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2019 annual results

uploaded on 26 February 2020

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2019 annual results

Edenred announces strong growth in earnings to record levels in the first year of its Next Frontier strategic plan (2019-2022).

Double-digit growth in 2019 earnings, as reported and like-for-like:

  • Total revenue up 18.0% to €1,626 million (+13.8% like-for-like)
  • EBIT: up 18.3% (+14.8% like-for-like) to €545 million, in line with the EBIT guidance of between €520 million and €550 million
  • Net profit, Group share: up 22.9% to €312 million
  • Proposed dividend: €0.87 per share, up €0.01 versus 2018
  • Funds from operations of €524 million up 30.9% (+16.5% like-for-like)
  • Net debt/EBITDA ratio of 1.9x, after €782 million dedicated to acquisitions

Performances for 2019 were in line with the annual financial targets set for the period to 2022 in the Next Frontier strategic plan:

  • Operating revenue: up 14% like-for-like (annual target: above 8%)
  • EBITDA: up 14% like-for-like (annual target: above 10%)
  • Free cash flow/EBITDA conversion rate: 65% (annual target: above 65%)

 

Edenred is beginning the new year with confidence and confirms the Next Frontier strategic plan’s 2019-2022 targets for 2020.

***

Bertrand Dumazy, Chairman and Chief Executive Officer of Edenred, said: “2019, the first year of the Next Frontier 2019-2022 strategic plan, was another record-breaker for Edenred, underpinned by strong momentum in sales and innovation. The Group generated double-digit growth in all business lines and in all regions. Thanks to our unique model, based on a platform for services and payments, we connect close to 50 million employees with 2 million partner merchants via more than 850,000 corporate clients every day. Our 10,000 employees are fully committed to providing digital solutions closely aligned with new consumer trends and to making the world of work a connected ecosystem that is safer, more efficient and more user-friendly. We are beginning 2020 with confidence and expect to meet our financial targets under the Next Frontier strategic plan.”


 

2019 ANNUAL RESULTS

Due to the current situation in Venezuela, the like-for-like performance and the currency effect are temporarily calculated excluding the country.

The consolidated financial statements for 2019 were approved by the Board of Directors on February 25, 2020.

 

Key financial metrics for 2019:

(in € millions)

2019

2018

% change (reported)

% change
(like-for-like)

Operating revenue

1,570

1,327

+18.3%

+13.9%

Other revenue

56

51

+10.4%

+11.0%

Total revenue

1,626

1,378

+18.0%

+13.8%

EBITDA

668

536

+24.8%

+13.8%

Operating EBIT

489

410

+19.3%

+15.3%

Other revenue

56

51

+10.4%

+11.0%

EBIT

545

461

+18.3%

+14.8%

Net profit, Group share

312

254

+22.9%

 

 

In 2019, Edenred generated business volume of €31 billion. Digitalization rate reaches more than 83% of the total, up 3 points from 2018. This level is in line with the Group’s target of a digitalization rate of over 85% by 2022.

 

  • Total revenue: up 18.0% to €1,626 million

Total revenue for 2019 amounted to €1,626 million, an increase of 18.0%, that took into account the positive impact from changes in the scope of consolidation (+5.1%) and a slightly negative currency effect (-0.9%) over the year. Like-for-like growth was 13.8% compared with 2018.

Total revenue for the fourth quarter was €456 million, up 17.7% as reported on fourth‑quarter 2018 and up 12.5% like-for-like. The scope effect had a positive impact on revenue in the period (+5.4%), the currency effect was slightly negative (-0.1%), and the impact of Venezuela was negligible (+0.1%).

 

  • Operating revenue: up 18.3% to €1,570 million

Operating revenue for 2019 came in at €1,570 million (including €445 million in the fourth quarter), representing an increase of 18.3% as reported after taking into account the positive scope effect (+5.3%) and the negative currency effect (-0.9%). Like-for-like growth in operating revenue was 13.9% over the year and 13.6% in the fourth quarter.

In 2019, Edenred delivered double-digit operating revenue growth in all of its business lines and in all regions in which the Group operates.

