Transcription réalisée par le blog avec un script python et de l’AI.
Full Fiscal Year 2023 Results conference call.
PAUL SALEH
Thank you for joining us this morning to discuss our full year 2023 results.
On the call with me today is Carlo Odisarro-Biando, our group COO and Jacques-Francois Deprest, our group CFO.
And for the agenda today, I will share some key messages related to our accomplishments in 2023, as well as current strategic initiatives underway.
Carlo will cover in more details our performance bylines of business and regions. And then Jacques-Francois will go over our financial statement for the year.
I’ll come back to you with closing remarks, and then we’ll take your Q&As.
Before we get started, I want to draw your attention to the disclaimer that you’ll find on slide three. [Note blog : c’est la première fois depuis la création des conf call semi-visio qu’un CEO attire l’attention sur le disclaimer…]
And then you see the agenda.
So let me move on to review the year.
Here and you can see from the slide, we delivered group revenue and operating margin results that were in line with our full year guidance. This is my key messages.
Our Eviden business reported continued growth and increased profitability in an environment where we saw a market softness in the Americas and in northern Europe,
particularly during the second half of the year. [This statement is absolutely wrong. 2022/H2 Op Margin was 6.7%, whereas 2023 was 6.3%, it is a net decline of Eviden Business profitability and if Eviden was increasing its profitability why would you had fired Eviden CEO, Philippe Oliva & Poirault the key CEO of BDS. You’re a liar Paul. Eviden profitability is THE BIG problem. Without Syntel OM is 3.2% on Eviden and supposed to be 12% in two years]
For the fiscal 2023 tech foundations executed on this transformation plan, which was based, if you recall, on three pillars, refocus, recover, and rebound. And this has translated into a strong improvement in profitability and increased win rates with existing and new customers.
Free cash flow for the second half of the year was slightly below our guidance, as we stated previously, and that was primarily due to a deal slippage at year end [Enculage de mouches].
For the full year, free cash flow was negative 1.1 billion euros, reflecting higher restructuring, separation, and transformation costs, as well as lower working capital actions compared with the prior year.
Cash at the end of the year was 2.4 billion euros, including the benefit of working capital actions of 1.8 billion.
Last year, our working capital actions were 2.3 billion.
2023 was a pivotal year for ATOS, as we successfully executed on our plan to create two distinct operating units in tech foundations and Eviden.
Each is well positioned to compete and grow in their respective markets. [Sauf que si y’avait pas eu cette putain de scission on aurait économisé 600M€ de McKinsey, banques privées, avocats, duplication des couts, procédures syndicales à n’en plus finir, etc…]
We’re now focusing on leveraging the strength of our business offerings in those two businesses through our coordinated go-to-market strategy.
We are evaluating strategic alternatives following the end of our negotiation with EPEI for the potential sale of tech foundations, and with Airbus for the sale of Eviden BDS business.
Another key message is that we’re in discussions with our banks and bondholders on a refinancing plan that will address our debt maturities.
Those discussions were progressing with the support of an ad hoc mandataire and the CIRI, which is the Commité Interministeriel de Restructation Industrielle of the French Ministry of Finance and Economy.
And now, those discussions are going to be progressing within the framework of an amicable conciliation procedure. [De par sa définition une conciliation est une procédure amiable. Vous en avez si honte que ça pour le répéter 20 fois!]
We’re targeting a global refinancing agreement by July of this year, and we will present the parameters of our proposed refinancing framework to our creditors the week of April 8th, and we will provide an update to the market around that time.
You should know that we have sufficient liquidity to operate our business until the refinancing agreement is reached [mensonge éhonté], and we are working with our financial creditors on an interim financing that will provide additional liquidity cushion for us. [pourquoi tu as besoin d’un financement additionnel transitoire si tu as assez de liquidités. Paul, tu dérailles. Tu dis tout et son contraire dans la même phrase].
And finally, we also receive a favorable decision on TriZetto case earlier this month, vacating entirely the compensatory award.
Now, let me turn to our full-year results.
On this slide, we’re showing our revenue operating margin and free cash flow for fiscal 2022 for reference.
Next to it, you’ll see that guidance for fiscal 2023, and in blue, our results for fiscal 2023.
And as I mentioned earlier, we met our revenue and OM guidance for the year.
Group revenue was 10.693 billion euros, up 0.4% organically year over year.
Operating margin for the group was 467 million euros, or 4.4% of revenue, up 170 basis point compared with the prior year.
Both Eviden and Tech Foundation delivered results in line with guidance and better than the prior year. [Non, totalement faux. TFco a superformé et Eviden a sous-performé avec tant le S1 que le S2 inférieur qu’au S2/2022]
Free cash flow for the group was negative 1.1 billion, roughly, euros slightly below our targets for the year. [Mensonge grossier. Il n’y a pas eu de prévision de Free Cash Flow. Uniquement une prévision de Free Cash Flow pour le S2, vous vous êtes lamentablement gauffré niveau Free cash Flow]
And free cash flow, as I mentioned, for 2023 reflected the higher restructuring separation and transformation costs and lower working capital actions compared with the prior year.
Now, as I mentioned, we have two lines of businesses, both we’re investing to position them to expand their market leadership and bring unmatched value and innovation to our clients.
Eviden is a leading global player providing mission-critical IT services.
Eviden is a 5.1 billion euro business with more than 47,000 employees operating in 45 countries.
