Atos surges 20% after reporting improved commercial activity post-restructuring

Investing.com -- Atos’ (EPA:ATOS) stock surged by 20% on Wednesday after the company reported its full-year 2024 financial results, signaling progress in its restructuring efforts and a recovery in commercial activity. 

“During the fourth quarter, our commercial activity recovered thanks to the positive change of perception of our clients, who took note of the improvement of our credit rating. This positive commercial momentum materialized in renewals or extensions of large strategic multi-year contracts,” said Philippe Salle, chief executive at Atos in a statement.

The IT company reported total revenue of €9.58 billion for 2024, representing a 5.4% organic decline from the previous year. 

This drop was primarily attributed to previously established contract terminations, scope reductions, and market softness in key geographies, particularly North America, the UK, and Ireland. 

Eviden, the company’s digital transformation and cybersecurity division, saw its revenue fall by 6.7%, while Tech Foundations, which handles IT infrastructure and outsourcing, recorded a 4.1% decline. 

The group’s operating margin also weakened, dropping to 2.1% from 4.4% in 2023, as the company absorbed higher selling, general, and administrative (SG&A) costs previously allocated to other operating expenses.

Despite these declines, the fourth quarter of 2024 marked a turning point for Atos. The company recorded a significant increase in order entry, reaching €2.7 billion, driving its book-to-bill ratio to 117%, a sharp improvement from the full-year ratio of 82%. 

This growth was largely due to renewed client confidence following Atos’ financial restructuring, which was completed in December. 

The restructuring included a €2.1 billion gross debt reduction through a debt-to-equity swap and new financing arrangements, reducing the company’s net debt to €275 million (from €2.23 billion a year earlier). 

With no major debt maturities before 2029, Atos now has the financial flexibility to focus on its transformation strategy.

The company’s performance varied across business units and regions. Eviden’s digital activities suffered due to contract terminations, but its Big Data & Security segment remained stable, benefiting from high-performance computing project deliveries in Denmark and Germany. 

Tech Foundations showed resilience despite revenue declines, as it secured multi-year contract extensions, particularly in financial services and public sector IT services.

Regionally, North America and the UK & Ireland faced the steepest declines, with revenue falling 12.3% and 14.9% organically, respectively. 

Meanwhile, Benelux and the Nordics and the company’s “Growing Markets” segment managed to post moderate growth, supported by HPC deals and major events like the Paris Olympic & Paralympic Games.

Atos reported a net income of €248 million for 2024, a stark turnaround from the €3.44 billion loss in 2023. 

However, this was largely due to a €3.52 billion financial gain from the debt restructuring, offsetting a €2.36 billion impairment charge on goodwill and non-current assets. 

Free cash flow remained deeply negative at €-2.23 billion, reflecting the end of one-off working capital optimizations.