Worldline disappointed investors as it blamed macro-factors for slow growth in H1 2024 and shared a downbeat assessment of the outlook for the rest of the year. Giles Grabinet, CEO, called out a “volatile consumer spending environment that exhibited a visible softening across many European countries in the second quarter.”
Revenue grew just 2% to €2.289bn with all three divisions – merchant services, financial services and mobile/ticketing struggling to grow sales faster than inflation.
Merchant solutions is the largest division and also the one that interests us most at Business of Payments.
Merchant volume was up 5% at €230bn in H1 2024 but all the growth came in the first quarter. Q2 volume was flat at €120bn with management blaming the wet spring and a “particularly weak June.”
Merchant revenue was up just 3% to €1.6581bn with the take rate dropping 1bp to 0.72%. Growth was constrained by “softer macroeconomic conditions” despite a resilient performance in Italy and the travel/gaming verticals.
Sales were also hit by the loss of €130m annual revenue from the termination of a set of high-risk merchants. €40m of this reduction was from Germany and followed BAFIN’s intervention at PayOne, Worldline’s troubled JV with the local savings banks. Worldline’s share of PayOne’s losses was €88.4m in 2023 although it did receive a dividend of €18.4m.
Worldline’s growth problem is reflecting in its merchant metrics which show it failing to profit from the shift in commerce to online sales. The total number of merchants rose 3% to 1.22m of which the vast majority (85%) are still trading F2F. Annualised payment volume per merchant rose just 2% to €377K, revenue per merchant was flat at €2,718 and adjusted EBITDA per merchant fell 6% to €633.
Management promises that new products and distribution partnerships will restore the business to growth. The most important initiative is the Credit Agricole JV which Wordline confirmed will go live in the first half of 2025. The new business, called Cawl (for Credit Agricole Worldline) will allow Worldline access to the acquiring market in France for the first time.
Cawl will be competing with a newly announced JV between two other French banks, BPCE and BNP, which also has grand ambitions. Giles Grapinet is unphased, saying that although these two banks bring “extremely powerful distribution” this newly created partnership will use in-house systems and will struggle without an external technology partner.
Worldline’s expansion into Italy, in partnership with local banks is going well and growing in the“very strong double digits.” The latest deal, Worldline’s fifth, is with CCB bank, and brings an additional 60.000 (very small) merchants processing €6bn in total. Migration begins in the second half.
Management made no update on progress at Worldline’s very expensive JV with ANZ Bank. In 2022, Worldline paid €307m for its 51% of the business which processes 20% of transaction volume in Australia. Worldline’s share of the JV’s losses was €39m in 2023 and it had to invest a further €20.4m in H1 2024.
Away from bank partnerships, Wordline had good news to share with other new products and commercial deals including:
- Lidio, one of Turkey’s leading Fintechs, allowing Worldline to offer direct access to local payment methods for its international clients.
- Tabesto, a French manufacturer of in-store ordering technology will deploy Worldline’s SoftPOS application in 36 countries. Overall, 6.300 merchants are now live with SoftPOS across all platforms.
- Worldline’s combined payment solution for marketplaces and platforms with OPP, a Dutch eCommerce gateway acquired in 2022, is now live with 165 partners.
Worldline says there are likely to be 2.5m public EV charging points in Europe by 2030. With more than 20 EV charging operators representing more than 25% of the market, Wordline says it is well placed to capture the promised growth. Two new EV partners were signed in H1 – Ampeco and EnerCharge.
Other new merchants included Luxair, (acquiring and APMs), IWG (payment orchestration and collecting), North Consulting (vending linked to local acquirers in the Nordics) and Cdiscount (online smart routing).
Worldline’s brief outage in the UK during July had limited impact. Marc-Henri Desportes, deputy CEO, said “We handled it very professionally, keeping a very good engagement with our customers. Impact is limited and outages, unfortunately, in our industry, it happens from time to time even to the biggest ones in the tech industry.”
Management called out cost pressures from the steady migration of domestic cards to international schemes, notably in Italy, but said it was standardising on IC++ to mitigate the risk. Worldline has been a strong supporter of the EPI and Giles Grapinet reiterated the need for strong European payment schemes. “It’s part of our playbook ..to make sure that there is diversity at point of sale and that there is never one monopoly route that is going to impose its condition on the entire ecosystem.”
Merchant solutions adjusted EBITDA fell 3% to €386m in H1 as margins dropped 2bps to 23%.
Turning to Worldline’s two smaller divisions, financial services revenue was down 2% to €457m and adjusted EBITDA down 1% to €126m. Issuer and acquirer processing performed well, especially in Germany. New wins included Sonet and MarketPay for Italy, but the topline was hit by the earlier loss of some large contracts.
Mobility revenue was up 2% at €174m and adjusted EBITDA up 36% at €30m. Worldline renewed to large contracts that include ticketing and payments – one in the event sector, the other with an energy company.
Group adjusted EBITDA (formerly known by a French acronym as OMDA) fell 1% to €514m.
After integration and rationalisation costs (€58m) and Power24 (€174m), unadjusted EBITDA fell 34% to €282m.
The Power24 programme will see hundreds of staff exit the business in the second half of this year. The new operating model is live from August and the exercise is expected to save €220m annual costs, 10% higher than originally expected. 29% of staff are now located in “low cost” countries, mainly India, Poland and Romania and this proportion should rise to 33% in 2025.
After deducting depreciation and amortisation, Worldline recorded an operating loss of €16m following a profit of €120m in the same period last year.
Looking ahead, management says growth is constrained by “European domestic consumption uncertainties” and is targeting a very modest 2-3% organic revenue increase. Investors were unimpressed and the stock trades at around €8 compared to a peak of €80 in 2021. Despite the negative market reaction, Grabinet believes that “Worldline will quickly start to benefit from a strengthened competitiveness and operational leverage that will drive solid medium- term performance.”