Worldline SA :WLN-FR: Earnings Analysis: For the six months ended June 30, 2017 : August 5, 2017

Worldline SA reports financial results for the half-year ended June 30, 2017.

We analyze the earnings along side the following peers of Worldline SA – Atos SE and GFI Informatique SA (ATO-FR and GFI-FR) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of EUR 778.10 million, Net Earnings of EUR 50.80 million.
  • Gross margins narrowed from 34.65% to 34.56% compared to the same period last year, operating (EBITDA) margins now 19.93% from 19.10%.
  • Year-on-year change in operating cash flow of 23.32% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2016-12-31 2016-06-30 2015-12-31 2015-06-30
Relevant Numbers (Semi-Annual)
Revenues 778.1 694.4 614.8 632 595
Revenue Growth (YOY) 26.56 9.87 3.33 6.59 6.94
Earnings 50.8 52.1 92.1 54.7 48.7
Earnings Growth (YOY) -44.84 -4.75 89.12 -0.18 6.8
Net Margin 6.53 7.5 14.98 8.66 8.18
EPS 0.38 0.39 0.7 0.41 0.37
Return on Equity 3.83 4.93 11.44 7.39 7.38
Return on Assets 4.54 5.89 13.28 8.4 8.06

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Market Share Versus Profits

Revenues History
Earnings History

WLN-FR‘s change in revenue this period compared to the same period last year of 26.56% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that WLN-FR is holding onto its market share. Also, for comparison purposes, revenues changed by 12.05% and earnings by -2.50% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 34.65% to 34.56%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 19.10% to 19.93%. For comparison purposes, gross margins were 36.10% and EBITDA margins were 20.32% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

WLN-FR‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 110.61 days from 151.72 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

WLN-FR‘s change in operating cash flow of 23.32% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Worldline SA engages in electronic payment services and banking. The company provides its services to the banking, financial, retail, telecom, public, transport, oil and media sectors. Its services include merchant services terminals, mobility e-transactional services and financial processing software licensing. The company operates through the following segments: Merchant Services & Terminals, Financial Processing & Software Licensing, and Mobility & e-Transactional Services. The Merchant Services & Terminals segment includes commercial acquiring, private label cards & loyality services, online services, and payment terminals. The Financial Processing & Software Licensing segment includes issuing processing, acquiring processing, online banking services, and payment software licensing. The Mobility & e-Transactional Services segment includes e-government collection, e-ticketing, and e-consumer & mobility. Worldline was founded on July 31, 1990 and is headquartered in Bezons, France.

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