Atos S1 2023 Conference Call – 2023-07-28 08:00:20
Hello, and welcome to the Atos H1 2023 Results Conference call.
I would like to hand you Nourdine over now to the conference to the Atos management team. Please go ahead.
Nourdine Bihmane :
Hello. Good morning, everyone.
And thank you for joining us to discuss Atos H1 2023 Results.
I’m Nourdine Bihmane, Group CEO and Co-CEO in charge of Tech Foundation. And today, I’m joined with my colleagues, Diane Galbe, our Group SEVP; Philippe Oliva, Co-CEO in charge of Eviden; and Nathalie Senechault, our CFO In today’s call, I will first share the highlight of the group performance in H1 ’23. Philippe and I will then cover the performance of our two businesses, Tech Foundation and Eviden. After that, Diane will provide an update on our strategic transformation project. Then Nathalie will go through the detail of our financial performance in the first half of this year. And lastly, we will discuss our outlook before going to Q&A So, overall in H1, we have kept our momentum and continued to successfully drive our operational improvement. This ongoing improvement has translated into robust H1 results.
In particular, we experienced solid commercial traction at the group level in Q2 with 112% book-to-bill. This is a significant improvement compared to Q1, which was at 73%. And Evidence is the relevance of the go-to-market strategy that are implemented at both Tech Foundation and Eviden. We also delivered a robust organic revenue growth at 2.3% and brought our operating margin to 3.8%. Consequently, we have revised upwards our full-year outlook for revenue growth and confirmed our operating margin outlook. We will come back to it at the end of the presentation.
Our free cash flow in H1 was minus EUR969 million and should be broadly similar over the full-year. This reflects the high pace of execution of a major transformative action we are carrying out through the year. The margin expansion, including restructuring and tackling legacy underperforming contracts, as well as internal carve-out activities and working capital normalization. We did achieve significant milestone in our transformation project in July. Notably, the separation of our internal operation into two entities and we have fully secured our EUR700 million plus divestment program which we are now expanding by an additional EUR400 million. All of this was completed within a 12 months time frame.
Let’s now turn to Tech Foundation. As you remember, we recently hosted an Analyst Day that provided to the Tech Foundation team an opportunity to shed more light on our business and on the clear value creation plan that we have in front of us. We have redefined our portfolio around core activities in order to address a wider market and focus on a higher growth segment in order to deliver the core revenue grow up to 2% in the next two years and accelerating hereafter. We also highlighted our comprehensive margin expansion expected to deliver EUR1.2 billion in gross benefits by 2026.
That will bring our operating margin to industry standard. And as of today, we have already delivered 32% of this objective. It has been a very rich and productive first year for Tech Foundation. The strong execution of our plan led us to upgrade our midterm ambition, which are detailed at the bottom right of the slide.
Another key aspect highlighted at the event was how AI is already and will continue to enhance all aspects of our business. At Tech Foundation, we are actively embedding several Gen AI platforms to improve our internal and external operations. In our offering, for example, in hybrid cloud, Gen AI will improve the management of IT infrastructure by automated incident triage ticket routing, and problem resolution. Also, Gen AI is a key technology in providing coding assistance to our infrastructure as a code practice.
In digital workplace, too, GenAI is changing the way we deliver our services with more personalized, context-aware experiences, knowledge management, and co-pilot offering readiness. We are developing new Gen AI offering. Altogether, we are already having highly industrialized Gen AI platform available with two new solutions already released, and we are working on a few additional specific partnerships, more to come. Many use cases are bringing benefits, not only in our sales function for crafting proposal, but also launching automated bid and RFP, response generation, or in procurement with supplier assessment. Overall, Tech Foundation is fully embracing generative AI AI technology in our offering, in our operation for our customers, and for our internal efficiencies. Turning back to our H1 result and starting with book-to-bill.
Book-to-bill in Q2 was 106% compared to 67% in Q2 last year. We exceed the 100% mark for the first time since the Tech Foundation business line was created.
This is quite an achievement, and our refocused go-to-market strategy is clearly showing some tangible results. We improved the upselling on our top 100 account and successfully drove revenue retention with major long-term renewal in Q2. Commercial traction improved, in particular in the US., where we needed the most to rebuild sales teams and commercial pipeline, which we are doing, and it is starting paying off.
