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spk07: Thank you for joining us this morning to discuss our full year 2023 results. On the call with me today is Carlo Desaro-Biondo, our group COO, and Jacques-Francois Deprest, our group CFO. And for the agenda today, I will share some key messages related to our accomplishments in 2023, as well as current strategic initiatives underway. Carla will cover in more details our performance bylines of business and regions. And then Jack Francois will go over our financial statement for the year. I'll come back with closing remarks, and then we'll take your Q&As. Before we get started, I want to draw your attention to the disclaimer that you'll find on slide three. And then you see the agenda. So let me move on to review the year. year end and you can see from the slide, we delivered group revenue and operating margin results that were in line with our full year guidance. This is my key messages. Our evident business reported continued growth and increased profitability in an environment where we saw a market softness in the Americas and in Northern Europe, particularly during the second half of the year. For the fiscal 23 tech foundations executed on this transformation plan, which was based, if you recall, on three pillars, refocus, recover, and rebound. And this has translated into a strong improvement in profitability and increased win rates with existing and new customers. Free cash flow for the second half of the year was slightly below our guidance, as we stated previously, and that was primarily due to deal slippage at year end. For the full year, free cash flow was negative 1.1 billion euros, reflecting higher restructuring, separation, and transformation costs, as well as lower working capital actions compared with the prior year. Cash at the end of the year was 2.4 billion euros, including the benefit of working capital actions of 1.8 billion. Last year, our working capital actions were 2.3 billion. 2023 was a pivotal year for Atos. as we successfully executed on our plan to create two distinct operating units in tech foundations and evidence. Each is well positioned to compete and grow in their respective markets. We're now focusing on leveraging the strength of our business offerings in those two businesses through our coordinated go-to-market strategy. We are evaluating strategic alternatives following the end of our negotiation with EPPI for the potential sale of tech foundations and with Airbus for the sale of evident BDS business. Another key message is that we're in discussions with our banks and bondholders on their refinancing plan that will address our debt maturities. Those discussions were progressing with the support of an ad hoc mandataire and the theory which is the Committee Interministerielle de Restructurisation Industrielle of the French Ministry of Finance and Economy. And now those discussions are going to be progressing within the framework of an amicable conciliation procedure. We're targeting a global refinancing agreement by July of this year, and we will present the parameters of our proposed refinancing framework to our creditors the week of April 8th, and we will provide an update to the market around that time. You should know that we have sufficient liquidity to operate our business until a refinancing agreement is reached, and we are working with our financial creditors on an interim financing that will provide additional liquidity cushion for us. And finally, we also received a favorable decision on Trizetto case earlier this month, vacating entirely the compensatory award. Now let me turn to our full year results. On this slide, we're showing our revenue operating margin and free cash flow for fiscal 22 for reference. Next to it, you'll see that guidance for fiscal 23. And in blue, our results for fiscal 23. And as I mentioned earlier, we met our revenue and OM guidance for the year. Group revenue was 10.693 billion euros, up 0.4% organically year-over-year. Operating margin for the group was 467 million euros, or 4.4% of revenue, up 170 basis points compared with the prior year. Both Evident and Tech Foundation delivered results in line with guidance and better than the prior year. Free cash flow for the group was negative 1.2%. 1 billion, roughly, euros slightly below our targets for the year. And free cash flow, as I mentioned, for 23 reflected the higher restructuring separation and transformation costs and lower working capital actions compared with the prior year. Now, as I mentioned, we have two lines of businesses, both we're investing to position them to expand their market leadership and bring unmatched value and innovation to our clients. Evident is a leading global player providing mission-critical IT services. Evident is a 5.1 billion euro business with more than 47,000 employees operating in 45 countries. The business has strong intellectual property with over 2,100 patents and over 50,000 certification in digital, cloud, and next-generation technologies, including Gen AI. 20% of our top 30 clients have relationship with us over 10 years. And we have an average renewal rate of close to 90% and more than 97% of our revenues generated from existing clients. When you look at our key offerings in Evident, they range from transformation, acceleration, smart platforms, cloud migration and operations and sustainability in our digital business. And for BDS, is our offerings in digital security and advanced computing. Underpinning all of these offerings is our Gem AI capability. The key strategic priority for the business are modernizing client applications, delivering digitization at scale, and providing actionable insight to clients through data analytics and artificial intelligence. The business is also a leader in digital security. identity management, threat identification, and protection. And in advanced computing, Evident introduced the first FSKL computer in Europe, and we're introducing GenAI high-performance computing as a service. Now, all these offerings are well-recognized by the industry analyst community, including Gartner, IDC, Everest Group, just to name a few. Turning to Tech Foundation, the business is 5.6 billion euros in size with more than 48,000 employees in operations in 69 countries. The business has a proven track record of serving clients with their mission critical operations, and the business has a balanced offering and geographic mix. The average relationship across the top 170 clients is 10 years, with a 90% renewal rate. And the net promoter score for this business is 20% higher than industry peers. Tech Foundation is a leading IT infrastructure player with key offerings in hybrid cloud, infrastructure, technology advisory, customized services, business platform, and digital workplaces. And our key strategic opportunities and priorities, actually, in that business is to manage clients' workloads in a hybrid cloud environment, transform operations powered by AI, focus on next-generation offerings, and aligning talents on post-generative AI opportunities and maintaining our leadership in helping clients in their sustainability and D&I initiatives. Now, let me turn the call to Carlo, who is going to give you more information on our performance in fiscal 23. Carlo?
