Worldline SA (WLN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Worldline H1 2022 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gilles Grapinet, Worldline CEO. Please go ahead.

Many thanks, operator. Ladies and gentlemen, good morning. This is Gilles Grapinet speaking, and thank you for attending today's Worldline con call on our first half 2022 results. I will start this presentation providing you the key highlights of the semester. Then Marc-Henri, our Deputy CEO, will make a deep dive on the Merchant Services business dynamics as we now usually do. And hereafter, Gregory, our Group CFO, will present you in detail our first half results before I wrap up from myself for the conclusion before opening the Q&A session. And let me start by saying that we are satisfied with this very strong first half of 2022. Indeed, after our solid full year 2021 and our Q1 2022, which was also very solid, our second quarter is showing again a very strong organic growth momentum as we have delivered overall a 12.6% growth in H1 with a 13.5% in Q2. I want here to focus 1 minute in particular on Merchant Services. Merchant Services is posting its fourth quarter in a row of organic acceleration with circa 18% in Q2. This is really worth to be noted as this Q2 performance was achieved while absorbing the negative impact on the full quarter this time of the complete stop of our e-commerce activities with Russia and, of course, in compliance with the international sanction framework and also facing a less favorable comparison basis than during Q1. In a minute, Marc-Henri will go more in detail into this MS business performance, which we believe is reflecting a sustainable and very dynamic commercial development both in store and online after the acquisition of Ingenico and the first 18 months of integration. This growth translates into 80 basis points improvement of our OMDA margin, thanks to the operating leverage at play in our Merchant Services division, while our OMDA conversion rate into free cash flow reached a satisfactory high level at 49%. Now regarding the strategic initiatives. During the first half, we have closed as planned the acquisition of Axepta Italy, ANZ Commercial Acquiring activities and Eurobank Merchant Acquiring. I will come back in a minute on their combined benefits for the group. And in parallel, as you know, the closing of the announced TSS disposal is fully on track with a confirmed closing during H2. All this taken into consideration we as a team here believe that this H1 2022 has been a very positive semester for our group, paving solidly the way to a successful execution of our plans and ambitions for the rest of the year and for the rest of the 3-year plan. Based on this very strong H1, we, of course, confirm our guidance for 2022 being said that our central scenario for revenue growth this year is clearly now the top edge of our 8% to 10% range. Let me briefly come back on the key first half 2022 figures. Revenue for H1 2022 was EUR 2.02 billion, representing an organic growth, as I said, of 12.6% compared to 2021 at constant scope and exchange rates. Regarding profitability, OMDA stood at EUR 468 million, representing 23.2% of revenue or an 80 basis point improvement compared to H1 last year. This margin improvement comes from our ability to deliver our expected synergies on top of the operating leverage generated, in particular, by the accelerated growth profile in H1 of our Merchant Services business line. First half 2022 free cash flow was EUR 229 million, representing this conversion ratio, which is solid at 49% of OMDA. Normalized net income group share reached EUR 213 million on continued operations, representing 10.5% of revenue, while normalized diluted EPS reached EUR 0.70 (sic) [ EUR 0.76 ] per share, up 29%. On the strategic initiative side, we had, as you all know, a very busy and successful semester. As highlighted sooner, I start by coming back on some KPIs of these 3 acquisitions we have closed in the first half. Axepta Italy is adding circa 30,000 merchants to our portfolio and circa 200 million transaction acquired per year. Eurobank Merchant Acquiring in Greece is adding circa 123,000 merchants to the portfolio and circa 219 million transactions. While in Australia, the ANZ Commercial Acquiring activity will represent circa 80,000 additional merchants and circa 2 billion transactions acquired and processed per year. Combined, these 3 acquisitions will bring a material contribution north of 10% to our MS business on a full year basis. As always, these 3 closings have been perfectly prepared from a pre-integration standpoint. They also have in common to be structured as joint ventures controlled and consolidated by Worldline, but as importantly, supported by the Worldline global platform, technology and products. These 3 transactions are also great examples of the bank-focused part of our M&A road map, which is pursuing, as you know, a couple of objectives. First, expanding our presence in new countries, offering ideally better-than-average structural growth perspectives; and #2, adding a new distribution channel for our Merchant Services products and portfolio through long-lasting and strategic partnerships with major local banks to leverage their brand power and commercial networks; #2, the TSS disposal after the binding offer received from Apollo end of February 2022 kept us very busy during H1. But I have the satisfaction to report that we have completed all the necessary regulatory milestone and that the carve-out process is fully on track. The closing of the operation is confirmed for H2 this year as already mentioned. The good progress on all these strategic initiatives is undoubtedly one of the key achievements of the semester. As a matter of fact, it will contribute to enhance our growth profile and will provide a significant deleveraging of our balance sheet once the TSS divestment will have been completed. But without waiting for this closing, Worldline is already using this increased future agility to actively prepare its future inorganic developments. I will give now the floor to Marc-Henri to guide you through more detail in the commercial dynamics of the Merchant Services activities, pointing as an introduction for his part that we have continued to materially develop our key market positions in the first half, thanks to our scale, competitive value proposition and the more and more visible benefits of our combination with Ingenico. Marc-Henri, the floor is yours.

