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Edited Transcript of EDEN.PA earnings conference call or presentation 26-Feb-20 8:15am GMT

Full Year 2019 Edenred SA Earnings Call

Mar 9, 2020 (Thomson StreetEvents) -- Edited Transcript of Edenred SA earnings conference call or presentation Wednesday, February 26, 2020 at 8:15:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bertrand Dumazy

Edenred SA - Chairman & CEO

* Patrick Bataillard

Edenred SA - EVP of Finance

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Conference Call Participants

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* Geoffrey d'Halluin

BofA Merrill Lynch, Research Division - Director & Research Analyst

* Mourad Lahmidi

Exane BNP Paribas, Research Division - Analyst

* Simon LeChipre

MainFirst Bank AG, Research Division - Analyst

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Presentation

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Bertrand Dumazy, Edenred SA - Chairman & CEO [1]

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Okay. Good morning, everybody. It's a pleasure to have you today to present the 2019 annual results of this fantastic company, that is Edenred. And by the way, 2020 is going to be the 10-year anniversary of Edenred. So 2020 is a very important year for all of us.

So the things we want to share with you this morning are pretty simple. First of all, we have a vision. And our vision is to be the everyday companion for people at work, i.e. Edenred is a unique platform of services and payment benefiting to all stakeholders.

Not only we have a vision, but we also have a plan, and the plan has been presented to all of you during our Capital Market Day in October. And the plan sits on 4 elements: scale, innovation, M&A and transformation of the company.

As I used to say, with the 10,000 employees of Edenred, the only thing that doesn't change at Edenred is change. The third thing is we have ambitious financial targets. So not only a vision, not only a plan, but we want to see the realization of all that with some ambitious financial targets.

So as explained, we want to grow by at least 8% in like-for-like in operating revenue. Year 1, we did plus 14%. We want to grow our EBITDA by, in fact, more than 10% like-for-like, and we grew in 2019 by 14%. And then our cash conversion rate, we want to have it at least at 65%. And we are on par with the objective.

So 2019 has been another record year for Edenred. First of all, the revenue grew by 18% at EUR 1.6 billion. Our EBIT rose by also 18% at EUR 545 million, which is in line with our guidance that we share with you every year in the middle of the year, a guidance that is between -- that was between EUR 520 million and EUR 550 million.

Our net profit group share grew by 23%, reaching EUR 312 million. And that's why we are able to propose to the general assembly a dividend of EUR 0.80 (sic) [EUR 0.87] per share. Our funds from operations or the ability for Edenred to generate cash has increased by 31% to reach EUR 524 million. That's why our leverage ratio is at 1.9, and we are strong investment grade. And so it leaves us room for further acquisitions.

In a nutshell, for 2020, we expect to grow in all business lines and all geographies over the year. And we are able today to confirm our annual medium-term target for 2020. The magic numbers being 8%, 10% and 65%.

So what does it mean in details? So we are entering a new phase of growth. As I said, we have a vision. We are the everyday companion for people at work. What does it mean? Concretely, a small video for you guys.

(presentation)

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Bertrand Dumazy, Edenred SA - Chairman & CEO [2]

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Okay. So we have a vision, and this vision is powered by a unique technological platform. The platform is unique in the sense that the way we do the job of being a platform, we do it only in B2B2C. That's our go-to market. We are doing it to solve inefficiencies for people that work in 4 universes, Eat, Move, Care and Pay, second specificity of Edenred. The third one is we are operating this platform through a specific-purpose wallet.

We don't have a universal-purpose wallet. What does it mean? We enable public and private regulations and every funds that are going through our systems are earmarked for specific merchant verticals. And all those specificities of the Edenred platform make our business model very profitable.

So yes, we are a platform connecting 50 million users to 2 million merchants. And in fact, we are doing it in B2B2C via 850,000 companies.

And in fact, as I said, we do it only in 4 universes, the Eat, the Move, the Care and the Pay, for fundamentals for people at work. And in fact, we are doing it only by enabling both public and private regulations.

On the left part of this slide, you see in gray, general purpose universal payment, and it's not our universe. We are not in the payment anywhere, anytime, anything without any price gap. For every program we have, we implement into our systems some public or some private regulations on every business lines we are operating. So it's a very different way of doing the integration of payment services.

And because we do that, on top of that, we are able to earmark the funds in every partner merchant network that we develop, i.e., our funds are not going everywhere. We select one by one, the merchant partner we want to work with and us, they want to work with Edenred. What does it mean? It means that we are able to prove to our partner merchants that we are generating some traffic for them. And in exchange, we are able to monetize the traffic we generate for those people.

So all the characteristics of this platform makes Edenred business model profitable and sustainable. Profitable, because if you look at the main components of our business model, whether the acquisition cost or the activation rate or the retention rate or the monetization of the payment services we have on our platform, if you look at every indicator, we are doing it with very high rates. The level of acquisition is very high. The level of activation within the first few days of being part of the -- of our systems is also very high.

So due to those metrics that we are able to maximize, thanks to the unique way of doing our job of platform makes the Edenred platform very profitable. But not only the platform is profitable, but the platform is also sustainable because of many different factors.

Factor #1 is we are dealing with a very fragmenting -- fragmented B2B customer base; think that we have more than 850,000 B2B customers. And we are serving via those employers more than 50 million users.

The second barrier to entry on our market is we are managing a multi-local portfolio with a high level of use case complexity. As I said before, we are dealing with more than 250 programs in 46 different countries with 4 major product lines. So there is a lot of use case complexity behind what we are doing. The third thing is we have a large effect network.

If you want to enter into our different markets. You, have to be able to orchestrate on one side, 50 million users, and you have to go and grab them one by one. And on the other side, 2 million merchants that are very specific to every program we have, and we selected carefully and they selected us as well carefully one by one. And the fourth element in terms of barrier to entry is we are in a trust business. We have been doing that for the last 50 years. In 2019, more than EUR 31 billion went through our platform on behalf of employees, companies and partner merchants.

And so it's a trust business that we have been doing for many years, and it takes time to be trusted. So we have a vision, we have a plan, we have a plan that is powered by a very unique platform, a unique platform that makes our business sustainable and profitable.

The last element I want to add with you because we made a lot of thinking about that is Edenred platform is also a very powerful enabler of social and responsible behavior in the working world.

What does it mean? It means that Edenred is tech for good. If you think about the 4 major stakeholders we have in this platform, the employees, what we provide to them is to improve their well-being. Then the employer, which are corporate clients, what do we provide? We provide for those companies, attractiveness and efficiency. Then when you think about our partner merchants, what do we provide? We vitalize the economy and local employment. We drive local traffic.

And when you think about the public authorities, because on many cases, we integrate the regulation and the willingness to earmark the funds and the usage of the funds, we are able to enhance the effectiveness and the traceability of public policies. So when you think about Edenred as a platform, it's a lot of technology, but it's technology for good. Having said that, what does it mean concretely?

