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Atos has given an update on the Tech Foundations deal and its financial aspects with no real progress at this stage. Confusion and uncertainty abound, in particular on the capital increase. The renegotiations with EPEI should lead to the cancellation of EPEI’s stake in Eviden, a higher amount of cash paid for Tech Foundations (in return for which) and the reinforcement of the Onepoint position. Atos is still in discussions on its debt refinancing and is considering further divestments. What will
Companies: Atos (ATO:EPA)Atos SE (ATO:PAR)
AlphaValue
Organic revenue was down 3%, more than expectations. Conversely, the book to bill ratio improved thanks to Tech Foundations. Atos was impacted by lower volume in software and cloud licences and longer decision-making by customers in the US and an adverse comparative in South America. The stabilisation of revenue is anticipated in the Americas in Q4 23 (vs -13% in Q3 23). 2023 guidance is confirmed, thereby removing fears of a slippage regarding tough trading conditions in the US market.
The new governance does not change the scenario for Tech Foundations and massive capital increase announced in August 2023. The extended completion time will be even more negative in terms of business development and financing. The new target price takes into account a capital increase reset at the par value of the share (€1.0/share).
The appointment of Jean-Pierre Mustier as the new Chairman of the Board is positive given the disastrous results of Bertrand Meunier. The appointment of Laurent Collet-Billon as Vice-Chairman of the Board is the political aspect of the case considering the involvement of Atos in defence and cybersecurity. Inversely, the scenario for Tech Foundations does not change and shareholder approval of the operation (including the capital increase) has been delayed until early Q2 24. No hope of a lasting
Tech Foundation has revised upwards its mid-term targets vs the previous objectives given last year. Revenue growth is expected to be back in 2026 after a bottom of €5.0bn in 2024, one year ahead of the previous target. The operating margin is expected to be 6-8% of revenue in 2026 (vs above +5% in 2025 previously). The presentation of the measures show the scale of the task over the next few years.
Q1 23 organic revenue growth beat expectations (+2.8%) due to the strong growth at Eviden (+9.5%), boosted by the ramp up of the HPC activity on the back of strong orders in H2 22 and growth in application development and digital security. The Tech Foundations’ core businesses were flat, which was reassuring. The book to bill ratio improved in Tech Foundations and showed high volatility in Eviden. 2023 guidance is maintained. There is still no guidance for free cash flow.
Atos achieved the 2022 guidance after a long period of negative news flow. The H2 22 showed an improvement in the book to bill ratio (112% in Q4 22 vs 71% in Q3 22), and an improved organic revenue growth (+2.3% o/w +4.6% in Q4 22) and operating margin (5.1% vs 1.1% of revenue in H1 22). At the end of February 23, 80% of the €700m of divestments had been completed/or secured. The 2023 guidance is not exceptional but includes further improvements.
The decrease in organic revenue is slowing sequentially (-0.1% vs -1.9% in Q2 22) thanks to the earlier-than-expected stabilisation of the Tech Foundations activities. The recovery of HPC revenue in Q4 22 based on strong order intake in Q2 22 should support group revenue growth close to +1.5% at constant currency in 2022. The operating margin should be at the low end of 3%-5% of revenue. Atos confirmed the completion of the separation of its activities in H2 23.
Onepoint has made a €4.2bn offer for Evidian which does not integrate Evidian’s potential recovery by 2026 presented at the Capital Market Day in June 2022. Onepoint justifies this valuation by the deterioration in the performance of Evidian. Regarding this offer, all of Atos’ debt would be removed from its scope. The offer has been rejected by Atos which is expecting a higher valuation with the distribution and listing of Evidian shares as from mid-2023.
Atos reported a mixed set of figures for H1 22. Nevertheless, there were some positive achievements sequentially. In Q2 22, the decrease in organic revenue decelerated and the order intake jumped vs Q1 22. The operating margin was low in H1 22 (1.1% of revenue) and should improve in H2 22 thanks to restructuring, higher HPC volume, price increases and further work on underperforming contracts. Atos secured new debt to fund the transformation plan before the split into two listed companies.
The transformation plan includes two independent entities, SpinCo and TFCo, significant investment and the disposal of non-core assets. The joint announcement of the resignation of the CEO highlights a governance problem. In 2022-23, the funding needs are under control if there is no slippage in the execution of the plan. By the end of 2023, 70% of SpinCo shares should be distributed to Atos shareholders and the remaining stake should be monetized to fund TFCo’s transformation costs.
Q1 22 was hardly fantastic but there was some small improvement. Organic revenue decreased (-2.4%) showing a sequential improvement (-6.9% in Q4 21) partly explained by the catch-up in activity from Q4 21 to Q1-Q3 22. Revenue decreased at a lower pace than expected in infrastructure and increased in the digital business and cybersecurity services. High Performance Computing was affected by difficulties in the component supply chain. The low book-to-bill ratio was the bad surprise. The 2022 guida
Atos released its final 2021 figures that were in line with the preliminary numbers. The news flow does not improve significantly. 2022 guidance is disappointing with revenue between -0.5% and +1.5% at constant currency due to the continuing decline in the classic IT infrastructure and a low operating margin of 3-5% of revenue reflecting uncertainties on how much the decrease of IT infrastructure will slow and on the timing to pass on price increases to customers to offset wage inflation.
