• Market update - April 29

    Source: Nasdaq GlobeNewswire / 29 Apr 2024 02:00:00   America/New_York

    Non-binding letter of intent received from the French state to acquire 100% of the Advanced Computing, Mission-Critical Systems and Cybersecurity Products activities of Atos SE’s BDS (Big Data & Security) business

    • Indicative enterprise valuation between €700 million and €1 billion
    • Due diligence phase to start shortly in view of the issuance of a confirmatory non-binding offer by early June 2024

    Revision of the parameters of the financial restructuring framework presented on April 9, 2024, to reflect current market conditions and business trends

    • €1.1 billion of cash needed to fund the business over the 2024-25 period compared with €600 million previously. Funds to be provided in the form of debt and/or equity by existing stakeholders or third-party investors
    • €300 million in new revolving credit facility and €300 million in additional bank guarantee lines (unchanged)
    • Targeting BB credit profile by 2026, which assumes a financial leverage1 below 2x by year-end 2026 and implies a gross debt reduction of €3.2 billion compared with €2.4 billion previously
    • Remaining debt maturities extended by 5 years (unchanged)
    • These parameters are based on Atos full business perimeter of Tech Foundations and Eviden (unchanged)

    Submission of financing proposals including new money by existing stakeholders of Atos SE and third-party investors extended to May 3, 2024

    • Allowing time to incorporate new information
    • Given the Group’s needs, a global financial restructuring agreement will trigger significant dilution of existing shareholders

    July 2024 target date to reach a financial restructuring agreement with financial creditors unchanged

    • Atos intends such financial restructuring agreement to include the extension of €450 million interim financing agreed in-principle and an incremental interim financing of €350 million from July 2024 to final implementation of the financial restructuring agreement.

    Paris, France – April 29, 2024 - Atos SE announces today the receipt of a non-binding letter of intent from the French state to acquire 100% of the Advanced Computing, Mission-Critical Systems and Cybersecurity Products activities of Atos SE’s BDS division. The Company also presents a revision of the parameters of its financial restructuring framework based on an adjusted business plan that reflects current market conditions and business trends.

    Non-binding letter of intent received from the French state to acquire 100% of the Advanced Computing, Mission-Critical Systems and Cybersecurity Products activities of Atos SE

    Atos announces it has received on April 27, 2024, a non-binding letter of intent from the French state concerning the potential acquisition of 100% of the Advanced Computing, Mission-Critical Systems and Cybersecurity Products activities of Atos SE’s BDS division for an indicative enterprise value comprised between €700 million and €1 billion. This perimeter represents a turnover of circa €1 billion in 2023, out of a total of €1.5 billion for the BDS division as a whole.

    The Group welcomes this letter of intent, which would protect the sovereign strategic imperatives of the French State. Due diligence phase with the French state would start shortly, in view of the issuance of a confirmatory non-binding offer by early June 2024.

    The letter of intent provides for a limited exclusivity undertaking, applying to direct offers on the perimeter covered by the letter of intent (expressly allowing exchange of information and global offers in the context of the financial restructuring plan), until the earlier of July 31, 2024, and the conclusion of a global restructuring agreement.

    Adjusted 2024-2027 business plan of the Atos Group

    20242

    The Group 2024 revenue of €9.8 billion compares with €9.9 billion communicated previously and represents an organic revenue evolution of circa -3.3% compared with 2023, compared with circa - 2% communicated on April 9, 2024.

    The Group Operating margin of €0.3 billion or 2.9% of revenue compares with €0.4 billion or 4.3% of revenue communicated previously.

    Change in cash before debt repayment of €-0.6 billion compares with €-0.4 billion communicated previously. It excludes the full unwind of the working capital actions of circa €1.8 billion as of December 31, 2023, which will be covered from cash on the balance sheet.

    20273

    The Group’s revenue of €11.0 million in 2027 compares with €11.4 billion in 2027 communicated previously and represents a revenue CAGR4 of +2.3% over the 2023PF5 - 2027 period, compared with circa +3.1% communicated on April 9, 2024.

