2017 Annual Results Sell-side analysts workshop. Patrick Bataillard, CFO. February 20, 2018

Transcription

1 2017 Annual Results Sell-side analysts workshop Patrick Bataillard, CFO February 20,

2 Agenda I. Fleet & Mobility solutions A leading position on a fast-growing market 1. A global player 2. Two transformational acquisitions 3. Business model 4. Electric vehicles II. Digitization A key growth driver 2

3 FLEET & MOBILITY SOLUTIONS: EDENRED S OFFER 2 main sub-segments Fuel & Fleet Expenses dedicated to the business use of a vehicle from Light Fleet to Heavy Fleet Examples: Ticket Log in Brazil, UTA in Europe Corporate Expenses Expenses incurred by an employee for business purposes (mobility/travel, procurement, petty cash) Examples: Ticket Empresarial in Mexico, Expendia Smart in Italy >90% of Fleet & Mobility operating revenue in 2017 <10% of Fleet & Mobility operating revenue in 2017 Value proposition Anti-fraud & costeffective solutions Ensure expense tax deductibility Business volume & revenue driver for affiliated network No need to advance cash Simplified reporting procedure Formalization of the informal economy Carbon emissions control 3

4 FUEL & FLEET MARKET A large, multi-local and fast-growing market with a low penetration rate Over 1,000bn annual spend Average annual growth of 5-10% for Fuel & Fleet solutions 25% average penetration Competitive landscape US specialist players Large fuel card specialists NORTH AMERICA LATIN AMERICA AFRICA & MIDDLE-EAST EUROPE APAC Local issuers & resellers Annual spend 225bn 100bn 35bn 300bn 375bn Light Vehicle penetration Medium Low Low Low- Medium Low International, regional and national oil companies Heavy Vehicle penetration High Medium Low High Low Source: Alphanova, Edenred estimates 4

5 EDENRED HAS BECOME A GLOBAL PLAYER ON THE FLEET & MOBILITY MARKET A large footprint in Latam & Europe #2 Europe-wide player in multi-brand fuel cards Edenred Fuel & Fleet solution Only Edenred Fuel & Fleet acceptance network Edenred Travel & Expense solutions #1 in Latin America #1 in Brazil for Light Fleet #2 in Brazil for Heavy Fleet #1 in Mexico In 2017, Edenred managed 6.6bn liters of fuel, 2.6m payment media, >90K points of acceptance 5

6 FLEET & MOBILITY SOLUTIONS WITHIN EDENRED Acceleration of the rebalancing of Edenred s product mix Fleet & Mobility Solutions operating revenue as a % of the Group s operating revenue Like-for-like CAGR % % Group +18% Fleet & Mobility Solutions operating revenue >20% >20% 140m ~ x m Successful acquisitions Strong double-digit L/L growth Successful integration of large acquisitions in Brazil and Europe Group +96% scope effect in vs Fleet & Mobility operating revenue Consolidated since January 2017 Consolidated since May 2016 Consolidated since January

7 FLEET & MOBILITY SOLUTIONS: GEOGRAPHICAL BREAKDOWN Latin America Europe Rest of the World Fleet & Mobility Solutions as a % of 2017 operating revenue by region Contribution of the region to the Group s 2017 Fleet & Mobility operating revenue 69% 30% 1% 100% 2017 L/L growth of the Fleet & Mobility Solutions >20% >10% NM +20% 7

8 Agenda I. Fleet & Mobility A leading position on a fast-growing market 1. A global player 2. Two transformational acquisitions 3. Business model 4. Electric vehicles II. Digitization A key growth driver 8

9 EMBRATEC ACQUISITION IN BRAZIL (1/2) Acquisition of Embratec and launch of Ticket Log in Brazil leading to #1 position in Latin America Creation of a major player; 65% owned by Edenred Creation of the #1 player in Brazil s Light Fleet market and #2 in the Heavy Fleet market: Embratec shareholders 65% 35% ~27K clients >1m active cards >24.5K affiliated service stations & repair workshops 100% 62% 100% 100% 100% Taking advantage of the fast-growing and underpenetrated Fuel & Fleet market in Brazil: Doubled Edenred s fuel card and maintenance offering in Brazil BtoB fuel distribution market ~55-60bnL Addressed F&F market ~10-11bnL 15-20% penetration rate 9

10 EMBRATEC ACQUISITION IN BRAZIL (2/2) A value-creating transaction with significant synergies Ambition: R$60m (1) annual synergies expected within 3 years post-closing (2) ~R$60m (1) of cost & business synergies in 2017, with 1 year in advance Business synergies Improved sales efficiency Densified geographical reach Leveraged best practices (loyalty, pricing, etc.) Cost synergies Corporate and Support function rationalization IT platform mutualization Economies of scale on variable costs (1) Synergies of ~ 17m at 2017 average exchange rate of R$3.60 for 1. (2) Closing in May

