Good day, and thank you for standing by. Welcome to the Atos H1 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chairman and CEO Jean-Pierre Mustier. Please go ahead, sir.
Thank you very much, and, good morning to everybody. Thank you for joining us, and to discuss our half year 2024 result. On the call today, will be, Carlo d'Asaro Biondo, our group COO, as well as, Jacques-François de Prest, our group CFO. Before we start, I just want to draw your attention to the customary disclaimer that, you find on this slide. Now, for the agenda, I will share some key messages related to our first half 2024, then Carlo will cover in more details our performance by lines of business and region, and then Jacques-François will go over our financial statement for the half year. And then I will come back with closing remarks, and we will take your questions.
As far as the highlight of the semester are concerned, first, the opening of the accelerated safeguard proceedings by the Commercial Court last week marked another important step in Atos' financial restructuring process. In three words, Atos is saved. We now have an agreement with our financial creditors that secures the financing for the short and long term and provides ample liquidity to run the company. This plan establishes strong foundation for the company future, with a total debt reduction of EUR 3.1 billion and no debt maturing before the end of 2029. With this stronger capital structure, we target an improvement of our credit rating profile to double B by the end of 2026.
This is really the start of a new period of commercial recovery and the development for the group, with reinforced focus on serving our customers through innovation and high quality of service. Second, our revenue and operating margin for the first half of 2024 are in line with the business plan we shared with you on April 29. We are investing for our future, and our free cash flow for the semester reflects increased investments for customer and one-off reduction, as announced, of our working capital optimization. Finally, on the operational side, we have seamlessly delivered the UEFA Euro Football Club, and as you know, our teams are currently fully mobilized for the Paris Olympics and the Paralympic Games. Our commercial activity was resilient during this semester. Our success rate on contract renewal was 88%, which demonstrates the confidence of customers in Atos.
Let me now give you an overview of our first half 2024 financial performance. Group revenue was EUR 5 billion, down 2.7% organically compared with the first half 2023. Eviden revenue was affected by the general market slowdown in the Americas and by contract scope reduction in the United Kingdom. Tech Foundations revenue decreased due to lower scope of work with certain clients in America and Central Europe. Group operating margin in the first half of 2024 was EUR 115 million, representing 2.3% of revenues, compared with 3.3% in H1 2023. The group operating margin was impacted by the allocation to the business of SG&A costs previously allocated to other expenses below the line as part of the separation project in prior year. Eviden operating margin decreased beyond the allocation of SG&A costs.
The profitability was also impacted by revenue decrease and lower utilization of resources. Tech Foundations profitability improved. The business benefited from the continued execution of its transformation program. There was also a positive impact from the accelerated reduction of underperforming contract via renegotiation and improved delivery, which more than compensate the SG&A cost allocation. Group free cash flow was at -EUR 1.9 billion for the first half of 2024, reflecting the planned reduction of EUR 1.3 billion of working capital optimization compared to December 31, 2023. In addition, a decision was made to prioritize client capital expenditure and R&D, which will translate into future earnings, and conversely, to save on restructuring costs in order to manage our cash position. This translated into higher capital expenditure for H1 2024 compared to H1 last year and to lower restructuring costs.
Now, I hand over to, Jacques-François. Oh, to Carlo, sorry.
Thank you, Jean-Pierre, and good morning, everyone. Jacques-François will cover the financial elements more in details later on, and I would now like to share our key business highlights. Let me change slide. Let me introduce our H1 and business highlights by providing some updates on our commercial activity. First half of the year was soft for the industry in general. We had, nonetheless, in the course of the semester, several commercial successes, with, in particular, four large contract renewals and two new customers. Also, a limited number of customers decided to leave us, and some contract awards were delayed, as some customers are waiting for the formal finalization of our financial restructuring process. In this context, we had intense customer engagement and were able to secure a contract renewal rate of 88%.
As stated in this context, commercial activity was lower in the first half of 2024, with a book-to-bill ratio of 73%, compared with 93% in H1 2023, as contract awards were delayed. Eviden book-to-bill was 85% in the first half of 2024, and Tech Foundations book-to-bill was 63%. I would like to highlight 4 illustrative deals, including renewals and wins. We signed new deals, 2 deals, to provide application services to 2 large customers in Europe. We have also signed a 4-year renewal contract with EUROCONTROL to provide mission-critical systems, as well as hybrid cloud and security services. Lastly, we signed a 3-year renewal contract with a U.S.-based used vehicle retailer to deliver computing, hosting, and networking solutions.
