Atos Origin's (AEXAY) CEO Thierry Breton on Q2 2014 Results - Earnings Call Transcript

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 |  About: Atos Origin SA ADR (AEXAY)
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Atos Origin SA (OTCPK:AEXAY) Q2 2014 Earnings Conference Call July 29, 2014 2:15 AM ET

Thierry Breton

Good morning ladies and gentlemen, Thierry Breton speaking. And thank you to all of you for attending Atos Conference Call today on First Half of 2014 Results.

So, I’m going to share this presentation together with Charles Dehelly, our Senior Executive Vice President in-charge of Global Operations; with Michel-Alain Proch, our CFO, Patrick Adiba, our new Chief Commercial Officer and Elie Girard our new Deputy CFO.

I would start with giving you H1 2014 and FAQs (ph) on the IPO of Worldline and on the Bull acquisition, which were as you all know some of the key milestones of the semester. Then Michel-Alain will develop the financial performance of the first half 2014.

After Michel-Alain, Charles will provide you a follow-up on the Group Transformation plan, the tier one program and will give you further details on Canopy, our Atos cloud services entity. Right after, Patrick Adiba, our newly appointed Chief Commercial Officer will comment on the Group commercial performance and on the sales dynamics. And finally, I will come back to you to conclude before starting our Q&A session.

So, let move directly on the slide number 5, you can see the key figures of H1. First revenue wise, €4.171 billion representing an organic evolution of minus 1.9% compared to the first half of 2013.

Operating margin reached 6.6% of revenue which represents an increase by 20 basis points compared to the 6.4% in the first half of 2013. This is fully consistent with the objective to improve up to 50 bp by the end of this year.

Free cash flow during the first semester reached €124 million leading to group net cash position of €845 million compared to €359 million one year before. So net cash position at the end of June included €628 million restricted cash for the planned Bull acquisition and excluded deposits of the online IPOs as a group as collected just right after end of June, it was right early July.

Moving on slide number 6, net income stood at €76 million compared to €116 million for the same period last year. 2013 figures included one-time items that Michel-Alain will remind.

The group book-to-bill ratio was 104%. The commercial activity was strong in Q2, with book-to-bill at 127% as we committed last quarter and upper cortile of our commitment. The full backlog was €15.3 billion representing 1.8 shares of revenue and finally 2,000 number of employees, 176,000 with now 22% in offshore countries mainly for our system integration operations but more in more to increase our efficiency in managed services.

On the next slide, we will see our guidance for the full year, taking into account of course the result of H1 and our specific chief for H2 that I confirmed today. In revenue, the group expects to positively grow compared to 2013.

Regarding the operating margin, the group has objective to continue improving its profitability target to 7.5% to 8% of revenue. And finally the group expects to achieve the free cash above 2013 level which was €265 million in-line with our 2016 ambition.

The next two slides highlight an important achievement of the first half of the year, the Worldline IPO. You all know that Worldline successfully completed its IPO according to our initial planning. Indeed on June 27, the Worldline share was officially floating in new expiry, at an introduction price of €16.4 per share representing a market cap of €2.2 billion for Worldline.

The final size of the offering was €639 million after exercise of 75% of the overallotment option. The operation is two-folded Worldline sold €255 million of new shares while Atos sold €284 million of existing shares.

Looking into more details on the next slide, the final allocation was realized to ground Worldline on a very solid business of shareholders. With the global reach, Worldline has 24% shareholders U.S. based and so it’s not a surprise that almost two third of shareholders are European based as Worldline is as you know leading European electronic payment landscape.

A vast majority of the investor, who choose to invest in Worldline are long-term driven investors ensuring a stable shareholding per share as I said previously, Atos intend to keep the majority stake in Worldline, as we consider this activity as core business for the group. Consequently, Atos owns today 70% of Worldline.

Let’s move on the next slide, where I would like to come back on another right move that the group announced in May which is a friendly offering that we did on the bid. As a reminder, we initiated an all-cash public offer at a price of €4.9 per share representing a premium of 30% of our bill stream of our share price.

On a business endpoint, we consider that this transaction is completely is a competing strategic opportunity for Atos and we expect significant benefits across our businesses. First, complimentary technologies would build in critical segment will further increase our businesses impact and the relevance of our integrating offerings.

As an illustration, Bull will bring critical and complementary capabilities in big data which combine with Atos solutions would create a unique offering in this high-growth segment.

Similarly, the combination will enhance Atos’ number one position in cloud services anchor its global leadership in managed services and system integration and needless to Say that in cyber security, we will have a very strong offering which would be probably one of the leading one in Europe.

Let’s move to the next slide on synergies, which are as you all know one of the key highlights of the transaction. Regarding cost synergies only, we estimate the potential at €80 million per share, per year on a run rate business with 24 months. We did this calculation at the beginning of the transaction and we confirm it today.

First, bill management as announced a strategic plan at the beginning of the year called one bill on the prior 2014-2017 bill that we expect to generate €30 million through. Secondly, we’re going to implement an incremental optimization of SG&A particularly on the international operations of Bull combining them with Atos representing another synergy run-rate of €30 million.

Finally, on top of the SG&A optimization, we plan to optimize a real-estate program adding up and those are €7.5 million of savings. So combination of the two companies will create more leveraging power on our common suppliers, particularly for hardware so agent several which would yield a saving of €12.5 million totalizing €20 million.

Needless to say that these cost synergies are backed by a detailed integration strategy and as you all know we know how to do it. We expect this transaction to translate into more than 10% accretion on Atos earnings per share within 24 months of integration.

This is what I wanted to tell you about the Bull, but to conclude few words on the next steps and expected timeline on this transaction. After having completed the French market requirements the offer period opened at the end of June and will close before the end of this week.

The offer will be conditional upon acceptance by more than 50% of Bull shareholders and we will get the result of the offer on August 11. We are very confident that we will reach this 50% threshold given the attractive financial terms of the offer and thanks to the relation with several allowed Bull shareholders as you know most of them committed to bring their shares.

Michel-Alain, the floor is now yours to comment the financial performance of our semester. Michel-Alain?

Michel-Alain Proch

Thank you, Thierry, and good morning to all of you. So, I’m beginning with slide number 14, this first slide is presenting you the usual reconciliation between statutory and organic figures. Two items to underline, first €5 million scope effect relating to the acquisition of Window Logic in Australia in July 2013, and the disposal of two small companies in France Atos Formation in March year 2013 and in the Netherland Metrum in January year 2014, altogether €5 million of scope effect.

Then the second item is negative exchange rate impact for minus €37 million resulting from the Argentina peso, the Brazilian Riyal and the U.S. Dollar, depreciating versus the euro and from the British Pound straightening versus Euro.

So, comparable basis of revenue for the first semester is €4,285 million and the comparable margin is €273.5 million.

Slide number 5 is presented for your reference, presenting the performance by service line in terms of external revenue and operating margin. I’m going to present the performance of each service line in detail in the next three slides. So let’s begin with managed services on slide number 16.

Managed services revenue which now includes BPO, we presented 51% of revenue and was €2,138 million down minus 2% to 3% compared to the first semester year 2013 and reaching a margin at 6.4% thus decrease of €29 million.

First in terms of revenue dynamics, the pattern was contracted as gross materialized in the U.K. with 3.7% coming from the full on purpose DWPP, which over compensated the WCA contract and business increase with Department of Health and the good dynamic with NACI. That we renewed with the new business model last year.