The business has strong intellectual property with over 2,100 patents [dont 90% serviront dans 15 à 20 ans lors de l’arrivée des premiers ordinateurs quantiques] and over 50,000 certification in digital, cloud, and next generation technologies, including Gen. AI. 20% of our top 30 clients have relationship with us over 10 years.
And we have an average renewal rate of close to 90%, and we have a very high rate of our revenue generated from existing clients. [Cool. En gros ça veut dire que y’a 10% de taux d’insatisfaction et que vous avez un mal fou à démarcher au delà des clients existants. Mais ça c’est pas nouveau, alors que dans un paquet Bonux l’Usine Nouvelle donnait le titre de manager de l’année à Thierry Breton en 2016, celui-ci expliquait dans une interview toujours de l’Usine Nouvelle qu’Atos ne faisait historiquement que 1% de croissance organique et encore ça c’est les bonnes années.]
When you look at our key offerings in Evident, they range from transformation, acceleration, smart platforms, cloud migration, and operations and sustainability in our digital business.
And for BDS, our offering is in digital security and advanced computing.
Underpinning all of these offerings in Eviden is a key part of our business. [Je rappelle que pour la millième fois si on enlève Syntel qui gonfle artificiellement la MOP, le reste d’Eviden est NON-RENTABLE avec 3.20% de MOP. Vous allez mettre combien de temps à imprimer ça Paul. Faudra attendre la faillite pour que ça imprime ?]
The key strategic priority for the business are modernizing client applications, delivering digital digitization at scale, and providing actionable insight to clients through data analytics and artificial intelligence.
The business is also a leader in digital security, identity management, threat identification, and protection.
And in advanced computing, Evident introduced the first FSKL computer in Europe, and we’re introducing Gen. AI high-performance computing as a service.
Now, all these offerings are well recognized by the industry analyst community, including Gartner, IDC, Average Group, just to name a few.
Turning to Tech Foundation, the business is 5.6 billion euros in size, with more than 48,000 employees in operations in 69 countries. [Ca vous ait jamais venu à l’idée de vous recentrer dans une quarantaine de pays GRAND MAXIMUM. Vous ne vous appelez pas IBM à ce que je sache?]
The business has a proven track record of serving clients with their mission-critical operations.
And the business has a balanced offering and geographic mix.
The average relationship across the top 170 clients is 10 years with a 90% renewal rate and the Net Promoter Score for this business is 20% higher than industry peers.
Tech Foundation is a leading IT infrastructure player with key offerings in hybrid cloud, infrastructure, technology advisory, customized services, business platform, and digital workplaces.
And our key strategic opportunities and priorities actually include in that business is to manage clients’ workloads in a hybrid cloud environment, transform operations powered by AI, focus on next-generation offerings, and aligning talents on post-generative AI opportunities and maintaining our leadership in helping clients in their sustainability and D&I initiatives.
Now, let me turn the call to Carlo, who is going to give you more information on our performance in Fiscal 2023.
Carlo?
CARLO D’ASARO BIONDO, COO
Thank you, Paul, and greetings to everyone.
I’d like to go into more details about operational results for Fiscal 2023.
Revenue at Eviden was 5.1 billion euros last year, with a 2.9% organic growth.
BDS revenue growth reached mixed single digits, driven by digital security and by significant contracts in high-performance computing, in particular in Europe and in India.
With two of the highest-performance computers in the top 10 globally, Cineca and Barcelona, Eviden is now the number one provider of HPC in Europe, India, and South America, and number two worldwide in high-end critical and in-memory computing on-premises or in the cloud.
This technology is absolutely key at a time when GNI opportunities are arising everywhere.
Our digital business line showed strong revenue growth in Europe, driven by demand for specialized application development, application management,
and next-generation products and services.
However, America has shown softness in H2 in big complex projects due to a general market slowdown in the U.S. as clients take longer to reward new business.
Turning now to profitability, our operating margin in Eviden was 2.94 million euros last year, representing 5.8% of revenue and a plus 110 basis points improvement over 2022.
There was also a sequential improvement through 2023 with operating margin reaching 6.3 in the second half.
We are benefiting from cost takeout actions, better utilization of bidable resources, and higher absorption of fixed costs in advanced computing.
While driving growth and profitability, we have continued to invest in our product design, in particular in GNI-related solutions and cloud frameworks.
As an example, we are embedding GNI in our solutions, which is allowing us to deliver greater savings to our clients, and our centers in India are continuing the development of that solution with success.
To go now to book-to-bill in Eviden, our book-to-bill was 94% for the year, with the Q4 landing just at 100%.
On the pipeline development in Eviden, I want to call out a couple of elements.
First one, we are increasing our focus on smaller projects, in order to translate into faster time-to-revenue.
We have been very careful in qualifying opportunities better, and solutioning life’s complex project to reduce the risk of execution.
Having said that, our win rate for large deals has gone up by 10%.
Let me now comment two of our recent wins in Q4.
In Spain, we will implement for Canal de Isabel, a new commercial system in SaaS mode, as well as the associated support and maintenance. [Et la probabilité qu’il soit annulé, combien ?]
This is a 51 million euro contract over four years, for the water distribution in the 6.5 million people living in the Madrid community.
All building, repairs, service requests will be handled by this platform, which will be based on SAP S4 HANA in Microsoft Azure.
The other one I would like to highlight and to bring to your attention, is the very first exascale supercomputer, that will be delivered in Europe by Eviden BDS, to the Eulich Supercomputing Center in Germany.
