Solid growth & financial results. 2019 objectives exceeded.
Ingenico Group (Euronext: FR0000125346 - ING), the global leader in seamless payment, today announced its 2019 full-year results.
The Group posted a solid performance in 2019, exceeding our expectations with a strong 10% organic growth. The Retail performance is fully in-line with 11% growth, whilst B&A performed above expectations at 10%. This achievement, coupled with the Fit for Growth program, enabled us to deliver a solid €606 million EBITDA, above the Group guidance.
2019 has been a key step change with the execution of our new strategic plan, and we are already seeing the benefits of a more agile, efficient and customer-centric organization. We have revived B&A and restored its competitive edge while investing in Retail to accelerate its profitable growth. To pursue in that direction, we announce today the opening of a new phase of B&A development with the launch of Payments Platform as a Service initiative, repositioning the point of payment acceptance higher in the value chain with a more recurring business profile.
Ingenico’s teams are fully committed to execute our transformation and this 2019 performance is a solid foundation to deliver our 2020 guidance which is consistent with our mid-term ambition.
Over the fourth quarter of 2019, revenue totalled €879 million, representing a 5% organic growth in gross revenue and 7% organic growth in net revenue. On a reported basis revenue was 21% higher than in the fourth quarter of 2018 and included a positive foreign exchange impact of €7 million.
Over the quarter, the Retail Business Unit reported a revenue of €512 million, showing an increase of 10% organic growth in gross revenue and 14% organic growth in net revenue. On a reported basis, revenue increased by 41% during the quarter and included a positive foreign exchange impact of €3 million. Compared to Q4’18, the various activities performed as follows on a like-for-like basis::
The B&A Business Unit posted a stable revenue of €367 million on a comparable basis. On a reported basis the activity increased by 1% and included a positive foreign exchange impact of €4 million. Compared to Q4’18, the various regions performed as follows on a like-for-like basis:
In the full-year 2019, revenue totalled €3,370 million representing a 10% organic growth. Excluding interchange fees, net revenue reached €2,895 million and a 11% organic growth. On a reported basis revenue was 27% higher than in the full-year 2018 and included a positive foreign exchange impact of €32 million.
Over the year, the Retail Business Unit reported a revenue of €1,919 million, showing an increase of 11% on a comparable basis. Excluding interchange fees, net revenue reached €1,444 million and a 12% organic growth. On a reported basis, revenue increased by 43% during the year and included a positive foreign exchange impact of €12 million.
The B&A Business Unit posted a revenue of €1,451 million, a 10% increase on a comparable basis. On a reported basis the activity increased by 11% and included a positive foreign exchange impact of €20 million.
In 2019, adjusted gross profit reached €1,240 million (€1,235 million excluding IFRS 16), representing 36.8% of revenue (36.7% of revenue excluding IFRS 16) to be compared with €1,170 million in 2018 pro-forma, or 38.6% of revenue. Retail adjusted gross profit rate was stable, while investing into growth initiatives and B&A adjusted margin was impacted by an unfavourable geographical mix as expected, mainly driven by the 64% organic growth in Latin America, and isolated pricing pressure in some mature countries, as expected.
During the year 2019, adjusted operating expenses have reached €634 million. Excluding the positive IFRS 16 effect of €28 million, adjusted operating expenses were €662 million, down 160 bps as percentage of revenues (19.6% versus 21.2% in 2018 pro-forma) while revenue base increased by c. €340 million. The decrease in adjusted operating expenses rate is the result of a strong cost control program initiated globally, then rolled out and accelerated in B&A, Retail and Group support functions through the implementation of the Fit for Growth plan.
EBITDA came in at €606 million including a positive IFRS 16 effect of €33 million. Without this effect, EBITDA would be €573 million, against €527 million like-for-like in 2018 (€488 million on reported basis), thus an improvement of €46 million, of which €20 million is derived from the Fit for Growth plan.
Retail EBITDA came in at €301 million. Excluding positive IFRS 16 impact of €20 million, EBITDA reached €281 million (14.6% of revenue) to be compared with €250 million (14.5% of revenue) in FY’18 pro-forma, an increase of 10 bps. Excluding the €5 million growth initiatives investment, EBITDA would have reached €286 million, at 14.9% of revenue, increasing by 40 bps. This overall performance is above our annual Retail EBITDA objective to be above €285 million with €301 million delivered.
B&A EBITDA stood at €305 million. Excluding positive IFRS 16 impact of €13 million, EBITDA reached €293 million (20.2% of revenue) to be compared with €277 million (21.2% of revenue) in FY’18, decreasing by 100 bps. This EBITDA improvement of €16 million is mainly derived from an over-performance in revenue in Latin America. In line with the B&A revival plan as previously communicated, the Fit for Growth positive EBITDA impact in FY’19 has compensated pressure on gross profit coming from geographical mix evolution and isolated pricing pressure in some mature countries. Overall performance is in line with our annual B&A EBITDA objective to deliver c.€305 million.
