8.1% organic revenue increase in H1 2005 and creation of Atos Euronext Market Solutions
PARIS – July 27th, 2005 – Atos Origin, a leading international information technology services provider, today announced that unaudited revenues for the six months ended June 30th, 2005 amounted to EUR 2,725 million, showing 8.1% organic increase on a constant scope, exchange rate and accounting principles basis. The Company also announced a major expansion of AtosEuronext, its partnership venture with Euronext.
Analysis of Revenue Performance
Reported Group revenues for the first half ended June 30th, 2005 were EUR 2,725 million, compared with EUR 2,653 million for the equivalent period last year. Atos Origin has adopted IFRS standards with effect from January 1st, 2005. The comparative pro forma revenues of the Group in H1 2004 were EUR 2,622 million and on that basis the statutory H1 2005 figures under IFRS were 3.9% higher. After adjusting for business disposals during the past twelve months, and at constant exchange rates, the Group produced organic growth of +8.1%.
Revenues for the period are reported under the new IFRS accounting standards.
The appendix to this statement provides an analysis of revenues by service line and geographic region.
The reported level of revenue represents an organic increase of 7.2% in Q2 2005 after 9.1% in Q1 2005. This is the fourth quarter-on-quarter increase in succession, confirming not only a general improvement in market conditions, but also the successes of the Group.
The three main service lines each recorded good organic revenue growth. Consulting improved on the first quarter organic growth rate, giving a 13.5% increase for the first half, year-on-year. The improvement in consulting demand is also a positive indicator of the market recovery.
Revenues in Systems Integration were 8.4% higher organically in the first half, which confirms the upward trend seen in 2004. The growth in H1 was mainly due to better volumes. The Group has increased the amount of recurring revenues in this segment from application life cycle management contracts.
After adjusting for business disposals, mainly the US Cellnet business, organic revenue growth in Managed Operations was 7.0%, reflecting the steady inflow of orders that has accumulated during the past year. After strong revenue growth of 9.0% in Q1 2005, the lower increase of 5.1% in Q2 2005 was mainly due to the expected end of a one-year, non-recurring contract in the United Kingdom, representing a revenue loss of EUR 90 million on a full year basis.
On a regional basis, revenues in France were 5.5% higher than last year, representing growth of 9.2% in Q2 2005 after 1.8% in Q1. France benefited from a strong performance in Consulting and Systems Integration, particularly from the new contract with Renault. Outsourcing also achieved better organic growth than in the first quarter, as a number of contracts finished the transition phase in Q1 and entered into a normal run rate in Q2.
Elsewhere, good organic revenue growth was achieved in The Netherlands (+6.7%), and the United Kingdom was able to compensate the end of one contract (explained above) by picking up additional work, especially in the Public Sector. The United Kingdom will in the second half benefit from the expansion of the AtosEuronext partnership, including the Liffe Exchange business, in managed operations. Revenues in Germany and Central Europe registered an exceptional 94% organic growth, mainly due to the KarstadtQuelle contract. In the rest of EMEA, growth in Italy and Spain confirmed an encouraging trend, but in the Middle East revenues are still affected by political instability in the region. Activity in the Nordic region decreased during the divestment phase.
After disposing of more than 50% of the business in the Americas in mid-2004, the remaining activity is now healthy and growing once again and recorded a year-on-year organic increase of 2.7% in the first half. The Asia-Pacific region recorded strong organic growth of 11.7% in the first half of 2005.
In 2004, Atos Origin established a Key Account program that comprises 30 major clients, representing more than 50% of total revenues in the first half of 2005. With the addition of a further 70 clients, the Group has established a go-to-market strategy focused on 100 clients globally, which drives organic growth, and from whom the Group currently derives nearly 70% of total revenues. Atos Origin believes there is potential to do substantially more business with this core group of clients in future.
New orders during the first half
The successful reorganization of the commercial strategy began delivering results in the second half of 2004. In the first half of 2005, the book-to-bill ratio reached 139%, including the substantial renewal of the contract with the Department for Work and Pensions in the United Kingdom over the next 7 years, and the significant contracts signed with Renault and LCH-Clearnet.
Atos Origin, as the Worldwide Information Technology Partner of the International Olympic Committee (IOC), also signed on July 1st, 2005 a contract extension with the IOC to become the Information technology systems integrator for the 2010 Olympic Winter Games in Vancouver, Canada, and the 2012 Olympic Summer Games in London, United Kingdom.
On July 13th, 2005 Royal Philips Electronics sold 10.3 million shares in Atos Origin (15.4% of the common stock) to Citigroup in a block deal. Citigroup immediately sold those shares on to a wide range of investors. Following this transaction, the free float of the Company’s shares is now almost 100%.
The commercial relationship with Philips remains very good and Atos Origin is one of the leading IT strategic partners of Philips. Philips remains one of our largest customers, representing less than 5% of total sales. The Group has many contracts and service level agreements with Philips maturing at different dates, of which 60% relate to Managed Operations business.