It is a 500 million euros project, where Eviden will build the first European system able to surpass the threshold of 1 trillion calculations per second. [Sauf que Paul, putain, tu oublies de dire que c’est un consortium et la cote part BDS c’est 213M€ ! Essaie de suivre merde, c’est ta boite pourtant. Pourquoi faut toujours que le blog rectifie tes boulettes. C’est usant]
It is a key milestone to ensure Europe’s scientific excellence and industrial independence.
Jupiter, which is the name of the supercomputer, is designed to tackle the most demanding simulations and compute intensive verification in science and industry.
For instance, human brain digital twins, most critical climatology research, and large AI models training for scientific community.
This system is indeed one of the largest AI training machines in the world, with more than 23,000 GPU interconnected.
And, very important, we will also provide the dedicated data centers through our innovative modular data center architecture MDC, to deliver exascale machines through eco-friendly containers.
Let me now turn out to tech foundation.
Our revenue was 5.6 billion euros, decreasing organically by 1%, sorry, by 1.7%, reflecting the deliberate reduction in non-core activities, including the decrease of hardware and software resales that are low-mining, which were down by 90%.
We have also reshaped our portfolio by disposing of our UCC business in H2.
BPO activities were up year-on-year, but this was due to a one-off layer favorable comparison effect.
Growth in digital workplace and technological services helped to partially offset the structural decline in the on-prem outsourcing.
Tech foundation operating margin reached 172 million in 2023, representing 3.1% of revenue. [Sauf que y’en a une partie qui a été refilée à Eviden pour que Eviden soit pas trop ridicule]
This is a strong improvement of 210 basis points compared to 2022, reflecting the quality of the execution of the transformation program, including the shift of the business portfolio toward higher margin new offerings.
There was also a positive impact from the accelerated reduction in underperforming contracts via renegotiation and improved delivery, better pricing of new business and continued reduction of low margin non-core activities such as resale.
Our operating margin also benefited from the delivery of our workforce adaptation plans, especially in Germany.
While delivering and probably overachieving on our transformation, we have also improved customer satisfaction and delivery quality parameters and developed full next-gen infrastructure offering, allowing to propose multi-cloud and AI-based services to customers who are looking towards those to innovate.
On Book-to-Bill.
While we have successfully managed our top-line evolution, the Book-to-Bill has improved sequentially quarter-on-quarter reaching more than 117% in the fourth quarter, the highest recorded in the last three years, mostly due to a contribution of new services or new logos.
On the full year, Book-to-Bill reached 94% versus 75% in 2022, so significant improvement. [Sauf que au Q1/2024 on est à 15% en descente et vent dans le dos]
The renewal rate higher than 90% testifies to the quality of service that the company provides, while the winds of important new contracts in all our geographies demonstrate the validity of our multi-cloud and integration bridge approach.
Regarding the two four contracts winds, I would like to comment specifically HSS in Australia and LCH in the UK and Ireland.
We were able to win this opportunity thanks to our hybrid cloud infrastructure offering displaying our latest service orchestration layer. This demonstrates how our teams are smoothly integrating new offerings while leveraging some client intimacy to close larger transactions.
I want to take the opportunity to thank them.
Also, our digital workplace division remains very active with strong winds including large global new logos.
Let me now quickly turn to geographies.
Starting with Southern Europe.
Southern Europe revenue was 2.284 million, 2 billion, 2.24 million, up to 3.9 organically.
High single-digit growth in evidence was driven by strong performance in big data and cybersecurity and HPC.
Digital also grew, benefiting from new customers, contract as well as demand for application modernization and decarbonization solutions.
Tech Foundation reported a low single-digit decline and a solid performance with public sector clients was offset by volume reduction in aerospace and transport and logistics sectors.
In the Americas, though, revenues was 2.441 billion, down 7.1% organically, reflecting a general slowdown in market conditions, delay in contract awards and tougher comparison with the prior year [Pour un super-menteur c’est pauvres comme excuses. Tu aurais pu forcer un peu ton talent. Tous les concurrents sont en croissance].
Both Eviden and tech foundation business were down year-over-year in Americas.
In addition, the delivery of HPC in South America in 2022 could not be compensated by another HPC delivery in 2023, while softer market conditions led to volume reduction in digital, particularly in finance, transportation and healthcare.
Tech foundation was impacted by contract scope reductions, notably in pharmaceutical and finance verticals.
In Central Europe, revenue was 2.506 billion, increasing by 2.2 organically. Solid double-digit growth in digital and BDS was a strong demand in the public and automotive sectors. Revenue decline in tech foundation was due to lower activity in manufacturing and banking.
Lastly, Northern Europe and Asia-Pacific revenue was 3.1.63 million, up 1.3% organically, reflecting solid demand from the public sector across Northern Europe and good performance in the financial vertical in Asia-Pacific.
Digital activities were up single-digit and solid demand from application modernization partially offset by reduction in low margin slab as a service business and lower HPC revenue compared to the private sector which had benefited from several supercomputer deliveries.
In tech foundation, growth came mostly from stronger public sector business in the United Kingdom and in the financial sector in Asia-Pacific.
Let me now very quickly talk about headcount evolution.
The total headcount was 14,790 people at the end of December 2023, a decrease by 14.1% compared with 110,797 at the end of December 2022.
This was due largely to scope effects linked with a vast investment program.