Concretely, if you think about the iconic product line, which is a Ticket Restaurant that we have been running for the last 50 years, and that is now deployed in 35 countries. In fact, we are helping the employees to secure their food budget and reduce the financial barriers to healthy diets. Another way to say it, we improve the employees' health and well-being. Think about that, thanks to us, 1.5 billion meals are served every year around the world.

And 64% of the French employees that have been interviewed said that Ticket Restaurant enhanced their well-being at work, being able to make a pose, being able to go outside and have access to a proper meal really improve your well-being at work.

But if you think about the Ticket Ecocheque in Belgium that we started 10 years ago. In fact, Ticket Ecocheque is the ability to reconcile environmentally friendly consumption and purchasing power. What does it mean? It means that thanks to us, every employee in Belgium is able to receive EUR 250 per year. But this amount of money can only be used for ecological product within the right merchant network.

What does it mean is thanks to us, and working hard for the last 10 years, we have more than 800,000 users in Belgium, and every euro spent via the Ticket Ecocheque due to the specific usage of this money is able to save 1 kilograms of CO2. So Edenred has been a powerful enabler for many years, and we start rediscovering that.

I take another example in the U.S. In the U.S., we started commuter benefits. Commuter benefits, what does it mean is, as an employee, if I accept the idea of using the public transportation instead of commuting with my private car, I receive an allocation from my employer and the state or the city.

The ability to put that in place, to have access to that digitally, to be able to explain the program and convince employers and employees to use it leads to much more greener commuting habits. And after years of effort in a country that is far from this idea of trying to incentivize towards the right habits, we have now more than 330,000 users in the U.S. And we know that thanks to our effort, we have been able to save more than 500 kilotons of CO2 in 2019. So another example of being an enabler of CSR habits.

Thinking about LCCC, we did some effort as well. LCCC is what is fuel cards, fuel cards and all the associated services. If you go on the LCCC platform, you will see that as an employer, if you provide those services to your employees, then you can subscribe to say, well, I want to know the equivalent of my fuel card consumptions in terms of emission of greenhouse gas. And then I can buy so I can contribute, and it's about EUR 0.02 per liter, I can contribute to plant some trees or buy some carbon credits. So on our digital platform, we help improve, let's say, the good habits of the working world.

And thanks to our system, more than 55,000 trees have been planted since 2018. And once again, the platform makes things easier to understand where you stand and to understand what needs to be done if you want to compensate.

One last example that is the most recent one, it's Action Logement in France. To make a long story short, the French state want to have elder people stay longer in their home. And one of the reasons they don't stay longer in their home is the fact that some of the personal infrastructure is not adapted to age anymore.

And so there is some money that goes into a digital account, and if this money, and only if this money is used to make the refurbishment, for example, of your lavatories and the access to the lavatories, then the money can be spent. So the ability of giving the money easily to be able to earmark that money and the money can be used only for the specific usage that has been defined is a unique capability that Edenred can put in place on many private ecosystems.

By doing that, we are proud, in fact, to enhance the effectiveness of the subsidies that are given to people in need. So not only we have a vision, we have a plan, we have some technological assets. We have some objectives and the objectives are not financial ones, but also the willingness to contribute to a better society.

As explained at the Capital Market Day, what is the plan? And the plan is Next Frontier. And Next Frontier is 2019, 2022.

Next Frontier sits, as I said in introduction, on scale, M&A, innovation and transformation. And when we look at the contribution of those drivers, if I exclude M&A, so if I speak in like-for-like, let's say around 80%, 85% will come from business excellence, i.e. cards we have in our hands, penetration on one side, base maximization on the other side.

And 15%, more or less, will come from innovation for the like-for-like growth. To be able to do that, we need to transform every day Edenred. At Edenred, we don't believe in revolution, we believe in evolution. The change is every day. Every day, as Edenred employees, we are asked to go back home and think about our day. What went well? What didn't go well? What are the things that I personally can improve to help us grow as a team and as a company? So and in the transformation, the CSR, or let's say the Corporate and Social Responsibility of Edenred is at the top of it. It's consubstantial to who we are, and we are happy to see this evolution within the different countries we are operating in.

So we have a plan. We have some objectives behind the plan because, obviously, as one of my favorite say -- CFO used to say, if you measure it, it's going to improve. So what are our objectives? Plus 8%, plus 10%, 65% like-for-like annual operating revenue growth, annual EBITDA growth and our free cash flow conversion rate.

And as said before, not only we have some financial objectives, but we also have some CSR targets by 2022 and by 2030. Those targets are on 3 categories: People, Planet and Progress. And if you compare the objectives we set for ourselves by 2022 and by 2030, and if you look at the SDG, or Sustainable Development Goals of the United Nations, they decide to focus on 17, and we have 12 out of the 17 in our People, Planet, Progress worksheet.

So with that plan, year 1 of the plan was 2019, where do we stand? First of all, as you can see, Edenred is generating growth year after year, whether in total revenue, but also in EBITDA, in EBIT and in net profit group share. Another way to say it, at Edenred, when we think growth, we think sustainable and profitable growth every year, one year after another.

And in fact, we want to see some growth. The 2016, 2018, it's our fast forward plan. 2019, year 1 is the Next Frontier plan. We did better than the objectives, so plus 14% in operating revenue growth, plus 14% in EBITDA growth and a cash conversion at par at 65%. We grew in every geographical area and at double-digit, and we grew on every product line at double-digit as well. So we did well in every part of the world, on every product line, which is the best way to generate sustainable growth.

And if you look at what we did versus the plan, so you see the same framework. Driver #1, scale. Scale, you have business excellence. And behind business excellence, you have the base maximization and the penetration.

As to the penetration, we increased our level of SME contracts, new SME contract by 20%. We have a machine, and this machine is delivering the growth we are looking for in an under penetrated segment, the priority #1 being the SMEs. But because we are innovating a lot, because we are better with our clients, it doesn't mean that we don't have room for growth.

I'm not happy on certain things that we are doing today, on which we need to improve. But the combination of the innovation, the combination of value-added services allows us to increase our take up rate.

So for example, our take-up rate has increased in benefits by 32 basis points this year, which is the best reward we can get when you invest a lot in customer satisfaction and in innovation.

Then the second lever is innovation. And as you can see in product, technology and adjacencies, we are accelerating our level of innovation. And one thing we are good at Edenred is the scaling of the innovation. We have an idea. And then we are not too bad at deploying fast the innovation on all our markets.

So right now, if you think about mobile payment, we have been the first one to introduce that. We have more than 25 million transactions that are done by mobile, and we are growing at double-digit growth every month.

When you think about our payment API, so the ability to connect our platform with food delivery companies, we started with 1 country, France. We added in 2019, 4 countries, and we're going to add more than 4 countries in 2020. And we have now 40 partners around the world. But when you count them, we have the big ones, Uber Eats, Deliveroo or in Latin America, people like Rappi.

And when you think about our app container, it's now live in 4 countries. So we invest a lot in innovation, EUR 250 million per year. We will continue to invest because the profit of today are the investments of tomorrow and the growth of the day after tomorrow.

