Ingenico’s H1 2013 revenue up 21 percent
July 30, 2013
Ingenico Group Press Release
Paris, July 30, 2013 — Ingenico (Euronext: FR0000125346 – ING) announced today its reviewed interim financial statements for the six-month period ended June 30, 2013.
Philippe Lazare, Chairman and CEO of Ingenico, commented:
Our excellent results in the first six months of the year are in line with our strategy geared towards profitable growth. This has enabled us to raise our full-year revenue and EBITDA guidance for 2013.
Those results also demonstrated our ability to deploy a geographically differentiated sales and service strategy, across all channels: in store, on-line and mobile.
As anticipated, we enjoyed strong business growth in the United States.
The integration process of Ogone takes place in accordance with our roadmap, and will accelerate the expansion of our service business, which accounted for 48 percent of revenue in the Europe-SEPA region in the first half of the year.
As we enter the second half of the year, we are confident that we will be meeting our full-year targets and that our multi-channel approach will gradually come on stream.”
H1 2013 financial data
Performance in the first half
In the first half of 2013, revenue totaled €656 million, supporting a 21 percent increase on a reported basis, including a €26 million contribution from Ogone and a negative foreign exchange impact of €13 million. Total revenue included €511 million generated by the Payment Terminal business and €145 million generated by Transaction Services. More generally, the share of total revenue generated by Services was 33 percent, including Ogone’s contribution.
On a comparable basis, the growth in revenue stood at 19 percent compared to the first half of 2012, driven by an outstanding performance in Payment Terminals (up 21 percent). Transaction Services revenue increased by a healthy 10 percent. Excluding TransferTo and Ogone, the revenue of Transaction Services was up 5 percent, while on a pro forma basis and excluding TransferTo, it increased by 9 percent, driven by the merger of Ogone into the Group.
All regions contributed to the Group’s overall performance, thanks to a geographically differentiated product and service offer. Ingenico has strengthened its position in its legacy Europe-SEPA markets through successful implementation of its service strategy and accelerated its growth in North America, particularly in the U.S., where revenue is up 50 percent. The Group has also continued to expand in the emerging markets, with encouraging business trends in Latin America, Asia-Pacific and the EMEA region.
The Group’s Central Operations is mainly based upon the TransferTo’s business and, to a lesser extent, on the deployment of the Group’s mobile payment strategy through ROAM Data.
Performance in the second quarter
In the second quarter of 2013, revenue totaled €353 million, supporting a 17 percent increase on a reported basis, including a €14 million contribution from Ogone and a negative foreign exchange impact of €7 million. Total revenue included €277 million generated by the Payment Terminal business and €76 million generated by Transaction Services.
On a like-for-like basis1, revenue was 14 percent higher than in Q2 2012. This performance can be attributed to high growth in Payment Terminal revenue (up 15 percent) and continuous development in Transaction Services (up 9 percent). Excluding TransferTo and Ogone, Transaction Services grew organically by 5 percent during the quarter; and by 9 percent on a pro forma basis2 without TransferTo.
In the second quarter, Ingenico posted strong organic growth across all regions, successfully deploying its geographically differentiated strategy.
Performance for the quarter by geography, compared with Q2 2012, was as follows:
Europe-SEPA : Despite a challenging macroeconomic environment, Ingenico’s Payment Terminal revenue increased at a respectable pace, due to the Group’s diversified geographic footprint in the region, and following very high growth in the United Kingdom in 2012. In addition, the Group has accelerated the deployment of its strategy based on its Transaction Services strategy combining point-of-sale (Axis, easycash), on-line and m-payment with the integration process of Ogone growing 24 percent. Ingenico also won an award from KFC for the improvement of its payment systems in the United Kingdom.
Latin America: Business continued to grow, thanks to an ongoing robust performance in Brazil and strong growth across the other countries in the region. Ingenico has contributed to a payment technology upgrade, particularly in Central America and Mexico, where the Group is deploying contactless payment solutions with Banamex.
Asia-Pacific: Strong growth across the region continued to push revenue higher. The momentum has remained strong in China. Moreover, Ingenico has maintained its rapid deployment drive in Indonesia by acquiring its distributor and has accelerated its market penetration in India.
North America: Accelerating growth in the region reflects the Group’s increased traction in the United States, where Ingenico has continued to implement its strategy at large retailers and to win over smaller merchants through ISOs (Independent Sales Organizations). To date, Ingenico has already obtained certification from 8 of the 10 leading organizations in the processor/acquirer segment, including Heartland Payments, as announced on May 3rd.
EMEA: In most countries in the region, Ingenico enjoyed strong growth fueled by the direct access to the Russian market, where the Group has continued to deploy its solutions to new banks customers, and the expansion of its distribution network, particularly in the Middle East, where a partnership agreement has been signed with Alhamrani Universal.
Central Operations: Growth was driven primarily by TransferTo’s expanding business.
Gross margin still high – up 50 basis points
Gross margin reached 42.2 percent, an increase of 50 basis points compared to H1 2012. The main driver of this performance was the 120 basis points increase in gross margin in Payment Terminals (hardware, servicing and maintenance) to 44.8 percent of revenue, due in large measure to outstandingly high growth in revenues volume and procurement cost optimization.
