Earnings Release • Feb 13, 2013
Earnings Release
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"Conquer 2012" strategic step successfully completed
• Another year of growth in 2012:
1 Funds from operations before non-recurring items (FFO).
2 Negative net debt.
3 Normalized annual organic growth target. Normalized growth means the level of growth that the Group believes it can achieve in an economic environment in which there is no increase in unemployment.
4 To be recommended at the Annual Shareholders' Meeting on May 24, 2013.
5 Total dividend as a percentage of recurring profit after tax.
The consolidated financial statements6 for 2012 were approved by the Board of Directors on February 12, 2013.
| % change | |||||
|---|---|---|---|---|---|
| (in € millions) | 2011 | 2012 | Reported | Like-for-like7 | |
| Issue volume | 15,188 | 16,657 | +9.7% | +10.1% | |
| Operating revenue | 940 | 976 | +3.7% | +7.7% | |
| Financial revenue | 92 | 91 | -0.7% | +3.2% | |
| Total revenue | 1,032 | 1,067 | +3.3% | +7.3% | |
| Operating EBIT | 263 | 276 | +4.7% | +10.6% | |
| Financial EBIT | 92 | 91 | -0.7% | +3.2% | |
| EBIT | 355 | 367 | +3.3% | +8.7% | |
| Operating profit before tax and non-recurring items | 315 | 331 | +5.0% | ||
| Net profit, Group share | 194 | 183 | -5.9% | ||
| Recurring profit after tax | 203 | 208 | +2.5% | ||
| Recurring earnings per share (in €) | 0.90 | 0.92 |
Edenred's 2012 results reflect solid sales performances and the successful completion of the "Conquer 2012" step in the Group's strategic plan. This step consisted of setting up the conditions for sustainable strong growth by increasing the pace of solution launches, geographic expansion and the digital transition.
Issue volume for the year totaled €16,657 million, up 10.1% like-for-like on 2011. The reported increase was 9.7%, reflecting the 0.8% positive impact of changes in scope of consolidation and a 1.2% negative currency effect over the period.
| Like-for-like growth in issue volume |
First quarter 2012 |
Second quarter 2012 |
Third quarter 2012 |
Fourth quarter 2012 |
2012 |
|---|---|---|---|---|---|
| Latin America | +22.1% | +21.5% | +19.9% | +21.6% | +21.3% |
| Europe | -0.3% | -3.8% | +0.1% | +0.5% | -0.9% |
| Europe excluding Hungary8 | +2.7% | -0.2% | +3.6% | +3.5% | +2.4% |
| Rest of the world | +13.6% | +9.8% | +7.9% | +5.8% | +9.2% |
| TOTAL | +10.4% | +8.5% | +10.5% | +11.0% | +10.1% |
6 The consolidated financial statements have been audited and the statutory auditors will issue their report before the registration document is filed.
7 At constant scope of consolidation and exchange rates (corresponding to organic growth).
8 Where legislation favoring local companies was introduced in the meal voucher market on January 1, 2012.
In 2012, the three drivers of the 10.1% like-for-like growth in issue volume were:
| Employee Benefits |
Expense Management |
Incentive & Rewards |
Public Social Programs |
TOTAL | ||
|---|---|---|---|---|---|---|
| Meal & Food | Quality of life | |||||
| Issue volume (in € millions) |
12,897 | 1,302 | 1,666 | 602 | 190 | 16,657 |
| % of total issue volume |
77% | 8% | 10% | 4% | 1% | 100% |
| Like-for-like growth |
+9.3% | +5.5% | +3.2% | +24.4% | +10.1% |
The year saw robust growth in Employee Benefits issue volume (representing 85% of the Group total), with Meal & Food Benefits up 9.3% and Quality of Life Benefits up 5.5%. Expense Management issue volume was up by a strong 24.2%, while Incentive & Rewards issue volume was 3.2% higher.