Another element is the M&A. We have a very strong discipline of, first of all, strategic rationale behind the acquisition, but also strategic, let's say, financial discipline. And if we continue to do that, we're going to create some value for everybody, for our customers, but also for our shareholders.

2019 was an active year in terms of acquisition because we closed or signed 9 acquisitions and among the biggest one, CSI, but also TRFC in the U.K., a country where we didn't have any asset in terms of Fleet & Mobility.

And then we talked about the transformation. So I can pass very fast.

If we look at those pillars one by one. If we start with the business excellence, here, what you see is we took one example. The example is in the Benefit business, and it's the evolution of the business volume or the issue volume.

The message we want to pass above the arrow, you have all the good news on our market, and below, you have the bad news. We are in a business that sometimes we have some bad news. Sometimes, we are losing some markets. But what we want to show you is the sum of the good news year after year is by far bigger than the sum of bad news.

So sometimes you will hear about the bad news, but bear with us. It's not the end of the world. We have many other good news running in some other countries.

If I take a few examples. We have been able to open the market of the Holiday voucher in Slovakia. We have Holiday vouchers in many countries, we didn't have in Slovakia. In 2019, boom, the market is opening. In France, we have good hope on Ticket Mobilite. Ticket Mobilite, we do it in some other countries, for example, in Germany.

So the law has been passed. We don't have the decree yet, but we are on it because there are many things we can bring to the French market on the Ticket Mobilite, and then you have the face value increase. In many countries, we are still far from being able to have access to one proper meal, a modest one, a simple one, but 1 meal per day per ticket. So we are actively explaining why it is important.

And so in many countries, we have some face value increase. So for example, we had an increase in Spain, we had an increase in Belgium, and we have some good news for 2020. There will be some face value increase in Italy, in Czech Republic and in Romania. For example, in Romania, the face value has increased from RON 15 to RON 20. For your information, the assembly in Romania voted at the unanimity, the move from RON 15 to RON 20 because when you explain well our program, you have a large majority of people who said, that's good for everybody, for the employees, for the employer, for the local economies, and it promotes, in fact, good health habits within the society.

So business excellence, what does it mean? It means also has just demonstrated, the ability to explain our programs, what good it does for the society, and we see the benefits of it.

In terms of innovation, as said before, if you think about app-to-app payment, so connection to food delivery platform, we started with France. We scaled very fast in 4 other geographies in 2019, and we have between 6 and 10 more new countries to come in 2020. In terms of innovation, the question behind that is why do we innovate? We innovate for our users. We innovate for our platform, but we also innovate to make sure that our reliability level is going to be at the top level.

So among the next few years, we're going to continue to invest in the cloud. Our service level agreement is going to be 24/7, what we call Follow the Sun monitoring. Our disaster recovery plan are moving to the next level and our security as well. We're going to double the investment in our security budget in 2020 versus 2019.

Another lever of growth, external growth this time is the acquisition. We always have the same discipline, so strategic discipline and financial discipline. We applied that in 2019, we have been able to acquire 9 companies on the 3 different segments we are operating in, Benefits on the left, Fleet & Mobility in the middle and Corporate Payment on the right.

It represent a total cash of -- out in 2019 of EUR 782 million, and we expect from those acquisitions to generate more than EUR 60 million additional EBITDA in 2020.

And thinking about the, let's say, the acquisition and the adjacencies, CSI, CSI was the first year of CSI within the Edenred family. And in fact, the figures are very promising. We grew our revenue by 18%, if we exclude 1 contract. And the card spend because we make money by the level of traffic we generate on our platform, the card spend has increased by 34%.

The good news also is we have many flagship customers that are now customers of CSI. And the other good news as well is we have partners because the American market is a very large, a very deep market, so we need some help to distribute our products. We started with Bank of the West.

In fact, we just signed a partnership with 1 of the top 3 American bank, and we are working on the second one, within the top 3. So it seems that from a technological point of view, but also from a usage point of view, our solutions in the U.S. are more and more accepted and will be more and more widely distributed.

That's all I can share with you in this first part, which is 2019 is for Edenred the entrance into a new phase of growth. And now I'm very happy to pass the mic to Patrick to go through our Q4 performance and 2019 financial performance. Patrick, may the force be with you.

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Patrick Bataillard, Edenred SA - EVP of Finance [3]

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Thank you, Bertrand. This is not a difficult exercise to me this year.

Hello, everybody. Thank you, Bertrand. I'd like to go through the P&L with you and then an insight about the free cash flow, and then some insight about the net debt. Let's start with the operating revenue.

So total operating revenue for the 12 months of 2019 rose at EUR 1.570 billion. It is a reported growth of 18.3%, of which 13.9% was organic growth. So we are far above the guidance we've given to the market, which is at least 8% annual like-for-like growth.

What is interesting as well is that we observed the same trend in Q4 than what we posted in Q1 to Q3 this year, so no deceleration, no specific topics overall in Q4. Scope effects accounted for plus 5.3% in 2019, mostly around the 3 main acquisitions, CSI in the U.S., The Right Fuelcard in the U.K. that we are entering into our scope in January for both of them, and Easy Welfare that enter into a perimeter in June this year and many others, especially in the employee engagement platform business.

Currency impact. We are minus 0.9% or minus EUR 12 million expressed in absolute figures, which is not that much. It was from that very specific standpoint, let's say a quiet year. And the main negative impact came one more time for the Brazilian reais, with minus EUR 10 million impact. The other impact came from Argentinian peso. We used the hyperinflation principle in this country. But we have -- we had also positive news coming from the Mexican peso in 2019 with a positive impact of plus EUR 6 million.

If we start with the contribution of Europe, we are very pleased with the growth we posted in Europe with an overall 16.9% growth in this area, of which 13% was organic. We had, as we see, a slight acceleration in Q4 in comparison with the 3 first quarter of the year. This has been explained by a very good performance in France, especially when we posted solid performance with Ticket Restaurant, but as well with ProwebCE that did much better in 2019 than in 2018 for many reasons.

And we were also very pleased with the fast ramp-up of the Fleet & Mobility, light fleet solution we had in LCCC, but as well in Edenred SA as well, in fact.

For the rest of Europe, we continue to have a very strong penetration amongst the SME markets.

Most of the business, most of the growth comes from Employee Benefits, but as well we posted a strong growth in the Fleet & Mobility business with our core asset UTA, but as well with the fact that we are deploying value-added services and light fleet cards in countries like Italy, which is very successful, Germany and Austria, for instance.

And then on top of that, I daresay that we're successfully integrating the acquisition we've done in Europe, mostly around the employee engagement platforms. The most important one being Easy Welfare in Italy. But as well Ekivita Merits & Benefits in Belgium and Benefit Online in Romania.

In Latin America, we are -- we have a total like-for-like growth of 14.4% in terms of operating revenue, i.e. 12.5% as reported. We see some strong acceleration in Brazil this year, with plus 14.5% over the year. And in Q4, you see a plus 19.7%, but the footprint is important. The real growth, the real like-for-like growth in Q4 is 15.1%.