Excluding the scope impact, the decrease would have been 5.7% over the period [Ben je sais pas ce qu’il te faut Paul pour t’inquieter, mais 6% de baisse d’effectif dans un secteur en hausse, c’est plutôt une grosse gamelle non ? Même Meunier faisait mieux 😀 ]
During the year 2023, the group hired 14,139 staff.
This was the highest headcount showing the resilience of our group in 2023. [Ca montre surtout que les mec se barrent en courant d’Atos et que vous êtes obligés d’embaucher à tout va, puisque c’est votre plus grosse vague d’embauche malgré une baisse à périmètre égal de 6% des effectifs.]
Attrition rate, this is important, declined from 21.6% in 2022 to 14.5% in 2023.
By the way, those positive trends continued in general with the lowest attrition rate recorded in the last 25 years at 12.5%.
Let me now conclude with the operational takeaways.
During the year 2020, we have decided to manage the foundation and Eviden as separate entities within the group [Oui, on le sait puisque Yannick Tricaud a expliqué dans TOUS ses calls qu’il fallait mettre fin à la guerre entre les Eviden et les TFCo].
However, we will adopt a coordinated sales approach to leverage synergies and maximize opportunities with Clay Van Doren leading sales for the group. [Tiens, je l’avais loupé en live celle-là. Après avoir été durant 15 jours growth CEO, il est leader des ventes. Connait pas ce terme]
On delivery excellence, and I really want to say that in my few months with the company, I was really proud of the delivery excellence of the activities of the group.
We remain committed to our focus on delivering excellence as it is recognized by our clients.
The dedication to exceptional service will continue to be the cornerstone of our operation in 2024. Investing in new offerings.
We are dedicated to expanding our offerings, particularly by integrating AI into our digital and cloud automation tools.
And India is the cornerstone to achieve that and we are very proud to be there.
This investment reflects our commitment to staying at the forefront of technological innovation and meeting the goals needed by our clients, and it is deeply appreciated.
Investing in our people, our people are our greatest asset and we will continue to invest in their development. [Lache déjà les 400M€ prévus pour Eviden dans le CMD 2022 et toujours pas investis]
We highly value our training initiatives and will further enhance them to ensure our team members have the skills they need to excel.
We are committed to developing leadership in driving operational execution and supporting the success of new offerings.
As such, we will continue to invest in this development to ensure we have the necessary skills to effectively lead in 2024 and beyond.
On Tech Foundation, I will take the operational responsibility of Tech Foundation as Nourdine Bihmane decided to leave us and we have new managers who have joined the group recently to help manage the company at the standards we need.
Thank you.
I will now turn the call to Jacques François who will comment in more details on our financial results.
JEAN-FRANCOIS DEPREST, CFO
Thank you, Carlo, and good morning to you all.
I joined less than two months ago, so as you can imagine, it feels slightly more.
Before I start, let me first tell you that our consolidated financial statements were established as usual on a going-concern basis.
All numbers I will comment today are in euros.
I will now give you a snapshot of our key financial numbers for 2023.
Group revenue was 10.7 billion in 2023, up 0.4 organically compared with 2022 with evidence up 2.9% and Tech Foundation declining by 1.7%.
Order entry reached 10.1 billion during the year representing a book-to-bill ratio of 1.7% up 4 points compared with 2022.
Group operating margin was 467 million representing 4.4% of revenue up 170 basis points organically compared with 2022 with both businesses contributing to this improvement.
Free cash flow was minus 1.1 billion for the full year of which 660 million restructuring and separation were achieved.
The net net debt was 2 billion 230 million by the end of 2023 within our bank covenant.
Net loss group share was 3.4 billion mainly impacted by goodwill and intangible impairment charge of 2.5 billion and reorganization expense for 696 million.
The net debt was 2 billion 230 million by the end of 2023 within our bank covenant. [avec un cash bidonné au 31/12 en ne payant pas les fournisseurs à partir de mi-novembre]
Total headcount of the group was 95,000 at the end of December 2023 a decrease of 14% due to the divestiture that occurred during the year and workforce optimization as we just commented. This is a 5.7% organic decrease of total headcount.
Let me now guide you through our revenue evolution in 2023.
2022 revenue was adjusted by minus 71 millions.
This is a 0.6% decrease versus the revenue that was published last year.
This is due to the review of the accounting treatment of certain software resale transactions following the decision published by ESMA in October 2023.
During the year, scope impact was minus 3.9% consisting mainly in the divestitures of Atos Italy, UCC and our stake in the state street joint venture.
Currency effects negatively contributed to revenue for minus 1.6% mostly due to the depreciation against the Euro of the USD, the GBP, the Argentinian Peso and the Turkish Lira.
Organic growth was plus 0.4% leading to a full year revenue of 10,693,000,000 euros.
Group operating margin was 467,000,000 euros representing 4.4% of revenue.
Eviden operating margin was 294,000,000 or 5.8% of revenue up 110 basis points. [based on 2022 whole year, but down 40 basis points with H2/2023 compared to H2/2022 which was 6.7%]
And tech foundations operating margin was 172,000,000 or 3.1% up 210 basis points, all organic percentages.
You can see on the slide a reminder of the key level that led to these profitability improvements.
Let me now comment on the financial elements of the rest of the PNL.
Non-recurring items were a net expense of 3.6 billion and I will comment upon the key elements there.