Throughout Q2, we won several high-profile contracts, including a leading entertainment company based in the US., where we extended for five-year digital workplace contract and network operation. We are talking about a significant contract value with more than 80,000 clients with highly automated resolution. We renewed also a contract with Texas Department of Information and Resources, where our private cloud and mainframe-as-a-services model delivers adaptive, resilient, cost-effective, and secure services to over 35 state agencies.
Another one, with Honda, we renewed for three-year contract to continue their modernization and delivery of their digital workplace services for more than 3,500 associates. And lastly, we won a contract extension with the European Commission did it after 15 years of successful collaboration to accelerate their IT transformation project. And I would take a moment here to thank all our customers for the deep relationship we have been able to keep and maintain and grow during the years. If we move to the next slide, Tech Foundation generated revenue of EUR2.9 billion in H1.
The core business was stable as the decline of hybrid cloud and infrastructure continued to soften while digital workplace and technology advisory posted a moderated growth. In parallel, we kept reducing our non-core activities, which I remind BPO and all the hardware and software we sell as part of our portfolio reshaping strategy. As a result, we posted a managed organic decrease of minus 1.6% in total revenue for H1 ’23. As discussed during our Analyst Day, we are making steady progress on margin expansion plan targeting our EUR1.2 billion in gross benefit by ’26.
As of June ’23, 32% of this target has already been achieved compared with 21% at the end of March, meaning that we had a very productive Q2 with an additional EUR120 million gross run rate benefit delivered, partially offsetting by cost inflation and backfilling on the impact of the revenue decrease. This achievement was primarily driven by headcount reduction in high-cost countries, 900 headcount in total during H1, and the continuous focus on addressing underperforming accounts, which accounted for 8% of our H1 revenue versus 9% last year. This concludes the conclude the Tech Foundation section. And I will now pass it to Philippe.
Philippe Oliva :
Thanks, Nourdine. And good morning, everyone. So like Tech Foundation, Eviden and another robust first half. Strategically, we are continue to expand our unique software capabilities around data and our technology capabilities, as well as cementing the deep industry expertise that we have, and which is enhanced by an efficient delivery model and a strong IP portfolio.
In H1, we opened three new cloud centers in India and in Eastern Europe that reinforce our end-to-end cloud offerings from engineering, application migration to operation, and obviously improving the efficiency and competitiveness of our delivery capabilities. We also launched very significant capabilities that we’re calling AIsaac Cyber Mesh. It’s a cutting-edge cybersecurity detection and response solution powered by generative AI technologies and that we deployed in partnership with AWS We also opened a new campus and leading research and development center in Grenoble in France with the capacity of 1300 people bringing expertise in artificial intelligence, decarbonization and obviously our high performance computing capabilities. Lastly, we are getting our digital identity solution ready for what is called on the market the post quantum era.
Notably our Eviden leading products on identity management or encryption will evolve to be adapted to quantum threats by the end of this year and that’s an announcement that you’ve seen a couple of weeks ago. AI is a domain that we’ve been working for years. As you know, we already drive solution in infrastructure with our advanced computing solution where we have specific high-performance computing with AI application on-premise or in the cloud for large research center, healthcare and other application domain like climate change monitoring. Of course, GenAI is a fantastic opportunity on the market and also for us and we’re embracing it.
So, what is the GenAI offerings we are building? We are currently building offerings to help our customers fully leverage GenAI from application to orchestration capabilities, new business models and obviously, impact on the infrastructures. This also includes a very practical way and pragmatic capabilities on how to run it out in a corporate environment. That means tackling the regulatory and compliance, making sure that the data sets that we are using are highly secured and obviously ensuring the highest level of data encryption and security on those environments. This includes local solution and infrastructure, from supercomputers to the edge, as many customers want to leverage an AI in a private, sovereign, and high-end secured environment.