Thank you, Gilles, and good morning to you all. I'm indeed very pleased to take the floor and guide you through this part of today's presentation, zooming on our very satisfactory merchant acquiring business market performance for the first half of 2022. I will comment 3 types of business information and KPIs as we now regularly do. Regarding the MS mass market segment, I will share with you the evolution of our net number of small merchants in H1 2022. I will -- then I will share with you the main wins and upsells of Q2 [ on the large merchants ] and the new partnership since allowing us to further accelerate our monetization strategy. And I will conclude on the full benefit of this market share and commercial development on Worldline acquiring merchant service value growth. Let me start my deep dive on MS dynamics with what we consider as the heart of Worldline Engine, our merchants, which represent the first pillar for Merchant Services growth. First, this is the last data we have provided to you in our full year 2021 publication. You can see that our merchant base includes now Axepta Italy and Handelsbanken merchants. To have a comprehensive and comparable view, we have made a full pro forma of the merchant count starting in Q4 of 2020, allowing you to see the organic growth of our merchant base. In H1 2022, we have onboarded circa 60,000 new merchants, pushing our merchant base at the end of June 2022 at 1.22 million. It represents a steady growth of Worldline acquiring merchant base, up 10% versus H1 2021, driven by all merchant segments with in-store merchant up 9% and online merchants up 14%. This overall dynamic is the result of Worldline key differentiating factors and dedicated offerings covering all types of merchants, as I will illustrate in the following slides. Our merchant count is fully in line with the dynamic we have seen over the past quarters as you can see in the chart and clearly highlights the unmatched access of Worldline to the European retail. This is a solid proof point that gives us some advance and confidence for our midterm objective to onboard circa 190,000 merchants over the period 2022-2024. Coming to the Q2 significant merchant wins and partnerships, which reflects the relevance of the Worldline offering as well as the orchestration strategy in the payment ecosystem. Regarding the merchant wins, I will illustrate this around 2 categories. First, I will share a concrete example of the way we grow our share of wallet with existing customers. And then I will give example of new merchants that we could win from competition. Let us start with the development of existing customers. With JD Sports, a leading U.K. sportswear retailer, we expanded the scope of services with pan-European payment solution on both static and mobile payment devices allowing to provide an increased payment experience in store. With TUI, a leading travel agency, we supported the company in its expansion strategy, offering a full end-to-end acquiring solution to support presales and onboard business acquiring needs, fully integrated into 2 EPMS system with customized reporting tool. In this vertical of travel like in others, in which we are specialists, you need to be relevant. You need to have deep native integration with sector-specific systems and [indiscernible] and that's what we do with our global sales and vertical teams, and you can see the results. With fs.com, a global network solution provider, as we are their primary payment service provider, we support them in their geographic expansion in the U.S., Europe and Asia Pacific, ensuring a strong payment performance through a multi-acquire solution and a full suite of payment means. Now coming to new wins. For full service and omnichannel solution on the EV charging, EV stands for electric vehicle charging space, made the difference for Alpiq, a leading Swiss energy provider, an electricity producer in Europe, but also [indiscernible] team. We are particularly pleased with the successes as electric vehicle charging is an emerging and promising market for our services, in particular in Europe. Our omnichannel solution for large retailers has been key the win of ERAM Group, ranking Worldline as a trusted partner to support the change in consumer behavior for their brands with a full payment value chain coverage and global presence. And with Myra, the self-service kiosk, Worldline will offer a full end-to-end solution from the acceptance device to the acquiring capability for the hospitality vertical, allowing hotels to enable self-checking in payments. Now regarding the partnerships. Our scale reached a single entry point to circa 15% of the European retail gives us a key advantage and strong activity in the payment ecosystem. This position allowed us to pursue the dynamic in numerous partnership signings during the second quarter with fintechs and digital massive players. As a reminder, being at the center of the payment ecosystem allows Worldline to fully leverage this partnership approach, which is one of the growth accelerator for the group, with, on one hand, the additional services of the partner, and on the other hand, is proper reach to new merchants. On this line, you can see Planet with whom we extend the joint offering, providing full service end-to-end integrated payment solution for hospitality, featuring omnichannel capabilities and DCC services, dynamic currency conversion services. Casio, with whom we will improve the simplification of the card acceptance in Japan, leveraging Casio front-end positioning, leading front-end positioning on the electronic cash register market while combining it with Vesca, the partnership we signed in Japan in Q1 2022. Plus at the end of June, we have signed a partnership with the fintech SoftPos to access the new market segments through a mobile Tap & Pay solution on mobile phones, Android smartphones and tablets allowing Worldline to expand its value proposition to micro merchants and complementing our existing strong product offering in the Belgian market. We will come back to you in the future on the progress of our products, sale channels and partnership strategy, but I hope you can already see with this list of recent examples that behind our merchant wins, we leverage a solid and growing basis of assets and teams. To conclude my part, let us come back to some business data points. All our actions to expand our merchant base have contributed to a remarkable MSV growth during the first half. In H1 2022 Worldline own acquiring MSV has increased 30% versus H1 2021 to reach EUR 147 billion which represent a strong performance in our addressable European acquiring market. It illustrates our capacity to continue to gain market share in both in-store and online with respective MSV growing at circa 30% and 31% versus H1 2021. For information, our MSV is organically up 28% versus H1 2019. Then we continue to see a solid dynamic at the beginning of Q3 2022 with a steady trend in MSV expansion, fueled by both in-store and online volumes. One of the positive surprises of this H1 2022 is a strong comeback of in-store consuming habits. I hope you can perceive through the disclosures of KPI and information, the strong business momentum of our Merchant Services activity as it enjoys more and more visibly the full power of our strong integration with Ingenico while continuously improving its market share and competitive positioning. I will now give the floor to Gregory to present you our financial performance.

