Sunday, October 16, 2016

Edenred Raises Third-Quarter 2016 Revenue


·         The Group's like-for-like growth[1] picked up pace in the third quarter of 2016, as expected:
o    Issue volume was up 10.2% like-for-like. All families of solutions contributed to this solid performance, with like-for-like growth of 8.2% in Employee Benefits and 17.2% in Expense Management.
o    Revenue also grew at a sustained pace, with like-for-like growth of 9.1% in the third quarter.
·         For the first nine months of the year, the Group posted robust like-for-like growth with:
o    Issue volume up 8.9% like-for-like to €13,911 million for the nine months to September 30, reflecting a good performance throughout Europe (up 7.7%), an acceleration in growth in Latin America (up 10.0% over the nine-month period and 14.3% in the third quarter), and strong growth in the Rest of the World (up 9.8%).
o    Total revenue up 7.0% like-for-like to €804 million for the nine months to September 30, reflecting a rise of 7.6% in operating revenue with issue volume and a decrease of 1.9% in financial revenue.
·         The Group confirms its targets for full-year 2016:
o    Organic growth in issue volume in line with the Group's historic target of 8-14% (expected at the lower end of the range).
o    An operating flow-through ratio of more than 50%.
o    Like-for-like growth in funds from operations (FFO) of over 10%.
o    EBIT of between €350 million and €370 million.



In € millions
First nine months 2016
First nine months 2015
  % change

Reported
Like-for-like

Issue volume (IV)
13,911
13,290
+4.7%
+8.9%
Operating revenue with IV
Operating revenue without IV
Financial revenue
Total revenue
646
109
49
804
621
109
52
782
+4.1%
+1.2%
-8.5%
+2.8%
+7.6%
+7.8%
-1.9%
+7.0%

Sustained issue volume growth

Issue volume for the first nine months of the year totaled €13,911 million, up 8.9% like-for-like.

Issue volume grew 4.7% on a reported basis, which includes a positive 4.9% impact from changes in the scope of consolidation, notably relating to Embratec in Brazil consolidated as from May. Currency fluctuations had a strong negative impact (9.1%) during the period and related mainly to the decline in the Brazilian real (down 11.2%), the Mexican peso (down 15.0%) and the Bolivar fuerte (down 60.8%). The currency effect remained negative in the third quarter but eased somewhat, with the Brazilian real gaining 8.7% on third-quarter 2015.

Employee Benefits issue volume grew by 7.5% like-for-like for the first nine months of 2016 and by 8.2% in the third quarter. Expense Management issue volume was up by 13.4% like-for-like for the nine-month period and by 17.2% in the three months to September 30.

Issue volume by region

Like-for-like growth
First-quarter
2016
Second-quarter 2016
Third-quarter
 2016
First nine months 2016
Europe
+6.9%
+9.7%
+6.4%
+7.7%
Latin America
+7.5%
+8.7%
+14.3%
+10.0%
Rest of the World
+12.1%
+11.1%
+6.0%
+9.8%
TOTAL
+7.4%
+9.3%
+10.2%
+8.9%


Solid issue volume growth in Europe over the first nine months of 2016 reflected the Group's good sales performance in the region. Issue volume totaled €6.6 billion (or 48% of the Group's total issue volume) for the nine months, up 7.7% like-for-like and up 6.4% in the third quarter. Calendar effects were positive in the second quarter but negative in the three months to September 30.


Europe excluding France posted like-for-like growth of 9.2% for the first nine months of the year (and 7.7% in the third quarter), thanks to strong sales dynamics. Like-for-like growth remained high in Central Europe (8.5% for the nine months to September 30 and 4.0% in the third quarter) in an improving economic environment. Germany achieved strong gains in the Ticket Plus Card solution, the Childcare Vouchers business expanded by 5.6% like-for-like in the United Kingdom, and Italy posted like-for-like growth of 3.4% for the nine months to September 30, 2016. Lastly, the other countries in the region put in a solid performance, achieving double-digit growth for the first nine months of 2016 on a like-for-like basis.

In France, issue volume was up by 4.6% like-for-like over the first nine months of the year, and by 3.4% in the third quarter, reflecting solid gains in the Ticket Restaurant® solution (up 3.9% over the nine-month period) driven by client wins. With 225,000 Ticket Restaurant® card beneficiaries at end‑September 2016, Edenred has consolidated its leadership in the French digital meal voucher market. Incentive & Rewards solutions, especially Ticket Kadéos, also performed solidly in the first nine months of 2016.

In Latin America, issue volume growth was strong for the nine months to September 30, at 10.0% like-for-like, with an acceleration in the third quarter, at 14.3%. Issue volume for the region was €6.7 billion, representing 48% of the Group's total issue volume.

Despite the challenging economic environment, issue volume in Brazil rose 4.5% like-for-like over the first nine months of the year, and increased 4.5% in the third quarter. Reflecting this market's significant growth potential, Expense Management continued to enjoy robust like-for-like growth (15.7% for the nine-month period and 13.0% for the third quarter), driven by client wins and an increase in sales to existing clients. In spite of a surge in the country's unemployment rate[5], Employee Benefits issue volume continued to rise in the first nine months of the year, up 1.0% like-for-like for the nine-month period, and up 1.6% in the third quarter.