In Europe, we are the unique player to be able to provide those kind of capability, and that’s really something that we are continuously insisting on, related to the fact that we are the [ph] sole unique remaining hardware manufacturer in Europe. Our solution in the cloud, notably with our key partners, Microsoft OpenAI, Google Cloud, and AWS, we are already supporting world-leading customers in this domain, and with a specific reference that is currently live for patient data management in the US We need to use — industry use cases, so we know that we are actively developing on the market many, many any use cases related to products like personalization, knowledge management, patient assistance, or risk assessment and secure development capabilities and improvements. What we’re doing differently is that we are already deploying internally what we call our coding acceleration and developer assistance solution to also drastically improve our cost-based effectiveness and obviously our time to market to ensure, let’s say, a fast deployment of new applications to our clients. And of course, we are working to apply GenAI to ourselves.
So internally, we say we are drinking our own champagne. We are driving GenAI projects in consulting ourselves, in marketing development, in obviously application development, but also in a knowledge-based model that we’re calling GenI That is basically the capitalization of all the IP that we’re creating internally to ensure fast understanding and rollout of our co-innovative solution. We all know that Gen AI is a revolution. We all have to leverage it, but what is putting us in a unique position in Europe, it’s really related to our first dealing with 8,000 data experts and our unmatched number of key patterns, such as our 260 patterns in cognitive solution, that means artificial intelligence, machine learning, and also our 100,000 patterns in advanced computing and more.
Now, let’s go back to our H1 performance and starting with the book-to-bill one more time. Our commercial momentum remain really, really strong in Q2 with the 119 book-to-bill, well-balanced between it all and our big data and our cybersecurity, our business. We maintain our focus on what we’re calling short-term signings, that means ensuring that our or backlog is really well positioned to extract a fast revenue yield capability. Interestingly, our [ph] underentry reflect the unique differentiating factors that set dividend apart.
A highly synergetic portfolio. We won, as an example, a very large contract with Atlantic Coca-Cola Bottling Company to provide both application modernization, public cloud migration, data analytics, AI and machine learning, and everything protected with our cybersecurity portfolio. We also announced and demonstrating our leadership in HPC We won our first major HPC contract outside of Europe with the Indian Ministry of Earth and Science for climate change monitoring. So it’s really, really something that we can be proud of because that drastically changing the way our innovation is recognized on a global basis.
[ph] Sovereign cloud offerings, we won a contract with the to the European Engineering and Technology Company to deliver first of its kind AI as a service through Eviden Nimbix portal, which is a key to the sovereignty cloud strategy and the blueprint for further AI offerings development. We then also demonstrate our expertise in selected industry, which is allowing clients to really recognize our differentiated capability in very diverse sectors, including energy, utilities, healthcare, where we recently won a major US companies to provide public cloud migration to Microsoft Azure, combining application development and cybersecurity. Now, let’s look at our revenue and operating margin. Eviden delivered strong organic revenue growth at 7% in H1.
Growth was strong in both cybersecurity and advanced computing, as well as digital and cloud business lines. Organic growth improved significantly compared to the same period last year, driven by smart platform and cloud transformational services, along with very positive trends in the public sector and military and activity in Europe. Our growth in Q2 is optically lower than what we deliver in Q1. This is a reflect of a higher comparison basis, plus 270 basis points higher than in Q1, and fewer networking days in Q2.
But our underlying business trends in Q2 remain as solid as what we delivered in Q1. Evidence operating margin was 5.3%, a substantial increase compared to 3.5% in H1 2022. Despite continued cost inflation, we demonstrated improvement across all activities, resulting from effective cost take-out actions, portfolio rationalization, and higher cost of absorption in our advanced computing and manufacturing capabilities. With that, I now turn it over to Diane.
Diane Galbe, Senior Executive Vice President:
Thank you, Philippe. And good morning, everyone. So, as Nourdine mentioned in the highlights, H1 2023 was marked by significant milestones achieved in our transformation. One of the main achievements was the completion of our internal operation carve-out.
This is a decisive step in the execution of Atos transformation. We achieved this in the 12-month timeframe. As we announced to you back in the Q1 results, we are now in a position to confirm that we completed in July as planned all local carve-outs and underlying separation activities, covering more than 99% of the group’s revenue. As a result, The result, Tech Foundations and Eviden are fully operational as separate entities within the wider Atos Group.
It means that we have now delivered, thanks to the great engagement of our teams, our customers and our suppliers, the operationalization of the local legal entities in all geographies, the transfer of our employees, contracts, assets, to name a few, is now completed. Tech Foundations and Eviden have now a distinct operating model, a go-to-market strategy and a focused portfolio.
