Covid-19 action plan and Fit for Growth in full execution
Improvement in EBITDA and free cash-flow versus H1’19
Q2 revenue performance in line
2020 objectives confirmed
Ingenico Group (Euronext: FR0000125346 - ING), the global leader in seamless payment, today announced its results for the six-month period ended on June 30th, 2020.
In the context of the Covid-19 crisis, which has strongly impacted the second quarter, the Group posted a relatively resilient performance, with an 8% organic decline in the first half, due in part to a good start to the year in each of the business units and the better than expected performance of Retail in Q2’20.
During this semester, we have successfully executed our holistic and robust Covid-19 action plan on top of the Fit for Growth plan and delivered €60 million in EBITDA impact in order to protect our profitability and free cash-flow generation. We have been able to strongly improve our margin in the first half of the year by 400 basis points and we have kept our cash conversion above 50%. I would like to thank of our teams for their focus and proactive mobilization during this period and for their full commitment to delivering these good first half results. Our long-term growth drivers remain intact and I am convinced that we should come out of the current crisis even stronger. Finally, the combination project with Worldline is on track and will offer a unique opportunity to create the undisputed European champion in payments on par with the largest international players, for the benefit of all our stakeholders.
In the second quarter of 2020, net revenue totalled €584 million, representing a 18% decrease on a comparable basis. On a reported basis net revenue was 21% lower than in the second quarter of 2019 and included a negative foreign exchange impact of €17 million and the effect of Healthcare France disposal.
Over the quarter, the Retail Business Unit reported a net revenue of €291 million, showing a decrease of 14% on a comparable basis. On a reported basis, net revenue decreased by 17% during the quarter and included a negative foreign exchange impact of €4 million and the effect of Healthcare France disposal. Compared with Q2’19, the various activities performed as follows on a like-for-like basis:
The B&A Business Unit posted a net revenue of €293 million, a 22% decrease on a comparable basis. On a reported basis the activity decreased by 24% and included a negative foreign exchange impact of €12 million. Compared to H1’19, the various regions performed as follows on a like-for-like basis:
In the first half of 2020, net revenue totalled €1,242 million, representing a 8% decrease on a comparable basis. On a reported basis net revenue was 10% lower than in the first half of 2019 and included a negative foreign exchange impact of €20 million and the effect of Healthcare France disposal.
Over the semester, the Retail Business Unit reported a net revenue of €631 million, showing a decrease of 4% on a comparable basis. On a reported basis, net revenue decreased by 6% during the semester and included a negative foreign exchange impact of €4 million and the effect of Healthcare France disposal.
The B&A Business Unit posted a net revenue of €611 million, a 12% decrease on a comparable basis. On a reported basis the activity decreased by 13% and included a negative foreign exchange impact of €16 million.
In the first half of 2020, adjusted gross profit reached €572 million, representing 46.1% of net revenue to be compared with €586 million in the first half of 2019 pro-forma, or 42.7% of net revenue. Retail adjusted gross profit rate was slightly up due to the mix of activities and B&A adjusted margin was positively impacted by an favourable geographical mix, mainly driven by the 45% organic growth in North America and a better relative performance in EMEA compared to emerging countries (Latin America and Asia-Pacific). Otherwise, the adjusted gross profit has benefitted as well from €25m positive impact derived from Fit for Growth and Covid-19 action plan execution during the first half 2020.
During this first half of 2020, adjusted operating expenses have reached €294 million, down €39 million or 12% versus the first half of 2019 pro-forma. Adjusted operating expenses rate has decreased from 24.3% to 23.7% down 60 bps compared to the first half of 2019 pro-forma. Otherwise, the adjusted operating expenses have benefitted as well from €35m positive impact derived from Fit for Growth and Covid-19 action plan execution during the first half 2020.
EBITDA came in at €278 million (22.4% of net revenue), against €252 million (18.4% of net revenue) in the first half of 2019 pro-forma (€254 million on reported basis), thus an improvement of €26 million (up 400 bps on EBITDA margin), despite the impact of the Covid-19 crisis on revenues. The Group EBITDA has benefitted from the execution of the Fit for Growth plan and the Covid-19 action plan initiated during the semester. The combined effect of those two initiatives has delivered €60 million EBITDA impact in the first half of 2020, before €3 million investments dedicated for the PPaaS initiative of B&A.
