Earnings Release • Feb 12, 2014
Earnings Release
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1 Before non-recurring items.
2 Mainly the 14.3% decline in the Brazilian real against the euro over the year and the change in the Venezuelan bolivar fuerte exchange rate from VEF 6.3 to VEF 11.3 to the dollar.
3 To be recommended at the Annual Shareholders Meeting on May 13, 2014, payable 100% in cash or 50% in cash/50% shares with a 10% discount.
4 Total dividend as a percentage of recurring net profit after tax.
5 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.
The consolidated financial statements6 for 2013 were approved by the Board of Directors on February 11, 2014.
| % change | |||||
|---|---|---|---|---|---|
| (in € millions) | 2012 | 2013 | Reported | Like-for-like7 | |
| Issue volume | 16,657 | 17,119 | +2.8% | +11.8% | |
| Operating revenue | 976 | 950 | -2.7% | +7.7% | |
| Financial revenue | 91 | 80 | -12.0% | -3.7% | |
| Total revenue | 1,067 | 1,030 | -3.5% | +6.7% | |
| Operating EBIT | 276 | 263 | -4.6% | +15.8% | |
| Financial EBIT | 91 | 80 | -12.0% | +3.7% | |
| EBIT | 367 | 343 | -6.4% | +10.9% | |
| Operating profit before tax and non-recurring items | 331 | 302 | -8.8% | ||
| Net profit, Group share | 183 | 160 | -12.6% | ||
| Recurring profit after tax | 208 | 193 | -7.4% | ||
| Recurring earnings per share (in €) | 0.92 | 0.86 |
In 2013, strong organic growth combined with an active acquisition strategy enabled the Group to expand in existing markets and generate new opportunities to grow the business by deploying new solutions and opening new countries. However, financial performance for the year was impacted by unfavorable exchange rates.
Issue volume for the year totaled €17,119 million, up 11.8% like-for-like on 2012. The reported increase was 2.8%, reflecting the 3.1% positive impact of changes in the scope of consolidation and a 12.1% negative currency effect over the period, related mainly to the Venezuelan bolivar fuerte8 and the Brazilian real.
| Like-for-like growth in issue volume |
First quarter 2013 |
Second quarter 2013 |
Third quarter 2013 |
Fourth quarter 2013 |
2013 |
|---|---|---|---|---|---|
| Latin America | +18.8% | +17.9% | +19.6% | +12.0% | +16.8% |
| Europe | -0.3% | +5.7% | +9.7% | +8.3% | +5.9% |
| Rest of the world | +9.6% | +11.0% | +10.8% | +13.7% | +11.4% |
| TOTAL | +9.8% | +12.2% | +15.2% | +10.4% | +11.8% |
6 The audit has been completed and the auditors will issue their opinion before the registration document is filed.
7 At constant scope of consolidation and exchange rates (corresponding to organic growth).
8 Reflecting the application of a new exchange rate for the Venezuelan bolivar fuerte of VEF 11.3 to the dollar (versus VEF 6.3 previously), as announced by the Group on December 27, 2013
In 2013, the Group's four growth drivers all contributed to the 11.8% like-for-like growth in issue volume, as follows:
like growth of 8.3%, of which 3.9 points attributable to Portugal.
| Employee Benefits |
Expense Management |
Incentive & Rewards |
Public Social Programs |
TOTAL | ||
|---|---|---|---|---|---|---|
| Meal & Food | Quality of Life | |||||
| Issue volume (in € millions) |
12,775 | 1,446 | 2,078 | 599 | 221 | 17,119 |
| % of total issue volume | 75% | 8% | 12% | 4% | 1% | 100% |
| Like-for-like growth | +11.7% | +9.2% | +17.3% | +5.0% | n/a | +11.8% |
9 Additional meal and food vouchers distributed during the Christmas season in Latin America.
10 Legislation has been introduced to encourage the development of meal vouchers, which are now more tax-advantaged than employee cash benefits.
The year saw robust growth in Employee benefits issue volume (representing 83% of the consolidated total at year-end), with Meal & food benefits up 11.7% and Quality of life benefits up 9.2%. Expense management solutions also enjoyed rapid growth, with issue volume rising by 17.3% over the year to represent 12% of the Group total at year-end versus 10% at end-201211 . Incentive & rewards issue volume was 5.0% higher.
