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French tech giant Atos issues second profit warning in 7 months
Week 2 for new CEO, forced to report sliding sales, delayed projects to investors
Atos has issued a profit warning following a "major" contract revision with a UK financial services customer, as well as wider project slippages and lower reselling revenue.
The French firm told investors this morning it is unlikely to meet commercial forecasts for calendar 2021, outlined in July. Turnover of 5 per cent has morphed into a decline of 2.4 per cent to €10.8bn; operating margin is said to be nearer to 4 per cent of revenue than 6 per cent, and free cash flow is estimated to have changed to -€420m.
The latest set of numbers is not yet finalised or audited, and lands just days after Rodolphe Belmer took over as CEO at Atos last week when the financial data was being "collected and consolidated," as the exec was quick to point out.
"The current state of financial insight leads us to the obligation to issue a profit warning today due to the significant variance in the financial KPIs. However, most of the items underlying this severe gap are non-recurring. In particular, the large gap in Free Cash Flow mostly stems from working capital," said Belmer.
Atos, he said, has the "necessary assets and all the talents to operate a swift turnaround." The intent is for the new CEO to present a "new organisation" to the current board of directors at the end of February, when the 2021 results are due out.
What caused the warning to investors? The company said sales shrinkage was due in part to big data, HPC, and Unified Comms & Collaboration projects being pushed into 2022 "due to supply chain challenges" as well as "customer postponements in Public Sector & Defense in the Netherlands and the UK." Other factors include a delay to being compensated by clients for extra work in 2021 and one large contract facing issues.
This was the "unexpected reassessment of the cost to go on transformation, replatforming and operations of a financial services BPO contract, signed in 2018 for 15 years with a large UK financial institution, leading to a major revision of the completion rate on the project, at the end of December 2021, and therefore translating into a negative impact in 2021," Atos said.
The BPO contract also dampened operating margin, as did the well-documented supply chain issues and customers postponing work until 2022. Cashflow was similarly dented by the above issues, the company said.
This is the second profit warning in seven months for Atos, with the pandemic blamed.
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James Preece, senior analyst at Megabuyte, said today's updates "caps off what has been a rather miserable 2021 for Atos."
Preece added: "Starting with its questionable and eventually failed attempt to acquire also challenged and debt-laden US peer DXC Technology in January 2021, the group has battled organic growth declines, a massive Germany operations restructuring, a North American accounting scandal and, unsurprisingly, a CEO departure in October."
The major drivers of a turnaround at Atos should be "technology and decarbonisation consultancy," Preece added. ®