Il faudrait réécouter les 35mn tout en lisant et voir les quelques coquilles du logiciel de transcription
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Hello everyone.
Glad to have you on the line with us in the short notice.
So thank you. We are pleased to announce a major step today in our trajectory.
But before going there, I would like to welcome in the team Paul Salle, our new group CFO. We're taking over from Natalie Senesho.
Paul, maybe a few words on your background first.
All right, thank you, Nordine and greetings, everyone. I'm Paul Saleh.
I have extensive finance leadership experience.
I served as CFO of CSC and then DXC, which came as a result of the merger of CSC and HP Enterprise Services.
I was also the CFO of prior to that of Sprint, which was one of the largest wireless company in the US.
I'm very excited to join the Athos leadership team. My objective is to assist the team in executing on the separation plan that you're going to hear more about today.
My also objective is to just improve cash flow and strengthen the balance sheet and improve the financial performance of the company.
Very excited to join the team. And thank you, Nourdine.
Thank you, Paul. And again, really glad for you to join.
So as mentioned, today we are very pleased to announce a comprehensive strategic plan to achieve the group's transformation and accelerate value creation for our shareholders.
So after all, and in line with our objective announced in June 22, to fully separate tech foundation and evidence, we have entered into exclusive negotiations with AP equity investment, EPAI, holding on mainly by Daniel Kretinski for the sale of TFCO on the basis of an enterprise value of $2 billion, which implies 0.1 billion positive net cash impact for the group.
We will detail the terms of this transaction shortly.
But what I would like you to note already is that this will lead to the full transfer of the liabilities associated with TFCO to EPAI, which amounts 1.9 billion euro unbalanced sheet liability, and 7.6 billion euro unbalanced sheet liabilities, mainly comprised of performance guarantees and UK pensions. The transaction will enable the reconciliation of TFCO negative free cash flow and unwind SIRCA 1 billion of intra-year working capital needs.
We presented a major derisk in of the group's future trajectory.
At the same time, we have agreed provisions allowing the group to retain exposure to the TFCO website to be triggered in certain liquidity events or enough performance of TFCO above certain free shows.
This transaction will lead to a rebirth of atos into evidence, the pure play leader in the tech and digital space, with full autonomy to deliver on its strategic roadmap and unlock its full value potential.
In conjunction with this transformational transaction, it is critical to provide a dividend with the adequate capital structure to achieve its growth ambition and unlock its full potential.
Therefore, as part of the comprehensive plan announced today, we are also contemplating to reinforce a vision balance sheet through a new capital raise of 0.9 billion and with the benefit of a 0.4 billion proceed from our new disposal program and on Friday.
As you may have already read in our communication this morning, EPEI will be committed to participate in the secret contributions, notably by participating in a 180 million reserve capital increase at 62% premium to atos 30 days average.
This reserve capital increase will be complemented by a right issue offered to all atos shareholders for an amount of up to 720 million.
EPEI has also committed to subscribe up to 37.5 million in this right issue.
I would like to note that the commitment of EPEI to invest in a vision is a testimony of a strong ship arc and confidence of a recognized investor in Eviden's plan.
Additionally, the 720 million reminder of a capital increase and its edge has been standby underwriting by BNP Paribas and JP Morgan, significantly the risk in the capital raise.
With the capital increase and the expansion of our disposal plan, we announce on Friday, we expect the group's net leverage at four times initially targeting the two time net leverage by 2025 year end.
But before going into the detail of this comprehensive plan, I would like to take a step back and remind you that atos plays today in two distinct markets that do not belong together.
On the one hand, we have a dynamic and high grow market in data, cyber and application and drawing strong demand. And on the other hand, TFCo plays in a more mature market that suffers from the rise of the public cloud and requires years of restructuring.
There are no synergies today between both divisions, and we can create a lot of value for our focus on the most attractive market.
And for that, we have a unique capabilities and differentiated positioning for evidence.
This one's the strategic rationale behind the separation plan announced last year and implemented over the past 12 months. And today's announcement is the achievement of this process.
Diane to you
Thank you, Nourdine. Good morning, everyone.
So before getting deeper into the terms of the transaction, I want to take the opportunity to provide you with more background on the genesis of this announcement, which represents an holistic solution for our group.
Following last year's capital markets day, when we announced the separation plan, we received inbound from interested parties regarding TFCo. The board decided to evaluate all alternatives with the aim of maximizing at those shareholder value.
EPI emerged as the strongest contender based on an attractive offer on which I will come back shortly. EPI also provided a compelling plan for the TFCo transformation. And we are convinced that TFCo, its employees and customers will benefit from the backing and long-term vision of EPI to fully implement its transformation and reposition.
In addition to the sale of TFCo, let me provide you with more details on how we will strengthen sustainably the capital structure of APOs, which means the capital structure of every then post disposal of TFCo.
First, as part of the 900 million capital entries we discussed earlier, EPI is committed to participate for a total amount of 217.5 million euro divided into a reserve capital increase at an ugly price of 20 euro per share and a subscription of $57.5 million in the right issue of 720 million offer for all shareholders.
Both legs of these capital entries, as well as a disposal of TF core to EPI, will be submitted to the vote of our shareholders in a dedicated EGM.