In May 2005, Atos Origin completed the disposal of its Venezuelan business and at the end of June 2005, Atos Origin finalized the sale of its Nordic operations to WM-data. Atos Origin and WM-data have entered into an alliance agreement to provide extended support for each other’s clients in heir respective geographic domains.
In 2004, the Group disposed of businesses with annual revenues of just over EUR 200 million and the Nordic disposal represents a significant further step in completing the objective to dispose of businesses with annual revenues of up to EUR 500 million. The eight disposals to date had cumulative annual revenues of around EUR 390 million, representing more than 75% of the disposal plan being actioned by the Group. The Group expects the remainder of its disposal program to be completed in 2005.
Creation of Atos Euronext Market Solutions
Atos Origin today announced a major expansion of AtosEuronext, its partnership venture with Euronext, Europe’s leading cross-border exchange business. The two companies have signed an agreement to form a new company, to which new activities are contributed jointly, including the provision for services to Euronext.liffe in London, thereby creating a leading provider of technology services to capital markets globally. The new extended venture is called Atos Euronext Market Solutions.
Atos Origin has been closely involved in providing development and support services to Euronext for a number of years. In 2000, Atos Origin and Euronext created AtosEuronext, a 50/50 joint venture to manage the IT operations of Euronext in Paris, Amsterdam and Brussels, and to offer capital market services on a global basis. The joint venture has been successful in broadening the base of its services externally and helping Euronext to further improve its cost efficiency. AtosEuronext generated revenues of more than EUR 200 million in 2004.
Building on the successful delivery of AtosEuronext’s strategic objectives, Euronext announced last year that it had entered into discussions with Atos Origin to extend its joint venture relationship, with new contributed assets and a strong focus on capital markets globally.
The New Agreement
An agreement was signed on July 22nd, 2005, under which both parties contribute additional assets and business to the joint venture. The major contributed assets from Euronext are the operations of LIFFE Market Solutions (LMS), the IT division of Euronext.liffe, which is the derivatives arm of Euronext (including the successful LIFFE Connect® electronic trading system). The major contributed assets from Atos Origin are market-related businesses, including middle and back office solutions, and its 50% stake in Bourse Connect. No cash is exchanged since the contributions of the parties are equally weighted. The new venture is expected to have annual revenues of more than EUR 350 million at the outset, with services provided directly to Euronext making up less than a half of that total. External clients include a number of international exchanges and clearing houses, and more than twenty banks and brokers.
The expanded joint venture will continue to be owned 50/50 by the parties and will be headed by Jean-Marc Bouhelier, formerly Chief Information Officer of Euronext.Liffe, who will become Chief Executive and Chairman of the Management Board. The venture will operate with a Supervisory Board comprising up to five directors from Atos Origin and up to four from Euronext. Atos Origin will fully consolidate the revenues of the joint venture from July 1st, 2005. For Atos Origin consolidation purposes, the expansion of the partnership will contribute additional revenue of EUR 150 million on a full-year-basis, with Euronext and a range of other clients.
Bernard Bourigeaud, Chairman of the Management Board and Chief Executive of Atos Origin said, "The long-standing trust, cooperation and partnership between Atos Origin and Euronext provides us with an opportunity to build a dominant global business serving capital markets. At the same time, it will enable Euronext to continue to improve its cost efficiency and to further extend its leading market position. I wish everyone at Atos Euronext Market Solutions good fortune in this exciting venture".
Jean-Francois Theodore, Chairman of the Management Board and Chief Executive of Euronext, said, "This extension of our successful partnership with Atos Origin will enable us to realize our vision of building the world’s leading provider of services to global exchanges and clearing houses. In addition, the new operation will keep Euronext at the forefront in the use of technology, and enable us to maximize efficiencies while delivering high levels of service and reliability to our customers".
Outlook for the remainder of 2005
In 2005, the Atos Origin Group will continue to focus on achieving organic growth, ensuring that it executes properly on large contracts and provides its clients with the highest level of service.
Based on the clear recovery in the market, on the steady flow of new orders announced since the beginning of the second half of 2004, on the level of activity in the first half of 2005 and including the expansion of the AtosEuronext partnership in the second half, the Group now expects to be able to achieve organic revenue growth of at least 8% in 2005 on a constant scope and exchange rate basis.
About Atos Origin
Atos Origin is an international information technology services company. Its business is turning client vision into results through the application of consulting, systems integration and managed operations. The company’s annual revenues are more than EUR 5 billion and it employs over 46,000 people in 40 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and has a client base of international blue-chip companies across all sectors.
Atos Origin is quoted on the Paris Eurolist Market and trades as Atos Origin, AtosEuronext, Atos Worldline and Atos Consulting.
Contact for Press:
Marie-Tatiana Collombert, Tel: +33 (0) 1 55 91 26 33
Contact for Investors:
John White, Tel: +33 (0) 1 55 91 26 32
ANALYSIS OF REPORTED REVENUE