Second geography to grow, North America with plus 2% thanks to the ramp up of several Cloud contracts, Iberia Middle East and India grew too. Nevertheless, this good performance was not sufficient to compensate the dynamics of Germany, BTN, CE and France.

In Germany, despite new contracts ramping up in Telcos and financial services, revenue declined due to the end of the transition period with barrier and with Siemens as well as pie solutions with Siemens.

Revenue contracted in BTN on the back of the expected rundown of KPN and despite the ramp-up of the new infrastructure outsourcing contract with Philips which is going to produce its full effect on the top line in H2.

In Central and Eastern Europe, this geography was affected by lower volumes and the days effect in Australia and in Slovakia and finally in France, we saw the large Cloud based contract which were now to bank but this was not enough to fully compensate the run-down and cost reduction with customer in energy and manufacturing sectors.

So, operating margin reached €136 million, it’s minus€29 compared to last year. And there are three major elements that affected operating margin that I’m going to detail. First, and that’s the most important effect, France performance deferred from our view decreased and one-off transition slippages for total of €13 despite strong action on indirect costs.

As part of the strategy to reproduce managed services on high value services, the group decided to outsource its on-site activities in the last 2 GBU that we have not yet outsourced namely North America and France.

In France, this project presented to the relevant social buddies is conducted with Proservia and if successful, will result in the transfer of over 800 employees to Proservia to subsidiary of manpower in this field. This project will participate to the rebuilding of a solid margin in France derived from higher value services.

So, one important element to have in mind to judge the performance of managed services, the group recorded €10 million one-off cost savings in the first semester year 2013, I’m sure you remember due to the pension plan agreement that we found in the Netherlands and this run-off was not good for use.

And third, we decided to increase our operational expenditures from €10 million to €16 million an extra €6 million to further enhance the Canopy Cloud platform worldwide. Nonetheless and despite this element, this three elements, several business units in managed services carry on to perform well during this semester mostly U.K., North America and Asia Pacific.

Now I move on to slide number 17, consulting and system integration. So the revenue was €1,503 million down minus 2.1% compared to last year. We had actually growth in consulting which grew by 12.3% thanks to new contracts won in the U.K. primarily with Ministry of Defense, British Airways, and several other clients in the private sector.

System integration including technology services by itself softened by minus 2.9%. So, the service line posted significant growth in public and health sector and was up 5.5% mainly in Germany, in major events thanks to several international Olympic committee projects and in Iberia. But revenue was impacted by lower volume in several markets and particularly and here is the explanation it’s a bit like managed services, in Benelux with a run-down of KPN.

Finally, the days of comparison was unfavorable in the U.S. due to a large contract delivered to AIG in the first semester 2013. In Germany and it’s an global contract, carried on its ramp-up, an important point to note, France posted a slight growth over the period so compared to year 2013. Utilization rate increased to 84.8% in year 2014 which is 3 points more than last year.

Very importantly, and I think it’s one of the major point of the performance of CNSI, CNSI delivered a very strong financial performance in terms of margins, reaching 6.7% which is €100 million of operating margin, an increase of 170 bp. This margin improvement did not benefit from any major one-off effect but is really the materialization of the meta program that we shared with you during the Investor Day last November.

The stream of this program related to seize G&A optimization, asset management and quality improvement to lean an end-to-end processes, produce this margin increase of €25 million all over the group.

And finally this performance was actually achieved despite the transfer of home line 2 system integration of a contract principally for Great Manchester, carried, which was carrying a slippage of €10 million. So, as you can see a very strong performance and 170 bp, a very good start of CNSI to achieve the year 2016 ambition.

Now Worldline, slide number 18, Worldline is representing 13% of the group but €535 million of revenue plus 0.2% year-on-year. Financial processing and software licensing was the main contributor to revenue evolution thanks to a good volume dynamic that back shares and terminals also contributed to growth with higher volume in number of transaction.

And the terminal business dropped by 9.4 % even if this activity started to recover at the end of the semester, this drop was coming from a time-lag between two generations and terminals and would be behind us in the second semester.

So, please note that Worldline presented yesterday its results as a standalone company with a growth of plus 2.2%, the difference between the 0.2% and 2.2% was due to the increase of revenue that Worldline did with Atos which was fuelled by sales synergy program launch one year ago.

Operating margin at €80 million at 15% of revenue and that 50 bp more than last year, 50 bp was which came from both transaction volume growth particularly in commercial acquiring as well as cost optimization in the Benelux cost optimization as part of the team program.

So, overall this results are fully in-line with Worldline gained supposed a year. And as I said, assuring the matter that is shown of the first results of the team plan.

Slide number 19, is presenting the performance by business units. As I have described in detail the performance by service line, we’ll comment on these four major geographies. First, as a generic comment, all global business units improve their operating margin with the exception of U.K. and France.

As I have already explained it, the U.K. posted a growth of 62% fuelled by Peeps and NDA contracts but faced a difficult contract with transport for greater Manchester, TFGM, transferred from Worldline prior to the IPO which led to a minus €10 million loss recorded in the tie-up. So you need to have this in mind to look at the performance of the U.K. on the semester.

Germany revenue decreased by minus 3% due to the end of transformation phase with Bayer and Siemens as well as I said it’s a ramp-down of KPN, nevertheless the German team posted a very positive performance in terms of margins reaching 6.6% to strong increase compared to last year, they’ve done productivity gains and addiction of overheads.

France results were particularly challenging but still positive in OEM and posting a slight decrease overall of minus 2% GBU primarily impacted by the lack of revenue in managed services and large overhead on the clients in the energy sector that led to reduction of managed services margin that they have mentioned of €13 million.

And finally and that’s important the project to out-prove our own site services to put where we are will help restore the margin as earlier as H2, despite difficult economic environment and a decline in revenue and KPN, which by the way represents half of the organic decrease. BTN reached double digit margin rates, an increase of 110 bp due to strong actions being carried forward on the direct cost base leading to an improvement of the utilization rates of workforce.

And finally the group continued to reduce its global structure cost both in IT services and in Worldline.

Slide number 20 is presenting the headcount. In total, 76,465 at the end of June year 2014 which is pretty much stable over the semesters, a number of direct employees at the end of June year 2014 was representing 92.7% of the total account which is to be compared with 91.5% at the end of the first quarter, year 2013.

We recruited 5,476 new employees with 53% in offshore countries, in offshore accounts total 16,778 staff so roughly 17,000 representing 22% of total staff at the end of June year 2014, which is an increase of 16% compared to one year earlier, with 56% of them being located in India and mainly for system integration and 26% of them in Central Eastern Europe this time mainly for managed services.

Attrition during the semester was 9.7% at group level and 17% in emerging countries.

I move on to the group income statements of the first half on slide 21. I already commented revenue and operating margin. So although operating income and expenses represent a net expense of €145 million in the first half of year 2014 when you make the total of staff reorganization, rationalization and strategic growth and integration and acquisition costs.

So, first, these first three lines that I have just mentioned the reorganization of the rationalization and integration cost totaled €110 for the semester, it’s an increase of €30 million compared to last year most of the action of the organization and rationalization that we plan for year 2014 were actually performed in the first semester.

I’m talking here first for restructuring plan in Germany agreed with the employee representative in June year 2014 for the employees located in Frankfurt following the termination of the application management contact with the regional bank due to its acquisition by Commerzbank.

