Atos Origin H1 Report 2010
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TURNING CLIENT VISION INTO RESULTS 2010 HALF-YEAR REPORT This document is a full free translation of the original French text. The original document has been filed with the Autorité des Marchés Financiers (AMF) on 30 July 2010, in accordance with article 212-13 of the AMF’s general regulations. Page 1 of 95 CONTENTS 1 FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 30 JUNE 2010 ........................... 3 2 CEO MESSAGE .............................................................................................................................. 5 3 GROUP GOVERNANCE ................................................................................................................. 6 4 THE IT SERVICES MARKET .......................................................................................................... 8 5 OPERATIONAL REVIEW.............................................................................................................. 24 6 TOP PROGRAM (TOTAL OPERATIONAL PERFORMANCE) .................................................... 37 7 FINANCIAL REVIEW .................................................................................................................... 42 8 HALF-YEAR FINANCIAL REPORT.............................................................................................. 47 9 COMMON STOCK EVOLUTION AND SHARE PERFORMANCE ............................................... 72 10 SHAREHOLDER RELATIONS ..................................................................................................... 76 11 PERSONS RESPONSIBLE FOR THE DOCUMENT AND THE AUDIT OF THE FINANCIAL STATEMENTS .......................................................................................................... 81 12 PRESS RELEASE FOR THE 2010 FIRST HALF RESULTS........................................................ 84 13 GLOSSARY – DEFINITIONS ........................................................................................................ 89 14 LOCATIONS.................................................................................................................................. 95 Page 2 of 95 1 FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 30 JUNE 2010 (in EUR million) 6 months ended 6 months ended % Change 30 June 2010 30 June 2009 (*) Income Statement Statutory revenue 2,494 2,589 -3.7% Impact from exchange rates 26 Revenue at 2010 scope and exchange rate 2,494 2,615 -4.6% Operating margin 150.1 118.3 % of revenue 6.0% 4.6% Operating income 95.9 42.5 % of revenue 3.8% 1.6% Net income (Group share) 60.0 18.2 % of revenue 2.4% 0.7% Normalised net income (Group share) (c) 98.3 73.9 % of revenue 3.9% 2.9% Earnings per share (EPS) Basic EPS (a) 0.87 0.27 Diluted EPS (b) 0.85 1.27 Adjusted basic EPS (a) (c) 1.42 1.08 Adjusted diluted EPS (b) (c) 1.35 1.08 30 June 30 June (in units) 2010 2009 Other Key Indicators Net debt to equity ratio ( Gearing ) 7% 20% Employees at period end 48,188 49,407 (*) Does include the impact on Operating Margin from the change in accounting policies for the calculation of pensions (a) In euros, based on a weighted average number of shares. (b) In euros, based on a diluted weighted average number of shares. (c) Based on net income (Group share) before unusual, abnormal and infrequent items (net of tax). Page 3 of 95 REVENUE BREAKDOWN BY SERVICE LINES, GBUS AND MARKET VERTICALS Medical BPO Consulting 3% 4% H1 2010 HTTS Managed Serv. 903 Managed 20% Serv. Systems Integration 902 37% HTTS 499 Consulting 110 Systems Integration Medical BPO 80 36% 2,494 Other countries Spain 8% France H1 2010 6% 23% France 573 Germany / Benelux 459 CEMA 10% UK 442 Atos Worldline 420 Benelux Germany / CEMA 241 Atos 18% Worldline Spain 158 17% UK Other countries 201 18% 2,494 Energy & Public Utilities sector H1 2010 11% 23% Public sector 585 Manuf. / Financial services 562 Retail / Telecom & Media 388 Trans. 27% Manuf. / Retail / Trans. 690 Financial Energy & Utilities 269 services Telecom & 23% 2,494 Media 16% (in EUR million) Global Business Units include France , United Kingdom , Benelux (The Netherlands, Belgium and Luxembourg), Atos Worldline (French, German and Belgium subsidiaries), GCEMA (Germany Central Europe with Austria, Poland, and Mediterranean countries and Africa which include South Africa, Greece, Turkey and Switzerland), Spain and Other countries (South America including Argentina, Brazil and Columbia, Asia Pacific including China, Hong Kong, Singapore, Malaysia, Indonesia, Taiwan, and Japan, as well as North America, India, Major Events, Morocco and Middle East with Dubai). Page 4 of 95 2 CEO MESSAGE Dear Shareholders, Mid way through the three-year recovery plan I announced at the end of 2008, I am glad to report that once again this