First, ensuring that that of shareholders are equally convinced by the merits of this holistic solution is of the utmost importance. And as such, the closing of the transaction will be subject to their vote in an adult EGM to be condemned in the last quarter of 2023.
Moving on to next slide, let's recap and dive deeper on the terms of this proposed transaction.
The disposal of TFCo is made on the basis of an enterprise value of 2 billion euro, implying a 3.9 times OMBM multiple, an attractive premium to tech foundation in RAPYER's public valuation. This will be a 100% sale, which means that significance on and off-balance its liabilities will be transferred to the buyer. 1.9 billion euro of provisions, leases, and pensions will be assumed by EPI going forward.
On the off-balance sheet front, we are talking about 7.6 billion euro, but longer assumed by Eviden of transactions.
The transaction is also structured in such a way that Evidane will benefit from an upside sharing mechanism triggered by the outperformance of TF core or subsequent liquidity events.
What it means in terms of cash impact for us, so first the transaction will have a 0.1 billion euro positive cash impact immediately, and also means we will avoid any further future negative free cash flow required on TF core front for its restructuring.
We expect this transaction to close end of 2023, or beginning of 2024, as the latest subject to customary conditions you see on this page.
Turning now to Paul to describe the capital structure.
Thank you, Diane.
So with this transaction, Eviden will have the right capital structure that will ensure it can deliver on its ambitions and also on its strategic roadmap.
In total, we're expecting 1.3 billion euros in cash inflows.
900 million will come from a capital increase, and the key components of that increase include $180 million from reserved capital from EPI.
$720 million from the right offering, which is supported, as you heard, by standby underwritten commitment from BNP Paribas, and JP Morgan.
We also expect $400 million euros from the new disposal proceeds, and you should know that we've already received indications of interest on these assets.
Now we plan to use the 1.3 billion euros to strengthen the capital structure of Eviden. [ça veut dire quoi ça???]
Already Eviden will benefit from the immediate de-consolidation of TFCO negative free cash flow, as well as the transfer of a significant on and off-balance sheet liabilities of TFCO to the purchaser.
We also plan to unwind intra-year working capital needs of TFCO, which amount to about a billion euros.
We're currently planning to extend debt maturities and reduce debt as part of this transaction.
So in that net, Eviden is expected to have a proforma leverage of about four times right first.
And then with its strong cash flow, Eviden expects to be able to de-lever rapidly with a target leverage of three times by the end of 2024 and two times at the year end 2025. And with that, I'll turn it over now to Phillip.
Thank you, Paul, and good morning, everyone.
So as mentioned by Nodin and Diane and Paul, so today is indeed a very important day for Eviden.
I would like to reiterate with you the clear ambitions that we have and the value potential that exists in this business. Leading global player in Growth digital transformation, you already know that slide and starting with who we are and what makes us unique.
We are the leading global player in the iGross digital transformation operating in big data, cloud and cybersecurity services markets.
These markets offer tremendous potential and major opportunities for growth.
With 5.3 billion euros revenue in 2022 and over 57,000 employees, we operate globally within more than 50 countries, with a well-balanced footprint both in terms of accounts and revenue.
On the iGross market segments where we operate, our value proposition is centered around clear distinctive factors, a portfolio of unique sovereign capabilities with complementarity across our Swiss inert stick business lines, a dip in our unrestricted fees, and by a strong portfolio of intellectual property, we have more than 2,100 patterns across our business and partnerships.
These are true right to win in our marketplace and the foundation on which we are building our profitable growth.
As I indicated, Eviden is positioned on segments within the IT and tech markets which offer the highest growth potential.
In total, we estimate that our addressable markets could represent to combine 1.8 trillion euros in 2025, which implies an annual growth rate of 11.7% on average between 2021 and 2025.
Digital is the biggest segment. We address from a smart digital platform and digital transformation segment. This is a market that is expected to reach close to 1 billion euro in 2025, growing at 12.8% per year on average.
Our offering here revolves around smart platform, transformation, acceleration of digital application, and net zero decabornation play [NDLR : 12 staffs].
Our cloud markets, where we offer end-to-end services from advisory, design, and build to operation, is expected to represent 12.13 billion in 2025, growing close to 10% per year on average.
In big data and security, our unique offerings address these three segments. Digital security, where we offer cybersecurity services and products, as well as mission-petacle system. This market is expected to grow 10% per year.
On high performance computing, where we are active in supercomputing, high performance AI, quantum computing encryption, and scientific computing, this market is expected to grow 8.6% per year.
Lastly, business computing and AI, where we are present in business and hedge computing and AI solution, like our famous Ados Compto. Compto option platform software, this is a very promising market expected to grow close to 14% until 2025.
So the market dynamic are very strong and look for significant growth potential for our businesses.
Yet now we are looking at our midterm ambitions.
With the TFCo disposal and the new capital structure setup, we are aiming to accelerate our growth trajectory and significantly enhance our margin profile.
Evidet is playing in a very dynamic market, as we discussed before. That is structurally growing fast.
We are today reiterating our guidance and expect to reach 7% annual growth rate over the 2022 and 2026 period and significantly improve margins to see our cut 12% by 2026.
For 2023, we expect to overperform last year organic growth and improve our profitability versus last year.
With that, Diane, back to you.
