Good day and thank you for standing by. Welcome to the Atos full year 2021 results conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Rodolphe Belmer, Atos CEO. Please go ahead.
Good morning, and thank you for being with us today for the presentation of Atos 2021 results. I am Rodolphe Belmer, CEO, and I'm joined on this call by Uwe Stelter, Group CFO. As you know, our 2021 results have been pre-announced earlier this year. Uwe and I will go through them in detail. We'll then present our main priorities and objectives for 2022 before taking your questions. Atos didn't deliver well in 2021. The accelerated move to the cloud prompted a severe decline in classic IT services that could not be compensated by growth in cloud, Digital, and security activities. In addition, the unexpected reassessment of a large contract, as well as unforeseen slippages at year-end, further impacted the group's performance.
This led to the results you already know, -2.5% revenue decline at constant currency, 3.5% operating margin, and a free cash flow of -EUR 419 million. In light of such developments and of the group's decision to refocus its activity portfolio towards the growing parts of the business, I joined Atos in January with a clear mandate to lead a deep structural and rapid transformation of the group in order to restore growth and shareholder value. This transformation is already firmly engaged. An important first step was achieved in February with the announcement of our new simplified governance structured around three distinct business lines that is designed to make the group more efficient and accelerate our business cadence.
This is a very important step, but only the first one of an ambitious turnaround plan that we'll present in May together with our midterms objectives. I will now move on to the highlights of 2021. You already know some of the figures as they have been pre-announced. Revenue decreased by 2.5% at constant currency and by -4.3% on an organic basis. Operating margin was EUR 383 million, or 3.5% of revenue. Net income was negative, close to -EUR 3 billion, mainly due to impairments. Free cash flow was -EUR 419 million, and our net debt increased to EUR 1.2 billion or 1.1 times OMDA.
We managed to grow our headcount to more than 109,000 people, and I would like to stress that despite a very difficult year, Atos has remained an attractive employer in 2021. This is key in the current state of the talent market. Logically, because of the net loss recorded in 2021, the Board will propose to the AGM not to pay a dividend this year. Commercial activity remained sound in 2021 with an order entry of EUR 10.8 billion, representing a book-to-bill ratio of 99%. 2021's largest wins were logically focused on cloud, Digital, and security activities. I will mention a couple of them, a Digital transformation contract for a European leader in imaging systems. This contract includes cloud, security, and decarbonization.
A contract with a U.S.-based global insurance company for public cloud migration and in the logistics sector, a contract for a cloud-native application development using machine learning and artificial intelligence. Our backlog at the end of 2021 was EUR 23.6 billion, representing 2.1 years of revenue. Atos made nine bolt-on acquisitions in 2021, representing around EUR 170 million of annual revenue and adding 1,500 highly skilled professionals to the group. In total, over two years, Atos has acquired 19 companies that generated cumulative revenue of around EUR 600 million in 2021. These companies focus on cloud, Digital, security and decarbonization, therefore supporting the group's business mix improvements. Our bolt-on acquisition program is already complete for 2022 with Cloudreach, which we actually finalized earlier this year and which is larger than other bolt-ons we recently did.
Now we are going to focus on integrating these acquisitions and delivering synergies. Moving now to key non-financial indicators. Atos made progress in all of them in 2021. Customer satisfaction remained very high in 2021. This is measured by the Net Promoter Score, which increased to 66%. This compares favorably to 65% in 2020 and 59% in 2019. The group kept reducing its carbon footprint in 2021 to 2.4 million tons for Scope 1, 2, and 3. This is 27% less than in 2019. Employee satisfaction remained high too, which is key in the current talent market. We scored 66% at our annual all- employee Great Place To Work assessment, which was slightly higher than in 2020.
Lastly, we remained in the high end of our industry in terms of gender diversity with 32% women in executive positions. For many years now, Atos has been one of the most advanced companies of our industry in terms of sustainability, which will remain at the heart of our strategy going forward. Now over to you, Uwe.
Good morning, everybody. Uwe Stelter speaking. Thank you, Rodolphe. On this slide, you can see the main financial KPIs for 2021. I'm going to detail them in the coming slides, starting with revenue and operating margin, then net income, free cash flow, and finally net debt. Let me start with the 2021 revenue evolution. The group recorded revenue of EUR 10.8 billion in 2021, which is a -3.1% decrease compared to 2020. Growth at constant currency was -2.5%, including an organic decline of -4.3% and the scope effect of +1.8% coming mainly from the acquisitions described earlier. Foreign exchange accounted for -0.5%.
On the next slide, you can see that the gradual improvement of our business mix continued in 2021, which reached now 51% of our revenue generated in the portfolio of Digital, cloud, security, and decarbonization. Moving on to the revenue analysis by regional business units. First, on revenue. North America decreased by -4% as the decline in classic data center activity was only partially mitigated by a good performance in consulting system integrations and application development, cloud and Big Data, and cybersecurity. By industry, Public Sector, Resource and Services, Health and Life Sciences were down, while Telco, Media and Technology, Manufacturing and Financial Services and Insurance recorded growth.
