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Good day, welcome to the Worldline Third Quarter 2018 Revenue Conference Call. Today's conference is being recorded. The call is planned to last for 45 minutes. At this time, I would like to turn the conference over to Mr. Gilles Grapinet, Chief Executive Officer. Please go ahead, sir.
Thank you, Kathleen. Ladies and gentlemen, good evening, this is Gilles Grapinet speaking. Thank you very much for attending the Worldline conf call today on our third quarter 2018 revenue. I'm going to share, as usual, this presentation with Marc-Henri Desportes, our Deputy CEO; and Eric Heurtaux, our Group CFO. I will start by commencing the highlights of the quarter. Then Eric will develop in detail the revenue performance for Q3. After Eric, Marc-Henri will take the floor to present the third quarter commercial development and the particular focus on the preparation of the SIX Payment Services integration. And finally, I will come back to conclude before starting our Q&A session. I'm very pleased, as you can see, to report today a very solid third quarter. Revenue reached EUR 411 million, representing an organic revenue growth of plus 6.3%, perfectly in line with the target set for the full year. This quarter was also marked, as you can guess, by the intense preparation of the closing of the merger with SIX Payment Services and by the preparation of the integration work, as you will see in a minute. And while a strong priority is currently given to the successful closing of this transaction, we keep monitoring, as usual, all potential value-creative acquisition opportunities in the medium term in Europe. I would like to highlight that the commercial activity has been pretty robust during the quarter, supported by the market success of our key innovative offerings, as Marc-Henri will further develop. Indeed our weighted pipeline of commercial opportunities includes many, many midsized to very large outsourcing opportunities. Let me give you now an update of the SIX Payment Services closing process. Since the announcement of the transaction in May, both teams, on the Worldline side and over the SIX Payment Services side, have been strongly mobilized to obtain all the required social, antitrust and regulatory approvals. And given the fast progress made, our Board of Directors decided to convene an extraordinary meeting of the shareholders of Worldline to approve the proposed merger with SIX Payment Services on November 30, 2018, which is approximately 1 month ahead of the calendar that was initially contemplated, thanks to the exemplary cooperation between our 2 companies. In parallel, the day 1 readiness pre-integration program is completely on track for the launch of the various integrations streams at closing, as Marc-Henri will share with you. Let me now remind you our objective for 2018, which we fully confirmed to date. The group expects to achieve an organic growth of its revenue at constant scope and exchange rates of between plus 5% and plus 7%. The group targets an OMDA margin between 22% and 23%, and the group has the ambition to generate a free cash flow of between EUR 200 million and EUR 210 million. As a precision, these 2018 objectives do not include an impact from SIX Payment Services. This impact will be communicated at a later stage. Thank you for your attention, and I leave now the floor to Eric, who will present you more in detail our Q3 revenue performance. Eric, floor is yours.
Thank you, Gilles, and good evening to all of you. Before I start commencing our Q3 2018 revenue, just a word on the figures I will use in my presentation. As you know, for the analysis of the group performance, revenue for Q3 2018 is compared with Q3 2017 at constant scope and exchange rate. And as you can see on the screen, the main reconciliation items are the following: first the application of the IFRS 15 accounting standard revenue from contracts with customers, which had an impact on the Q3 2017 revenue of minus 3%. Internal transfers correspond to transfer and refocus of some minor contracts between Merchant Services and Mobility & e-Transactional Services. Scope effects correspond to the addition of revenue in Merchant Services of MRL Posnet and Digital River World Payments. In Financial Services, the addition of revenue of First Data Baltics and Diamis. Last, the exchange rate effects correspond mainly to a depreciation of the Argentinian peso and the Indian Rupee versus the Euro. So on a comparable basis, the revenue for Q3 2017 is at EUR 386.5 million.The table on this slide shows another view of the organic growth for the group and for each global business. During the third quarter of 2018, Worldline's revenue reached EUR 410.7 million, increasing by 6.3% organically, which is perfectly in line with the objectives set for the year. In terms of group profile, Financial Services represent 46% of the revenue; Merchant Services, 35%; and Mobility & e-Transactional, 19%. Moving now to the evolution by Global Business Line. Merchant Services revenue stood at EUR 142.4 million during the third quarter of 2018, growing organically by 4.7% at constant rate -- at constant scope and exchange rate. Growth in Merchant Payment Services was fueled by Commercial Acquiring which benefited from a positive