PARIS – 8 March 2006 -
Atos Origin, a leading international information technology services provider, today announced audited results for the year ended 31 December 2005.
* Group revenues were EUR 5,459 million, representing organic growth of 8%
* Operating margin increased organically by 14% (7.6% margin)
* Net income (Group share) was EUR 235 million (2004 - EUR 113 million)
* Basic earnings per share were EUR 3.50, an accretion of 104%
* Net debt fell to EUR 180 million at 31/12/05 (EUR 492 million at 31/12/04)
FINANCIAL PERFORMANCE IN 2005
(in EUR million) 2005 2004 % Change
Revenue 5,459 5,249 +4%
Operating margin 413.0 383.3 +8%
% of revenue 7.6% 7.3%
Operating income 387.8 220.2 +76%
% of revenue 7.1% 4.2%
Net income (Group share) 235.4 113.3 +108%
% of revenue 4.3% 2.2%
Earnings per share (EPS)
Basic EPS (a) 3.50 1.72 +104%
Diluted EPS (b) 3.48 1.71 +104%
(a) In euros, based on a weighted average number of shares
(b) In euros, based on a diluted weighted average number of shares
Extract from the Chief Executive’s review of 2005:
2005 was a year of consolidation for Atos Origin after the acquisition and integration of Sema Group in 2004. We said at the start of the year that we would focus on organic growth and that is precisely what we did, increasing global market share and achieving all of our financial targets.
The main commercial highlights of the year were the expansion of our business in Germany, the signing of contract extension agreements with Philips and the International Olympic Committee, the capture of a ground-breaking contract with Renault, the renewal of our major BPO contract with the UK Department of Works and Pensions and the extension of our partnership with Euronext. There have been many other successes that stem directly from the acquisition of Sema and the restructuring of our commercial operations during 2004 and thirteen of our key clients now generate annual revenues of more than EUR 100 million.
The development of our German business is particularly satisfying. Capturing a major contract with KarstadtQuelle in late 2004 provided the catalyst and we subsequently won contracts with E-Plus and Premiere that enabled us nearly to double revenues in Germany and Central Europe to EUR 562 million in 2005. The Symrise contract in early 2006 extends that successful trend.
We began 2005 targeting organic revenue growth of 5% and increased that figure to 8% in July 2005 after extending our commercial relationship with Euronext, where we have taken over the IT operations of Euronext.Liffe. In November 2005, we advised the market of a risk that we might fall slightly short of that growth target, but in fact trading in the final months of the year was strong and we have reported total revenues of EUR 5,459 million, giving organic growth of exactly 8% for the full year.
In terms of profitability, we saw further benefits from restructuring the business and although some of those were offset by investments in our global organisation and start-up costs on several new contracts, we managed to increase operating profit to 7.6%. The fact that profitability was towards the lower end of our guidance range was due mainly to the one-time effect of lower than expected profitability in a number of non-core businesses, most of which have now been divested.
When we acquired Sema, we announced that we intended to sell businesses with annualised revenues of approximately EUR 500 million, most of which were in geographically or commercially non-core areas. By June 2005, we had disposed of businesses with annual revenues of EUR 410 million, including the US Cellnet business and our Nordic operations. The disposal of our Middle East operations in February 2006 effectively completed that programme. However, we will continue to monitor the future of small sub-scale businesses that are not sufficiently profitable.
In cash terms we reduced net debt below the target level of EUR 200 million, reaching EUR 180 million at 31 December 2005. This means that over the course of the two years since acquiring Sema Group in January 2004, the cash proceeds from disposals have been reinvested in developing the Group’s commercial activities, including new outsourcing contracts, in core countries. At the same time, the cash cost of the Sema acquisition and the subsequent cash cost of integrating and restructuring the enlarged business, has been fully funded by the direct operational cash flow from the Group. At the end of 2005, net debt was well below the EUR 266 million level that existed at 31 December 2003, immediately before the Sema Group acquisition.
In 2006, in addition to our continuing commitment to expand market share in Europe, we intend to accelerate the development of business and resources in China and India. We also intend to focus more specifically on developing several commercial activities, including our payments business Atos Worldline, Atos Euronext Market Solutions (AEMS) and our BPO Healthcare practice, all three of which are within Managed Operations. Atos Worldline and AEMS each have annualised revenues of around EUR 350 million going forward, above group average profitability and significant growth prospects.
