Atos: As a mega-dilution looms for its shareholders, Atos lowers its outlook

(BFM Bourse) – The digital services company has revised its projections for 2024 and 2027, following its first-half results. The company is preparing to present its restructuring plan to the commercial court next month.

Atos’ survival is no longer threatened since an agreement was reached at the end of June with its banks and creditors (who will themselves take over the company) on the terms of its financial restructuring. But the operational side remains in difficulty.

In the first half of 2024, the company’s revenues fell by 2.7% on a comparable basis, the operating margin fell by 1 percentage point to 2.3% and the company burned €1.9 billion in cash. These results were communicated by the company in early August.

A few weeks later, the group, now led and chaired by Jean-Pierre Mustier, decided to revise downwards its projections for the period from 2024 to 2027 in order to “reflect the results of the first half of 2024”, as well as “current commercial trends in key regions and the expected impact on free cash flow”.

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A revised trajectory

This new business plan takes into account, for example, the loss of two major accounts in the digital transformation and cloud computing activities. In the “Tech foundations” division, which groups together Atos’ historical businesses such as outsourcing, this update “takes into account the impact of contract terminations or reductions in contractual scopes, as well as expectations regarding future client activities”.

As a result, Atos anticipates a 4% decline in comparable sales in 2024 (compared to 3.3% previously), an operating margin of 2.4% (compared to 2.9%) and a negative cash flow variation of €783 million (compared to -€634 million previously).

By 2027, revenues are expected to reach 10.6 billion euros, compared to 11.046 billion previously, and the operating margin to reach 9.9% (compared to 9.4%).

Atos also intends to generate a positive free cash flow from 2026. This horizon has not changed, but the group is now counting on a cash flow variation of +138 million euros in 2026 compared to +343 million previously.

In terms of debt, the ratio of net debt to gross operating profit will be reduced to 2 in 2027, compared to the end of 2026 previously.

Mega-dilution coming soon

On the Paris Stock Exchange, Atos shares fell by 3% to 79 cents. “While this downward revision is relatively limited in light of the current dynamics and does not call into question the parameters of the financial restructuring, there is a risk that further revisions will be necessary,” comments Invest Securities.

This revision of the outlook comes as the group must present its restructuring plan on October 15 to the Nanterre Commercial Court.

As a reminder, this plan provides for the cancellation of 3.1 billion euros of debt, of which 2.8 billion will be converted into capital. 1.75 billion euros of new financing will also be provided to the company in the form of new secured debt.

This restructuring is intended to put the company’s finances back on track at the cost of a mega-dilution for its shareholders. Atos had estimated this dilution at more than 99.9% at the end of June.

According to Invest Securities, 90 billion shares will ultimately be put into circulation, compared to 111 million currently. The research firm is retaining a price target of 1 cent for the Atos share, which is currently trading at around… 80 cents. Which gives an idea of ​​the potential fall in the share price.

Once court approval is obtained, Atos intends to complete its restructuring between November 2024 and January 2025.

Julien Marion – ©2024 BFM Bourse