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Ladies and gentlemen, welcome to the Edenred Q1 2019 Revenue Conference Call.I now hand over to Mr. Patrick Bataillard, CFO. Sir, please go ahead.
Thank you, sir. Good morning, everyone, and welcome to our Q1 2019 revenue conference call. I will commence the slides of the presentation, which is available on our website in the Finance section.First, let's start with a few highlights of the first quarter on Slide 2. So we're pleased to share with you the Q1 revenue. This quarter is a strong start of the year, with total revenue of EUR 383 million, up 15.3% as reported and 14.1% like-for-like. The group reports double-digit growth in both operating revenue and other revenue, with positive scope effects of plus 4% and a negative currency impact of minus 2.8%, much lower than last year.Organically, Edenred operating revenue grew at a sustained growth rate in all regions and all business lines in line with the 2018 trends. This good performance has been fueled by 3 main drivers: business excellence with focus on SME targeting; innovation, including the rollout of mobile payments and the ramp-up of employee engagement platforms; and a good integration of all the acquired companies in Q4 2018 or early 2019. All in all, we tackled 2019 with confidence and confirmed our medium-term targets for the year.Moving on to the Slide 4. Looking at the performance, our first quarter total revenue, which is composed of the operating revenue and the other revenue, grew organically by a solid 14.1% driven by a strong performance in operating revenue and pickup in the other revenue.On a reported basis, total income is up 15.3% thanks to positive scope effects and despite still-negative currency impacts.Let's now focus on the operating revenue performance on the next slide. So on Slide 5, you can see that we have the strong start of the year in operating revenue with a solid organic growth of 14.2%, well on track with our plan. Taking into account positive scope effects and slightly negative currency impacts, reported growth reached 15.6%.During the first quarter, we benefited from the integration of recently announced acquisition such as CSI in North America, TRFC in the U.K. or Merits & Benefits and Ekivita in Belgium. The combined performance of these acquisitions led to a plus 4.1% scope effect.This quarter, we reported a negative currency impact of minus 2.7%, which is mainly linked to the Brazilian real and to the Argentine Peso, you can see on the slide.I will now comment our figures by business line. Please see the Slide #6. Employee Benefits, operating revenue around EUR 235 million for this quarter, up 14.5% on a like-for-like basis.Moving to Fleet & Mobility Solutions, the like-for-like growth of this business line reached 13.7%, although the double-digit growth [ to mid-term targets. ] This business generated EUR 92 million this quarter, representing 25% of the group activity.Lastly, the Complementary Solutions, which include Corporate Payment Services, Incentive & Rewards Solutions and Public Social Programs, registered a like-for-like growth of 13.5%. Reported growth reached 44.3%, having benefited from the integration of CSI consolidated since last January.I will now comment our figures by region, just turn to the next slide. As you can see on this map, Edenred has also been able to deliver a double-digit organic growth across all regions. In Europe, in the Q1, organic operating revenue growth was 13.8% and 16.4% on a reported basis, as we benefited from the integration of acquisition announced in end 2018 or early 2019 in the Fleet & Mobility and Employee Benefits business line, i.e., TRFC, Merits & Benefits and Ekivita.In Latin America, the organic growth was plus 13.9%, with a sustained growth in both Brazil and Hispanic Latin America. On a reported basis, we were up 7.3%, mainly due to the negative effect of the Brazilian real and the Argentine Peso currencies. The Rest of the World posted a solid plus 20.9% like-for-like growth, reported growth reached plus 64%, thanks to the integration of CSI in North America.Going to the next slide now. On Slide 8, let me focus, once again, on how Edenred leveraged its proprietary and partner capabilities to fit new user needs. First, we keep extending our mobile payment offering. We added 3 more programs over the past 3 months. We are now live in 12 countries with 21 programs, and more and more adoption of this innovative payment medium.Then we're also rolling out Edenred direct payment services. The payment API is ramping up in France and the increased number of transactions month after month and a high-user engagement. We signed a new partnership with local players, such as Melchior and BoboResto. In Q1, we started to expand this also outside France with the launch of