If we exclude, sorry, the positive effect from a revenue classification change between operating revenue and other revenue, we did retroactively in Q4 for the whole year 2019. So 14.5% for the 12 months is not polluted by this change.

The figures you see for Q4, yes, is polluted. Especially in Brazil, we had a very strong ramp-up in toll and maintenance solutions amongst the Fleet & Mobility division.

Hispanic Lat Am and Mexico, especially are slightly disappointing in Q4. This has been anticipated when we disclose our figures at the end of Q3. In fact, we are expecting this decrease. And this decrease of minus 1.8% is mostly explained by the Mexican situation with a recession in the year, but as well a base effect for the -- relating to the fuel price. We had a very strong fuel price in Q4 2018, and that was not the case in Q4 2019.

Then on top of that, we made a specific decision to submit -- to less what we call Navidenos, which is a kind of gift cards attributed by the government to the public servants, in fact. We had a strong campaign in 2018. We decided not to have such a campaign in 2019 because the economic conditions, the margin were much poor in 2019 than in the past.

So it has an impact here in the lack of operating revenue growth. It has an impact on well on the cash because, thanks to this kind of products, we have a very limited in the time amount of cash we keep at the balance sheet traditionally at the end of the year, and we are lacking this cash this year.

Regarding other revenue, what I'd like to point out is that, overall, we had a quite strong growth, EUR 56 million for the 12 months of 2019 to be compared to EUR 51 million in 2018, i.e., plus 11% growth.

This is a growth. It has not been the case over the last years until 2018. This growth comes from a mixed effect, amongst which the positive effects of higher interest rate outside the Eurozone in euro, coming from a country like the U.K., like Romania and Turkey as well.

And we have a decreasing interest rate situation, especially at the end of the year in Latin America, mostly in Brazil and in Mexico.

Then on top of that, our float keeps increasing throughout the year, even if at the very end of the year, the float is almost flat in comparison to the situation as of the end of December 2018. But during the year, the average float keeps increasing, explaining the fact that the base effect is increasing, so that the other revenue can increase in fact.

In comparison with the Q1 to Q3, apparently the growth is much lower in Q4. But in reality, this is the counterpart of the explanation I just given to you for -- regarding operating revenue in Brazil, that is to say that we have this change in revenue classification in Brazil.

And in order for you to have the full impact of that, you can have a look at Page 63 in the appendixes of the documents that has been distributed to you in order to have the full impact quarter after quarter.

So total revenue, which is the sum of operating revenue and other revenue. Without any surprise, we posted a strong growth. Total reported growth for the year is 18%, of which like-for-like growth was at 13.8%. Q4 trend, as you can see, is very comparable to what we've posted between Q1 and Q3 with a total reported growth of 17.7%, of which like-for-like was 12.5%.

Now if we move to the rest of the P&L and starting with the profitability, we posted a strong double-digit growth in EBITDA, in operating EBIT and in EBIT.

As you can see, the like-for-like growth of EBITDA is strictly comparable to the like-for-like growth of total revenue, plus 13.8% in both cases, which is good news, in fact. As you can see as well, the EBITDA margin came from 38.8% last year to 41.1%, so plus 2.2% in terms of margin. In fact, this has been explained partly by the change around IFRS 16, the lease principle that has been put in place this year.

This explains plus 1.8% overall. So without this change in methodology, EBITDA margin would have increased by 0.4 points this year, of which part of that is explained by the scope effect, said differently or said simply, the last acquisition we've done, especially TRFC, CSI but as well, Easy Welfare has a very strong EBITDA margin. And this, of course, is not a surprise.

When you look at the operating EBIT, we posted a higher growth, in fact, the like-for-like growth of plus 15.3% or reported growth of plus 19.3%, meaning that we have an operational leverage in the company. This is not a surprise, but this is a confirmation of that. And when you look at EBIT, we succeeded and posted EUR 545 million. As explained previously by Bertrand, we are well in the bracket that has been given to the market in July last year.

Despite the fact that, as you know, we faced the cyber crisis, the cyber attack in -- at the end of November this year, we had some costs relating to these attacks. And all those costs are including in this level of EBIT. All those costs are including in the cost, you can see here. Another way to look at how we succeed in improving the EBIT is to look at this bridge. We moved from EUR 461 million to EUR 545 million in terms of EBIT.

The vast majority of that, let's say 80%, i.e. EUR 63 million plus EUR 5 million of operating EBIT plus other revenue, i.e. direct impact on EBIT is explained by organic growth, in fact. So it demonstrates the fact that we have a level.

And when you look at the transformation rate, what we called in the past, the drop-through ratio, maybe you remember that we posted a 31% drop-through ratio in H1. The drop-through ratio for H2 was slightly higher, 34%, in fact. And this is explained by the fact that we continue to invest a lot in technology in order to transform our platforms. But nevertheless, we succeed in increasing the operating EBIT and succeeding and increasing our margin, by the way.

The change in scopes are plus EUR 22 million, mostly explained by the last acquisition, the most important contributor are as well as CSI and TRFC, like it was the case for EBITDA, as I mentioned before. And despite the fact that we had some goodwills for those company, meanings that we have to amortize the part of this goodwill and this has an impact on EBIT, of course.

Look at -- looking at the currency effect, I must add that I'm pretty happy with the fact that we only posted minus EUR 6 million. Maybe you remember that at the end of H1, we had minus EUR 7 million, in fact, meaning that overall, the exchange rate of the main currency we are dealing with are comparing in a smoother way than it was the case in H1 -- in H2 this year, in fact.

When we now look at how we move from EBITDA to net profit. As you can say, EBITDA growth is plus 25%. In fact, EBITDA growth has been partly explained by the change around IFRS 16. IFRS 16 has a noncash impact on EBITDA of plus EUR 29 million in 2019, which was the first year of adoption of this new principle. In the other way around, it has a negative impact of exactly the same amount, minus EUR 29 million in the D&A, in fact. So this explain mainly the fact that you see this increase in the D&A. We had as well additional PPA related amortization, minus EUR 38 million in the present to EUR 21 million last year.

Other interesting topics to mention is the fact that the overall amount of other income and expenses is slightly going down. We had a total net cost of minus EUR 31 million last year, and we had only into bracket minus EUR 25 million this year. This is mostly explained by the fact that we have much less acquisition fees this year.

The last -- the more -- the last more -- most important acquisition we've done CSI and TRFC has been concluded at the end of 2018, meaning that we have almost the full amount of cost related to those acquisition in 2018 and not in 2019.

The other impact, important impact, as you can see, is that we have a higher level of impairment of asset and goodwill this year. We've made the choice of depreciating some goodwill in small subsidiaries that are not doing perfectly well in some places in the world.

And then we've made some decision to impair some softwares we've deployed a long time ago that were not fully depreciated so far. And thanks to the fact that we are renewing those platform we're investing in technology. From time to time, we have to throw those softwares away.