 

  • Operating revenue by business line

(in € millions) 

2019

2018

% change (reported)

% change
(like-for-like)

Employee Benefits

975

854

+14.1%

+13.0%

Fleet & Mobility Solutions

409

336

+21.8%

+15.8%

Complementary Solutions

186

137

+35.6%

+14.9%

Total

1,570

1,327

+18.3%

+13.9%

 

Operating revenue for the Employee Benefits business line was €975 million in 2019, representing 62% of the consolidated total, and €276 million in the fourth quarter. Operating revenue rose by 14.1% as reported (+13.0% like-for-like) over the full year and by 17.0% in the fourth quarter alone (+11.8% like-for-like). The effectiveness of the action taken under the Next Frontier 2019-2022 strategic plan, notably the deployment of a sales strategy focused on SMEs, helped generate strong organic growth. Also reflected in this performance is Edenred’s technological leadership, be it in terms of mobile payment, with 32 Apple Pay, Google Pay and Samsung Pay programs accessible in some 20 countries, or in app-to-app payment, now available in five countries. With app-to-app payment, users can order meals from more than 40 different partners such as Deliveroo, Uber Eats or DejBox. In addition, the Group acquired several employee engagement platforms in Europe in 2019. These innovative digital solutions aim to improve employee retention, motivation and purchasing power. They open up  real growth and cross-selling opportunities for Edenred, notably in Europe, where this remains a fairly new market.

In the Fleet & Mobility Solutions business line, which now accounts for 26% of the Group’s business, reported operating revenue rose by 21.8% in 2019 (+15.8% like-for-like) to €409 million. In fourth-quarter 2019, operating revenue grew by 25.8% as reported (+17.7% like-for-like) to €114 million. Reported growth includes the performance of The Right Fuelcard Company (TRFC), the number four fuel card program manager in the United Kingdom, acquired in January 2019. The robust like-for-like growth reflects the good momentum of sales teams, notably Brazil, and the success of recently launched solutions for light fleets in Europe. In addition, value-added services such as maintenance in Brazil, and interoperable toll solutions in Europe, ramped up at a satisfactory rate.

The Complementary Solutions business line, which includes Corporate Payment Services, Incentive & Rewards Solutions and Public Social Programs, generated operating revenue of €186 million in 2019, up 35.6% as reported (+14.9% like-for-like, of which +15.2% in the fourth quarter) to €55 million. This solid performance reflected both the successful integration of CSI, a North American fintech specialized in optimizing accounts payable processes, consolidated since January 2019, and the healthy deployment of Corporate Payment Services, which has developed organically.

 

  • Operating revenue by region

(in € millions)

2019

2018

% change (reported)

% change
(like-for-like)

Europe

884

755

+16.9%

+13.0%

Latin America

559

497

+12.5%

+14.4%

Rest of the World

127

75

+70.9%

+19.3%

Total

1,570

1,327

+18.3%

+13.9%

 

In Europe, operating revenue rose by 16.9% as reported (+13.0% like-for-like) to €884 million, representing 56% of total consolidated operating revenue in 2019. In fourth-quarter 2019, operating revenue increased by 18.3% as reported (+13.2% like-for-like) to €254 million.

In France, operating revenue amounted to €264 million in 2019, an increase of 10.2% as reported (+10.2% like-for-like) for the full year and of 13.6% in the fourth quarter. In 2019, Employee benefits such as Ticket Restaurant and the employee engagement platform ProwebCE enjoyed rapid growth, thanks notably to their improved marketing mix, innovative digital offerings, and the successful drive to increase revenues in the SME segment. The good performance of Fleet & Mobility Solutions was led notably by the development of dedicated solutions for light fleets.

Operating revenue in Europe excluding France was up 20.0% as reported in 2019 (+14.3% like-for-like) to €620 million. Operating revenue for the region in the fourth quarter grew by 20.4% as reported (+13.0% like-for-like) to €177 million. Employee Benefits experienced strong momentum all throughout the region. Demand for Fleet & Mobility Solutions surged in the light fleet segment and the value-added services segment such as toll payment and VAT collection services, notably in Italy, Germany and Austria.

Operating revenue amounted to €559 million in Latin America, up 12.5% as reported (+14.4% like-for-like). The region accounted for 36% of the Group’s operating revenue for the year. In fourth-quarter 2019, operating revenue for the region increased by 12.9% as reported (+13.7% like-for-like) to €156 million.

In Brazil, operating revenue was up 14.5% like-for-like in 2019, and up 19.7% like-for-like in the fourth quarter alone. This good Brazilian performance was attributable to rapid organic growth both in Employee Benefits and in Fleet & Mobility Solutions, with maintenance and toll payment services getting off to a good start.

