Earnings Release • Jul 24, 2013
Earnings Release
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Strong organic growth1 in issue volume, up 11.0%, and EBIT, up 7.7%
1 Like-for-like growth, i.e. at constant scope of consolidation and exchange rates.
2 Before non-recurring items.
3 Normalized growth target for the period 2010-2016. Normalized growth is the objective that the Group considers to be attainable in a context in which unemployment does not rise.
First-half 2013 was shaped by a number of notable achievements, in line with the Group's strategic vision:
A large number of new clients chose Edenred during the first half, including agri-foods group Nestlé in Brazil, oil company PDVSA in Venezuela, retailer Carrefour Market in France, and temporary employment agency Federgon in Belgium. These four contract wins alone have enabled more than 135,000 new users to benefit from meal and food vouchers.
The increase in the penetration rate was particularly strong in Portugal, following a change in legislation that is encouraging the development of meal vouchers, which are now more interesting tax-wise than cash allowances. As a result, by year-end, the penetration rate is expected to rise to 20% of the estimated market of around three million potential beneficiaries, compared with 7% at the end of 2012. In response, in June, Edenred joined with Banco Espirito Santo, Portugal's leading listed bank, to form a joint venture that is now the market leader with a 50% share4 . It is committed to driving fast growth in issue volumes to capture all of the market's high potential.
Edenred recently announced the launch of two new employee benefits solutions, Ticket Cultura, for the purchase of cultural goods and services in Brazil, and NutriSavings, designed to promote a balanced diet in the United States.
These solutions come on top of the 28 new solutions launched since July 2011, whose objective is to contribute between 2% and 4% of organic growth in issue volume in 2013 and beyond. This objective was met right from the first half, with a 2.0% contribution.
In February, Edenred closed the acquisition of a 62% stake in Repom for €53 million in Brazil, with a call option to purchase the remaining 38%5 . The leader in the frete market6 with more than 40% market share, Repom reported business volume of €606 million7 in the first half, up 28%.
The Group also opened its 40th country market8 by acquiring Big Pass, a major provider of employee benefits in Colombia.
In addition, the first half offered an opportunity for the Group to deepen its positions in Mexico by purchasing OPAM, a food voucher issuer. With more than 1,000 clients and a portfolio of entirely digital solutions, OPAM reported more than €140 million in issue volume in 20129 .
4 After the creation of the joint venture.
5 The option, which is exercisable in 2018, has been recognized in debt in an amount of €64 million.
6 Brazil's frete market covers all the costs incurred by major manufacturers and trucking companies for the outsourced delivery of goods by independent truck drivers.
7 Of which €182 million in issue volume.
8 The objective is to open six to eight new country markets between 2010 and 2016, including Finland in 2011, Japan in 2012 and Colombia in 2013.
9 OPAM will be consolidated in the income statement fromJuly 2013.
The faster transition to digital initiated in early 2010 continued to gain momentum in first-half 2013. As of June 30, 56% of issue volume was digital, versus 51% as of December 31, 2012.
The transition is proceeding rapidly in Europe, with 21% of issue volume delivered in digital formats as of June 30, versus 15% at year-end 2012. The shift is moving forward especially in Belgium, Spain and Sweden. In Belgium, for example, more than 35% of issue volume had been shifted as of June 30, compared with 20% at year-end 2012. In France, a digital meal voucher solution is ready and will be introduced as soon as the legislative framework has been clarified10 .