Thank you, Marc-Henri, and good morning, everyone. Delighted to be presenting this very good set of results. During H1 2022, core Worldline's revenue passed the 2 billion mark for the first time in a semester, posting a 12.6% organic growth fueled by our Merchant Services growth engine. In H1 '22, the main highlights are as follows: MS is up 16.8% for the first semester with an acceleration at 17.6% in Q2 and represents now 2/3 of Worldline revenues; FS was up 2.8% with a similar growth pattern between Q1 and Q2 as expected; MTS growth stood at 9.4%, in line with our mid to high single-digit guidance. So overall, a good start of the year where all businesses have carried out accelerating, in particular, on MS and to a lesser extent, in FS and MTS. Let's go in more detail on the next slide, where our focus on Q2 growth acceleration. So if you look at the building blocks for H1 growth, you've already seen the 11.6% growth in Q1 back in April. And the good news is the Q2 growth acceleration to 13.5% versus H1 2021, mainly driven by MS. The 13.5% growth can be broken down by GBL with 17.6% in MS, 3% in FS and 10.3% in MTS. In MS, the acceleration reached 17.6%, with commercial acquiring trending towards 30% and almost all geographies and customer segments contributing, whether it be SMBs, large retailers or online, and we also enjoyed a strong performance from BCC product as the good start of the holiday period is boosting travel and hospitality verticals. In payment acceptance, we were up mid-single digits with a strong performance of global sales and vertical as well as SMBs. Despite a significant recovery of travel-related vertical in digital commerce, we still face the impact of Russian sanctions, which for memory is impacting the group for 1% to 1.5% digit growth at group level and 2% at MS level. Finally, Digital Services grew high single digits with a strong recovery in Germany, compensating some anticipated delays in POS supply during the quarter. In FS, organic growth stood at 3% in Q2 as in Q1, in line with the expected full year trajectory, given the temporary effect of large historical Equens contract renewals. The main Q2 trends are; in account payment, we grew double digits, fueled by a high level of activity of large contracts in Germany, both in volumes as well as in projects; in digital banking, we're up mid-single digit with more authentications of e-comm transactions following the enforcement of PSD2 regulation. Those PSD2 volumes are compensating for lower ideal revenues in the Netherlands. And finally, our card-based processing and acquiring revenues declined slightly versus Q2 '21 affected by the Equens price decrease and partly offset by improved volume trends in Germany, Belgium and Netherlands, which are core markets in FS. On MTS, revenues accelerated slightly in Q2 to 10.3%, driven by trusted digitization and e-ticketing. Overall, the Q2 performance fully demonstrates the strength of our model, combining strong acceptance and acquiring capabilities following the acquisition of Ingenico. Now moving on to the next slide regarding our OMDA performance. During H1, Worldline's OMDA reached EUR 468 million, representing a 23.2% OMDA margin or an 80 basis point improvement versus last year. It's been achieved by strong margin development in our MS activities, thanks to the operating leverage and synergies from past acquisitions. While in FS, OMDA faced the full semestrial impact of Equens Worldline price decrease, and both FS and MTS faced some inflationary pressure. Let me now detail a little bit further those margin numbers. As mentioned, profitability increased 80 basis points over the semester, driven by growth acceleration and operating leverage in MS in particular. In more detail, MS margin is up 310 basis points to 25.5% margin, benefiting from growth and operating leverage as well as the execution of synergies from Ingenico and SPS delivering exactly as per plan. FS margin is down 220 basis points to 26.8% as expected, given the renewal of Equens contract at a lower price, and to a lesser extent, the temporary impact related to cost inflation not yet compensated by the full impact of already launched mitigation measures. MTS profitability is down 90 basis points to 13.9% for similar reasons as FS. Finally, on the corporate side, our corporate costs have increased to EUR 32 million in H1 2022 as the result of the full implementation of our corporate business model being a bit more centralized versus more distributed in the past. Overall, as for revenues, a good performance in H1 with MS activity showing a masive margin improvement, while FS and MTS face inflation headwinds starting to be compensated by mitigation measures. This evolution is fully in line with the expected pattern for 2022, given our business seasonality. Now moving from the OMDA to the other elements of the income statement. Nonrecurring items reached EUR 228 million and consisted globally of EUR 110 million purchase price allocation amortization, mostly linked to the Ingenico acquisition and EUR 72 million of integration and post acquisition costs corresponding on the one hand, to Ingenico integration costs, but also to the start of the integration of Axepta and ANZ. The vast majority of H1 '21 figures can be explained by the Ingenico combination and synergy plan. As a result, operating income for the first half 2022 stood at EUR 118 million. Net financial expense amounted to EUR 41 million, showing an increase versus H1 2021, but restated from 2 specific effects on our net financial expense is broadly stable. The 2 items explaining the difference between '21 and '22 are: first, a favorable effect of the fair value of our Visa shares in H1 '21 amounting to EUR 13 million last year, which we didn't have this year; and a negative FX impact due to the hyperinflation in Turkey and Argentina, which implied that we took a hit for EUR 17 million to the value of those assets in our balance sheet, so a noncash element. The tax charge was EUR 18 million, with an effective tax rate of 23.4% in H1 '22, down versus last year and consistent with our objective to maintain the full year rate close to '21 levels at around 24%. As a result of these items, our net income group share stands at EUR 53 million for the semester, in line with last year. Taking into account the impact of the TSS transaction on our accounts, we are booking a EUR 95 million negative impact for discontinued operations, mostly reflecting a positive FX impact on the value of key assets in our books due to the dollar appreciation of our H1, while the price paid by approval remains fixed. So this negative entry would be reversed at closing. Adjusting for nonrecurring impacts linked to M&A, the normalized net income in our cost [indiscernible] scope stood at EUR 213 million, representing a 10.5% margin versus 10% in H1 '21. As a result, our normalized EPS reached EUR 0.76 in H1, 30% improvement versus last year, so it stood at EUR 0.59. Moving on to the cash flow statement. The main parameters of free cash flow generations are CapEx at EUR 140 million, representing 6.9% of revenue and fully in line with our midterm objective to be in the range of 5% to 7% of revenue; a change in working capital requirement bringing a positive contribution of EUR 86 million and reflecting the alignment of contractual terms and conditions between Worldline and Ingenico, which should be normalized in the second half of 2022. Finally, integration costs were fully in line with expectations and mostly relating to Ingenico and more recently, Axepta and ANZ integration costs. So overall, H1 free cash flow generation stood at EUR 229 million, representing 49% cash conversion, which supports a full year trajectory. The strong achievement reflecting our ability to deliver the synergy on the one hand and a strict cash management policy on the other. That results in the next line in the net debt evolution, where group net debt stood at EUR 3.5 billion at the end of the semester compared to EUR 2.9 billion at the beginning of the year. The main driver of this evolution is the cash out net of disposals, mainly related to the acquisitions closed in H1 2022, Axepta Italy, ANZ card acquiring as well as Eurobank Merchant Services on the 30th of June. The other point to mention is the capital increase during the course of the semester, which relate to stock option exercise as well as the implementation of our employee share purchase program, Boost. So the net debt trajectory is fully in line with our expectation at the end of the semester. Based on this very strong H1, we fully confirm our 2022 guidance with an 8% to 10% organic growth revenue growth being said that our central scenario is clearly now the top [ even ] of this range. And OMDA margin improvement between 100 and 150 basis points compared to 2021 estimated pro forma margin of 24.8%. And finally, an OMDA conversion rate in free cash flow of circa 45%. Now let me hand over to Gilles to conclude.