Those example wins illustrate our commercial strategy focused on contracts with fast implementation and on large contract renewals leveraging partners. Turning now to our revenue performance by region. As you can see, our business has well-balanced geographic mix, with Northern Europe and APAC representing 31% of group revenue, Americas representing 22%, and the rest of Europe, 44%. Let me provide more details on each regional business unit in the next slide. Southern Europe was stable organically. Eviden revenue grew low single digit. Digital activities grew, benefiting from the ramp-up of large contracts in Spain and with a major European utility company in France. Revenue in BDS grew, thanks to HPC deliveries, high-performance computer deliveries in France. Tech Foundations revenue declined low single digit due to contract completions with select customers.
Americas revenue decreased by 6.9% on an organic basis, reflecting the current general slowdown in market condition, as illustrated by the performance of some of our peers. Eviden revenue was down low double digit, impacted by contract completion and volume decline in healthcare and finance. The delivery of a supercomputer project in South America in H1 2023 also provided a higher prior year comparison basis for BDS for this year. Tech Foundations revenue declined low single digit due to contract completion as well, and scope reductions with select customers. Central Europe now. Central Europe revenue was down 4.5% on an organic basis. Eviden revenue declined mid-single digit, impacted by project delay in a mission-critical system and contract ramp downs in manufacturing and defense.
Tech Foundations revenue declined mid-single digit, reflecting volume reductions in manufacturing and in banking sectors, and delays, mostly that, delays in public sector spending. Northern Europe and Asia Pacific revenue decreased by 1.3% on an organic basis. Eviden revenue declined low single digit. The revenue increase at BDS due to new business in advanced computing with an innovation center in Denmark, was offset by the decline of digital revenue, reflecting a lower demand from public sector, healthcare, and insurance customers. Revenue in Tech Foundations was down single digit, with volume decline in healthcare, insurance, and public sectors. Let me finish by talking about headcount evolution. You can see details on the slide. First, we were able to hire 1,900 employees in our global delivery centers, thanks to the certification program that we've put in place.
Second, we managed to adjust our headcounts to the business environment. And third item, to be noted, our attrition was lower than in H1 2023, and in line with our historical ratio. With that, in turn, I turn the microphone to Jacques-François, who will comment in more details our financial results.
Thank you, Carlo, and good morning to you all. Our consolidated interim financial statements were established as usual on a going concern basis. I will now give you a snapshot of our key financial numbers for the half year 2024. Group revenue amounted to EUR 5 billion in the first half 2024, down -2.7% compared with the first half 2023. Down -4.2%, and Tech Foundations declining by -1.4%. Group operating margin was EUR 115 million, representing 2.3% of revenue, down 100 basis points compared with H1 2023, with contrasted performance between Tech Foundations, which improved in the first half, and Eviden, mainly impacted by market softness. Our H1 2024 revenue and operating margin, as well as cash, are in line with the business plan that we presented on April 29....
Free cash flow was -EUR 1.9 billion for the half year, largely explained by EUR 1.3 billion lower working capital optimization at half year, compared with December 2023, as planned. Also, we decided to increase our investments and conversely, to lower restructuring costs, as Jean-Pierre explained in his introduction. Net debt was EUR 4.2 billion at the end of June 2024. Net loss group share was EUR 1.1 billion, mainly impacted by goodwill and other intangible impairment charge of EUR 1.6 billion. I will now comment more in detail, these numbers. You can now see on this page, the detail of the revenue growth. This revenue bridge is explained mainly by the revenue organic decrease of 2.7%, that Carlo commented, as well as scope disposals last year.
This leads us to a half-year revenue of EUR 5 billion. Group operating margin was EUR 115 million, representing 2.3% of revenue, down 100 basis points compared to H1 last year. This margin decrease comes mainly from the allocation to the business of SG&A costs, which were previously allocated to other expense as part of the separation project, which was conducted last year. Eviden operating margin was EUR 58 million or 2.4% of revenue, down 230 basis points. Beyond the allocation of the SG&A cost, profitability was also impacted by revenue decrease and lower utilization of billable resources. Tech Foundations' operating margin was EUR 57 million or 2.2% of revenue, up 30 basis points organically. The business benefited from the continued execution of its transformation program.
There was also a positive impact from the accelerated reduction of underperforming contracts via renegotiation and improved delivery, which more than compensated the SG&A cost allocation. Let me now comment on the financial elements of the rest of the P&L. Net loss amounted to -EUR 1.9 billion, and I will comment upon the key elements there. Firstly, reorganization costs amounted to EUR 60 million, a strong reduction compared with the EUR 430 million cost incurred last year. Secondly, goodwill and other non-current assets impairment amounted to EUR 1.6 billion. The group performed impairment for this June closing, considering the ongoing financial restructuring of the group and the resulting offers received. At risk of stating the obvious, I remind you that this impairment charge is a non-cash item.