Then when you look at the tax expenses, overall, this is apparently a big increase. The effective tax rate without one-off effects, without nonrecurring effect, is slightly going down this year. The effective tax rate moved from 30.5% to 29.8% this year. So not a big change, in fact. And the fact that we are paying much more is simply explained by the fact that the profit before tax is increasing a lot this year. So that the net profit came in at EUR 312 million i.e., a 23% increase in comparison to previous year.

If we move now to the free cash flow, what I'd like to point out there is that we've mentioned here a 2 level of EBITDA. We will do -- we will not do that regularly over the time, but it was important for me to give you the sense of the impact relating to IFRS 16 because amongst the EUR 668 million of EBITDA we've posted this year, EUR 29 million is not a cash EBITDA, if I may. So the EBITDA comparable to previous year is, in fact, EUR 339 million. Second comment is about the funds from operation.

FFO did grew up a lot. In fact, it grew up by 31%, of which 16.5% was organic. Then when you look at the way the float increased and the way working capital, excluding float did increase as well, the main comment is around the fact that the float did not increase as much as last year, in fact. And this is almost totally explained by the situation I've mentioned before and we face in Mexico.

We've made the choice to submit less to the Navidenos tender this year. We've done 3x less in terms of volumes, meaning that we have a big impact here, but this has to be considered as a one-off impact, in fact. This impacts sharply the situation of working capital and cash at the end of this year. This is good news for the future because it will help us in terms of base effect for next year. And we have no doubt about the fact that from a profit standpoint, it was a rational decision.

We submit less because the profitability of this business this year was not enough for us, in fact. So overall, the free cash flow is EUR 400 million or EUR 412 million if we restate this amount, including the change in regulation, a small change in regulation, we faced this year in Brazil around the cards that are edited by Repom, our local subsidiary in Fleet & Mobility. So nothing to do with the Employee Benefit. We don't see any change in regulation for the big Employee Benefit business in Brazil, but we have this slight change.

So overall, if we compare EUR 412 million to EUR 639 million, the conversion rate stood at 65% this year, in line with our guidance.

Without the sole Navidenos impact, we should have posted more than a 70% conversion rate. And in my view, I'm very optimistic about the fact that we should post this kind of conversion rate for the next coming years.

If we take into account those EUR 400 million of free cash flow in order to understand how the net debt came from EUR 659 million at the end of EUR 2018 to EUR 1.219 billion at the end of 2019, you see that we invested a lot in acquisition, EUR 780 million, as described previously by Bertrand. Most important topics coming from the CSI and the TRFC. We had this one-off IFRS 16 impact of minus EUR 91 million, very close to what has been estimated at the beginning of the year.

And then we have a total shareholder return of minus EUR 134 million, of which EUR 62 million we have paid to the shareholders of Edenred, EUR 25 million we have paid for noncontrolling interest and EUR 52 million were used to buy back treasury share in the market this year.

Two interesting achievements in 2019 and early 2020, I'd like to mention to you regarding the evolution of net debt. The first comment is about the fact that we've extended and amended our revolving credit facility. We did that thanks to Jean-Urbain in this room today. And with 14 of our banks, we succeed in increasing the amount from EUR 700 million to EUR 750 million.

We improved the financial conditions. We improved the spreads. And we are very proud to have introduced environmental and social performance KPIs. Two KPIs, one around the promotion of healthy and sustainable eating habits. And the second one about reducing the greenhouse gas emission, in fact. So 2 of the 10 commitments that has been described to you previously by Bertrand, we've picked up in order to convince our money lenders to use that in this green revolving credit facility.

Second comment is about the very successful convertible bonds we've issued at a record -- at a market record condition, that as was done in October last year, in fact. We issued EUR 500 million of convertible bond with a 0 coupon, the yield was a fantastic yield in my view, minus 1.63%, with a 40% premium and with a 5-year maturity.

So as a matter of fact, when you look at the maturity of our debt, on the right side of this slide, you can see that this debt is very spread over the next years. And we have no major debt wall for the next 6 to 7 years.

Another comment about debt is that we have a very sound debt profile. We've succeeded in reducing a lot the cost of debt and a good outcome for that is the fact that overall, the average cost of debt reduced by 36 basis points this year.

And when you look at the P&L, I didn't mention that earlier, but the total cost of debt, the total financial results did grow from EUR 37 million to EUR 35 million this year.

Another interesting top KPI as well is the fact that despite the fact that we invested a lot in acquisition this year, the leverage ratio stood at 1.9x at the end of this year with a net debt of EUR 1.290 billion as of December 31, 2019, meaning that without any surprise, we will keep our strong investment-grade as decided by Standard & Poor's in the next coming weeks now.

Last comment from my side about our dividend. Maybe you remember that we expressed the fact that we will -- we expressed the fact during the last Investor Day in October 2019 that we will move into a progressive dividend policy, meaning that our commitment consists in increasing the dividend every year at least by EUR 0.01.

And that's the decision we will propose to the general assembly meeting. Our proposition consists in increasing the dividend from EUR 0.01, i.e., moving from EUR 0.86 last year to EUR 0.87 this year. On top of that, we will propose a scrip dividend, as we did for many years now with a 10% discount for the scrip dividend.

Thank you for that. I will now let the floor to Bertrand.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [4]

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Thank you, Patrick. So to conclude, what do we see in 2020? First of all, what we see is our anniversary, as I said, it's the 10-year anniversary of Edenred. Many things have happened for the last 10 years. The second thing is we will generate in 2020 sustained growth in all regions and all business lines.

And why? Because it's going to be driven by the engines that really produced well in 2019. The engine #1 is scale. We will continue to grow in under penetrated market, and we will do it program after program and especially among the SMEs. We will continue to work on the maximization of our of our customer base by developing the up selling and the cross-selling.

The second driver is innovation. We have a budget that is massive in terms of investment. In 2020, it's going to be more than EUR 250 million that are going to be invested to continue to nurture our technological platforms and prepare for the future growth. And this innovation is for our users, but also for the reliability that is needed behind our platforms.

The third driver is the M&A. In M&A, we have 2 aspects to look at. The first one is we have been acquisitive in 2019, so we need to continue the good work of integration. And for us, an integration plan is laid out for 2 years. So we did well in year 1, we continue, and we will work hard to continue to do well in year 2 to be able to close the chapter of integration. But we will continue to be acquisitive on targeted acquisitions on our 3 main business lines, Benefits, Fleet & Mobility and Corporate Payments, but we are highly determined to use the same strict strategic and financial discipline as the one we used in the past.

And the last driver of the generation of growth is transformation. And I'm sure you noticed it. We will continue and accelerate the willingness to deploy our ideal strategy, ideal being the 3 pillars: People, Planet, Progress, not only for us as a company, but pushing also our solutions because our solutions are very powerful enabler of CSR behavior within the working world.

So if we work hard, if we work well on those 4 pillars of our fast-forward plan, we should be able to confirm our annual -- and we are able to confirm our annual medium-term target for 2020, i.e., like-for-like operating revenue growth of more than 8%, for EBITDA more than 10% and a cash conversion of more than 65%.

Thank you for your attention. And Patrick and myself are now for you and with you to answer all your questions.