semester our Group has delivered a performance in line with its commitments. Our profitability reached 6.0% (5.7% excluding the impact of the new French tax regulations) representing a strong improvement of 110 basis points compared to the first half of 2009. Our Group is therefore on track to improve its operating margin by at least 250 basis points between 2008 and 2011 according to its objective. The net debt has decreased by EUR 20 million taking into account EUR 54 million cash outflow in order to acquire the company Shere in the United Kingdom and the minority interests of the German subsidiary of Atos Worldline, to further develop transaction based services. This performance was achieved thanks to the rigorous implementation of the Total Operational Performance (TOP) program regarding cost optimization, off shoring, cash management and Lean productivity. In what is a still difficult economic environment, and in line with our anticipations, our revenue decline was limited to 4.6% in the first half. Our services in emerging countries performed very well, but we are still enduring the effects of the crisis in several geographies and service lines. Therefore, we reinforced several initiatives to prepare the Group for the post crisis economic environment, which enabled us to increase order entries and our backlog. The 5 new TOP Programs on sales aim to build a world-class sales organization by developing strategic and proactive selling – especially for our new innovative offerings (Cloud, Green IT…) -. The Global Atos Market Alignment (GAMA) reorganization has started to be implemented and emphasis has been put on innovation. In this respect, we presented a suite of Smart Mobility services; we launched Atos WorldGrid in order to regroup all our Smart Energy and Utilities activities in one single entity. New innovative solutions will be developed regarding Enterprise Content Management (ECM) and Social Computing. High Tech Transactional Services (HTTS) deployment is a key engine of our development. Our HTTS initiatives have grown up in several countries beyond the Atos Worldline core geographies. Dedicated teams have been trained in our main geographies, generating new leads and business opportunities thanks to the Atos Worldline support. During the past 6 months we have moved forward to transform Atos Origin into a truly socially responsible company. We published our first corporate responsibility report certified according to the Global Reporting Initiative (GRI) standards. We also signed the UN Global Compact regarding human rights, labour, environment and anti-corruption principles. During the next 6 months we will pursue our ambition to be recognized as one of the best companies to work for, by anticipating new and sustainable ways of working. This is the objective of the Well Being at Work program. Our new Atos Campus in Bezons near Paris is a tangible proof of progresses in theses domains. Overall the Group performance allows Atos Origin to pursue its international development, building on its core assets but also by taking advantage of acquisitions opportunities. I am proud of the work and the performance realized by our teams during the first half of this year, and I am confident in our capability to achieve our objectives for the full year 2010. Thierry BRETON, Chairman and Chief Executive Officer Page 5 of 95 3 GROUP GOVERNANCE Since 10 February 2009, Atos Origin has been incorporated in France as a ” Société Anonyme” (Joint Stock Corporation) with a Board of Directors. Since then, Thierry Breton has been its Chairman and Chief Executive Officer. The change from a Supervisory Board and a Management Board structure to a system with a Board of Directors and Chairman and Chief Executive Officer has simplified and unified the Company’s governance so as to adapt it to its current challenges. 3.1 THE GROUP TOP MANAGEMENT The Group Top Management is composed of a Chairman and Chief Executive Officer and two Senior Executive Vice-Presidents. Name Operational functions Transversal functions Chairman and Chief Executive Thierry Breton Officer Global Systems Integration & Managed Senior Executive Vice President Charles Dehelly Services, TOP Program, Global Global Operations Purchasing, Group Business Units (*) Support functions, Global Sales & Markets, Strategic International Senior Executive Vice President Customers (SICs), Group Innovation Gilles Grapinet Global Functions Business Dvpt & Strategy (GIBS), Global Consulting and Hi-Tech Transactional Services (*) Excluding Atos Worldline and Atos WorldGrid that are under the responsibility of Gilles Grapinet 3.2 THE EXECUTIVE COMMITTEE The purpose of the Executive Committee is to manage the operational performance of the Group. Its main areas of competence are to assist the Top Management in defining priorities