Pluxee N.V. (PLX) Earnings Call Transcript & Summary

Good morning. Thank you for standing by, and welcome to the Pluxee First Quarter Fiscal 2025 Revenues Presentation. [Operator Instructions] I advise you that this conference is being recorded today on Wednesday, January 8, 2025. At this time, I would like to hand over the conference to Ms. Pauline Bireaud, Head of Investor Relations. Please go ahead, madam.

Thank you, and good morning, everyone. I hope you all had a wonderful holiday season, and thank you very much for joining us today for the first quarter of the fiscal year 2025. So as you know, I'm Pauline. And today, I'm joined by Aurelien, our CEO; and by Stephane Lhopiteau, our CFO. So here is our agenda for the call. So Aurelien will start with the highlights and key figures of the quarter. This will be followed by an overview of our business performance, highlighting some of our key achievements in this quarter, along with an update on the execution of our M&A strategy. And Stephane will then take you through our financial performance in detail before Aurelien come back to our outlook. And with that, I will hand over to Aurelien.

Thank you, Pauline, and good morning, everyone. And I would like to take the opportunity to wish you a very Happy New Year. I'm pleased to be with you today to share the achievements that Pluxee delivered in the first quarter of fiscal 2025. Let's start with our key highlights on the next slide. Q1 has been a solid quarter, and I am pleased with the progress that we have made in terms of commercial dynamics, revenue growth and execution of our M&A road map. Starting with business momentum. Our commercial performance is strong this quarter, driven by client loyalty, efficient portfolio management and continued new client acquisition. Second, on revenue growth. Total revenues in Q1 grew organically by plus 13.2%, up to EUR 289 million. While Employee Benefits continued its solid double-digit trajectory, we also saw Other Products and Services trending towards a return to growth as a good development in employee engagement partly offset residual base effect coming from the Public Benefits program discontinuation in Chile. And last but not least, we signed the acquisition of Benefìcio Fácil in Brazil, reinforcing the group offering in employee mobility benefit while steadily progressing on the deployment of our partnership with Santander in Brazil and the integration of Cobee in Spain. So this solid start to the year gives us confidence to reiterate our strategic and financial objectives. And to illustrate the solid start to the year, I would like to focus now on the commercial dynamics that we delivered during this quarter. Fiscal 2025 started with a solid business performance as once again, we have remained focused on execution. So first, net retention stood consistently above our 3-year target of over 100%. This came through a combination of improved client value proposition, boosting the customer loyalty and a steady portfolio growth fueled by further average fair value increase in most countries. For example, in Brazil, we managed to secure a high single-digit increase in average sales value. And this is significantly above the local inflation level. This was driven by the deployment of our internal strategic initiatives such as the Average Meal Price Campaign and coupled with positive local evolution such as the new collective agreement in the banking sector. Our new client acquisition pipeline is also on track with EUR 1.3 billion annual objective, including a continuous robust contribution from SMEs. To highlight one of our key wins of the quarter, let's take a closer look at Austria, where we won a major multiyear employee benefit contract with the city of Vienna. The key success factor was the innovative approach that we brought through our hybrid solutions, providing the freedom of choice to the 30,000 Citi employees to be equipped with a fully virtual solution. With this successful deal, we have not only underlined our clear market leadership position in Austria, but above all, exemplified our ability to further penetrate the market by serving the specific needs of large clients with a high number of employees. So let's now look at the top line performance in the next slide, and I will give you the key highlights before Stephane provides you later with more detail on the product and regional mix. Growth for the quarter was strong with total revenues reaching EUR 289 million and as previously mentioned, representing a plus 13.2% organic revenue growth. This puts us on a good track to achieve our low double-digit growth objective for the full year. Operating revenue continued to follow a favorable trajectory, reaching EUR 249 million, up plus 12.1% organically. One final point before I move on to the next slide. Float revenue growth continued to be accretive to the total revenue growth this quarter. It stood above 20%. And as expected, it has leveled off compared to the previous quarters. And this is in line with our expectation of slight organic growth for the full year. Let's now move to the last slide of this section focused on our M&A strategy. We continue to be active in terms of M&A during the quarter with first the signing of the acquisition of Benefìcio Fácil in Brazil. This is a tech-enabled provider of employee mobility benefit solutions for public transport. This complementary bolt-on acquisition will reinforce the group's multi-benefit approach in Brazil, targeting especially the SMEs. This acquisition should be accretive on the group recurring EBITDA margin from year 1, with the closing expected in the beginning of H2 2025, subject to the approval by the Central Bank of Brazil. We are also focused on the ongoing deployment process of our strategic partnership with Santander in Brazil, where 90% of Ben's business volumes have been already migrated to Pluxee platform and 95% of our integration work streams have been completed. Meanwhile, we have made significant strides in terms of commercial development. As of today, more than EUR 130 million of annualized business volume have been signed, comprising both new client wins and contract renewal. And finally, the integration process of Cobee has been progressing well since the closing of the acquisition in September 2024, with a specific focus on client migration plan, the brand positioning and the product road map, among others. The progress of the integration in Spain will form a solid foundation for broader integration efforts across Mexico and Portugal. These 3 deals underpin our commitment to deliver growth synergies and their contribution to organic growth will ramp up quarter after quarter. Last but not least, we have a robust pipeline of relevant targets in line with our disciplined M&A strategy to continue delivering a mix of bolt-on and build-up acquisition in the coming years. And with that, I will hand over to Stephane to take a deeper dive on our financial performance.