product mix. In India, business trends were strong with increasing volumes. Also, the number of transactions grew fast in the Netherlands, in Germany and in Czech Republic. The good performance of Commercial Acquiring was nonetheless partly offset by the temporary slowdown of Payment Terminal Services, however, less pronounced than in Q2, thanks to a successful commercial development of the new unattended payment terminal VALINA. Q3 2018 revenue for Financial Services reached EUR 188.5 million, up 7.4% organically. Revenue in Issuing Processing grew, fueled by increased volume of card transactions as well as strong increase in authentication services. Account payments was also particularly dynamic during the period, benefiting from good SEPA payment transaction volumes, strong volume growth and transactions on the Dutch iDeal scheme, as well as some robust projects and nonrecurring activities for Instant Payments and SWIFT Payments. Acquiring Processing revenue grew thanks to more authorization volume and projects. Last, Digital Banking was roughly stable during the quarter, with the start of the delivery of new digital banking wins in France and contracts related to PSD2. Revenue in Mobility & e-Transactional Services was EUR 79.8 million, increasing by 6.5%. Trusted digitization grew with high single digits, benefiting from a good activity in France on various government agencies, deployment of Worldline Track & Trace solutions, and favorable business trends, in particular in healthcare transactional services. Strong sales were recorded in e-Consumer & Mobility, thanks notably to implementation of Worldline digital omni-channel consumer engagement platform Contact for large French banks. And revenue in e-Ticketing was positive, thanks to the ramp-up of Worldline Tap2Use contracts in France, and good business trends in Latin America, still partly offset by lower project revenue in the United Kingdom. Looking now at the first 9 months for 2018, Worldline revenue was EUR 1,229.3, up 5.9%. Comparing this figure with Q3 at 6.3% versus H1 2018 at 5.8%. This starts materializing the anticipated acceleration of H2 versus H1 that we communicated at the beginning of the year, and leads to 5.9% for the first 9 months. As you can see, the growth is nicely balanced between all 3 divisions. After 9 months, each of them significantly contributes to the company's [project revenue]. By the way, for your information, if we include Payment Terminals from the Merchant Services Division, the growth rate of Merchant Services would have been above 7%. Last, without any surprise, we find in our business driver than the one I just commented for the Q3 for the first 9 months of 2018, concerning overall and across the divisions, solid transaction volume growth over whole platform, and intense project activity linked to the many new contracts and successful scope extension we won over the last 12 months, notably in connection with implementation of a new regulatory initiative, and the digital transformation of banks, merchants and government. Overall, the first 9 months are showing a very solid development of the plans of the company without any significant surprise and unexpected events. Thank you and I leave the floor now to Marc-Henri for the comments on the Q3 operational and commercial highlights.
Thank you, Eric, and good evening to you all. As Gilles explained to you, the closing of the SPS acquisition is now set on November 30, and we are perfectly on track with our pre-integration works to start the way we like to do it, that is, fully ready on day 1. We would define organization, with processes in place, and we have a very operational action plan to deliver the synergies. The program of preintegration, which we engaged after signing a similar, only faster to the one done for the Equens integration. With 22 integration stream slides, 10 for business activity, 9 for functional stream -- 9 functional streams, and 3 strategic projects. Coordinated with the streaming, we are progressing very well with exceptional quality teamwork, both for cost and revenue synergies, confirming the potential we have identified prior to signing. I must say it's a very pleasant feeling to lead a team, sharing clearly, its ambition to take and hold the leadership position in the European market, both in Merchant Services and Financial Services. And let me also remind you that the carve-out and the separation works between SIX and SPS was perfectly on time, allowing the closing agenda to be expected. Of course, all this is done while continuing to deliver the business results we are sharing with you today. In Q3 in particular, we experienced good acquiring transaction volumes in Europe and the rest of the world, plus 9% like-for-like, in an overall dynamic market. We also add a fast growth of alternative payment methods, such as iDeal transaction in the Netherlands, plus 39%, and a strong increase in mobile payment platform with plus 80% e-Wallet Payment transactions. Our payment security offers such as Trusted Authentication and ACS confirmed our success with altogether a growth of plus 32%, driven by overall remote payment expansion. Let me now comment some of the key deals and achievement during the past quarter, and I will start with Merchant Services. In online