9 Excluding Hungary. Including Hungary, organic growth would have been +15.7%.
10 Excluding the impact of Hungary.
| Like-for-like growth in revenue | First quarter 2012 |
Second quarter 2012 |
Third quarter 2012 |
Fourth quarter 2012 |
2012 |
|---|---|---|---|---|---|
| Operating revenue with issue volume | +9.4% | +9.2% | +8.2% | +9.2% | +9.0% |
| Operating revenue without issue volume |
+0.3% | -4.3% | +6.5% | +2.8% | +1.0% |
| Operating revenue | +7.8% | +6.7% | +8.0% | +8.1% | +7.7% |
| Financial revenue | +10.4% | +4.5% | -2.1% | +0.9% | +3.2% |
| Total revenue | +8.0% | +6.5% | +7.0% | +7.5% | +7.3% |
Total revenue rose by 7.3% like-for-like to €1.1 billion. On a reported basis, the increase was 3.3%, after taking into account the 1.3% negative currency effect and the 2.7% negative effect of changes in the scope of consolidation. The overall rise reflects:
Operating revenue grew 7.7% like-for-like to €976 million, reflecting the 9.0% like-for-like increase in operating revenue with issue volume led by Latin America (up 17.7% like-for-like) and Europe (up 3.2% like-for-like excluding Hungary).
Operating revenue without issue volume, primarily generated by corporate marketing and incentive consulting services which are less recurrent than other solutions, rose by a slight 1.0% like-for-like.
Financial revenue was up by 3.2% like-for-like at €91 million, with higher volumes in Latin America helping to offset the impact of lower interest rates in most countries.
Fourth quarter trends were in line with those for the year. Revenue for the quarter grew 7.5% compared with the year-earlier period, lifted by 8.1% growth in operating revenue and a modest 0.9% like-for-like rise in financial revenue. Operating revenue with issue volume advanced 9.2% during the quarter, reflecting good performances in the Latin America and Rest of the World regions (up 16.3% and 17.3% respectively), while growth in Europe was a more subdued 1.7% like-for-like.
Operating EBIT (which excludes financial revenue) rose by a strong 10.6% like-for-like in 2012 to €276 million. This good performance results in an operating flow-through ratio11, which, stripped out from the €8 million in extra costs generated by the digital transition, stood at 50%, in the upper range of the target of 40% to 50%.
Financial EBIT (corresponding to financial revenue) was 3.2% higher like-for-like, at €91 million.
11 Operating flow-through ratio: ratio between the like-for-like change in operating EBIT and the like-for-like change in operating revenue
| EBIT | 2011 | 2012 | % change | |
|---|---|---|---|---|
| (in € millions) | Reported | Like-for-like | ||
| Latin America | 206 | 243 | +18.1% | +20.1% |
| Europe12 | 158 | 140 | -11.1% | -6.6% |
| Rest of the world | 3 | 3 | n/m | n/m |
| Worldwide structures | (11) | (19) | n/m | n/m |
| TOTAL | 355 | 367 | +3.3% | +8.7% |
Operations in Latin America reported an excellent performance, with EBIT up 20.1% like-for-like reflecting the region's dynamic growth. In Europe, like-for-like EBIT growth came to 2.8% excluding the extra costs associated with the digital transition (€5 million) and the impact of the situation in Hungary (€10 million).
After deducting net financial expense of €36 million, income tax expense of €103 million and minority interests of €20 million, recurring net profit after tax came to €208 million, an increase of 2.5% from €203 million in 2011.
Net profit, Group share came in at €183 million versus €194 million in 2011 which was positively impacted by non-recurring capital gains of €25 million13 .
The Group had a net cash position of €85 million at December 31, 2012 compared with €74 million at the previous year-end. The ratio of adjusted funds from operations to adjusted net debt estimated at 110%, a level consistent with the Group's strong investment grade14 rating.
The structurally negative working capital requirement amounted to €2,456 million at December 31, 2012, an increase of €113 million from the year-earlier figure on a reported basis. The average rate of interest earned by the Group was 4.1% in 2012.
The Edenred business model generates large amounts of cash. In 2012, funds from operations before nonrecurring items (FFO) totaled €282 million and free cash flow stood at €330 million. The 13.4% like-for-like increase in FFO was in line with the Group's normalized target of over 10% a year.