Thank you, Aurelien. Good morning, everyone, and Happy New Year to each and everyone. It is my pleasure to be with you today to present in more detail our top line performance for Q1 '25, starting with the business volumes issued on Page #10. In Q1 '25, we recorded a total of EUR 6.5 billion in business volumes issued that we refer to as BVI. The Employee Benefits line of business, BVI increased to EUR 4.8 billion, representing a plus 10.4% organic growth, in line with the previous quarters. As mentioned by Aurelien earlier, this growth in Employee Benefits BVI has been fueled by strong net client retention as a result of improved client value proposition, strengthening customer loyalty and further increases in average face value in most countries. We are also pleased to see BVI from Other Products and Services returning to growth with a plus 5.9% organic growth. And while base effects from one discontinued Public Benefits contract in Latin America remained a headwind, we have seen improved dynamics in Public Benefits BVI in Continental Europe. Let's now see how this continued BVI positive momentum has translated into total revenue growth in Slide #11. In Q1 '25, total revenues reached EUR 289 million, up plus 13.2% organically and plus 8.7% reported. Currency effects represented a minus 7.6% impact compared to Q1 '24. It was largely driven by the depreciation of the Brazilian real, which has been ongoing since May 2024. This was partly offset by a plus 3% scope effect related to Santander and Cobee. Total revenue growth reflected the performance in operating revenue, up plus 12.1% organically at EUR 249 million and float revenue up plus 20.9% organically at EUR 40 million. Operating revenue benefited from the positive momentum in business volumes issued, coupled with an improved take-up rate compared to Q1 '24. Moreover, as you can see, even if growth in float revenue was leveling off compared to previous quarters as expected, it remained at a high level, reaching EUR 40 million, making us confident on delivering a slight organic growth in float revenue for the full fiscal year '25, as previously mentioned. I will now provide you with more details on the underlying trends supporting operating and float revenue growth, starting first with how operating revenue has evolved by activity on Page #12. As already mentioned, we recorded EUR 249 million of operating revenue in Q1 '25, representing a plus 12.1% organic growth. This was mainly driven by the continuous robust momentum in Employee Benefits. Operating revenue in Employee Benefits grew indeed by plus 14.9% organically in the quarter. As for the BVI growth, the Employee Benefits operating revenue was well balanced across product lines, while in terms of geographic mix, it was slightly more weighted towards Latin America and rest of the world better than Continental Europe as expected. Operating revenue in Other Products and Services decreased by minus 2.6% organically to EUR 37 million as growth in employee engagement and reward and recognition did not fully offset the Public Benefits contract discontinuation in Chile. I would like to highlight again that we are seeing this line of business gradually returning to growth in terms of operating revenue, while we see the well-flagged base effects fading away and the BVI of this line of service growing in this quarter. Aside from this performance by lines of business, let's move to the geographic mix and how operating revenue growth has materialized across regions on Slide #13. In short, we delivered a balanced growth profile across all regions in the quarter. Organic growth in Latin America came in at plus 11.1% as the base effect flagged in Q4 '24 in relation with the change in regulation in Brazil started fading away, although such organic growth was still impacted by the Public Benefits contract discontinuation in Chile. This Q1 '25 performance in Latin America is fully aligned with the trends we had highlighted during the 2024 full year release with organic growth in the region expected to strengthen in the coming quarters, whilst base effects completely disappear. Continental Europe performed on track with expectation at plus 9.7% organic growth. Going forward, we are now starting to observe the impact of the economic environment in some European countries. This should result in growth deceleration in the region in the coming quarters, notably when compared to Latin America and rest of the world. Moreover, in Q2 '25, Continental Europe will face significant base effect compared to Q2 '24 when we deliver close to plus 20% organic growth. Finally, in Rest of the World, operating revenue grew by plus 20% organically, driven to a large extent by Turkey and India as well as by other smaller emerging countries. To conclude on operating revenue trends, we expect this growth momentum at group level to continue, while growth may vary in each region from one quarter to the next, primarily driven by base effects and product mix as observed in fiscal 2024. And before I give the floor back to Aurelien, let's now shift to the evolution of float revenue on Page #14. Float revenue increased by plus 20.9% organically in Q1 '25 compared to Q1 '24, in line with expectations, driven by a growing float baseline in the balance sheet, fueled by continuous rise in business volume issued and by still better investment yield overall compared to Q1 '24. As expected, float revenue organic growth is now leveling off compared to fiscal '24 levels in light of the overall downward trend in interest rates, notably in Continental Europe. However, it remains relatively high and consistent with our expected slight organic growth trend for fiscal 2025. That's it for our top line performance in Q1 '25, and I will now hand over to Aurelien for our final outlook section on Slide #16.