In Northern Europe, it decreased by -3% due to the reassessment of the cost to go on the BPO contract with a large U.K. customer in Financial Services, which led to a major revision of the project's completion rate. Business with customers in Telco, Media, and Technology, as well as in Manufacturing and Health and Life Sciences grew, while revenue decreased in Public Sector and Resources and Services. Central Europe was down -6.8% year-on-year, reflecting again the decline in classic IT services, especially in the Manufacturing industry, as well as the lower product sales in unified communication and collaboration, and also in Big Data and cybersecurity. Southern Europe grew by +3%. Revenue grew in most industries, Health and Life Sciences in particular, with a double-digit growth, as well as Manufacturing, Financial Services, Insurance, Public Sector, Defense, and Resources and Services.
Growing Markets grew by +2.7%. Health and Life Sciences grew again double-digit, driven by Australia and in Asia. Manufacturing and Financial Services delivered robust growth. This was partially diluted by a low level of activity in Public Sector and Defense and UCC. On the operating margin, the group as a whole decreased from 8.9% - 3.5%. Of course, there are some region-specific sectors, but the main reasons for this strong decrease are the ones that also explain the variance with our initial guidance for 2021, and that we already mentioned in our previous announcements. First, for circa 280 basis points, the decline in the classic IT Infra business in all regions, where limited cost flexibility did not allow us to adjust the revenue decrease.
Second, the U.K. BPO contract reassessment with circa -120 basis points impacting Northern Europe. Third, dispute settlements late in the year and delayed compensation by customers for extra work in total circa -70 basis points. Fourth, investments in hiring, retention, and salary increases for -60 basis points. Moving to the performance by industry. Based on the impacts described before on the decline of classic Infrastructure business, most of them recorded a decrease in their global revenue at constant currency, as well as a lower operating margin compared to 2020. Exception was manufacturing, which managed to grow its revenue and operating margin, partially recovering from a strong decline in 2020. Financial Services and Insurance revenue, and to a larger extent, operating margin, were negatively impacted by the U.K. BPO contract reassessment in Q4.
Public Sector and Defense recorded a decrease in revenue and profitability, driven by the volume reduction with a large client in North America and lower high performance projects after a very strong performance in 2020. In Telco, Media and Technology, revenue decreased slightly, with a sharper decrease in profitability based on the non-repeat of one-off benefits in 2020 and the reduction of UCC business. Resources and Services contracted as volume reductions in retail and energy and utilities could not be compensated by a partial recovery in transport and hospitality. Finally, Healthcare and Life Sciences continued to grow its revenue after a resilient 2020 already, while operating margin was significantly lower in North America.
Moving on to the next slide on the income statement, the main items to highlight are, first, reorganization, rationalization and integration costs for -EUR 437 million. This amount includes EUR 180 million related to the German turnaround plan, as communicated before. Impairments and others for -EUR 2.5 billion. This is largely the result of the comprehensive asset and contract review we conducted over the last months in the context of the accelerated move to cloud and the refocusing on the growing segments, which we communicated already on February 10th. I will come back to that later. Net financial expenses for -EUR 151 million. Here, the year-on-year increase reflects the change in fair value of the optional exchangeable bond derivative and of the underlying Worldline shares for -EUR 81 million.
On the next slide is more detail on the impairments and other impacts that resulted from the assets and contracts review conducted over the last month. These numbers are fully in line with what we presented on February 10th. First, the goodwill impairment amounted to circa EUR 1.3 billion and relates to the Atos legacy businesses. Second, other non-current assets and provisions for supplier commitments amounted to EUR 532 million and included EUR 165 million of impairment of intangible, tangible and right-of-use assets and EUR 367 million of provisions on certain supplier contracts on which we had commitments. These first two amounts, EUR 1.3 billion and EUR 532 million, add up to the EUR 1.9 billion of goodwill and other asset impairments we communicated on February 10th.
Third, contract asset impairments, bad debt and provisions for EUR 499 million. This breaks down into EUR 280 million of provisions for onerous contracts and EUR 219 million of asset write-offs and bad debt reserves related to the legacy business. Coming now to the free cash flow statement. In line with our previous communication, free cash flow was -EUR 419 million. Besides a lower OMDA at EUR 1,095 million, this reflects first, CapEx at 2.5% of revenue, slightly below last year, where it was 2.9%. Lease payments at 3.6%.
Thirdly, change in working capital of EUR -156 million, reflecting the adverse impacts on customer advances and supplier payments we communicated in July and in January for roughly EUR 400 million, mitigated by the mechanical decrease in contract assets and receivables resulting from the organic revenue decrease in Q4. Fourth, reorg and rationalization integration costs of EUR 438 million, including the payment of EUR 180 million related to the German restructuring plan, as well as costs related to the implementation of the Spring program. Fifth, other changes of EUR 151 million, which includes the cash impact of the early retirement programs as well as customer settlements. Leading us to the net debt slide. M&A activities led to a net payout of EUR 275 million.