So going to the adaptation of workforce in several countries, such and Benelux and Nordic, Iberia, U.K. and Germany. And finally the streamlining of the number of middle management layers including a headquarters. The important point that we will stay in the overall envelop of €160 million for the year as I explained during Investor Day November and that I reiterate during the presentation of our full-year 2013 results last February. It means that on this reliance we will spend maximum of €50 million in the second semester.

The second category of cost is PTA that you lose a customer relationship amortization which is a non-cash charge and which is fixed at €22 million. And finally the third category is the line order which in year 2014 was mainly composed of provision on the DWP/DWC contracts and acquisition fees related to M&A performed by the group in H1.

While in 2013, it was fuelled by €20 million exceptional profit maybe you remember it, maybe on the sale and the back operation of the datacenter of 49 in Brussels.

Net financial expense amounts to €21 million for the period, and the tax charge apply to a profit before tax of €108 million presented an ETR of 27%. The net income is at €76 million which represented 1.8% this year.

Next slide is presenting the cash flow statement of the period, so I start with UMDA at 10% of revenue increasing by €20 million compared to last year then capital expenditure which represented 3.7% of revenue slightly below the first half year 2013. The main element of CapEx came from Germany and the U.K. further to the implementation of last BPO of managed services contract.

Then moving on to the working capital which is positive by €31 million. This positive change in the working capital came exclusively from the BPO fuelled by the global purchasing plan that Charles will actually detail later on, and which would use the number of suppliers and improved largely working capital, DSO in the period as I told you remain stable compared to June last year as expected.

Most of the actions as I have told you regarding the reorganization and rationalization were launched at the beginning of the year in order to maximize the full year effects. So we confirm the full-year amount plant for reorganization rationalization and integration cost at €160 million on the year decreasing by €20 million compared to year 2013.

Cash out related to tax was higher than last year to differ tax payment of previous period which were paid in the first half of this year, the cost of net debt decreased is mainly due obviously to the conversion of the two convertible bonds during the second half of last year.

Although change mainly correspond to the employees exercise of stock option as well as the expense of €10 million related to the DWP/DWC contracts. And as a result the group free cash flow generated during the first half was €124 million.

Moving on to the next slide, which is the net evolution and position of cash at the end of the semester. So, we started the year with €905 million, as I’ve just explained free cash to that €124 million. At the end of the first half, the group paid €20 million for the acquisition of Cambridge Technology Partners a consulting firm located in Switzerland which generated €35 million revenue in year 2013.

During the first semester the group repurchased €439 million of its own shares as part of its buyback program which we pursued in the second semester. Foreign exchange rates, fluctuation was positive for €13 million and cash out for the payment in cash of dividend on year 2013 results was €38 million.

So, at the end of the day, the net cash position totaled €845 million at the end of June year 2014, of which €628 million for the planned acquisition of Bull is placed in these core accounts for the privilege tender offer which itself excluded from our statutory cash position with an amount to €270 million.

Finally as Thierry told you, we will – we have received the proceeds of the IPO of net of fees of €619 number in the first day of July which means that our pro forma net cash position is €836 million.

Now, let me finish my presentation with slide number 24, which is a simplified presentation of the balance sheet. Main volumes compared to December year 2013 is obviously coming from the shorter equity including Worldline capital entries, stock option exercise. And net income, so, as you can see during the first half of the year, the group kept impacted capability to generate external growth and to finance it.

Charles, the floor is yours.

Charles Dehelly

Thank you, Michel-Alain. Good morning. I would like to share some of the key indicators we presented during our Analyst Day last November. And thus we are talking now with Tier One program. Generally speaking the sale semester of our three-year plan is right in line with our plan, with a good momentum of our teams as demonstrated by the following indicators.

Slide 26, import unit, we share with you our mission to get by 4, the number of vendor making 80% of our purchases in order to increase our average price addition to year and to develop a strong year partnership, we saw selected vendors.

At the end of this semester and sums to a very active negotiation, we are mid-way. We are still around 500 vendors coming from around 800 in 2013. It’s clear that the remaining gap, with our goal will take more time to be delivered.

A nice side effect of these vendors consolidation is an improvement for contract to LDPO larger vendors of free and leverage longer terms and smaller terms with short term being reduced.

All-in-all, this is fiscal four the DPO which are contributing to improve a working capital by around €40. And most who come, as we will get closer to avoid.

On the next slide 27, we are measuring two key productivity indicators. The first one, is a number of our people in wind managements. I would like to remind you that after adding implemented lean techniques on more than 35,000 position within our tools, we decided to implement on top of sustaining effort, new processes aiming to optimize the global end to end delivery to our clients reduced same cost and cycle time and improving customer satisfaction with positive impact on business.

During this first half, we involved 2,000 additional colleagues and we are haunting to get the program. So an indicator on see slide is of systematic ratio of (inaudible). Our aim is to pass the 50% mark by the end of 2016 at 38% and in June, we are on the right trend to a achieve a goal.

Next slide, June earnings day on last November. We presented you or the offering, aiming to reduce our cost while increasing the customer satisfaction index, and increasing all new providing to our client’s recommendation to do it.

Deep storm fall zero in Sweden program, some first pilots achieved during the H2 so as that we could 20% to 30% reduction to incident we see in our clients

As the end of first half, we cover it clients who are presenting 22% of manager service revenue and a 31-perasonal improvement confirming of expectation in terms of improvement. They told so in term of customer satisfaction and bees net after utilization. We are of course holding up to this offer.

Slide 29, now world on Bull. We are in the starting blocks to start the Bull integration. As you know the finalization of the (inaudible) we’re not able to share non-public information with bill but although from safe time we explained our integration process and as will to create that integration information or ongoing start of format as well we don’t see burned and kept on that so, as to the year to start immediately after the meridian lights.

Our goal is to there all the organization fully in place on January and the budget on making the plan 2015 synergy has presented during announcement.

I know we’d like to make a statue on the board Canopy dedicated closed on city slight €30.

As indicated during our Analyst Day last November, an audition for 2016 as part of €700 final revenue coming from €280 million in 2013. I’m really pleased to report a 31% of doing fees between H1 2014 and H2 2013 and that we book more than €200 for the MC, this was still particular with blue chip company of which some logo in size.

In parallel we see standalone, in enterprise privately clothes and other infrastructure social services.

I move to slide 31, Canopy is a ready to sustain these egos trend supported by your EMC n VMOS from partners. You see there is a split of Canopy was new with the dominant in North America and around 90% we’ve seen the most dynamic European economy, Germany, Benelux and Nordics U.K.

20% of Canopy the view is made of service provided to a client to build their target growth and to manage the condition from legacy to crowd while 80% of the revenue is made of securing option this is all private cloth as well as mutualized platform.

We see private growth in all 18 security sales yields being in high demand in your up – in particular for Laughter enterprise.

Slide 32, shows that the combination of Bull and I thought I mean at least we’ve cleared the number one, the European flavor in cloud service in western Europe, which is a pro forma of view of both 400 million in 2013, at a market that is going fund overall 25% burnout.

Due believe you compliment our ePortfolio including new offerings for in terms of platform as a service I guaranteed web development and OST offer, which could be expenses to Europe. And you think this capacity for instance security operating center And additional on the engine. As well, as new technologies that cannot be as its own, I mean, do you own nape?