Belgium in partnership with Uber Eats and NESTOR. Rolling out these innovative solution so fast is possible, thanks to our global digital platform, which is a strong competitive edge to boost growth.Let's now have a quick focus on employee engagement platform, a dynamic and innovative Employee Benefits solutions. On Slide 9, we give you a highlight of employee engagement platforms, following from the acquisition of Merits & Benefits and Ekivita in Belgium last January. This offering come in addition to existing solutions already deployed in France, Italy or U.K., such as ProwebCE, Ticket Welfare or Flex. What do we mean by employee engagement platforms? First use case can be tax-free benefit launched by the employer that the employee can spend on a platform. The second use case can be the employer gives the employee access to the best deals on an e-commerce platform. The third use case is different one. The employee receives from its employer a reward that can be used on a platform.In terms of value proposition, this platform enable employees to faster employee engagement, to reward efficiently and to leverage tax-free legislation when applicable. For the employee, it brings additional purchasing power. Edenred has continuously invested in these segments in 3 years, as it is a low-penetrated market, it offers cross-selling opportunities, it enables to improve retention by having a B2C2B approach. It is a scalable business as we can leverage our merchant network and technology platform. It is a good way to monetize the final reserve with the top-up options. Let me now comment with more detail the operating revenue performance by region. On Slide 10, in Europe, first, the operating revenue is up 13.8% like-for-like. The region account now for 58% of the group operating revenue. In addition of the sustained organic growth, we benefited from ongoing integration of last acquisitions, and the operating revenue for region to grow plus 16.4% as reported.In France, operating revenue growth reached 9% like-for-like this quarter. This solid performance was mainly achieved by winning our new clients, particularly in the SME segment. Moreover, we benefited from the -- first time from the full migration of CM-CIC meal card user to our global technology platform.In the Rest of Europe, operating revenue rose by 16.3% like-for-like this quarter. In this region, we continue to benefit from the digitalization of our solutions and distribution channels in both Employee Benefits and Fleet & Mobility Solutions. We also have a goodwill impact of new products and services, such as employee engagement platform in Italy, our solution for light fleets in France, Italy and Germany, for instance.Let's now focus on the Latin America in the following slide. Latin America is at 13.9% like-for-like. The region accounts for 34% of group's operating revenue in the quarter. There is a robust sale momentum in Hispanic Latin America with new client win, notably in the SME segment, both in Employee Benefits and Fleet & Mobility Solutions. We also benefit from a rapid and successful ramp-up of new solutions, of which the corporate expense solution of Empresarial in favorable LATAM countries on top of Mexico when it has been invented.In Brazil, this quarter confirmed the steady recovery in Employee Benefits observed in the second quarter of 2018. However, you have to keep in mind that the local unemployment rate remains high at the level of more than 12% last February. In the Fleet & Mobility segment, there is a good sales momentum as well, and we are launching new initiatives to enhance the business model such as toll, maintenance or freight management.Let's now have a look at the other revenue on Slide 12. Other revenue came up -- came at EUR 14 million, up 12% like-for-like and up 7.9% as reported. We benefited from a dynamic growth momentum in our different businesses, meaning [ more flow ] especially; and some slight rise in interest rates in certain European countries outside the eurozone during the quarter. As expected, we benefited from a more favorable basis of comparison since the beginning of the year as well.Let's now move on to our comments for the next quarter on Slide 14. So to sum up, with a sustained growth in all regions and all business lines in Q1, the group had a good start of the year in line with 2018 performance. We confirm our medium-term targets defined as part of our fast forward strategic plan for the year 2019, i.e. like-for-like growth in operating revenue of more than 7%; like-for-like growth in operating EBIT of more than 9%; and a like-for-like growth of more than 10% in funds from operations.Thank you very much for your attention. And I would like now to open the floor to your questions.
[Operator Instructions] The first question is from Simon LeChipre from MainFirst.