Many thanks, Gregory. Now moving indeed to the key takeaways of this first half. The 4 key messages that I would like you to keep in mind, following this presentation are the following ones: first, the steady MS growth acceleration clearly and fundamentally reveal, we believe, beyond some post-COVID recovery effects, the enhanced and sustainable competitive strengths we start to visibly benefit from only 18 months after the closing of the Ingenico acquisition and the successful combination of our businesses. Second, on top of the solid growth that generates visibly operating leverage, we fully execute all our integration plans and extract in line all the expected synergies. This is bellowing us in particular to deliver a solid margin expansion while absorbing some unexpected headwinds like the stop of our e-commerce Russia-related activities we must face in 2022. Third, the 3 acquisitions we have closed in H1 will start to bring a meaningful contribution to our Merchant Services activities from H2 2022 onward and should not be underestimated. Last, -- as said, the closing of TSS is well on track and confirmed for H2, and it will bring to Worldline an enhanced flexibility to support the conversion of our rich and very active current M&A pipeline. Today's results are, I believe, one more proof point of the solid execution of our vision and our plans that we shared with you during our Capital Market Day 9 months ago, and which are clearly making our company stronger every quarter. Thanks to all these key achievements, Worldline as a company feels more than ready to successfully navigate through the complex geopolitical and macroeconomic context, we all know, while solidly delivering on its guidance. After 3 semesters of well-executed integration, we have indeed created strong foundations to take advantage of the structurally positive European payment market trends and doing so, deliver our medium-term double-digit growth expectations for MS and so for the group. All this makes this first half 2022 a very solid cornerstone for continuing the successful execution of our Australia plan. Thank you very much for your attention today, and I am now ready with Marc-Henri and Greg to take your questions.

[Operator Instructions] We will now take the first question. It comes from the line of Josh Levin from Autonomous.

I have 2 questions. So it looks like you've been adding around 10,000 merchants per month on a net basis. To what extent are you taking these merchants from competitors versus these are merchants which have not previously accepted electronic payments? And then if we were to go into a recession and the consumer changes his or her spending, can you help us think about what might happen to both your volumes as well as the number of transactions and what all that means for Worldline's revenue?

Josh, thank you for your question. Well, I must say that, indeed, your calculation is right. This is indeed the reason of roughly 10,000 a month this semester definitely. If you remember, last year, we shared with you during the full year 2021 that we added circa 100,000 net new merchants in 2021, so more or less ballpark the same order of magnitude, the commercial engine of the group is really working well. And I guess, there is a mix of both, but I will let Marc-Henri elaborate on that between new merchants being converted to accessing electronic payments and probably indeed wins from various competitors from banks to other players. I will maybe then come back on your second question regarding recession scenarios.