Actually are eating thank to market especially blocked all of them to clutter. Conversely, Bull’s installed customer base would benefit from Atos offer so you cannot be will in fact benefit from the accelerated both in terms of revenue where it will climb from the position for to position to be NMS, all in west and Europe and in terms of technology, where it would benefit from the combined technical capability and especially CQ Cloud technology that we will bring to the combined strategy.

So, now I think floor is yours.

Patrick Adiba

Hi Michel and good morning I’m Patrick Adiba is the new Chief Commercial officer. On my first slide I would like to highlight some important contract significant of the second quarter. In addition to securing three main renewals in H1 2014, BBC in Q1 and large bank in Hong Kong and Renault in Q2, I would like to focus on two new business contracts 10 years full maintenance, mainframe outsourcing contract with the global aircraft manufacturer.

This totally new business increase operation of a four main European countries and transformation, the objective being the consolidation into a single data center and migration to Linux.

And also, five-years contract, one of the big four accounting firms to manage their workplace with highest security standards, the latest collaborative technologies and best in class cloud services for desktop naturalization and secure back-up, this again, totally new business.

We won those two contracts, thanks to our ability to operate globally but also our knowledge of those clients market environment allowing us to convince them about our capacity to transform those business models in line with our business needs.

Of the next slide, slide 35, you see the summary of the new signatures, they are reflected in the group H1 commercial figures. As the book-to-bill was 104% in the first half we’ve as mentioned earlier 127% in Q2 as anticipated. Out of the 127%, managed services reached 153% resulting from the signature of several large new deals that we signed in June on top of renewals.

Book-to-bill in managed services was driven in particular by the U.K. Benelux and Nordic, France and Asia Pacific.

Consulting and system integration made a catch-up into two with 105% with France in particular supported a healthy 113% book-to-bill, this performance was mainly in most of the markets and more particularly U.K. in the public sector, France in manufacturing and also in Telcos and Spain in financial services.

Worldline improved its figures in Q2, as a reminder this activity has a seasonality effect and a certain number of contracts with banks are renewed at the end of the year. Through this level of book to bill, sales team succeeded to sign new deals on which we’re working for months.

One word of the backlog, which remains, strong and offer a good visibility with Worldline at €1.4 of revenue, consulting and system integration at 1.1 and managed services at 2.3 years. Finally the pipeline remains strong and more importantly includes several large deals on which we’re going to focus in order to get signatures in the next two quarters.

Since I started and you can see that on the next slide, slide 36, since I started three months ago amongst all the things and especially the deal I just highlighted, I have been focusing on reshaping our sales organization in order to reach our 2016 growth ambition by improving our sales efficiency and better leverage, our innovations and differentiators.

Our go to market is now relying on two powerful engines, growth engine, the global markets are taking full accountability of the 250 Atos top large accounts and a certain number of accounts expected to become a top account. The total representing share count 70% of revenue of the company. My target is to grow this top accounts by more than 3% year-on-year.

The global science executives reported global markets and have the full authority on all the sales and pre-sales resources necessary to manage the account. This year will enable to create higher intimacy and generate long-term innovative contracts.

Second point is a fertilization engine, the service line accountable for the customer satisfaction, renewals and fertilization of all the accounts with the objective of preventing the natural erosion of existing contracts. The addition will take full accountability of the smaller accounts their target is to reach a positive gross year-on-year.

On slide 37, you see the summary of the various points. This new client driven organization with a level organic growth in-line with ambition 2016, as it empowers client executives to grow existing and new accounts and lowers the service line to ensure sustained revenue and existing clients.

The global market has and are leading the 200-client executives at group level, which strengthen business development through value creation, leveraging our full portfolio and innovation capabilities.

To further support the growth, we will use two newly created levers, the rapid gross market board to proactively propose to our customer solution but anticipate on the demand on key trends such as big data Cloud cyber security or digital transformation.

And the second lever is the alliances of the sales channel to accelerate the go-to-market with partners such as Siemens, CMC, VMWare, SAP, Samsung, with dedicated specialized sale resources generating incremental revenue.

This new organization will enable amongst other things to pursue generating up-selling both with Worldline further to more visibility on Worldline due to the IPO as we clearly observe this semester. And in addition, we are already able to leverage good assets with our clients specifically in big data and security as soon as the acquisition is completed. This goes both ways and is also valid to leverage Atos portfolio with all-built clients.

Thank you for your attention. Thierry, the floor is back to you.

Thierry Breton

Thank you, Patrick. And it’s time now for the takeaway and start with Q&A. Moving on the slide 39, you can see on this picture the combined entity after planned Bull acquisition will generate €10 billion of revenue if we consider 2013 performance business, of which $8.8 billion in IT services and with more than 85,000 employees around the world.

As you all know, because we are convinced of that – this acquisition will strengthen our position along some of the fastest growing segment in IT services, namely big data, cyber security and of course cloud. On top of those, as we explained today, the integration of build Atos will have virtuous effect also on the system integration and the manager services business of our company.

On the next slide and before I summarize, I just would like to tell you that what I will do as the CEO of this company over the next three years.

You see on this slide, that we have Atos IPO valuation of Worldline with a market cap of €2.2 billion and this represents for Atos as a value of €1.5 billion. So, market cap of Atos today is something like €5.9 billion. So it means that we have in our hands an ITS chart valuation for this activity of €3.7 billion.

So let me tell you that as a manager with the management team, we are – we know exactly where we will put our thoughts on the next three years to create huge value for our shareholders and by the way Charles and Michel-Alain for us since we are strong shareholders, big shareholders of this company.

So, as the CEO of this company, for the next three years, let me tell you that I know exactly where I would put my efforts. Let’s conclude with the slide 41, we as the key takeaway of this presentation, we launch an offer we’ll be running till July 31. It will be a compelling and strategic as I said. As such, the new group profile will be a very powerful engine for value creation for all its stakeholders.

Internally with more than €500 of new contracts sign and more that we will in July but we cannot still announce. I could tell you that there is a big momentum in the sales activity for this company and Patrick was mention, how he’s running now on a full-time basis activity. And as mentioned by Charles, and with the focus on Cloud, the Tier one program while delivering Charles as planned and we’ll continue to do it on the second half of course.

So, all-in-all, I confirm all the objectives for 2014 in line of course with our 2016 and beyond. Thank you for your attention. And we are now are ready with Charles, Michel-Alain, Patrick, Ellie and ready to answer to your questions.

Question-and-Answer Session

Operator

Thank you very much. (Operator Instructions). The first question comes from the line of Charles Brennan from Credit Suisse. Please go ahead.

Charles Brennan – Credit Suisse

Thanks. Morning, guys. I’ve got a couple of questions, actually. The first is just on the pricing environment. It’s obviously very encouraging to see you signing up some bigger deals in the second quarter. But can you just give us an idea of what sort of gross margins you’re signing those up at, are you, having to take any pricing pressure there?

And the second one is just on the Bull transaction. It looks like they’ve come out with numbers today reflecting negative organic growth. What sort of organic progression have you got into your budgets to enable you to hit the €80 million of cost synergies?

Thierry Breton

Michel-Alain, you’ll take that question?

Michel-Alain Proch

Sure, sure. But first on the, you want to take it Charles, no, okay. All right, Charles, in terms of pricing environment yes, as Patrick described it we sustain several contract in June. And all of them, all of them are above the gross margin of the company so either at gross margin stand-out gross margin of 18% or at higher gross margin.

