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Free AccessEdenred (NR, A-) 1H (to June) results
Unclear what's driving equities to one-year lows; 1H and FY guidance look in line with consensus. We have always liked both Pluxee (#2 in employee benefits) and Edenred (#1) with both left at the wides of consumer services despite riding strong expected and actual (in recent years) organic growth. That has been paired with clear BS policies even through bolt-on M&A.
Edenred sold-off on Italian regulator issues around a single deal (first emerged in Feb). We still liked the curve noting the fine company was estimating was small (€1-2m) and co had a past history (in France) of riding headline growth through regulatory issues. It's echoed that today in the earnings call saying "business is doing well in Italy, we are growing at double digits...we continue to win many, many accounts in Italy." Seems credit has finally faded those concerns too - Edenred 29s -17bps tighter over the last 2-months (vs. €IG unch). It no longer looks cheap - switch into Pluxee 28s (NR/BBB+) (Z+80) who has been left unch and still shows some value. Note Pluxee is not as diversified outside of employee benefits (like Edenred is) and hence more exposed to any shared regulatory headwinds that come up.
- 1H revenue at €1.4b (+18-19% LFL & gross) with EBITDA at €597m (+26% LFL). Headline growth helped operating EBITDA margin to 37% (+140bps LFL). FCF was €18m (in-line with seasonally weak 1H WC).
- "Operating revenue" was at 1.3b (+15%). Within that Benefits & engagement (65%) (voucher/card business and #1 vs. Pluxee #2 in global share) grew +16%, Mobility (24%)(corporate fleet/fuel & toll cards) grew +21% and complementary solutions (11%) up a slower +2.9%.
- By region Europe (61%) slower +11%, LATAM (29%) firmer at +22% and Rest of the World (10%) the fastest growth at +26%.
- Shareholder returns totalled €496m this half, capex within its "expected range" for FY of 7-8% of revenue.
- FY24 EBITDA guidance is for €1.23-1.3b (+12-18% yoy) and is in-line with its April guidance for LFL EBITDA growth >+12%. Consensus is already there at €1.26b.
- In April it had FCF/EBITDA conversion guidance of >70% which it didn't mention in presser, but affirmed in the earnings call.
- Gross debt (incl. small leases) was €5.1b (up 0.6b over the half) while net debt was €1.9b on €3.2b cash & eqv's. It leaves it gross/net 4x/1.5x levered on FY guidance.
- Front maturity is a €500m convertible which it says its "working on refinancing".
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Why MNI
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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.