It's a mix, it's a combination, and it depends a bit on our various situation. In online, you have some -- a lot of existing merchants starting their online activity or merchants creating their business online. So this is rather a newcomer to the online world. When it comes to the store, it depends a bit on the geographies. If we take geography like Germany or Italy, we are really taking significant market share and onboarding our existing merchants from competition. When you talk about the geographies like Benelux or Switzerland, where we already have a very, very strong market share, the dimension of new merchant is a bit more important, but there is also a dimension of competition in this mix. So it's a combination. And I would say, rather to the side of the existing merchants taken from competition and the new merchant because we are -- and that's why also we are launching the tap-to-pay solutions. We are less equipped as we speak to address the micro merchants, and we want to grow also in these domains. So rather our existing merchants. Now to the point of recession, first thing, we need to say very clearly -- we hear financial community talking about the winter coming, and we observe that we are starting the summer to see it in simple terms. There is no slowing down of any consumer habit of spending as we speak. We don't observe that. We don't see it. So that's at the [ end ] and you could see it in my curve and in my MSV curve. Then we are not macroeconomists, so there is a limit to what we are able to know and predict but we are very clear about what we can observe.

And just expanding on that one, Josh, I mean we look backward at actual recession that did take place over the past 10 years because we had some to face in Europe when Worldline was a different company, much smaller and less competitive than it is today because you see in our figures, I think, the combined effect of the very high level of domestic consumption in Europe and definitely also a decent level of pickup of travel during this H1, but also the benefit of our competitive positioning. It's why for us today, as Marc-Henri said, and you see that in the curve, the level of growth of our MSV is miles above the evolution of the European domestic consumption. We talk about plus 30% MSV growth versus 2021. Of course, the European retail activities are not growing plus 30% as we speak. So there is a mix of both. But coming back to my point, we look backwards and we look at the way [ behaviors ] domestic consumption has been working in Europe facing actual recessions. The one linked to the subprime crisis, the one linked to the sovereign debt crisis in the past years. The reality is that these recessions have never severely affected so far the level of European domestic consumption. European domestic consumption is a very resilient engine of GDP growth. Generally, recessions are hitting first exports, investment from corporate and the public sector and only a little much more limited level domestic consumption. For many reasons, there is a lot of fixed household income in Europe. There are an aging population with pension schemes. There are a lot of steps supporting scheme for low-income households. Altogether, when we look backward, the reality is that we've always been growing even in recession times that we shared already with the community many times. It's why we know that this may be different is why we want to stay conservative at this stage. But as Marc-Henri said, as we speak, there is nothing looking like a recession. In H1, we've been having very unusually record high level volumes on our platform at unexpected moment in H1, stronger than Black Friday, stronger than Christmas, at Easter weekends during the start of the summer sales season. This is really showing a level of domestic consumption which is really, really very high. And so let's look forward. We don't know what tomorrow will bring. Definitely, we want to navigate very solidly on the guidance, as you understand, but the machine is working super well at this point in time in Worldline.

Maybe [ one point more ] is the fact that we're pretty spread even -- I mean, given the breadth of our revenue footprint, we are pretty well equipped to take advantage of move from discretionary to nondiscretionary spending, which is an important fact in a recession environment.

Yes, sure. And [indiscernible] one point that Marc-Henri highlighted is that in-store has really picked up very strongly, which we believe is also a very strong supporting factor even in a recession context because online is probably a bit more discretionary, and we are a very big in-store player.

We will now take the next question, and the next question comes from Frederic Boulan from Bank of America.

Two questions, please. First of all, following up on the previous question on any signals you're seeing. If we can maybe dive a bit into some regions, in particular, around Germany, anything in particular you can flag there, or e-commerce where we hear some more in signals elsewhere. It doesn't really seem to be your message. But if you can flag whether you see any shift, any signs of normalization, we spend going back to in-store to a degree. And then on the margin side, interested to hear a bit more, what are the moving parts to which the low end or the high end of your guidance. You mentioned some mitigation measures, so if you can give us a bit more insights into the measures you implemented?

On the first question, I understand you want to just have a bit more color on type of trends, we understand from a macro standpoint, consumption, I believe.

Regional consumption. First, you mentioned Germany. Germany has been super strong in H1, we have a close to 30% growth in this country. So super, super dynamic momentum. The country is really fully back on track and from any COVID restrictions that did take place in the past. And indeed, on your point of online momentum, we -- I gave the number on the MSV, it's 30%, some orders magnitude both online and in-store. The surprise for us come primarily from the in-store, meaning we saw that there has been a shift of consumption from the online to the in-store and the in-store was above expectation. It was not easy to foresee post-COVID, people have taken a habit to consume online. But apparently, the will to spend social time together is stronger and has really driven this in-store momentum. Our online has been good, in particular, because we have some exposure to the travel sector being back and from the former global collect inside the Ingenico perimeter, and we continue to develop it because it's a very strong asset we have. And probably it has supported a strong online momentum. I cannot comment on competition. So it would be interesting to see a bit the data point that are emerging. But from what we observe, there has been [indiscernible] in the store, in the physical life, in the social time being together. And this is a momentum we observed. On the margin, you take it Gregory.