The internal separation is now done. Atos has therefore completed the rollout of its new client-centric organization and can now focus on innovation and performance improvements with consistent value delivery.
The other significant achievement of Q2 was the fact that we fully secured our non-core business divestment program set during the group’s capital market day back in June 2022. The six transactions featured on this Slide, 4 of which are already completed, were carried out efficiently and at good financial conditions for the group. This demonstrates our ability to execute swiftly as well as the attractiveness of our assets. The results are a more streamlined portfolio for both Tech Foundation and Eviden, and over EUR700 million of total proceeds secured, which contribute to the financing of our transformation.
Building on this success, we plan to expand our divestment program, targeting an additional EUR400 million in proceeds that will enhance our financial flexibility. When we devised on our program a year ago and as we refined the scope of the two entities, we identified additional opportunities to rationalize the portfolio of both groups and some of them have already received expressions of interest. We will of course keep you updated on our progress as we move forward. Turning now to headcount evolution.
At the end of June 2023 total headcount was 107,000 people down minus 3.4% compared to end of December 2022 and down minus 1.9% excluding the impact of divestments. In H1 Atos welcomed more than 8,400 new employees. Our hiring is is selective this year and our ability to attract the right talents across the world is very good. The job market as is highly competitive particularly in cyber security, cloud or data sciences but the technology and image of Atos recognized by the great place to work certification enable us to onboard as many talents as required by the business.
Another highlight is our voluntary attrition. It remains low at 15% in Q2 which is slightly lower than the industry standard. This is another evidence of the high level of employee satisfaction and commitment at Atos. The reduction in group headcount during H1 primarily resulted from intensified restructuring as part of our ongoing transformative actions as well as performance-related terminations resulting in a total of 2,404 2,404 exits.
Now, I turn the mic to Nathalie. Thank you.
Nathalie Sénéchault :
Thank you, Diane, and good morning, everyone. If we take a broad view on Atos’ financial position, the group has made notable progress during the past six months.
Revenue was EUR5.5 billion, broadly stable year-on-year with a robust organic growth offset by disbursement and foreign exchange. Operating margin was EUR212 million or 3.8% of revenue, more than tripled compared to H1 2022. OMDA was up by 32% to EUR487 million or 8.8% of revenue. Normalized net income, excluding exceptional items, was minus EUR113 million, broadly stable year-on-year, and reported net income came out at minus EUR600 million.
I will detail that later in the presentation. In terms of cash generation, we did improve our underlying cash flow from operation in H1 2023, as you will see, and this was offset by the ramp-up of transformative actions and associated costs, as we are executing at a high pace on all fronts this year on restructuring, internal carve-outs, tackling underperforming contracts, as well as working capital normalization. As a result, free cash flow was minus EUR969 million in H1. Now, let’s take a deeper dive into each key metrics.
Starting with the evolution in H1. Group revenue was EUR5,548 million in H1 2023, up to 2.3% on an organic basis, a combination of a strong 7% growth at Eviden and a managed decrease of minus 1.6% at Tech Foundation, as Nourdine and Philippe explained. Scope effect was at minus 1.7%, primarily reflecting the divestment of Atos Italian operations, finalized on April 2023, and Russian activities in September ’22. Foreign exchange had a limited impact at minus 0.8%, mainly reflecting the depreciation of the Pound Sterling against the Euro over the period.
Turning now to our operating margin on Slide 22. Atos operating margin was EUR212 million in H1 or 3.8% of the revenue. Meaning that we triple, in fact we multiply by 3.5x our operating margin between H1 ’22 and H1 ’23. This is the combination of strong improvements at both Tech Foundation and Eviden, as Nourdine and Philippe highlighted earlier.
Tech Foundation with a steady delivery on our margin expansion plan that generated a EUR230 million of growth increment in operating margin year-on-year, offset by cost inflation, backfield and the impact of lower revenue. Eviden reaping the benefit of cost take-out actions, notably on staff costs and portfolio rationalization as well as a better fixed cost absorption in advanced computing, thanks to higher revenue. Moving now to our income statement from operating margin to net income, the main items to highlight are as follows. Reorganization, rationalization, and integration costs amounted to minus EUR464 million in H1.