In Hispanic Latin America, operating revenue climbed 14.4% like-for-like in 2019. This new year of double-digit organic growth reflected good sales performances by the Group’s two main business lines throughout the region. In the fourth quarter operating revenue was down by 1.8% like-for-like, mainly due to an economic slowdown in Mexico. As expected, in this country currently in recession, the effect of the unfavorable basis of comparison for fuel prices had an impact on the growth of Fleet & Mobility Solutions locally. Moreover, in Employee Benefits, following a change in the rules for awarding Navideños benefits, Edenred decided to considerably reduce the issue volume related to this product at the end of the year.

Operating revenue in the Rest of the World region rose by 70.9% as reported (+19.3% like-for-like), to €127 million, representing 8% of total Group operating revenue in 2019. The strong reported growth was attributable to the consolidation of CSI as from January 2019. Like‑for-like growth was led notably by the good performance of the payroll cards business in the United Arab Emirates, which has expanded to include new digital services designed to improve the daily lives of under- or unbanked workers.

 

  • Other revenue: €56 million

Based on a float of €3.0 billion at the end of 2019, other revenue totaled €56 million for the year, up 10.4% as reported (+11.0% like-for-like). In 2019, the Group benefited from a slight rise in interest rates in certain European countries outside the eurozone, but was impacted by lower interest rates in Latin America.

 

  • EBITDA: up 24.8% to €668 million

EBITDA was €668 million in 2019 compared with €536 million in 2018, an increase of 24.8% as reported and of 13.8% like-for-like. The EBITDA margin came in at 41.1%, up 2.2 points year‑on‑year. Excluding the impact of IFRS 16, the increase was 0.4 of a point.

 

 

  • EBIT: up 18.3% to €545 million

EBIT rose by 18.3% on a reported basis in 2019, reaching a record high of €545 million, within the range of the EBIT guidance of between €520 million and €550 million announced in mid‑2019. The currency impact reduced EBIT by €6 million, while the scope effect increased it by €22 million during the period. Like-for-like, EBIT advanced by €68 million, or 14.8%.

Operating EBIT by region:

(in € millions)

2019

2018

% change (reported)

% change
(like-for-like)

Europe

280

234

+20.0%

+14.3%

Latin America

204

188

+8.6%

+9.9%

Rest of the World

19

5

+269.1%

+106.1%

Holding & Other

(14)

(17)

-14.2%

-31.6%

Total

489

410

+19.3%

+15.3%

 

Operating EBIT rose by 19.3% in 2019 (+15.3% like-for-like) to €489 million.

In Europe, operating EBIT was up 20.0% as reported, reflecting the Group’s improved operating leverage in the region, with profitability rising in all the region’s main countries, and the contribution of newly acquired businesses.

In Latin America, operating EBIT increased by 8.6% as reported and 9.9% like-for-like, thanks first and foremost to a good performance in Brazil, where like-for-like operating EBIT growth was in the double digits. The healthy rate of growth was attenuated by a less favorable macro-economic environment in Hispanic Latin America and unfavorable bases of comparison, notably for fuel prices in Mexico in the fourth quarter, which had a negative impact on EBIT margin.

 

  • Net profit, Group share: €312 million

Net profit, Group share in 2019 came in at €312 million versus €254 million in 2018, an increase of 22.9%.

Other income and expenses represented a net expense of €25 million in 2019, compared with a €31 million net expense in 2018. The total included non-recurring expenses corresponding for the most part to the costs incurred for the acquisitions carried out in 2019, asset impairment losses and restructuring costs.

Net profit also takes into account net financial expense (€35 million versus €37 million in 2018), net income tax expense (€153 million versus €119 million in 2018) and non-controlling interests (€34 million in 2019 versus €31 million in 2018).

 

  • Strong cash flow generation

The Edenred business model generates significant cash flows, lifting funds from operations before other income and expenses (FFO) to €524 million in 2019, an increase of 30.9% as reported and 16.5% like-for-like.

Despite a fall in volume related to the Navideños program in Mexico in December, Edenred generated free cash flow of €400 million in 2019. At December 31, 2019, after taking into consideration the €782 million dedicated to targeted acquisitions and the €134 million allocated to dividend distribution, minority interests and the share buyback program, the Group’s net debt stood at €1,290 million versus €659 million at December 31, 2018. The ratio of net debt to EBITDA is 1.9 at end‑2019.

 

  • A well-balanced debt profile
The cost of the Group’s debt was 0.8% in 2019 versus 1.2% in 2018, a decrease of 40 basis points. The average maturity of the debt is close to 5 years. The Group has been attributed a “Strong Investment Grade” rating by Standard & Poor’s (BBB+).