On your second question, on OMDA guidance and dynamics. Just to remind you, in H1 '22, we posted an 80 bps improvement in OMDA, which is fully in line with our expectations and with the expected pattern for full year 2022. The growth overperformance in MS translated into great margin performance with 310 basis points for the business line, which really validates the operating leverage at play in that business line. In FS, the contraction is as expected and reflects the exact impact of temporary effect of lower pricing granted to former Equens shareholders. And therefore, we fully confirm our improvement of 100 and 150 basis points for OMDA improvement over the year. As you know, the bottom line at the bottom part of the guidance is clearly stated since the beginning of the year and in -- and repeated in Q1 2022. Obviously, we have seen some return of travel in H1, but we're not seeing the intercontinental travel yet. Chinese travelers, for example, which have a higher purchasing pattern. If there are limited delays on POS supply in the first half, if those were to continue further, the -- we could be at the bottom of the guidance. And obviously, Russian activities continuing to impact our online business is what justifies the bottom line of the guidance.

The margin mitigation measures, to name them, they are quite simple. We have done on price somehow also and to factor the inflation where we are in a position to do so, in particular, in Merchant Services. We have done on cost. We clearly reviewed our [indiscernible] policies. So we are not in a position -- in a situation, given our growth to decrease the workforce but clearly to stabilize it. And we are working on all kind of rightsizing including some transversal programs and some discretionary spend that we are currently reviewing. So this on top of all the ongoing actions that we are doing, like purchasing consolidation and others. And we did not mention it because it I think you know from that point of view, we are all aware at expectation. Our synergy plan are already on track, delivering as planned, and the plan was to be above EUR 50 million in terms of synergy in 2022, and we are clearly fully on track to deliver it.

We will now take the next question, and the next question comes from the line of James Goodman from Barclays.

First one for me, just lots of detail on the strong merchant acquiring performance, but just focusing for a second on the payment acceptance business at mid-single digits. I appreciate you called out the Russia impact there. But I had expected a stronger travel recovery, particularly in global collect. So I wondered if you could expand on the trajectory in the acceptance business. And I wondered if you've done an analysis of the extent to which inflation is perhaps in fact in the outperformance that we're seeing in, I guess, the value-based acquiring business from the volume-based acceptance? And the second question is just around the CapEx that you called out at 6.9% of sales. Is it at the high end of the midterm guidance already? Just wondered where that investment is focused and whether you're expecting CapEx to remain at the high end into H2 and throughout the midterm guidance? Or is this more of a front-loading potentially of that investment through the midyear -- multiyear guidance period?

Maybe on the payment acceptance, I can say a word. First, we announced we had to stop all the activity that we are leveraging to the Russian consumer, so we're helping global brands to stay in Russia. We mentioned the impact of circa 1.5% for the global revenues of Worldline for acceptance, it means circa 10%. So it is a significant headwind we have to compensate to continue growing. This being said, you are mentioning the trajectory, the trajectory of digital commerce, if we take Russia aside, is a trajectory of strong acceleration. Yes, travel is helping, recovery of travel. But more importantly, the wins of new merchants. The pipe is very much up compared to last year. We are beating our sales performance month after month. And so the trajectory in particular in terms of -- thanks to the win of new business and the development of the activity is toward the strong acceleration in H2 from that point of view. On the travels, we think it's much more volume than price. You mentioned inflation and what we observed, price has an impact. Of course, the price of travel has increased. But for the moment, we see it more driven than volumes. And as we said, a part of the travel is not yet fully back on the -- business travel is not yet fully back, and we will observe in H2 what's going to happen. I will give the floor to Gregory to comment on the CapEx level. Just in terms of content, no surprise where we focus on investments is primarily on the core of MS products and platforms. So it is a bit also relying on financial services, which is a processing engine for merchant services, but it's primarily around our products being in acceptance, in acquiring or in the full service.

But effectively, you're right, James. We are indeed front-loading in 2022 and should remain in the upper range of the midterm guidance towards the end of the year, as we are investing in the target platform as Marc-Henri just reminded.

We will now take the next question, and the next question comes from the line of Alexandre Faure from BNP Paribas Exane.

A couple of questions, if I may. Firstly, for Marc-Henri, I think you mentioned just now when discussing mitigating actions that you might actually hike prices in merchant services, I wonder if this is something you are contemplating for H2 or if some of those price hikes kicked in, in Q2 already? And my second question relates to this Slide 8 and sort of 10,000 merchants that you seem to be adding a month. Just wondering if you're activating a new sales strategy to try and accelerate that growth beyond 10,000 merchants per month.