EBIT margin represented 13.8% of revenue and reached €464 million. Excluding positive IFRS 16 impact of €4 million, EBIT were €460 million, compared to €443 million in FY’18 pro-forma.
After taking into account the other income & expenses and price purchase allocation, operating income excluding positive IFRS 16 impact was €307 million (9.1% of revenue).
The net financial results account for €-40 million compared to €-38 million in 2018. Income tax were stable to €55 million in 2019 (20.2% effective tax rate) against €52 million in 2018 (21.5% effective tax rate).
In 2019, Group net profit attributable to shareholders came in at €208 million, against €188 million in 2018.
Free cash-flow improved very significantly during the year 2019 at €310 million compared to €238 million in 2018. The major elements of the free cash-flow improvement were:
Consequently, the free cash-flow conversion rate reached 51%. Excluding IFRS 16 and the tax one-off effect, the free cash-flow conversion rate reached 50%, an improvement of 1.0 point compared to last year.
The Group's net debt decreased to €1,307 million against €1,518 million at the beginning of the year. The major elements of this evolution are the €310 million free cash-flow generation and the €66 million net cash-out mainly related to the Paymark acquisition. The ratio of net debt to EBITDA is down to 2.2x from 3.1x at the end of 2018.
In line with the Group’s dividend policy, a proposal to distribute a dividend of €1.20 per share will be presented to the Annual General Meeting of shareholders on May 26th 2020, representing a distribution rate of 36%. This dividend will be payable in cash.
Ingenico has performed a full assessment of its exposure related to the corona virus Covid-19 outbreak both on its employees and its activities.
This assessment has been conducted on the basis of the current available information in regards to the spread of the virus in Asia and in other geographies including European countries as Italy. The outcomes of the analysis to date are the following ones:
As of today, the central scenario of Ingenico is a progressive reopening of Asian factories by end of March 2020 and a recovery of international travel in the second half 2020.
Globally, Ingenico has implemented all necessary measures to protect its employees and to minimize the impacts on its activities. These measures are piloted daily and a Top Management ad-hoc committee is directly monitoring the situation on a weekly basis.
Fit for Growth key achievements
The Fit for Growth plan has been launched in February 2019 and is now fully in run mode. Its ambition is to revive the B&A business unit, accelerate the Retail growth profile and to transform the Group structure and operating model by 2021. Some key milestones have already been reached during 2019:
These milestones are in line with the plan and enable us to deliver the €20 million positive EBITDA impact expected in 2019 and to confirm the €100 million positive EBITDA impact anticipated in 2021.
In 2019, with the implementation and execution of B&A revival plan, B&A has delivered a solid profitable growth through the ramp-up of Tetra devices and the internationalization of business centric open terminals Android based. In parallel, B&A has initiated a flexible Terminal as a Service (TaaS) solution, offering an added full suite of services to B&A customers.
Today B&A announces the next step of its strategy by launching the Payments Platform as a Service (PPaaS) initiative. This new solution fits perfectly with the need to transform an installed base of payment acceptance device by creating a new digitalized commerce experience. With this initiative, B&A is repositioning the acceptance value chain by proposing an open, API-driven payment platform offered as a service for the entire ecosystem, being banks, acquirers, ISOs, ISVs, PSPs aggregators or Fintech players. It will allow B&A to become the ecosystem enabler of integrated business and payment solutions.
Through the creation of a secure and flexible cloud based payments and value added services platform, B&A will provide to its customers:
To deploy PPaaS initiative, B&A will invest a first tranche of €10 million in 2020 to foster the ecosystem development and get live with customers on-boarding their merchants on the cloud platform by the first half of 2021.
B&A is opening a new era from a hardware centric payment acceptance model towards a recurring as a service revenue model and expect in the coming five years to:
In 2020, Ingenico will implement a new reporting format to provide a better measure of both divisions’ performance, aligned with European and American market best practice. The new reporting format will impact two financial aggregates as follows:
This press release contains forward-looking statements. The trends and objectives given in this release are based on data, assumptions and estimates considered reasonable by Ingenico Group. These data, assumptions and estimates may change or be amended as a result of uncertainties connected in particular to the performance of Ingenico Group and its subsidiaries. These forward-looking statements in no case constitute a guarantee of future performance and involve risks and uncertainties. Actual performance may differ materially from that expressed or suggested in the forward-looking statements. Ingenico Group therefore makes no firm commitment on the realization of the growth objectives shown in this release. Ingenico Group and its subsidiaries, as well as their executives, representatives, employees and respective advisors, undertake no obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future developments or otherwise. This release shall not constitute an offer to sell or the solicitation of an offer to buy or subscribe for securities or financial instruments.
Ingenico Group (Euronext: FR0000125346 – ING) is the global leader in seamless payment, providing smart, trusted and secure solutions to empower commerce across all channels, in-store, online and mobile. With the world’s largest payment acceptance network, we deliver secure payment solutions with a local, national and international scope. We are the trusted world-class partner for financial institutions and retailers, from small merchants to several of the world’s best known global brands. Our solutions enable merchants to simplify payment and deliver their brand promise.