payments, of relevance of the acquisition of Digital River World payment last year was continued to be demonstrated by new contracts, in particular with FASTBOOKING and HotelsPro. In India, we renewed a key contract with Axis Bank. And regarding Payment Terminals, we continue to ramp up for our Worldline newest unattended payment terminal, VALINA, notably for SV365 following the success of the first installation in a Tiffany store, but I will come back to this product in a minute. For Financial Services, the quarter recorded several promising deals related to new innovative products and solution. Worldline’s Trusted Authentication solution was sold to 4 new European banks. PSD2 compliant Worldline Digital Banking Platform continued to register new sales and is currently being implemented for 16 banks. Regarding Instant Payments, Diamis’s CRISTAL software was sold to Banco BPM. KNAB Bank decided to use Worldline's Instant Payment clearing and settlement systems and back-office processing. Including the total 8 new contracts signed in Q3 2018, we now have 18 contracts signed to date for Instant Payments. For the last business line, Mobility & e-Transactional Services. In eConsumer & Mobility, Worldline omni-channel consumer engagement platform, Contact, leveraging our payment security system was sold to an insurance company in the U.K., and to an additional major French bank. In e-Ticketing mobile point-of-sale system, @Station was sold to large U.K. rail franchise. It's a mobile sales enablement system, allowing to sell tickets to passenger in the station concourse or on board the train. Dijon Tap2Use open payment solution was extended from tramways to bus lines. And I remind you that this solution allows the payment of a public transport journey by simply tapping your payment card, while onboarding or offboarding the transportation network. And Worldline Track & Trace solution successfully -- was successfully sold as part of the rollout of the European Tobacco Product Directive to secure proper tax payments of the -- in the various member states. Now to comment further on the 2 wins, I mentioned, on FASTBOOKING and HotelsPro. As you know, following the acquisition of Digital River World Payments last year, we invested in integrating further this gateway with our acquiring platform, finalizing the connecting features to create a comprehensive Worldline Online Payment Acceptance solution. This solution, combined with our international sales force is registering an acceleration of win. And these 2 new signatures, FASTBOOKING and HotelsPro, are good proof points of the efficiency of our integration work. In particular, in the hospitality sector, which by the way, is also a strong position of SIX Payment Services and will be a core vertical of the combined company. These Terminals as always -- have been a part of the niche position of Worldline, the unattended terminal for vending machine are the long-term strength in our range of product. For this reasons and also because of its differentiating features, we believe that our new VALINA products has a strong chance to benefit highly from the development of vending machine and no cashier services. Combining touchscreen, Android-based processor, low cost of ownership, it can be the unique screen and technology component of a vending machine. It can address segments as dynamic as shared transport infrastructure, eCar chargers, car parks, or any product vending machines. VALINA represents already 25% of our Terminal shipments in Q3, while the product is only live in a few countries, so we think it is only the beginning of a great journey. Of course, these physical products should not make you forget that our business is, in its vast majority, about services. And we share on this slides about awards and recognition that our investment in innovative products and solution is more and more recognized by the experts. The combination of our online solution and global reach got us recognized as a strong performer by Forrester in the area of Global Merchant Payment Providers. NelsonHall highlighted our blockchain capabilities, where we received prizes for solution for Digital Banking, mobile device cybersecurity, and disruptive card issuing solution. Finally, we are proud of the continuous CSR focus, brought us to the top 1% of the company most involved in these topics with -- for the third year in a row, the gold EcoVadis ranking. To conclude my business talk, I'm glad to share with you the success of our first Worldline e-Payment challenge, fully part of our open innovation fintechs strategy that we already shared with you. This event was a first of a kind as it offered fintechs the opportunity to compete around the challenges of some of our premium customers using Worldline assets and APIs. These concepts enabled fintechs to get involved in very concrete opportunities, while allowing us to benefit from the energy to use and see with additional volumes our core platforms such as online payments, mobile security or unattended payment terminals. With 7 of our top clients engaged with their own challenges and much more attending, the event was a significant success and resulted in numerous leads and projects. Thank you for your attention. I will now give the floor back to Gilles for the conclusion.