spk03: Thank you, Paul, and greetings to everyone. I'd like to go into more details about operational results for fiscal 23. Revenue at Eviden was 5.1 billion euros last year, with a 2.9 organic growth. BDS revenue growth reached mid-single digits, driven by digital security and by significant contracts in high-performance computing, in particular in Europe and in India. With two of the highest-performance computers in the top 10 globally, Chineca and Barcelona, Eviden is now the number one provider of HPC in Europe, India, and South America, and number two worldwide in high-end critical and in-memory computing on-premises or in the cloud. This technology is absolutely key at a time where GNI opportunities are arising everywhere. Our digital business line showed growth, strong revenue growth in Europe, driven by demand for specialized application development, application management, and next-generation products and services. However, America has shown softness in H2 in big, complex projects due to a general market slowdown in the U.S. as clients take longer to reward new business. Turning now to profitability, our operating margin in Eviden was $2.94 million euros last year, representing 5.8% of revenue and a plus 110 basis points improvement over 2022. There was also a sequential improvement through 2023, with operating margin reaching 6.3 in the second half. We are benefiting from cost take-out actions, better utilization of biddable resources, and higher absorption of fixed costs in advanced computing. While driving growth and profitability, we have continued to invest in our product design, in particular in GNI-related solutions and cloud frameworks. As an example, we are embedding GNI in our solutions, which is allowing us to deliver greater savings to our clients. And our centers in India are continuing the developments of that solution with success. To go now to book-to-bill in Eviden, our book-to-bill was 94% for the year, with the Q4 landing just at 100%. On the pipeline development in Eviden, I want to call out a couple of elements. First one, we are increasing our focus on smaller projects in order to translate into faster time to revenue. We've been very careful in qualifying opportunities better and solutioning life's complex project to reduce the risk of execution. Having said that, our win rate for large deals has gone up by 10%. Let me now comment two of our recent wins in Q4. In Spain, we will implement for Canal de Isabel a new commercial system in SaaS mode, as well as the associated support and maintenance. This is a 51 million euro contract over four years for the water distribution in the 6.5 million people living in the Madrid community. All billing, repairs, service requests will be handled by this platform, which will be based on SAP S4 HANA in Microsoft Azure. The other one I would like to bring and to highlight and to bring to your attention, is the very first exascale supercomputer that will be delivered in Europe by Evident BDS to the Jülich Supercomputing Center in Germany. This is a 500 million euros project where Evident will build the first European system able to surpass the threshold of 1 trillion calculations per second. It is a key milestone to ensure Europe's scientific excellence and industrial independence. Jupiter, which is the name of the supercomputer, is designed to tackle the most demanding simulations and compute intensive application in science and industry. For instance, human brain digital twins, most critical climatology research and large AI models training for scientific community. This system is indeed one of the largest AI training machines in the world with more than 23,000 GPU interconnected. And very important, we will also provide the dedicated data centers through our innovative modular data center architecture MDC to deliver exascale machines through eco-friendly containers.
spk05: Let me now turn out to Tech Foundation.
spk03: Revenue was 5.6 billion euros, decreasing organically by 1%, sorry, by 1.7%, reflecting the deliberate reduction in non-core activities. including the decrease of hardware and software resales that are low margin, which were down by 90%. We have also reshaped our portfolio by disposing of our UCC business in H2. BPO activities were up year on year, but this was due to a one-off favorable comparison effect. Growth in digital workplace and technological services helped to partially offset the structural decline in the on-prem outsourcing. Tech Foundation operating margin reached 172 million in 2023, representing 3.1% of revenue. This is a strong improvement of 210 basis points compared to 22, reflecting the quality of the execution of the transformation program, including the shift of the business portfolio toward higher margin new offerings. There was also a positive impact from the accelerated reduction in underperforming contracts via renegotiation and improved delivery. Better pricing of new business and continued reduction of low margin non-core activities such as resale. Our operating margin also benefited from the delivery of our workforce adaptation plans, especially in Germany. While delivering and probably overachieving on our transformation, we have also improved customer satisfaction and delivery quality parameters and developed full next-gen infrastructure offering, allowing to propose multi-cloud and AI-based services to customers who are looking to access to innovate. On book-to-bill, while we have successfully managed our top-line evolution, the book-to-bill has improved sequentially quarter-on-quarter, reaching more than 117% in the fourth quarter, the highest recorded in the last three years, mostly due to a contribution of new services or new logos. On the full year, book-to-bill reached 