In September 2019, Edenred successfully placed bonds convertible into and/or exchangeable for new and/or existing shares (OCEANE) due in 2024 for an aggregate nominal amount of approximately €500 million, under particularly favorable financial conditions (yield to maturity of -1.53%). The net proceeds of the offering will be used by the Company for general corporate purposes, including the financing of potential external growth operations.

 

2019 highlights

 

  • Edenred unveils its new Next Frontier strategic plan for 2019-2022 at the October 2019 Capital Markets Day

Next Frontier has been built on the solid foundations created by the Group’s radical transformation under the Fast Forward strategic plan (2016-2018), which enabled Edenred to increase in scale and build new growth momentum.

In line with its vocation as the everyday companion for people at work, Edenred intends to capitalize on its unique platform model to generate more sustainable and profitable growth.

 

  • Edenred completes the acquisition of CSI and that of TRFC

In January 2019, Edenred completed the acquisition of Corporate Spending Innovations (CSI), one of the leading providers of automated corporate payment software in North America, as well as 80% of the share capital of The Right Fuelcard Company (TRFC) group, the number four fuel card program manager in the United Kingdom. The two companies have been fully consolidated in Edenred’s financial statements since January 1, 2019.

 

  • Edenred acquires employee engagement platforms in Europe

In January 2019, the Group acquired Belgium’s Merits & Benefits and Ekivita, leading players on the country’s employee engagement platform market, and, in May, acquired Easy Welfare, the number one operator of employee engagement platforms in Italy. In July 2019, Edenred acquired all outstanding shares in Benefit Online, a pioneer in developing employee engagement platforms in Romania.

 

  • Edenred launches exclusive distribution partnership with Itaú Unibanco in the Brazilian Employee Benefits market
Since September 2019, Itaú Unibanco has exclusively distributed Edenred’s Employee Benefits in Brazil. The new distribution channel will be ramped up progressively as from 2020. It strengthens Edenred’s existing sales organization and will help speed up its growth in the high-potential Brazilian employee benefits market.

 

  • Edenred strengthens its leadership position in the United Arab Emirates payroll cards market

In December 2019, Edenred acquired Mint’s payroll card portfolio in the United Arab Emirates, strengthening its leadership position in the UAE market, where its C3 solution already boasts more than a million users. With a combined total of more than 1.6 million users, Edenred will benefit from substantial scale effects linked to its B2B2C intermediation platform model and its global technology assets. The transaction will be accretive to Group EBIT from 2020.

 

Subsequent events

 

  • Edenred expands its Fleet & Mobility Solutions offering in Europe

In February 2020, Edenred finalized the agreement signed in September 2019 to acquire EBV Finance, a Lithuanian company specialized in tax refunds for European transportation companies. Edenred now has a 60% interest in the new entity. The transaction is accretive to Group EBIT from 2020.

 

  • Edenred ties social and environmental criteria to one of its financing instruments for the first time

In February 2020, Edenred announced that it had renegotiated its syndicated credit facility, increasing it from €700 million to €750 million, extending its maturity from July 2023 to February 2025 – with extension options to February 2027 – and improving the financial conditions. For the first time, Edenred introduced environmental and social performance criteria into the calculation of the financing costs:

-       promoting healthy and sustainable eating habits – Edenred aims to reach by 2030 an 85% nutrition awareness rate among merchants and employees using its solutions (versus 30% in 2018);

-       combating global warming – Edenred is targeting a 52% cut in greenhouse gas emissions intensity by 2030 compared with 2013 (26% reduction in 2018).

Proposed dividend

At Edenred’s Capital Markets Day in October 2019, which saw the unveiling of the new Next Frontier strategic plan for 2019-2022, the Group announced the introduction of a progressive dividend policy. The Group proposes paying a dividend of €0.87 per share for 2019. This represents an increase of €0.01 compared with the previous year. Shareholders may opt to receive the dividend 100% in cash or 100% in shares with a 10% discount. The dividend will be put to the vote at Edenred’s Annual Shareholders Meeting to be held on May 7, 2020.

 

2020 outlook

Edenred begins 2020 with confidence and expects to continue enjoying sustained business growth in all regions and all business lines, thanks to the efficient deployment of the Next Frontier strategy.

The Group confirms the Next Frontier strategy’s 2019-2022 targets for 2020, namely:

-       like-for-like operating revenue growth of more than 8%;

-       like-for-like EBITDA growth of more than 10%;

-       a free cash flow/EBITDA conversion rate of more than 65%.

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