Third quarter 2019 performance
Over the third quarter of 2019, revenue totalled €880 million, representing a 10% increase on a comparable basis. On a reported basis, revenue was 28% higher than in the third quarter of 2018 and included a positive foreign exchange impact of €13 million as well as a positive contribution from the newly consolidated BS Payone and Paymark.
The Retail Business Unit reported a revenue of €501 million, showing an increase of 11% over the quarter on a comparable basis. On a reported basis, revenue increased by 45% during this third quarter and included a positive foreign exchange impact of €5 million and the positive contribution of BS Payone and Paymark. Compared to Q3’18, the various activities performed as follows on a like-for-like basis:
- SMB (up 10%): The third quarter performance was in line with our expectations and with the Q2’19 performance, impacted by the rebalancing of our risk portfolio that will fade in Q4’19. SMB continued to deliver a steady onboarding rate of merchants on its platform with more than 4,000 new customers per month. SMB continued to gain traction in the ISV space with an increased number of ISV contracts signed across Europe and North America, both in e-commerce and in instore through the Bambora Connect offering launched in Q2’19, while continued growth is expected in 2020. In the meantime, our advanced acquiring solutions progressed well with a transaction value up 16% since the beginning of the year driven by market share wins in this segment. Geographical expansion, part of the Fit for Growth plan, is on track with the Bambora blueprint implementation in the Benelux region that progresses according to plan.
- Global Online (up 11%): The third quarter performance came in the expected trajectory in terms of growth and commercial development, with the emerging markets growing more than 30%, consistent with the first-half performance. Key milestones in the deployment of new products and services were reached such as the launch of a full suite of Chinese payment methods for international ecommerce players and the dynamism of Chinese online players. The verticalization of our offering towards Travel continued to gain traction with our dedicated Travel Hub solution. In the meantime, major commercial contracts were signed during the quarter such as Yoozoo Games, Yandex or Ikea e-com India.
- Enterprise (up 18%): The performance was slightly above our expectations during the third quarter 2019, with a stronger than expected dynamic overall. The business line continued to grow on both POS and transaction activities. In the latter, activities continued to perform well with double-digit organic growth, driven by the European omnichannel platform (Axis), new customer wins and Turkey benefiting from transaction volume growth. Omnichannel retail space deployment experienced clear successes with the M&S contract win in the UK, while the self-service market segment continued to gain traction with new pilots launched in all geographies. POS activities enjoyed a strong dynamic particularly in the Healthcare vertical in Germany. The latter remained a driver this quarter while its dynamic should fade in Q4’19 due to comparison basis.
- Payone (up 8%): As expected, organic growth accelerated during the third quarter. With the integration process between the two entities progressing well, Payone was able to accelerate on the roll-out of existing merchants’ portfolio conversion towards a full service offering certified during the first half. In addition, the saving banks partnership confirmed its dynamic with growth driven by the conversion of their customers to the Payone payment solution at a run rate pace above 1,000 merchants per month, confirming the benefit of the partnership in a DACH region still fuelled by the secular shift towards electronic payments.
During the quarter, B&A posted a revenue of €379 million, an increase of 8% on a comparable basis. On a reported basis revenue increased by 11% and included a positive foreign exchange impact of €9 million. Compared to Q3’18, the various regions performed as follows on a like-for-like basis:
- Europe, Middle-East & Africa (down 4% excluding Iran impact in Q3’18 / down 10% including Iran impact in Q3’18): The region came below our expectations with revenue showing two different dynamics during the third quarter, with mature countries returning to a low positive organic growth whereas Eastern Europe was in decline after a strong first half of the year. United Kingdom and Northern Europe are showing positive trends while Southern Europe is stabilising after a mixed performance during the first half of the year. Eastern Europe experienced a challenging third quarter with strong volatility due to weaker demand from local banks. We have implemented a new regional leadership organisation with a specific focus on Eastern Europe.
