Atos's UK auditor raises 'material uncertainty' about future

Looming debt repayments and stalling restructure talks cause for concern

The UK wing of Atos, the ailing IT services provider that has scored billions of pounds in government contracts locally, has pointed to a "material uncertainty" over its ability to continue trading as a going concern.

In the latest annual report for the year ended December 31, 2022 [PDF] – filed on June 24 – Atos highlights the ongoing discussions to reach a "refinancing plan" for its financial debt and to restructure the business, as well as talks to sell certain elements including the big data and security unit to the French state and Worldgrid.

"However, the group cannot rule out that the outcome of those discussions may be unsuccessful or that the solutions arising from those discussions prove insufficient to cover the group's financing maturities and cash requirements on a long-term basis," auditor Grant Thornton says in the report."

"As a result of the circumstances described above regarding the ability of the group to support the company's access to liquidity, there is a material uncertainty related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern."

Until a longer-term agreement is reached, Atos's interim financing program includes a €100 million ($106 million) revolving credit facility, a €300 million ($320 million) factoring facility, and a €50 million ($53 million) loan from the French state.

The company has €2 billion ($2.14 billion) of debt that will mature in 2024 alone, so restructuring talks need to go well. Yet it was back to the drawing board yesterday after the consortium led by OnePoint, the biggest shareholder in Atos with an 11.4 percent stake, pulled out for an unspecified reason. This leaves just two alternatives on the table.

With such uncertainty surrounding the future of the France-headquartered operation, the UK government is already reported to be lining up alternative suppliers should Atos fail to get over its financial struggles.

According to public sector researchers at Tussell, Atos has won a total of £2.4 billion ($3 billion) in contracts since December 2019, and contracts worth a total £942 million ($1.18 billion) are currently active, including at the Student Loans Company, the Department for Work and Pensions, the Home Office, and HMRC.

A spokesperson for the Cabinet Office told us: "We undertake regular reviews of suppliers and on occasion will undertake further due diligence to ensure public services can be maintained in a variety of scenarios."

We asked Atos to comment on the annual report for its UK ops but the company has yet to reply.

Atos's share price peaked in March 2010 at €147 and the last high was €99.45 in June 2017. It has slid ever since and at the time of writing it stands at €1.12. Atos was slow to react to the threat to its tech infrastructure and services businesses caused by the advent of the cloud, much like IBM GTS (now Kyndryl), as well as HPE and CSC (now DXC).

Lopping off the big data and security division, for which the French state has bid €700 million ($748 million), might give the business some breathing room and an injection of cash. However, finding a buyer for the legacy operations (datacenter, outsourcing, etc.) may well prove more difficult, hence the going concern warning. ®

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