Thank you, Stephane. The performance achieved in Q1 has established a solid foundation to deliver our full year ambition. And as a result, we can confidently reaffirm all the financial objectives that we announced during the release of our annual results back to October. So namely our low double-digit organic revenue growth for both fiscal '25 and 2026, a target of plus 75 basis points recurring EBITDA margin expansion in each of fiscal '25 and fiscal 2026 at constant rates and above 75% of recurring cash conversion on average over fiscal 2024 to 2026. And now with that, I will -- with Stephane, I will be happy to take your questions.

[Operator Instructions] The first question is from Julien Richer of Kepler.

I have 3 questions, if I may. The first one on the gift voucher season. If you can give us a bit of visibility on what happened in December and how you see that compared to last one? You mentioned the very tough Q2 base. So more granularity would be appreciated. The second one on the impact of French decision not to be able to use the meal voucher anymore in supermarkets. Will that have a negative impact on your growth, maybe on discussion with potential new clients? And what will be the impact also on the float period because I guess it will be positive. So net, what will be the impact of that decision? And third point, on the Santander deal, you mentioned more than EUR 130 million of new BV signed. It's more or less 2% positive impact on your business volume. Is there more to expect going forward? Or is it mainly most of it that has been achieved already?

Thanks, Julien, for your question. I will start with the first one regarding the Christmas campaign. So as you know, our first quarter ends at the end of November. And so as such, I mean, we still don't have -- I mean, we don't have the full visibility on the 2024 Christmas campaign. What I can tell you today is that at the end of November, the performance overall was in line with our expectations, and it contributed well, I mean, to the total revenue growth. Regarding your second question on the impact on the French decision. Actually, I mean, this is more the resignation of the Spanish government that led to the suspension of the examination by the parliament of the measure related to the extension of the usage of the meal benefits in France to buy all kind of food products for 1 year or more. What I would say is that, first of all, we expect this discussion at the Senate to resume on January 15, so in 1 week time. So I think after it's going to be a matter of a few weeks to be voted and implemented. So it's a very temporary situation that we are facing at the moment. Is there any impact on the business? There is nothing significant that it's worth being mentioned as we speak. And regarding the Santander deal, maybe, Stephane, you want to comment it?