So, we have not turned out clearly, we have not made the choice of taking deals at lower price. The second point on Bull, yes, indeed, Bull announced this morning by the way an organic decrease of minus 2% to 6% but, one of the action of the 1 Bull plan was to take out a certain number of contract that was either money losing or substantial in terms of margin. And that’s exactly what the Bull team has been executing on this first semester.

And finally, it’s too early to give I would say a flavor of the organic growth or the profile of Bull, as we are going to, if the operation is successful, we’ll be in control of the company in two weeks time.

Charles Brennan – Credit Suisse

All right. Thank you.

Operator

And the next question is from the line of Brice Prunas from Exane BNP. Please go ahead.

Brice Prunas – Exane BNP

Yes. Good morning, gentlemen. And thanks for taking my questions. Three, if I may? The first one is to come back on your €500 million new contract signings. I would like to understand the triggers to see these contracts unlocked at the end of June or in July, as well. Is it market related or can it be also ascribed to the first benefits of your sales organization changes?

The second question is on your fiscal year top-line guidance. I can see an implied target of 2% organic growth for H2. And could you please elaborate, how it is going to flow between Q3 and Q4? And the last one is the kind of organic growth we can expect for H1 2015 based on these June signings, just the embargo effect you can see from these signings? Many thanks.

Thierry Breton

Thank you, Brice. Patrick will take the first question and Michel-Alain the second one and I will correct Michel-Alain if he’s not precise. But since he would be precise I think he will do it. Patrick?

Patrick Adiba

So, very simply on this signature is yes, there was a new momentum as I explained. But really those contracts, we’ve been working on them for a few months. And we really pushed significantly to make sure we could get them to closer into two but to adjust I would say the combination of the customer needs on this contract plus the acceleration new to the – leads the new sales that are created.

No, there is no specific trigger except a lot of focus and attention and insisting on the key value we are bringing to this customer because of course the sooner the sign, the sooner they get the benefits of those new contracts, especially the one related to transformation.

And it’s true also that we had some slippages from Q1 to Q2, not too much but we had some. And this is why we said the target that we had was between 120% to 130% order entry in Q2, because of some of these slippages but it’s true that we were able to enjoy better than anticipated sales momentum in Q2 as expected.

Thierry Breton

Michel-Alain?

Michel-Alain Proch

Yes, Michel-Alain speaking. So you’re right, we are planning for second semester move 2% of organic growth. And in order to materialize this 2% of organic growth, there are three major elements that are on which we are basing this assumption.

First, it’s an acceleration of the rules of the Worldline, both goes as standalone, company but contributive growth to Atos and for Worldline to be around 2% to 3% in the second semester.

The second element which is important is the stabilization of manager this is including BPO in the second semester. And this shows the amount of CNSI, it’s really an acceleration of the goals of CNSI, with Q3 around there and a very strong Q4. And that’s really on what we have based our forecast based on the contract we had signed. And based on the contract we sign in the first semester that’s going to produce a full effect in the second semester. Thierry you want to take this other point.

Thierry Breton

No, I would have to tell you but it’s also that just so we are not bothered. And of course we added up with revenue of Q1. But we presented the budget in second half and the bad weather was supportive and comfortable with what we presented, and as you said it’s been that we expect to present goals. Of course, it’s actually in H2.

And I would like to add so with that we, as the board decided to grant this on a yearly basis, some gas or free shares. And for the first time, since I’m in the company, we have decided not to have two criteria but criteria to reach, to have these free shares to be allocated to the management over the next two years.

One is free cash flow of course, one is OM. And for the first time we had also a gross as a free share. It’s true also that we feel this momentum and we saw that it was appropriate to do it now for the time being to be able to measure the progress of our team and to reward them the way they should be if we achieve what we see in our sales forecast.

Michel-Alain Proch

And maybe, Brice, Michel-Alain again, to sum up on your question about the impact growth for H1 in 2015, I think it’s too early to tell obviously we’ll do the budget after summer. But obviously we’ll – our objective will be to be in line with our ambition year 2016 plan.

One more thing I just want to add because that’s for Charles who had the first question, seems important thing on the top-line of what Charles asked, well, what is the assumption of the topline of Bull in order to create the synergies?

I think you understand that the synergies we are creating on below the €80 million which is really €30 million plus €30 million plus €20 million. All these €80 million are the same type of synergies we’ve made with Siemens which is really synergy being direct and the indirect cost base which is very I would to lose from the top-line evolution just two words to complete.

Thierry Breton

And then as the completion, I would like to tell you that yes, Brice, we have been extremely active on this semester. It is an incident that, have taken. I wanted to be in a position to be ready as early as possible with good probably matter even if we’re still contemplating some moves in the geographies as you know.

But we want to assist behind as early as possible so that we’ll be able to deliver the three-year plan that we presented last year. And which to you and which was approved by our AGM last December. My strategy was do it immediately have the right payment in place, the right team in place, the right program chart in place and then deliver. And it’s true that we did all of these things in start, so I should tell you even if yet I’m disappointed with the goals, I am pleased with what the team has delivered and we worked extremely hard as you see. Waiting for new question.

Operator

Thank you. The next question comes from the line of John King from Bank of America. Please go ahead.

John King – Bank of America

Great. Thanks for taking the questions. I’ve just got two; one on Cloud and one on off-shoring, if that’s okay. On the cloud side, could you just say a few words about the profitability currently of Canopy? It is dilutive?

And also, secondly, on that side, what are you seeing in terms of pricing stability in that section. Are prices falling or are they at least in line with the rate of fall in the cost of provision?

And secondly on off-shoring, you’ve done a good job there of shifting work offshore in the last few months. Is that having any quantifiable drag on the top-line growth as you move deals from, onto offshore? If you could comment on that, that would be great. Thank you.

Thierry Breton

I will answer on the financial side our Cloud strategy and (inaudible) you’re right John, this is a very part of sheet that we have put in place. And we can start to see the benefit will continue by the way to invest in this joint venture. But Michel-Alain will answer the first one. And I’ll take the second one.

Michel-Alain Proch

Sure, the shrinkage on the margin of our Cloud activity is not dilutive to the margin of the goal is dilutive in this first semester. We are following it globally at a good level since H2 doesn’t suit in. Now we have in place a very stronger financial control on the entire operation, so it’s relative to the group.

And I think after the acquisition of Bull, actually as presented it, we will present the Cloud as the service language by itself so we’ll give much more detail in the financial information we present for you 2015. Charles, you want to take the second part?

Charles Dehelly

Yes, on the offshore and on the win rate, it’s clear now to win a deal you need to have an offshore rate which is pretty high, which first allow us to win and so on deliver a better margin. No doubt that it’s a key driver of the significant improvement.

You start to see in consulting CNSI and which is not at the end of year as we presented in our figure plan. We have the ambition for significant goals in operating margin which will directly result from two factors. One factor is offshore goals which start to materialize, and the second it’s an improvement, it’s a mix of the service we provide to our clients.

John King – Bank of America Merrill Lynch

All right. Thank you.

Thierry Breton

Thank you. Next question please.

Operator

The next question comes from Michael Briest from UBS. Please go ahead.