11 UTA ACQUISITION IN EUROPE (1/2) UTA, a key asset for deploying Edenred s Fleet & Mobility strategy in Europe Gradually increased stake, from a 34% minority interest in 2015, to an 83% stake in early 2018 (1) New growth strategy well on track: Expand internationally especially into the fast-growing markets of Eastern Europe Enhance the network Tackle Light Fleet market 2014 before acquisition +11 direct sales countries 2018 In # of acceptance points K 55K Development of Ticket Fleet Pro, French solution giving access to UTA network (2,700 service stations in France) Launch of a Light Fleet offer in Germany and Italy UTA footprint Direct Sales Opened since 2015 Acceptance network only No presence (1) The Van Dedem family s exercise of its put option of 17% of UTA stake is subject to approval from the relevant competition authorities, expected to be finalized by the end of Q The Eckstein family holds a put option on the remaining 17% of UTA s share capital. 11

12 UTA ACQUISITION IN EUROPE (2/2) From a 34% stake in UTA s capital in 2016 to 83% in 2018 A GRADUALLY INCREASED STAKE TO TAKE CONTROL OF A UNIQUE ASSET TO LEVERAGE IN EUROPE Edenred stake 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 34% 51% 66% 83% +34% +17% +15% Jan Jan Dec Q % Acquisition Edenred UTA CONTRIBUTION TO EDENRED P&L IN 2017 Operating revenue 72m Operating EBIT (before PPA amortization) 18m Operating EBIT 12m Shares from equity accounted companies (AGES + MSC) Non-controlling interests 11m (10)m Net profit, Group share 30m NET DEBT RELATED TO UTA MINORITY SHAREHOLDER PUT OPTIONS As of Jun. 30, m As of Dec. 31, m Expected Q m The acquisition of the additional 15% and 17% stakes in Dec 2017 and Q1 2018, will decrease non-controlling interests, and therefore increase net profit 2017 net profit includes 19m of exceptional capital gain Acquisition of Daimler s 15% Acquisition of Van Dedem s 17% 12

13 Agenda I. Fleet & Mobility A leading position on a fast-growing market 1. A global player 2. Two transformational acquisitions 3. Business model 4. Electric vehicles II. Digitization A key growth driver 13

14 CASH FLOW POINT OF VIEW Typical transaction model and related cash flows Pre-loaded Post-paid Float generation due to prepayment of volume and fees, with a shorter retention time than in Employee Benefits Negative working capital generation, due to the management of the time between payment by client companies and reimbursement by merchants Focus on post-paid model 1) The driver consumes a service offered by Edenred s affiliated network (fuel, toll, maintenance) Card usage Billing flow Payment flow 4 2 Driver Client company Service, toll or maintenance stations 2) Edenred issues an invoice to the client company. It increases the trade receivables by the volume amount + the commission, if eligible 3) The affiliated merchant or provider issues a bill to Edenred, which increases the trade payables by the volume amount the commission, if eligible 4) The client company pays the bill (volume + fees) to Edenred 5) Edenred pays the bill (volume fees) to the affiliated merchants 14

15 Transaction volume related BREAKDOWN OF THE FLEET & MOBILITY PERFORMANCE Revenue generation Fees Rate Variable from one country to another Illustration for 2017 Post-paid (~70%) % Fuel related Sensitive to retail fuel price (as a % of the amount) Not sensitive to retail fuel price (in per liter) [29% 88%] [10% 29%] 100% Operating revenue Pre-loaded (~30%) % Not fuel related Maintenance, toll, etc. (as a % of the amount) Not linked to volume [2% 42%] + Set-up fees, fees per card/onboard unit, late fees, etc. (% of toll or maintenance bill) Free float Negative working capital Financial revenue = Total revenue 15

16 BREAKDOWN OF THE FLEET & MOBILITY PERFORMANCE Diversity of business profiles across the Group Revenue sources by type in Edenred s main Fuel & Fleet operations Illustration for % 10% 16% 10% 42% Not related to fuel Revenue in per liter of fuel Revenue as a % of the transaction in (sensitive to retail fuel price) 88% 74% 29% Ambition to enhance revenue sources Strong knowledge-sharing between BUs: 29% Mexico Ticket Log UTA Development of value-added services (toll, maintenance, parking) to stand out from the competition New innovative tools for maintenance Introduction of fixed fees +2pts of non-fuel-related revenues in the three main subsidiaries vs

