Atos Origin: resilient under pressure
Confident despite drop in revenues
The September 2002 acquisition of part of KPMG Consulting's business drove Atos Origin to post a net loss and declining revenue last year. While the company may also struggle initially to absorb Sema, its latest purchase, it remains well placed overall in the IT services sector.
Parisian services provider Atos Origin has announced a net loss of €169m for 2003, including a goodwill impairment charge of €225m relating to its €657m acquisition of the UK and Dutch KPMG Consulting practices in September 2002. In the light of these results, Atos Origin finds itself under pressure to successfully integrate its €1.28bn take-over of Sema Group.
Overall revenue and operating margin both declined due in part to the increased presence added in the weak consulting and systems integration markets by the KPMG Consulting takeovers. Those deals gave Atos Origin an additional 2,800 employees and an operation with sales of &euro600m in full-year 2001, but revenue fell 0.3 per cent in the 12 months to 31 December 2003, and its operating profit margin fell from 8.7 per cent to 8.2 per cent. Revenue is expected to be flat in 2004 on a pro forma basis including its Sema operation, which would put it on course for sales of €5.41bn.
However, chief executive Bernard Bourigeaud said the company will quickly eat into the new debt accrued through the Sema takeover and improve the overall profitability of the merged business. Bourigeaud's confidence is down to the more stable health of the IT services market.
If the company meets its 2004 sales targets, it could leapfrog a number of its rivals, including SAIC, Siemens Business Services and Unisys, to become the IT services market's eleventh largest player.
One of Atos Origin's strongest suits is that it makes a large percentage of its revenue from long-term outsourcing contracts. This has given its recent financial performance a more solid appearance than that of its main domestic rival Cap Gemini Ernst & Young, which is attempting to grow its outsourcing business from a consulting-heavy background. In this context, Atos can look to the future with cautious optimism.