At its meeting on July 23, 2013, the Board of Directors approved the consolidated financial statements for the six months ended June 30, 2013.
| % change | |||||
|---|---|---|---|---|---|
| (in € millions) | First half 2012 | First half 2013 | Reported | Like-for-like | |
| Issue v olume | 7,865 | 8,576 | +9.0% | +11.0% | |
| Operating revenue | 465 | 483 | +3.8% | +7.4% | |
| Financial revenue | 46 | 42 | -7.6% | -5.8% | |
| Total rev enue | 511 | 525 | +2.8% | +6.2% | |
| Operating EBIT | 124 | 130 | +4.6% | +12.5% | |
| Financial EBIT | 46 | 42 | -7.6% | -5.8% | |
| EBIT | 170 | 172 | +1.4% | +7.7% | |
| Operating profit before tax and non-recurring items | 150 | 150 | +0.3% | N/A | |
| Net profit, Group share | 100 | 89 | -10.7% | N/A | |
| Recurring profit after tax | 101 | 97 | -3.3% | N/A | |
| Recurring earnings per share (in €) | 0.44 | 0.43 |
Issue volume totaled €8,576 million in first-half 2013, a like-for-like increase of 11.0% that was in line with the Group's normalized annual growth target of 6% to 14%. Reported growth stood at 9.0%, as the 2.8% increase from the acquisitions of Repom and Comprocard in Brazil, Barclay Vouchers in Japan and Big Pass in Colombia was offset by a 4.8% negative currency effect over the period, primarily due to the decline against the euro in the Brazilian real (by 10.6%) and the devaluation of the Venezuelan bolivar fuerte (by 14.9%).
The increase reflected fast growth in emerging markets, up 16.5%, and a good performance in developed markets, up 2.9%.
10 The French Ministry of the Economy and Finance and the Ministry of Labor are conducting discussions with all of the stakeholders concerned by the introduction of digital meal vouchers.
| Like-for-like growth in issue volume | First quarter 2013 | Second quarter 2013 | First half 2013 |
|---|---|---|---|
| Latin America | +18.8% | +17.9% | +18.4% |
| Europe | -0.3% | +5.7% | +2.7% |
| Rest of the world | +9.6% | +11.0% | +10.3% |
| TOTAL | +9.8% | +12.2% | +11.0% |
Issue volume in Latin America rose by a significant 18.4% like-for-like in the first half, reflecting higher penetration rates in a still favorable economic environment shaped by rising wages and the creation of formal jobs. Food and meal voucher issue volume increased by 18.6%, while the Ticket Car expense management solution advanced 15.1%.
In Brazil, issue volume climbed 13.9% like-for-like over the first half. The 11.0% gain in the second quarter reflected a good sales performance, despite the impact of high prior-year comparatives resulting from the ITAU contract win (which added four points of growth in Brazil as from April 2012) and a calendar effect between the first and second quarters of 2013 (which trimmed one point of growth from Ticket Car issue volume in the second quarter).
In Hispanic Latin America, issue volume increased by 24.9% like-for-like. The strong gain was led by the excellent performance by the sales teams over the period, as seen in the major contract win with PDVSA in Venezuela, which added 3.1 points to first-half growth in Latin America.
Despite the still challenging economic environment, issue volume rose by 2.7%like-for-like in Europe.
Operations in France delivered a good performance over the period, with a 3.7% like-for-like gain. This was mainly due to the gain of new clients for Ticket Restaurant® , whose issue volume rose by 3.9%. The strong 7.9% growth in the second quarter reflected the 2.9-point contribution from the Ticket CESU11 solution.
Issue volume contracted by 2.1% like-for-like in Italy, where business remains penalized by rising unemployment, but rose by a solid 4.1% like-for-like in Belgium on the back of new meal voucher contract wins.
Lastly, in Portugal, where a change in legislation is driving growth in the meal voucher market, issue volume rose sharply and added 1.1 points to growth in Europe for the period.
Issue volume in the Rest of the world rose by 10.3% like-for-like over the period, led by strong growth in Turkey, the region's primary contributor.
