Atos shares tumble as free cash flow expected to miss target

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Shares in indebted French IT group Atos fell as much as 16 per cent on Monday after the company said it expected to miss its target on free cash flow for the year.

Atos said its cash flow situation had deteriorated and free cash flow would come in about €100mn below the previous target, but reaffirmed it would meet its other financial benchmarks amid growing concerns about the group’s liquidity.

It also announced that chief financial officer Paul Saleh had been promoted to chief executive, replacing Yves Bernaert after only three months in the job as the group struggles to restructure and cut its debt.

On Sunday French newspaper Le Figaro reported that Atos had asked a French commercial court to appoint an agent to oversee negotiations with its creditors. The company on Monday said it had not filed a request, but that it could use such legal mechanisms in future. 

Atos shares have lost more than 94 per cent of their value in the past three years as the business has struggled amid a rapid churn of executives and difficulty defining and executing a strategy to improve performance and cut debt. Standard & Poor’s downgraded the company’s credit rating in November citing growing liquidity risks.

The company had previously forecast negative free cash flow of €1bn. Shares fell to slightly more than €4 in early trading.

Recently appointed chair and former UniCredit chief executive Jean Pierre Mustier is working to salvage a deal to split the business while negotiating to secure financing from its creditors ahead of €2.25bn in debt coming due in 2025. 

Under the current plan, Atos is supposed to sell its lossmaking legacy business dubbed Tech Foundations to Czech billionaire Daniel Křetínský. However, that deal proved contentious with shareholders, who thought Křetínský was getting overly favourable terms, as well as with some French politicians due to the militarily sensitive nature of some of Atos’s programmes. 

But talks to renegotiate terms with Křetínský have dragged on longer than expected and “were not guaranteed to end in an agreement”, the company has acknowledged in recent weeks. Atos said it would consider additional asset sales in order to meet its obligations, as well as a back-up measure should the deal with Křetínský fall apart.

Earlier this month, Airbus announced it had entered due diligence for an offer worth up to €1.8bn for Atos’s prized big data and cyber security unit, called BDS. The negotiations to sell BDS mark a change in strategic direction under Mustier, as his predecessor Bertrand Meunier had resisted selling the group off in parts. 

The talks are not yet exclusive and could become competitive, according to people with knowledge of the process. Atos said it had received two expressions of interest for BDS, one of which concerned only part of the division, without disclosing the name of the other party.

French defence electronics group Thales, which has jet-fighter maker Dassault Aviation as a big shareholder, has been interested in BDS in the past as part of its effort to expand its cyber security business. Thales has been considering its options in recent weeks, one person briefed on the situation said.

Thales did not confirm or deny its interest in BDS earlier this month, but said it was focused on strengthening its core business areas of “aerospace, defence, and security and digital identity”.