Thank you, Marc-Henri. And it is now time for me to conclude indeed. I would like to share with you what I believe are the most relevant points of these last 3 months of development in Worldline. First, our business performance has been very solid in all divisions, and this seems the start of the year. And this Q3 is no exception, thanks notably to the market success of our key offerings, in particular, all the ones which are part of our 2018 sales campaign. The solid execution of our 2018 plan allows us to fully confirm all our 2018 objectives. Regarding our strategic developments, I would like to stress that the merger between Worldline and SIX Payment Services, 5 months after its signing and announcement, has received many, many positive market feedbacks from our customers, industry analysts, and to a certain extent, from the regulatory side, which was invited to review it and to approve it. Notably, this merger is clearly seen as a game-changing combination for cross-border acceptance and acquiring by the large pan-European merchants, which have been looking for such a value proposition for years, particularly when they are operating thousands of physical point-of-sales.According to industry analysts, as you saw in Marc-Henri's presentation, it is also a step change for the global visibility of the Merchant Services business of Worldline, giving it a very strong relevance for non-European merchants or international payment brands looking to further develop their business in Europe. Last but not least, it is also an additional, but definitive proof point of the European payment market consolidation. And without being more explicit, I can only confirm that this transaction since it has been announced has triggered at a world level, Marc-Henri and myself, to a brand-new level of exploratory discussions with many large institutions and banks in Europe. So no need to tell you that these very positive market feedbacks are just for us all an extra motivation to close this transaction as fast as possible, and we are now looking forward to the closing of the merger in the coming weeks, and are very excited to soon start working as one integrated company to deliver this great value proposition for our customers and for our shareholders, and to pursue shaping together within the stronger Worldline, the future of European payments. Thanks for your attention, and I am now ready and happy, with Marc-Henri and Eric, to take your questions.
[Operator Instructions] We will now take our first question from Mohammed Moawalla of Goldman Sachs.
I had 2 questions. Number one, obviously, it's interesting the comments you made, the SIX sort of processes is developing well and sort of things are on track. I'm just curious, first of all, is there anything at this stage you can say in terms of perhaps realization or delivery of both the cost and revenue synergies would potentially be faster than planned given kind of the earlier closing or does that change your timetable on that delivery? And then secondly, Gilles, I know you mentioned in the release and upfront on the call, that you remain kind of opened and focused around other opportunities in the market. I'm just curious to get your take on sort of the landscape of competition, given we've seen moves from other parties that were interested in SIX also try to make some strategic moves as you look at other assets out there. How -- do you envisage this to be even more kind of intense for the remaining assets? And how far are you willing to go in potential future kind of M&A opportunities?
I think Marc-Henri will take the first question, and I will try to share some thoughts with you on the second one.
Yes, thank you, Mo. Now regarding the synergies, the work we are still prior to closing. The closing will take place only, on the 30th of November, so we have 1 month post closing in 2018 and then start with a full year in 2019. So change of agenda for the synergy in itself is not massive. Very important and positive point is that in a very short time frame, we were able to progress very fast to confirm and really organize a team so that we can deliver the synergies. So a bit soon to tell that it's going to be different from what we said before, I mean, or [quoted]. But we feel very confident that nothing will disappoint you in the synergy we're going to conduct with.