Michael Briest – UBS

Good morning. Thanks. Michel-Alain, if we could just look at the cash flow. I think in the first half you’ve had a strong working-capital performance again, plus €30 million. I think when you gave your guidance in February you were talking about €100 million outflow for the year. Can you talk about what’s likely to happen to working capital in the second half?

And also, in that regard, on the stock-option exercise, there was quite a large benefit last year. Have you any sense on how large the impact will be in 2014?

And then secondly in terms of Siemens, I think there was a comment earlier on about a price reduction having an effect on revenues and profits in Germany. Can you elaborate on that? And then also on Siemens, in the past you’ve given us an indication of the drag effect of exiting loss-making contracts. What was that in H1 and expected to be in H2? Thanks.

Michel-Alain Proch

Okay, it’s Michel. Okays, so I think it’s five questions if I’m not mistaken so I’m going to try to answer them one after the answer. So first on the cash, and you correct me Michael I forgot something.

First on the cash and the working capital, so indeed, the way we have – we have working capital was roughly to be slightly positive overall for the year. And I have been, I would say prudent when I did this calculation. As we discussed that length with Charles, I put it on that in 2G as focused too.

But the truth is, that we have engaged very large program with our vendors. And as I was telling you, this increase of working capital in the first semester and you will see it in the financial statement fully coming from the suppliers. And the work that Charles has been doing with purchasing that to consolidate base of supplier.

So, you’ve got here a bit push in the first semester. And I believe we will have some in the second but not much, if I have the number to say so it’s not precise signs. But if I have a number to say, I would be somewhere around €10 million to €15 million, obviously.

Then on your second item, which I think was related to the cash flow too. In the first semester year 2013 we had stock option being exercised for €27 million. And in the first semester year 2014, we had stock option exercised for €57 million.

Now, and I think it was your third question, going forward what do we see in terms of exercise of stock option, there is one more plan so, as you know all the stock options are in the money. There is one more plan which is actually – which is actually going to expire in January 2015, so it means that’s the holder of this stock option. I think largely convert them or then we lose them by the end of the year. So, I think there will be roughly €15 million coming from this plan in the second semester.

Okay, I’m sorry, I think I forgot your fourth question, seems the last one was on Siemens?

Michael Briest – UBS

Well, based on Siemens. In Siemens there was a price reduction talked about in the prepared comments. And then also just the loss-making contract trajectory.

Michel-Alain Proch

So, on Siemens, obviously I cannot comment on the commercial contract based but the one thing you need to know is that the two points, this price decrease in Siemens does not come as a surprise. It has been committed in our contract since the beginning on the infrastructure part, so it’s totally normal.

And the second point which is very important, is the fact that the gross margin of the Siemens contract again and you understand why, I cannot disclose the gross margin of a contract.

But what I can tell you that the gross margin of the Siemens contract, when you compare H1 2014 to H1 2013, is slightly increasing despite decrease because we are in line with our productivity program mostly in Germany I think Charles is telling me offshore I need the off-shoring program of the Siemens contract.

Finally, in terms of drag, as far as the money-losing contract that we took over from Season, at that time just to remind the big numbers, at the time of the acquisition, we’re talking about when 12 months or €420 million. This, we reduced it to €300 million in year 2013.

And then we reduced it to €250 million in year 2014 so, most of it being behind us now. And we do not and I think that’s an important point in the modernization. We do not expect any longer, any drag of this money-losing contract in the second semester, meaning we have done the job.

The contract has been either terminated or renegotiated. And we are not planning to terminate any of this, contract in the second semester so no drag on the second – on the H2. I think I have covered everything.

Michael Briest – UBS

Yes, thank you.

Operator

Okay. The next question comes from the line of Mohammed Moawalla from Goldman Sachs. Please go ahead.

Mohammed Moawalla – Goldman Sachs

Thank you very much. I wonder if you can comment on the evolution of the book-to-bill that underpins the acceleration we expect to see in the business in the second half. Should we see a lot less volatility than we saw perhaps in the first half? And, generally, can you maybe comment around the pipeline and the visibility that underpins that growth?

And then my second question is obviously the cash balance on the balance sheet is rebuilding again. I’m interested in your thoughts on further M&A. But also any plans on buying back stock, given where the stock price is at current levels?

Thierry Breton

Michel speaking, I think there are several questions here. I will take the first – I think the third one which was the share buyback, Thierry will comment on the strategy of M&A. And finally, Patrick will give you some of color I would say on the dynamics on the pipe specific and what we see on the market.

So, just simply on the share buyback, we have covered €139 million in share buybacks in first semester. Maybe you remember that most of it to be precise €113 million was designated to be transferred to the Dutch pension fund which has been successfully done.

And by the way we see in our results in this first semester, maybe I haven’t said it enough as a result of this agreement because the increase of UMGA by €20 million is mostly coming from the reduction of pension. So you see everything is linked, it seems this operation has been quite successful.

In terms of share buyback we are now executing the third trench of the share buyback, what we have called share buyback three. Share buyback three is €115 million. We have began to proceed with it just before I given the mandate, just before the – it was the beginning of – actually the beginning of the month of June. And we are planning to execute it into the second semester. Thierry, if you want to comment on the M&A partition?

Thierry Breton

Yes. As you know, for us we’re clear that it was important to enlarge our scope in U.S. and also in Asia. And as you know that we are working as U.S. for few months and we will concentrate our effort on this two geographies. But with a specific focus on U.S.

This being said, we have been active here. And we have the ability to do what we have to do. Thanks to our very strong gas situation that we just recall. So we believe that we will be able to do it hopefully within the next few months.

And of course, more you know that we have now supposed ability for Worldline to pursue its strategy in terms of acquisition in payment. So we continue to look very carefully what is available now. And I could tell you that the team is pretty active in this segment. And of course thanks to our strategy, it has the ability to do under the strict control of our gross and of broad of our line to do what it has to do in terms of being able to be a strong player in Europe. And we have of course an interesting pipe here.

I just wanted to, since I have the mic Michel, I just wanted to add two things to your previous question to Michael. The first one is probably stock option, you mentioned that we may expect to have some stock option in second half. We don’t know that because I just want to correct the timing of the last trench is not the end of the summer, its end of January.

So maybe someone who like to take the benefit of fiscal advantage, so I don’t want to take into account this initial light could come, and if it comes it will come but we don’t manage it with this because again it is in the hands of the one who want it.

And also, I wanted to mention that the comments that you made to Michael, for the first time since we have our extremely strong partnership with Siemens, I guess for the first time, I could tell you that plenty of project that we saw in first half, we were concentrating on those first two or three of these contract and our ability to deliver the contract properly to turnaround the business, to clean the situation.

And now I should tell you that I never saw so many activities between Atos and Siemens in many, many area, namely some of them big data, we have decided to invest to big data with Siemens building so largest U10, big data that’s from. We are now investing a lot in cyber security. We have many, many activity in cyber security. They are extremely they’re waiting for the intimation of Bull because we know that there is a lot of things that we will do together with Bull that we could do also with Siemens. So, we have many activities.

And by the way, for the first time we won a new contract, a new very important contract which is an extension of what we do. So there is a lot of momentum with between Zimmen and us. And by the way it’s not a surprise also that we are lodging our penetration in older large German companies like as we mentioned across industry.

Patrick Adiba

Yes, so Patrick Adiba, on the pipeline, there are few comments. We have of course a strong pipeline but also balanced pipeline meaning that we have a good mix now of large deals and small deals in across various geographies.