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Questions and Answers

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Simon LeChipre, MainFirst Bank AG, Research Division - Analyst [1]

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Simon LeChipre, MainFirst. Three question, please. First of all, looking to CSI, could you please give us a level of growth if we do include the contracts you've lost? And if you could also comment on the margin performance of CSI in 2019. And in terms of 2020, what do you expect in terms of top line for CSI? Do you expect to be able to reach your target of 20% top line growth?

Secondly, if you could comment on your margin performance because you return to margin improvement in H2, but it seems there are some moving parts there with the margin declining in Lat Am and in the rest of Europe. On the other hand, you have some, I would say, some cost-cutting at the headquarter level. So if you could explain the different moving parts and how should we think about margin performance for 2020?

And lastly, looking to the malware, what are the actions you've taken following what happened there? And what are the implication in terms of IT investments? You notably mentioned you want to double security investments. So does that mean we have to expect EUR 50 million of CapEx linked to cybersecurity next year compared to the roughly EUR 25 million you mentioned in the past?

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Bertrand Dumazy, Edenred SA - Chairman & CEO [2]

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Okay. It's more than 3 questions, I'm sure, but let's say, 3 buckets. So I start with bucket number one, CSI, and then Patrick for the bucket number two. And then I'll take the malware.

So first of all, for CSI, if you look at the performance of CSI for the second part of the year, so in H2, we grew at more than 20%. And by the way, in January, we also grew by more than 20%. So the expectations we have in 2020 at CSI in terms of revenue is to grow by, let's say, at least 20%. And we made some investments. So for example, we increase the number of salespeople. We made some partnership investment. As I said, our distribution is also indirect and we signed 1 big bank, and we are working on the second big bank in the U.S. for the distribution of our products. So we are confident as to our ability to continue the trend that started, in fact, in H2, a trend that is 20% and more growth of operating revenue.

You had one question, which was a question of the performance of CSI including the contract we lost. I think that was your question. So in fact, the total growth was between 5% and 10%, okay. But if you exclude this contract, in fact, for H2, we are above 20%. That's why if you exclude this event, we are pretty positive and happy about the engine forces that we have in place at CSI.

One last question about CSI was about the margin performance. You remember, the question was asked, and the margin we have at CSI are, let's say, around 50% of EBITDA margin. And so the year 2019 has been a year where the margin is slightly less than in 2018 but still around 50%, and I share with you the same explanation as we did before. If we want to grow at a pace of 20% and more, we need to invest, and the investment has a slight impact on your margin. But it's still a very highly profitable margin, and we want to continue like that. Patrick?

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Patrick Bataillard, Edenred SA - EVP of Finance [3]

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Regarding the operating margin, we didn't see any major differences in 2019 in comparison to last year for the big countries. What you can see in the figures you mentioned is mostly a geographical mix impact, in fact, meaning that we have the -- sometimes more growth in countries where the operating margin is slightly below the average, in fact, this year's. But overall, no specific concern, in fact.

When you look at the split between the holding companies, in fact, and the operating companies, here you have a change, in fact. Our group is more and more centralized when it comes to speak about technology because we are investing in the same platforms, blah, blah, blah. So overall, one of big changes we've introduced this year consist in recharging more the central cost that we have for the high tech -- for the IT team, for the technology team to the local companies. So on one hand, you see less cost on the, let's say, the central, the holding bucket, and this is more explained by more recharge than a cost cutting. We did not cost that much this year, some of our running costs, in fact. On the other hand, we invested on additional OpEx and CapEx for technology. And the other way around, you see more central cost in the P&L of the OpCos this year.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [4]

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Okay. Your third question, Simon, was about the evolution of our spending. So first of all, technology spending for us is a very large bucket. It's about EUR 250 million. And we did put the split of this investment into the appendices of the booklet you have. So you have the split. You will see that out of the EUR 250 million, 10% is in security, but not only, compliance and support as well. So just to have an idea of the bucket we are talking about.

In fact, if you look at the level of CapEx this year, we are at a ratio of about 6.1%, knowing that the information we shared with you during the Capital Market Day was between 6% and 7%. So you see that at 6%, we are at the bottom of the range. In 2020, yes, we're going to invest more in security because after a malware attack, you learn things. And so maybe you accelerate some of the investment we planned. So there will be an acceleration in security, and it's a good investment. But we will stay within the range of 6% to 7%.

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Geoffrey d'Halluin, BofA Merrill Lynch, Research Division - Director & Research Analyst [5]

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Geoffrey d'Halluin from Bank of America. Three questions, please, for me. The first one is regarding the French market. So we've seen double-digit like-for-like operating revenue growth in Q4, which compare with the high single digit in the first 3 quarters of the year. Would you mind maybe to get back to this? And maybe what can we expect for 2020, given the exit rate we have seen in '19?

Secondly, just getting back to the margin question. So what are exactly the mix impact you've seen in Latin America? This is linked to the Brazil and Mexico growth we see in '19, which explain the slight decrease in terms of margin in Latin America this year.

And thirdly, would you mind to comment on your float policy for -- let's say we have seen other revenue increasing in '19, what can we expect for 2020? And maybe would you mind to remind us what is your float policy and interest rates policy in Lat Am, please?

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Bertrand Dumazy, Edenred SA - Chairman & CEO [6]

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Okay. So I do the first one and then it's for you, Patrick. Okay. So the French market on the -- so first of all, year 2019 in France has been a good year. It has been a good year. And because what is true for the world is also true for France. When you think about the penetration of Ticket Restaurant solutions, for example, in France, it's only 25% of the market. So it's not because this product and those products have been invented in France, but France is doing better in terms of penetration.

So we invest a lot. We do a lot of work to accelerate the penetration. So France, on Benefits, did well and did well mainly thanks to 2 things. First of all, the penetration of the SME markets on one side. And the second thing is the fact that by bringing more innovation, we have been able to transact more on our platform. Plus on employee engagement, which is an axis of development for us on Benefits, the first part of the year was slow; the second part of the year was very good on employee engagement platform with the brand that you know, which is ProwebCE. By the way, one of the reason we were slow in H1, it's because you had many elections about the new body of Workers Council.

So while people are voting. And while the new organization are putting in place, our business development is not as active. But as soon as it is done because we have the biggest sales force in France for both solutions, boom, we are able to go and have a constructive dialogue with all the workers' bodies for them to accelerate their digitalization with our platforms. So it has been a good year. Q4 is exceptionally well mainly due to the basis of comparison. So you cannot draw a conclusion on 2020 in France based on Q4. Unfortunately, we have to admit that Q4 2018 was slow, and so we have mainly an effect of comparison.

We believe that 2020 is going to be another good year of sustained growth in France because what we are doing on employee engagement, due to the penetration, there's still a lot to go after. Same thing for emblematic brands, such as Ticket Restaurant on one side, but also on Ticket Kadéos on the other side. Finally, in France, we started a new engine, which is light fleet mobility solutions with the LCCC product on one side and the TFP product on the other side, and we have a lot of traction behind those products. So this engine of Fleet & Mobility will continue to be a good engine in 2020.