Definitely. Thank you Marc-Henri. Regarding your more wide-ranging question, regarding the dynamics, which are actually today materializing in the European payment industry. I think it is fair to say that nothing is a surprise for us, and I guess, for you guys because you are following this industry for years with us by the way. We always knew that SIX was a landmark transaction. And I think if I remember well, we say that when we announced it that it was a transaction that would redefine actually the payment industry, because it is really bringing together 2 of the most significant players with a pretty unique value proposition. And what we meant by that is that we knew since the start that it would force other players to reassess their options rather quicker than slower. And it is exactly what is happening, i.e., everyone now -- and it is my point regarding the type of discussion that the announcement that triggered at our level is that everyone wants first to revisit what are -- what could be their options with their payment asset, what the payments landscape should look like in a few years' time, with whom they could join forces because everyone understands that now the playground is definitely Europe, if you are in Merchant Services and if you want to really support the large retailers, there's no hope in keeping only your local franchise because the big merchants are definitely looking for consolidation of their volumes to get also their fair share of the economies of scale that we can realize. So it is exactly what is happening. And indeed, I'm not going to be explicit on what we see in the news flow sometimes coming here and there from this or this company. But fundamentally you can expect a lot of moves to actually pursue happening. And I can actually tell that you have a lot of banks that are accelerating actually the review of their options. And of course, regarding Worldline, it is part of our mandate to monitor this situation very closely. And more than monitoring, also to create the conditions for -- in the medium-term, following other banking communities, other institutions to join our story as we demonstrated. And it is exactly what we do. Of course, our short-term priority, as you can guess, and Marc-Henri was very clear, is definitely to secure the closing and to secure the preintegration, precisely because we want as we did with Equens to stem awhile, to stem and revel, and to entertain the right level of discussion in the right time frame with potential future partners. It is a mandate we received since the IPO, and it is a mandate that is even further reinforced, of course, by the merger with SIX because it is now the bus wheel of bus Atos, that has been always the case, but our future shareholders are coming from SIX. So definitely a very interesting moment for the European payment industry. All what you covered you guys on your side is actually happening as you saw it a few years back, it is just accelerating. And we're going to definitely be part of this, you can be sure.
We will now take our next question from Gerardus Vos of Barclays.
Just a couple of questions. First of all, on the terminal kind of drag, it looks like it's just over kind of percent on the overall business in kind of Q3. What should we expect for that in kind of Q4? And would you expect Q4 to be a step-up again from Q3 as it looks a little bit more facing towards the Q4? Then secondly just following up on the consolidation deal, you mentioned comments around kind of Europe. Given the consolidation is accelerating a bit, would you also consider now transatlantic deals, U.S. deals, perhaps with some kind of European exposure?
Thank you, Gerardus. Good evening. Thanks for the questions. Marc-Henri, maybe?
As a first question, I must say it is very, very granular. We don't give guidance on quarter, so I think we are a bit -- not very much at ease to give guidance on the subsegment of the sub-business line for quarter. So -- and maybe not that precise, but the momentum is there on the terminals. The momentum is there. It's evolving from Q2 as you could see, in H1 in general. And it's sustained both by, let's say, short-term sales and big orders. So overall, I would say the momentum is good and we look at it with trust. Then I'm sorry but I'm not going to look at such short-term numbers. What I can remind you is that what we say is that for 2019, very clearly, we see it, but to grow in this domain and so we must evolve into this direction for sure and dragging back has to vanish. And overall, I would say, we -- it is -- this quarter was a good intermediate step on this journey.
Regarding your second question, there are so many, so many opportunities in Europe that, of course, beyond the short-term priority given to the closing and the preintegration of SIX, most of what we are discussing, exploring, looking at, monitoring is based in Europe. We still have to build, in Europe, a platform that will be uniquely positioned. And definitely, to a certain extent, what we are doing ourselves, what others are also doing because we are not the only one having moved the way of 2 important German consolidation taking place last year. There are, of course, development models everywhere. It's putting a real pressure upon the banking communities to make decisions and to look in '19 at what they should do. So I expect significant things to take place somewhere in the course of '19 in Europe. And I think it would be, at this stage, very reasonable to stay focused on the success we're still -- SIX integration on one hand and to still maintain our bandwidth for dealing with European opportunities.
We will now take our next question from Emmanuel Matot of ODDO.
Two question for me, please. First, you have been growing each quarter by 6% since the beginning of 2017, I mean, on an economic basis. What do you need to go higher notably to move to a level of 7% or 8% next year? Second question what explains the huge difference of margin between you and your U.S. peers? Is that just a question of size? Or are there are some structural differences between the 2 markets, which make not possible for you to target 35% EBITDA margin over the long term?
Hello, Emmanuel, good evening. Thanks for the questions. I will take the second one and maybe, Eric, you want to give some color on the first question of Emmanuel?