The Group's policy consists of allocating free cash flow on a balanced basis to the payment of dividends, the repayment of gross debt and the financing of targeted acquisitions, while ensuring a solid financial situation with a strong investment grade rating. Based on this policy, the Group is aiming to increase the amount of the dividend on a recurring basis in the coming years.
In light of the 2.5% growth in 2012 recurring profit after tax and the proposed increase in the payout rate to close to 90% from 78% in 2011, the recommended dividend for 201215 will amount to €0.82 per share, up 17% on 2011.
12 Of which EBIT of:
- €95 million in Europe excluding France, a decline of 13.1% like-for-like after taking into account the €10 million negative impact of the situation in Hungary.
- €45 million in France, up 8.9% like-for-like.
13 Mainly on the sale of Davidson Trahaire in Australia and Workplace Benefits in the United States.
14 The ratio of adjusted funds from operations to adjusted net debt, determined by the Standard & Poor's method, must be above 30% at any time to maintain a strong investment grade rating.
The Group's ―Conquer 2012‖ strategy consisted of deploying new solutions and opening new countries, while increasing the pace of digital transition, in order to set up the conditions for sustainable strong growth.
28 new solutions had been launched compared with the 26 planned for the period July 2011-December 2012. They included ten Employee Benefits solutions, eight Expense Management solutions and ten Incentive & Rewards solutions.
Among these, Ticket Cultura® is the first card allowing employees of Brazilian companies to purchase cultural products and services. The solution has a face value of up to BRL 50 per month per employee and will be introduced during the first half of 2013. By 2016, the number of users of this benefit is estimated at 1.5 million.
With the December 2012 acquisition of Repom16 , Edenred has become the market leader in Brazil's promising ―frete‖17 market which is estimated at some €25 billion. Growth in this largely untapped market (the penetration rate is estimated at around 6%) is led by the Brazilian government's commitment to putting transactions made by independent truck drivers on a more formal basis18 . This involves, in particular, requiring truck drivers to pay their expenses using a pre-loaded card. Combining Repom's technological expertise in integrating clients' logistics systems with Edenred's sales force, the Group is now the only player to cover all segments of the road transportation market in Brazil19 and the undisputed leader of this exceptionally promising market.
Lastly, Germany has seen very rapid growth in issue volume for the Ticket Plus Card® , which can be used by employees to purchase staple goods such as food and gasoline. A total of 600 clients and 36,000 beneficiaries have been signed up since the card was launched in March of last year. By 2016, the number of users of this benefit is estimated at 700,000.
Following its move into Finland in 2011, Edenred has entered Japan, through the July 2012 acquisition of Barclay Vouchers, the country's only meal voucher issuer, and in Colombia, through the acquisition of Big Pass, a major employee benefits solution provider, in February 2013. With each business representing issue volume of some €100 million in 2012, Colombia and Japan will act as future growth drivers for the Group.
The Group is currently examining a further ten new countries and confirms its objective of adding between three and five additional countries by 2016, contributing 1% to 2% to like-for-like issue volume growth beyond 2015.
15 Dividend to be recommended by the Board of Directors to the Annual Shareholders' Meeting on May 24, 2013. Date of payment : May 31, 2013.
16 Approved by Brazil's anti-trust authorities on February 7, 2013.
17 Brazil's "frete" market covers all the costs incurred by major industrial groups and transportation companies for the outsourced delivery of goods by independent truck drivers.
18 Since November 2011, Brazilian regulations require companies to place their relations with independent truck drivers on a formal footing by giving the drivers an electronic card issued by a company licensed by Brazil's National Transport Office, to be used for all payments.
19 The Brazilian road transportation market comprises three segments: integrated light vehicle fleets, integrated heavy vehicle fleets and independent truck drivers.
2012 represented a milestone in the Group's digital transition. Over half of its issue volume is now in digital format (51% at end-2012), in line with the 50% target set for 2012.
France embarked on the transition with the launch of the Ticket Kadéos® Universel card and 3% of issue volume was digital in 2012. In parallel, at the end of 2012 France's Ministries of the Economy, Finance and Labor initiated discussions between all the parties affected by the introduction of paperless meal vouchers.
