Atos SE - FR0000051732

Financial Performance and Key Metrics

Atos' financial performance in 2024 was marked by a significant decline in both Eviden and Tech Foundation segments, down 6.7% and 4.1%, respectively. The group operating margin of 2.1% reflected one-time costs, including €103 million for restructuring and €40 million in provisions, as well as weaker utilization. Management noted that the attrition rate stabilized at 15%, with 92% retention of key employees, signaling some stability amid restructuring efforts. The company also reported a negative free cash flow of €2.2 billion, driven by higher capital expenditures and the reversal of prior working capital optimizations.

Regional Performance and Strategic Initiatives

Regional performance was uneven, with North America (-12%) and the U.K. (-10%) underperforming, while Benelux/Nordics (+5%) and growing markets (+7%) showed relative strength. The company has implemented working capital optimization actions totaling €1.4-1.5 billion and increased capital expenditures by €0.2 billion, primarily to support high-performance computing (HPC) contracts. Management emphasized that the financial restructuring has positioned the company to prioritize free cash flow generation, targeting positive free cash flow from 2026 and expecting improvement in 2025.

Valuation and Market Sentiment

Atos' valuation metrics reflect investor concerns, with a price-to-book (P/B) ratio of 0.08 and a price-to-sales (P/S) ratio of 0.08, indicating a challenging market sentiment. The negative enterprise value to EBITDA (EV/EBITDA) ratio of -0.46 underscores the financial restructuring's impact on near-term profitability. Despite these metrics, management remains optimistic about the company's long-term prospects, citing a strong client base, skilled workforce, and strategic focus on cost optimization and growth opportunities in high-margin segments.

Outlook and Management Commentary

Looking ahead, Atos aims to stabilize revenue and restore profitability, with a focus on enhancing sales momentum and controlling costs. Management highlighted that the financial restructuring has significantly reduced leverage, with net debt falling to €275 million post-restructuring, and €2.9 billion of debt equitized. The company's liquidity position, with €1.8 billion in cash and undrawn credit facilities, provides a buffer for operations and strategic initiatives. Management emphasized that 2024 was a year of transition, with restructuring measures setting the stage for future growth. As Philippe Salle, Chief Executive Officer, stated, "We are making progress in reshaping Atos to deliver sustainable value for our customers, employees, and shareholders."

Conclusion and Analyst Outlook

Atos' 2024 results reflect the challenges of restructuring and macroeconomic headwinds, but also signal progress toward financial stability. With a focus on cost optimization, asset disposals, and strategic initiatives, the company is positioned to improve cash flow and profitability in the coming years. Analysts expect modest revenue growth of 0.2% in 2025, suggesting cautious optimism. The upcoming Capital Markets Day in May will provide further clarity on the company's strategy and long-term goals, offering investors a clearer picture of Atos' recovery trajectory.