Yes, yes. So, Emmanuel, the first answer to the question is related to the strong commercial activity we have. Remember we signed a very large deal, Commerzbank, last year which start to ramp up. On top of that, we have also mentioned our good commercial activity and this would be one of the driver of the acceleration for next year. There is also a mix of Merchant Services business, which is more and more significant in higher work we've gotten. This is also supporting the ramp-up of growth, in particular, in Merchant Services. On Financial Services, we are still supported by regulatory and project-based activity as well as now also a little bit of trend starting to emerge on Instant payments and PSD2 regulatory. So this also supports the high growth of the Financial Services to continue over next year. Last, as Marc-Henri mentioned, we expect next year a positive contribution from the terminal business from -- for the growth, which has been a drag this year, so it would have also a comparatively positive impact. Last, I would say, we are also expecting a positive impact of our merger with SIX, with some cost customization that we will start as soon as possible, to have some impact, probably as early as H2 2019 if we are good.
Thank you, Eric. Regarding your second question, Emmanuel, as a matter of fact, I mean, the answer was pretty much in your question indeed. What is lacking in Europe today is really the scale that our U.S. counterparts have reached in their own domestic market. And in that context, I would call domestic market, the entire Euro SEPA environment in Europe. So when you are parent companies in the U.S. that have $3 billion, $4 billion and sometime even more, as you know, of turnover, you can really get the full benefit of the scalability of this business model. It is true that the U.S. is having, on top of that, some particular characteristic in the pricing, particularly on the merchant acquiring side, which has different bargain between the level of fees and the type of fees that are tolerated in the market. But for me, this is secondary. The point is all about the scale. If we can get progressively to the scale of, I would say, the typical U.S. peers, we should have absolutely that level of margin. If you look more precisely within Worldline at what we did already with Financial Services, plus the merger with Equens, due to the synergies and the good development of the business, we really started actually to turn progressively as we can under the control of my CFO, towards the 30% OMDA margin. Our Merchant Services business was clearly -- with that in mind, clearly much more than our Financial Services business. With the SIX combination, it won't be the case any longer. And you know that the bulk of the EUR 110 million of synergy will actually happen within our Merchant Services division. And it's why we expected also to capture Financial Services and to positive -- actually put the company in the 30% OMDA margin journey on the medium to long term. And of course, depending on the possible future organic development on one hand, which would bring further volume on the platform and potential further inorganic developments, we will get progressively into the U.S. scale. And accordingly, everything being equal, normally being able to break this 30% and turn toward what we observe in the U.S., some companies are actually at 35% to 40% EBITDA margin. And the market accept that because there is a lot of value that is delivered by the scale of this company to their own customers. So this is really a long-term mission of the group to create in Europe what is missing, the equivalent in size, scope, industrial power of the largest U.S. company in their own domestic environment.
We will now take our next question from Tammy Qiu of Berenberg.
Firstly, I noticed that you have gained 2 -- a new contract within the online e-commerce solution utilizing Digital River acquisition. So I'm just wondering, do you have more deals in the pipeline from the same space? And also, in addition, basically you had more PSD2-related contract this year with more banks. So I'm just wondering, would, next year, PSD2 become a major issue that banks have to address? Do you expect more deals like that in 2019 at all? And what can be the pace of deal acceleration?
Yes, I would take these questions, Marc-Henri speaking, thank you. So on the online e-commerce, indeed, as I said, it is a result of procured work now for the senior solution and then ramping up the sales force and putting the full sales force of Worldline, and to some extent, in some cases, even with the support of some -- our people to extend the potential. And the pipe is increasing, the pipe is reinforcing, is increasing and we have more and more visibility. We want to make it a pillar of our strategy. We know that historically, we're a bit beyond some competitors when it comes to online payments, and it is a parameter where it can accelerate the growth we experience today by unloading more of these deals. So yes, the pipe is ramping up. Yes, the product is attracting attention. And we are going to release, in the coming weeks and months, more and more of our omni-channel features into it. And I think it will attract more and more attention and pushing the pipe even further. When it comes to PSD2, you're perfectly right. There has been a bit of delay in the publication of the technical specification for the bank and the agenda has evolved a bit. So the real stress moment is coming next year with -- they needed for the banks to be compliant by 2019, and to start even some stress test as from March. And we see a real and clear acceleration of awareness that they have all this work in front of them and an acceleration of commercial contracts and deals. So it's a bit difficult to talk precisely in terms of pace beyond the fact that it's accelerating and to give more data at this stage. But we feel very confident that we will have the acceleration impact we expect from this area of our business in 2019. It's demonstrating our views even if, overall, a bit later than what we expected initially, and we wanted a bit more of it in 2018. But I think that would be more to us, the acceleration into next year. But the good thing is, overall, this is a business that's here to stay. The regulation is for some bank to open their accounts as for intermediation. So far, we propose this as a service, and so we will propose it in a run mode and in a long-term basis.