The digital transition continued at a rapid pace, with digital issue volume representing 58% of the consolidated total at end-2013, compared with 51% the year before. In Europe, the transition launched in 2010 is accelerating and digital issue volume now represents 23% of the region's total, compared with 15% at end-2012. In Latin America and the Rest of the world region, the digital rates stand at 87% and 64% respectively.
| Like-for-like growth in revenue | First quarter 2013 |
Second quarter 2013 |
Third quarter 2013 |
Fourth quarter 2013 |
2013 |
|---|---|---|---|---|---|
| Operating revenue with issue volume | +8.0% | +8.1% | +11.0% | +9.8% | +9.2% |
| Operating revenue without issue volume | +4.8% | +1.0% | -5.8% | -6.4% | -1.9% |
| Operating revenue | +7.5% | +7.2% | +8.8% | +7.2% | +7.7% |
| Financial revenue | -6.3% | -5.2% | -2.8% | -0.6% | -3.7% |
| Total revenue | +6.3% | +6.1% | +7.8% | +6.7% | +6.7% |
Total revenue for 2013 amounted to €1.0 billion, an increase of 6.7% like-for-like over the previous year. On a reported basis, revenue was down 3.5% after taking into account the 1.3% contribution from changes in the scope of consolidation and the 11.5% negative currency effect. The year's like-for-like growth reflected:
• A 7.7% like-for-like increase in operating revenue to €950 million, reflecting the 9.2% like-for-like increase in operating revenue with issue volume, led by Latin America (up 14.3%) and Europe (up 2.9%). Fourth quarter trends were in line with those for the first nine months. Operating revenue with issue volume advanced 9.8% during the quarter, reflecting gains of 14.5% in Latin America and 14.3% in the Rest of the World region, while growth in Europe came in at 4.0% like-for-like.
Operating revenue without issue volume, primarily generated by non-recurring corporate marketing and incentive consulting services, decreased by 1.9% like-for-like.
• A 3.7% like-for-like decline in financial revenue to €80 million, due to lower interest rates in most countries. Financial revenue was stable in the fourth quarter (down 0.6%), helped by a better basis of comparison and increased issue volume in the Latin America and Rest of the world regions.
Operating EBIT (which excludes financial revenue) rose by 15.8% like-for-like to €263 million. This good performance resulted in an operating flow-through ratio of 57%12, in line with the target of more than 50%.
Financial EBIT (corresponding to financial revenue) was down 3.7% like-for-like to €80 million.
11 With an objective of over 20% by 2016.
12 Excluding digital extra costs of €4 million and non-recurring items, including:
Positive impact from the reduced weight of low-margin businesses without issue volume.
Positive impact from adapting the cost structure in Hungary in response to a sharp decrease in the business in 2012.
Total EBIT rose 10.9% like-for-like to €343 million, a performance in line with the most recent guidance of €340-350 million13 . On a reported basis, EBIT was weakened by 6.4%, reflecting the 0.9% contribution from changes in the scope of consolidation and the 18.2% negative currency effect, which amounted to €67 million over the period.
| EBIT | 2012 | 2013 | % change | |
|---|---|---|---|---|
| (in € millions) | Reported | Like-for-like | ||
| Latin America | 243 | 218 | -10.1% | +15.0% |
| Europe14 | 140 | 140 | -0.4% | -0.1% |
| Rest of the world | 3 | 3 | n/a | n/a |
| Worldwide structures | (19) | (18) | -5.1% | -2.0% |
| TOTAL | 367 | 343 | -6.4% | +10.9% |
Operations in Latin America reported an excellent performance, with EBIT up 15.0% like-for-like reflecting the region's dynamic growth. In Europe, like-for-like EBIT growth was 1.9%, excluding the extra costs associated with the digital transition.
After deducting net financial expense of €41 million, income tax expense of €97 million and minority interests of €11 million, recurring net profit after tax came to €193 million, a decline of 7.2% as reported compared with €208 million in 2012.
Net profit, Group share amounted to €160 million in 2013, versus €183 million in 2012, after deducting the €6 million surtax on distributed earnings.
The Edenred business model generates large amounts of cash. In 2013, funds from operations before nonrecurring items (FFO) totaled €262 million, a year-on-year increase of 11.5% like-for-like that was in line with the Group's target of over 10% growth per year.
The €335 million in free cash flow generated during the year was allocated to the shareholder return policy for €237 million and to acquisitions for €138 million15 .
After taking into account the negative €287 million impact from currency movements as well as various nonrecurring items, the Group had net debt of €276 million at December 31, 2013.
The ratio of adjusted funds from operations to adjusted net debt was an estimated 41.3% at end-2013, a level consistent with the criteria applied by Standard & Poor's, thereby supporting a "Strong Investment Grade" rating.