Thank you, Philippe.
So today marks the first step of the new journey for our group, with the announcement of the transaction and also the launch of the consultation process with our employees.
Over the next few weeks, we will also work with our banks to obtain the waiver required to consume this transaction on which we are very confident.
Both steps are required before we can sign the FDA with ETI and the forecasted in Q4 this year.
We will also reconvene with you to provide a much more detail view on evidence, its ambition and financial plan as part of the dedicated capital market day that is expected to take place prior to the extraordinary general meeting.
Finally, we will convene this added general meeting to obtain up-world from our shareholders to consume the transaction and to issue the capital required. To conclude, I leave the floor to sleep.
Thank you, Diane.
So before we open up Q&A, I wanted to take a step back and wait for a what all of these means for the group and all its stakeholders.
First, evident that the new listed entity will not be exposed anymore to TFCo and its associated cash burn, restructuring and significant liabilities.
Second, we are creating a strong environment to ensure sustainable and successful development of evidence and to unlock value creation for our shareholders.
And finally, we are strengthening our capital structure with the weak-width insurance and disposal proceeds, targeting a two-time net leverage.
And finally, we are bringing on board a recognized investor, EPI, fully supporting the evidence project.
Thank you.
We can open for Q&A.
Ladies and gentlemen, we now begin the questions and answers session.
We are now taking the first question. And the first question from Frederick Bolan from Bank of America.
Please go ahead.
Hi, good morning. Couple of questions, please.
Can you share with us the cash? So you took about 100 million cash in at closing.
So can you share with us a little bit what's going on in terms of cash transferred, potentially in the unit? What liability are going and staying?
So between factoring, pension restructuring, and any color you can give us on the debt position you plan to reach at the end of 2023 for the remaining business.
So you took about a level of three times. So if you can triangulate the absolute debt level and any color on where you expect that to be in the 24 would be great.
Thank you.
Hello, Frederick.
I will start through on the 0.1 million net cash positive and the transfer of the liabilities attached to TFCo perimeter for both unbalanced liabilities for 1.9 billion euro and 7.6 billion euro in terms of balance sheet liabilities, including significant portion for UK pensions, but also for parent company guarantee.
On other questions and factoring and the debt I entered out to And yeah, let me just actually provide a bridge that may be somewhat helpful.
Just in terms of, first of all, how do we get to the four times for evident and then how are we going to go down from there?
First of all, we ended the first half of the year with a net debt of $2.3 billion. Excuse me, 2.3 billion euros.
And as was discussed at the last earnings, last week, the company expected to have a relatively flat free cash flow in the second half of the year.
And there's also the proceeds that are going to come from some of the assets that were already out for sale.
And that's about somewhere around $250 to $300 million of positive free proceeds.
So net net, at this stage, the expectations would be that year end, we would end with a 2.1 billion euros in net debt.
And so what Deanna's indicated, you have the proceeds of $100 million from this transaction and the conveyance of the liability.
But in addition to that, you heard us talk about unwinding some of what we turn the intro year, working capital needs of the TFCO business.
It was about $1 billion.
And so when you do the bridge from 2.1, that the company would finish the year at, 100 million of euros of proceeds, 1.0 of working capital unwind.
And then you have the disposition of new assets. We talked about 400 million.
You have also the equity raise that comes in the form of the reserve capital and the rights offering.
If you just kind of tag those along, you will see that indeed the pro format for evident, which would be NewCo, the new ATOS, would be called Eviden.
It is one point, around 1.9 billion euros. And then that gives us the four times of leverage, considering where the OMDA of Eviden is expected to be roughly at year end fiscal 23.
And then as I mentioned in my remark, this is a business that generates strong free cash flow. So we would expect rapidly de-levering with the free cash flow of the business. It's also less capital intensive, particularly in other areas of the business.
So that's how we get to the three times and then two times. And then you have the four.
OK, thank you very much.
Yeah, thank you.
Good carry on, sorry.
We are now taking the next question.
Please, then bye.
The next question from Federic Poulan from Bank of America. Please go ahead.
Yeah, thank you.
If I can just follow up on what's left in evident in terms of liabilities beyond the financial debt, that would be useful.
Thank you very much.
I think in terms of liabilities, I think you'll have the, can you be more specific in terms of what you're looking for?
Yeah, factoring, pension, restructuring, any other non-death liabilities.
OK.
I think from a factoring standpoint, there would be still some factoring at Eviden. If you look at where the company was at the half of the year,
there was about 700 million euros in factoring. Some of that is going to go away with the TFCO, and that's part of that unwind of the working capital
that we just mentioned. And there'll be left as of the middle of the year in June and the semester, about 300 million, that was for evident.
And then the objective, again, is, as I mentioned, also in my very introductory remark, the objective is to just fundamentally work on improving working capital for both businesses, even though we're separating TFCO.
But we're going to make sure that over the next six months to nine months, we are really embarking on a major improvement in working capital.
OK.
So no pension liabilities or restructuring left at.
Yeah, the pension is going with the TFCO,
and there's always a little bit of maybe restructuring or rationalization that takes place in any business.
But it's much more moderate in size. Most of the other restructuring that you heard this talk about
is related to the transformation taking place at TFCO.
OK.
Thank you very much.