We will now take our next question from Anil Akbar of Kempen.
I had one question regarding India. So apparently, the government over there announced some measures against the localizing the data that is used by payments companies and not sending it abroad. Is that going to affect you in any way? And if it does, then how would it, and what are the measures being taken to -- because I know that Visa and Mastercard are currently lobbying for the government to not go ahead with this, but what are you guys doing in this regard?
Okay. So thank you for the question. And indeed, you may remember that we acquired a processing business to start this situation in India in 2000 -- the very first time was 2010. And we acquired another one last year with MRL Postnet. And we grew these businesses by adding technological components from a global platform but always process locally. We started being processed locally, and we grew and developed being processed locally. So we are notably compliant, with this regulatory pressure that you're mentioning. So for the moment, the government has not been too harsh on some partners or competitors that are not compliant themselves. So from this point of view, we see no downside. On the contrary, that if they are pursuing it too much on some of people in the market, we can support them in doing it locally because that's the way we do. So overall, we see that as an opportunity, but certainly there is no negative downside of this regulation for us. We are notably compliant.
We will take our next question from Laurent Daure of Kepler.
Three quick questions for me. Just the first one is a clarification on your comments regarding the acceleration of sales next year. And you referred to the Commerzbank contract. I think you already have revenue this year, I was expecting a really ramp-up up in 2020. So just a clarification, is the contract will also help 2019? The second question is on the Equens shareholders and the contract associated. Could you remind us the timing for the renewal? I think those were 5-year deals. You signed the deal, that's 3 years ago. So how are your relationship with those 5 big customers, and what do you expect going forward? And my last question is, if I understand, we're going to have one month of consolidation of SIX this year. I know you're going to give us details later. But apart from 2019 ambition, we never had real figures on SIX since you announced the deal. So anything granular and additional on '18 would be useful for us.
Laurent, good evening. Thanks for the question. I think Eric will take the first one and the third one, and I will come back maybe on the second one briefly. Nothing special...
Yes. So on the first one, Laurent, indeed, we expect an acceleration of the revenue from the Commerzbank deal. You remember that we will honor this contract based on several modules. It's not a big bank, it's not a contract for which we are doing everything at the same time. It's not on a granular basis, so indeed, we have a few modules we have initiated this year, we added to the new one we will be starting next year. And as a consequence, indeed, we will have an acceleration of this revenue next year on this contract that is expected to accelerate again in 2020, piling up one more time to reach, let's say, a stable level probably by 2021. But that's the deal profile and the reason why we will enjoy some growth based on this contract.
So regarding the Equens shareholders contract, maybe, Marc-Henri?
So on the Equens shareholder, indeed, it's 5-year contract, started end of 2016, so it brings up end of 2021. So it's still, I would call it, in business, good long-term visibility. That being said, what's important is Equens' relationship, and it is Equens' relationship overall with the shareholders is good. And you can imagine they are satisfied with the equensWorldline performance that we've delivered so far. And more importantly, we have discussion with them on various components of business, and in some cases, even very important extension of the scope that is currently being covered. So the size of the portfolio of Wordline from that point of view is a great toolbox to come and propose things, so we extended some small things, and we have discussion about much more in some cases. So overall, I would say, a good visibility and good overall relationship situation.
Last question regarding SIX consolidation. Basically, we've admitted, we do not have so much more to share with what we shared already at signing. The deal is not yet closed, so it's a little bit too soon to tell you more. Obviously, once it is closed, we will be hopefully in a position to give you visibility of SIX contribution. Indeed, we had other consortium bidding, so that you can update your model accordingly. And for the rest, rendezvous to our next update in 2019 where we'll present our ambition for the year, together with the communication of our financial presentation for full year 2018 in February.
Our next question is from Alex Faure of Exane.
