First-Half 2019 Results

First-half 2019 results

At its meeting on July 22, 2019, the Board of Directors reviewed the Group’s consolidated financial statements for the six months ended June 30, 2019.

First-half 2019 key financial metrics:

• Total revenue: up 16.8% to €777 million

Total revenue for first-half 2019 amounted to €777 million, representing a like-for-like increase of 14.6% on the previous year. Reported growth was 16.8% for the period, including a positive 4.4% scope effect linked to the acquisitions made in recent months, an unfavorable 2.1% currency effect, and a slightly negative 0.1% impact relating to Venezuela.

• Operating revenue: up 16.8% to €748 million

Operating revenue for the first six months of 2019 came in at €748 million, up 14.4% like‑for‑like. Reported operating revenue growth was 16.8% for the period, including a positive 4.5% scope effect, an unfavorable 2.1% currency effect and a negative 0.1% impact relating to Venezuela.

Following on from the results achieved in 2018, Edenred delivered double-digit organic operating revenue growth in the first half of the year in each of its business lines and in each of the regions in which the Group operates.

This performance illustrates the effectiveness of the growth drivers activated in the area of business excellence, including the roll-out of a multi-channel, multi-product sales strategy, notably focused on SMEs. It also reflects the opportunities created by the Group’s recent achievements in digital and product innovation, made possible by the resources allocated to rapidly enhancing its global technology platform. This has enabled Edenred to speed up both the international expansion of its mobile payment programs, which are now available in 16 countries, and the adoption of its app-to-app payment technologies in France and Belgium. Furthermore, the Group has also continued to enhance its product portfolios in all of its business lines, from employee engagement platforms to value-added services related to mobility and corporate expense management.

Lastly, Edenred has significantly strengthened its Corporate Payment Services offering with the acquisition of CSI in the United States.

• Operating revenue by business line

The Employee Benefits business line generated €472 million in operating revenue in first‑half 2019, representing a like-for-like increase of 14.2% (+12.2% as reported) and accounting for 63% of the consolidated total. In addition to strong organic growth, the first half was also shaped by the integration of employee engagement platforms Easy Welfare in Italy as well as Merits & Benefits and Ekivita in Belgium. These innovative digital platforms are designed to meet growing demand from companies that want to improve their employees’ loyalty, motivation and purchasing power. Via these portals, employees have access to a wide range of flexible, personalized employee benefits, as well as promotional offers from a network of partner merchants. These acquisitions round out the portfolio of solutions offered by Edenred, which already operates in this segment in France, Italy, the United Kingdom and the Czech Republic.

In the Fleet & Mobility Solutions business line, which accounts for 26% of the Group’s business, operating revenue rose 15.4% like-for-like over the period (+19.3% as reported) to €192 million. Edenred has deployed a number of effective tools to boost its sales, notably in the SME segment. New contracts were signed during the first half, including with oil and gas company BP in Mexico and retailer Carrefour in France. In Europe, the swift ramp-up of the light fleet offering continued during the period and, in Latin America, the innovative corporate expense management solution Empresarial enjoyed ongoing success. Edenred’s revenue for the first half also included, for the first time, contributions from TRFC in the United Kingdom.

The Complementary Solutions business line, which includes Corporate Payment Services, Incentive & Rewards and Public Social Programs, generated operating revenue of €84 million for the period, versus €59 million for first-half 2018. The sharp 43.1% increase recorded in the first half was above all attributable to the contribution of CSI, a leading provider of automated corporate payment software in North America, which Edenred acquired in early 2019. Organic growth in Complementary Solutions came to 13.2% and notably reflected the ramp-up of the Corporate Payment Services offering, which now includes virtual payment cards, solutions for the settlement of accounts payable, solutions dedicated to business travel expenses, fund transfer solutions and tailor-made programs such as the one developed for the IATA.

• Operating revenue by region

In Europe, operating revenue rose by 13.6% like-for-like (+16.4% as reported) to €422 million. The region represented 56% of Group operating revenue.

In France, operating revenue amounted to €128 million, an increase of 8.6% like-for-like and as reported. In the Employee Benefits business line, strong growth in Ticket Restaurant program was driven by new client wins, notably in the SME segment, and by the migration during the period of 60,000 CM-CIC meal card users to Edenred’s digital platform. The various innovations implemented, such as mobile payment and direct payment on meal delivery platforms, have made the Ticket Restaurant program even more attractive, with more than 900,000 holders of the Ticket Restaurant card in France now enjoying access to these digital functions. Edenred France also benefited from the good ramp-up of its ProwebCE employee engagement platform and of white-label fuel card solutions for large retailers such as Carrefour and Intermarché.