Three questions for me, please. First of all, regarding CSI, if you could please share with us some elements regarding the integration and how it is ramping up? Second question regarding currency. If you please -- if you can please comment on the level of growth you're seeing right now and also if you see an impact of the uncertainty around Brexit? And lastly, in terms of the employee engagement platform segment, what is the potential we see in this market? And in which extent you expect this segment to contribute to the level of growth going forward?
Thank you, Simon. So to start with CSI integration, it is well underway. I'd like to mention especially that we've made the right choice to integrate successfully the [indiscernible] in our group, meaning that we have now a new GM and a new CFO coming from the group that are based now in the U.S., in fact. We have succeeded as well to keep the former General Manager, David Disque, who remain in the company. We have put in place our reports. So now CSI is fully reporting its performance under Edendred standard, in fact. No major issue, especially to adapt the IFRS norms. And in terms of operations, the commercial term is being -- are being structured to better target this key segment that we are looking forward, in fact.So overall, we are really in line what we have anticipated in the post-merger integration plan. And in terms of performance what we can say is that Q1 is in line with our budget, in fact, even if quarterly analysis is not meaningful in this kind of business, in fact. Your second question is relating to TRFC? Was it U.K. -- I didn't -- yes, so overall TRFC is doing really well on the British market as well in line with the budget. And integration process is well underway. We do not suffer at all from any economic situation in the U.K. And we do not anticipate any major difficulties, in case, we go for hard Brexit, for instance. What we may anticipate is that if they're going to hard Brexit, maybe, for certain period of time, British economy may suffer, but don't anticipate any major negative impact on this kind of effectiveness over the long run.Regarding employee engagement platforms. Well, as I said before, we're investing in the business for quite a long time. In fact, we really see this business as Complementary Solutions on top of what we are already doing in terms of Employee Benefits. And what is really important, in my view, is that this can create some additional retention or additional stiffness because we have a B2C2B model in this business. Meaning that, as I tried to describe during my presentation, of course, it gives advantages to the company to retain [ capital ] that would give as well benefits to the employees. And for me, it's really one of the best example of the user monetization we can create in our business, thanks to fully digital -- fully digitalized solutions, in fact. When it comes to give you some insight about the potential growth it can create, it's probably too soon to say. And most probably, I will give you some further information about that during our next Capital Market Day in October 2019.
Next question from Paul Sullivan from Barclays.
A few from me. Firstly, in the -- in Fleet & Mobility, I think we were expecting some headwinds from the oil price and also some supply issues in Mexico. Did -- how -- did that have an impact in the quarter? It doesn't seem to have had a big impact, but did it have an impact in the quarter? And maybe could you quantify that? Secondly, in Employee Benefits in Brazil, what's really driving the growth there or recovery there given GDP growth remains stubbornly low and forecasts are sort of keep on being reduced rather than increased? And then finally, in Rest of Europe, clearly, you're benefiting from the follow-through of some of the face value uplift we saw last year and also the competitive situation in Italy. Beyond the second quarter, how sustainable do you think that growth will be as comps become more challenging in the second half?