94% versus 75% in 2022, so a significant improvement. The renewal rate is higher than 90%, testifies to the quality of service the company provides, while the wins of important new contracts in all our geographies demonstrate the validity of our multi-cloud and integration bridge approach. Regarding the Q4 contracts wins, I would like to comment specifically HSS in Australia and LCH in the UK and Ireland. We were able to win this opportunity thanks to our hybrid cloud infrastructure offering displaying our latest services orchestration layer. This demonstrates how our teams are smoothly integrating new offerings while leveraging some client intimacy to close larger transactions. I want to take the opportunity to thank them. Also, our digital workplace division remained very active with strong wins, including large global new logos. Let me now quickly turn to geographies, starting with Southern Europe. Southern Europe revenue was 2.284 million, 2 billion, 2.284 million, up to 3.9 organically. High single-digit growth in evidence was driven by strong performance in big data and cybersecurity and HPC. Digital also grew, benefiting from new customers' contact contracts as well as demand for application modernization and decarbonization solutions. Tech Foundation reported a low single-digit decline. The solid performance with public sector clients was offset by volume reduction in the aerospace and transport and logistics sectors. In the Americas, though, Revenues was $2,441,000,000, down 71% organically, reflecting a general slowdown in market conditions, delay in contract awards, and tougher comparison with the prior year. Both evident and tech foundation business were down year over year in Americas. In advanced computing, the delivery of HPC in South America in 2002 could not be compensated by another HPC delivery in 2023. while softer market conditions led to volume reduction in digital, particularly in finance, transportation, and healthcare. Tech condition was impacted by contrast scope reductions, notably in pharmaceutical and finance verticals. In Central Europe, revenue was 2,506,000,000, increasing by 2.2 organically. Solid double-digit growth in digital and BDS was driven by strong demand in the public and automotive sectors. Revenue decline in tech condition was due to lower activity in manufacturing and banking. Lastly, Northern Europe and Asia-Pacific revenue was 3.163 million, so 3.163 million, up 1.3% organically, reflecting solid demand from the public sector across Northern Europe and good performance in the financial vertical in Asia-Pacific. Digital activities were up single digit on solid demand from application modernization and cloud transformation, partially offset by reduction in low margin, slab as a service business and lower HPC revenue compared to the previous year. which had benefited from several supercomputer deliveries. In tech foundation, growth came mostly from stronger public sector business in the United Kingdom and in the financial sector in Asia-Pacific. Let me now very quickly talk about headcount evolution. The total headcount was 95,140 people at the end of December 2023, a decrease by 14.1% compared with 110,797 at the end of December 2022. This was due largely to scope effects linked with a vast investment program. Excluding the scope impact, the decrease would have been 5.7% over the period. During the year 2022, the group hired 14,139 staff. 70% of hirings were in offshore and nearshore countries, showing the resilience and attractivity of our group in 2023. Attrition rate, this is important, declined from 21.6 in 22 to 14.5 in 23. By the way, those positive trends continued in January with the lowest attrition rate recorded in the last 25 years at 12.5%. Let me now conclude with the operational takeaways. In managing tech foundation and evidence, we have decided to manage tech foundation and evidence as separate entities within the group. However, we will adopt a coordinated sales approach to leverage synergies and maximize opportunities, with Clay Van Doren leading sales for the group. On delivery excellence, and I really want to say that in my few months with the company, I was really happily surprised by the clients' recognized delivery excellence of the activities of the group. We remain committed to our focus on delivering excellence as it is recognized by our clients. The dedication to exceptional service will continue to be the cornerstone of our operation in 2024. Investing in new offerings. We are dedicated to expanding our offerings, particularly by integrating AI into our digital and cloud automation tools. And India is the cornerstone to achieve that through our development centers there. This investment reflects our commitment to staying at the forefront of technological innovation and meeting the evolution needed by our clients. And it is deeply appreciated. Investing in our people. Our people are our greatest asset. And we will continue to invest in their development. We highly value our training initiatives and will further enhance them to ensure our team members have the skills they need to excel. On reinforcing leadership. we do understand the importance of strong leadership in driving operational execution and supporting the sets of new offerings. As such, we will continue to invest in leadership development to ensure we have the necessary skills to effectively lead in 2024 and beyond. On tech foundation, I will take the operational responsibility of tech foundation as Noureddine Binman decided to leave us and we have new managers which have joined the group recently to help manage the company at the standards we need. Thank you. I will now turn the call to Jacques-François, who will comment in more details on financial results.