Atos Worldline is a long-standing core business of the Group, founded back in 1972. It provides payment card issuing and transaction settlement services, secure internet payment services and customer relationship management, including loyalty card schemes. We believe that the introduction in 2007/08 of SEPA, the Standard European Payments Area, will encourage a number of European payments organisations to divest or outsource their activities to third party providers such as Atos Origin, who are able to provide a more efficient service at much lower cost by combining resources and building scale operations. Atos Origin already has a very strong presence in France and Germany and is intent on extending its services throughout the other major markets in Europe and into fast-growing markets such as China.
In July 2005 our long-standing joint venture relationship with Euronext was expanded through the creation of Atos Euronext Market Solutions (AEMS). Atos Origin and Euronext have pooled their knowledge, intellectual property and support resources to create a business that is at the forefront in providing IT services to capital markets worldwide, including cash, derivates and clearing operations for banks and brokers. Trading off a strong base of experience in Europe, AEMS has already sold its solutions to more than 15 stock markets worldwide, as well as to influential organisations such as the Chicago Board of Trade and Liffe. I believe that there will be substantial consolidation of exchange activities in the coming years, not just in Europe, but also globally. AEMS is well positioned to capture a major share of that market.
In 2005, we renewed our major healthcare BPO contract with the Department of Work and Pensions in the UK, which will be worth at least EUR 750 million over the next seven years and provides a strong base for developing our primary healthcare practice. We view the delivery of primary healthcare as a market in which there will be enormous growth in the coming years and huge opportunities for Atos Origin. We are already involved in serving public sector departments in the United Kingdom, which is at the forefront of developments in the sector. Our experience in providing services both to the UK National Health Service and to the UK Department of Work and Pensions will, we believe, provide reference points and benchmarks for similar developments in the rest of Europe in the coming years.
Our strategy is constant and unchanging. The Group provides an integrated set of services – Consulting, Systems Integration and Managed Operations – to a base of large multinational clients in specifically targeted industry segments. Business consulting is at the heart of relationships with our clients and the main driver of new business. Systems Integration is increasingly focussed on providing high-end technology solutions and Managed Operations is the focal point for long-term relationships with clients. We believe that this is the most productive way of developing business today.
Our ambition in the short-medium term is to become the leading IT Services provider within Europe, which requires that we build a top 3 position in each of the major European IT spending markets, through a combination of organic growth and acquisition. We have also started to build solid foundations for our business in Asia Pacific, most notably in China and India, where regional revenues grew by more than 12% in 2005. China is the focal point for the development of our commercial activities in that region and our contract to run the IT systems for the Olympic Games in Beijing in 2008 will provide an important platform for promoting our services. India is our primary centre for offshore support globally.
It remains important that we have global reach in the Americas and our refocused operations in North America and Brazil are once again growing. We will continue to strengthen that base of operations organically, while at the same time being conscious of the need to maintain profitability.
Trading outlook for 2006
A number of contradictory indicators were published at the start of 2006, but in our view the European market for IT services is growing consistently at an underlying base annual rate of around 4% in the current cycle. Atos Origin’s organic revenue growth is expected to be in the order of 5% in 2006 on the basis of the current order book and pipeline prospects.
We are targeting a further improvement in our operating margin, based on the ramp-up of margins on new long-term contracts, further organisational efficiency improvements in the business, including the disposal of some remaining non-core businesses, and by offering high-end technology solutions while at the same time moving away from commoditised areas of activity.
We enter 2006 with a Group where restructuring from the Sema acquisition is complete and the underlying cash generative qualities of the business are sound. Our aim in 2006 is to generate strong operating cash flow, which will place us in an excellent position to develop the business further.
Olympic games in Torino
In February 2006, Atos Origin managed the IT systems for the Torino 2006 Olympic Winter Games. As in Athens 2004, our systems performed perfectly to specification in the face of unscheduled disruptions and constant security attacks that international events of this kind attract. Many of our clients visited the Games and saw for themselves the rigorous procedures and processes that we brought to bear to achieve that success. It is an event where performance has to be at the highest level and on time to the second. There are no second chances at the Olympics.
Chairman of the Management Board and Chief Executive Officer
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 EUR 5.5 billion and it employs over 47,000 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, Atos Euronext Market Solutions, Atos Worldline and Atos Consulting.