    The Group Operating margin of €1.1 billion or 9.9% of revenue compares with €1.2 billion or 10.3% of revenue communicated previously.

    Change in cash before debt repayment of €0.2 billion compares with €0.5 billion communicated previously.

    Key revisions to business plan hypothesis

    The adjusted business plan takes into account current business trends and softer market conditions in some of the Group’s key regions. It also reflects delays in award of new contracts and add-on work, as clients await the final resolution of the Group’s financial restructuring plan. In addition:

    • The adjusted business plan for Digital reflects:
      • A delay in the return of a positive organic revenue growth to July 2025;
      • Lower profitability due to lower utilization of billable resources;
      • Higher overhead costs;
      • Higher restructuring costs in 2025.
    • BDS operating margin was reduced in 2024 mainly due to lower utilization of billable resources in Cybersecurity services.
    • The adjusted business plan for Tech Foundations includes:
      • Lower revenue and operating margin due to higher risk of contract terminations and reduced expectations for new logos in 2024 and 2025;
      • Lower profitability due to lower utilization of billable resources and lower absorption of fixed costs.

    Digital adjusted business plan6

    Digital, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 3,4763,3473,4433,7294,070
    Growth (%)  -3.7%2.9%8.3%9.1%
           
    Operating margin 23395254349458
    OM% 6.7%2.8%7.4%9.3%11.3%
           
    Free cash flow before interest and taxes  4691276420

    BDS adjusted business plan7

    BDS, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 1,4381,5531,8362,0542,253
    Growth (%)  8.0%18.2%11.9%9.7%
           
    Operating margin 3587189237269
    OM% 2.4%5.6%10.3%11.5%11.9%
           
    Free cash flow before interest and taxes  -7115233197

    Tech Foundations adjusted business plan8

    Tech Foundations, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 5,1794,8574,6374,6704,724
    Growth (%)  -6.2%-4.5%0.7%1.1%
           
    Operating margin 14810187243368
    OM% 2.9%2.1%1.9%5.2%7.8%
           
    Free cash flow before interest and taxes  -160-23851253

    Atos Group adjusted business plan9

    Atos Group, in € million 2023PF2024E2025E2026E2027E
           
    Revenue 10,0939,7579,91510,45311,046
    Growth (%)  -3.3%1.6%5.4%5.7%
           
    Operating margin 4172825318281,095
    OM% 4.1%2.9%5.4%7.9%9.9%
           
    Free cash flow before interest and taxes  -1855659770
           
    Taxes  -61-68-94-140
    Separation costs & other  -169-79-42-42
    Interests10  -190-300-317-281
           
    Change in cash before debt repayment  -605-442206307

    Free cash flow may vary based on interest expense related to the new financial restructuring solution. Please refer to the disclaimer in this press release.

    Parameters of Atos’ financial restructuring framework

    As indicated in its press release of March 26th, 2024, Atos SE has entered into an amicable conciliation procedure in order to frame discussions with its financial creditors. This is to facilitate the emergence of a global agreement regarding the restructuring of its financial debt within a short and limited timeframe of four months, which could be further extended by one month if needed.

    Atos SE presents today a revision of its financial restructuring framework presented on April 9, 2024, to reflect current market conditions and business trends:

    • €1.1 billion of cash needed to fund the business over the 2024-25 period compared with €600 million previously. Funds to be provided in the form of debt and/or equity by existing stakeholders or third-party investors. The €1.1 billion of cash needed for the 2024 and 2025 period is based on a severe downside case performed by the Company adjusting for lower interest expenses related to debt reduction targets;
    • €300 million in new revolving credit facility and €300 million in additional bank guarantee lines (unchanged);
    • Targeting BB credit profile by 2026, which assumes a financial leverage11 below 2x by year-end 2026 and implies a gross debt reduction of €3.2 billion compared with €2.4 billion previously;
    • Remaining debt maturities extended by 5 years (unchanged).

    The key parameters of this financial restructuring framework are not impacted by the Letter of Intent received from the French state. If an agreement is reached with the French state, proceeds resulting from such a transaction are not assumed to be received before H2 2025. Such proceeds would be available for early repayment of potential new money instruments as part of the financial restructuring solution.