Thank you, Paul. So to start with the Fleet & Mobility, the fact that we -- in the first quarter, we did not benefit as much as we did in the past from the stronger increase of fuel we've had in the past, in fact. So we cannot consider that as a headwind for the time being. And especially when you look at the last increase in terms of fuel price, in fact, we are not so pessimistic about that, but the fact that we had a stronger increase in prices in the past. When having said that, you remember that we are -- definitely, our Fleet & Mobility, same situation in terms of impact of the fuel price in our invoice in the different geographies, and we want to continue to derisk a little bit this situation. And this is a matter of more fixing than variability. But this is as well a matter of having new services such as toll and maintenance, fleet management. And this is going fast in many geographies, in fact.Second comment regarding Fleet & Mobility is that we have to be very cautious about the base effect from a quarter to another and especially when you come to speak about the fuel price.Second question relates to the situation in Mexico. You have heard about the pipeline crisis, in fact. Of course, it has an impact on our business, in fact, in the first part of the year. As far as with Mexico, by the end of 2018, the government has decided, by law, to supply the station by trucks and no more by pipeline. And this situation actually did some shortage in isolated stations [ dealing ] to one. We mean that it was difficult to increase our business in this period of time, in fact. As far as we know, Q2 should be better in terms of savings because we have still some issue regarding this pipeline crisis, but this is almost over.Regarding Employee Benefits in Brazil, my main comment relates to the fact that you probably didn't know there that we were in the negative gross territory in Q1 2018, meaning that we have a stronger increase in the business line in Q1 of 2019. But the base effect is quite favorable, which will be like the case starting in Q2 because you remember that we came back in a positive gross territory last year at this point of time. Nevertheless, we are quite confident about the fact that Brazil, like in many other countries, will succeed in bringing more innovation, will succeed to implement new solutions to add the quality of service related to the clients. We mean that even if it's still -- we are still in the [ government ] when the internal rate remain high, more than 12% in February this year. We are quite happy to speak about our capacity to improve the business especially for the rest of the year.Regarding Rest of the World, well, the truth is that we benefited from increase in sales vending in some countries. Probably, we have in mind Turkey, for instance. The truth as well is that -- sorry, talking about that, included in our reporting. So Spain is probably an example as well that we had in mind, in fact. The truth is that we create some differentiation among the competition fields, thanks to the innovation, thanks to the digitalization, thanks to the fact that, like I described to you, some countries we bring in additional solution to a classical discount in many countries. Payment solutions and the fact that we do so well as one of the service providers, the fact that we succeed in deploying access during the lead platform create some differentiation as well in many countries. So our view is that this -- the growth is sustainable, and we remain profitable in the Rest of Europe like it was the case in, like I said, the case in Q1 this year.Having said that, when we look at our performance from a pure geographical standpoint, on top of the Employee Benefits business, we must keep in mind as well that UTA is doing a strong business. UTA is successful in improving its business. UTA came back to a profitable growth, to a double-digit growth. And we succeed in as well in deploying more toll business at UTA. And we succeed as well in deploying light fleet solutions in many countries. So all in all, we remain very pleased regarding what we can do in what we call Rest of Europe.
Next question from Geoffrey d'Halluin from Bank of America Merrill Lynch.
Geoffrey d'Halluin from Bank of America Merrill Lynch. Three questions, please. First one on France. So basically, we have seen a double-digit growth in all regions, all business lines, except in France where the growth is at 9%. So I just would like to get your thoughts for the next coming quarters on France and why basically we have a high single-digit level of growth and, I guess, it was also the case in Q4 '18. Second question, which is a kind of follow-up, on CSI. Would you mind to share with us what was the level of growth for CSI specifically in Q1? And thirdly, in terms of other operating revenue, we have seen a slight increase in Q1, which is the first time for many quarters. Just if you can share with us your thoughts for the next coming quarters and maybe also remind us what is your hedging policy for interest rate in Latin America and in Brazil.