Dividends were EUR 101 million, including share buyback and foreign exchange effects. Net debt was EUR 1.226 billion. Assuming the full conversion of the Optional Exchangeable Bond, the group's net debt would have been EUR 883 million at the end of 2021. Last but not least, on the headcount evolution. We managed to recruit close to 26,000 people in 2021. Net of people leaving the company, this is an organic increase of more than 3,000 people, mainly in offshore and nearshore countries. As Rodolphe mentioned, the ability of the group to recruit new talent in the business where we want to grow is absolutely key in the current market environment. We also welcomed 1,644 new colleagues from acquisitions. As a result, the total headcount was 109,135 at the end of December, and is up 4.5% compared to last year. Thank you, and back to you, Rodolphe.
Thank you, Uwe. As I said, Atos is now firmly engaged in a deep and structural transformation, aiming at accelerating the return to growth, improving drastically our financial performance, and restoring shareholder value. This transformation will be articulated around four main priorities. One, adapt and simplify our governance. On this one, we have just made a major step forward, which I will detail in a minute. Two, energize sales and commercial momentum. There is a unique technological know-how at Atos, but we need to shorten our time to market and be better at capturing the vast opportunities in the IT services market offers. Three, rationalize our cost structure. In particular, over the past couple of years, the group's structure costs have increased, largely due to the reorganization by industries. This will clearly reverse with our new organization. Four, reposition our activity portfolio through disposals and acquisitions.
We are looking forward to presenting in detail our turnaround plan at a dedicated Capital Markets Day in May. The precise date will be communicated at a later stage. Moving now to our new governance, which again is a major first step in the group's transformation. It is simpler, more efficient, lighter, and will provide the best framework for an improved commercial and economic performance. It is structured around three distinct business lines. Tech Foundations, which include asset-intensive and mature activities like data center and hosting, Digital workplace, UCC, and BPO. Second business line is called Digital. It's a skills-driven service business that includes Digital applications, application maintenance, cloud, and decarbonization. Third one is Big Data & Security, BDS. It is a high-growth, R&D-intensive business that includes Big Data, cybersecurity, high performance and edge computing, and mission-critical systems.
There is a strong rationale for such an organization, as different activities must be managed differently depending on how mature they are, what growth potential they offer, and what investments they require, as well as the specificities of their economic models. It also makes more sense externally, in particular for market disclosure. We are going to report our numbers according to these business lines, starting at our Capital Markets Day. It will provide a much better visibility, not only on the financial performance, and this was indeed a shortfall of the current reporting by industry, but also on the value of each of these business lines. We also have four regions which will have ownership of accounts, regional resources, and full P&L. Lastly, the executive board will be streamlined with 2 members instead of 24 previously, in order to accelerate decision-making and increase accountability.
On this note, I'm happy to announce that four new members of the Executive Board are going to join to complement and finalize the overhaul of the Executive Board of the company. Their names will be announced later today. In this context, 2022 will be a pivotal year for Atos, paving the way for recovery. Headwinds will persist. In particular, the continued decline in classic IT services, personnel cost inflation, and supply chain tensions. They will put further pressure on our revenue and profitability, particularly in H1. However, the second half should see an improvement with a return to revenue growth and an uptick in operating margin, thanks to a better business mix, a lower comparison basis, and the first benefits from performance optimization measures. Therefore, we expect a back-end loaded year, which should, however, see revenue bottoming out and financial performance starting to go in the right direction.
Overall, for the full year, we expect revenue growth at constant currency between -0.5% and +1.5%. Operating margin between 3% and 5%. Again, the continued decline in classic IT services as well as accelerated salary inflation will keep our margin under pressure. We also adopted a more cautious approach to profit recognition on certain contracts. How quickly we can cut costs and pass on inflation will ultimately determine where we end within this range. Free cash flow will be between -EUR 150 million and +EUR 200 million, depending on operating margin delivery and potential working capital fluctuations. Now I want to make this very clear because of the H1, H2 sequence I just described, our results for the first half of the year will be below these annual targets.
The second half will see a sequential improvement leading to the ranges you see here for the whole of 2022. This is, of course, fully embedded in our guidance. We have a lot of work ahead of us, but we now have a solid base to build upon and a springboard for improvements. 2022 will be a first step in Atos recovery, and I'm convinced that we have all the assets in hand to get back on track and make our transformation a success. Now, Uwe and I will take your question, but maybe before that, Uwe.
Perhaps on a personal note, before we go to Q&A, I decided to leave Atos effective beginning of May, so not now, but beginning of May. My successor will arrive May first. I think this is a good time for me to open a new chapter in my life, but also for the company to gain the benefits of a new experienced leader who will accelerate the turnaround already started. Now over to Q&A.
Thank you, Uwe.