    Interim financing until the final implementation of the financial restructuring agreement

    The financial restructuring agreement will need to include the extension of €450 million interim financing agreed in-principle and an incremental interim financing of €350 million from July 2024 to final implementation of the financial restructuring agreement.

    Next steps and financial restructuring discussions’ process

    Existing stakeholders of Atos SE and third-party investors can submit proposals for new money by May 3, 2024, in order to allow a global agreement on the new capital structure of the Company to be finalized by July 2024.

    Atos will evaluate all proposals, under the aegis of the conciliator Maître Hélène Bourbouloux in the best corporate interest of the Company including its employees, clients, suppliers, shareholders, and other stakeholders, while maintaining an attractive business mix.

    Atos will inform the market in due course of the progress of the financial restructuring discussions, which will result in a change in its capital structure arising from a final financial restructuring agreement, including the potential issuance of new equity which will result in a dilution of the existing shareholders.

    Shareholders and financial creditors will be consulted in compliance with French legal requirements.

    ***

    Appendix 1

    The debt structure of the Group as of 31 December 2023, taking into account drawings on the remaining available RCF (drawn in January 2024) is as follows:

    Debt Structure as of 31 Dec. 2023, Pro Forma(1)
    € in millions MaturityOutstanding
        
    Term Loan A Jan-251,500
    RCF Nov-25900
    Bank loans  2,400
        
    Sustainability linked Bond 1%Nov-29800
    OEB zero couponNov-24500
    Senior Bond 1.75%May-25750
    Senior Bond 2.5%Nov-28350
    NEU MTN Apr-2650
    Bonds & mid-term notes 2,450
        
    Other debt  85
        
    Total debt  4,935

    (1)   Pro Forma €320M RCF draw and maturity extension of Term Loan A to January 2025

    (2)   Excluding accrued interest on LT Borrowing

    Note: the €1.5 billion Term Loan A, maturing in July 2024, provides for another 6-month extension option until January 2025 available to Atos SE under standard conditions (notably no event of default and payment of an extension fee); it should be noted that under French law, any events of defaults triggered by the opening of mandat ad hoc or conciliation proceedings are considered void.

    The debt principal schedule of the Group from 31 December 2023, taking into account drawings the remaining available RCF and assuming the exercise of the Term Loan A second extension option would be as follows:

    Maturity Profile of Gross Debt as of 31 Dec. 2023, Pro Forma(1)

    € in millions, FYE Dec. H1-24H2-24H1-25H2-252026202720282029
              
    Term Loan A - - 1,500 - - - - -
    RCF - - - 900 - - - -
    Bank loans - - 1,500 900 - - - -
              
    Bonds - 500 750 - - - 350 800
    MTN - - - - 50 - - -
    Bonds & mid-term notes - 500 750 - 50 - 350 800
              
              
    Total debt - 500 2,250 900 50 - 350 800

    (1) Pro Forma €320M RCF draw and maturity extension of Term Loan A to January 2025

    Appendix 2: expected guarantee needs

    €m, FYE Dec. Dec-23Dec-24Dec-25Dec-26Dec-27
           
    Guarantees beginning of period 504 573 407 453 562
    New lines 280 164 226 214 199
    Releases (211)(330)(180)(105)(114)
    Outstanding end of period 573 407 453 562 647

    Appendix 3: FY23 actual – FY23 pro forma revenue and operating margin reconciliation

    The tables below present the reconciliation between the FY 2023 actual revenue and operating margin and the 2023 pro forma revenue and operating margin, for the Group, Eviden, Tech Foundations and the two components of Eviden, Digital and BDS. Elements in reconciliation correspond to businesses disposed in 2023.

