AtosOrigin SA benefited from growth in its outsourcing business in the third quarter, but said that demand for its consulting services remains weak.
In the three months to September 30, the Paris, France-based company increased revenue 1.5% to 734m euros ($737.8m), which was helped by a contribution of 41m euros ($41.2m) for the month of September from the recently acquired KPMG Consulting operations in the UK and the Netherlands. If this is stripped out, sales fell 4.1% to 693m euros ($696.6m).
The company’s operating profit fell 4.4% year-on-year to 58.7m euros ($59m), with the operating margin falling from 8.5% to 8%. AtosOrigin said that profitability in its core operations rebounded strongly after the summer vacation period, and it expects its margin to increase to 9% in the final quarter of the year.
AtosOrigin said the consulting market remains tough, particularly in the UK, with revenues from its consulting and systems integration business (excluding KPMG Consulting) falling 17% to 289m euros ($290.5m), representing 39% of total sales. The company implemented a round of job cuts in its consulting operation following the KPMG Consulting takeover in order to improve utilization rates.
AtosOrigin was recently ranked as the largest IT outsourcing provider in France by research house PAC, and it is outsourcing and managed services that continue to be the company’s sole source of growth. Sales from managed services grew 20% in the third quarter to 313m euros ($314.6m), driven by contract wins with Dutch telecom provider KPN. AtosOrigin now makes 60% of its sales from multiple-year, recurring revenue contracts.
Chairman and CEO Bernard Bourigeaud, said the company will equal last year’s revenue figure of $2.6bn in full-year 2002, including the four-month contribution from the KPMG Consulting operations. He added that the improvements to the cost base of AtosOrigin’s cost base should put the company on track for a full-year operating profit margin in excess of 8.7%.