11 A voucher prepaid by employers that allows employees to pay for a variety of personal services.
In the first half, three growth drivers contributed to the 11.0%like-for-like growth in issue volume:
| Like-for-like growth in rev enue | First quarter 2013 | Second quarter 2013 | First half 2013 |
|---|---|---|---|
| Operating revenue with issue volume | +8.0% | +8.1% | +8.1% |
| Operating revenue without issue volume | +4.8% | +1.0% | +3.1% |
| Operating revenue | +7.5% | +7.2% | +7.4% |
| Financial revenue | -6.3% | -5.2% | -5.8% |
| Total rev enue | +6.3% | +6.1% | +6.2% |
Total revenue rose 6.2% like-for-like to €525 million in the first half of 2013. After the negative 4.8% currency effect and the positive 1.4%12 impact from changes in the scope of consolidation, reported growth stood at 2.8% for the period. The overall rise breaks down as follows:
Operating revenue of €483 million, up 7.4% like-for-like, illustrating the good performance of revenue with issue volume (up 8.1% like-for-like), particularly in Latin America (up 13.4% like-for-like) and Europe (up 1.6% like-for-like). The 2.9-point difference between the growth in issue volume and the growth in operating revenue with issue volume reflects the varying take-up rates13 , which depend on the type of solution, country and contract size.
Operating revenue without issue volume, primarily generated by non-recurring corporate marketing and incentive consulting services, rose by 3.1% like-for-like.
Financial revenue of €42 million, down 5.8% like-for-like due to the decline in interest rates in most countries.
12 Of which a 2.2% increase from the acquisitions of Comprocard in Brazil and Barclay Vouchers in Japan (both consolidated from July 2012), Big Pass in Colombia (consolidated from February 2013) and Repom in Brazil (consolidated from March 2013); and a 0.8% decrease from the disposal of Tintelingen in the Netherlands.
13 Ratio of operating revenue with issue volume to total issue volume.
Total EBIT stood at €172 million in first-half 2013, compared with 170 million in the prior-year period. This represented an increase of 7.7% like-for-like and of 1.4% as reported, after a negative 7.0% currency effect.
| EBIT (in € millions) |
First half 2012 | First half 2013 | % change like-for-like |
|---|---|---|---|
| Operating EBIT | 124 | 130 | +12.5% |
| Financial EBIT | 46 | 42 | -5.8% |
| TOTAL | 170 | 172 | +7.7% |
Operating EBIT (i.e. excluding financial revenue) rose by 12.5% like-for-like to €130 million. This good performance resulted in an operating flow-through ratio14, adjusted for the €2 million in extra costs generated by the digital transition, of 51%, in line with the objective of more than 50%.
Financial EBIT, which corresponds to financial revenue, declined by 5.8% like-for-like to €42 million, impacted by falling interest rates.
| EBIT (in € millions) |
First half 2012 | First half 2013 | % change like-for-like |
|---|---|---|---|
| Latin America | 112 | 114 | +12.3% |
| Europe15 | 67 | 64 | -3.8% |
| Rest of the world | 1 | 1 | N/A |
| Worldwide structures | (10) | (7) | N/A |
| TOTAL | 170 | 172 | +7.7% |
Operations in Latin America reported a good performance, with operating EBIT up 13.8% like-for-like, reflecting the region's dynamic growth. In Europe, like-for-like operating EBIT growth came to 5.5%, excluding the extra €2 million in costs associated with the digital transition.
After deducting €22 million in net financial expense, €46 million in income tax expense and €7 million in noncontrolling interests, recurring profit after tax came to €97 million, versus €101 million in the first half of 2012.
Net profit, Group share stood at €89 million, versus €100 million in first-half 2012, after €8 million in net nonrecurring expense and a €6 million increase in income tax expense16 .
14 The ratio between the like-for-like change in operating EBIT and the like-for-like change in operating revenue.
15 Of which EBIT of:
- €42 million in Europe outside France, down 1.9% like-for-like.
- €22 million in France, down 7.2% like-for-like. 16 Deferred tax assets in respect of historical tax loss carryforwards were recognized in 2012, in particular in the United Kingdom in an amount of €7 million.