Thank you. We will now begin the question- and- answer session. As a reminder, if you wish to ask a question, please press star one on your telephone. To withdraw your request, please press the pound or hash key. The first question comes from the line of Stacy Pollard from Atos. Please go ahead.
Hi, I'm from JP Morgan, actually. Just a couple of quick questions for me. First of all, quite a large range for operating profit margins. Usually, you're sort of about 50 basis points, and this time it's 200. Now, I appreciate it might be similar in absolute amount, but what are the big swing factors? Is it more some uncertainty around revenue streams and the types of revenues, or is it more around the cost flexibility and controls as you move through the year? So that was question number one. Really the second one is, any comments on progress for the disposals, and are there any additional assets now that you've been there for a couple of months, are there any additional assets that you might consider for disposal?
Well, on the first question, it's certain that we are providing a slightly larger range for our operating margin guidance for 2022, which is actually reflecting how we see the business evolving in 2022. The reason why we are using that slightly wider range is because there are still moving parts in the business at the moment. I will list a few of those. The first question is how quickly can we come back in line with market average in the decline in revenue of the Infra business, which is one of the main factor of erosion of our operating margin, this deceleration in the Infra part of our business.
The second question, of course, is how quickly can we take the cost out of this declining IT business. There is also a question of cadence in how quickly we can reduce the structural costs that were inferred by the implementation of the Spring program, which is quite heavy in that regard. There is also a point on how much of the salary increase we can pass on to our customers in terms of price increase. Of course, one natural question like the ramp up pace of new contracts in H2.
All in all, it means that there are still moving parts in our operating margin built up, which explain why we have taken a bit of prudence and provided a wider scope than usual in this metric. On the second question on disposals, there is not a lot of progress to report on that front. What I can say is that we continue to see disposals as one of the key elements of our strategy. Maybe I should start saying that our strategy is to return to growth and to accelerate our growth in the growing parts of our business in Digital and at BDS.
Second element, which is also very important, as you have understood from what I said before, we want to stabilize the what we call the Tech Foundations part of our business and to focus on being resilient in that part of the business, which is also very important, and that's one of the main element why we have decided to change our organization, to be able to focus more determination, more energy in that respect, and to be in control of that important part of the business, which is today decelerating too much rapidly. That's the first one. First element, we are core-focused on business. Second element, we continue to see an important part of our strategy to dispose some of the assets we have announced previously.
Like in the Infrastructure business and the unified communication business. Unfortunately on those two questions, negotiations and discussions are still underway, but we have no progress to report at this stage. What I said also to answer a bit more, well to the long-term part of your question on how I see disposals going forward, what I said is that our turnaround plan will be articulated around four main drivers. One of them being, that's the last one, but it's a very important one, portfolio considerations, and I mean what I'm saying.
Okay, that's useful. Thank you.
Thank you. Next question comes from the line of Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Good morning, gentlemen. I have three questions. The first one is on the free cash flow guidance that you have set up. Could you share with us your assumption you have taken for the cash restructuring charge and the range of working cap increase or decrease? My second question is on the Infra business. Could you walk with us a little bit on how fast you could close some of the data center and the kind of revenue decline you could cope with without further deteriorating the losses of this business? And my final question is, Uwe, if you could share with us on the balance sheet the contract asset and the advance payment you had at the end of 2021. Thank you.
Well, on the first question that you have on the free cash flow guidance, which is a bit more wide than what is suggested by the operating margin bracket that we're providing. The reason for it is that we have provided for slight deterioration in our working capital, which is in the order of -EUR 150 million to -EUR 200 million. That's what we have in our guidance. In terms of restructuring, our base case is that we're going to stay at our customary level of 1% of our revenues, which is EUR 110 million.
In our guidance, we have provided some flexibility which could lead us to go up to EUR 150 million in that line. That's not our base case, but we have this kind of small reserve in case we want to. We're in a position to go a little faster in that in some restructuring project. In the Infra business, well, what I can tell you on this question is that the Infrastructure part of our business is in decline, double digits in the mid-teens level, which is substantially higher than the reference market of that business, which is in decline also overall, but it's more in the single digit level, mid-single digit level, meaning that we underperform.
One of the reasons is probably because of the defocus which was brought by the Spring program. What we intend to do is to come back to market average in that part of the business by refocusing our management on investing in that part of the business and maximizing the fill rate of our Infrastructure, which is a key driver of revenue, but also of margin in this purely fixed cost business. Deterioration in that part of the business costs a lot in terms of margin and in terms of cash flow, and we need to invest in that. We have lots of headway and potential for that by only returning to market standard level of performance.
Laurent, good morning. On the contract assets, on the net basis, you will see a reduction of EUR 350 million actually. It comes down from 900 to circa 550, which is a good reduction. 1/3 , I would say, of that is due to write-off, but the other part is really operational. 2/3 is operational and will of course help the cash flow moving forward on contract assets.
Okay. Thank you very much.
Thank you. Next question comes from the line of Nicolas David from Oddo BHF. Please go ahead.