spk04: Thank you, Carlo, and good morning to you all. I joined less than two months ago, so as you can imagine, it feels slightly more. Before I start, let me first tell you that our consolidated financial statements were established as usual on a going concern basis. All numbers I will comment today are in euros. I will now give you a snapshot of our key financial numbers for 23. Group revenue was 10.7 billion in 23, up 0.4 organically compared with 22, with evidence up 2.9%, and tech foundations declining by 1.7%. Order entry. reached 10.1 billion during the year, representing a book-to-bill ratio of 94%, up four points compared with 22. Group operating margin was 467 million, representing 4.4% of revenue, up 170 basis points organically, compared with 22, with both businesses contributing to this improvement. Free cash flow was minus 1.1 billion for the full year, of which $660 million restructuring and separation costs and $502 million lower working capital actions at year-end compared with December 2022. The net debt was $2,230,000,000 by the end of 2023 within our bank covenant. Net loss group share was $3.4 billion, mainly impacted by goodwill and intangible impairment charge of $2.5 billion and reorganization expense for 696 million. Total headcount of the group was 95,000 at the end of December 23, a decrease of 14% due to the disasters that occurred during the year and workforce optimization as we just commented. This is a 5.7% organic decrease of total headcount. Let me now guide you through our revenue evolution in 23. 2022 revenue was adjusted by 71 million, minus 71 million. This represents a 0.6% decrease versus the revenue that was published last year. This is due to the review of the accounting treatment of certain software resale transactions following the decision published by ESMA in October 23. During the year, scope impact was minus 3.9%, consisting mainly in the divestitures of Atos Italy UCC, and our stake in the State Street Joint Venture. Currency effects negatively contributed to revenue for minus 1.6%, mostly due to the depreciation against the euro of the USD, the GBP, the Argentinian peso, and the Turkish lira. Organic growth was plus 0.4%, leading to a full year revenue of 10,693,000,000 euros. Group operating margin was 467 million euro, representing 4.4% of revenue. Evidence operating margin was 294 million, or 5.8% of revenue, up 110 basis points. And tech foundations operating margin was 172 million, or 3.1%, up 210 basis points, all organic percentages. You can see on the slide a reminder of the key levels that led to these profitability improvements. Let me now comment on the financial elements of the rest of the P&L. Non-recurring items were a net expense of 3.6 billion, and I will comment upon the key elements there. Firstly, reorganization costs amounted to 696 million, consisting in 343 million in workforce adaptation, of which 147 million for the extension of the German restructuring plan launched in 22 and 353 million in separation and transformation costs. Secondly, goodwill and other non-current asset impairment amounted to 2.5 billion euros. Full annual goodwill impairment test was performed at year-end in compliance with IS36 and in the context of the contemplated disposals of assets. Fair values were determined based on multi-criteria approach, including discounted cash flows, discount rates, reflecting estimated execution risks, and adjusted trading multiples, consistent with the methodology applied in prior years. Thirdly, in 2023, other items were a net expense of $169 million. Those exceptional items mainly included litigation costs and vendor contract renegotiations for $65 million, Net capital loss arising from disposals for 46 million, mainly due to the disposal of UCC, reassessment of onerous contracts that were accounted for in other items in 21 for 36 million. As a result, 2023 operating loss stood at minus 3.1 billion euros. Net financial expense was $227 million and was composed of a net cost of financial debt of $102 million, which increased by $73 million due to the higher interest rates, coupled with additional drawdowns on bank borrowings, and other net financial expense of $125 million, which include in particular the interest components on pension and liens. The tax charge for 23 was $112 million, Consequently, net loss group share was 3.4 billion, mainly impacted by goodwill and intangible asset impairment charges of 2.5 billion and reorganization expense for 0.7 billion. Now, free cash flow statement. Let me guide you through the key items. CapEx and lease payments totaled 562 million, down 94 million from the prior year. as the group further optimized lease and capital expenditure and moves to less capital-intensive activities. The negative contribution from change in working capital requirement was 391 million. We have taken lower working capital actions compared with prior year, as year-end working capital actions amounted to 1.8 billion euros. This compares with 2.3 billion in prior year, of which 862 million was factoring. Let me give you full clarity on these numbers on the next slide. Our working capital requirement at year-end was negative 319 million euro. The group indeed carried out specific actions to optimize its working capital. These actions are of three different natures. Non-recourse transfer of trade receivables for 712 million. Other specific actions on trade receivables for 455 million. consisting mainly in the reduction in the average payment period for trade receivables, as well as specific actions on trade payables for 650 million, resulting mainly from the extension of supplier payment execution. Those specific actions did not comprise any reverse factoring measure. Bear in mind that in the 650 million, you have any past due invoice, including if it is overdue by one day. Back to the free cash flow statement. The total of reorganization, rationalization, and integration costs reached 660 million compared with 283 million in 22. Restructuring cost was 605 million of which 382 million of one of separation and transformation costs. Cash out related to other changes was 312 million and consisted mainly of costs incurred on onerous contracts for 129 million payment related from past settlements with customers and vendors, and legal costs for 115 million. As a result of the above impact, mainly driven by reorganization costs and the change in the working capital requirements, the group presented a negative free cash flow of minus 1.1 billion in 23 compared with minus 187 million in 22. The net cash impact resulting from net disposal amounted to 411 million, and mainly originated from the disposal of Atos Italian Eco Act. This corresponds to the