Second question about the margin in Latin America.

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Patrick Bataillard, Edenred SA - EVP of Finance [7]

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So coming back on margin one more time. When you compare apples-to-apples, i.e. result, the additional recharge, which in this year coming from central team such as technology team, in fact, we don't see major differences from a year to another, in fact. And of course, this kind of recharge are netted when it comes to consolidated the local figures.

Having said that, we posted a very strong growth performance in Brazil. And you have to keep in mind that we exited from a very poor year in terms of growth in the past, meaning that we reduce as much as we can our structural costs in these countries, meaning that the additional revenue you can get in Brazil means that we get additional margin. So overall, the margin kept increasing in Brazil. And the other way around, the year was, let's say, pretty poor in Mexico when the margin is as well very good, meaning that the geographical mix in this Lat Am regions, mostly from the difference between Brazil and Mexico.

And then on top of that, as you may know, in this beautiful part of the year, we have a very small but specific situation. We had a fantastic profitability long time ago in Venezuela, and it's nothing now. In Argentina, Argentina is a very interesting country, a fast-growing country that even without hyperinflation or even without inflation, but we have to invest in order to grow the business additionally, meaning that overall, it's a bigger part of Latin America. And here the margin is not as high as it is in local -- in the other countries. And then at the end of the year, we had specific situation as well in Chile. You heard about the economic and social crisis, meaning that we did not post a strong performance in Chile this year. But it's obviously much smaller than the rest of the geographies.

Regarding float, what I'd like to remind is that -- what I expressed during the last Investor Day in October 2019, is that overall, we see many factors impacting the float and, more broadly, the negative working capital. Overall, my bet is that it will continue to increase. And what I can tell you is that this year, without this very specific Navideños impact, it has increased, in fact, this year. When you look at the cash flow statement especially, the float increased by EUR 20 million this year in comparison to EUR 161 million last year. In fact, this was pretty poor this year, explained by the Navideños campaign of 2019. And it was pretty high last year, explained to the very huge Navideños campaign we had last year in 2018 in very different economic circumstances, in fact.

Overall -- in many cases, in fact, our Employee Benefit business, which is the business that create the big bunch of the float, is not only a prepaid business, like it was in the past, let's say in the paper world. It's more and more a preloaded business, meaning that we have to ask the client to pay us after we've loaded the cards, in fact. So we have to be stronger in credit management, and this is what we are doing.

Second important topic is that the digitalization of Employee Benefit is not finished, as you know. And the view we expressed in October last year is that, over the long run, the float maturity for Employee Benefit should go down to a floor of 7 weeks. We did move from 2018 to 2019, from 8.1 week to 7.7 weeks. So overall, this is not different to what were expressed. And fundamentally, the equation for the next coming years is, on one hand, the increase in volumes, which increased the float. And in the other hand, the fact that the float duration is smaller and smaller in some countries. And we have this mix effect that make me confident about the fact that the float will continue to increase. The overall negative working capital will continue to increase, but probably at a lower pace than what we see in the last year's impact.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [8]

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Maybe one element I'd like to add as to the second question for the margins. The way we look at we need to manage Edenred is we are a growth company, and we are going for sustainable and profitable growth. So we are looking at the margins per product line, per country, per economic zone. We are looking at it very carefully.

Having said that, when we have to make a trade-off between investing today to generate some high growth tomorrow and if by doing so, for a period of time, it's going to have a negative impact on our margin, we accept it. It doesn't mean that we -- but medium to long term, it has to contribute to the improvement of the margin, because we are in business for that, and we are a scale business.

But in terms of pecking order, our top priority is to look at the growth opportunities. And because we are a highly profitable and cash generative, if we don't accept sometimes to invest by degrading a little bit our EBIT or operating EBIT or EBITDA margin, we will never invest because we're at high levels. So we are very careful to improve our margin and work on it, but we take part of the benefit we get from the scale to reinvest and prepare for the future.

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Unidentified Analyst, [9]

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I have, like everybody, 3 question, please.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [10]

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It's because you are French.

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Unidentified Analyst, [11]

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Yes -- no, I don't think so.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [12]

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We have been trained like that.

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Unidentified Analyst, [13]

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The first one is regarding the Mexican growth. Could we have an idea of more color with the split between the fuel impact, from one part, the Navideños impact and, finally, to have an idea of the underlying growth and the impact of the GDP slowdown?

The second question is regarding the take-up rate in the Employee Benefits. You have mentioned 32 basis points. But could we have an idea where it came from? Is it a geographical, type of clients, SMEs, for example?

And the latest one, just to come back on your M&A strategy. You said that -- you mentioned that you have tiers of integration. Does that mean that for the -- let's say, the next 12 months, you are not going to do any big acquisition because you have to focus on CSI and so on?

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Bertrand Dumazy, Edenred SA - Chairman & CEO [14]

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Okay. So I propose to take 2 and 3, and I leave you with 1. Okay. So your question is on take-up rate. In fact, the improvement of our take-up rates for Benefits is across every geographies, i.e. And it's one thing we are not too bad at doing is when we see some room for improvement, we really try to scale our program. So it's true everywhere around the world.

And one of the reason we have been able to increase the take-up rate, it's a mix of things. First of all, as you said, it's a client mix. When you deal with SME, knowing that we didn't have access to our programs before and because we are smaller and so we are able to charge slightly more, okay? But we are able to do that because we have been investing a lot in our digital solutions, because without the digitalization and the enrollment platform that is digital and the fact that we are taking care of the users directly, which has certain level of cost, but if we do that well, if we scale that well, in SMEs, we are able to have higher margins. So the increase of the take-up rate is coming from every country because in every country, we are going after the SME market.

The second main driver of that is the fact that we have been able to push a lot of innovation in 2019 in many countries. So when you have renegotiation of a contract and you come with something new that is very significant, so for example, the ability to connect, to deliver is -- doesn't seem a lot, but for many of our customers is a lot because we have a shift in generation and we are all fighting for the best resources. And when you are a large account and you say, well, if you join this bank or if you join this large company, you will have access to some employee benefits. One of them is at Edenred.

We at Edenred, on the Friday evening, if you need to order something, is going to be easy for you. It's a small element, but all those small elements are helping to create a digital environment that is very key for the effectiveness and the loyalty that you want to generate as an employer. So thanks to the innovation, we have been able to -- at the renewal of contracts as well, we have been able to get a better economic equation. And that's really the combination of those 2 elements.

Then one thing I want to share with you, don't take the plus 32 basis points as something we will do every year. You -- we are managing a base. It's a base of 50 million users, 850,000 corporations. And so it depends on many factors. The innovation will continue. Our professionalism will continue to increase. But it's going to -- the impact on the take-up rate is going to depend on the renewal of the contract because it's at the renewal where you can -- when you can propose the innovation. And it's also going to depend on the economic conditions of certain countries versus some other countries.

So we did well. We have been doing well for the last 4 years, because every year, we have been able to increase the take-up rate which is, for me, the proof in the pudding of our innovation and professionalism. But 32 basis points is somehow exceptional. It will continue to increase, but not at this rate.