Funds from operations before non-recurring items rose to €143 million from €140 million in first-half 2012, representing a like-for-like increase of 12.3%, in line with the Group's normalized growth target of more than 10% a year.
A total of €185 million in dividends were paid to Edenred SA shareholders, for a payout ratio of almost 90% of 2012 recurring profit after tax.
Net debt stood at €525 million at June 30, 2013, versus €412 million a year earlier. The increase was primarily attributable to the acquisition of Repom for €108 million (including the €64 million liability related to the call option on the remaining 38% of the company) and to the €85 million negative currency effect. The ratio of adjusted funds from operations to adjusted net debt came to 38%17 , reflecting a strong investment grade rating18 .
Over the period, the Group arranged an initial €700-million, five-year syndicated credit facility that has lengthened the average maturity of its debt. The new back-up facility replaced €528 million in unused committed credit lines a year ahead of their expiration.
In the second half, business trends and financial revenue are expected to be in line with the first six months of the year.
On this basis, assuming an operating flow-through ratio of more than 50% in 2013 and the €5 million in extra costs generated by the digital transition during the year, Edenred has set a 2013 EBIT target of between €370 million and €390 million.
This objective takes into account the adverse currency effects stemming from the Brazilian real19 and the Venezuelan bolivar fuerte20, estimated at a negative €15 million and a negative €9 million respectively.
The Group confirms its organic normalized growth objectives of 6% to 14% per year for issue volume and of more than 10% per year for funds from operations.
October 16, 2013: Third-quarter revenue.
November 12, 2013: Investor Day in New York.
February 12, 2014: 2013 results.
17 Internal estimates, based on the latest Standard & Poor's method.
18 The ratio of adjusted funds from operations to adjusted net debt, determined by the Standard & Poor's method, must be above 30% to maintain a strong investment grade rating.
19 Assuming an estimated average exchange rate of BRL 2.77/€ in 2013.
20 Based on an official rate of VEF 6.3/\$.
Edenred, which invented the Ticket Restaurant® solution and is the world leader in prepaid corporate services, designs and delivers solutions that make employees' lives easier and improve the efficiency of organizations.
—
Listed on the NYSE Euronext Paris stock exchange, Edenred operates in 40 countries, with nearly 6,000 employees, nearly 610,0 00 companies and public sector customers, 1.3 million affiliated merchants and 38 million beneficiaries. In 2012, total issue volume amounted to €16.7 billion, of which 61% was generated in emerging markets.
Ticket Restaurant® and all other tradenames of Edenred programs and services are registered trademarks of Edenred SA.
Anne-Sophie Sibout, Vice President, Media Relations and Internal Communication – Phone: +33 (0)1 74 31 86 11 - [email protected] Domitille Pinta, Media Relations Manager - Phone: +33 (0)1 74 31 86 27 – domitille.pinta@edenred.com Astrid Montfort, Press Attaché - Phone: + 33 (0)1 74 31 87 42 – astrid.montfort@edenr ed.com
Virginie Monier, Financial Communication Director - Phone: + 33 (0)1 74 31 86 16 - [email protected] Aurélie Bozza, Investor Relations - Phone: + 33 (0)1 74 31 84 16 – [email protected]