Yes. Good morning, Rodolphe. Good morning, Uwe. Thank you for taking my question. The first one is just a follow-up of the previous question from Laurent regarding the restructuring of exceptional item in the P&L this time for 2022. I understand that restructuring could be between 1%-1.5%, but usually you also have other exceptional items. Could you give us a sense of what would be the overall exceptional item below the line in 2022, and what do you expect over the midterm? My second question is, you mentioned several times the Growing Markets average growth for Infra management, where do you see currently this market average growth, and where do you stand currently compared to that?
When do you think you can catch up to this level? My last question is regarding profitability. Could you give us a sense of the current profitability by business line and what you expect for 2022? Which business line will improve and which one may suffer more? Thank you very much.
Well, thank you, Nicolas, for all those questions. Your first question on the other exceptional item that we might have taken our assumptions, I will let Uwe answer. Maybe you want me to start with the two last questions. On the Infrastructure and the improvements potential we have in that important business line which weighs around, well, a bit less than 40% of our total group revenue. As I said before, we are in this business line in decline, quite marked, actually, around but a bit less than -15% year-on-year. In the early days of 2022, this trend is the same, continues.
The reference market, as we see it, and it's our internal figures. We consider that the Infrastructure market is in decline at between -6% and -8%, means that we decline twice faster than the market average. This has started at the beginning of last year, probably due to the Spring program, where we decided to organize ourselves by industry and not by business line anymore, which means that we defocused a lot our teams from resisting in the Infra part of the business, all the more that our strategy is very clear and is changing. We're going to focus on Digital, cloud, cyber, and we have focused all of our sales efforts into growing that very important growing part of the business.
It doesn't mean that we have to give up on the existing core business of the company, and we should insist on that. That's exactly the notion behind the evolution of our governance of organization. Meaning that there is lots of potential to catch up with market average, and there is no reason why we shouldn't perform like market average given our size, given the quality of our Infrastructure, given the quality of our people. The fact is that this is easy to say, not that easy to do. Why? Because different from Digital, the sales cycle in the Infra part of the business is long. It's longer than in the Digital part of the business. Contracts are bigger and sales cycle is also longer.
On average, the sales cycle is between 12 and 18 months. Meaning that to see a real improvement, a step change improvement, in our Infra part of the business, it will take time. Of course, we are fighting hard to accelerate that and make sure that we restore our revenue trajectory faster than that. You have to understand that it will take some time. That's one of the reason why we have some uncertainty also in our operating margin bracket, because we don't know exactly how fast can we be in stabilizing, in improving, should I say, the performance in the Infra part of the business.
That's one of the reason why our H2 will be better than H1, because we consider that we'll be able to improve slightly the performance in that, in that segment, during the course of this fiscal year. Profitability by business line, we are not going to comment on that today. What I said is that we intend to provide a guidance across our three business lines as from the Capital Markets Day, to give visibility to our investors on the performance of our three business line, to be also in a position to maximize their performance and manage them effectively, and also to make sure that everybody can make up their mind on the real value of our company. I think that's all what I can say today on this question.
Nicolas, on the exceptional items, do we expect that the year 2022 comes back to the level prior to, of course, all the reassessments and all the impairments which we did? We expect that to come back to the level we had in the years before.
That's clear. Thank you. Just regarding the Infra decline, to what extent do you think that your willingness to sell the asset is also penalizing your ability to grow in line with the market? Thank you.
Sorry, could you, uh-
To what extent your willingness to sell this Infra management business is penalizing also your ability to grow in line with the market, given maybe a negative perception from the clients you may have, given you are in the process of disposing this asset?
Well, in theory, it's a good question, but I think it's a second order consideration. Even though we sold those assets, we are going to, well, to continue to have very solid Infrastructure, very talented people, meaning that whatever the end owner of this activity, the customer service will be unchanged. Meaning that seen from my point of view, I think it's a second order consideration for the customers. What we say now plainly and clearly to our teams is that they should, and we are motivating them, and we are also incentivizing them, on this, in this direction.
They should resist in that business, and we should focus much more time, energy, and resources to defend our positions in that business and to perform at least at par with market average. Now we have a team which is dedicated to manage that part of the business. They have their own sales support. They have their own KPIs. They have their own remuneration systems, which makes sure that they're going to deliver on that against those objectives. We have had some questions from customers on the subject of disposal, but we have never found it was a very determined or very structural consideration in their decision-making process.
Thank you very much.
Thank you. Next question comes from the line of Mohammed Moawalla from Goldman Sachs. Please go ahead.
Great, thank you. Good morning, Rodolphe and Uwe. A couple from me. You talked about sort of a lot of cost cutting and efficiency, particularly around the Infra business. Can you talk about what you have budgeted for investments, particularly around the Digital side of the portfolio? I'm talking here organic investments and the timing and phasing of that. Related to that, what is your thinking around kind of also pursuing bolt-on M&A as part of the plan to sort of further improve and diversify the portfolio on Digital? My second question was really around the phasing of the growth of the year.
