Ingenico Group, (Euronext: FR0000125346 - ING), global leader in seamless payment, announced today its results for the six-month period ended as of 30 June 2018.
The first half year came in line with our expectations. The Bambora integration is very satisfactory and the direct access to merchant strategy is already paying off. In this timeframe we have successfully launched the Axium platform with great commercial successes. Furthermore, as we are in line with US law, we have anticipated in our full year guidance the phasing out of our activities in Iran.”
He also welcomed the agreement with BS Payone: “I am proud to announce that we have signed the agreement with the Sparkassen-Finanzgruppe in order to create the undisputed leader in payment services in Germany, Austria and Switzerland. The Joint Venture between BS PAYONE and Ingenico Group will enable to create value through the combination of the respective portfolio of merchants and to accelerate the deployment of our Retail strategy across all channels within the DACH1 region, the largest growth opportunity in Europe.”
In 2018 Ingenico Group expects an EBITDA of at least €545m vs. a range of €545 million and €570 million previously. Following the US withdrawal from the JCPOA5 announced on 8th May 2018, the Group has anticipated the phasing out of its distribution partnership in Iran, in line with the US law. The Iran contribution, now excluded from our 2018 adjusted guidance, represents €16 million. However, the EBITDA related to these sales to Iran is still possible to execute within the timeframe.
The guidance factors in a negative impact from currencies of c. €25-30 million.
Given the high comparison basis in the first half and the projects pipeline, the phasing of the year has resulted in a soft first half and we expect a stronger second half. The adjusted FCF2 to EBITDA conversion ratio is expected to be above 45%.
Over the full year, our assumptions are based on a soft organic decline for the Banks & Acquirers business unit and a double-digit organic growth in Retail. The second half of the year will benefit from a higher growth, driven by an acceleration of growth in the Retail business unit and an improvement in the Banks & Acquirers business unit.
In the first half of 2018, revenue totalled €1,229 million, up 1% on a reported basis, including a negative foreign exchange impact of €71 million. On a comparable basis, revenue was 3% lower than the first half of 2017. Restated from the impact coming from the PCI V1 to V3 migration in Europe and the demonetization process in India, revenue would have grown 3% on a comparable basis.
EBITDA reached €193 million in the first half of 2018, i.e. a 15.7% EBITDA margin on gross revenues, down 3.6 points compared to last year on a pro forma basis. It has been impacted by the business mix. The second half of the year will be more favourable in terms of business mix which gives us confidence in the EBITDA improvement to reach our adjusted full-year guidance.
During the period, the Retail Business Unit reported a revenue of €630 million, an increase of 22% on reported figures, including a negative foreign exchange impact of €34 million. On a comparable basis, revenue was up 6%, driven by the strong SMB dynamic and the Global Online performance. In Enterprise, growth has been impacted by the tough comparison basis of the first semester 2017 related to the demonetization process in India and a contract that sifted to Q3.
EBITDA reached €77 million, representing an EBITDA margin of 12.2%, compared to €63 million last year.
The Banks and Acquirers Business Unit posted a revenue of €599 million, a 15% decline on reported figures including a negative foreign exchange impact of €37 million. On a comparable basis revenue declined by 11%, mainly impacted by the very tough comparison basis in India (demonetization process) and in Europe (PCI V1 to V3 migration), partially offset by the strong recovery in Latin America, especially in Brazil. Restated from these tough comparison basis, revenue would have been stable on a comparable basis.
EBITDA reached €116 million, representing an EBITDA margin of 19.4%, compared to €182 million last year.
Signing of BS PAYONE combination with Ingenico Retail assets in DACH
Ingenico Group today announced it signed a deal with DSV Group (Deutscher Sparkassenverlag), a subsidiary of the Sparkassen-Finanzgruppe, regarding the combination of BS PAYONE with Ingenico Retail assets in DACH (Germany, Austria, Switzerland). This non-cash business combination, at a time when transaction multiples keep on rising, will be 52% owned and controlled by Ingenico Group.
Within the DACH region, Germany, which is the main exposure of BS PAYONE, is the third largest market in Europe and the most dynamic country in the region in terms of electronic payment. With predominant cash transactions representing more than 70% of the overall transactions, cashless volumes are accelerating and should grow by 7% over the next five years. It offers strong growth perspectives for those players who are able to provide comprehensive and end-to-end electronic payment acceptance solutions to merchants.
Headquartered in Frankfurt, BS PAYONE is a leading full-service payment provider offering instore and online payment solutions and employing around 700 people. Serving more than 250,000 merchants in various industries, from small and medium-sized businesses to large international accounts, BS PAYONE is the second largest international card acquirer in Germany and a major Network Service Provider (NSP), with a volume of over €50 billion processed, of which €27 billion is from international card acquiring, and more than 135,000 point-of-acceptance devices. BS PAYONE benefits from close partnerships with the savings banks (“Sparkassen”) in Germany. In 2017 BS PAYONE generated €324 million in gross revenues6 and €31m EBITDA6.