Alexandre, on the price impact, you have some impact that is naturally factored in the first half, which is if the price of consumption is higher as we take a percentage of the transaction, even if this percentage stays fixed, you have a positive momentum, but that's not price increase, that's inflation support to your business. On repricing, we had limited impact. We started already some campaigns, but most of them are starting beginning of H2. So the impact on Q2 was minimal, and the vast majority of the impact will be in H2, so that's majority will be in H2. So that's to have an idea of the balance. So its impact to come, which also gives us confidence to our margin guidance. It's an important element. And I think it's fairly -- we are fairly applying the cost, the inflation of our cost to the inflation of our prices in this domain. Now coming to the sales strategy, but it is a continuous work. It's not something on which we are going to -- we never -- how we took them to start or we are going to stop. It's a continuous move. I think the combination with Ingenico as being a fantastic power, in particular, combining the good verticals on both sides and here, we are already at a very strong speed and it's about accelerating based on products and go-to-market ramping up of the teams but it's a continuation. On the regional business and the value geographies, we have the inclusion of all the new teams into our self-service kiosk methodology. So some here and there, we see some jewels, some nice ideas we can replicate in other parts of the group. So that's a kind of snowball effect, in particular, some nice idea we've got from the Italian market to expand to some other geographies. So no structural changes, rather an acceleration and more and more comfort coming to the strength of the combination with the full Ingenico [indiscernible]. So what I was mentioning thinking that really behind these solid figures, you have really sustainable competitive strengths that have been created over the last 18 months.

I would like to add to Marc-Henri's point and to bounce back on your question. But there is something that is working really extremely well as we speak, which is the combination of the very good product and platform capabilities of Worldline plus the bank distribution channel. One of the secret of the performance in Germany [indiscernible] is clearly the fact that we bring to [indiscernible] and to the power of the distribution channel of the German markets and much better products working together. It has been years in the making and that really to pay off. It is the same in other countries when we have now enough track record, and I think one should not underestimate that at the stage of the development of the European market, the power of bank distribution channel, better equipped with global grade quality products and service rig. This is not only the product and the technology, by the way. It is also the marketing know-how. It is also the support to the sales of the branches of the banks. It is also the customer service. Well, this engine is just working, Alexandre, and it's why also we are so keen to bring to you further proof points now that we have closed in the Eurobank, Axepta Italy. In Italy, I mean the machine is working already like in Germany. It is a small business yet, but growing much higher than the average of the Italian market. Just -- we just know it works. It's why we are so keen in M&A to pursue expanding this bank relationship. We look at banks as a big distribution channel first and primarily. And when we look at the transaction to a certain extent, we like buying the given existing portfolio. But we know that if we do well, the size of this portfolio will be doubled or tripled in the coming years because we better equip the bank distribution channel. That is what also you see at working these merchant accounts, I believe.

We will now take the next question, and the next question comes from the line of Alastair Nolan from Morgan Stanley.

Congratulations on the strong results. I think a couple of my questions have already been answered, but maybe a couple of follow ups. Firstly, on travel. Could you just quantify where travel volumes are running now versus, say, 2019, just to kind of give us a feel for potentially how much is left to go in terms of the recovery. And then just on the inflation impact, maybe it would be helpful just to run through kind of where Worldline does have these natural hedges, sorry, hedges in its business and kind of what you're seeing there in terms of what's purely transactional if you can kind of quantify that, that would be really helpful.

Yes. Alastair. Maybe I will elaborate on the second one with Greg, and on the first one, I will let Marc-Henri take it, on travel.

Yes. On travel, in fact, it's an evolving situation because it has been accelerating constantly throughout the full semester. So it's a bit still difficult to have a stable view on how exactly it positions us as 2019. And we also mentioned before that we see in terms of numbers of travel versus prices, it's a different mix. I have a feeling, but it's not indicative that we are not yet at the volumes of 2019 in terms of number of travels. And so there is still something to be glad there. But it's more also a result of a combination that the business travel is not fully back and some geographies are not traveling yet. But overall, it's a strong momentum. We also have a strong momentum in the overall travel world. And Q3 will be very interesting to observe to see if there can be and there is still some further acceleration. And if the consuming habit of the people once they have traveled in hospitality sector, in the restoration, in the leisure domain are also fully there. That's what we start to see at the beginning of Q3. So we are optimistic as we speak, and we will observe and see what continues.

Absolutely. Regarding your second question related to inflation. So the long story short and then maybe Greg would like to complement is that roughly 50% of our MS business is acquiring, strictly speaking, where we receive a fee which is sensitive on the street pricing of the merchants. So half of the merchant business is somehow benefiting from inflation. So if we just take an average maybe 5% inflation during the H1 2022, you can maybe guess that 2.5%. It is our round number estimate, I believe correct me [ if I am wrong ], Greg, that we have benefited from in the Merchant Services performance. But in particular, in the case of Worldline, we also consider that roughly this inflation benefit in H1 has been more or less canceled by the stop of our Russia-related activities that, as you know, represent 2.5% roughly of the MS business, and as Marc-Henri said, a significant part of the digital commerce space. It was entirely focused in online acceptance for the Russian consumer. So basically, we tend to believe that -- and this will go on somewhere in H2 also more or less where the Russia negative impact will cancel the benefit of inflation for this year. Of course, we hope that we will get rid of this Russian negative comparison effect in 2023 onward and we just don't expect that inflation would stay like that, but let's see what it will be at that point in time. But if inflation would stay in 2023, of course, the actual benefit of inflation in the business should be more visible next year than this year due to this type of matching effect. So I hope that I give you the big number, maybe. I don't know if you want to add anything to that?