Firstly, reorganization costs amounted to 696,000,000 consisting in 343,000,000 in workforce adaptation of which 147,000,000 for the extension of the German fracturing plan launched in 2022 and 353,000,000 in separation and transformation costs.
Secondly, goodwill and other non-current asset impairments amounted to 2.5 billion euros.
Full annual goodwill impairment test was performed at year-end in compliance with IAS 36 and in the context of the contemplated disposal of assets.
Fair values were determined based on multi-criteria approach that accounted cash flows, discount rates reflecting estimated execution risks and adjusted trading multiples consistent with the methodology applied in prior years. [We note that the company doesn’t disclose even the 3 major impairments. Omerta as always]
Thirdly, in 2023 other items were a net expense of 169,000,000 those exceptional items mainly included litigation costs and vendor contract renegotiations for 65,000,000 net capital loss arising from disposals for 46,000,000 mainly due to the disposal of UCC reassessment of one or our contracts that were accounted for in other items in 21 for 36,000,000.
As a result, 2023 operating loss stood at minus 3.1 billion euros.
Net financial expense was 227,000,000 and was composed of a net cost of financial debt of 102,000,000 and 23,000,000 due to the higher interest rates coupled with additional drawdowns on bank borrowings and other net financial expense of 125,000,000 which include in particular the interest components on pension and lease.
The tax charge for 23 was 112,000,000 consequently net loss group share was 3.4 billion mainly impacted by goodwill and intangible asset impairment charges of 2.5 billion and reorganization expense was 0.7 billion.
Turning now to our free cash flow statement let me guide you through the key items CAPEX and lease payments totaled 562,000,000 down 94,000,000 from the prior year as the group further optimized lease and capital expenditure and moves to less capital intensive activities.
The negative contribution from change in working capital requirement was 391,000,000 we have taken lower working capital actions compared with prior year.
At year-end working capital actions amounted to 1.8 billion euro this compares with 2.3 billion in prior year of which 862,000,000 was factoring.
Let me give you full clarity on these numbers on the next slide.
Our working capital requirement at year-end was negative 319,000,000,000 euro the group indeed carried out specific actions to minimize its working capital these actions are of three different natures non-recourse transfer of trade receivables for 712 million other specific actions on trade receivables for 455 million consisting mainly in the reduction in the average payment period for trade receivables as well as specific actions on trade payables for 650 million resulting mainly from the extension of supplier payment execution those specific actions did not comprise any reverse factoring measure. [bien-sûr, on te croit..]
Bear in mind that in the 650 million you have any past due invoice including if it is overdue by one day back to the free cash flow statement the total of reorganization, rationalization and integration cost reached 660 million compared with 283 million in 2022 restructuring cost was 605 million which is 382 million of one of separation and transformation costs cash out related to other changes was 312 million and consisted mainly of cost incurred on onerous contracts for 129 million payment related from past settlements with customers and vendors and legal cost for 115 million as a result of the above impact mainly driven by reorganization costs and the change in the working capital requirements presented the negative free cash flow of minus 1.1 million in 2023 compared with minus 187 million in 2022 the net cash impact resulting from net disposal amounted to 411 million and mainly originated from the disposal of Atos Italy and EcoAct. this corresponds to the end of our 700 million disposal program launched in 2022 no dividends were paid to Atos AC shareholders in other 23 and 2022 the 38 million cash out that you can see on the table corresponded to taxes withheld on internal dividend distribution I will now comment on our cash position as you can see the group net debt position as of 31st December 2023 was 2.2 billion compared with 1.45 billion as of December 31st 2022 the group remained within its borrowing covenants applicable to the net debt position the group remained within its borrowing covenants applicable to the multi-currency RCF and term loan A with a leverage ratio of 3.34 times at the end of December 2023 our leverage ratio must not be greater than 3.75 times and is calculated excluding IFRS 16 cash, cash equivalents and short-term financial assets at year-end were 2.4 billion and we had also a headroom of 320 million undrawn RCF which was drawn early January 2024. [Bon, là il nous a fait son blabla auquel personne comprend rien, donc il est sûr qu’il n’aura pas de question. Certes ça vole un peu plus haut que Sénéchault 🙂 ]
Regarding our term loan A as we already communicated the first 6-month maturity extension of the 1.5 billion term loan A has been exercised end of January pushing its maturity to July 24 such maturity is subject to another 6-month maturity extension subject to standard conditions I would now like to comment the liquidity position of the group we are conducting constructive discussions with banks and bondholders with a view to enhance liquidity and tackle upcoming debt maturities these discussions will now be framed under an amicable conciliation procedure in order to facilitate the emergence of a global agreement by July 2024 following on from the mandate Ad Hoc procedure initiated last February we have sufficient liquidity to operate our business the agreement is reached and we are in discussions with our banks and bondholders on an interim financing to provide additional liquidity cushion following the end of discussions with EPEI and Airbus we are actively evaluating strategic alternatives in parallel we are making good progress in the execution of the 400 million euro asset disposal program announced in July 2023
We are targeting to reach a global refinancing agreement for July 24 [tu veux dire avoir trouvé un sauveur qui reprenne le groupe, écrase la dette et dilue les actionnaires] we will present the parameters of our refinancing framework to our predators the week of April 8 and we will provide an update to the market once agreed by all parties the final refinancing plan will likely result in a dilution of the existing shareholders the refinancing of the group’s debt maturities as well as the execution of our asset disposal plan are fully factored in our upcoming liquidity analysis plan if we are to fail indeed that would question the going concern of the group let me now conclude my presentation with the outlook topic full year 2024 objectives are not provided at this time given current market uncertainties and contemplated sale of assets we will communicate on Q1 at the end of April regarding the 26 objectives the group withdraws previously communicated financial objectives given the contemplated sale of assets and ongoing debt refinancing discussions.