Yes. Julien, I believe that the 2% impact that you are referring to relates to the calculation you made based on Slide #18, where we disclosed the EUR 130 million of contribution from the Santander client to the business volume, but this is not the impact in Q1. This is the annualized business volume expected from the clients that we recorded in this quarter. So basically, the impact is much lower than this. But of course, going forward, we expect the ramp-up of our partnership with Santander to contribute significantly to the growth, and this is fully part of our strategy to accelerate the growth by M&A or partnership.

Yes. And maybe to [criticize] regarding -- I mean -- because in your question, Julien, you mentioned the fact that the meal benefit cannot be used anymore in the supermarket. This is not true. This is not the case. I mean, our products can still be used in supermarket, but they can be used to buy ready-to-eat food item. So actually, the number of items, let's say, raw food items that are concerned by the suspension of the extraordinary measure are very limited. So there is no -- that's why there is -- we don't expect anyway even for the month of January, any big change in the behavior of our consumers.

The next question is from Sabrina Blanc of Bernstein.

I have 3 questions from my part. The first one is regarding the performance in Continental Europe. You have mentioned some disparities between countries to other one. So could we have more granularity and your view regarding the end of the year? The second key question is regarding the float revenue. I just would like to understand your definition of slight organic growth expecting in 2025? And my latest question is regarding the acquisition of Benefìcio in Brazil. Could we have more color on the impact in terms of economic impact and also what does it bring to you?

Thank you, Sabrina. Stephane, do you want to take the question regarding the float revenue?

Yes. Sabrina, you remember it very well, but we don't share details in terms of guidance between operating and float revenue. However, based on the many questions that we received from you, the analysts, we decided to share at the time when we released our fiscal year '24 figures, a bit of color regarding float revenue. And so this slight growth, this slight increase in float revenue was to tell you that we don't expect a negative growth. So we expect a positive growth, a slight growth. It's just a few points of percentage. So it's going to be dilutive versus the low double-digit growth, but we are not going to give you, and this is highly unpredictable because this will as well be depending on how interest rates will evolve. But at the time when we released -- when we set the guidance, we told you that we had based our calculation on the consensus that is available. We checked it again just before the release of this quarter. And what we are saying today that we are reiterating this color within the guidance, which is to tell you that we are still expecting a slight increase in float revenue for the full year.

Thank you, Stephane. So regarding the performance of Continental Europe and so I'd like first to remind you that we don't guide by region. But to give you a bit of color, we've started indeed to see some disparities in the growth contribution from some sectors of activities and some countries. And this is mainly the result of the current economic environment. But having said this, I mean, we expected already that the contribution of Continental Europe to the organic revenue growth will come -- I mean, the contribution, I mean, to the organic revenue growth will come more from Latin America and Rest of the World in the coming quarter and especially for Q2. And I'd like to take the opportunity to remind you that we will face for Continental Europe, a very high comparison base with a very strong quarter on Q2 2024. I mean, we are delivering a plus, I mean, more than 19% organic revenue growth by 2024, so this is for the performance of Continental Europe. And last but not least, the acquisition of Benefìcio Fácil. So this first -- I mean, this transaction will reinforce our position as one of the key leaders in Employee Benefits and Engagement in Brazil. It will enhance our multi-benefit offer in Brazil, which is our largest market by far. And in terms of contribution and impact, we expect to achieve substantial growth synergies from the integration of Benefìcio Fácil within Pluxee, leveraging first the opportunity to drive additional revenues by boosting the cross-selling of their mobility solution to our existing client base. And I think that we -- I mean, we don't give more specific information on the Benefìcio Fácil itself.

If I may add something regarding Europe, is that possible? I understand that you are not providing details country by country. But just to understand that your message regarding Q2, we understand that it is tough comparable. But in terms of disparities between countries, do you see some countries on which we have some weakness? I'm thinking notably on the French market.

Yes. It's not countries having weaknesses, it's more sector of activities. I will mention the automotive industry and especially in Eastern Europe. But on the contrary, we have Southern Europe that has been performing very well. Spain is a great example. That's why we are talking about disparity. It's not like an overall trend.