15 Of which the Repom call option on the remaining 38% stake recognized in debt for €59 million.
13 The latest guidance released by the Group on December 27, 2013, following the change in the Venezuelan bolivar fuerte exchange rate to VEF 11.3 to the dollar from VEF 6.3 previously.
14 Of which EBIT of:
- €97 million in the Rest of Europe region, up 2.4% like-for-like.
- €43 million in France, down 5.4% like-for-like.
Edenred's policy consists of allocating free cash flow on a balanced basis to the payment of dividends, for around 90% of recurring net profit after tax, and the financing of targeted acquisitions, while retaining its strong investment grade rating.
The recommended dividend for 2013 will amount to €0.83 per share, representing a payout ratio of 96% of recurring net profit after tax, versus 89% in 2012. Shareholders may opt to receive the entire dividend in cash or to receive half in cash and half in shares16 .
2013 saw the launch of the new "Invent 2016" phase of the growth strategy that was presented at the Investor Day held on November 12, and several opportunities to grow the business were actively pursued during the year.
The Employee benefit markets continue to offer significant growth potential that can be tapped primarily by raising penetration rates. In 2013, this growth lever contributed 5.1% of issue volume growth, in line with the targeted 3-5%, thanks to contract wins with such clients as agri-foods giant Nestlé in Brazil, national oil company PDVSA in Venezuela, retailer Carrefour Market in France, and temporary employment agency Federgon in Belgium. These four contracts alone enabled more than 135,000 new users to benefit from meal and food vouchers in 2013.
Operations in Portugal also enjoyed strong growth, following the introduction of new legislation encouraging the wider use of the meal vouchers. To tap this market potential, in 2013 the Group joined with Banco Espirito Santo, the country's largest listed bank, to create Portugal's leading provider of employee benefit solutions. Thanks to this alliance, some 250,000 employees were benefiting from Edenred's meal voucher solutions by end-2013.
The Group also made several targeted acquisitions that have consolidated its position in existing Employee benefits markets. They include Opam in Mexico17 and Bonus in Brazil18 , whose meal voucher businesses generated issue volumes of €200 million and €70 million respectively in 2013.
The launch of new solutions and the opening of new countries in the Employee benefits and Expense management segments have also created new growth opportunities.
New solutions
Among the new solutions, the Ticket Cultura card launched in Brazil in October 2013 enables companies to distribute funds for the purchase of cultural goods and services. Over 80,000 employees already hold Ticket Cultura cards and a total of 1.5 million may receive this benefit by 2016, in an addressable market19 of 40 million people.
16 With a 10% discount.
17 Consolidated as from June 2013.
18 Consolidated as from January 2014.
19 The addressable market is the number of employees eligible for the solution according to local legislation.
In Germany, the Ticket Plus Card solution that allows companies to distribute funds for the purchase of staple goods20 was issued to around 90,000 new beneficiaries in 2013. The total could rise to 1.2 million by 2016, in a market of some 30 million employees.
In 2013, Edenred acquired Repom, the Brazilian market leader in Expense management solutions for independent truckers. This represents a potential market of around €35 billion and Repom expects to deliver growth of more than 30% a year in the period to 2016. In 2013, its issue volume grew by 28%.
New countries
After entering Finland in 2011, the Group increased the pace of expansion in the local Employee benefits market with the December 2013 acquisition of Nets Prepaid, the historical market leader. Nets Prepaid offers meal benefits and recreational benefits21 to over 10,000 clients and 120,000 beneficiaries. In 2013, its issue volume reached €200 million.
In light of these achievements, the Group confirms the strong and sustainable growth targets set for the "Invent 2016" strategic phase, which include:
"2013 provided a further demonstration of our teams' dynamic approach to innovation and business development", said Jacques Stern, Edenred's Chairman and Chief Executive Officer. "We are confident in our ability to meet this year's objectives and to generate strong and sustainable growth."
April 15: First-quarter 2014 revenue.
May 13: Annual Shareholders' Meeting
July 24: First-half revenue and results
October 15: Third-quarter revenue.
20 Mainly gasoline and food.
21 Solutions for the purchase of sporting and cultural goods and services.
22 Ratio between the like-for-like change in operating EBIT and the like-for-like change in operating revenue.
— Edenred, which invented the Ticket Restaurant® meal voucher and is the world leader in prepaid corporate services, designs and manages solutions that improve the efficiency of organizations and purchasing power to individuals.