These are costs associated with Atos’ transformation plan. This high amount reflects a significant accrual for a new restructuring plan in Germany, Tech Foundation, where we have provisioned the whole plan that will be executed over time. Second, restructuring costs incurred in the period in other countries, and finally, costs associated with the internal carve-out that was successfully completed at the end of H1. Therefore, RRI costs should logically be much lower in H2.
Other items for minus EUR53 million include legal costs and impact of vendor contract renegotiation. Lastly, net financial expense at minus EUR103 million, these are lower than H1 last year numbers, which included a loss of minus EUR109 million relating to the disposal of our Worldline shares, which I will remind you generated EUR290 million of net profit for the group. Cost of debt was minus EUR40 million, increasing compared to minus EUR30 million in H2 ’22, as we have now drawn most of our bank facilities Moving now to H1 cash flow statement from top to bottom. OMDA improved by circa EUR120 million, reflecting the strong recovery of our operating margin. CapEx and leases were strictly controlled and reduced by circa EUR40 million.
Change in working cap was minus EUR645 million. On top of our usual seasonality pattern, whereby we have a significant outflow in H1 and inflow in H2, we had a one-off impact of working capital normalization for approximately EUR250 million in the context of the group transformation. That was anticipated, if you remember, back in June 2022, at the group Capital Market Day. These impacts relate to factoring, which we, — to factoring which we reduce and trade creditors. Adjusted for this normalization impact of cash flow from operation was minus EUR200 million which represents EUR144 million improvement year-on-year reflecting a better underlying of our operational cash generation, thanks to better OMDA and a strict control on CapEx and leases.
Cash (inaudible) amounted to minus EUR274 million in H1 ’23 corresponding to transformation cost linked to restructuring and carve-out execution. Lastly, other changes for minus EUR165 million relate to losses on legacy contracts that were provisioned at the end of ’21 and ’22. this leads us to a free cash flow of minus EUR969 million in H1 2023. H2 should, of course, be much better, as Nourdine would explain. If we compare our H1 free cash flow to that of last year, which was at minus EUR555 million, the difference comes from, first, working capital normalization impact for circa EUR250 million, the plan increase in RRI, which reflects the ramp-up of our transformation actions, higher interest and tax, and the other item which I just described. These four items offset the EUR144 million underlying improvement in our cash from operations.
operations. Looking now at the group net debt, in addition to the free cash flow of the period, we received proceeds from disposal for EUR218 million. This is mainly our Italian operations that we sold to Lutech. The transaction was closed in April. Including FX and other items, net debt increased to EUR2.3 million. This amount is a net of EUR2.6 billion gross cash and EUR4.9 billion in gross debt. In addition, we had, at the end of June, over EUR3 billion of own loan bank credit facilities. With that, I will turn it over to Nourdine to discuss our outlook.
Nourdine Bihmane :
Thank you, Nathalie. So, as I mentioned in the introduction our performance in H1 has reinforced our confidence in our business. Based on the revenue growth delivered so far, and on the visibility that we have for the second half of the year, we are upgrading our revenue growth outlook. We now expect to grow organically between 0% and 2%, compared to our previous expectation between minus 1 to plus 1.
The dynamics remain the same, with an acceleration of Eviden organic growth compared to ’22, and a continued managed reduction of Tech Foundation revenue resulting from the portfolio reshaping, while our core business is fully stabilized. As for the group operating margin, our outlook remains unchanged at 4% to 5%. Eviden operating margin is expecting to increase compared to ’22, while Tech Foundation operating margin is expecting to stay in positive territories. In terms of cash flow, while the minus 969 were a pretty significant drop, I want to remind everybody that it was aligned with what we mentioned in the capital market day last year, knowing that we were going to accelerate the restructuring and the cost of separation, and as well transforming or normalizing our working caps.
So for H2, we will be broadly breakeven, like Nathalie mentioned, including the underlying operational improvement. So for the full year, we will be broadly in line with what we delivered in H1. Before going into Q&A, I want to thank all our employees. It has been a year since we embarked on this ambitious transformation process, and their dedication so far has been extraordinary.
This concludes our presentation. We will now take your questions.