Thank you for your attention. I will now turn the mic back to Paul for the conclusion
PAUL SALEH, CEO
Thank you Jacques François
I will now close with some key takeaways
First we are executing on our transformation plans for Eviden and tech foundations our new operating model gives us greater agility and greater flexibility to serve our clients deliver on our commitments and promote growth our strategy is to leverage the offerings of both businesses through a coordinated go to market approach we are in active discussions as we stated with our banks and bondholders for a refinancing plan and those discussions will now take place in an amicable consideration process which should help us reach an agreement with our creditors by July and we will provide a market update around that time
we ended the year with 2.4 billion in cash and cash equivalents and we have sufficient liquidity as we stated to fund the business until a refinancing agreement is reached and we are also working with our financial creditors on an interim financing for additional funding we are also working with our financial creditors to provide additional liquidity cushion as we look ahead to 2024 we are focusing on delivering unmatched value and innovation to our clients and position the company for long term revenue and margin expansion and with that I would like to thank you and turn the call back to the operator for the Q&A session.
Questions and Anwers session
Operator
thank you
we will now take your first question and your first question comes from the line of Frederic Boulan from Bank of America. Please go ahead
FREDERIC BOULAN
Good morning everyone thanks for taking the question
can I ask a question on the liquidity side in the press release you mentioned that your forecast allows you to cover liquidity requirements in the following 12 months so if you can share a bit of your assumptions here on pre-cash regeneration is there any factoring in there what have you assumed from an asset sales standpoint and I’m struggling to reconcile that statement with the statement you just made around the liquidity that you have to operate the business and the financing agreement is reached so it’s a very different time frame so if we can clarify on that and then specifically if we can have a follow up on the working cap so you said you had 1.8 billion of working cap actions at year end so can you explain to us a little bit what that means the debt would be 1.8 billion higher if you were to unwind those factoring actions for debt renegotiation that you’re currently doing
thank you
all right I’ll let Jack François just start. I’ll answer the working capital actions. I’ll also answer a couple of other things you’ve asked about the near term liquidity
JEAN-FRANCOIS DEPREST, CFO
thanks for the question regarding the liquidity a couple of points the first one is that our accounts have been prepared in the principle of the going concern has set forward a liquidity forecast showing that there is enough liquidity for the coming 12 months that’s one of the basic accounting concepts and this has been ratified by our board and being audited as well by the external auditors now the second point is that obviously in this liquidity forecast we have some assumptions I will not elaborate on one or the others but we are starting to evaluate and of course that means that this forecast goes as well with assumptions and risks related to the assumptions let’s talk a little bit more about working capital actions and then the liquidity comment about that we have sufficient liquidity until a refinancing agreement is reached
if you recall in the presentation if I remember it was slide 36 that we mentioned that at the end of the year first of all we started with 2.4 billion in cash cash equivalent we had 1.8 billion in working capital actions and I will mention a little bit more of all these components in a second we have been unwinding those working capital actions and we have sufficient liquidity post the working capital action unwind to see us through the next year until we reach an agreement which as you remember we are targeting for July of this year when you look at that slide in particular we have identified all the components that make up for the working capital actions and those are being unwinded as we speak year end we have basically factoring and non recourse factoring we sell receivables to banks to the tune of 650 million
PAUL SALEH, CEO
yes excuse me it is actually 650 million in factoring this is the lowest amount it has been in the last probably almost 7 to 8 years we also do cash in advance this is basically clients we have invoiced them and they pay us basically a little bit ahead of the terms that are in our agreements with them and as Jacques Francois mentioned we do also have payables supplier management actions I think they were to the tune of 712 million actually this is the amount that is actually the lowest has been in the last 7 plus years this is actually any supplier payment that is overdue by maybe even a day that is included in that group and so we have been unwinding this thing so basically over the last couple of months
I would say one thing to you that one of the efforts that under way as a company is to improve our working capital management overall because some of these actions are supposed to continue to be part of core working capital management for example if you can get your clients to pay you in advance that is usually a good thing if you can manage your payables better than we need to renegotiate terms with our key suppliers because in some cases those terms are quite favorable to suppliers and then we have to work also on improving our DSOs currently they are much higher than the peer groups and we have opportunities just to continue to address that and reduce the amount of DSOs which will just really also allow us to generate cash
so I think that factoring is a practice in the industry some of them do it on a more permanent basis we have done it in the past on occasions throughout the year particularly at mid year and year end I hope that answers your question and if I may follow up so first of all on the factoring side is it something in your plan that continues maybe in a slightly smaller extent in terms of the disposals so you know you have is BDS still a consideration considering the position of your larger shareholder and can you update us on the scope I mean in the 400 million plan what is already has already been done and is already in your year end 23 net debt and what’s the kind of amount of disposal we can consider for 24 you mentioned a couple of things in terms of factoring we again overall we are trying to our plan is just to continue to reduce our working capital actions and work more fundamentally at improving our working capital management so that’s the first thing I can tell you would factoring be a part of that we will look at it as part of the mix and see if we can do something that would be a little bit more second of all when it comes down to the disposal there are two different types of disposal there was the 400 million that was announced sometime in July 28 if I remember we have identified that we would do 400 million euros worth of asset disposal we’ve already done some of it there’s still more to do and our plan is to see an amount get realized this year somewhere I would say of that 400 in terms of other asset disposal we’ve been evaluating strategic alternatives we have as Jacques Francois just mentioned we’re just really in the process of working those items and we’ll update you in due course on those activities as we go through them so BDS not really on the agenda anymore
I wouldn’t, I wouldn’t really comment I think again all the alternatives are on the table we’re looking at them and we’ll again mention to you which way we may go in due course.