The extra costs generated by the shift to digital totaled €8 million in 2012. With a further €5 million to be incurred in 2013, mainly for the shift to digital meal vouchers in France, the total extra costs will be in line with the previously announced estimate of €10 million to €15 million. Excluding these costs, the Group confirms its objective of reporting an operating flow-through ratio of more than 50% as from 2013.
The Group is well on the way to meeting its goal of more than 70% digital issue volume by 2016. The shift will open up new growth opportunities, in particular by allowing Edenred to offer value added services to all stakeholders.
"In the last two years, the Group has set up the conditions for sustainable strong growth and it is now moving on to the "Invest 2016" step in its strategic plan." said Jacques Stern, the Group's Chairman and Chief Executive Officer. ―The ambition will be to deploy integrated solutions for clients, speed up the roll-out of expense management solutions and create new services for merchants and beneficiaries."
The Group reaffirms its organic growth objectives21 of 6% to 14% for issue volume and over 10% for funds from operations.
April 16, 2013: first-quarter revenue
October 16, 2013: third-quarter revenue
20 Number of beneficiaries signed to shift to digital at end-2012.
21 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.
Edenred, which invented the Ticket Restaurant® meal voucher and is the world leader in prepaid corporate services, designs and delivers solutions that make employees' lives easier and improve the efficiency of organizations.
—
Edenred solutions ensure that funds allocated by companies are used as intended. These solutions help to manage:
Employee benefits (Ticket Restaurant® , Ticket Alimentación, Ticket CESU, Childcare Vouchers, etc.)
Expense management process (Ticket Car, Ticket Clean Way, Repom, etc.)
Incentive and rewards programs (Ticket Compliments, Ticket Kadéos, etc.).
The Group also supports public institutions in managing their social programs.
Listed on the NYSE Euronext Paris stock exchange, Edenred operates in 40 countries, with nearly 6,000 employees, nearly 610,000 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, Media Relations and Internal Communication Director - Phone: +33 (0)1 74 31 86 11 - [email protected] Domitille Pinta, Media Relations Manager - Phone: +33 (0)1 74 31 86 27 – domitille.pint[email protected]
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 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 |
| France Rest of Europe Latin America Rest of the world |
659 1,148 1,628 119 |
666 1,127 1,987 129 |
617 1,232 1,742 120 |
613 1,157 2,054 132 |
512 1,112 1,836 120 |
524 1,103 2,209 163 |
810 1,278 2,131 125 |
817 1,259 2,554 163 |
2,598 4,770 7,337 484 |
2,620 4,646 8,804 587 |
| TOTAL ISSUE VOLUME | 3,554 | 3,909 | 3,710 | 3,956 | 3,580 | 3,999 | 4,344 | 4,793 | 15,188 | 16,657 |
| Q1 | Q2 | Q3 | Q3 | September end (YTD) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In % | Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
| France | 1.0% | 2.7% | -0.6% | 1.4% | 2.4% | 4.1% | 0.8% | 4.3% | 0.8% | 3.2% |
| Rest of Europe | -1.8% | -2.0% | -6.1% | -6.4% | -0.8% | -1.8% | -1.5% | -1.8% | -2.6% | -3.0% |
| Latin America | 22.1% | 22.1% | 17.9% | 21.5% | 20.3% | 19.9% | 19.9% | 21.6% | 20.0% | 21.3% |