In Hispanic Latin America, issue volume increased by 18.4% like-for-like for the first nine months and by 28.0% in the third quarter. Issue volume growth in Mexico accelerated in the third quarter, at 14.4% like-for-like, bringing like-for-like issue volume growth in the country to 8.3% for the first nine months of the year. At the regional level, Employee Benefits enjoyed strong 24.3% like-for-like growth, with a sharp increase in Venezuela driven by high inflation. Expense Management posted like-for-like growth of 10.8% for the period and of 19.7% for the third quarter, thanks to a good sales momentum in Mexico.

Issue volume in the Rest of the World rose by 9.8% like-for-like over the first nine months of 2016, reflecting in particular strong growth in Turkey, the region's primary contributor.


Acceleration in total revenue growth 

Like-for-like growth
First-quarter 2016
Second-quarter 2016
Third-quarter 2016
First nine months 2016
Operating revenue with IV
+5.8%
+7.8%
+9.6%
+7.6%
Operating revenue without IV
+6.6%
+5.2%
+12.2%
+7.8%
Financial revenue
-3.1%
+0.1%
-2.5%
-1.9%
Total revenue
+5.2%
+6.9%
+9.1%
+7.0%

Total revenue for the first nine months of 2016 amounted to €804 million, representing a 7.0% like-for-like increase. Total revenue comprises operating revenue with issue volume (up 7.6% like-for-like), operating revenue without issue volume (up 7.8% like-for-like) and financial revenue (down 1.9% like-for-like).

On a reported basis, total revenue increased by 2.8% after taking into account the 4.2% positive impact from changes in the scope of consolidation (relating in particular to the integration of Embratec in Brazil) and the 8.4% negative currency effect.

 Operating revenue with issue volume up 7.6% like-for-like

Operating revenue with issue volume amounted to €646 million in the first nine months of the year, up 7.6% like-for-like (up 9.6% in the third quarter). The increase reflected solid performances in all regions, with robust growth in Europe, an acceleration in Mexico, and gains in Venezuela driven by high inflation.

Operating revenue with issue volume by region

Like-for-like growth
First-quarter
2016
Second-quarter 2016
Third-quarter
2016
First nine months 2016
Europe
+5.1%
+8.9%
+7.3%
+7.1%
Latin America
+6.2%
+6.6%
+12.5%
+8.3%
Rest of the World
+7.9%
+8.6%
+2.4%
+6.4%
TOTAL
+5.8%
+7.8%
+9.6%
+7.6%

The take-up rate for the first nine months of 2016 was stable year-on-year, at 4.6%.

 Operating revenue without issue volume up 7.8% like-for-like

Operating revenue without issue volume amounted to €109 million, up 7.8% like-for-like (up 12.2% in the third quarter), reflecting the contribution of ProwebCE in France, which is subject to a higher seasonality than other operations within the Group, and of new businesses in Asia.

Slight like-for-like decrease in financial revenue

Financial revenue totaled €49 million, down 1.9% like-for-like (down 2.5% in the third quarter), with a solid 7.3% like-for-like increase in Latin America and a 13.3% like-for-like decline in Europe, reflecting negative interest rate trends in the region.

Conclusion
Edenred's like-for-like performance in the first nine months of 2016 attests to its balanced geographic presence and the vitality of all of its families of solutions.
The acceleration in issue volume growth to 10.2% in the third quarter was in line with the Group's expectations. This performance reflects continued strong growth in Europe (despite negative calendar effects in the third quarter) and the pickup in Latin America driven by acceleration in Mexico, resilience in Brazil and high inflation in Venezuela. As a result, issue volume rose 8.9% like-for-like over the first nine months of the year.
Total revenue was up 9.1% in the third quarter on a like-for-like basis, bringing like-for-like growth for the nine months to September 30 to 7.0%. This performance reflected solid 7.6% like-for-like growth in operating revenue with issue volume (9.6% growth in the third quarter) and a slight decline in financial revenue.
In the fourth quarter, Edenred expects issue volume growth to be driven by sustained positive dynamics in Europe despite further negative calendar effects, continued positive momentum in Mexico, and the initial impacts of Embratec's successful integration in Brazil despite the lack of an economic recovery in the country.
The Group confirms its targets for full-year 2016:
  • Like-for-like issue volume growth in line with the Group's historic target of between 8% and 14% (expected at the lower end of the range).
  • An operating flow-through ratio of more than 50%.
  • More than 10% like-for-like growth in funds from operations (FFO).
  • EBIT of between €350 million and €370 million
Quarterly information

 · Appointments to Edenred's Executive Committee
As part of its Fast Forward strategic plan for the next three years, Edenred announced two appointments to its Executive Committee during third-quarter 2016. Elie du Pré de Saint Maur joined Edenred as Executive Vice President, Marketing and Strategy, and Antoine Dumurgier was appointed Chief Operating Officer, Expense Management.

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