No, that's exactly right for the top line. And as you are also pointing to margins, I think if you look at our cost base, our fixed cost base is for 3 quarters, people cost, where we've also embarked around about 5% inflation in H1. The rest of the cost base is under control. So overall, there is an impact on -- I mean, we're pretty stable in terms of our ability to absorb inflation. And as mentioned earlier by [ Sherlock ] Marc-Henri, we have taken mitigation measures since the beginning of the year, in particular, in terms of repricing, in terms of adjusting our people equation with more generalization, more offshoring and these activities should get their full impact during H2. Hence, our confidence for the rest of the year.

We will now take the next question, and the next question comes from the line of Tammy Qiu from Berenberg.

So first one, when you talk about merchant gain, I wonder, have you actually seen any merchant trend out of from your platform? Are you losing merchants? When you lose a merchant, what's a normal reason for that, please?

Okay. Of course, there is some -- no, no, it's not an easy world in which you just sit down and see merchants going where it's the competition. So we also lose merchants. There is churn indeed, and merchants are sometimes leaving. You have -- one of the reasons is merchants stopping activities. And what all the numbers we gave to you is the net of the wins and the losses. So to be at this net, you need to win more than you lose. Bear in mind, it can vary from 1 month to another that we tend to win double of what we lose to get to this net more or less, that's order of magnitude. And so when we lose, it happens, it is on merchants stopping their own activities because they have not been successful in their own business. It can be merchant changing to competition. It happens as well, sometimes based on price, sometimes based on a strong marketing campaign from whatever competitors are coming. And so that's why we need to fight and come back with also relevance of the offer because it's not that much on strong price competition that we want to win and make our business and dropping the margin.

And you may have also -- sorry, Marc-Henri, just to complement, you may have also anecdotical reasons. Sometimes when you manage big numbers like that, a merchant that is unfortunately unsatisfied of our customer service, he had an issue that has not been solved at the speed he would have liked it or we were in disagreement on a given chargeback, for example, because we saw that it did not make what we had to do as per the rule book of Visa or MasterCard or the local scheme. So I mean there are anecdotical reasons. They are not that much important, but ultimately on big numbers, it may happen. And you have also, as always, the possibility also of merchants evolving its view about its business changing the business profile, and we are not happy with the risk this merchant may represent sometimes we also stop some relationships because of the change of risk or bigger measures not for bigger merchants, in particular.

Okay. That's really helpful. And the second question is about consolidation. So we haven't really talked about consolidation for a while. And I do understand that it's actually taking very long for you to do any deal with any bank-owned assets. So I'm just going to broaden the question, how do you see your business scaling up in the next 5 years in a material way to address the demand of European market consolidation?

Well, thank you. I would like to have the crystal ball to really be with you in 5 years' time to look at what will be Worldline, Tammy. But I'm very confident that Worldline will be much bigger in particular in the MS division, probably also in FS through its organic development, of course, and through acquisitions. As I mentioned, clearly, there is a momentum in the European payment space where already banks, including banks that have been for a long resisting to the idea to divest or to partner in merchant acquiring are clearly shifting gears and moving forward their strategic intent to do what many banks have already done in other countries. So the way I look at it is the following. In 5 years, what I would like is that Worldline is having material distribution channels with bank partnership in each and every significant core European geography. We look at this bank partnership as really fundamentally a powerful distribution engine, particularly relevant for SMBs. And you understand that SMBs is really a big part of our successful development. So when you will hear me talking about M&A with banks, you can also literally read that I'm talking about acquiring a new distribution channel in a country where we are either very small or even not present at all. And where these bank partnerships are a great way to crack our entry, bringing to the bank distribution channel much better product, more innovative products simpler onboarding processes for the SMBs, of course, the powerful e-comm acceptance capabilities, great customer support, ability to follow international customers in this local geography while previously, we could not do it because we were not having the local license, for example, to acquire domestic. And this is our vision about this bank partnership. And of course, we are always happy, as I said, sooner to buy their portfolio. So I actually see in long term, as we speak today, for the [indiscernible] say, somewhere by -- well, let's say the next 5 years. I see no limit in the growth potential of the MS business at this point in time given that we still have in front of us some big geographies where Worldline is quite small or even not doing acquiring at all or at a very limited level, like France, like Spain, like Portugal. In Italy, we are very happy of what we created with Axepta Italy, but we are still very small. So we look at Italy as a growth territory, of course. And of course, there are a couple of other geographies where we have today not at all significantly developed ourselves like Poland, for example. So I think the space is big. I think this company has now a great track record. The Ingenico combination, I can really add, Marc-Henri could say it is with me on all this discussion is really having a compelling impact on bank discussions because banks are also choosing a business partner when they do business these days. I mean certain extent, due diligence are a bit funny. They judge us as much as we judge their portfolio. It is really like us qualifying our technological advance, our know-how, our track record with other banks as much as we qualify their portfolio, their level of risk. And I believe we are just the best in that space. I just -- I don't want to overstate ourselves, but really I believe we are at this moment in time the best in Europe to do this type of transactions. And so I'm really comfortable that it should go through in the coming years definitely. And MS will be much bigger, much bigger. I think we have maybe now no more time for questions. I hope it was answering at least part of your question, and we will stay tuned and tell you the future development of Worldline. I'm sure it won't take too long. Thank you very much for being with us. I know the world around us, it's complex to navigate into that you understand that we feel in Worldline, that we are more than well equipped to enter into H2. We look forward to enter into H2 and in the coming years.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Speakers, please standby.