the merchant acquiring activities (PaySquare) to Equens for €72m in cash (12x 2015 est. OMDA).
Operating margin boosted by the UK and positive pension impact
30 Jul 15
H1 15 results: Revenue reached €4,941m (+18.3%, +0.3% organically) resulting from weak IT services revenue (€4,370m, -0.2% organically) and an increase in revenue at Worldline (€571m, +3.9% organically). In IT services, all the activities grew organically (Managed services: +0.8%, Big data & cybersecurity: +4.2%) except for the Consulting & systems integration (-2.4%). By geographic area (organically), the UK/Ireland (+11.5%, o/w +15.3% in Q1 15) benefited from a strong demand for BPO services and was therefore a buoyant country for Atos. The Other Business units also had a positive trend (+1.5%) thanks to good activities in the Financial services and Public/Health. Conversely, organic revenue was rather stable in France (+0.1%, o/w -0.3% in Q1 15) and declined in all the other major geographic areas (-7.9%, o/w -9.1% in Q1 15 in Germany, -6.1% in Benelux/the Nordics, -7.6% in North America). The operating margin surged to €346m (+26%, +10% excluding currency/perimeter effects). The margin rate improved to 7.0% of revenue (+0.4pt, +0.6pt on a comparable basis). The improvement was attributable to the outsourcing activities (€186m, 7.5% of revenue, +1pt) and lower central costs (€32m vs €55m in H1 14) considering that there was a positive pension item (€38m, o/w €18m net of corporate costs). Operating income increased to €197m (+53%) after significant restructuring, integration and acquisition costs (€116m vs €111m in H1 14), o/w €68m related to the staff reorganisation in Central Europe, mainly in Germany. These costs corresponded also to the measures to generate the Bull synergies and the rationalisation of offices in Benelux and Germany. The customer relationships' amortisation was up to €31m (vs €22m in H1 14) and other charges were down to €1m vs €12m in H1 14. Group net income was €123m (vs €76m in H1 14) after a decrease in net financial expenses (€-11m vs €-21m in H1 14) and a lower effective tax rate (25.2%, -1.8pts). FCF was €141m (+14%) after an improvement in the working capital at Atos stand-alone and Bull, higher capex to €215m, or 4.3% of revenue, significant reorganisation, rationalisation and integration costs paid (€142m vs €97m in H1 14) and lower taxes paid (€58m vs €75m in H1 14). Finally, out-flows included the acquisition price paid for Xerox ITO (€811m) and the payment of the dividend of €31m. On 30 June 2015, Atos had a net cash position of €354m (vs €989m at year-end 2014).
N+1 Singer - NCC Group - Further issues in Assurance
22 Feb 17
NCC released a trading update yesterday afternoon highlighting further issues in its Assurance division. Sales growth has been lower than expected in all regions, resulting in a significant reduction in full year expectations. We have reduced our EPS forecasts by 25% in FY’17 and 22%/25% in FY’18/’19 respectively. Escrow continues to perform in line with expectations. In response to these issues the Board has announced a strategic review into all of the Assurance businesses. The results of the strategic review are expected to be announced at the FY results in July. With an extended period of uncertainty on the horizon we believe it will be hard for investors to gain confidence in NCC in the short term. That said we see fundamental value in the stock. Escrow is unaffected by this warning and remains an extremely high quality business, which we value at £353m in our SOTP. At the current share price this leaves Assurance valued at c.5x cal’17 EBITDA. While this appears to be an attractive multiple for a rare cybersecurity asset, we would like further clarity on the underlying nature of the current issues, hence our Hold recommendation. Our 138p target price assumes a 12x EBITDA multiple for Assurance but we apply a 20% discount to the group to account for the current uncertainty.
20 Feb 17
Hayward Tyler Group* (HAYT): Trading update and financial position (CORP) | Petra Diamonds (PDL): Interim results (BUY) | Gemfields* (GEM): Interim results (CORP) | Premaitha Health* (NIPT): Middle East momentum (CORP) | Sound Energy (SOU): Acquisition update and TE-8 well spud (HOLD) | Proactis* (PHD): Interim trading on track (CORP) | 7digital* (7DIG): Automotive contract win (CORP)
21 Feb 17
Lighthouse Group* (LGT): Middle Britain growth (CORP) | Utilitywise* (UTW): Double-digit sales growth (CORP) | Trakm8* (TRAK): Earnings expectations cut again (CORP) | dotDigital* (DOTC): Myriad growth opportunities (CORP) | Artilium* (ARTA): Five-year Telenet deal secured and prepaid (CORP) | Netcall* (NET): Cloud investment pays off (CORP)
N+1 Singer - Small-cap quantitative research - New quality style screen + 11 quality focus stocks
09 Feb 17
We introduce our fourth and final style screen representing “quality”. This screens for stocks with the best combination of high returns on capital/equity, EBIT margins and operating cash-flow conversion rates. These criteria should help us monitor how strong underlying returns translate into share price performance over time and under varying market conditions. The screen selects the “best” 25 stocks from our universe of just over 500 stocks and, as usual, we focus on a shorter list of stocks we cover or otherwise know and believe to be particularly interesting. We provide brief investment summaries on these focus stocks on pages 4 – 9. We will monitor performance and refresh the screen in approximately 3-4 months time.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
N+1 Singer - PROACTIS Holdings - H1 in line
20 Feb 17
A positive interim trading update confirms that H1 results are in line with expectations, with revenues up 36% to c£11.8m on the back of strong organic growth (13%) and an in-line contribution from acquisitions. We make no changes to our forecasts, recommendation and target price pending the release of interim results on 26 April.