Thank you for your question.
We are now taking the next question.
And the next question is to Nicholas David from Oddo BHF. Please go ahead.
Yes, good morning.
And congrats for this very interesting deal.
I have several questions.
I understand.
Could you please, I mean, I understand that the two billion EV you mentioned for tech foundation
include leading engagement. Could you give us the amount of these engagements you are taking into account?
Both at Tech foundation, but also at Eviden.
And for Evident, could you help us to understand what is the implicit EV of the reserved capital increase you are taking into account in the multiple of not to MDA, but maybe more adjusted a bit or more? I'll let you the, I mean, the adjusted EV would be great.
So the split of leading engagement for tech foundation and Evident and the EV, implicit EV of Eviden as part of the reserve capital increase.
And also, how did you take into account this EV and the calculation for Evident and the distribution we are doing with EP, with Mr. Kretinsky, the litigation with Cognizant. You put a zero or a number, which is above that.
Thank you.
OK.
Sorry, you got the, actually the sound was not really good. So if you don't mind just repeating the questions so that we can provide the adequate answer.
Sorry, the line was a bit blurred. OK, sorry for that.
My question is, I would like to have the amount of leading engagement you take into account in Evident and tech foundation enterprise value.
And the total enterprise value of Eviden you have retained for the reserve capital increase.
I mean, it's very difficult. The amount you have taken into account.
Yeah, well, let's, I think it's very difficult for us to comment right now on the, you know, the value, you know, of Evident, right?
Post transaction, obviously, as we just really were going to be sharing at the, you know, investor day, we will share more insight into the business itself.
And we let the market just determine, you know, the fundamental value of this pure play asset that is in very well positioned in the market.
And one of the hottest aspects of the market these days was big data and with cyber and also with digital.
And so what we gave you is some indication a little bit of the type of leverage the company will have and the type of OMDA that you can derive of that business.
And it's really going to be doing very well also from a free cash flow perspective.
So I think it's going to be a very valuable asset. And that's why we set this complete unlocking value through this transformation, that transaction.
And as far as you said, some leases that have been really conveyed, most of the leases are going to go with TFCO.
There's just basically, on a relative basis, about 20% of the leases stay with Evident in terms of value.
Okay, thank you.
And we are now taking the next question.
And the next question for Alex, I'm just a, for being very well. Please go ahead.
Good morning, thank you very much for letting me on a couple of questions at my end.
How should we think of working capital needs at Eviden and maybe where it stood at the end of the first half, I'm thinking in particular in high performance computing, which from memory can have relatively brutal working cap swings.
And the second question is on restricted cash, maybe in India or elsewhere, anything on the restaurant when it relates to the Evident asset.
Thank you very much.
You'll have to pardon me, but again, with the few days on the job, I think to some extent on the restricted cash, I can't give you right now yet the breakdown between the two businesses, right, in terms of how much is in Evident remains with Evident.
But I think right now, I would assume the majority of it, since we're conveying the asset and getting in that proceed from the end of the year, we're going to be able to obtain a 15 of 100 million in euros.
Your next question was?
Was a working capital need that Eviden going forward? And is there any an winding to happen there as well?
As of the middle of the year that reported that week, we had about 300 million of still factoring in the business.
There's a normal element of factoring in this industry that all companies go through. And so the objective is to continue to monitor that.
And as I mentioned, fundamentally improve the working capital characteristics of the business, working across every element of the working capital from receivable to terms and with suppliers and the like.
And we'll just continue to be pretty prudent with our working capital management.
Got it.
Perhaps another way of touching on the same topic.
Maybe based on your prior experience at CSC and DXC when you look at the mix of activities of Evident in digital and super computing and cybersecurity, do you think that by nature those activities tend to consume cash as you grow or should be pretty neutral in terms of working capital changes or perhaps even positive just trying to get my head around the modeling of working capital flows around for the new asset.
Yeah, I think fundamentally each one of those businesses within Eviden has their own characteristics.
You would say that the digital business in particular would have very strong and quick turnaround in working capital, right? Because there's a lot of project work and the like. I would say that the cyber business and the big, the big data business also would generally speaking be also light on capital intensity, obviously, but much more.
Again, quick, better working capital characteristics. The HPC business is its own characteristic that industry tends to have longer lead time for delivering. And as a result of that, collections is a little bit more extended on the receivable side, right?
And you tend to have to just really order quite a bit of the material, why in advance just really build these solutions for the clients.
So that's a business that we will look at a little bit more closely.
Does that help?
Yes, yes, it does.
Thank you very much.
Just, I would like to come back on one of the previous questions to give clarity on the two billion enterprise value.
I think it was the question from Nicolas from Oddo.
So coming from the net cash impact for adults of 0.1 billion, then the 1.9 billion on balance sheet liabilities, they compose as follow.
So 0.8 billion, 1.6 billion, and charge, 0.4 on pensions and 0.2 on others. That's the detail on 1.9 billion on balance liabilities. In addition to that, as part of the transaction, we forecast the transfer of the 7.6 billion euro of balance liabilities.
I hope to carry that in the ground.
Thank you for your question.
There are no further questions at the moment.
This is really an important day in our trajectory, in our plan. We are moving ahead with the separation.