The next question is from Pravin Gondhale of Barclays.

First, I've got a follow-up on Sabrina's questions earlier on Continental Europe. I mean, given the tougher macro environment in Europe, are you seeing or expecting negative volume growth in any pockets? Or the expected deceleration in organic growth will be mainly due to slower new business development and face value revisions, do you think, while the existing business continues to remain stable? Then the second thing is on the net business development, which you said that continues to be very strong. Outside Brazil, can you share more colors how that appears across regions, especially in Europe and Rest of the World? And then how does it look in food versus nonfood verticals for you? And what is your expectation for the remainder of the year? And then finally, on the regulations, do we have any update on potential regulation on interoperability in Brazil?

Thank you, Pravin. So regarding the regulation in Brazil, so the most recent development, so we -- and I shared this with you last time. So we've been engaging proactively with the government to propose the right scheme that would address the interoperability issue and that [ fulfills ] the expectation. And more generally, and this is true for Brazil, but for all the other countries as well, we remain in constant dialogue with the labor ministry to identify and discuss ways to enhance the Employee Benefits system. And starting with the meal and food to ensure its success over the long term. And it's worth being mentioned as well that from our recent exchanges in Brazil, it seems that the portability is no more a priority for the current government. I mean, the additional question regarding Continental Europe, Stephane, do you want to give some more color regarding the contribution to the growth? I mean...

Yes, of course. So Pravin, regarding your question and maybe underlying concern that we might face some negative growth. So first of all, again, we don't guide by region. But so overall, what we wanted to let you notice, to be aware of, is that the second quarter in Continental Europe is going to be lower than what we have delivered in the last quarters because, as Aurelien explained, and as I said during the presentation, we have a very high comparison basis in last year in Q2 of '24. Then for the full year, we said that the global low double-digit organic growth of the group that we are confident to deliver, this is going to be driven more by Latin America and rest of the world. So meaning that the growth in Continental Europe is going to be more moderate than for the 2 other regions, but without jeopardizing the low double-digit global objective that we have, and we will still deliver growth. So we are -- with the business momentum is there, it's just that it is lower, and this is going to materialize more in Q2 than for the other quarter in the full year for Continental Europe. So we just want to avoid what happened in the last year to make it clear in Q3 when we had a lower growth. And you consider it, you the analyst, as an underperformance. This was not an underperformance and we have a good explanation. And this is what we are seeing again. We -- and this is the strength of our footprint, of our business model. We are well spread in the world. But in one specific area, for 1 quarter, there might be some differences in product mix, some fluctuation in the base effect. And this is just what we want to share with you today. So Q2 in Continental Europe is going to be with lower growth.

And regarding the development outside of Brazil. And by the way, you know the figures that we shared with you is related to the integration and the impact from -- coming from the integration of the Ben's business within Pluxee in Brazil. It's not the overall performance of Brazil. We are delivering more. That's the first thing. And we've been -- continue to experience a low double-digit growth in BV in Q1 in -- I mean, outside of Brazil. And again, this is led by both the strong net retention rate and alongside with new client gains. So it's from a pure new business standpoint, we said it. Our development pipeline is strong. It's confirmed with our EUR 1.3 billion of new business objective. And within this, the contribution from SME, I mean, remains very strong as well. So trending above our 30% contribution objective. So this is what I could share with you today, Pravin.

The next question is from Mourad Lahmidi of BNP Paribas.

So I have 3 questions. The first one is on face value in Brazil. Can you refresh our memories on the mechanics of legal face value in Brazil? Are they indexed to inflation? Are they set by local authorities every single year? The second question is on what you mentioned on Brazil in the Slide #6 in terms of the average meal price campaign and some new collective agreements in the banking sector, how those initiatives and agreements have impacted your revenues? And can you give us maybe more details on those? Finally, your business volumes in Employee Benefits is up 10%. Operating revenue for the same revenue line is up 12%, so outperforming business volumes. So I'm wondering whether there was some fee increase during the quarter on the merchant or on the employee, on the corporate side? Or whether there was some mix improvement. So maybe some granularity on the discrepancy.