Well, to start with France, said simply, we are very happy with the performance we've reached in Q1 in France, especially because it compares to year 2018. That was quite successful in terms of growth during the 4 quarters and it increased during the year, as you remember. In France, most of the solutions relates to Employee Benefits. And I just said that we are making a difference, thanks to the fact that part of our business, which has been utilized, is growing and that we are bringing many innovations that are well understood and well executed by the final user. But on top of that, we succeed in increasing our Fleet & Mobility Solutions, thanks to the light fleet solutions Edenred firm is offering to the client, and thanks to LCCC, which is growing well in the French market.And then we have the Complementary Solutions reaching almost 12%, which we did very well. So no specific exceptional topics, maybe with the exception of the fuel impact of the same fleet contract. We have now fully migrate the user of same thing, same solutions to our Ticket Plus Card, in fact. So it may have a slight positive impact but remain really optimistic for the rest of the year. And I'm deeply convinced that this growth is a profitable and sustainable growth as well.Regarding CSI, the only comment I can give around that is that Q1 is in line with our budget. Revenue, I expected to increase quarter-after-quarter. But Q1 and the quarter analysis, in general, is nothing for this business impact. Let me remind you especially that we own this company for more -- for just more than [ last 2 ] months. So this started the new adventure with this business and with this company especially. As I told you, during my presentation, we are very happy with the way the integration has been organized. We have no doubt about the fact that the team is fully committed with what we want to do together. And definitely, the market is huge, in fact. So no specific additional comment around the CSI for the time being.Finally, regarding the other revenue, what we call in the past, the financial revenue. I shared with you last year that probably, we'd reach the bottom mark in 2018. And you see indeed in our figures for Q1 2019 that other revenue are going up. You've mentioned, of course, that we have a ForEx impact which is a positive ForEx impact, which was not the case in last year. But on top of that, our like-for-like growth is positive as well, mostly coming from the fact that the float keeps increasing. That's the most important topic for me. Let me remind you that the float keeps increasing in all our business lines, in fact, and that's the interesting topic in my view. Clearly, in the eurozone, we do not benefit from any change in the interest rate. The short-term interest rates are even slightly more negative than last year. But outside the eurozone, Europe, we have countries in which we benefited from IRS.And then in Lat Am, when we do not operate the maximum amount of float, we benefit there from very high interest rates, such as in Brazil and in Mexico. And on top of that, we put in place regularly some rolling hedge, meaning that in Brazil, for instance, our average rate is higher than the standard rate for [ Turkey ], in fact. So we are benefiting from the situation. Maybe as well is that the fact that we will be in a positive territory, we will for sure continue for the rest of the year.
Next question from Julien Richer from Kepler.
Two questions from me, please. If we come back on the Mexican topic, have you been able to quantify the impact of oil supply issues in Mexico? If you can share that with us. And if you can give us the split of your Mexican activity between Employee Benefits and Fleet & Mobility Solutions. And the second question is digitization in France. Have you seen an acceleration there with the implementation of mobile payment, the acceleration of mobile payment, et cetera? Or is the trend in line with what it was in 2018 in terms of digitization?
Well, regarding the Mexican situation for Fleet & Mobility, all in all, the fact that we still have a client who is -- and the fact that we are facing this pipeline crisis situation means that overall, it's almost [indiscernible] in Q1, in fact. Then what should be taken into account as well is that the pump price which we are exposed to in Mexico was strongly positive in Q1. So this simply demonstrate the fact that even if the price was down in Q1, it went down. Luckily, we can place some regulated situation when the price keeps increasing. So overall, all in all, in Mexico in Q1, we keep a positive growth, in fact. And we can say that we succeed in neutralizing this pipeline crisis effect.More generally, we are almost 50-50 between Employee Benefits and Fleet & Mobility Solutions in Mexico. This is a very interesting case, and we have a stronger growth opportunity in both cases. Especially don't forget that in employee -- sorry, in Fleet & Mobility Solutions, we have, let's say, the classical fuel card business, which is not a card, by the way, in Mexico's near-term target. But on top of that, we have a very strong increase coming from our product Empresarial, which is a travel and expense card which is very successful with many use cases, in fact. Second question relating to digitalization in France. What is important, in my view, is that we are still leading the way in terms of digitization in the French market. We are by far the most important digital player offering business in the Employee Benefits business. But on top of that, in the past, operate and grow, we have 875,000 users in France. But on top of that, what's important is that it takes some time to migrate a user from, let's say, a voucher to cards. But then it takes much less time to migrate the users from a card to mobile payments, which opens some doors to additional services. So -- and this really creates a difference among the competition field in France. And this is still as well, by the way, that we have young player that want access to the [ different ] platforms. So really, this is a matter of competition differentiator in a country like France.
[Operator Instructions] We don't have any more questions. Back to you for the conclusion, sir.
Well, thank you very much. Thank you for your attention during this call this morning. To sum up, you understand that we are quite pleased with this Q1 2019 that constitute a very good start of the year. We will, for sure, continue to invest in order to prepare successfully the future for the company with more and more innovation and with more and more digital solution especially. You can count on us to continue to generate profitable and sustainable growth for the rest of the year and for the next years.Thank you very much and wish you a very good day.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.