That is a great news. And I would like to thank everybody and speak to you soon.
Thank you.
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Hello everyone.
Glad to have you on the line with us in the short notice.
So thank you. We are pleased to announce a major step today in our trajectory.
But before going there, I would like to welcome in the team Paul Salle, our new group CFO. We're taking over from Natalie Senesho.
Paul, maybe a few words on your background first.
All right, thank you, Nordine and greetings, everyone. I'm Paul Saleh.
I have extensive finance leadership experience.
I served as CFO of CSC and then DXC, which came as a result of the merger of CSC and HP Enterprise Services.
I was also the CFO of prior to that of Sprint, which was one of the largest wireless company in the US.
I'm very excited to join the Athos leadership team. My objective is to assist the team in executing on the separation plan that you're going to hear more about today.
My also objective is to just improve cash flow and strengthen the balance sheet and improve the financial performance of the company.
Very excited to join the team. And thank you, Nourdine.
Thank you, Paul. And again, really glad for you to join.
So as mentioned, today we are very pleased to announce a comprehensive strategic plan to achieve the group's transformation and accelerate value creation for our shareholders.
So after all, and in line with our objective announced in June 22, to fully separate tech foundation and evidence, we have entered into exclusive negotiations with AP equity investment, EPAI, holding on mainly by Daniel Kretinski for the sale of TFCO on the basis of an enterprise value of $2 billion, which implies 0.1 billion positive net cash impact for the group.
We will detail the terms of this transaction shortly.
But what I would like you to note already is that this will lead to the full transfer of the liabilities associated with TFCO to EPAI, which amounts 1.9 billion euro unbalanced sheet liability, and 7.6 billion euro unbalanced sheet liabilities, mainly comprised of performance guarantees and UK pensions. The transaction will enable the reconciliation of TFCO negative free cash flow and unwind SIRCA 1 billion of intra-year working capital needs.
We presented a major derisk in of the group's future trajectory.
At the same time, we have agreed provisions allowing the group to retain exposure to the TFCO website to be triggered in certain liquidity events or enough performance of TFCO above certain free shows.
This transaction will lead to a rebirth of atos into evidence, the pure play leader in the tech and digital space, with full autonomy to deliver on its strategic roadmap and unlock its full value potential.
In conjunction with this transformational transaction, it is critical to provide a dividend with the adequate capital structure to achieve its growth ambition and unlock its full potential.
Therefore, as part of the comprehensive plan announced today, we are also contemplating to reinforce a vision balance sheet through a new capital raise of 0.9 billion and with the benefit of a 0.4 billion proceed from our new disposal program and on Friday.
As you may have already read in our communication this morning, EPEI will be committed to participate in the secret contributions, notably by participating in a 180 million reserve capital increase at 62% premium to atos 30 days average.
This reserve capital increase will be complemented by a right issue offered to all atos shareholders for an amount of up to 720 million.
EPEI has also committed to subscribe up to 37.5 million in this right issue.
I would like to note that the commitment of EPEI to invest in a vision is a testimony of a strong ship arc and confidence of a recognized investor in Eviden's plan.
Additionally, the 720 million reminder of a capital increase and its edge has been standby underwriting by BNP Paribas and JP Morgan, significantly the risk in the capital raise.
With the capital increase and the expansion of our disposal plan, we announce on Friday, we expect the group's net leverage at four times initially targeting the two time net leverage by 2025 year end.
But before going into the detail of this comprehensive plan, I would like to take a step back and remind you that atos plays today in two distinct markets that do not belong together.
On the one hand, we have a dynamic and high grow market in data, cyber and application and drawing strong demand. And on the other hand, TFCo plays in a more mature market that suffers from the rise of the public cloud and requires years of restructuring.
There are no synergies today between both divisions, and we can create a lot of value for our focus on the most attractive market.
And for that, we have a unique capabilities and differentiated positioning for evidence.
This one's the strategic rationale behind the separation plan announced last year and implemented over the past 12 months. And today's announcement is the achievement of this process.
Diane to you
Thank you, Nourdine. Good morning, everyone.
So before getting deeper into the terms of the transaction, I want to take the opportunity to provide you with more background on the genesis of this announcement, which represents an holistic solution for our group.
Following last year's capital markets day, when we announced the separation plan, we received inbound from interested parties regarding TFCo. The board decided to evaluate all alternatives with the aim of maximizing at those shareholder value.
EPI emerged as the strongest contender based on an attractive offer on which I will come back shortly. EPI also provided a compelling plan for the TFCo transformation. And we are convinced that TFCo, its employees and customers will benefit from the backing and long-term vision of EPI to fully implement its transformation and reposition.
In addition to the sale of TFCo, let me provide you with more details on how we will strengthen sustainably the capital structure of APOs, which means the capital structure of every then post disposal of TFCo.
First, as part of the 900 million capital entries we discussed earlier, EPI is committed to participate for a total amount of 217.5 million euro divided into a reserve capital increase at an ugly price of 20 euro per share and a subscription of $57.5 million in the right issue of 720 million offer for all shareholders.
Both legs of these capital entries, as well as a disposal of TF core to EPI, will be submitted to the vote of our shareholders in a dedicated EGM.