| Rest of the world | 8.4% | 13.6% | 10.3% | 9.8% | 36.2% | 7.9% | 29.6% | 5.8% | 21.2% | 9.2% |
| TOTAL ISSUE VOLUME | 10.0% | 10.4% | 6.6% | 8.5% | 11.7% | 10.5% | 10.3% | 11.0% | 9.7% | 10.1% |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 |
| France | 36 | 34 | 34 | 32 | 31 | 29 | 43 | 43 | 144 | 138 |
| Rest of Europe | 81 | 76 | 78 | 72 | 71 | 69 | 96 | 92 | 327 | 309 |
| Latin America | 94 | 113 | 100 | 115 | 107 | 122 | 113 | 129 | 414 | 479 |
| Rest of the world | 17 | 11 | 16 | 12 | 12 | 13 | 10 | 14 | 56 | 50 |
| OPERATING REVENUE | 227 | 234 | 229 | 231 | 221 | 233 | 263 | 278 | 940 | 976 |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In % | Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
| France Rest of Europe |
-7.1% -5.7% |
2.5% -4.7% |
-3.3% -8.0% |
3.3% -6.6% |
-5.4% -3.4% |
7.4% -3.6% |
0.5% -4.3% |
9.6% -3.7% |
-3.6% -5.3% |
5.9% -4.6% |
| Latin America | 20.9% | 20.9% | 14.8% | 18.8% | 14.1% | 16.1% | 13.0% | 16.8% | 15.5% | 18.0% |
| Rest of the world | -35.0% | 6.1% | -30.7% | 3.7% | 8.4% | 6.1% | 33.9% | 16.2% | -11.5% | 7.3% |
| OPERATING REVENUE | 2.8% | 7.8% | 1.0% | 6.7% | 5.4% | 8.0% | 5.4% | 8.1% | 3.7% | 7.7% |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 |
| France | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 20 | 20 |
| Rest of Europe | 7 | 8 | 8 | 7 | 8 | 7 | 8 | 6 | 32 | 28 |
| Latin America | 9 | 10 | 9 | 9 | 9 | 10 | 9 | 10 | 36 | 39 |
| Rest of the world | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 3 | 4 |
| Financial Revenue | 22 | 24 | 23 | 22 | 24 | 23 | 23 | 22 | 92 | 91 |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In % | Change | Change | Change | Change | Change | Change | Change | Change | Change | Change |
| reported | L/L* | reported | L/L* | reported | L/L* | reported | L/L* | reported | L/L* | |
| France | 0.6% | 5.4% | -2.3% | 1.1% | -4.0% | -0.8% | -2.7% | 0.7% | -2.1% | 1.6% |
| Rest of Europe | 7.1% | 3.8% | -14.2% | 2.7% | -21.8% | -16.5% | -22.2% | -16.2% | -13.4% | -7.0% |
| Latin America | 13.9% | 15.1% | -1.1% | 4.2% | 14.4% | 8.4% | 10.3% | 15.4% | 9.5% | 10.8% |
| Rest of the world | 39.9% | 59.5% | 36.6% | 51.1% | 9.7% | 16.0% | 14.3% | 17.6% | 23.4% | 33.4% |
| Financial Revenue | 9.3% | 10.4% | -4.8% | 4.5% | -2.6% | -2.1% | -4.0% | 0.9% | -0.7% | 3.2% |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 |
| France Rest of Europe Latin America Rest of the world |
41 88 102 18 |
39 84 123 12 |
39 87 109 17 |
37 79 124 13 |
36 80 116 13 |
34 75 133 14 |
48 105 123 11 |
48 99 138 15 |
164 359 450 59 |
158 337 518 54 |
| Total Revenue | 249 | 258 | 251 | 253 | 245 | 256 | 286 | 300 | 1,032 | 1,067 |
| Q1 | Q2 | Q3 | Q4 | FY 2012 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In % | Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
Change reported |
Change L/L* |
| France | -6.1% | 2.9% | -3.2% | 3.0% | -5.2% | 6.2% | 0.1% | 8.7% | -3.4% | 5.3% |
| Rest of Europe | -4.6% | -4.0% | -8.6% | -5.8% | -5.4% | -5.0% | -5.8% | -4.7% | -6.1% | -4.9% |
| Latin America | 20.3% | 20.4% | 13.5% | 17.7% | 14.1% | 15.5% | 12.8% | 16.7% | 15.0% | 17.5% |
| Rest of the world | -32.2% | 8.1% | -27.9% | 5.7% | 8.5% | 6.8% | 32.3% | 16.3% | -9.6% | 8.7% |
| Total Revenue | 3.4% | 8.0% | 0.5% | 6.5% | 4.7% | 7.0% | 4.6% | 7.5% | 3.3% | 7.3% |
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