By ensuring that allocated funds are used specifically as intended, these solutions enable companies to more effectively manage their:
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 more than 6,000 employees, nearly 640,000 companies and public sector clients, 1.4 million affiliated merchants and 40 million beneficiaries. In 2013, total issue volume amounted to €17.1 billion, of which almost 60% was generated in emerging markets.
Ticket Restaurant® and all other tradenames of Edenred products 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] Astrid Montfort, Press Officer - Phone: + 33 (0)1 74 31 87 42 – [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 2013 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 |
| France Rest of Europe Latin America (pro forma) Rest of the world |
666 1,127 1,987 129 |
665 1,124 2,025 159 |
613 1,157 2,054 132 |
661 1,203 2,199 161 |
524 1,103 2,209 163 |
566 1,204 2,193 158 |
817 1,259 2,554 163 |
865 1,373 2,407 156 |
2,620 4,646 8,804 587 |
2,757 4,904 8,824 634 |
| Issue Volume (pro forma) |
3,909 | 3,973 | 3,956 | 4,224 | 3,999 | 4,121 | 4,793 | 4,801 | 16,657 | 17,119 |
| Venezuela change of rate restatement |
- | 178 | - | 201 | - | 208 | - | (587) | - | - |
| Issue Volume (reported) |
3,909 | 4,151 | 3,956 | 4,425 | 3,999 | 4,329 | 4,793 | 4,214 | 16,657 | 17,119 |
| Q1 | Q2 | Q3 | Q4 | FY 2013 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 | -0.2% | -0.2% | 7.9% | 7.9% | 8.1% | 8.1% | 5.9% | 5.9% | 5.2% | 5.2% |
| Rest of Europe | -0.3% | -0.3% | 4.0% | 4.5% | 9.1% | 10.5% | 9.0% | 9.8% | 5.5% | 6.2% |
| Latin America (pro forma) |
1.9% | 18.8% | 7.1% | 17.9% | -0.7% | 19.6% | -5.8% | 12.0% | 0.2% | 16.8% |
| Rest of the world | 23.8% | 9.6% | 21.8% | 11.0% | -3.7% | 10.8% | -3.5% | 13.7% | 8.1% | 11.4% |
| Issue Volume (pro forma) |
1.6% | 9.8% | 6.8% | 12.2% | 3.0% | 15.2% | 0.2% | 10.4% | 2.8% | 11.8% |
| Issue Volume (reported) |
6.2% | 9.8% | 11.9% | 12.2% | 8.2% | 15.2% | -12.1% | 10.4% | 2.8% | 11.8% |
*At constant scope of consolidation and exchange rates.
Pro forma: application of the VEF 11.3/\$ rate from January 1, 2013.
| Q1 | Q2 | Q3 | Q4 | FY 2013 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 |
| France Rest of Europe Latin America (pro forma) Rest of the world |
34 76 113 11 |
34 74 108 13 |
32 72 115 12 |
33 73 114 13 |
29 69 122 13 |
30 70 110 13 |
43 92 129 14 |
45 88 118 14 |
138 309 479 50 |
142 305 450 53 |
| Operating revenue (pro forma) (pro forma) |
234 | 229 | 231 | 233 | 233 | 223 | 278 | 265 | 976 | 950 |
| Venezuela change of rate restatement |
- | 10 | - | 11 | - | 11 | - | (32) | - | - |
| Operating revenue (reported) |
234 | 239 | 231 | 244 | 233 | 234 | 278 | 233 | 976 | 950 |
| Q1 | Q2 | Q3 Q4 |
FY 2013 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 2.3% | 1.2% | 1.1% | 2.8% | 3.0% | 3.0% | 5.2% | 5.2% | 3.1% | 3.2% | |
| Rest of Europe | -3.3% | 1.3% | 1.6% | 2.7% | 2.0% | 4.5% | -3.9% | 0.9% | -1.2% | 2.2% | |
| Latin America (pro forma) |
-4.3% | 13.6% | -1.0% | 11.1% | -10.1% | 12.8% | -8.8% | 12.0% | -6.2% | 12.4% | |
| Rest of the world | 17.1% | 8.1% | 15.2% | 7.9% | -4.4% | 7.6% | -1.5% | 11.3% | 5.7% | 8.8% | |
| Operating revenue (pro forma) (pro forma) |
-2.0% | 7.5% | 0.9% | 7.2% | -4.6% | 8.8% | -4.7% | 7.2% | -2.7% | 7.7% | |
| Operating revenue (reported) |
2.0% | 7.5% | 5.5% | 7.2% | 0.2% | 8.8% | -16.0% | 7.2% | -2.7% | 7.7% |
*At constant scope of consolidation and exchange rates.