First, ensuring that that of shareholders are equally convinced by the merits of this holistic solution is of the utmost importance. And as such, the closing of the transaction will be subject to their vote in an adult EGM to be condemned in the last quarter of 2023.
Moving on to next slide, let's recap and dive deeper on the terms of this proposed transaction.
The disposal of TFCo is made on the basis of an enterprise value of 2 billion euro, implying a 3.9 times OMBM multiple, an attractive premium to tech foundation in RAPYER's public valuation. This will be a 100% sale, which means that significance on and off-balance its liabilities will be transferred to the buyer. 1.9 billion euro of provisions, leases, and pensions will be assumed by EPI going forward.
On the off-balance sheet front, we are talking about 7.6 billion euro, but longer assumed by Eviden of transactions.
The transaction is also structured in such a way that Evidane will benefit from an upside sharing mechanism triggered by the outperformance of TF core or subsequent liquidity events.
What it means in terms of cash impact for us, so first the transaction will have a 0.1 billion euro positive cash impact immediately, and also means we will avoid any further future negative free cash flow required on TF core front for its restructuring.
We expect this transaction to close end of 2023, or beginning of 2024, as the latest subject to customary conditions you see on this page.
Turning now to Paul to describe the capital structure.
Thank you, Diane.
So with this transaction, Eviden will have the right capital structure that will ensure it can deliver on its ambitions and also on its strategic roadmap.
In total, we're expecting 1.3 billion euros in cash inflows.
900 million will come from a capital increase, and the key components of that increase include $180 million from reserved capital from EPI.
$720 million from the right offering, which is supported, as you heard, by standby underwritten commitment from BNP Paribas, and JP Morgan.
We also expect $400 million euros from the new disposal proceeds, and you should know that we've already received indications of interest on these assets.
Now we plan to use the 1.3 billion euros to strengthen the capital structure of Eviden. [ça veut dire quoi ça???]
Already Eviden will benefit from the immediate de-consolidation of TFCO negative free cash flow, as well as the transfer of a significant on and off-balance sheet liabilities of TFCO to the purchaser.
We also plan to unwind intra-year working capital needs of TFCO, which amount to about a billion euros.
We're currently planning to extend debt maturities and reduce debt as part of this transaction.
So in that net, Eviden is expected to have a proforma leverage of about four times right first.
And then with its strong cash flow, Eviden expects to be able to de-lever rapidly with a target leverage of three times by the end of 2024 and two times at the year end 2025. And with that, I'll turn it over now to Phillip.
Thank you, Paul, and good morning, everyone.
So as mentioned by Nodin and Diane and Paul, so today is indeed a very important day for Eviden.
I would like to reiterate with you the clear ambitions that we have and the value potential that exists in this business. Leading global player in Growth digital transformation, you already know that slide and starting with who we are and what makes us unique.
We are the leading global player in the iGross digital transformation operating in big data, cloud and cybersecurity services markets.
These markets offer tremendous potential and major opportunities for growth.
With 5.3 billion euros revenue in 2022 and over 57,000 employees, we operate globally within more than 50 countries, with a well-balanced footprint both in terms of accounts and revenue.
On the iGross market segments where we operate, our value proposition is centered around clear distinctive factors, a portfolio of unique sovereign capabilities with complementarity across our Swiss inert stick business lines, a dip in our unrestricted fees, and by a strong portfolio of intellectual property, we have more than 2,100 patterns across our business and partnerships.
These are true right to win in our marketplace and the foundation on which we are building our profitable growth.
As I indicated, Eviden is positioned on segments within the IT and tech markets which offer the highest growth potential.
In total, we estimate that our addressable markets could represent to combine 1.8 trillion euros in 2025, which implies an annual growth rate of 11.7% on average between 2021 and 2025.
Digital is the biggest segment. We address from a smart digital platform and digital transformation segment. This is a market that is expected to reach close to 1 billion euro in 2025, growing at 12.8% per year on average.
Our offering here revolves around smart platform, transformation, acceleration of digital application, and net zero decabornation play [NDLR : 12 staffs].
Our cloud markets, where we offer end-to-end services from advisory, design, and build to operation, is expected to represent 12.13 billion in 2025, growing close to 10% per year on average.
In big data and security, our unique offerings address these three segments. Digital security, where we offer cybersecurity services and products, as well as mission-petacle system. This market is expected to grow 10% per year.
On high performance computing, where we are active in supercomputing, high performance AI, quantum computing encryption, and scientific computing, this market is expected to grow 8.6% per year.
Lastly, business computing and AI, where we are present in business and hedge computing and AI solution, like our famous Ados Compto. Compto option platform software, this is a very promising market expected to grow close to 14% until 2025.
So the market dynamic are very strong and look for significant growth potential for our businesses.
Yet now we are looking at our midterm ambitions.
With the TFCo disposal and the new capital structure setup, we are aiming to accelerate our growth trajectory and significantly enhance our margin profile.
Evidet is playing in a very dynamic market, as we discussed before. That is structurally growing fast.
We are today reiterating our guidance and expect to reach 7% annual growth rate over the 2022 and 2026 period and significantly improve margins to see our cut 12% by 2026.
For 2023, we expect to overperform last year organic growth and improve our profitability versus last year.
With that, Diane, back to you.
Thank you, Philippe.