And with a new sales model as I said earlier, we’ll focus really the account executive on closing what is on the pipeline for the top accounts and the capitalization will be managed by the service lines meaning we expect not only we have a good pipeline but also the conversion should be better, thanks to that.

So, few comments as well, we have a lot of dig in the pipelines that includes cloud and security as was mentioned previously. And I those contracts or the potential contracts are important for the customers in order their, improve their own business model. And we think here we have a good momentum to hopefully see less volatility as you were asking. Thanks to the mix of pipeline and the type of deals that we have in this pipeline.

Mohammed Moawalla – Goldman Sachs

Great. Thank you.

Operator

(Operator Instructions). The next question comes from the line of Laurent Daure from Kepler. Please go ahead.

Laurent Daure – Kepler

Yes, thank you. Good morning, gentlemen. In fact, I have three questions. The first is what you mentioned on France and the potential agreement with Proservia. If we could have a bit more info on that and the expected benefit from a potential agreement with them because it was not really clear to me.

And the second question is on the Netherlands. If you could help us reconciliate the big drop in revenue and record margins in the first half.

And my last question is back to the bookings you had in Q2 and the expected acceleration in the second half. Clearly do you need another significant win over Q3 to achieve more than 2% organic growth in the second half or what you’ve just signed in Q2 is probably enough assuming macro conditions stay the same? Thank you.

Michel-Alain Proch

Okay, Laurent, it’s Michel. I’m going to take the first two questions possibly and then I will leave the last one to Patrick, so, first on Proservia, just to be clear on there. We’ve been presenting this project with the social buddies in France. So there is a certain number of things we can and cannot say.

But the main important thing, it has been a constant strategy of the groups to outsource on site services because this is a segment of managed services which is low value and on which we want to weight it. We know it’s a tough job of what the clients are, I think we’re seeing in demo services. But clearly we are not the best field to do these services internally.

And we’ve done that, Shaw has done it in the last year and we have outsourced pretty much on-site services everywhere in all our GBU. And there were only GBU that were keeping these on-site services internally, North America and France. We have done it in North America in June, it’s done – it’s now completely outsourced to an external partner with the transfer from price.

And it is the same thing in France. We are refocusing managed services on more high value services. And you see here, it’s a double-effect, it’s seasonal but in a good way meaning that we are taking out the low value services outsourcing it. And at the same time, and Patrick has described it to you, we are entering in France new full outsourcing compact with a full chain of value.

It is the case with the cost manufacturer that Patrick mentioned. And it is the case with big four audit that we have signed in France too.

Thierry Breton

So, Michel-Alain, if you let me, I just wanted to tell you that this was planned and this was part of our three-years plan to improve the profitability of France. So it was really something that we have put in our plants to go back to the profitability that we deliver in France.

Michel-Alain Proch

Okay. And just to go on the second point Laurent in the Netherlands, yes, indeed decrease of 8%. As you know, and I’m sorry, as I have commented this morning, after coming from the hand down of KPN, so as always I cannot comment on the margin on the past two documents of the contract.

But clearly, ramping down this contract with KPN was ramping down substandard margin so contract, so it helps in order to materialize 10% of EBIT in the Netherlands.

So, in the Netherlands you have three major items on EBIT. Number one is the level and the quality of our industrial tool in managed services which is producing one of the best margin we have in managed services, one. Second, so it’s productivity gain and there have been Charles is telling me yes, so there have been the front-runner in the implementation of end-to-end processes, so Laurent that’s the first thing.

Second thing, SG&A optimization, they’ve been doing a lot on this and they are quite in line with the very stringent guidelines of shares over in the GBUs. And so, then it’s important as I said, so then down of KPN actually exited substandard margin.

Thierry Breton

Well, the supplement on the growth, we build our budget based on what we see. And if it comes, if you have big single and it’s second large, it will be on top of it. And of course, most of it will fuel 2015 but Patrick will comment more.

Patrick Adiba

Yes, thank you, Thierry. Yes, indeed, so we are not, we’re depending on the big signature increase to ensure the growth. Nevertheless we are chasing several logics as I said now the time to pipeline. And of course this will come on top, so but I’m not necessary I would say to fuel the guidance that we just recommended.

Laurent Daure – Kepler

Okay. Thank you.

Operator

The next question comes from the line of Alex Tout from Deutsche Bank. Please go ahead.

Alex Tout – Deutsche Bank

Hi guys, thanks for taking the question. Just going back on the Proservia work that you’re doing there, so does that account for your guidance I think in answer to one of the questions that managed services would be pretty much flat for the year rather than growing in line with the large signatures that you announced?

And then just secondly, if you could just explain your distinction between private cloud and other IS when you’re talking about the Canopy revenues. How do they differ from a technical and commercial perspective? Thanks.

Michel-Alain Proch

Okay, so Alex, Michel-Alain. On Proservia, I think the – we will outsource the people and the business when the deal is closed. So there is no direct link with top-line of managed services, yes. Again, if we are doing this deal, it’s more to be completely consistent worldwide in terms of strategy and to concentrate on high value services. So, the point was maybe less about top-line.

And then, on the second item, on Canopy, Charles do you want to take the question, or okay. So, on Canopy, indeed we are providing – we are providing the two services, both infrastructure as a service and quite of cloud. In terms of private Cloud, the change we say, the differentiation between the two, is, one is multi-tenant, while the private cloud is unique – mono-tenant, that’s the big difference between the two.

So, one is much more ring fence that’s the private cloud to then infrastructure of the service which is by nature multi-tenant.

Alex Tout – Deutsche Bank

Okay, thanks.

Operator

The next question is from the line of Neil Steer from Redburn. Please go ahead.

Neil Steer – Redburn

Good morning. Thanks very much. Most of my questions have been asked and answered actually. But I just wanted a clarification. Michel-Alain, when you were talking about the managed services margin performance, you made a reference to the – in the first half of last year, the €10 million one-off saving you achieved through the pension deal that you did.

Just to be clear, that was a one-off benefit that you achieved last year. But in terms of the costs recognized through the P&L, you still have that benefit going through this year as well. Is that correct?

Michel-Alain Proch

No it was, it was indeed a €10 million one-off cost savings that was really one-off Neil, not a €10 million which is going to happen every year. So, it’s not on dark in the semester.

There was two parts in the pension fund argument we signed in the Netherlands, one which is doing reduction of the cash out and that was the most important one, the reduction of the cash out on the yearly basis.

And this, you can see now a financial statement, in the financial review, I don’t remember the page but it’s pretty much at the beginning in the bridge between operating margin and operating – and NDA, as I was saying I think previously to Michael. You see a reduction of our cash outs as to cash backs. And we – and there was this one-time savings that we registered in H1 2013.

Neil Steer – Redburn

But that was just a one-time saving. It’s not a reduction to the cost base on an ongoing basis.

Michel-Alain Proch

No, no.

Neil Steer – Redburn

Okay. And just so on with the question clarification on that could be exercised. I missed a figure, did you say I know point of clarification, it could be in January as opposed to the second half of this year, but is it 15 or 50?

Michel-Alain Proch

No, no, no, yes, yes, because Thierry is right. There is a plan of stock option that has been granted 10 years ago, which is in the money because it’s time to remember where that’s 48. And the older of this stock option have up to end of January 2015 in order to exercise them.

