2nd UPDATE: Atos Shares Up On Confirmed Guidance, Cost Control

Shares in French IT services company Atos Origin (ATO.FR) rose Wednesday as the company confirmed it still aims to improve EBIT this year and showed it is keeping a firm grip on costs.

The Paris-based company, which manages the IT systems for the Olympic Games, confirmed it still aims to improve earnings before interest and tax by 50 to 100 basis points this year and expects 2009 revenue to fall about 2% to 3%, stripping out acquisitions, disposals and currency movements.

The group also said it aims to accelerate margin improvement in the second half with the help of its action plan under new Chief Executive Thierry Breton, and still targets positive free cash flow this year.

"We are confident in our targets but remain careful amid the current environment," Breton said in a conference call with analysts.

At 1017 GMT, Atos shares were up 4.7% to EUR29.55 as investors responded to the positive effects of its restructuring and cost-saving efforts.

The stock has gained about 58% since the start of the year as investors have regained confidence in the group's ability to improve margins after a year of radical management changes and restructuring.

"The restructuring effect appeared faster than expected," Aurel analyst Brice Francois Thebaud said, noting that the group realized most savings through a sharp headcount reduction. He rates Atos Origin at sell.

"Atos Origin should be one of the rare software and computing services companies to improve its EBIT margin in 2009," CM-CIC said in a research note. The brokerage rates Atos at add.

Atos Origin has undertaken a series of restructuring measures in the past year and a half, accelerated by Breton when he took office in February.

Still, EBIT fell 3.1% to EUR118 million in the first six months of the year from EUR121.8 million last year. This was above an average EUR114 million forecast by six analysts polled by Dow Jones Newswires.

Atos said its first-half EBIT margin was 4.6%.

Excluding the impact of the insolvency of German retailer Arcandor AG (ACAGF), which was one of Atos' clients, the group improved its operational profitability by 50 basis points in the first half, Atos said in a statement.

Revenue fell 2.3% to EUR2.59 billion from EUR2.65 billion last year and in line with analysts' expectations of EUR2.59 billion.

Consulting revenues continued to decline most sharply, down 23% in the second quarter, as companies cut spending.

Last year's EBIT and revenue figures are at constant exchange rates and exclude Atos' Italian operations and Atos Euronext Market Solutions, or AEMS, which the company agreed to sell in 2007.

Net profit dropped 89% to EUR14 million from EUR125 million last year in the first half, notably due to higher restructuring charges. Analysts had seen net profit at EUR15.4 million.

Net debt at June 30 stood at EUR328 million, compared to EUR304 million at the end of the last quarter.

Atos competes with European peers Capgemini (CAP.FR) and U.K.-based Logica PLC (LOG.LN). Capgemini reports first half results Thursday.

 
   Company Web site: www.atosorigin.com 

-By Ruth Bender, Dow Jones Newswires; [phone]; [e-mail]

(William Horobin in Paris contributed to this report)