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Patrick Bataillard, Edenred SA - EVP of Finance [15]

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Maybe an additional comment, Bertrand, is around user monetization. It's a start in 2019. We have a new reporting line in our internal report, for instance. And especially, this is a good and interesting start in 2019 because we invested a lot organically and externally in employee engagement platform, meaning that we start to monetize the relationship with the final users. So it's an additional revenue line, in fact, and this has a positive impact in this change.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [16]

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Then your third question was about the M&A. No. Doing the integration on one side doesn't prevent us from being acquisitive. We are able to do both. The only thing I'm saying is, for us, acquisition is a value creation, an additional one, an additional value-creation lever. And because it is a value-creation lever, it has to be managed with all due care.

What does it mean? It means that the way we look at the integration program at Edenred on many dimensions, it's a 2-year program. So we have been acquisitive in 2019 with 9 acquisitions. And it's not because it went well in 2019 that we say we are done. We know that it's a 2-year effort, and we never forget it. And that's why I said, year 2020 is a year of integration, and it's the year 2 of the wave we had in 2019. Doing that doesn't prevent us at all from being acquisitive, and we will be acquisitive in 2020 on the Benefit segment. So we will continue the consolidation because we are the leaders, and there are some scale effects.

We will continue the acquisition in Fleet & Mobility because there's still a lot of parts of the world where it can be consolidated or where we don't have any presence. And we know that in Corporate Payment in priority in the U.S., today, the market is booming, but the market is very fragmented. So there will be some synergies coming from the consolidation, if we want to add some other industrial clusters or verticals behind our technological platforms.

So Patrick, for...

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Patrick Bataillard, Edenred SA - EVP of Finance [17]

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Regarding the Mexican lack of growth in Q4, one more time, let me remind you that we've anticipated this situation and that we express when we disclosed the figures for Q3 in October. Having said that, we did slightly more in term of negative growth, if I may, than what we estimated. And this different is strictly explained by the Navideños situation. Because we have to make decision at the very end of the year, we face a situation in which the tender were down -- were managed differently by the government than the previous years, and that the competition was simply awful this year. So we've decided not to play this game this year, in fact. We are here for profitable growth. We are not here for volumes only, in fact, and that's the decision we took.

Regarding the fact that for a long time ago, we estimated that Q4 will not be a strong quarter is mostly explained by the Fleet & Mobility situation, where in Mexico, on the contrary to the other major country in which we operate this kind of fuel cards, we are still very much exposed to the fuel price. That was a choice we've done so far, in fact. And as a matter of fact, it is -- it has been, let's say, dangerous game. And we will continue to derisk the situation in the future because we had a very positive fuel price increase in Q4 2018 and a very negative in comparison impact in Q4 this year, in fact.

So in a nutshell, in comparison with the double-digit growth we posted in the past, let's say that roughly half of the difference with the minus 1.8% we posted in Q4 was anticipated and was explained by this fuel card situation. And the rest is broadly explained by the fact that we've lacked this Navideños campaign this year.

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Mourad Lahmidi, Exane BNP Paribas, Research Division - Analyst [18]

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Yes. Mourad Lahmidi, Exane. Three questions from my side, please? The first one is on the operating flow-through at 34%. So we understand that it reflects the technology OpEx that you've decided to step-up in 2019. Are there other items that explains this operating profile, like wage inflation or other cost inflation in 2019?

Second question on technology OpEx. How should we think about this line? Is it going to be a percentage of sales going forward or an amount that you decide to monitor?

And then third question on the take-up rate. Have you decided also to increase the merchant side of the take-up rate in 2019?

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Bertrand Dumazy, Edenred SA - Chairman & CEO [19]

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Okay. So I go for the first one, you go for the second one, I take the third one?

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Patrick Bataillard, Edenred SA - EVP of Finance [20]

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Yes.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [21]

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Okay. So the operating flow-through, it goes to what I said before. We are in business for growth, for sustainable and profitable growth, so growth of the top line, and we try to improve our margins. Having said that, we need to make some investments. Part of it is in CapEx, and part of it is in OpEx.

So we were pretty happy with the flow-through we have, knowing that -- remember, a flow-through is the delta on the delta. So it's highly, highly sensitive. So we continue monitoring it because we are crazy about efficiencies, but it's a ratio that needs to be looked at and manipulated with all due care, so very sensitive ratio. The margins are improving. So it's a good sign. And with those constraints, we have been able to invest what needs to be invested also in OpEx to prepare for the future because part of our IT spending is, obviously, in people and OpEx.

Do we see some, let's say, abnormal situation in terms of wages, inflation? No, we cannot say that. Having said it, the people management is key for us because our main spendings are in people, and we are 10,000 people. And 30% of our 10,000 people are IT people, developer, people, digital products. So we monitor it carefully. We cannot say that due to some abnormal wage inflation, it had an impact on our flow-through, so on the evolution of the margin.

The second question on the technology OpEx.

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Patrick Bataillard, Edenred SA - EVP of Finance [22]

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Well, regarding technology CapEx, in order to answer your question, we don't express it as a percentage of sales, in fact, for a very, very simple reason. And main reason is the fact that more and more we invest centrally, in fact, because we are better sharing the technological changes we are putting in place.

And the equation for me, the fundamental equation is to see how investing more OpEx and more CapEx centrally can be compensated one day on -- also by the fact that, locally, the cost that still sits in the P&L of the OpCos will reduce because we replace the run cost of local software. For instance, we were the fact that we have impaired some of the software, for instance, in fact. So when [they're over] we have to replace the central cost -- sorry, the local cost by central cost, we have to replace the local software by common platforms, et cetera.

So overall, our view is that it help us deeply to have those costs managed centrally, to control that we still in the budget, in fact. And this is the case for 2019. We will continue to manage this kind of cost that way in 2020. What I can tell you is that most probably this kind of additional investment with the impact on flow-through will be around the same in 2020. Said simply, we'll continue to invest, in fact, and we are pretty convinced that's the good way to manage it.

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Bertrand Dumazy, Edenred SA - Chairman & CEO [23]

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Your third question was about the take-up rate improvement for Benefits, where does it come from, between a client, commission and merchant commission. In fact, it comes from both parts of the equation, and we are working on both parts of the equation. So more innovation for both parts, in fact. So when you are digital as a merchant, you make a lot of savings. You don't need to sell the tickets, send the ticket. So it's a lot of manual work that you don't need to do. And our job is to share the savings. And we can provide many services that we didn't provide in the past to those merchants. And we select more and more carefully the people who values the traffic we generate. So that's for the merchant, and it's also true for the clients. So it's coming on both parts of the equation.

Any other questions before we close this intense forum? Okay.

So once again, thanks a lot for being with us. I know that for some of you, it's an investment of your time and in terms of mobility. So thank you for being so patient and loyal to Edenred. And let's go for another year 2020 to celebrate the 10-year anniversary of this wonderful growing company that is Edenred. Thank you.