Just a couple of questions from my side. First on sort of pan-European acquiring that you mentioned in the slides, Gilles, I think. Following the acquisition of SIX notably, who do you think you're going to be maybe competing a bit more intensely once you're able to offer maybe a broader pan-acquiring offering to your merchants? I mean, are we seeing at the end, for instance, being quite focal with H&M, with Gap in Europe and the likes? Do you feel like your key competitors might be changing in that field? And my second question is back on the broader consolidation topic. I think we've seen a couple of big strategic moves in France, with Credit Agricole, with other banks. Should we read a lot into it? Is France still an important market for Worldline in terms of consolidation? Or you think maybe you've got other exciting ideas in other European countries?
Thanks for the 2 question. Maybe on the first one, we can answer jointly, Marc-Henri and myself. We just start to introduce that the beauty of this pan-European acceptance and acquiring value proposition is that at this point in time, as a matter of fact, particularly for the merchant saving significant networks of physical point-of-sale. It is just a value proposition that is totally underdeveloped. So the first competitor that will be displaced by the value proposition of Worldline and to a certain extent, you're right, probably also, at the end, at least of the one having also this type of profile probably more Internet than physical acceptance maybe, at least at the beginning. But the first one to be displaced are going to be the existing local, domestic acquirers that have no way to propose such a value proposition. And it explains also one of the reasons of the acceleration of the thinking of some banks because in many countries, still, where the commercial acquiring market is bank-led, part of the banks are purely local animals when it comes to commercial acquiring. Even when they have international presence, very hardly, they have an equivalent and coherent of footprint all across their geography. So the first market share we're going to take will be from domestic acquirers that cannot follow this large retailing group into the request for a type of one-stop shop sourcing.And so we will be only very limited number of players being really able to provide at that scale. That's one. Of course then in terms of typology of competitors, you mentioned one, I think it is probably the only one I see today being able -- being radiating such a breadth of presence and capability. Being said that, we are much stronger on the physical acquiring front. Marc-Henri, you want to add anything to that?
No, you said the main points. It's a very fragmented market still today. And we say that combining with SIX Payment Services, still being a leader or #1 in size, we would be around 10%, probably below this number. And this is for the pure player and the banking still -- or a lot of local bank still has a significant market share. So the competition is primarily about taking business from these guys. The one you mentioned is more coming from the online space, has a great momentum, but doesn't have the same reach when it comes to providing real physical acquiring services in such a wide range of country, taking into account the specificities of each one of them to be really the best partner for merchant and specific payment solutions. So overall, that's what I would say.
On your second question, which is extremely relevant, we always share with you. And of course, we start to see the first signs that things are changing indeed with some news flow and even some initiative like the one of Credit Agricole last year, that the very particular situation of the French market being very heavily in-sourced from the -- for the financial processing, with nonmutualized factoring in most of their large banks in France, which is different versus the setup that is prevalent in most of the European geographies, where there are, very often, companies like Equens, which were mutualized processor. That's one. And the second one, a very strong bank-led acquiring market is definitely showing very strong signs of evolution. Some banks made public announcement that they were looking for strategic transformation. Some others are actively looking for partners, particularly, to protect, as we mentioned in the previous question, their domestic market shares, because the pressure of the large French retailing group is also happening in France, as you can guess. And some of these large retailing groups are definitely looking for finding the solution, which is pan-European. So it's why all these is happening as we speak. Put that into the context also of the decrease of the interchange that did happen on the -- a few years back, and that has been putting a serious pressure on the economics of the big issuing P&L of this country, which was traditionally an issuer market. Now we are banking with, at the same time, large issuers and large acquirers. And you have, what I call, the perfect situation for the perfect storm in the French market. So I see this market transforming in depth in the coming years. And definitely Worldline is extremely, extremely engaged in making sure that we can only bring value to this market, helping banks to navigate in their new challenges in this payment era, which is fascinating when you are like Worldline and SIX together, having such a value proposition to offer to banks that you want to support both in their processing needs but also in the ability to serve their merchants. So that's it, guys. We have a train to take because the roadshow starts early tomorrow in London. So I would like to thank you for having been with us tonight, again, and for your consistent attention to the company. We were glad to answer some of your question. And of course, we hope to see you down the road in the coming weeks as part of our usual financial communication interaction. Thank you, again. Good evening.
This concludes today's call. Thank you for your participation. You may now disconnect.