The first question comes from Frederic Boulan of Bank of America. Frederic, your line is open. Please go ahead.
Hi. Good morning. A couple of questions, please. First of all, on your leverage, so net debt is now EUR2.3 billion.
How do you see net debt finishing the year, considering your commentary on the H2 free cash flow break-even? Any disposal in there or other items? And
then if you can share details at this stage on how you envisage the gap structure of the two units. Second, if you can comment on the spin-off, any next steps in terms of Bondholder Agreements, et cetera, that we should look for, any comment you can give us on that. And then if I may run Eviden, if you can give us a bit of color on trends, we’ve seen a lot of slowdown across the industry from your competitors. If you can comment a little bit on what to expect for H2 and how you see the group performing versus your 7% target you presented for the business.
Nathalie Sénéchault :
Hello. So on your first question on the leverage, as you rightly pointed out, we have now a net debt of EUR2.3 billion. We anticipate a free cash flow, as we mentioned, for H2 break-even.
We also anticipate some from proceeds from our disposals. So overall, based on this, we have sufficient headroom in terms of our banking covenants. On your second question, the capital structure of both entities, we are currently working on it. And we will give more information closer to the execution of the separation.
On the third question, Philippe.
Philippe Oliva :
Yes, so on evidence side, so first in terms of trends, what we are seeing clearly here is a very strong dynamic on our cybersecurity and advanced computing business. We are still outperforming the forming the market in terms of cybersecurity penetration. And it’s mainly related to the application of artificial intelligence in our portfolio.
Our managed detection and responses are really successful on the market. On the digital side, despite the macroeconomical environments, we are remaining confident on the trajectory that we’ve defined in terms of revenue generation in H2. So I’m not seeing any risk related to the trend that we were expecting. So that is mainly related to the fact that we’re also drastically, you probably remember we said clearly that we were stopping running after everything that is active on the market and really capitalizing on our cost trends, especially around, let’s say, the rise of sovereignty requirements and the global deployment of our end-to-end solution from the company imports down to, let’s say, a cloud migration and cloud operations.
So that’s the global situation. So no specific alarm sign related to the macroeconomical environments. I’m really confident on the fact that we are keeping our trajectory in terms of our CMD trend that we presented a year ago.
Your next question comes from Alexandre Faure at BNP Paribas Exane.
Alexandre, your line is open. Please go ahead.
Good morning. Thank you for letting me on.
And congratulations on finalizing the carve out up to time. I’ve got mostly housekeeping questions, I’m afraid. Firstly, on reorganization and rationalization integration costs, about half a billion in H1, and you talked about having booked the entire costs up front for the German restructuring.
Does it mean that RRI cost will be minimal in H2, and that in 2024 they might be lower than the EUR400 million you initially outlined at the June 2022 CMD?
The second point is on provisions.
I think there was about EUR750 million of those at the end of 2022. Am I right to think that this actually went up in H1, and also should we expect all of those provisions to have a cash impact, and could you share a timeline there? My next question, again apologies it’s a long list, you had EUR250 million of cash out out around working cap normalization, I think you called In June ’22, you talked about EUR400 million of potential impact from working cap normalization. So, do you think there’s a remainder that still needs to come through, or you reckon you’re done and it’s actually a smaller amount than you anticipated? Also wondering on what’s the rest of the working cap outflow in H1, the EUR400 million that remains. And lastly, could you share the amount of receivable factoring as it stood at the end of June 2023? And I’m finally done.
Thank you very much.
Nathalie Sénéchault :
So, I’ll start on the first point of your questions. So, on transformation cost, H2 will be much more limited than H1, in terms of P&L, you understand that ’23 in for Atos and for the transformation program is very, very strong here, where we have all our restructuring plans, our carve-outs, so very strong here. We have a big H1, which clearly in terms of P&L will be much lower in H1 in terms of P&L On the cash impact or linear, so H2 will be similar to H1 in terms of transformation cash out.
All-in-all, we expect roughly EUR500 million of transformation cost for the full year, both in terms of P&L and cash impact.
And more broadly when it comes to the whole provision amount at the end of 2022, so you’re sort of helping with 2023, I’m just wondering when the rest of it will start impacting the cash flow statement as well?
