Struggling IT giant Atos saw its share price enjoy a rare rally this morning after announcing it had secured €1.5bn of financing to fund its turnaround programme. The French company plans to split into two separate organisations later this year in a bid to reverse a decline in fortunes.
The value of Atos stock climbed 10% when the company announced the news as part of its half-yearly earnings report this morning. But this is likely to be of little comfort to shareholders, who have seen the value of their holdings fall some 70% since the start of the year.
Atos split could transform company’s fortunes
Atos is one of France’s biggest technology companies, and a key supplier to private and public sector organisations across Europe and beyond, delivering IT services and expertise in growing technology areas such as high-performance computing.
But like many traditional IT services providers, it has struggled with the transition to providing cloud services. A new CEO, Rodolphe Belmer, was recruited last year to deliver a new strategy for the business, but he reportedly clashed with the Atos board, and in June it was announced that Belmer would be leaving in September, when Atos announced plans to split into two separate companies.
Two deputy CEOs have been appointed to eventually lead the new businesses: Nourdine Bihmane will head up what is being called Tech Foundations, the company’s legacy IT infrastructure services, while Philippe Oliva will take charge of the company’s big data, cybersecurity and digital products under the name Evidian.
Today’s announcement says that Atos “has successfully secured a new debt package, which will provide the group with the funding it needs during the interim period before a potential split into two listed companies, and significantly reinforces its liquidity.” Banks will provide €1.5bn to support the process, with documentation to be signed in the coming days, Atos says.
In a joint statement, Bihmane, Oliva and Diane Galbe, the company’s chief strategy and sustainability officer, said: “Our envisioned transformation plan is now fully funded for the interim period before the contemplated split into two listed entities, and our liquidity is significantly strengthened.”
Atos results show the scale of the challenge
The company’s problems were laid bare in its half-yearly results, which show that it spent €555m in the first half of the year, while revenue experienced only a 2.6% increase year-on-year, up to €5.5bn. It reported a net loss of €119m.
Bihmane, Oliva and Galbe told investors that “on top of usual seasonal movements, operating margin and free cash flow were impacted in H1 by inflation and supply chain-related headwinds”. Tech supply chains continue to be impacted by Covid-19 outbreaks and related lockdowns in China, as well as the war in Ukraine.
However, the company says it expects a better second half of the year, with the number of orders it has received increasing. It has signed several high-profile contracts in recent weeks, including a deal with Nato to boost its cybersecurity, and it will be supplying a pre-exascale system, based on its BullSequana HPC architecture, to the Barcelona Supercomputing Centre as part of the European High Performance Computing joint undertaking, which aims to put Europe at the forefront of the development of the next generation of supercomputers.