Obviously it's gonna be a back-end loaded year, but does Q4 represent the trough for organic growth, or should we see that trough continue for a little longer before the organic growth sort of rebounds? In a similar vein, as we think of that sort of free cash flow, can you just reconfirm that H1 free cash flow will be below, you know, the lower end of your guidance for the full year? If so, give us a rough indication on the H1, H2 loading. Thank you.
On the bolt-on strategy, we don't deviate from this strategy, which we find solid and quite relevant in our activity, especially to accelerate our migration to Digital and to continue accelerate growth and by building capabilities in the Digital segments. What we said, and probably we should have been more explicit on that, is that, well, we have an envelope of around EUR 300 million-EUR 400 million that that's earmarked for bolt-on acquisitions each year. This year, a very substantial part of this envelope has already been consumed with the acquisition of Cloudreach, which is a slightly bigger acquisition than what we did previously under our bolt-on strategy.
Going forward, in the following years, we are going to continue this bolt-on strategy, continue to concentrate this strategy on the segments of activity which we think are the most value creative for us going forward, which means in the Digital part of the business. Digital meaning for us mostly cloud, in which we need to build capabilities. We're still too small in the cloud part of the business, and also in cybersecurity, which is truly the growth engine of the BDS division of the group, which is going very nicely, well, very solid double-digit growth rate.
On the structure of the H1, H2 for this fiscal year in terms of revenue and in terms of free cash flow and in terms of operating margin, H1 will be lower than the annual average in all respects. It will be better than Q4 of 2021. We will have a revenue growth which will be slightly declining, probably well in negative territory in H1, with a better profile in H2. Similarly in H1, the operating margin will be significantly lower. Positive territory of course, but significantly lower than our average. I'm not sure I have the H1, H2 cash flow structure. Uwe, do you have it in mind?
No, but it's following more or less the operating margin. Of course, we will be lower. It's the same story than the operating margin. Expect as well probably at a negative cash flow in the first half, and then a positive cash flow in the second half. Better than last year in H1, but still probably H1 in negative territory.
Great. Can I just clarify, Rodolphe, on the comment on the revenue growth, is that constant currency growth or organic?
Sorry, could you say it again, Mohammed?
The comment you made around revenue growth, is that organic revenue growth or is that constant currency revenue growth?
Well, it's a bit of both. Actually, the impact of inorganic for this year is around 1.3%. Well, it's precisely 1.3%.
Okay.
Meaning that, well, if you take the constant currency growth, it will be probably slightly negative in terms of revenue growth for H1, minus low single digit. If you want to take the constant perimeter, you subtract 1.3 percentage point to that.
Great. Thank you.
Thank you. Next question comes from the line of Michael Briest from UBS. Please go ahead.
Yes. Good morning. A couple from me as well. Uwe, just starting on the cash flow, I mean, last year, I think there was about EUR 150 million of receivables that slipped. You obviously extended, you know, customer advances by EUR 200 million. There were the suppliers and subcontractors who got EUR 200 million, and then there was the slipped Big Data business of about EUR 100 million. There seemed to be quite a few things which would be helpful to cash flow this year. Yet, Rodolphe has said that you're gonna assume working capital deteriorates by EUR 150 million. Can you sort of give some context to that, why we shouldn't see some of these things reverse from last year?
I think that's also the reasons for the width of the range, right? It's what Rodolphe mentioned is, of course, when you go to the low end of the range, besides the margin impact, you have a potential deterioration of cash collections and supplier payments. On the high end, of course, you see the benefits of what reverses from the year before. It is just that we, you know, anticipate or want to be sure that we also have that in mind if there's a further deterioration of any of the customer collections or supplier payments. 'Cause we are still in a situation, especially on the supplier side, that we are very much dependent on the supply chain.
Therefore, paying potentially earlier might be necessary to secure the delivery to our customers. On the customer collection side, you always have a volatility and also an uncertainty. That's also the reason why the range, as you saw from the free cash flow guidance, is wider than the operating margin range. In the high case, we expect, of course, that this actually has a neutral to positive impact.
Okay. Thank you. And then just on the pipeline, I mean, it's down a hell of a lot year-on-year, and I hear what you say about, you know, the Infrastructure management deals being bigger and sales cycles longer. Where would you like that number to be exiting this year? Do you think you can get it back to where it was at the start of 2020? Related to that, attrition's obviously risen quite a lot. Is there any comments you can make about current rates of attrition, whether they're continuing to increase or have stabilized or even improved? Thank you.
On the pipeline, the figures of 2021 are below the figures of 2020. That's what you are remarking. Now, what you're noticing, there are different reasons for that. First, in 2020, the pipeline figures were a bit unusually high because we had lots of renewal that year, which we do account for in our pipeline figures, in the order of EUR 4 billion in 2020, a bit smaller in 2021, which is one source of deviation. The second source of deviation, of course, as you have remarked by yourself, is the evolution in our business mix. The contracts in Digital are much smaller than in Infra, and it weighs, of course, in our pipeline figures.