Operating revenue in Europe excluding France was up 15.9% like-for-like during the period (+20.1% as reported) to €294 million. Edenred’s performance was boosted by the ongoing digitization of its solutions and distribution channels, which is driving both easier access to the still under-penetrated SME market and improvements in the marketing mix across all business lines. UTA pursued its pan-European expansion strategy during the period, with an offering strengthened by new toll payment and vehicle maintenance services. Lastly, the first-half revenue figure reflects the recent acquisitions of TRFC in the United Kingdom and Easy Welfare in Italy, as well as Merits & Benefits and Ekivita in Belgium.

Operating revenue amounted to €266 million in Latin America, up 14.5% like-for-like (+9.9% as reported). The region represented 36% of Group operating revenue.

In Brazil, operating revenue rose by 12.3% like-for-like (+7.1% as reported) in the first six months of the year. In Employee Benefits, Edenred succeeded in attracting new clients, in an environment where unemployment remains high. The business line benefited from a favorable basis of comparison in first-half 2019, because its gradual recovery got underway during the second quarter of 2018. In addition, Fleet & Mobility Solutions recorded strong sales growth during the period, in a still relatively untapped market where Edenred is enhancing its business model with new product initiatives, such as toll payment and vehicle maintenance solutions.

In Hispanic Latin America, operating revenue climbed 20.4% like-for-like in first-half 2019 (+17.3% as reported). This sustained growth was achieved by winning over new clients, notably in the SME segment, in both Employee Benefits and Fleet & Mobility Solutions. In the latter business line, the Group strengthened its leadership position in Mexico during the period by signing exclusive contracts, including with BPfleet. It also replicated various successful programs in other countries in the region, such as Ticket Car and Empresarial. Lastly, the region’s first‑half 2019 performance benefited from a favorable basis of comparison.

In the Rest of the World, operating revenue amounted to €60 million, up 68.9% as reported. In addition to the integration of CSI in North America early in the period, the region’s results also reflected strong organic growth of 22.1%, driven notably by solid performances in the payroll card market in the United Arab Emirates and by innovative Incentive & Rewards programs in Taiwan.

• Other revenue: €29 million

Other revenue came to €29 million, up 19.1% like-for-like and up 15.6% as reported. The increase was partly due to a further rise in the float[1], reflecting the good momentum in the Group’s various business lines. First-half 2019 also saw a slight rise in interest rates in certain European countries outside the eurozone. Lastly, other revenue benefited from a favorable basis of comparison.

• EBITDA: up 23.0% to €310 million

EBITDA amounted to €310 million in first-half 2019, versus €251 million in the prior-year period, up 14.6% like-for-like and up 23.0% as reported. EBITDA margin came in at 39.9%, up 2 points year‑on‑year.

• EBIT: up 15.6% to €249 million

EBIT for the first six months of the year rose 15.6% as reported to €249 million. Like-for-like, it advanced by €34 million, or 15.4%. The currency effect reduced EBIT by 3.1%, while the scope effect increased it by €7 million during the period, i.e., by 3.3%.

The EBIT figure of €249 million for first-half 2019 comprises operating EBIT of €220 million and other revenue of €29 million.

Operating EBIT rose 15.6% as reported, and 14.9% like-for-like, to €220 million.

Operating EBIT by region

In Europe, operating EBIT rose 13.2% like-for-like and 17.5% as reported. In Latin America, growth in operating EBIT came to 12.8% like-for-like and 7.9% as reported, notably reflecting an improved performance in Brazil. On a reported basis, the region was impacted by a negative currency effect.

The Group’s operating EBIT margin came to 29.4% in first-half 2019. Like-for-like, the 0.1-point improvement in operating margin was the result of good operating leverage, partly offset by the reinvestment of some productivity gains in technology and innovation, which help to drive the Group’s growth. As reported, operating EBIT margin decreased by a slight 0.3 of a point, including the accretive impact of the recent acquisitions and the negative impact of the currency effect on the geographic mix.

• Net profit: €146 million

Net profit, Group share stood at €146 million for first-half 2019, up 17.9% from the prior-year period.

