Atos SE (ATO) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Atos Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Saleh, Atos' CFO. Please go ahead.

Yes. And thank you, and greetings, everyone. Thank you for joining us this morning to discuss our press release. In it, we've provided a market update on a number of recent developments and the progress that we're making on ongoing business transformation and the corresponding work streams that go with it. You will see on Slide 2 our disclaimers and I can go now to the key messages that you will find in this update. The first one is, I want to just really reiterate that this management team and the Board of Directors are fully committed to pursuing Atos' corporate interest and preserving the interest of all of its stakeholders. And to that end, the group strategy has been adjusted right now to address, in particular, the repayment and the refinancing of upcoming maturities while maintaining the appropriate business mix for our employees and clients that we serve as well as for our investors. The third point and message is that our ongoing exclusive negotiation with EPEI are continuing to progress. This is for the sale of the Tech Foundations. There are a number of topics that we are in discussions with them on. And it's taking longer than we had originally anticipated, and we wanted just to really continue to stress that there is no certainty that an agreement can be reached, but we're continuing to progress in those discussions. The fourth message is as we look at changing market conditions and reactions in the market, we believe that a reduction in the planned size of evidence capital increase is warranted. And then we will be working on that. In addition, point message #5 is that we've made a decision to implement an additional asset disposal program, of which the sale of BDS is a key element of that. We have received indicative offer for this business, particularly from Airbus for EUR 1.5 billion to EUR 1.8 billion. And we are going to be initiating our due diligence process and that process will begin promptly. In addition to that, our message #6 is that the initiation -- we're going to be initiating discussions with our banks to maintain financing and to provide refinancing opportunities for us, and I'll cover that just in a moment. And finally, in the update, you will see that there have been some changes to the group's Board of Directors with the appointments of 2 board members, Francoise Mercadal-Delasales and Jean-Jacques Morin, both Board members, new Board members will be strengthening the areas of the companies, particularly on the board -- in areas of strategic -- in the strategic area of finance and major transformation projects. Let me move on now to the next slide and talk about the -- how the group is adjusted, as I mentioned, the strategy in order to maintain an attractive business mix for employees, customers, creditors and shareholders, obviously -- and with the particular focus to address the repayment and refinancing of the debt obligations that are coming due, particularly over the next 12 to 24 months. To do that, the company will need to take the following actions, either individually or in combination. We had mentioned some of these things in our prior communication back in November, but obtain new bank financing would be one of those steps, looking at accessing the capital market, whether it's debt or equity, implementing a major asset disposal program, which we have just already highlighted and continued specific actions to optimize our working capital management. If I go to the next slide and give you a little bit more insight into where things stand with the Tech Foundations and particularly our discussions with EPEI. As I mentioned, there are active discussions on many parameters of the transaction. Those include price to be paid, the structure of the transaction and this transfer of a large portion of liabilities to the buyer. As with any negotiation I mentioned, there are some uncertainty related to reaching an agreement. But you will see also in the update that we are mentioning that we're also examining with the potential buyer, the potential for releasing our -- whole or in part, the commitment to participate in the capital increase, but that would be -- there will be corresponding financial conditions for us so that it would be neutral from a capital raise perspective. The -- as I mentioned also earlier, we believe that a reduction in the initially planned capital increase due to changing market conditions and reactions may be warranted for the capital raise evident. And that point that I mentioned just would be a factor in that reduction in the capital increase by looking at not only better terms out of the negotiation with the potential buyer, but also, as I mentioned, to look at legal and financial conditions that will maybe allow us to release in whole or in part their commitment to participate in the capital increase. If I move on to the topic of asset disposal program. As I mentioned, that we had originally indicated that we would have a EUR 400 million asset sales program. That was really part of the press release that was issued on July 28 of last year. In addition to that now, we are considering other asset sales and the sale of BDS is part of that and a key component of that program. We received 2 nonbinding indication of interest for that business, one of which relate only to parts of the BDS business. And the other one is for the full perimeter of the BDS business, and we have made a decision to pursue discussions with Airbus. They've given us an indicative offer of EUR 1.5 billion to EUR 1.8 billion for that business. And as I indicated as well, that we're initiating due diligence phase with them very, very promptly. And then in light of those discussions, we have not yet ruled out the sale of additional assets than BDS if needed. Moving on to the topic of bank refinancing. You should know that we have exercised the first 6 months extension of the current term loan A that will take us to the July 2024. We're initiating now new discussions with our banks in light of the market developments but particularly also with the contemplated sale of the BDS business, we need just to reengage with our banks and initiate discussions. Those -- objective of those discussions will be to maintain the level of financing commitment that we have had with them, provide some refinancing overtime and also help us to address our long-term financing needs of the business, and particularly also allowing us the financial flexibility to execute on these asset sales. And then as with any discussions of this nature, the company has the ability to avail itself of various legal mechanism to frame, but particularly to facilitate any discussions with banks or other creditors or debt holders. So in summary, this update has the purpose of, again, reconfirming our commitment to pursue actions that are always in the interest of -- to preserve the interest of all of our stakeholders. I mentioned that our strategy has been adjusted in light of having to address our maturities that are coming due over the next 12 to 24 months -- ongoing negotiation with the EPEI on the sale of the Tech Foundations. And this is really going to continuing to progress. Again, uncertain about the outcome at this particular moment. Implementation of the additional asset sales with the contemplated sale of BDS, which is really a critical element of that added disposal program. And then as I mentioned just a moment ago, the initiation of discussions with our bank that will allow us to maintain the level of financing that we have with them and provide refinancing flexibility for us. And finally, we have -- we're reiterating our commitment to continuing to have that open dialogue with all of our investors and giving you a regular update on any market development. So with that, I will just now turn the session to your questions.

[Operator Instructions] There are no questions at this time. [Operator Instructions]

All right, operator, since we do not have any questions. I'll invite you if someone wants to follow up with questions later on, you can reach to our Investor Relations team, and we will just really schedule a call to answer any questions you may have. Again, thank you for...

Sorry, Paul. If that's okay, there is 1 question now.

Absolutely. That prior comments is still valid, you can...

I'm so sorry about that.

No, you can still reach out directly. But go ahead. Question.

It's from the line of Ankit Gupta from Goldman Sachs.

Just 1 question to start with is, what is the like it implies in one of the statements you have mentioned about using a legal mechanism to facilitate discussion. Like will it be possible to further clarify what you mean here?