The more our business mix evolves towards more Digital and less Infra, the smaller our book-to-bill, and in that respect, given the typical contract duration in Digital, we should expect to stabilize the level of pipeline we have had in 2021 into 2022.
That's helpful. Okay. All the best for the future with that. Oh, sorry, attrition.
Attrition is quite stabilized. Over the past few years, it has remained well, if you exclude the evolution which was triggered by the COVID crisis, it's almost stable, and we believe it's going to stay at that level in 2022.
Okay. Thank you.
Thank you. Next question comes from the line of Frederic Boulan from Bank of America. Please go ahead.
Hi. Good morning. Just a few questions on the data center hosting business, please. Can you share with us a little bit of granularity on trends, maybe where H1 revenue in terms of year-on-year growth, H2 What's embedded in 2022. I know the question has been asked already, but it would be great to see what was the margin of that business in 2021, and where that can go. In terms of improving the performance of the business, can you share with us a little bit what the plan is here?
Is it to increase field rate, even if it entails more competitive pricing? Is there more demand for that area? I mean, it seems to be still a very challenging market overall. Secondly, what happens if the sale is not successful? If we fast-forward a few years, is the plan to keep on running the business? If you can comment where you see the economics of that in the medium term, would be great. Thank you.
On the Infra part of the business, in 2021, we delivered a narrow operating margin while driven by the reduction in revenues, which was quite substantial, as I said, around -15% year-on-year. In the start of 2022 is in the same kind of vein as 2021, and we expect this part of the business to continue to erode at double-digit pace into at least the first half of 2022. That's what we have in our assumptions. And that's the underpinning driver of the guidance that we have in 2022 for the full year 2022. What's the driver of the improvement of performance?
First of all, there is demand on that market. Well, customers continue to have an increasingly high and sort of hybrid approach. They move to the public cloud for some of their workloads, but they want to maintain some private Infrastructure for some parts of their workloads, and it will continue like that. Our data tenders, data contracts, we just have to make sure that we get our fair share of those tenders, of those new customers. That's the first element. Second element, we need to make sure that we increase price effectively in that part of the business.
That's a business that's needed for our customers, in which we deliver a very good service, plus which is necessary for our customers, which we want very well for their sensitive workloads, and we should make sure that we monetize that. Of course, there is a work that needs to be undertaken to continue to optimize the cost line of those business and make sure that we adjust, as much as we can, the cost line with the fill rate of those Infrastructure.
If the disposal of this part of the business is not successful, which could always be the case, even though we are determined to fight hard to dispose of that business, if we can find a good and a value-creating solution for our shareholders, we are not going to dispose at any price, of course. While we would keep it, and we would make sure that we manage this business as an Infrastructure business in a declining market, which means that pricing considerations make sure that we use our importance on the market and the fact that we are a necessary facility for our customer to maximize the revenue and profitability by playing more on pricing considerations.
That's typical on Infrastructure in a declining market, when you are not able to boost your profitability by the fill rate of your Infrastructure because of the erosion in demand and volume. You have to make sure that because your Infrastructure is crucial for your customers, you are able to reflect the importance of the service you deliver into your pricing, and it will be one of the focus of our strategy going forward.
Great. Thank you, Rodolphe.
Thank you. Next question comes from the line of Neil Steer from Redburn. Please go ahead.
Morning, everybody. Thanks. I just have a couple of quick ones. The first one is on the prepared remarks, you referenced a couple of times, both in 2021 and your forward-looking commentary, that you're facing the pressures of salary increases. That's somewhat different to the messaging we hear from other companies, where they're suggesting they can use the staff pyramid and pricing to offset wage increases in terms of the impact on the margin. I'm just wondering to what extent, given the challenges of the business, you're having to overpay to recruit headcount in the company today, and if that's the case, for how much longer that has to continue? That's the first question.
On the wages, what we said actually is that, well, we see inflationary pressure on that element, wage increase, compensation increase, which is weighing on the operating margin of the company. The consideration on how to mitigate that inflation was through a pricing measures or of pricing is of course evident. What we see is that even though juniorization is an effective way to manage the workforce and the cost base of the company, it doesn't really enable to offset the inflation in premium wages across the industry, which also applies to the junior person and not only to the senior one.
Meaning that it's something which is a bit which is true across all the age group, meaning that that's not really a consideration that we see. Second element, key for us will be to make sure that we continue to attract key talents, and we pay at market price. Meaning that if market price is increasing, we have to increase our compensation also for the newcomers. The key for us and we see clear inflationary elements in that context that we have reflected in our operating margin targets.
I want to say, well, what I said earlier, and I'm maybe going to elaborate a bit more, is that of course, the key for us will be to compensate those costs that we have to support with price increase that we can pass on to our customers. On that question, the mix effect that we have today is not totally favorable and not totally comparable to what you might find at some of our competitors and or peers. Why? Because the portion of our business that we do in the Infrastructure is higher than many of our peers. In that part of the business, as you know, we have big contracts, and we have long-term contracts, which mean that it might.