17 2 BREAKDOWN OF THE FLEET & MOBILITY PERFORMANCE Oil price represents less than ~50% of retail fuel price, limiting financial exposure to fluctuations Breakdown of fuel price into main components 5 to 55% 100% Crude oil price Spot fuel price 25 to 50% 10 to 20% Very local and upward trend Pump price 10 to 40% Oil production Oil transportation Refining Fuel marketing & transport. Retail fuel margin Excise duty and VAT Retail fuel price 17

18 BREAKDOWN OF THE FLEET & MOBILITY PERFORMANCE EBIT margin and FCF generation Regulation Transaction amount Transaction frequency Digitization Cash model Fleet & Mobility Not regulated by law Employee Benefits Slightly regulated by law hundreds Less than 10 Weekly Almost 100% digital Mostly post-paid with negative working capital and some pre-loaded with float Daily 68% digital, leading to paper costs Pre-loaded, resulting in a large float Fleet & Mobility EBIT and FCF contribution In line with the Group EBIT margin >30% A high level of EBITDA (asset-light model) and negative working capital lead to FCF-generative model 18

19 Agenda I. Fleet & Mobility A leading position on a fast-growing market 1. A global player 2. Two transformational acquisitions 3. Business model 4. Electric vehicles II. Digitization A key growth driver 19

20 DESPITE A STRONG UPTAKE IN HYBRID AND ELECTRIC VEHICLES, THE GLOBAL CAR FLEET WILL STILL BE DOMINATED BY ICE (1) IN No impact on Heavy Fleet business, i.e. ~50% of Edenred Fleet & Mobility volume 2. Car stock renewal rate estimated at ~6%, ICE (1) vehicles will still represent: >90% of 2020 yearly sales ~60% of 2030 yearly sales In Europe, ICE (1) vehicles will represent 40% of yearly sales, and ~75% of the car stock In Latin America, hybrid and electric vehicles will represent <10% of yearly sales, and <~5% of the car stock ~1.6bn cars 5% 10% 3. Production problem: Electric infrastructure is not ready to bear a full and fast conversion to electric vehicles Battery production (and the related raw materials extraction) has limited capacity 85% 2030 car stock Transition to electric & hybrid vehicles will be very progressive Edenred is anticipating this trend and already initiated some discussions with players in the electric vehicle charging industry Electric vehicles Hybrid vehicles ICE (1) vehicles (1) ICE: internal combustion engine, i.e., traditional oil-based vehicles Sources: Morgan Stanley; CEPSA 20

21 FLEET & MOBILITY: WRAP UP Fuel & Fleet, a 1,000bn market full of opportunities A large, growing and underpenetrated market, fueling organic growth Multi-local and fragmented, providing opportunities for consolidation and new partnerships (outsourcing from oilcos) An opportunity to rebalance Edenred s portfolio toward non-regulated activities, and to benefit from significant synergies (IT mutualization, cross-selling, strong brand awareness) Edenred has a large and global footprint to leverage in this business Leading position in Latin America with strong organic growth of the historical business in Brazil and Mexico Successful integration of two large players in Brazil and in Europe Development of new value-added services and deep knowledge-sharing to replicate best practices in terms of partnerships, services and revenue management A business line that contributes to profitable growth ~30% EBIT margin, in line with the Group EBIT margin Contributive to negative working capital Contributive to FCF 21

22 Agenda I. Fleet & Mobility A leading position on a fast-growing market II. Digitization A key growth driver 1. Update on the digital shift 2. Revenue and margin improvement opportunities 3. Impact on cash generation 4. Strong opportunities 22

23 BUSINESS VOLUME DIGITIZATION : speed-up of the digital shift % of digital business volume Business volume 14bn 26bn % % % ~ 6bn digital +21% CAGR x3.5 ~ 21bn digital Edenred is well on track to achieve its 2020 digital ambition 23

24 A DIGITAL COMPANY Strong digital acceleration in Europe in line with our ambition to achieve digital business volume of more than 85% worldwide by 2020 DIGITAL % OF BUSINESS VOLUME IN 2017 Latin America 97% +1pt vs BY BUSINESS LINE 99% Fleet & Mobility Solutions Rest of the World 79% +6pts vs % 68% Employee Benefits Europe 61% +18pts vs pts vs % Complementary Solutions 24

25 DIGITIZATION IN EUROPE : speed-up of the digital shift % of digital business volume, all business lines combined 100% Sweden Belgium 80% 60% 40% 61% Europe Europe (excl. UTA) Italy Europe (excl. UTA) digital business volume CAGR: +28% 20% France (incl. LCCC & ProwebCE) 0%

26 Agenda I. Fleet & Mobility A leading position on a fast-growing market II. Digitization A key growth driver 1. Update on the digital shift 2. Revenue and margin improvement opportunities 3. Impact on cash generation 4. Strong opportunities 26