Gross margin in Transaction Services decreased slightly from 34.5 percent in the first half of 2012 to 33.5 percent. This decrease reflected a one-off expense of €5 million related to the bankruptcy of a German customer and the somewhat greater weight of TransferTo in the second quarter. However, solid business growth at Ogone has helped improve overall performance in Transaction Services. Excluding TransferTo and the impact of the incident in Germany, gross margin reached 47.1 percent, up from 44.6 percent in H1 2012.
Operating expenses under control at 26.5 percent of revenue
In the first half of 2013, adjusted operating expenses stood at €174 million, versus €160 million in the first half of 2012, and were down 300 basis points to 26.5 percent of revenue, compared with 29.5 percent in H1 2012.
Due to limited growth in general and administrative expenses, Ingenico was able to invest further, particularly in Research & Development and sources of future growth (Telium3, m-payment segment).
EBITDA up 53 percent
EBITDA increased by 53 percent to €122 million, up from €80 million in the first half of 2012. The EBITDA margin increased by 380 basis points to 18.6 percent of revenue.
UEBIT margin up 350 basis points
In the first half of 2013, EBIT increased by 56 percent to €103 million, compared with €66 million in H1 2012. The EBIT margin was 15.7 percent of revenue, up by 350 basis points.
Continued significant growth in profit from operations: 31 percent
Other operating income and expenses showed a net expense of €13 million, which included a non-recurring €8 million partial impairment loss on TransferTo goodwill. This non-cash accounting item reflects revenue synergies below expectations between TransferTo and the rest of the Group.
In the first half of 2012, other operating income and expenses showed net income of €4 million, due in large part to the €9 million impact of the remeasurement of assets and liabilities previously acquired or taken over from Roam Data when Ingenico gained control of that company in February 2012.
At €15 million, Purchase Price Allocation expenses show little change, even though acquisitions carried out in the first half have added €3.7 million.
Profit from operations was up 31 percent to €75 million from €57 million in the first half of 2012. Operating margin increased by 90 basis points to 11.4 percent of revenue.
Profit attributable to Ingenico S.A. shareholders up 41 percent to €45 million
In the first half of 2013, net profit attributable to Ingenico S.A. shareholders increased significantly to €45 million, compared with €32 million in H1 2012.
This result includes net finance costs of €8 million (versus €7 million in H1 2012), which increased only slightly despite higher debt following the Ogone acquisition in January 2013.
Income tax expense rose from €16 million to €23 million. As of June 30, 2013, Group effective tax rate – excluding impact of partial impairment loss on TransferTo goodwill – stood at 32.7 percent compared with 31.9 percent as of June 30, 2012.
A sound financial position
Total equity attributable to shareholders increased to €715 million.
Net debt increased to €414 million at June 30, 2013, from €155 million at June 30, 2012 and €75 million at December 31, 2012, due in particular to the €360 million required to finance the acquisition of Ogone. However, Ingenico’s financial ratios at June 30, 2013 demonstrated the Group’s sound financial position. The net debt‐to‐equity ratio stood at 58 percent, while the net debt‐to‐EBITDA ratio was 1.6x .
During the first half of 2013, Ingenico’s operations generated free cash flow of €46 million, compared to a negative €16 million in the first half of 2012. This improvement is mainly attributable to a strong increase in EBITDA and good control over working capital, limiting the negative change in working capital to €11 million, versus €45 million in H1 2012. This was made possible by strict management of inventories and trade receivables in a period of strong business expansion. At the same time, Ingenico continued to invest to support Group expansion, with investing activities net of disposals totaling €18 million.
Update on Ogone integration
Following the acquisition of Ogone in January, all of the Group’s Transaction Services business in Europe was merged together into the same entity now managed by Peter de Caluwe, the CEO of Ogone, to ensure that the Group’s strategy will be effectively implemented whatever the channel: in store, on-line and mobile. The Ogone and easycash platforms are now interconnected, and the Group has deployed its in-store and on-line payment services for a first customer in Germany. More broadly, the first contacts initiated with clients and prospects (banks and merchants) have confirmed their interest for combined payment offers.
In the first half of 2013, Ingenico performed outstandingly well, particularly in Payment Devices, and therefore expects less of a seasonal difference in revenue and EBITDA margin between the first and second halves than in previous years.
Accordingly, the Group has raised its annual revenue outlook, now anticipating low double-digit organic growth1 compared with above or equal to 8 percent previously. The Group reminds that the fourth quarter of 2012 represents a very high basis of comparison, given that order volume from emerging markets was particularly high
Ingenico has likewise raised its outlook for EBITDA margin, which is now expected to exceed or be equal to 19 percent, compared with above 18.5 percent previously.
This revised guidance for 2013 applies to the expanded consolidated Group, i.e., including Ogone in the accounts for the year. Ingenico also confirms that the Ogone integration process should be neutral to net earnings per share in 2013 (excluding PPA).