So, depending if they exercise them in H2 2014 or in the last month, which is the months of January 2015, it will fall into our cash flow of ‘14 or ‘15. And what Thierry was saying, if that’s in UA, we’ve not based our guidance of free cash flow on the year. Based on this, if it’s gone from ‘14, it comes in ‘14, if it gone in ‘15, it comes in ‘15.

Neil Steer – Redburn

I understand that, but was the figure 15 or 50?

Michel-Alain Proch

I’m sorry, 15 Neil.

Neil Steer – Redburn

15. Thank you very much.

Operator

The next question comes from the line of Chandra Sriraman from Mainfirst Bank. Please go ahead.

Chandra Sriraman – Mainfirst Bank

Hi gentlemen, just a couple of questions from my side. So when I’m looking at your margin guidance to achieve the top end of your guidance, I guess you have to achieve something like 9.3% for H2. That’s about 80 basis points of margin expansion. So I was just wondering is this all driven by the top line improvement or do you think it’s going to be difficult to achieve the top end. That’s one.

And the second question, sorry to come back to the bookings again. I notice that the bookings in Q2 2013 were about 118% and the H1 bookings for last year were in fact better than the H1 bookings for this year.

But you still managed to grow top line or decline top line by 1.2% last year. So I’m just wondering, what am I missing here? Is it some specific ramp-up, ramp-down that happened last year or is this a front end loaded contract that’s ramping up this year? I’m just trying to understand the dynamic here. Thanks.

Michel-Alain Proch

Okay, Chandra, it’s Michel-Alain again. So, I think on your two questions, first, on the margin, I think our guidance first your message right obviously. The guidance is 7.5% to 8%. We are at the first semester with 20 bps of increase of profit. So as you can see, we are there when you look at the line and we are there to reach the guidance. But that’s all we can say today.

Thierry Breton

We can say that we have a course of plan and we are I should say always comfortable because we have to deliver it. But we know how to do it and when we give a forecast on margin, that’s when you know that we did it right. So, we have the plans, we have the plans.

Chandra Sriraman – Mainfirst Bank

Sure, thanks.

Michel-Alain Proch

So, that’s on the first question. On the second question which is related to the business dynamics of book-to-bill and organic growth. Yes, in year 2013, you need to have in mind that we had as I mentioned it producing the drag of the money losing contract of Siemens that we’ve terminated. And I think it’s important to remember that we went from €400 million with both the company.

And the way you sit, step by step to €300 million in year 2013 and €250 million in 2014. So, that’s when you put that into the model, it explains while having a book to bill which we’re on – at the end we had, we were in the slight organic growth. So, the main message here is that this work of cleaning up the form of treatment that was in contract that were low and today we are to say these three years after the acquisition, all this and part of our plan, all this is now behind us. And this drag is now behind us.

Chandra Sriraman – Mainfirst Bank

Okay, thank you.

Operator

Thank you. The next question is from the line of Adam Wood from Morgan Stanley. Please go ahead.

Adam Wood – Morgan Stanley

Good morning, everybody, and thanks for taking the question. Just first of all on the contract ramp-up, obviously great confidence on the ramp-up of outsourcing contracts in the second half of the year. Sometimes, we have a little bit of margin drag in the first period of those outsourcing contracts coming in.

Could you maybe just give us a flavor for whether they’ve come already at Group margin or whether that might be a little bit of a drag in the second half of the year?

And then secondly, just looking at France and Holland, they’ve probably been two of the more difficult markets in Europe over the last couple of years. Maybe, it was obviously ins and outs in terms of contracts ramping up and ramping down.

And maybe in France first of all, is the internal action that you’re taking and then the contracts that have been signed on their own enough to get you to the kind of margins you’d like to have in France?

Or do you need to have the underlying market pick up as well? And really the same for Holland, do you see signs of pick up in that market to sustain those very strong margins in that market? Thank you.

Michel-Alain Proch

Okay, so Michel-Alain speaking on the – I would begin with by your second question Adam. On in France clearly we have, we have a plan to turnaround the margin of the GBU. This plan is based on three major items. The first one is obviously the turnaround of managed services by itself. I think we’ve been clear on what we’re doing, focusing on high-value services that’s the Proservia deal.

We have re-launched the commercial engine and Patrick has been instrumental including very important deals for France. And I’m always going back to this one with you didn’t prefer always the part industry because these are deals that we want exactly to sign in France with full outsourcing and services contract.

Thierry Breton

And new logo for us, a new logo, an absolute new logo.

Michel-Alain Proch

So, that’s managed choices. The second element in France, is the acceleration of system integration. In system integration and maybe I don’t know if you noticed it, system integration in the first semester in France was actually not bad in terms of supplying.

It was a slightly growing so we want to accelerate the growth and carry on the transformation of France, which as you know was not that much transformed by the Siemens deal as also GBU. So, second element on this side, acceleration of growth, off-shoring, timing of short deal that is exactly what we have been doing in the first semester.

And finally, we have a very strong network in several cities in France of time and material services that we carry on to render to our customers. It’s really local and we want to carry on working on deterioration rate of this activity which was previously called TS, and now which is part to precise so really these three levels that are in place in France.

In the Netherlands, in the Netherlands, you have to have in mind Adam that the Netherlands was really under the pressure of this KPN rundown so it’s no excuse it’s just the way it is. So it’s impacted, it’s impacted for view thanks to what I said. It’s actually better on the margin because the contract was still a margin contract.

So we have now Dutch GBU which is well optimized, well structured and really is ready to take any wind that will come into the top line in order to materialize it into EBIT. So, make your own story short, yes, it’s 10% is not due for one-off, that’s the important thing. And it’s something which is sustainable.

Well, I think that were the two elements, did I miss something Adam?

Adam Wood – Morgan Stanley

Just on the ramp-up of the contracts in the second half and the profitability of those.

Michel-Alain Proch

Yes, so, your question about the ramp-up was precisely what Adam?

Adam Wood – Morgan Stanley

Just really that in outsourcing contracts, often there’s a drag on margins at first as you ramp the contract up and they go into better profitability maybe in the kind of second year. Should we have that as a kind of outlook for the second half or are these coming in at already a good level of profitability versus the Group?

Michel-Alain Proch

Yes, I got it. Okay, no in the different contract, we signed with Patrick. As I said, the gross margin we signed either in-line with the gross margin of the group, both the gross margin as a group. And in terms of structuring of this contract, we’ve been able to sell the TNT, the transition and transformation phase. So it means that we don’t foresee any significant pressure on margin coming from the implementation of the stock TNT.

Adam Wood – Morgan Stanley

Great, that’s very helpful. Thanks very much.

Thierry Breton

So I think this will end this presentation. So, thank you for attending. So, you understand that we had a very, very active first half. We are happy that it’s behind us because we are now recognized as a company that we need in order to deliver as we have planned. And as I mentioned earlier believe me, we know exactly we have to produce to create a pretty strong value creation for our company.

Thank you all. And we will talk to you in three months. And we have decided to have our call and our announcement of Q3 revenue on November 7, in order to have everything integrated hopefully but Worldline but also Bull. And at that time, hopefully we will own Bull and shall, we will have started the integration since we plan not to take August vacation at least after August 11 because if we have good news as we believe we’ll start immediately integration.

For you, have a good vacation. And we’ll be happy to see you in three months. Thank you.

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