Thirdly, in the first half of 2024, other items were a net expense of EUR 150 million. Those items mainly included an additional loss on past disposals for EUR 55 million and advisors' fees on the financial restructuring of the group, and advisors' fees on asset disposals for EUR 51 million. Net financial expense amounted to EUR 175 million. The net cost of financial debt was EUR 73 million, an increase by +EUR 33 million due to higher interest rates on the Term Loan A, and the multicurrency RCF, for which additional portions were drawn in the second half of 2023 and in January 2024. Also, interest income was lower as a result of a lower level of deposits. Turning now to our free cash flow statement. Free cash flow was -EUR 1.9 billion for the half year.
Let me comment on the key elements there. Firstly, the free cash flow for the semester reflects the planned reduction by EUR 1.3 billion of working capital optimization compared to December 31, 2023. Details of these working capital actions are provided in the following slide. Decision has been made to prioritize clients' capital expenditures on R&D, which will translate into future earnings, and conversely, to save on restructuring costs in order to manage our cash position. This translated into EUR 168 million higher capital expenditures in H1 2024, compared to H1 2023, and to EUR 103 million lower reorganization, rationalization, and integration costs. You can see on this slide the various components of working capital optimization reduction of EUR 1.3 billion. For your information, this is not written on the slide, but that's on top.
Working capital optimization amounted to EUR 1.6 billion at the end of H1 2023, a year ago. To conclude my comments on cash flow, let me give you clarity on the other change line. Cash out related to other changes was EUR 167 million, stable compared to H1 2023. This amount included EUR 96 million of costs incurred on onerous contracts, EUR 34 million of advisors' fees paid related to the restructuring of the group and to asset disposals, and EUR 13 million of legal costs. In conclusion, the group reports a negative cash flow of -EUR 1.9 billion in the first half 2024, reflecting primarily stronger investments on customer contracts and a EUR 1.3 billion reduction in our working capital optimization as planned. I would like now to comment on the financial restructuring plan of the group.
As a reminder, we announced on July 24, the opening of an accelerated safeguard proceedings by the Specialized Commercial Court of Nanterre . This approval from the court is a major milestone in securing our company's future, and it is based on strong financial terms. Firstly, this will provide sufficient liquidity to fund the business at near and long term. We also secured EUR 800 million interim financing, providing the liquidity necessary to fund the business until close of the financial restructuring plan. This interim financing will be refinanced at closing, when the EUR 1.7 billion new financing will become available. Secondly, we will reduce significantly our net debt by EUR 3.1 billion, through two point nine billion euro of loans and bond debt converted into equity, and EUR 233 million capital increase open to existing shareholders, which is backstopped.
Thirdly, and finally, we will push out our debt maturity to 2029 and beyond, which will provide more financial flexibility to operate business. Thank you very much for your attention. I will now turn the mic back to Jean-Pierre for the conclusion. Thank you very much, Jacques-François. So let me now close with some key takeaways. First, the opening of the accelerated safeguard proceedings marks the completion of an important step in the finalization of our financial restructuring process. This is the start of a new period of recovery and development for the company. Second, we are also fully focused on restoring trust with our clients and partners, and on leveraging the best of Eviden and Tech Foundations capabilities to continue growing our business and deliver unmatched value and innovation to our customers.
And finally, I would like to take this opportunity to thank our 92,000 employees for their ongoing strong commitment. And with that, I would like to thank you and turn the call back to the operator for the Q&A session. Operator?
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, if you would like to ask a question, please press star one and one on your telephone. Please stand by while we compile the Q&A roster. Thank you. We will now go to our first question. One moment, please. And your first question comes from the line of Nicolas David from ODDO BHF. Please go ahead.
Yes, good morning. Thank you for this insightful presentation. I don't think there's any comment regarding the outlook. Could you give some insight about what you see for H2, and maybe comment on the outlook compared to the one which was exposed at the time of the financial restructuring, the business plan, which was including an organic decline of -3.3% for 2024, a margin of around 2.9%, and I think a free cash flow of EUR -600 million, excluding unwinding of specific working capital optimization. So could you comment on this outlook? And the second question is, what do you plan to do on the working capital optimization action in H2?
Do you plan to unwind the rest or, on the contrary, could you intend to increase or do more actions? Yes, this would be excellent. Thank you.
Thank you for, thank you for this very good question, Nicolas. Well, a couple of questions. The first one, I understand is, what's the outlook, for H2 compared to the, what we call the updated business plan, which are the latest numbers we have, we have shared with the market on the twenty-ninth of April. So here I can confirm that, H1 is trading in line with this business plan, and our outlook for H2 has not changed. So we are on track to delivering this business plan, or the numbers as, as they have been communicated. That's the answer for the first question. On the second question, in terms of working capital, what are our plans?