The joint venture would have a unique footprint in DACH with a combined volume processed of €125 billion and close to 335,000 point-of-acceptance devices. The combined entity would have generated a gross revenue6 of over €500 million and an EBITDA6 of c.€75 million in 2017. Over the period 2017-2021, the combined entity is expected to grow at a low double digit CAGR in term of revenues and a high double digit CAGR in term of EBITDA. The ambition of the combined entity is to become the largest acquirer in DACH and to further consolidate its Network Service Provider (NSP) leadership. The combination between the two assets is expected to generate significant synergies of €30 million, largely realized by 2022.
The partnership will represent a significant milestone in the execution of Ingenico Group’s strategy:
The closing is expected to occur during the first quarter of 2019, subject to approval from the relevant regulatory and antitrust authorities.
In the second quarter of 2018, Ingenico Group reported a revenue of €648 million, up 3% on a reported basis, including a negative foreign exchange impact of €31 million. On a comparable basis, revenue declined by 2% compared to the second quarter of 2017. Adjusted from the tough comparison basis coming from the PCI V1 to V3 migration in Europe and the demonetization process in India, revenue would have grown 3% on a comparable basis.
The Retail Business Unit has continued to grow in the second quarter, following a similar trend to the first quarter despite some non-recurring low growth profile in Global Online. Over the second quarter, revenue reached €328 million, up 21% on a reported basis and impacted by a negative foreign exchange impact of €16 million. On a comparable basis, revenue increased by 5%. Compared with Q2’17, the various activities performed as follows on a like-for-like basis:
The Banks & Acquirers Business Unit has shown, in the second quarter, the beginning of the expected recovery, despite the very tough comparison basis. Revenue reached €319 million, down 10% on a reported basis and negatively impacted by €15 million of foreign exchange. On a comparable basis revenue declined by 8%. Adjusted from the impact coming from the PCI V1 to V3 migration in Europe and the demonetization process in India, revenue would have been up 1% on a comparable basis. Compared with Q2’17, the various regions performed as follows on a like-for-like basis:
During the first half of 2018, adjusted gross profit reached €489 million, or 39.7% of revenue, representing a 250 basis points drop compared to the first half of 2017 pro forma adjusted gross profit. This fall is mainly attributable to the business mix evolution this semester that has weighed on the margin.
In the first half of 2018, adjusted operating costs were €295 million, representing 24% of revenue compared to 22.3% in the first half of 2017. Compared to the same period last year on a pro forma basis, the OPEX have decreased by €12 million during the first semester.
EBITDA was €193 million in the first half of 2018, equal to 15.7% and has been negatively impacted by €19 million of foreign exchange. The margin has been impacted this semester by an incompressible part of OPEX in a declining Banks & Acquirers business unit. The latter was facing two significant comparison bases that led to a strong fall this first half and so a compression of the EBITDA margin. Nevertheless, thanks to the growth acceleration we expect in both our business unit and to the operating leverage, we remain confident with our adjusted full year EBITDA objective.
After accounting for Purchase Price Allocation and other operating income and expenses, profit from operations totalled €94 million. The Group’s operating margin was equal to 7.7% of revenue.
Financial results reached €-19 million, against €-10 million last year on the same period.
Income tax expense decreased to €20 million compared to €51 million in the first half of 2017. The reduction of the tax expenses is the consequence of the decline in income before taxes as well as a weakening of the effective tax rate.
The net profit attributable to Ingenico’s shareholders in the first half of 2018 reached €54 million.
The adjusted free cash flow7 reached €40 million, i.e. an EBITDA conversion rate of 20.7% compared to €76 million last year. Following a dynamic year in terms of acquisition, the first semester 2018 has been impacted by a non-recurring expenses increase. The Group’s operations, post other income and expenses, generated a free cash flow of €23 million, i.e. an FCF/EBITDA conversion ratio of 11.7%. Investments increased to €53 million, related to the acquisition of Bambora.
The Group net debt increased to €1,702 million, against €1,471 million at the beginning of the year. The increase of the net debt level is mainly related to the Fosun stake purchase, share buyback and the dividend payment. The cash dividend paid in respect of 2017 was €48 million, whereas 50.3% of the total dividend amount was paid in stock (781,413 shares), reflecting the shareholder confidence. The ratio of net debt to equity is 101% and the ratio of net debt to EBITDA is up to 3.6x from 2.8x at the end of 2017.