Pro forma: application of the VEF 11.3/\$ rate from January 1, 2013.
| Q1 | Q2 | Q3 | Q4 | FY 2013 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 |
| France | 5 | 5 | 5 | 6 | 5 | 5 | 5 | 5 | 20 | 21 |
| Rest of Europe Latin America (pro forma) |
8 10 |
6 8 |
7 9 |
5 8 |
7 10 |
5 9 |
6 10 |
5 8 |
28 39 |
21 34 |
| Rest of the world | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 4 | 4 |
| Financial revenue (pro forma) |
24 | 20 | 22 | 21 | 23 | 20 | 22 | 20 | 91 | 80 |
| Venezuela change of rate restatement |
- | 1 | - | 1 | - | 1 | - | (3) | - | - |
| Financial revenue (reported) |
24 | 21 | 22 | 21 | 23 | 21 | 22 | 17 | 91 | 80 |
| Q1 | Q2 | Q3 | Q4 | FY 2013 | ||||||
| Change | Change | Change | Change | Change | Change | Change | Change | Change | Change |
| 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 | 5.3% | 5.3% | 2.0% | 2.0% | -1.5% | -1.5% | -4.7% | -4.7% | 0.4% | 0.4% |
| Rest of Europe | -24.5% | -21.0% | -26.7% | -29.6% | -22.3% | -20.1% | -23.3% | -21.6% | -24.2% | -23.0% |
| Latin America (pro forma) |
-14.9% | -0.6% | 4.0% | 10.6% | -17.4% | 7.2% | -8.3% | 13.9% | -9.7% | 7.7% |
| Rest of the world | -9.9% | -4.0% | -15.0% | -10.4% | -12.3% | -0.9% | -6.4% | 9.4% | -10.9% | -1.4% |
| Financial revenue (pro forma) |
-13.5% | -6.3% | -7.2% | -5.2% | -15.2% | -2.8% | -11.8% | -0.6% | -12.0% | -3.7% |
| Financial revenue (reported) |
-11.2% | -6.3% | -3.5% | -5.2% | -11.4% | -2.8% | -21.6% | -0.6% | -12.0% | -3.7% |
*At constant scope of consolidation and exchange rates.
Pro forma: application of the VEF 11.3/\$ rate from January 1, 2013.
| Q1 | Q2 | Q3 | Q4 | FY 2013 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € millions | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 |
| France Rest of Europe Latin America (pro forma) |
39 84 123 |
40 80 117 |
37 79 124 |
38 78 122 |
34 75 133 |
35 75 120 |
48 99 138 |
50 93 125 |
158 337 518 |
163 326 484 |
| Rest of the world | 12 | 13 | 13 | 15 | 14 | 14 | 15 | 15 | 54 | 57 |
| Total revenue (pro forma) |
258 | 250 | 253 | 253 | 256 | 244 | 300 | 283 | 1,067 | 1,030 |
| Venezuela change of rate restatement |
- | 10 | - | 12 | - | 11 | - | (33) | - | - |
| Total revenue (reported) |
258 | 260 | 253 | 265 | 256 | 255 | 300 | 250 | 1,067 | 1,030 |
| Q1 | Q2 | Q3 | Q4 | FY 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 Latin America (pro forma) Rest of the world |
2.6% -5.3% -5.1% 15.1% |
1.7% -0.8% 12.4% 7.2% |
1.3% -0.8% -0.7% 12.8% |
2.7% -0.1% 11.1% 6.4% |
2.3% -0.1% -10.7% -5.0% |
2.3% 2.3% 12.3% 7.0% |
4.2% -5.2% -8.8% -1.8% |
4.2% -0.6% 12.2% 11.2% |
2.7% -3.1% -6.5% 4.5% |
2.9% 0.1% 12.0% 8.0% |
|
| Total revenue (pro forma) |
-3.1% | 6.3% | 0.2% | 6.1% | -5.5% | 7.8% | -5.2% | 6.7% | -3.5% | 6.7% | |
| Total revenue (reported) |
0.8% | 6.3% | 4.8% | 6.1% | -0.9% | 7.8% | -16.4% | 6.7% | -3.5% | 6.7% |
*At constant scope of consolidation and exchange rates.
Pro forma: application of the VEF 11.3/\$ rate from January 1, 2013.
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