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Continuing the theme of its Q1 results (see Managed services & BPS put Atos UK on top), the UK remained the star of the show in H1 (to end June 2011) for the newly-rebranded AtoS (we had to double-check we were looking at the right company when we saw the logo!).
Indeed, the UK was the only geography to report revenue growth – up 3% to Eur458 million. Managed services (up 6.6%) and Hi-Tech Transactional Services (HTTS/BPS – up 7.0%) drove the growth due to public sector orders. One such contract (for IT managed services), with the Highlands and Islands Enterprise (HIE), the Scottish Government’s economic and community development agency, commenced on 1st April. There was also slight growth in medical BPO, due to the increase in volumes from existing customers. In contrast SI revenues were down 1.5%; this was also as a result of the UK public sector, highlighting that the demand for ‘project’-type work is still weak. The inference is that consulting was also down in the UK. The operating margin in the UK was 7.5% (down from 8.2% in H110).
Across the Group it was a similar story in terms of the ‘ups and downs’: Managed Services, HTTS, and Medical BPO all up (0.6%, 3.3% and 0.9% respectively) but SI and consulting both down (SI by 2.6% but consulting once again the worst performer – down 16.9%). Resultantly, total revenue was down 0.7% to Eur2,476 million. Atos claims that the drop in SI revenues is due to adhering to “strict criteria for gross margin” particularly in the UK and France. We doubt that’s the full story though; in the UK public sector it’s still proving pretty tough for suppliers looking for work outside of the major outsourcing deals (regardless of the operating margin). The good news though, is that this approach has pushed the SI business out of the red (-2.0% operating margin in H110 vs. +2.8% in the reported half).
Of course, as of 1st July 2011 Siemens IT Solutions & Services (we assume the capital ‘S’ of the new brand!) became a fully fledged member of the AtoS family. The forward picture in terms of combined revenues is confusing, as new entities such as China, Turkey and Russia weren’t transferred with the rest of the business on 1st July; they won’t contribute until Q4 at the earliest. With that in mind, we can expect Group revenues of Eur6.8 billion for the full year (Eur50 million less if those geographies were included for the full six months). In terms of profitability the focus will now turn from the Top program (started in December 2008) to the Top2 program, which is set to “deliver synergies ahead of schedule”, resulting in an improved operating margin forecast for the full year of 6.2%.
