Atos (ATO FP) France
Technology
Operating profit fell a long way short of Teun Teeuwisse’s expectations due to much higher than anticipated restructuring, rationalisation, impairment, and “other” costs. Only a mysterious inflow from working capital (exactly how ATO achieved this remains unclear for now) saved cash generation. This, alongside unjustified adjustments to profitability, meant ATO managed to remain within covenants reporting a lower debt equal to the FCF beat. Perhaps the clearest signal about the quality of the business is that it spent more than €200m on addressing underperforming contracts. Teun is happy to remain short as he still sees very little value for the combined businesses.
Edition: 155
- 03 March, 2023
Atos (ATO FP) France
Technology
Close to fully utilising its commercial paper facility - implies clear breach of covenants. This means that additional to Teun Teeuwisse’s original short thesis (sustainable cash flow generation of €200m at best and €1.8bn of hidden debt in factoring, stretched payables, delayed tax and social securities, and from unpaid capex), a potential capital increase is now added. While Teun assumes further cash outflows in 2022 and more margin pressure, to bring real net debt/OMDA to a manageable 1.5x the company needs to raise €1.5bn vs. its current M/Cap of €2.5bn. Shareholders face massive dilution.
Edition: 134
- 29 April, 2022