Bad news continues with significant impairments and provisions (€2.4bn in total) and lower 2021 revenue and operating margin than previously announced. There remains an undisclosed impairment (under assessment) to reflect a lower recognition of the group’s deferred tax assets. Nevertheless, it seems now that all is cleared up given the thorough analysis of all the contracts. The new organisation is simplified around three business lines (legacy infrastructure, digital & cloud services, big data
Atos missed all 2021 guidance. Revenue decreased by -2.4% on constant currency (vs stable revenue expected), the operating margin was c.4% of revenue (vs c.6% of revenue expected). The huge deterioration in free cash flow to c.€-420m is effectively very bad news. The new CEO’s priorities are the portfolio of services, the commercial activity, the cost base and a simplified organization. There should be a better visibility on the direction of Atos at the end of February 22.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Atos SE. We currently have 47 research reports from 4 professional analysts.
Alphawave Semi has reduced guidance for FY23 and prospectively citing lower revenues from China, changes in expected revenue recognition from long-term contracts, and continuing investment in R&D. The share price has reacted negatively, giving up most of the gains since the trading statement at the end of January. Current consensus, which is a good match for pre-existing guidance, should be reduced, most likely following release of the FY23 results and full 1Q24 trading update due on 23 April. H
Companies: Alphawave IP Group PLC
Capital Access Group
Audioboom’s FY23 results and Q1 trading update show Q1 24 revenue growth of +11% yoy, $6.7m of March 2024 revenue marking the platform’s highest revenue month since May 2022, and a confident outlook that leads us to reiterate our FY24E forecasts. Following the focus on new initiatives through FY23, the platform is now in its strongest ever operational position, with a record 1.1bn monthly ad impressions created in March 2024, record global audience reach of 38.6m unique global listeners in Janua
Companies: Audioboom Group PLC
Cavendish
Crimson Tide has reported FY23 results to December in line with expectations, with additional operating leverage benefitting updated FY24 and maiden FY25 and FY26 forecasts. FY23 delivered +15% revenue growth to £6.2m at 86% GM, of which over 90% is recurring, and maintained £5.8m ARR even after unexpected customer churn in the year as we previously noted. Crucially, the Group achieved milestone adj EBITDA profitability of £0.4m at 7% EBITDA margin, and edges closer to adj PBT profitability expe
Companies: Crimson Tide Plc
Companies: BILN ELCO NXQ CUSN ATG
Devolver Digital encouragingly delivered 2023 results slightly ahead of expectations and provided a steady medium-term outlook that leads us to reiterate our 2024 Adjusted EBITDA estimates. Longer term, the company is now planning to further develop its two major planned titles, Human Fall Flat 2 and System Era's next major new release. We now expect those major titles to be released in 2026 rather than 2025, meaning we lower our 2025 Adjusted EBITDA forecast to $10.6m from $17.6m but introduce
Companies: Devolver Digital, Inc.
Zeus Capital
Companies: 88E RNO TRIN KRM EXR BOOM
GE Healthcare has announced the launch of the Voluson Signature 20 and 18 ultrasound systems, with the related press release noting these systems ‘comprehensively integrate artificial intelligence’ to improve the ultrasound procedure for clinicians and the women being scanned. These ultrasound systems include SonoLyst, the AI which incorporates Intelligent Ultrasound’s ScanNav Assist and ScanNav AutoCapture AI software. The launch of additional Voluson systems including the SonoLyst suite of AI
Companies: Intelligent Ultrasound Group Plc
Checkit has won contracts with two customers worth at least £417k over the three-year lives of the contracts, confirming its ability to upsell to its existing customer base and supporting our forecasts. Having trialled the new technology with multiple customers, Checkit has launched its Asset Intelligence module, which uses advanced analytics and machine learning to enhance customer sustainability, reduce costs and increase revenue.
Companies: Checkit plc
Edison
Companies: Kainos Group PLC
Canaccord Genuity
ATG’s H1/24 trading statement indicates revenue for the six-month period to 31 March 2024 was $86m, a 6% increase on H1/23 (1% organic growth), helped by the addition of the EstateSales.Net (ESN) marketplace last year, which performed well in the period. Total marketplace revenue increased 2% (organic), driven by growth in value-added services (VAS) and event fees, offsetting a decline in commission revenue (mainly through lower asset prices).
Companies: Auction Technology Group PLC
Companies: Crimson Tide Plc (TIDE:LON)Plant Health Care PLC (PHC:LON)
Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning's full year results reflect the outcome of a multi-year strategy coming to fruition for the group, with recurring revenue growth of 8.7% delivering overall revenue growth of 7.1% and in turn a 60% increase in PBT to £0.7m. Over the past few years, Touchstar has focused on enhancing the returns from their product offering through a shift towards recurring software licen
Companies: Touchstar plc
WHIreland
This report is intended to help UK small- and mid-cap investors gain a better understanding of software companies’ routes to market, and to highlight how one of the most important facets of the way in which they grow and deliver value is routinely ignored. We examine sales processes for six UK-listed companies and one that has recently been taken over, and consider why they have followed their respective paths.
Companies: Idox plc
Progressive Equity Research
Companies: Cirata Plc
Liberum
ENGAGE XR’s FY23 results show revenue and net cash in line with the February trading update, EBITDA ahead at -€4.0m vs -€4.5m due to the split of cash outflow between opex and working capital, and a confident outlook that leads us to reiterate our FY24E forecasts. FY23 revenue for the core ENGAGE platform was unchanged vs FY22 at €3.3m, as H2 23 revenue was impacted by the record seven-figure contract announced in February shifting to 2024, and several enterprise customers scaling back renewals
Companies: Engage XR Holdings PLC
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