27 DIGITIZATION OFFERS STRONG TOPLINE GROWTH OPPORTUNITIES Focus on Employee Benefits business opportunities Impact on business volume Impact on operating revenue Shift to digital of existing products e.g., Ticket Restaurant ++ More differentiation (e.g., mobile payment) More penetration due to more convenience (e.g., consulting firms, SMEs) + New revenues from merchants & corporates (e.g., fees per card, new services) New revenues from users (e.g., data collection) New digital solutions e.g., ProwebCE, Employee Savings + More solutions possible (e.g., web platforms) But not every solution based on volumes (e.g., e-commerce) Boosts cross-selling ++ Additionnal revenue New digital sales channels e.g., Telesales ++ More sales efficiency (e.g. industrialized telesales organization) More penetration (e.g., SMEs, Tie r2/3 cities) ++ Lower price sensitivity of some client categories (e.g., SMEs) 27

28 DIGITIZATION OFFERS STRONG TOPLINE GROWTH OPPORTUNITIES Focus on Employee Benefits business opportunities Second year of Employee Benefits take-up rate stabilization 4.67% 4.69% 4.68% Leading meal benefits issuer in mobile payment Group take-up has been stable 2 years in a row However, in Europe: +13bps in 2017 vs Edenred is the only meal benefits issuer to offer Android Pay and Apple Pay in Spain Improved performance in France Improved performance in France, with doubledigit growth in Employee Benefits in 2017, partly fueled by: Digital shift of Ticket Restaurant, with the capacity to tackle SME and remote workers segments Already 560,000 French employees equipped with a Ticket Restaurant card i.e., 35% of Edenred French Ticket Restaurant users ProwebCe: e-commerce and cross-selling Already 34% adoption rate (1) (1) Adoption rate calculated on card users equipped with a smartphone compatible with Apple Pay or Android Pay. 28

29 % % 60% 40% 20% 0% % % 60% 40% 20% 0% % % 60% 40% 20% 0% DIGITIZATION IMPACT ON THE COST BASE Clear positive impact on the cost base, post-transition phase Sales Call centers Logistics Production Support (finance, HR, etc.) IT Total impact Impact of digital shift = = + a shift toward more variable costs vs. fixed costs + ~5% to 10% reduction Illustrations Belgium (100% digital (2) ) Europe (61% digital) France (23% digital) 100% 100% 61% 4% 31% 54% 86% 23% 29% 36% 43% 5% 6% 15% 23% (1) (1) (1) % of digital volume Total costs (as a % of volume) % of digital volume Total costs (as a % of volume) % of digital volume Total costs (as a % of volume) (1) Total costs include digital and paper costs (2) Belgium : Employee Benefits only 29

30 DIGITIZATION IN EUROPE Operating margin & digitization Operating EBIT margin as a % 70% Illustration of 4 European countries and Europe operating margin change over digitization and time 60% 50% 40% 30% 20% 10% Country 1 (2014/2015/2016/2017) Country 2 (2014/2015/2016/2017) Country 3 (2014/2015/2016/2017) Country 4 (2014/2015/2016/2017) Europe (2014/2015/2016/2017) 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of digital business volume 30

31 DIGITAL TRANSITION AND INCREASED PROFITABILITY Illustrative 75% +5pts 93% Strong increase in margin in Mexico after transition to digital Rapid shift to digital, accelerated by changes to food benefit regulations enforced in 2014 Accelerated migration plan in 2013 following a company transformation plan % digital IV Operating EBIT margin Return to a high EBIT margin, after the transition phase was weighed down by the doublesystem cost (legacy paper + digital) 31

32 Agenda I. Fleet & Mobility A leading position on a fast-growing market II. Digitization A key growth driver 1. Update on the digital shift 2. Revenue and margin improvement opportunities 3. Impact on cash generation 4. Strong opportunities 32

33 IMPACT OF DIGITIZATION ON THE FLOAT Float increase due to topline growth and limited retention reduction EMPLOYEE BENEFITS DIGITIZATION & FLOAT RETENTION IN WEEKS OF ISSUE VOLUME (i.e., excluding Fleet & Mobility) Announced at the 2016 Investor Day % 36% 46% 52% 57% 60% 65% 68% Amount of float excl. Fleet & Mobility Digital Employee Benefits issue volume Nb of weeks of IV

34 Agenda I. Fleet & Mobility A leading position on a fast-growing market II. Digitization A key growth driver 1. Update on the digital shift 2. Revenue and margin improvement opportunities 3. Impact on cash generation 4. Strong opportunities 34

35 CONCLUSION OVERALL, STRONG OPPORTUNITIES OFFERED BY DIGITIZATION 35

36 CONTACT Solene ZAMMITO Loic DA SILVA 36