Thank you, Mourad. Maybe, Stephane, do you want to start with the last question, and I will take the one regarding Brazil and the average further.

Sure. So regarding your last question, Mourad. So this is true that on top of the additional business volume that we have been able to generate in the quarter, there is an improvement in the take-up rate. So we did not disclose it clearly on this side, but you can do the math and when you make the comparison with the previous year, so the quarter 1 of fiscal year '24, you will see that we have a slight improvement of 15 basis points. It's lower than the global take-up rate for the full year that we disclosed end of last year. So end of last year, the take-up rate was 4.95%. And in this quarter, it's 4.45%, which is 15 basis points higher than what we had the year before. So we are still improving. This is the global momentum, and this is -- so overall, the variance in the take-up rate from one quarter to another is highly related to the mix of product delivered all along the year. But then we are on this momentum to improve the take-up rate as we disclosed it before, which was much more driven by increases in client commission than merchant commission.

And regarding the face value in Brazil and the way it works, so it's not a decision made by the government or by the authorities. This is really a decision made by each and every companies. So it's a business. It's a decision by the human resources department, companies by companies. But it's fair to say that for some sectors, there are some collective agreement. I mean this is the case for the banking sector. This does not apply to each and every sector, but especially for banking sector, this is the way it work. So they came out with this strong recommendation to significantly increase the average fair value for all the employees of this sector. And we started to see the positive impact on our existing client portfolio for this specific sector. But it's -- I mean the full impact will come over the next quarters.

The next question is from Justin Forsythe of UBS.

I've got 2 questions, if I might. So first one being on Benefìcio Fácil. Maybe I'll try asking the question a different way because it seems like you're not really wanting to share transaction size or revenue. But should we just then assume that this is close to de minimis, something like a low single-digit uplift max? And also, I think in the release, initially, it was noted that you were working with them in the past. So in what capacity was that? And is there some portion of existing revenue for Pluxee that's already tied to Benefìcio Fácil? And I want to ask a second question around the Other Products line. Maybe we could just review and re-unpack the growth algorithm there. So understanding that Chile has been a drag, which I believe is going to persist for another quarter. But maybe we could talk through what your expectations are for that segment, call it, medium term? And what are the drivers of that? I recall it being mostly other benefits rather than mobility, but where are you expecting to see strength in Other Products to get that back towards low double digits?

Thank you, Justin. So regarding your question on the Public Benefits activity. So indeed, as we said, the performance of this Public Benefits activity in the first quarter, is still impacted by the discontinuation of the large contract in Chile that you mentioned. This impact will progressively disappear over the second quarter. And I'd like to take the opportunity to share with you that we have -- and I'm very pleased to say that we have already regained a significant portion of this contract, so 1 year later. And this is the opportunity to congratulate the teams that have been involved in this project. So to your question, it will accelerate the return to growth of the public benefits activity from Q3 onwards. Regarding Benefício Fácil, maybe, Stephane, you want to bring more color to...

Yes. I mean more color just on what you said already. And so this is correct, Justin, that we had a partnership with this company. So we are internalizing the full value. And so we expect -- this segment, this employee mobility segment in the Employee Benefits overall market is a very important segment in Brazil. So this is going to help us to accelerate. And doing so in terms of scope effect, in order to make it clear, we are talking a few millions. So we are not talking about a significant transaction. We are talking about a few millions of euros in terms of scope effect because we will -- we're going to internalize what was recorded at the level of Benefício Fácil and keep our share. And then we're going to accelerate, thanks to the synergy that we are going to deliver together.

Got it. Just on the Other Products, if I might. So well noted on Chile, and congrats on winning some of that deal back. That's really good news for you guys. Is there something else that will help drive that acceleration? Like I know you won this project in Vienna, which seems interesting. Is there a glide path for that? Or is there something else in terms of the building blocks for that segment or revenue line going forward into kind of the back half of '25?