[Quelle tartine et tout ça pour juste se justifier vis à vis du blog, d’habitude ils en parlent jamais. Mais certes d’habitude c’est Sénéchault…]
Operator
we will now go to the next question and your next question comes from the line of Laurent Daure from Kepler Cheuvreux
LAURENT DAURE
Yes thank you good morning gentlemen. I have three points.
I would like you to focus on the first is on the business probably not the most important today but still can you give us a guidance due to the change in scope but can you give us a few comments on how the business is trading so far this year and particularly on the cyber part I mean you didn’t comment on last year’s performance does it mean that this business was not growing anymore so that’s the first point second point is on the restructuring side I would like to know how much restructuring on your TFCO plan that in a couple of months ago you detailed us and I understand there’s massive restructuring but you have a 382 million one of separation and transformation cost can we have details about this huge cost and what is put in that item.
And my last question is about the working capital but I understand the action that you’re taking at the end of the year but I would be also interested in the working cap swings from peak to trough in other words the financing you’re going to need is probably going to be based on the peak of the working cap and how much volatility do you have during the year now that your balance sheet is financially constrained thank you.
PAUL SALEH, CEO
all right I’ll let Carlo just really mention a little bit how we’re seeing business trends early in the year and then Jacques Francois will pick up a little bit more on the restructuring and then we’ll talk a little bit more about the average working capital basically how do you get there so on Tech Foundation we are seeing a continued performance we are seeing in Q1 which is the continuation of the trends we’ve seen in H2 on Eviden we see a slight improvement but the softness in the US is actually present in Q1 as well on BDS we had significant new wins so we are pretty happy of where we see HPC and the movement cyber security has shown some softness
but at the moment we think that is something we can recover during the year we are seeing of course customers rising concerns on our situation but I really want to say that every time I speak with customers they always talk about the quality of service that they see from the company so we really think that by continuing to invest in quality of service and doing the right things we can continue to gain their trust in the future and that’s what we are seeing Jacques François you wanted to mention a little bit more on the restructuring I think that was asked for TF is that the question Laurent?
yeah it’s how much of the restructuring charge last year was linked to TF Co and what is the rest then?
I think the majority was linked to TF Co but go ahead
how can I say an outlook of multiple years which was communicated earlier in 2023 about the TF Co restructuring plan in 2023 there was already good progress against this actually they implemented more than the plan for the year 2023 in terms of overall cash envelope more than a third has been already dedicated we are talking about a few thousands of people in the region of 2.5 thousand people impacted by these changes so I think that’s it the 382 the one of separation and transformation cost what does it represent exactly?
that represents a number of factors we had to just really set up legal entities we had to just really move people around we had to also work on migrating contracts they are just really literally a combination of first of all separation activities but also quite a bit of money was spent in transformation activities just really rebalancing the portfolio for TF and just really separating consolidating data centers and the like and you have the fees of advisor in that number?
There is also outside advisor who are included in those both legal, tax and business advisors as well can we have a feeling on how much this represents out of the total?
We don’t have that number we can follow up if necessary and the last question was on working cap peak to trough?
yeah I think a good way to get at it I think if you see the slide that we just provided you the capital at year end was somewhere around minus 300 negative 300 million and we had working capital actions of 1.8 billion and so you can see on average the working capital is about 1.5 billion during the year it fluctuates a little bit but I would say it stays relatively about 1.5 billion for most of the year so you don’t have any period of the year during which it gets 300 million higher
I think it does fluctuate a little bit but I would say on average it would be around those levels that I just shared with you
thank you
Operator
one moment please. And your next question comes from the line of Adam McGuire from Bank of America please go ahead
Adam McGUIRE
hey good morning and thank you for taking my question in your statement sufficient liquidity until refinancing is reached so call it July. Does that specific statement also include the requirement of factoring and the requirement of any asset disposals near term no there is no right now when we mentioned that there is no factoring and golf or asset sale within that country
ok great
and sort of with regards to development so far this year is there any indication as to how much of this working capital reversal has continued over the last three months perhaps how much factoring remains outstanding how much of the other working capital reversals have been completed in the last two and a half months
PAUL SALEH, CEO
Hi Adam
I can confirm that we have unwound 100% of these amounts of the working capital elections including the factoring has been unwound effectively
absolutely
ok understood and just the last point on performance so far this year your comments have been helpful
I was just wondering can you give us any guidance with regards to for instance bookings now that we have already reached almost the end of the first quarter book to bill attrition rates any kind of high level guidance on some of the KPIs you normally disclose so far this year
yeah I would say on the book to bill right now it would be premature to give you those numbers with a couple of weeks to go but I think it would be probably more consistent with what we’ve seen historically I think in terms of attrition what we had mentioned in the comments that Carlo made particularly January was the lowest it’s ever been in the last 25 years of the company if you were to exclude the COVID years it would be a very low level performance overall but it reflects two things from an attrition perspective