So today marks the first step of the new journey for our group, with the announcement of the transaction and also the launch of the consultation process with our employees.
Over the next few weeks, we will also work with our banks to obtain the waiver required to consume this transaction on which we are very confident.
Both steps are required before we can sign the FDA with ETI and the forecasted in Q4 this year.
We will also reconvene with you to provide a much more detail view on evidence, its ambition and financial plan as part of the dedicated capital market day that is expected to take place prior to the extraordinary general meeting.
Finally, we will convene this added general meeting to obtain up-world from our shareholders to consume the transaction and to issue the capital required. To conclude, I leave the floor to sleep.
Thank you, Diane.
So before we open up Q&A, I wanted to take a step back and wait for a what all of these means for the group and all its stakeholders.
First, evident that the new listed entity will not be exposed anymore to TFCo and its associated cash burn, restructuring and significant liabilities.
Second, we are creating a strong environment to ensure sustainable and successful development of evidence and to unlock value creation for our shareholders.
And finally, we are strengthening our capital structure with the weak-width insurance and disposal proceeds, targeting a two-time net leverage.
And finally, we are bringing on board a recognized investor, EPI, fully supporting the evidence project.
Thank you.
We can open for Q&A.
Ladies and gentlemen, we now begin the questions and answers session.
We are now taking the first question. And the first question from Frederick Bolan from Bank of America.
Please go ahead.
Hi, good morning. Couple of questions, please.
Can you share with us the cash? So you took about 100 million cash in at closing.
So can you share with us a little bit what's going on in terms of cash transferred, potentially in the unit? What liability are going and staying?
So between factoring, pension restructuring, and any color you can give us on the debt position you plan to reach at the end of 2023 for the remaining business.
So you took about a level of three times. So if you can triangulate the absolute debt level and any color on where you expect that to be in the 24 would be great.
Thank you.
Hello, Frederick.
I will start through on the 0.1 million net cash positive and the transfer of the liabilities attached to TFCo perimeter for both unbalanced liabilities for 1.9 billion euro and 7.6 billion euro in terms of balance sheet liabilities, including significant portion for UK pensions, but also for parent company guarantee.
On other questions and factoring and the debt I entered out to And yeah, let me just actually provide a bridge that may be somewhat helpful.
Just in terms of, first of all, how do we get to the four times for evident and then how are we going to go down from there?
First of all, we ended the first half of the year with a net debt of $2.3 billion. Excuse me, 2.3 billion euros.
And as was discussed at the last earnings, last week, the company expected to have a relatively flat free cash flow in the second half of the year.
And there's also the proceeds that are going to come from some of the assets that were already out for sale.
And that's about somewhere around $250 to $300 million of positive free proceeds.
So net net, at this stage, the expectations would be that year end, we would end with a 2.1 billion euros in net debt.
And so what Deanna's indicated, you have the proceeds of $100 million from this transaction and the conveyance of the liability.
But in addition to that, you heard us talk about unwinding some of what we turn the intro year, working capital needs of the TFCO business.
It was about $1 billion.
And so when you do the bridge from 2.1, that the company would finish the year at, 100 million of euros of proceeds, 1.0 of working capital unwind.
And then you have the disposition of new assets. We talked about 400 million.
You have also the equity raise that comes in the form of the reserve capital and the rights offering.
If you just kind of tag those along, you will see that indeed the pro format for evident, which would be NewCo, the new ATOS, would be called Eviden.
It is one point, around 1.9 billion euros. And then that gives us the four times of leverage, considering where the OMDA of Eviden is expected to be roughly at year end fiscal 23.
And then as I mentioned in my remark, this is a business that generates strong free cash flow. So we would expect rapidly de-levering with the free cash flow of the business. It's also less capital intensive, particularly in other areas of the business.
So that's how we get to the three times and then two times. And then you have the four.
OK, thank you very much.
Yeah, thank you.
Good carry on, sorry.
We are now taking the next question.
Please, then bye.
The next question from Federic Poulan from Bank of America. Please go ahead.
Yeah, thank you.
If I can just follow up on what's left in evident in terms of liabilities beyond the financial debt, that would be useful.
Thank you very much.
I think in terms of liabilities, I think you'll have the, can you be more specific in terms of what you're looking for?
Yeah, factoring, pension, restructuring, any other non-death liabilities.
OK.
I think from a factoring standpoint, there would be still some factoring at Eviden. If you look at where the company was at the half of the year,
there was about 700 million euros in factoring. Some of that is going to go away with the TFCO, and that's part of that unwind of the working capital
that we just mentioned. And there'll be left as of the middle of the year in June and the semester, about 300 million, that was for evident.
And then the objective, again, is, as I mentioned, also in my very introductory remark, the objective is to just fundamentally work on improving working capital for both businesses, even though we're separating TFCO.
But we're going to make sure that over the next six months to nine months, we are really embarking on a major improvement in working capital.
OK.
So no pension liabilities or restructuring left at.
Yeah, the pension is going with the TFCO,
and there's always a little bit of maybe restructuring or rationalization that takes place in any business.
But it's much more moderate in size. Most of the other restructuring that you heard this talk about
is related to the transformation taking place at TFCO.
OK.
Thank you very much.
Thank you for your question.
We are now taking the next question.
