Shape-shifting French IT services provider Atos is reporting widening losses amid a costly group transformation that involves employing thousands more workers offshore and nearshore, and a two-way split of the group.
It has been an unsettling year to date for the IT giant starting with yet another profit warning in January, writing down goodwill to the tune of €1.9 billion (c $1.92 billion) in February, and then announcing the bifurcation in June.
At that point last month, Atos said it would spin out its Digital, Big Data and Security businesses into a new separate, publicly traded entity called Evidian, and funnel the remaining legacy bits including Data Centre & Hosting, Distal Workplace, Unified Comms, and BPO into Tech Foundation Co (TFO).
Short-serving CEO Rodolphe Belmer quit over the strategy.
Now Atos has outlined prelim numbers covering trade for the first half of calendar 2022 with group revenue down 0.6 percent year-on-year to €5.563 billion. Evidian grew 2 percent to $2.539 billion and TFO declined 2.6 percent to €3.024 billion.
The infrastructure business reported a “much more contained revenue decline” than last year, UC shrank due to “persisting supply chain tensions” as did HPC, cyber security was in strong demand, as were professional services, applications and public cloud.
Atos said it witnessed a “sharp rebound in order entry” in the second quarter and the book-to-bill ratio improved at 101 percent compared to 78 percent in Q1. This, Atos said, signals a “ramp” of business in the second half of 2022 and indicates “customer support” for the transformation plan.
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Operating margin in H1 was €59m versus €302 million in the prior year, but staff reorganization costs of €124 million along with a raft of other expenses left Atos nursing a €298 million operating loss for the period.
According to slides presented by Atos, 12,370 employees left the company during the first half of this year and it made 16,089 new hires “predominantly in offshore and nearshore locations”, and mostly in the Digital and Security divisions.
“In H1 2022, Atos executed swiftly on cost optimization measures and reorganizations planned at the beginning of the year (for a total estimated annual cost of €-150 million),” it said.
Atos added it will make “selective hiring” in the second half of the year, and confirmed it has agreed funding of €1.5 billion with banks to support the transformation plan. It sold 70 million shares in Worldline for €220 million in June but has another €480 million worth of assets yet to be offloaded.
The French IT services biz is facing the same turmoil that all infrastructure services players have cobnfronted: the move to the cloud has made their classic portfolio of services less and less attractive. ®