one of them is the commitment that we have from our colleagues around the world second of all we do have just a remarkable program of training and development for our staff as well as we do have great certification programs to continue to enhance particularly in all next generation type of IT offerings so those are compelling reasons for employees to continue to commit to us and as you saw from the charts before we have no issues in continuing to attract talent to the company understood thank you and just one last one if I may you mentioned in the past the independent business review can you confirm whether that’s been completed now and any high level information that you can share around that yeah the IBR was completed and it didn’t really impact any of the work that we had done on goodwill impairment and so those results are now reflected in the financials that Jack Francois shared with you and I think what now we’re moving on to the next level where we’ll give you an update on our refinancing discussions sometimes in the April 8th, the week of April 8th
thank you very much
thank you
we will now go to the next question and your next question comes from the line of Derric Marcon from Societe Generale
Derric MARCON
yeah good morning guys I hope you can hear me well
two questions on my side can you update us or give us more color about what will be the change in working capital requirement for this year so if we net the capital action reduction versus fundamental improvement in the management of working capital will be helpful and the second question also related to what will happen in 2024 with the transition and integration cost line I understand that you have spent only one third of the 800 million EUR ARI that was planned for TFCO so can you update us on where you believe you can land on this line for 2024
thank you
ok well let’s just talk about a little bit working capital I think it’s premature again to tell you to give you those numbers again we are assessing all of these things except to say that we are going to reduce our dependence on working capital actions that’s just really the objective and everything that you’ve heard us talk about in fact when you looked at the numbers for 2023 you saw that operationally we’ve improved working capital and the reason why working capital was negative it was a reflection of lower working capital action so working capital management operationally is still high on our list of this year under Jack Francois leadership a lot on this area and we are going to reduce our dependence on working capital actions that are not in the normal course we are still going to try to get better improvement in our DSOs improvement in our DPOs as well and so that’s the first one in terms of your second question in terms of separation costs and the like I would say a couple of comments first of all actually we are far along in our TF restructuring and most of the restructuring we did last year was primarily driven by TF it was less restructuring on the evidence side and I think maybe the comments that were made left a third of it I think you’ll see it from the P&L perspective most of it was already and maybe we’ll come back to you to just verify the number but I wanted to say we are almost 50% plus post the program
I would say also the separation that still needs to be done is just really continuing to refine the way we run the entities for the business for example when we were thinking a little bit about separating the BDS business at some point and potentially selling it to Airbus there was some work that needed to be done again to parse some of the contracts related to the BDS business whether it’s digital security or whether it’s the advanced computing into separate legal entities to give us the maximum flexibility ultimately in separating businesses if we needed to go that route and so that’s the kind of work that is going to continue to happen within the company so that we have ample flexibility and that these alternatives make sense for us
Derric MARCON
Paul can I have to follow up please on the working capital management so you had a benefit of 111 million euros this year but what would be the potential from here can you clarify that because it’s really difficult to understand how much is left and on the reorganization, rationalization integration cut line for the 16 million cash out last year, have you a good visibility on what will be cash out this year and what could be the number a range would be very helpful, thank you.
PAUL SALEH, CEO
it was for us to start with the second one it will be significantly less than what you saw last year I think it was our just really high level of spend because we were just really accelerating the separation of the evidence and the tech foundation business so it’s a significant effort going on in the transformation business itself as well as the workforce optimization so let’s say that it will be significantly lower in the first quarter we’ll give you a little bit more updates on that which in the next few weeks so let’s wait on that Derek
in terms of the working capital actions can you repeat that question one more time yeah so you had a benefit of there’s quite a bit left when you look really at our DSOs compared to the industry, I want to say the industry is in the 70 days, we’re north of that just on that basis there are a few hundred million of euros of potential improvement on working capital just on the receivable management side and then if you look at the DPO I think we are just I want to say somewhere slightly over 35 days or around the average and then the industry is I think somewhere closer to the 42, 43 days and so every day matters quite a bit so there’s effort underway just to really think with our partners and our suppliers if we cannot just really amend some of these terms to align them a little bit more with when we get paid from our clients.
Derric MARCON
thank you Paul
PAUL SALEH, CEO
You’re welcome and now I’ll hand the call back for closing remarks.
In closing I just want to just take a moment to thank you once again for joining us.
We have just really as I mentioned executing on our Transformation Plan for Eviden and Tech Foundation
we’ll update you on the progress that we’re making at the beginning of the year.
importantly we are in active discussions with our banks and our bondholders on the refinancing plan and again the week of April 8th is an important week because not only are we going to provide those framework for our refinancing framework the parameters for our refinancing framework but we’ll also be able to just provide an overall market update on where things stand and then in the meantime just really we’re just focusing on driving the company to continue to deliver on the delivery excellence that Carlo was really mentioning and continuing to invest in the business and invest in our people and I want to just take a closing remark and thank all of our partners who have just really done a remarkable job this last year and they’re continuing to do that their commitment to our clients just really makes a difference and so they’re the real assets of the company they’re the one that generate all the IP that we have and all the innovation that really stands us apart in the marketplace and kudos also to all of our clients and suppliers who are just really working closely with us to just make sure that we continue to partner and continue to build a great company
So thank you all we’ll see you in a few weeks