So Justin, first to clarify, the contract with the City of Vienna is an Employee Benefits contract. So it's not part of the Other Products and Services. It's really, I mean, part of our core business. It's not because the client is a public client that actually classify it as another product and services. So that's the first element. And the other part is that, yes, we -- in the Other Products and Services, not only we have the Public Benefits business, but we also have the reward and recognition programs. And we've been, I mean, optimizing this business, I mean, over the past 2 years. And we start seeing some positive rebound there. So yes, I mean, we are optimistic for this Other Product and Services activities. Regarding the -- Justin, because -- and thanks, I mean, for your congrats, I mean, I will pass them to the team. And I just would like to precise, I mean, to manage your expectation. I mean, the size of this -- I mean, what we won in terms of revenue will not be as important as it was before. The volume will be -- I mean, as I said, I mean, this will be a large portion of what we were managing, but condition will be different.

The next question is from Andre Juillard of Deutsche Bank.

Congratulations for this solid start to the year. Two follow-up questions, if I may. First one was about client retention that you were mentioning as very strong. Could you give us some more color about it? And second question about the deleveraging of your balance sheet. You are mentioning that you have a significant pipe for acquisition, but you also mentioned that they were mostly bolt-on acquisitions. Could you consider at a certain level, a return to shareholder or something like that to use your cash net position?

Do you want to take the first question -- I mean, the second question from that.

So Andre, on the -- our capital allocation policy, you have in mind that we designed it and explained it at the time of the Capital Market Day and with a top priority, which is clear for us, which is to feed the growth. And so we have 2 key pillars of our capital allocation policy, which is first to invest internally in CapEx in order to feed organic growth. And then we have the second key pillar, which is to accelerate the growth with M&A. And the objective behind it is, of course, to generate significant growth in order to create value for our shareholders in the long term. And this is really our priority. However, at the same time, we have a third pillar, which is to return value to shareholders in the short term. And in fiscal year '24 -- by the end of fiscal year '24, we decided to improve this pillar by basing the payout, not anymore on just net profit, but adjusted net profit, which is an expanded basis. And this led to an improvement of the distribution of dividend of 50%. So this was quite a move in order to return value to shareholders. Now we are still targeting, we have a strong pipeline in terms of M&A. We will always do -- deliver this strategy in a very disciplined way. So far, there is no reason for us to change our capital allocation. Going forward, depending on the rollout of our M&A strategy and always preserving our BBB+ rating, we might investigate any other potential option, but this is not something that we are planning to do in the short term as our priority is still to deliver significant growth in order to create value for shareholders in the long term.

And regarding the client retention, again, our net client retention rate, we said it is trending above 100%. This is led, on one hand, by the average face value increase that we talked about. And we are in line to deliver on our objective of EUR 3 billion of additional volume over fiscal 2024 to 2026. And on the other hand, it's driven by the, I mean, high client loyalty, and we are achieving this very strong level of loyalty, thanks both to the operational excellence and to all the investments that we are putting to improve our value proposition to all our stakeholders, so including, of course, clients, but their employees and our merchants.

[Operator Instructions] The next question is from Estelle Weingrod of JPMorgan.

Two quick questions. The first one, organic operating revenue growth in Q2 last year was good. As you mentioned, it was close to 20%. Can you provide a split of the comps in there, including the leap year? And the second question on Chile again, does it mean that you won back 1 of the 2 lots you lost last year? And should we expect this to kick in back in Q3?

Stephane, do you want to answer the first question from Estelle regarding the...

I'm sorry, Estelle, because I was not clear. So your first question was referring to the organic growth that we delivered in operating revenue in Q2 last year for Continental Europe. So this is 20%, which is true. It wasn't -- sorry, 19.6%, so close to 20%. But then what was the end of your question? You were referring to a split in...

Yes. I mean, just what are the comps in there? I mean, like the comps are difficult for this year, so I guess the leap year was one of the things that contributed positively, for instance. Is it possible to quantify a little bit more the good performance of Q2 last year?

I think that one of the specific elements last year was the purchasing power program that was an extraordinary measure decided by the government in Belgium. And it was a one-off because this was not conducted in, I mean, this year. I mean, I think it's a significant part of this strong performance for the Q2 of 2024. And regarding Chile, actually, so we -- indeed, I mean, there are 3 lots for this specific contract. We won the one, which is the largest one. And it will kick off, I mean, beginning of March as this season is the beginning of the school year in Chile.