end of our 700 million disposal program launched in 22. No dividends were paid to Atos AC shareholders in either 23 and 22. The 38 million cash out that you can see on the table corresponded to taxes withheld on internal dividend distribution. I will now comment on our cash position. As you can see, The group net debt position as of 31st December 23 was 2.2 billion, compared with 1.45 billion as of December 31st, 22. The group remained within its borrowing covenant applicable to the multi-currency RCF and term loan A with a leverage ratio of 3.34 times at the end of December 23. Our leverage ratio must not be greater than 3.75 times and is calculated excluding IFRS 16. Cash, cash equivalents, and short-term financial assets at the year-end were €2,423,000,000, and we had also a headroom of €320,000,000 undrawn RCF, which was drawn early January 24. Regarding our term loan A, as we already communicated, the first six-month maturity extension of the €1.5 billion term loan A has been exercised end of January, pushing its maturity to July 24. Such maturity is subject to another six-month maturity extension, subject to standard conditions. I would now like to comment the liquidity position of the group. We are conducting constructive discussions with our banks and bondholders with a view to enhance liquidity and tackle upcoming debt maturities. These discussions will now be framed under an amicable conciliation procedure in order to facilitate the emergence of a global agreement by July 24, following on from the mandate ad hoc procedure initiated last February. We have sufficient liquidity to operate our business until a refinancing agreement is reached, and we are in discussions with our banks and bondholders on an interim financing to provide additional liquidity cushion. Following the end of discussions with EPI and Airbus we are actively evaluating strategic alternatives. In parallel, we are making good progress in the execution of the 400 million euro asset disposal program announced in July 23. We are targeting to reach a global refinancing agreement by July 24. We will present the parameters of our refinancing framework to our creditors the week of April 8, and we will provide an update to the market. Once agreed by all parties, the final refinancing plan would likely result in a dilution of the existing shareholders. The refinancing of the group's debt maturities, as well as the execution of our asset disposal plan, are fully factored in our upcoming liquidity analysis plan. If these actions were to fail, indeed, that would question the going concern of the group. Let me now conclude my presentation with the outlook topic. Full year 24 objectives are not provided at this time. given current market uncertainties and contemplated sale of assets. We will communicate on Q1 at the end of April. Regarding the 26 objectives, the group withdraws previously communicated financial objectives, given the contemplated sale of assets and the ongoing debt refinancing discussions. Thank you for your attention. I will now turn the mic back to Paul for the conclusion.
spk07: Thank you, Jacques-Francois. I'll now close with some key takeaways. First, we're executing on our transformation plans for Evident and Tech Foundations. Our new operating model gives us greater agility and greater flexibility to serve our clients, deliver on our commitments, and be positioned for long-term growth. Our strategy is to leverage the offerings of both businesses through a coordinated go-to-market approach. We are in active discussions, as we stated, with our banks and bondholders for a refinancing plan, and those discussions will now take place in an amicable conciliation process, which should help us reach an agreement with our creditors by July. We'll provide the parameters of our refinancing work to our financial creditors the week of April 8th, and we'll provide a market update around that time. We ended the year with $2.4 billion in cash and cash equivalents, and we have sufficient liquidity, as we stated, to fund the business until a refinancing agreement is reached. And we're also working with our financial creditors on an interim financing for additional liquidity cushion. As we look ahead to 2024, we're focusing on delivering unmatched value and innovation to our clients, and position the company for long-term revenue and margin expansion. And with that, I'd like to thank you and turn the call back to the operator for the Q&A session.
spk00: Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now take your first question. One moment, please. And your first question comes from the line of Frederick Boulin from Bank of America. Please go ahead.
spk09: Hi, good morning, everyone. Thanks for taking the question. Can I ask a question on the liquidity side? So in the press release, you mentioned that your forecast allows you to cover liquidity requirements in the following 12 months. So if you can share a bit your assumptions here on free cash flow generation, Is there any factoring in there? What have you seen from an asset sales standpoint? And I'm struggling to reconcile that statement with the statement you just made around the liquidity that you have to operate the business until the financing agreement is reached. So it's a very different timeframe, so if we can clarify on that, and then specifically if I can have a follow-up on the working cap. So you said you had $1.8 billion of working cap actions at year-end. So can you explain to us a little bit what that means? I mean, is it that the debt would be $1.8 billion higher if you were to unwind those factoring actions? And is this also part of the debt restructuring or debt renegotiation that you're currently doing? Thank you.
spk07: All right, I'll let Jacques François to start it. I'll answer the working capital actions. I'll also answer a couple of other things you've asked about the near-term liquidity. Go ahead.
spk04: Hi, Frédéric. Thanks for the question. Regarding the liquidity, a couple of points. The first one is that our accounts have been prepared in the principle of the going concern, meaning that management has set forward a liquidity forecast showing that there is enough liquidity for the coming 12 months. That's one of the basic accounting concepts. And this has been ratified by our board and being audited as well by the external auditors. Now, the second point is that obviously in this liquidity forecast, we have some assumptions. I will not elaborate on one or the others, but we have multiple scenarios, which Paul said we are currently evaluating or starting to evaluate. And of course, that means that this forecast goes as well with assumptions and risks related to the assumptions.