Other income and expenses amounted to a net expense of €12 million, versus a net expense of €3 million in first-half 2018, and notably included €4 million in non-recurring expenses, corresponding to acquisition-related costs.

Net profit also takes into account a net financial expense of €14 million, a net income tax expense of €69 million and non-controlling interests, which represented an expense of €14 million in the first half of 2019.

• Strong cash flow generation

 The Edenred business model generates significant cash flows. In first-half 2019, funds from operations before other income and expenses (FFO) totaled €264 million, versus €200 million in the prior-year period. Growth in FFO came to 32.6% as reported and 22.8% like-for-like.

The Group had net debt of €1.63 billion at June 30, 2019, versus €1.19 billion at end-June 2018. Thanks to strong free cash flow generation of €567 million over the past 12 months, Edenred was able to carry out several significant acquisitions during this period, representing a total of €798 million. This amount primarily reflects the acquisitions of CSI and TRFC, which were both completed in January 2019. The change in net debt also includes €91 million in shareholder returns, a €91 million accounting impact relating to the application of IFRS 16 and €27 million in currency effects and non-recurring items. 

Significant events since the beginning of the year

• Edenred completes the acquisition of CSI and that of TRFC 

In early January, Edenred completed its acquisition of Corporate Spending Innovations (“CSI”), one of the leading providers of automated corporate payment software in North America. The Group also announced that it had finalized the same month the acquisition of 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 Italy and Belgium

In May 2019, Edenred acquired Easy Welfare, the number one operator of employee engagement platforms in Italy. The deal follows on from the dual acquisition in January of Belgium-based Merits & Benefits and Ekivita, the local market leaders in employee engagement platforms. With these transactions, Edenred is addressing the increasing demand from companies that want to improve employees’ loyalty, motivation and purchasing power.

Edenred is already operating in this segment in France, the United Kingdom, Italy and the Czech Republic. These acquisitions multiply opportunities for cross-selling and enhance the Group’s portfolio of Employee Benefits.

The acquisition of these three companies will be accretive to Edenred’s EBIT as of 2019.

• Exclusive partnership with Itaú Unibanco in Brazil approved by anti-trust authorities

The relevant authorities in Brazil, namely the Brazilian Central Bank (BACEN) and the national anti-trust authority (CADE), have approved the exclusive partnership agreement signed in September 2018 with Itaú Unibanco, the largest privately owned bank in Brazil. The agreement relates to the distribution of Edenred’s Employee Benefits in Brazil.

The objective of the partnership is to combine Edenred’s unique industry know-how with Itaú Unibanco’s outstanding reach and strong corporate customer relationships, with the aim of accelerating Edenred’s growth in the highly attractive Brazilian employee benefits market.

In addition, Itaú Unibanco will become a minority shareholder holding an 11% stake in Ticket Serviços to further cement the business partnership.

The deal will be accretive to Edenred’s EBITDA from the first year after closing, which is expected to take place during summer 2019.

SUBSEQUENT EVENTS

• Appointment to the Executive Committee

 On July 15, 2019, Marie-Laurence Bouchon was appointed Vice President, Communications of Edenred and became a member of the Group Executive Committee. She is responsible for internal and external Group communications.

2019 Outlook

Backed by a sustained first-half performance, Edenred reiterates its confidence in the full year and confirms the Fast Forward strategy’s medium-term targets for 2019, namely:

-       like-for-like growth in operating revenue of more than 7%;

-       like-for-like growth in operating EBIT of more than 9%;

-       like-for-like growth in funds from operations before other income and expenses (FFO) of more than 10%.

In the second half of the year, the Group expects to see sustained business growth in all regions and all business lines.

Edenred will also reap rewards from the integration and ramp-up of recent acquisitions and partnerships, with employee engagement platforms and indirect distribution channels to accelerate growth in Employee Benefits, an expansion of the multi-brand offering in Fleet & Mobility Solutions in Europe, and entry into the North American Corporate Payment market, which is undergoing a digital transition.

Edenred will confirm its ambition of being a digital leader in its industry by pursuing its innovation and acquisitions strategy, with the aim of offering new products and services that meet growing needs in the working world. The Group is on track to improve efficiency and offer the best possible customer and user experience, thereby generating profitable and sustainable growth.

In light of this, Edenred is targeting record EBIT of between €520 million and €550 million[2] for full‑year 2019, versus €461 million in 2018.

Upcoming events

October 18, 2019: Third-quarter 2019 revenue

October 23, 2019: Capital Markets Day in London