The next question is from Hannes Leitner of Jefferies.

I got also 2 questions. The first one is a follow-up on the European weakness. Do you think -- besides this one-off effect in Belgium, do you think that this is a temporary or longer lasting? And do you plan to have any measurements in terms of cost composition, headcount, et cetera? And then the second one is just like on Italy after the laws have been passed of the commission cap, have you put together any agenda of trying to gain here market share, take the opportunity to circle back to clients? Maybe you can share there your thoughts.

Okay. So I will start with your question regarding Italy. So to remind you, our meal benefit solution there represent less than 3% of our financial aggregate. And the amendment that is capping the merchant commission at 5% was voted in December. Again, as previously announced, it will not impact our financial objective for '25 or '26. Having said this, so this measure will be effective on September 1 for our existing merchant network. And so currently, I mean, our team is working on the client renegotiation plan. So that everything is ready by then. So that's what I can share with you for Italy. And back to your question on the European weaknesses, Stephane, you want to...

And so to be -- this is true that I don't have in mind all the details of what is favorably our performance in Continental Europe a year ago, I mean, for Q2. So this is true on top of the example in Belgium that Aurelien referred to that we had this additional 1 day in February last year, this leap year that Estelle was referring to. At the same time, I have in mind that the gift campaign was a great success last year, setting the baseline quite high for comparison to this year and with revenue recorded in Q2. So there were a number of things, but there are no specifics. Again, every time you look at a very limited scope and it's even worse when you look at just the country, there are very significant fluctuation. And this is, again, why we need to look at the group overall on our commitment and strong confidence to deliver this low double-digit organic growth for the full year for the total group from one quarter to the other, from one region to the other. And it's even worse when you look at just the country, there might be some significant fluctuation.

But I was not looking backwards. You called out -- besides the tougher comparatives in Q2, you called out some mix effect in macro headwinds. And so we just wanted to understand better the dynamics for the upcoming quarters or even for years. Do you expect there that there's just like a smaller business momentum? Or is it just really the tough comparatives?

And so again, we don't. Because we don't share all the details, but what we can tell you that for Continental Europe, we expect Q3 to be quite strong. Then Q4 is far from now, we'll see, but Q2 is going to be low. Q3 should be strong. But this is based on our execution plan because, of course, we manage the group on a monthly basis, on a quarterly basis. And our views right now is that Q2 is going to be low for Continental Europe, Q3 will be strong in order to be reassuring.

The final question is from Ed Young of Morgan Stanley.

I've just got one left. When you talk about macro weakness affecting the business, I'm not going to ask you to break down Continental Europe, don't worry. But if you could perhaps talk at a high level about how that translates into Employee Benefits. Does that mean you're seeing weaker employment growth than you might have otherwise considered? Are you getting weaker contract wins than you might have considered or at worse pricing? Or do you see your clients reduce the amount of spend relative to maximum face value? I wonder if you could just talk a little bit about how that actually translates into the numbers and then what you're sort of looking for, I guess, as you look for that business to accelerate or improve going forward?

Okay. Again, it's -- I mean, what we are seeing is some early signs. What I would say and what we shared with you regarding our development pipeline is true as well for Continental Europe, so we have a very strong pipeline there. But indeed, I mean, in some countries or for some specific sector of activities, given the current economic environment, we start observing here and there that some clients might be more prone to adopt a wait-and-see approach, especially among SMEs. But it's more like it's taking more time for them to decide, but still the decision is made. So it's increasing a bit the time for them to make the decision. So this is what we are observing at the moment.

Okay. So slower conversion.

Thanks a lot for being with us. Just to wrap up this call, I would like to highlight again that Q1 has been a solid quarter, both in terms of business momentum and revenue performance. So while it's still early in the year, these trends give us full confidence in achieving both our strategic and financial objectives. And we look forward to presenting you our half year results in April. So thanks a lot again. Happy New Year, everyone, and talk to you in April. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.