spk07: Let's talk a little bit more about working capital actions and then the liquidity comment about the, you know, that we have sufficient liquidity until a refinancing agreement is reached. If you recall in the presentation, if I remember, it was slide 36. You'll see that we mentioned that at the end of the year, first of all, we started with $2.4 billion in cash-cash equivalent. We had $1.8 billion in working capital actions, and I'll mention a little bit more of all these components in a second. We've been unwinding those working capital actions, and we have sufficient liquidity post the working capital actions. action unwind to see us through the next few months several months actually until we reach an agreement which as you remember we're targeting for july of this year when you look at that slide in particular we have identified all the components that make up for the working capital actions and those are being unwind as we speak year end we have basically uh factoring and non-recourse factoring we sell receivables to banks to the tune of 650 million. Yes, excuse me. It's actually, yeah, 650 million in factoring. This is the lowest amount it has been in the last probably almost seven to eight years. We also do cash in advance. This is basically clients. We have invoiced them And they pay us basically a little bit ahead of the terms that are in our agreements with them. And as Jacques-Francois mentioned, we do also have payables, supplier management actions. I think they were to the tune of $712 million. Actually, this is the amount that is actually the lowest it's been in the last seven plus years. This is actually any supplier payment that is overdue by maybe even a day that is included in that group. And so we've been unwinding this thing. So basically, you know, over the last couple of months, I would say one thing to you that one of the efforts that's underway at the company is to improve our working capital management overall, because some of these actions are supposed to continue to be part of core working capital management. For example, if you can get your clients to pay you in advance, that is usually a good thing. If you can manage your payables better than just renegotiate, we need to renegotiate terms with our key suppliers, because in some cases, those terms are quite favorable to suppliers. And then we have to work also on improving our DSOs. Currently, they're much higher than the peer groups, and we have opportunities just to continue to address that and reduce the amount of DSOs, which will just really also allow us to generate cash. I would say also to you that factoring is a practice in the industry. Some of them do it on a more permanent basis. We have done it in the past on occasions throughout the year, particularly at mid-year and year-end. I hope that answers your question.
spk09: And if I may follow up. So, I mean, actually, two follow-ups. So, first of all, on the factoring side, is it something in your plan that continues maybe in a slightly smaller extent? And then on the disposals, is BDS still a consideration, considering the position of your larger shareholder? And can you update us on the scope? I mean, in the 400 million plan, what has already been done and is already in your year-end 23 net debt? And what's the kind of amount of disposal we can consider for 24?
spk07: Yeah, you mentioned a couple of things. In terms of factoring, again, overall, our plan is just to continue to reduce our working capital actions and work more fundamentally at improving our working capital management. So that's the first thing I can tell you. Would factoring be a part of that? We'll look at it as part of the mix, right, and see if we cannot do something that would be a little bit more consistent and a more permanent basis. Second of all, when it comes down to the disposal, there are two different types of disposal. There was the 400 million that was announced sometime in July 28. If I remember, we have identified that we would do 400 million euros worth of asset disposal. We've already done some of it. There's still more to do, and our plan is to see an amount get realized this year, somewhere I would say over 200 to 300 million of that 400. In terms of other asset disposal, we have not, we've been evaluating strategic alternatives. We have, as Jacques-Francois just mentioned, we're just really in the process of working those items and we'll update you in due course on that. on those activities as we go through them.
spk09: So BDS not really on the agenda anymore?
spk07: I wouldn't really comment. I think, again, all the alternatives are on the table. We're looking at them. And we'll, again, mention to you which way we may go in due course. Yeah.
spk09: Thank you very much.
spk00: Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We will now go to the next question. And your next question comes from the line of Laurent Dora from Kepler-Chivre. Please go ahead.
spk01: Yes, thank you. Good morning, gentlemen. I have three points I would like you to focus on. The first is on the business, probably not the most important today, but still, I understand you don't want to give us a guidance due to the changing scope, but can you give us a few comments on how the business is trading so far this year, and particularly on the cyber part? I mean, you didn't comment on last year's performance. Does it mean that this business was not growing anymore? So that's the first point. Second point is on the restructuring side. I would like to know how much restructuring has already been achieved on your TFCO plan that a couple of months ago you detailed us. And I understand there's massive restructuring, but you have a $382 million of separation and transformation costs. can we have details about this huge cost and what is put in that item and my last question is sorry to go back on your working capital but I understand the action that you're taking at the end of the year but I would be also interested in working cap swings from peak to trough in other words the financing you're going to need is probably going to be based on the the peak of the working cap and how much volatility do you have during the year and especially on the supplier side now that your balance sheet is financially constrained. Thank you.
spk07: All right. I'll let Carlo just really mention a little bit how we're seeing business trends early in the year and then Jacques-Francois will pick up a little bit more on the restructuring and then we'll Talk a little bit more about the average working capital, basically. How do you get there?