The Retail EBITDA came in at €141 million (22.3% of net revenue) to be compared with €130 million (19.6% of net revenue) in H1’19 pro-forma, an increase of 270 bps. This overall performance is fully in line with our annual Retail EBITDA trajectory.
The B&A EBITDA stood at €154 million (25.2% of net revenue) to be compared with €150 million (21.1% of net revenue) in H1’19 pro-forma, increasing by 410 bps. This EBITDA margin improvement is derived from a strong performance in revenue in North America and costs savings initiatives.
The corporate costs during the first half of 2020 are down €10 million to €17 million (€27 million in H1’19 pro-forma), reflecting the strong action plan executed within Fit for Growth and Covid-19 aiming at reducing corporate costs to c.€45 million in 2020 versus €50 million in 2019. The first half 2020 achievement is fully in line with our full year 2020 trajectory.
EBIT margin reached €204 million, compared to €187 million in the first half of 2019 pro-forma (€188 million on reported basis).
The other income and expenses (OIE) reached €-24 million compared to €-13 million in H1’19 pro-forma (€-13 million on reported basis), fully in line with our full year trajectory and under control.
The operating income also includes purchase price allocation amortization that represented €50 million in the first half of 2020 compared to €50 million in H1’19 (see exhibit 4).
After other income & expenses and purchase price allocation described above, operating income came in at €131 million, compared to €124 million in the first half of 2019 pro-forma (€124 million on a reported basis).
The financial result accounted for €-15 million compared to €-22 million in H1’19 pro-forma (€-21 million on reported basis).
Income tax landed at €-24 million in this first half from €-21 million in the first half of 2019 pro-forma €-21 million on reported basis). The latter has benefited from the specific tax provisions related to the Covid-19 situation. The effective tax rate landed at 21%, against 20.8% in H1’19 pro forma (20.4% in H1’19 reported).
After accounting for €5 million of non-controlling interests, the 2020 first half Group net profit attributable to shareholders came in at €87 million, up 9% compared to €80 million in the first half of 2019 pro-forma (up 8% vs. €80 million on reported basis).
The free cash flow improved very significantly during the first half of 2020 at €151 million compared to €120 million in the first half of 2019. The major elements of the free cash-flow improvement were:
In consequence, free cash-flow conversion rate for the first half 2020 came in at 54.3%, to be compared to 47.4% in the first half of 2019 (c.37% in H1’19 and c.46% in H1’20 netted from the one-off tax reimbursement and tax payment delay).
The 2020 objectives communicated in April have been built on the three following scenarios structured around different recovery curves and taking into account business assumptions unchanged, i.e. a progressive pick-up in consumption while stores re-open depending on sanitary constraints, a central scenario on travel with no recovery of international travel before end 2020 and a gradual pick-up on regional travel, and some possible short and local re-confinements in the countries in which the Group operates.
Based on these scenarios, Ingenico Group has sized and activated in early March a strong and holistic action plan aimed at adapting its cost structure, protecting profitability and preserving cash. This sizing was decided upon the basis of the most conservative scenario (Scenario 3). Consequently, on top of the Fit for Growth plan that will deliver €35 million EBITDA impact in 2020, this C19 action plan implemented during Q1’20 will deliver €100 million added EBITDA impact in 2020. The combination of the two plans will reduce the Group’s operating expenses and other cost of sales by up to 13 %.
As of end July 2020, the scenario 2 seems to be most likely. On that basis, the Group preserves the possibility to release a part of the savings expected in the frame of Covid-19 action plan if this scenario is confirmed in the course of the third quarter 2020.
Ingenico Group’s long-term growth drivers remain intact and we are convinced that the Group should come out of the current crisis even stronger with the engagement of all of the teams serving our clients for the benefit of all of our stakeholders.
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 shaping the future of payments for sustainable and inclusive growth. As a global leader in seamless payments, we provide merchants with smart, trusted and secure solutions to empower commerce across all channels and enable simplification of payments and deliver customer promises. We are the trusted and proactive world-class partner for financial institutions and retailers, from small merchants to the world’s best-known global brands. We have a global footprint with more than 8,000 employees, 90 nationalities and a commercial presence in 170 countries. Our international community of payment experts anticipates the evolutions of commerce and consumer lifestyles to provide our clients with leading-edge complete solutions wherever they are needed.