- Asia-Pacific (down 4%): The performance was in line with our expectations during the third quarter, impacted by a weaker demand in China partially offset by a good dynamic in many other Asian countries. As expected, China was affected by the phasing of budget allocation concentrated in the first half of the year, leading to a weaker performance in the third quarter. South East Asia remained dynamic fuelled by the Indonesian market. India is maintaining a solid momentum driven by the development of electronic payment solutions, while Japan was strong on the back of the EMV migration.
- Latin America (up 61%): As expected, the pace of growth slowed during the third quarter of the year but remained at a high pace driven by a continuous dynamic in Brazil. The strong momentum in market share gains and deployment of traditional and APOS devices across the main local players continued to drive growth in for the country. Columbia, Peru, Chile and Bolivia benefited from a good traction accelerating during the third quarter with the contribution of contracts signed in the first half. Mexico continued to grow on the back of ongoing demand from the main local banks.
- North America (up 25%): After a first half impacted by weaker demand in Canada, revenue from the region was strong throughout the third quarter. Canada remained challenging, affected by a high comparison basis that is expected to normalise in the fourth quarter. After a stable first semester, US-based activities accelerated in the third quarter with the ongoing benefit of the ramp-up in ISV certification and strong project delivery. The solid pipeline built since the beginning of the year – North America has been leading B&A transformation - shall be a strong basis for a continuous dynamic in the fourth quarter.
Update on the Fit for Growth implementation
The Fit for Growth plan has been launched in February 2019 and is now fully in execution 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 been reached during the third quarter of 2019:
- B&A Revival: Android competence center in Vietnam is now up and running to accelerate the international deployment of APOS. The Global account management organization has been set-up and gain momentum. The EMS footprint has been rationalized and the product portfolio simplification is underway, with c. 50% of product references already decommissioned;
- Retail Acceleration: Geographical expansion of SMB is ongoing with the deployment of the Bambora blueprint in Benelux. Enterprise accelerates its product offering development with solutions including payment acceptance and acquiring. Global Online development of its domestic acquiring capabilities is underway and Payone starts to benefit from the saving banks partnership;
- G&A Streamlining: Implementation of the defined target model for major functions is on-track and the Group launched the scoping of its ERP infrastructure. Procurement contract renegotiations are ongoing with savings already generated. The first data centers migration initiated during the first half has been completed and outsourcing and nearshoring initiatives are ongoing.
These milestones are in line with the plan and enable us to confirm the €20 million positive EBITDA impact expected to be generated in 2019 and the €100 million positive EBITDA impact in 2021.
New Leadership appointed to head Ingenico Group’s Retail Business Unit
As of November 1st, 2019, Johan Tjärnberg, EVP of the Ingenico Group’s Retail Business Unit, is moving from day to day operational management and, transitioning his responsibilities until year-end. He will then take a new strategic role as a Special Advisor to Group CEO Nicolas Huss until he joins the Company’s Board later in 20202.
Through this evolution, Nicolas Huss and Johan Tjärnberg will continue their successful partnership to transform Ingenico Group: following the acquisition of Bambora, they built together the organization and business strategy of Ingenico Group’s retail activity, creating the conditions for the Business Unit’s accelerated and sustained growth.
Ingenico Group is appointing Gabriel de Montessus as EVP of the Retail Business Unit, as of November 1st, 2019. Due to the importance of the partnership with the Sparkassen-Finanzgruppe, Niklaus Santschi, CEO of the Payone joint venture, will report directly to Nicolas Huss.
All 2019 objectives reiterated
- Revenue: Organic growth above 9%. B&A revenue is expected to grow above 7% compared to last year and Retail to achieve a double-digit organic growth.
- EBITDA (after application of IFRS 16): EBITDA above €590 million. This target factors in €20 million EBITDA positive impact related to the Fit for Growth plan. The group expects the Retail EBITDA above €285 million and the B&A EBITDA at c. €305 million
- Free cash-flow: free cash-flow conversion rate of c. 50% leading to a free cash-flow of c. €300 million.