spk03: So on Tech Foundation, we are seeing a continued good performance. We are happy with the performance we are seeing in Q1, which is the continuation of the trends we've seen in H2. On Eviden, we see a slight improvement, but the softness in the US is actually present in Q1 as well. On BDS, we had significant new wins, so we are pretty happy of where we see HPC and the movement. Cybersecurity has shown some softness, but at the moment we think that it's something we can recover during the year. We are seeing, of course, customers rising concerns on our situation, but I really want to say that every time I speak with customers, they always talk about the quality of service that they see from the company. So we really think that by continuing to invest in quality of service and doing the right things, we can continue to gain their trust and push our activities forward.
spk05: Jacques, I want to mention a little bit more on the restructuring.
spk07: I think that was asked for TF. Is that the question, Laurent?
spk01: Yeah, it's how much of the restructuring charge you put last year was linked to TFCO and what is the rest then?
spk07: I think the majority was linked to TFCO, but go ahead.
spk04: Yes, so there was an outlook over multiple years, which was communicated earlier in 2023 about the TFCO restructuring plan. In 2023, there was already good progress against this. Actually, they implemented more than the plan for the year 23. In terms of overall cash envelope, more than a third has been already dedicated. We're talking about a few thousand of people, actually. We're talking about in the region of 2.5 thousand people impacted by these changes. So I think that's it.
spk01: The 382, the one of separation and transformation cost, what does it represent exactly?
spk07: That represents a number of factors. We had to just really set up legal entities. We had to just really move people around. We had to also work on migrating contracts. I mean, they're just really... Literally a combination of first of all separation activities, but also quite a bit of money was spent in transformation activities just really rebalancing the portfolio for TF and Just really separating, you know, you know consolidating data centers and the like And you have the fees of advisor in that number there is also outside advisors that also are included in those both legal and tax and business advisors as well.
spk01: Can we have a feeling on how much this represents out of the total?
spk07: We don't have that number. We can follow up if necessary.
spk01: And the last question was on working cap peak to trust.
spk07: Yeah, I think a good way to get at it. I think if you see the slide that we just provided you, the working capital at year end was somewhere around minus 300. a million negative 300 million and we had working capital actions of a billion eight and so you can see it on average the working capital is about 1.5 billion during the year obviously it fluctuates a little bit but i would say it stays relatively about a billion five for most of the year okay so you don't have any period of the year after the payment of bonuses or things like this during which it gets
spk01: I don't know, 3 or 5 million, 500 million higher. This is not happening.
spk07: I think it does fluctuate a little bit, but not, I would say, on average, it would be around those levels that I just shared with you.
spk01: Okay, great. Thank you. You're welcome.
spk00: Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. That is star 1 and 1 to ask a question.
spk06: We'll now go to the next question. One moment, please.
spk00: And your next question comes from the line of Adam McGuire from Bank of America. Please go ahead.
spk10: Hey, good morning, and thank you for taking my question. Just to follow up on the liquidity point, in your statement, sufficient liquidity until refinancing is reached, so call it July. Does that specific statement also include the requirement of factoring and the requirement of any asset disposals?
spk07: Near term, no. There's no right now. When we mentioned that, there's no factoring involved or asset sale within that timeframe.
spk10: Okay, great. And sort of with regards to development so far this year, can you give us any indication as to how much of this working capital reversal has continued over the last three months. Perhaps how much factoring remains outstanding, how much of the other working capital reversals have been completed in the last two and a half months?
spk04: Hi, Adam. I can confirm that we have unwound 100% of these amounts of the working capital elections that year end.
spk10: Including the factoring has been unwound effectively?
spk08: Absolutely.
spk10: Okay, understood. And just the last point on performance so far this year, your comments have been helpful. I was just wondering, can you give us any guidance with regards to, for instance, bookings now that we've already reached almost the end of the first quarter, book-to-bill, attrition rates, something like that, any kind of high-level guidance on some of the KPIs you normally disclose so far this year?
spk07: Yeah, I would say on the book-to-bill, usually the first quarter is a little softer anyway, and I think – Right now, it would be premature to give you those numbers with a couple of weeks to go, but I think it would be probably more consistent with what we've seen historically. I think in terms of attrition, what we had mentioned in the comments that Carlo made is that the last, particularly January, was the lowest it's ever been in the last 25 years of the company, if you were to exclude the COVID years of two years. But it's 25 years. It's just really remarkable numbers. performance overall, but it reflects two things from a attrition perspective. One of them is the commitment that we have from our colleagues around the world. Second of all, we do have just a remarkable program of training and development for our staff, as well as we do have great certification programs to continue to enhance the skills of our workforce, particularly in all next generation type of IT offerings. So those are compelling reasons for employees to continue to commit to us. And as you saw from the charts before, we have no issues in continuing to attract talent to the company.
spk10: Understood. Thank you. And just one last one, if I may. You mentioned in the past the independent business review that you were waiting for. Can you confirm whether that's been completed now and any high-level information that you can share around that?
spk07: Yeah, the IBR was completed, and it didn't really impact any of the work that we had done on goodwill impairment. And so those results are now reflected in the financials that Jacques-Francois shared with you. And I think now we're moving on to the next level where we'll give you an update of where things stand on our refinancing discussion sometime in the week of April 8th.
spk10: Thank you very much.