And the next question is to Nicholas David from Oddo BHF. Please go ahead.
Yes, good morning.
And congrats for this very interesting deal.
I have several questions.
I understand.
Could you please, I mean, I understand that the two billion EV you mentioned for tech foundation
include leading engagement. Could you give us the amount of these engagements you are taking into account?
Both at Tech foundation, but also at Eviden.
And for Evident, could you help us to understand what is the implicit EV of the reserved capital increase you are taking into account in the multiple of not to MDA, but maybe more adjusted a bit or more? I'll let you the, I mean, the adjusted EV would be great.
So the split of leading engagement for tech foundation and Evident and the EV, implicit EV of Eviden as part of the reserve capital increase.
And also, how did you take into account this EV and the calculation for Evident and the distribution we are doing with EP, with Mr. Kretinsky, the litigation with Cognizant. You put a zero or a number, which is above that.
Thank you.
OK.
Sorry, you got the, actually the sound was not really good. So if you don't mind just repeating the questions so that we can provide the adequate answer.
Sorry, the line was a bit blurred. OK, sorry for that.
My question is, I would like to have the amount of leading engagement you take into account in Evident and tech foundation enterprise value.
And the total enterprise value of Eviden you have retained for the reserve capital increase.
I mean, it's very difficult. The amount you have taken into account.
Yeah, well, let's, I think it's very difficult for us to comment right now on the, you know, the value, you know, of Evident, right?
Post transaction, obviously, as we just really were going to be sharing at the, you know, investor day, we will share more insight into the business itself.
And we let the market just determine, you know, the fundamental value of this pure play asset that is in very well positioned in the market.
And one of the hottest aspects of the market these days was big data and with cyber and also with digital.
And so what we gave you is some indication a little bit of the type of leverage the company will have and the type of OMDA that you can derive of that business.
And it's really going to be doing very well also from a free cash flow perspective.
So I think it's going to be a very valuable asset. And that's why we set this complete unlocking value through this transformation, that transaction.
And as far as you said, some leases that have been really conveyed, most of the leases are going to go with TFCO.
There's just basically, on a relative basis, about 20% of the leases stay with Evident in terms of value.
Okay, thank you.
And we are now taking the next question.
And the next question for Alex, I'm just a, for being very well. Please go ahead.
Good morning, thank you very much for letting me on a couple of questions at my end.
How should we think of working capital needs at Eviden and maybe where it stood at the end of the first half, I'm thinking in particular in high performance computing, which from memory can have relatively brutal working cap swings.
And the second question is on restricted cash, maybe in India or elsewhere, anything on the restaurant when it relates to the Evident asset.
Thank you very much.
You'll have to pardon me, but again, with the few days on the job, I think to some extent on the restricted cash, I can't give you right now yet the breakdown between the two businesses, right, in terms of how much is in Evident remains with Evident.
But I think right now, I would assume the majority of it, since we're conveying the asset and getting in that proceed from the end of the year, we're going to be able to obtain a 15 of 100 million in euros.
Your next question was?
Was a working capital need that Eviden going forward? And is there any an winding to happen there as well?
As of the middle of the year that reported that week, we had about 300 million of still factoring in the business.
There's a normal element of factoring in this industry that all companies go through. And so the objective is to continue to monitor that.
And as I mentioned, fundamentally improve the working capital characteristics of the business, working across every element of the working capital from receivable to terms and with suppliers and the like.
And we'll just continue to be pretty prudent with our working capital management.
Got it.
Perhaps another way of touching on the same topic.
Maybe based on your prior experience at CSC and DXC when you look at the mix of activities of Evident in digital and super computing and cybersecurity, do you think that by nature those activities tend to consume cash as you grow or should be pretty neutral in terms of working capital changes or perhaps even positive just trying to get my head around the modeling of working capital flows around for the new asset.
Yeah, I think fundamentally each one of those businesses within Eviden has their own characteristics.
You would say that the digital business in particular would have very strong and quick turnaround in working capital, right? Because there's a lot of project work and the like. I would say that the cyber business and the big, the big data business also would generally speaking be also light on capital intensity, obviously, but much more.
Again, quick, better working capital characteristics. The HPC business is its own characteristic that industry tends to have longer lead time for delivering. And as a result of that, collections is a little bit more extended on the receivable side, right?
And you tend to have to just really order quite a bit of the material, why in advance just really build these solutions for the clients.
So that's a business that we will look at a little bit more closely.
Does that help?
Yes, yes, it does.
Thank you very much.
Just, I would like to come back on one of the previous questions to give clarity on the two billion enterprise value.
I think it was the question from Nicolas from Oddo.
So coming from the net cash impact for adults of 0.1 billion, then the 1.9 billion on balance sheet liabilities, they compose as follow.
So 0.8 billion, 1.6 billion, and charge, 0.4 on pensions and 0.2 on others. That's the detail on 1.9 billion on balance liabilities. In addition to that, as part of the transaction, we forecast the transfer of the 7.6 billion euro of balance liabilities.
I hope to carry that in the ground.
Thank you for your question.
There are no further questions at the moment.
This is really an important day in our trajectory, in our plan. We are moving ahead with the separation.
That is a great news. And I would like to thank everybody and speak to you soon.
Thank you.