Nathalie Sénéchault :
Yes. So, the provision will be disclosed in our account that will be published later, early in August. Cash impact was approximately EUR90 million in 2022.
This will possibly be higher this year, as we are addressing our legacy contract. and our free cash flow guidance for this year include the same amount of cash flow of provision, same amount as 2022.
Okay. And on working capital normalization and so you had EUR250 million in H1, do you think you’ll still get to EUR400 million of cash out related to working capital normalization?
Nathalie Sénéchault :
Yes. So, you remember back in the June ’22, The Capital Markets Day we announced that we may have EUR400 million of working cap normalization. We have it for EUR250 million this first semester and the best of our estimate for the full year is that we would reach EUR400 million.
Nourdine Bihmane :
Understood. And maybe just to complement on Nathalie here, we are splitting the businesses and as we announced last year, we will and we anticipated to normalize the two working cap of the two future both companies. So it is really part of the plan we designed and we are exactly executing what we mentioned last year.
Right, yeah. This is helpful. Thank you.
And very lastly, when it comes to receivables factoring, I know it will show in the bigger report in a few days, but if you could share where we spend the ideas could be.
Nathalie Sénéchault :
Yes, the amount is EUR715 million.
Nathalie Sénéchault :
Please stand by for your next question. Your next question comes from Lauren Daure at Kepler Cheuvreux.
Lauren, your line is open. Please go ahead.
Yes. Thank you.
Good morning, ladies and gentlemen. So, I only have three questions. The first one is on the trajectory, if you could be a bit more precise, on the growth you are now generating in cyber and HPC Are you going double-digit organic My second question, I would like to come back on this working cap normalization. I mean, it’s not only reimbursing factoring, it’s more than that.
And do you plan to reduce over time the non-recourse factoring to zero? Or do you want to keep some factoring in your balance sheet? And the third point is if we take the end of the first half, what I really need to have to model the coming years is from mid-2023 to let’s say 2026, how much restructuring charge and maybe provisions for loss-making accounts are still to come. And same for the cash. How much cash outflow do the companies still need to spend over the next 2.5 years. Thank you.
Philippe Oliva :
Hello, Laurent. It’s Philippe. So I start with the trajectory and I know that you are really impatient let’s say to get more breakdown in terms of financial figures between the different business lines of Eviden. As I said, let’s say in the course of Q1 and I mentioned that quite rapidly in the running calls today, we are outperforming the market on both the HPC dynamic and the cybersecurity.
So it remains very strong revenue growth we are still seeing the same trend in H2 back-end loaded in terms of operating margin improvement also as well as the same profile than what we had in the H2 H2 or 2022, so still some effort to provide in terms of operating margin later improvement, but quite confident, especially as I said, on the revenue growth trend for H2.
Nathalie Sénéchault :
So, Laurent, on your question on factoring, on working cap normalization, so we have EUR250 million of working cap normalization, out of which EUR100 on factoring and the rest on supplier side. On your question whether we will maintain the level of factoring, the idea is to keep beside this amount of working cap normalization, a level of recurrence factoring.
At the same level as today, 7.15, or do you plan to push it down?
Nathalie Sénéchault :
It’s difficult to say right now exactly, but it should be around this number.
Okay. So, it’s really a day-to-day working cap Because it’s — I mean, the reason why your share has gone down so much today is, in fact, you already — you were supposed to have cleaned a large part of the working cap 18 months ago. I remember, there was already a big impact. So does it mean that the working cap was massively optimized two or three years back, massively? Is it the case then? The fact is that we have anticipated a normalization of EUR400 back in June, and we see a normalization of EUR250 million in H1 that at the end of the year, our best estimate is that we will have EUR400 million.
Nourdine Bihmane :
I think just to step in, we cannot really comment on two or three years ago.
I think, Laurent, you want to understand, but anyhow, at the initial of our project, we decided to normalize the working cap. We cleared it by mentioning that we will do EUR400 million before the end or before the final split. We already achieved 260, I think a little bit more to come, and that’s really the product of the entire transformation project that we launched.
So maybe with that last sentence, thank you, everybody, and I will propose we stop here and I wish all of you a nice holiday and talk to you back in September. Thank you.
This concludes today’s conference call. Thank you for participating.