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In € millions | 2012 2013 |
2012 | 2013 | 2012 | 2013 | ||
| France | 666 | 665 | 613 | 661 | 1,279 | 1,326 | |
| Rest of Europe | 1,127 | 1,124 | 1,157 | 1,203 | 2,284 | 2,327 | |
| Latin America | 1,987 | 2,203 | 2,054 | 2,400 | 4,041 | 4,603 | |
| Rest of the w orld | 129 | 159 | 132 | 161 | 261 | 320 | |
| TOTAL ISSUE VOLUME | 3,909 | 4,151 | 3,956 | 4,425 | 7,865 | 8,576 |
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In % | Change Change reported L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
||
| France | -0.2% | -0.2% | 7.9% | 7.9% | 3.7% | 3.7% | |
| Rest of Europe | -0.3% | -0.3% | 4.0% | 4.5% | 1.9% | 2.1% | |
| Latin America | 10.9% | 18.8% | 16.9% | 17.9% | 13.9% | 18.4% | |
| Rest of the w orld | 23.8% | 9.6% | 21.8% | 11.0% | 22.8% | 10.3% | |
| TOTAL ISSUE VOLUME | 6.2% | 9.8% | 11.9% | 12.2% | 9.0% | 11.0% |
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In € millions | 2012 2013 |
2012 | 2013 | 2012 | 2013 | ||
| France | 34 | 34 | 32 | 33 | 66 | 67 | |
| Rest of Europe | 76 | 74 | 72 | 73 | 148 | 147 | |
| Latin America | 113 | 118 | 115 | 125 | 228 | 243 | |
| Rest of the w orld | 11 | 13 | 12 | 13 | 23 | 26 | |
| OPERATING REVENUE | 234 | 239 | 231 | 244 | 465 | 483 |
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In % | Change Change reported L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
||
| France | 2.3% | 1.2% | 1.1% | 2.8% | 1.7% | 2.0% | |
| Rest of Europe | -3.3% | 1.3% | 1.6% | 2.7% | -0.9% | 2.0% | |
| Latin America | 4.1% | 13.6% | 8.3% | 11.1% | 6.2% | 12.3% | |
| Rest of the w orld | 17.1% | 8.1% | 15.2% | 7.9% | 16.1% | 8.0% | |
| OPERATING REVENUE | 2.0% | 7.5% | 5.5% | 7.2% | 3.8% | 7.4% |
| Q1 | Q2 | H1 | ||||
|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 |
| France | 5 | 5 | 5 | 6 | 10 | 11 |
| Rest of Europe | 8 | 6 | 7 | 5 | 15 | 11 |
| Latin America | 10 | 9 | 9 | 9 | 19 | 18 |
| Rest of the w orld | 1 | 1 | 1 | 1 | 2 | 2 |
| Financial Revenue | 24 | 21 | 22 | 21 | 46 | 42 |
| Q1 | Q2 | H1 | ||||||
|---|---|---|---|---|---|---|---|---|
| In % | Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
||
| France | 5.3% | 5.3% | 2.0% | 2.0% | 3.7% | 3.7% | ||
| Rest of Europe | -24.5% | -21.0% | -26.7% | -29.6% | -25.5% | -25.0% | ||
| Latin America | -9.3% | -0.6% | 13.0% | 10.6% | 1.2% | 4.7% | ||
| Rest of the w orld | -9.9% | -4.0% | -15.0% | -10.4% | -12.5% | -7.3% | ||
| Financial Revenue | -11.2% | -6.3% | -3.5% | -5.2% | -7.6% | -5.8% |
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | |
| France | 39 | 40 | 37 | 38 | 76 | 78 | |
| Rest of Europe | 84 | 80 | 79 | 78 | 163 | 158 | |
| Latin America | 123 | 127 | 124 | 134 | 247 | 261 | |
| Rest of the w orld | 12 | 13 | 13 | 15 | 25 | 28 | |
| Total Revenue | 258 | 260 | 253 | 265 | 511 | 525 | |
| Q1 | Q2 | H1 | |||||
|---|---|---|---|---|---|---|---|
| In % | Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
|
| France | 2.6% | 1.7% | 1.3% | 2.7% | 2.0% | 2.2% | |
| Rest of Europe | -5.3% | -0.8% | -0.8% | -0.1% | -3.2% | -0.5% | |
| Latin America | 3.1% | 12.4% | 8.6% | 11.1% | 5.8% | 11.8% | |
| Rest of the w orld | 15.1% | 7.2% | 12.8% | 6.4% | 13.9% | 6.8% | |
| Total Revenue | 0.8% | 6.3% | 4.8% | 6.1% | 2.8% | 6.2% |
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