    (in € millions)

    External revenue 2023 ActualsScope effects2023 PF
    Digital3,630-1543,476
    BDS1,459-211,438
    Sub-total Eviden5,089-1754,914
    Tech Foundations5,604-4255,179
    Total Group10,693-60010,093
        
        
    Operating margin2023 ActualsScope effects2023 PF
    Digital257-23234
    BDS38-236
    Sub-total Eviden295-25270
    Tech Foundations172-25147
    Total Group467-50417

    Pro forma information consists in adjusting historical published information from scope changes but shall not be considered as pro forma information as defined by the EU Prospectus regulation.

    Appendix 4: Free cash flow reconciliations

     In € billion
      
    Reported 2023 Free cash flow-1.1
    Less: working capital actions-1.8
    Free cash flow assuming no working capital actions-2.9
      
    2024E change in cash before the unwinding of working capital actions12-0.6
    Unwinding of the working capital actions-1.8
    2024E change in cash after the unwinding of working capital actions13-2.4

    Disclaimer

    This document contains forward-looking statements that involve risks and uncertainties, including references, concerning the Group’s expected growth and profitability in the future which may significantly impact the expected performance indicated in the forward-looking statements. These risks and uncertainties are linked to factors out of the control of the Company and not precisely estimated, such as market conditions or competitor’s behaviors. Any forward-looking statements made in this document are statements about Atos’s beliefs and expectations and should be evaluated as such. Forward-looking statements include statements that may relate to Atos’s plans, objectives, strategies, goals, future events, future revenues or synergies, or performance, and other information that is not historical information. 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 2022 Universal Registration Document filed with the Autorité des Marchés Financiers (AMF) on April 21st, 2023 under the registration number D.23-0321 and within the 2023 Consolidated financial statements published by Atos SE on March 26, 2024. Atos does not undertake, and specifically disclaims, any obligation or responsibility to update or amend any of the information above except as otherwise required by law. This document does not contain or constitute an offer of Atos’s shares for sale or an invitation or inducement to invest in Atos’s shares in France, the United States of America or any other jurisdiction.

    This document includes information on specific transactions that shall be considered as projects only. In particular, any decision relating to the information or projects mentioned in this document and their terms and conditions will only be made after the ongoing in-depth analysis considering tax, legal, operational, finance, HR and all other relevant aspects have been completed and will be subject to general market conditions and other customary conditions, including governance bodies and shareholders’ approval as well as appropriate processes with the relevant employee representative bodies in accordance with applicable laws.

    ***

    About Atos

    Atos is a global leader in digital transformation with c. 94,000 employees and annual revenue of c. € 11 billion. European number one in cybersecurity, cloud and high-performance computing, the Group provides tailored end-to-end solutions for all industries in 69 countries. A pioneer in decarbonization services and products, Atos is committed to a secure and decarbonized digital for its clients. Atos is a SE (Societas Europaea), and listed on Euronext Paris.

    The purpose of Atos is to help design the future of the information space. Its expertise and services support the development of knowledge, education and research in a multicultural approach and contribute to the development of scientific and technological excellence. Across the world, the Group enables its customers and employees, and members of societies at large to live, work and develop sustainably, in a safe and secure information space.

    Contacts

    Investor relations : David Pierre-Kahn | investors@atos.net | +33 6 28 51 45 96

    Individual shareholders : 0805 65 00 75

    Press contact : globalprteam@atos.net

    1 Ratio net debt pre-IFRS16 over EBITDA pre-IFR16; EBITDA computed as OMDA pre-IFRS16 minus anticipated RRI (restructuring, rationalization, integration) costs and Other changes
    2 Please refer to the disclaimer of this press release
    3 Please refer to the disclaimer of this press release
    4 CAGR: Compound annual growth rate
    5 PF: Pro forma
    6 Please refer to the disclaimer of this press release
    7 Please refer to the disclaimer of this press release
    8 Please refer to the disclaimer of this press release
    9 Please refer to the disclaimer of this press release
    10 Reflect contractual interests and 7% interest rate on negative liquidity position
    11 Ratio net debt pre-IFRS16 over EBITDA pre-IFR16; EBITDA computed as OMDA pre-IFRS16 minus anticipated RRI (restructuring, rationalization, integration) costs and Other changes
    12 Before debt repayment
    13 Before debt repayment

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