Café de la Bourse took an interest in Atos, the French leader in digital transformation and cybersecurity. The group continues its disappointments and continues its descent into the underworld of the stock market which began in 2021. Let’s go back to the misfortunes of the Atos company: financial underperformance, strategic inconsistency or governance crisis. Can the Atos stock still bounce after losing 90% of its value since January 2021?
Atos has chained a financial underperformance since 2020
The figures are no longer there for Atos in a context that is nevertheless lively. While the pandemic has encouraged the digital transformations of companies, Atos has not benefited from it as expected by the market.
For the full year 2020, Atos’ revenues were € 11.8 billion, down 3.5% on an organic basis and 2.3% at constant exchange rates. At the same time, its competitor Capgemini recorded an increase in its turnover of 12.2% in 2020 … Atos’ operating margin also decreased dramatically, dropping 14% to reach 1 billion euros, compared to 1, 16 billion euros in the previous financial year.
In 2021 the Atos group is not faring better.
The IT services firm posted heavy losses of € 2.96 billion (reflecting asset writedowns and bad debt provisions on some contracts) and Atos’ annual revenue fell 3.1%, to € 10.84 billion. of Euro.
“Atos faced significant challenges in 2021, which are reflected in the group’s results. Its financial objectives were not met and an in-depth analysis of its activities and contracts, carried out at the beginning of the year in light of the recent change in the group’s strategy, led to significant write-downs “, commented its director. general, Rodolphe Belmer, in a press release.
Nothing worked during the first half of 2022.
Atos’ turnover was € 5.56 billion, down 0.6% in constant currency. The operating margin for the first half of 2022 was € 59 million compared to € 302 million in the first half of 2021. Atos’ net loss was € 503 million in the first half of this year compared to a loss of 129 million euros in the first half of 2021.
Finally, Atos forecasts are not encouraging: the company expects a change in turnover of -0.5% and a free cash flow of -150 million euros.
Investors worried about governance crises and the lack of clarity in Atos’ strategy
Investors have doubted Atos for several years, especially as regards the consistency of its strategy and governance.
In fact, Atos investors were surprised for the first time in 2021 following the announcement of the takeover bid on DXC, an American consultancy firm, for 10 billion dollars.
This offering cast doubt on the group’s strategic orientation, in contrast to the previously publicly communicated acquisition strategy: specific verticals, strong technology building blocks and a particular emphasis on cybersecurity.
This year, Atos announced its desire to separate into two separate companies with the departure proposal of its CEO Rodolphe Belmer. This decision would echo strong tensions within the group’s board of directors. The news was very badly received on the stock exchange, because Rodolphe Belmer had taken the reins of Atos in early January, affirming his determination to carry out a major reorganization to improve the group’s commercial performance and return to growth.
The separation project into two entities involves the consolidation of the historical activities of the data centers within a new Atos as well as the creation of a new company, called Evidian, which brings together the growth activities of Atos related to cybersecurity, digital transformation and to Big Data.
This separation should allow the Atos group to better manage its financial performance. However, such a strategic transformation has put the creeps in an uncertain macroeconomic environment, especially when it comes to financing the project.
This is an opportunity that arouses greed, particularly that of the Onepoint group, which is interested in Evidian’s growth businesses. The French IT consulting group, associated with the Anglo-Saxon investment fund ICG, is ready to buy Evidian for an enterprise value of 4.2 billion euros.
However, the letter of intent was initially rejected by Atos’ board of directors, much to the chagrin of retail investors. OnePoint founder David Layani affirms his desire to create a new French champion in strategy, consulting, technology and data. He also assured us that it was a “perfectly friendly offer”.
Atos shares: after a catastrophic trend in the stock market, what can we hope for?
Atos stock has lost 90% of its value since the beginning of 2021. Atos stock is trading at 0.24 times its 2022 turnover, which is a steep discount compared to its competitor Capgemini, which pays 1.30 times the turnover of 2022.
Poor financial results and lack of visibility at all levels have a very strong impact on Atos’ valuation. However, the company has some strengths. For the moment, however, the market seems to rather sanction the title by ignoring the strong elements of the company.
This division of assets is in fact an opportunity for Atos to adapt the financial management of its businesses to maximize the cash flow of its historic assets (new Atos) and to invest significantly in its high-potential future assets (Evidian). The Onepoint Group’s interest in this entity also supports the idea of this split.
The Atos group expects a recovery in results also in the second half of 2022, anticipating a return to positive growth at constant exchange rates and an improvement in the operating margin and cash flow.
It will certainly take longer to bring back investors who have fled Atos shares for several months. The macroeconomic context is delicate and leaves no room for hesitation, be they strategic, financial or governance.
Also find this article on Café de la Bourse
Image source: Freepik
All of our information is, by nature, generic. They do not take into account your personal situation and do not in any way constitute personalized advice for the purpose of carrying out transactions and are not assimilated to a financial consultancy service on investment matters, nor to any incentive to buy or sell financial instruments. The reader is solely responsible for the use of the information provided, without the possibility of an appeal against the publishing house of Cafedelabourse.com. The responsibility of the publisher of Cafedelabourse.com cannot in any way be held liable in the event of an error, omission or inappropriate investment.