(News Bulletin 247) – The payment services group is plunging on the Paris Stock Exchange after lowering its targets for 2024. Worldline mentions uncertainties relating to domestic consumption in Europe

This summer results season is definitely not giving any favors to companies that deviate from their trajectory. This Thursday, it is Worldline that is taking the brunt of the pain after lowering its annual targets. The payment services company’s stock plunged by 17%, around 11:30 a.m., showing the biggest drop in the Paris SRD.

The disappointment is all the greater as Worldline seemed to have turned the page on a particularly difficult 2023. Last May, the group confirmed its 2024 targets, after revealing higher-than-expected growth in the first three months of the year. The activity was then driven by an improvement in its merchant services division.

But this improvement seems to have been one-off when we look more closely at the results presented today by Worldline. The payment services specialist published a lower-than-expected activity in the second quarter. Between April and the end of June, Worldline published a turnover up on a comparable basis of 1.7% to 1.19 billion euros.

Sluggish consumption

This growth is below the consensus expectations cited by Oddo BHF (+1.7%) and marks a clear deceleration compared to that achieved in the first quarter (+2.5%).

The group recalls that the quarter was marked by the gloomy macroeconomic context at the end of the quarter and by the expected effect of the termination of contracts. Worldline remains a group whose activity is closely linked to household spending volumes and therefore consumption. In addition, Worldline operates in a fixed cost industry where revenues are generated via small commissions but on gigantic transaction volumes.

Financial services, whose activity contracted by 1.5% in the second quarter, also weighed on Worldline’s performance. Over the entire half-year, the group thus revealed a turnover of 2.29 billion euros, representing organic growth of +2.1%.

On the other lines of account, the gross operating surplus contracted by 0.9% in comparable data, to 514 million euros, but Worldline did better than the consensus (505 million euros). The corresponding margin deteriorated to 22.5%, against 23.1% a year earlier.

Cash flow plunges

Another disappointment was the net result, which fell into the red at -29 million euros, compared to a net profit of 81 million euros in the first half of 2023. Free cash flow collapsed by 64.5% over one year to 82 million euros, but this is less than feared by analysts (52 million euros).

Taking note of the deterioration in consumption in Europe, Worldline has been forced to adjust its forecasts for this year. Management now expects its revenues to grow between 2% and 3% on a like-for-like basis, compared to a like-for-like growth of 3%.

Adjusted gross operating surplus is now expected to be between 1.13 and 1.17 billion euros, an organic increase of between 2 and 5%, compared to a previous forecast of at least 1.17 billion euros, and an increase of 5%.

“The second half of the year will benefit from an easier basis for comparison. The cost structure should also start to benefit from the restructuring plan (whose annual savings target in 2025 is raised by 10% to 220 million euros. Regarding free cash flow, it is expected at 230 million euros this year (compared to >230 million euros previously and consensus at 223 million euros)”, details Oddo BHF

The payments group is, however, confirming its medium-term ambitions, first mentioned in February 2024. Worldline still intends to achieve like-for-like revenue growth of “mid- to high-single digits” (roughly translated as a range of 4% to 9%) and is targeting “continuous improvement in its adjusted gross operating surplus from 2024”. The company also intends to achieve “rapid progress in the conversion of adjusted gross operating surplus to around 50%”.

Its competitor Nexi is doing much better.

Comparison is not reason, but Worldline also suffers from the cross-reading of the publication of the Italian competitor Nexi which, for its part, confirmed its annual objectives after quarterly results above the consensus.

Nexi’s quarterly revenues rose 5.8% year-on-year to €879 million, beating analysts’ expectations, who had on average been targeting growth of 5.1% and turnover of €873 million.

The group maintained “good momentum in merchant solutions and no slowdown in growth in issuing solutions, contrary to expectations,” notes Oddo BHF.

Nexi’s gross operating profit rose 7.5% to €465 million, exceeding the €460 million forecast by analysts.

The Italian group confirmed its annual targets after these quarterly results that exceeded expectations. The research firm added that Nexi should “benefit from an easier basis for comparison in the second quarter and from the first benefits of its restructuring plan.”

These publications therefore confirm Oddo BHF in its sector hierarchy which therefore tends to favor Nexi, whose research office is outperforming Worldline (neutral recommendation) due to “more sustained revenue growth, better profitability and higher cash generation allowing cash to be returned to shareholders”.