spk07: You're welcome. Bye, Adam.
spk00: Thank you. We will now go to the next question. And your next question comes from the line of Derek Macron from Societe Generale, please go ahead.
spk08: Yeah, good morning, guys. I hope you can hear me well. Two questions on my side. Can you update us or give us more color about what will be the change in working capital requirement for this year? So if we net the capital action reduction versus fundamental improvement in the management of working capital, it will be helpful. And the second question also related to what will happen in 2024 on the reorganization, rationalization, and integration cost line. I understand that you have spent only one-third of the 800 million euro ARI that was planned for TFCO. So can you update us on where you believe you can land on this line for 2024? Thank you.
spk07: Okay, well, let's just talk about a little bit working capital. I think it's premature, again, to tell you, to give you those numbers again, where you just say we're not going to, we're in the process of just really assessing all of these things, except to say that we are going to reduce our dependence on working capital actions. That's just really the objective and everything that you've heard us talk about. In fact, when you looked at the numbers for 2023, you saw that operationally, we've improved working capital. And the reason why working capital was negative It was a reflection of lower working capital actions. So working capital management operationally is still high on our list of this year. You're going to see us just really focus under Jack Francois' leadership a lot on this area. And we are going to reduce our dependence on working capital actions that are not in the normal course by that. We're still going to try to get better improvement in our DSOs, improvement in our DPOs as well, better DPOs. And so that's the first one. In terms of your second question, in terms of the separation costs and the like, I would say a couple of comments. First of all, actually, we're far along in our – in our tf restructuring and most of the restructuring we did last year was primarily driven by tf it was less restructuring on the evidence side and i think maybe the comments that were made left a third of it i think you'll see it from the p l perspective most of it was already a good chunk of it was already done i want to just really think it was maybe we'll come back to you to just verify the number but i wanted to say we're almost 50 plus post the program. I would say also the separation that still needs to be done is that just really continuing to refine the way we run the entities for the business. For example, when we were thinking a little bit about separating the BDS business at one point and potentially selling it to Airbus, There was some work that needed to be done, again, to parse some of the contracts related to the BDS business, whether it's digital security or whether it's the advanced computing, into separate legal entities to give us the maximum flexibility, ultimately, in separating businesses if we needed to go that route. And so that's the kind of work that is going to continue to happen within the company so that we have ample flexibility to consider alternatives if those alternatives make sense for us.
spk08: Paul, can I have to follow up, please? On the working capital management, so you had a benefit of €111 million this year, but what would be the potential from here? Can you clarify that? Because it's really difficult to understand how much is left. And on the reorganization, rationalization, and the integration cut line, so the minus €660 million cash out last year, Have you a good visibility on what will be cashed out this year and what could be the number? A range would be very helpful. Thank you.
spk07: Yeah. I'll start with the second one. It will be significantly less than what you saw last year. I think it was just really a high level of spend because we were just really accelerating the separation of the Evident and the Tech Foundation business, and there was really some significant effort going on in the transformation business itself, as well as the workforce optimization. So let's say that it will be significantly lower in the first quarter. We'll give you a little bit more update on that within the next few weeks. So let's wait on that, Derek. In terms of the working capital actions, can you repeat that question one more time?
spk08: Yeah, so you had a benefit of 110 million euros or 11 million euros.
spk07: There's quite a bit that's left. When you look really at our DSOs compared to the industry, I want to say the industry is in the 70 days. We're north of that. Just on that basis, there are a few hundred million euros of potential improvement on working capital just on the receivable management side. And then if you look at the DPO, I think we are just, I want to say somewhere, slightly over 35 days or around 35 days or so on average. And then the industry is, I think, somewhere in closer to the 42, 43 days. And so every day matters quite a bit. So there's effort underway just to really think with our partners and our suppliers, if we can just really amend some of these terms to align them a little bit more with when we get paid from our clients.
spk08: Very clear.
spk07: Thank you, Paul. You're welcome.
spk00: Thank you. I will now hand the call back for closing remarks.
spk07: In closing, I just want to just take a moment to thank you once again for joining us. We have just really, as I mentioned, executing on our transformation plan for Evident and Tech Foundation. We'll update you on the progress that we're making at the beginning of the year. Importantly, we are in active discussions with our banks and our bondholders on a refinancing plan again in the week of April. Eight is an important week because not only are we going to provide those framework for a refinancing framework, the parameters for a refinancing framework, but we'll also be able to just provide an overall market update on where things stand. And then in the meantime, just really we're just focusing on driving the company to continue to deliver on the delivery excellence that Carlo was really mentioning. and continuing to invest in the business and invest in our people now i want to just take a closing remark and thank all of our employees around the world they have just really done a remarkable job this last year and they're continuing to do that their commitment to our clients just really makes a difference and so they're the real assets of the company they're the one that generate all the ip that we have and and all the innovation that really stands us apart in the marketplace. And kudos also to all of our clients and suppliers who are just really working closely with us to just make sure that we continue to partner for the long run to build a great company. So thank you all. We'll see you in a few weeks.
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