We have said already in the last two result earnings release that this is our plan to unwind and to no longer repeat this one-off working capital optimization specific actions. So we have implemented that already somehow in Q1. We are keeping, as you can see, the numbers today, the unwind and the decrease of these actions is pretty significant today, and this is absolutely in our plans to keep on this trend going forward.
All right, and could you clarify that the EUR 600 million was excluding those, unwinding, this unwinding?
Yes, that is correct.
So if we want to make another assumption, we take the 600 minus -600 and -1.8 to get to the-
Your assumption is correct, Nicolas. Yes, we stated in our numbers from the twenty-ninth of April, that this was excluding the unwinding of working capital actions.
Perfect. In terms of commercial activity, how do you see the book-to-bill evolving in some incoming quarters? Do you expect a further recovery and be back to a level which would be closer to 100% in coming quarters?
... Well, I will just give you a brief answer, and Carlo might add. We have now, you know, a focus on client growth and development and restoring trust with our clients, with, you know, the the funding of our accelerated safeguard procedure. We see already, you know, early signs of, clients, you know, looking at us with, a different, approach, and, you know, going back to normality, if I may say. So, you know, this should have positive consequences on, our ability, you know, to, develop, new activities and new contract, with, with our clients, and the team is now fully focused, on doing that. Carlo, I don't know if you want to,
No, I want to confirm-
Yeah.
I want to confirm, Jean-Pierre, what you just said. What I can outline is we've seen the sales pipe and the order entry re-accelerate significantly in the second part of the semester, in particular, in June and August. We know that there's been delays in customer to take decisions because they are happy with our quality of service, so they wanted to be reassured before to renew. So these two elements will certainly help the order entry to increase. And we know as well, that with the return to normality, obviously, we'll be back into the tenders and the normal activity. So these three elements will, for sure, bring us back to a situation closer to our normal book-to-bill, and I expect that to happen now, pretty fast.
Perfect. That's helpful. Thank you. Thank you. Once again, if you would like to ask a question, please press star one and one. We will now go to our next question. Your next question comes from the line of Aditya Buddhavarapu from Bank of America. Please go ahead.
Hi, Jean-Pierre, Carlo, thanks for taking my questions. Just a couple from my side. You spoke about the market softness in North America. Could you maybe just talk about what you're seeing in terms of the broader demand picture in the US for both Eviden and Tech Foundations? And maybe just also how you think about the outlook for the second half of the year. And then second, you also mentioned a few regions where you had the impact from contract completion. So what should the impact from that be for the second half, again, at the group level?
Carlo, do you want to take these two questions? Carlo, are you still on the line?
I am. I'm here.
All right.
I was sorry. I thought I was speaking only me.
Yeah.
In the U.S., we see a phenomenon, which is that customers, in particular in the infrastructure deals, are rethinking about their approach, given the importance of AI and given the growing importance of hybrid and, you know, let's say, less complete usage of public cloud. This is delaying decisions. It's a market trend, and-- But it's also an opportunity because it implies that, rethinking that, we do that with the customers. So this is the first part. The second part, on the outlook of the second part of the year, our sales pipe has increased significantly in the last two months, and the number of deals around GenAI has increased very significantly, as well as hybrid cloud. So I hope in the second part of the year, given also the improvement of our situation, to see recovery in our numbers.
For the third part, no, I don't believe there will be very significant reductions of scope in the coming future. I think we saw the maximum, the biggest part of that. Thank you.
Got it. And maybe just one follow-up on BDS, that was down low single digits in the first half. I know you mentioned a delay in ramping up a large project in Europe.
Yeah.
Could you just maybe talk about BDS outlook for the second half, and when that large project should start to contribute to revenues? Is that maybe in two years or 2025?
BDS sales in high performance... Do you hear me?
Yeah.
Okay. BDS sales in high performance computing have been very successful. When BDS sales in high performance computing are successful, there is an initial part where we build the machine, do research and work for the machine, which obviously has a cap, means capital expenditure and cost. And then there is reaping the benefits when you deliver. So we will deliver the significant sale in Central Europe next semester, and it should be, you know, significant return for us. Then, as you said, we sold also in South America, and we have other sales around the world, one in India, and we have other sale, another sale coming up. So we will see the HPC activity during the next semester and the first semester of next year, reaping the benefits of all that by delivering those contracts.
All right, understood. Thank you.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. That is star one and one to ask a question. There are currently no further questions. I will pass the call back to you.
Thank you very much. So, you know, let's close the call here, and let me just remind you that, you know, we see, as I mentioned in my conclusion, a new phase for Atos, where we're going to focus on industry development, client growth, and making sure that we can restore the trust of our clients to grow our activities. So thank you very much, and we are, of course, always available to answer any of your questions. Bye-bye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.