Which most often don't provide for CPI or automatic price increase, adjusting to the inflation rate. Of course, in Digital, where contracts are shorter, as we said before, it's much easier to compensate for the wages increase through automatic adjustment in price for customer. In the Infrastructure part of the business, we have to work on that because long-term contracts have to be enhanced in order to compensate for that price for that wages increase. It's not that automatic, not that easy to do. We're focused on that. We are determined, but it's something we have to work hard to be able to be in a position to offset that element.
Okay, thank you. Just a couple of clarifications. The question's been asked a couple of times, but just to be clear, obviously the P&L charge for staff reorganization, rationalization, including property and integration, the P&L charge is what the P&L charge will be for this year. Perhaps most importantly is what is the cash for those three line items going to be in 2022? That's staff reorganization, rationalization, including property and integration costs. Can you give us a figure for that, please?
Yeah. It's in the same neighborhood you know, somewhere, as we said in our guidance at about 1%. What we catered for as well in our cash flow upside and downside, or let's say on the low case scenario, is that we would also go to a 1.3%- 1.4%, so to EUR 150 million. 'Cause we took already a lot of those provisions also in cash for the German restructuring into account. That's already taken in 2021.
Okay. Just to be clear, the total cash cost of those items is only gonna be just over 1% in 2022?
Yeah, between 1% and 1.4%.
Okay.
Yeah.
Okay. The provisions you mentioned you've taken EUR 280 million of contract provisions also. Could you give us a sense of the time horizon over which those contract provisions of EUR 280 million get utilized or released back to the P&L?
Of course, it's very different by contract. Of course, the largest, the longest ones, which is only 1 or 2, could go even up to 10 years. The other ones, I would say on average is 3-4 years of remaining contract durations.
Okay. Thanks. Just one very final comment. You've mentioned, Rodolphe, that in response to a question about if you can't sell the businesses you want to sell, you'll have to look about pricing and maximizing the profitability and so forth from those businesses. Given that those businesses were at break even last year, and with the revenue declines you've referred to are probably on the cusp of making losses in the first half of this year, wouldn't it be a good time now to think about upping the pricing if indeed you have the flexibility to do so?
Well, it's a bit difficult to have this kind of conversation, which is a bit of a theoretical what if you wouldn't sell. Well, first, what we said is that we're going to refocus our energy onto stabilizing that part of the business and delivering a performance which is at par with market average. With that, we have already lots of upsides to improve substantially the performance in that part of the business and to reduce the weight of that business, the drag of that business on the operating margin and cash flow generation of the group. That's the first question. Second, as we said, we continue to see disposals as one of the key option for this part of the business, but I cannot promise on that because I'm not the only one to decide.
We need to make sure that somebody is buying those activities at a price that we deem value creative for our shareholders, and also in a customer divestiture situation, which is satisfactory for our customers, because it's also a very important consideration. Last point, it's a bit theoretical, but well, we could debate on theory if you like for quite a long time. If we're not able to sell, what's the situation? The situation is that we see in the long term that hybrid cloud will be staying, meaning that we don't see all the workloads migrating to the public cloud.
What we in our conversations with our customers, we see very clearly that they will continue for some parts of their workloads, which could be the more sensitive, the more sophisticated, the ones for which they don't want to take any risk for their data or many different considerations. They will keep private Infrastructure that will be continued to be operated by us.
For those very specific activities which will be needed for our customers, we will provide them at a higher price because of the added value that's required by our customers, but also because we will be one of the few remaining players under that theoretical assumption, which is again a hypothesis for the long term, would be one of the few players staying in the Infrastructure part of the business, which will give us hopefully a leverage to pass to our customers the legitimate price for us to operate with a decent operating margin.
Okay, thanks very much.
Well, I think we are coming to the end of our call today. Well, before the concluding words, I would like to, well, even though it's not a goodbye call from Uwe, because we still have another meeting for the quarterly results in two months from now. Since the announcement was made today, I would like to thank Uwe and to express my gratitude for his dedication and professionalism in this, sometimes a bit tense moment for the company over the past two years, in which he has shown a very strong professionalism, commitment and resilience at the helm of the finance group of the company.
Again, it's not a goodbye, but I wanted to make sure that I can express my gratitude at this point in time. Well, I want to say also that we are making sure that Uwe has accepted to make sure that a smooth transition is done with his successor, meaning that everything will be managed in the most professional and the most prepared way to make sure that this is a perfectly best in class and smooth transition for the finance group of this company. That's for the comments I wanted to make on that important subject. Well, I understand there is no more question.
As a conclusion, I would like to reiterate that I'm convinced that Atos has a clear path to recovery. We will start our roadshow shortly after this call, and I'm looking forward to continuing our open dialogue and hopefully embarking you on our transformation journey. Thank you for your attention.
That does conclude our conference for today. Thank you for participating. You may all disconnect.