Ladies and gentlemen, welcome to the Q1 Revenue 2019 Teleperformance conference call. I now hand over to Mr. Olivier Rigaudy, Deputy CEO and CFO. Sir, please go ahead.
Thank you. Good evening, everyone, thank you for your presence tonight. We are going to commence your quarterly group figure for the first quarter that has just been released. I hope you get all of us the press release and the presentation that is available also on the website. I'm hosting this call from Paris with the team here, Alain Destailleur, Quy Nguyen, and Julien Marois. Let's give the speech to Quy to have preliminary remarks to make first.
Yes. Thank you, Olivier. Good evening, everybody. Welcome to this call. Financial press release related to the first quarter of 2019 revenue has been released today after the closing of the market. Dedicated slides are available on Teleperformance website in the investor relations section. As usual, Olivier's presentation will be followed by a Q&A session. A replay of the conference call will be available later on the group website. Today's call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These expectations are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. For a detailed description of these factors and uncertainties, please refer to the section Risk Factors in our registration documents available on Teleperformance website. I turn the call over to Olivier.
Thank you, Quy. Before going in depth in the figure and the Q1 figure, in looking precisely to the slide, I want to highlight three key messages from this release. First of all, of course, we are very happy with the strong growth recorded again. Once again, during this Q1, with 10% like-for-like growth. This is the 28th straight quarter in a row posting organic growth above 5%. That demonstrates, if it was still needed, that strength of our business model and confirm our status as a growth company. We just put on the appendix of the presentation, the slide showing quarterly like-for-like performance since 2012, if you are interested.
Second thing, I'm sure you have noticed that we have changed our presentation of our business to reflect two things, the expansion of its range of service and its shift to high-value solution, notably following the acquisition of Intelenet, and of course, information about the digital solution deployment strategy across the operation. We continue to split our business by geographical, because this is the way that we manage a group. This is the management approach of the group to follow by geography. That's the way we conduct our business. That's why we added a new region, I'll come back in a minute to that. We added a new region, in the meantime, we have gathered all, what we call the digital solution, in a so-called DIBS total to allow you to capture the size of this new business. We come back in a minute to that.
This new organization enable us to more effectively meet our client needs in term of development and digital transformation. It doesn't change at all the full financial performance of the group, of course, it illustrates its progressive transformation and convergence between these different business lines. Today, close to 20% of the revenue comes from digital solutions that we call DIBS, more than 20% is generated from what we call worldwide leader in digital, in mega apps in business like retail, transportation, or entertainment. First of all, very good strong record. Secondly, change of the reporting, third, very promising starting year, allowing to confirm obviously we're under target at 7% like-for-like growth for 2019, plus increase profitability by 20 basis points. Let's go more in detail now in slide three.
You have the figure of the Q1 for 2019 and 2018 figures, showing that we are at EUR 1,271 million, up 9.9% on a like-for-like basis. I agree we miss 0.1, we should have been at 10, we are at 9.1. Clearly, it's the same performance. It's continuing as we have seen in the past over the last quarter. Total growth is, of course, is higher, close to 24%, 23.9% to be precise, it takes into account, of course, the acquisition of Intelenet that is recorded now in full. If we move to the following slide, you have the detail of what is the currency effect, the like-for-like growth, the changes scope. No surprise here, the changes scope, of course, is Intelenet, the currency effect is EUR 30 million, of which the US dollar is the main impact.
There are other impact, net-net, the full impact, major impact is US dollar, which is close to the EUR 30 million that I described here. That is the point. I'm going to spend a minute on slide five, because this is probably the most new thing that we are going to make. Just to explain to you how we are now explaining our new sector. Following the acquisition of Intelenet, we maintain the presentation of our activity by region. Why? TP organization remains structured by region in term of operational management. You may have people that are running a country where you have DIBS and non-DIBS business in the same country. We wanted to keep this operational management alive and living as we have done in the past. Anyway, two mentions that impacted the business presentation are as follows.
First of all, we call the first category, core service, is changing to a larger new category called core service and DIBS, or Digital Integrated Business Services, still split into region. A fourth region, named India and Middle East, has been created, gathering all the ex-Intelenet activity in the zone, plus Teleperformance India, that was before, I would say, run under for the EWAP business and Praxidia or TP consulting solution that has been close to all the activity of the entire Intelenet. Secondly, we identify revenue generated by DIB solution in addition to the activity in India and Middle East region. DIBS include all the BPO activities as well as email, chat, and social network solutions of the group.
You have different core services that are followed on a geographical basis, but we disclose on these four regions, including the new regions that we created, the total of the DIBS activity across these four regions. Specialized Services remain globally unchanged with LLS and TLS, except for Praxidia that is now reclassified in core service and DIBS category, as explained earlier, in the region of India and Middle East. I hope it's clear, but it's not so complex. In fact, when you look on page five, you understand what has been done. What was devoted to some specific region from Intelenet has been classified with the correct region. That means that Intelenet Guatemala is going to be all the time. Intelenet Poland is going to continue for Europe and Middle East.
Philippines, U.S.A., and U.K., that was coming from Intelenet are, I would say, now gathered in EWAP while the TP India business has been put to India and Middle East. Let's move now to the activity on the message of Q1. We recorded a growth of 11.1%, I'm on slide six, in core service and DIBS. That has been clearly across the different regions and it is driving the growth of this quarter, clearly. Secondly, if you strip, if you look to the Specialized Services, you have a growth which is at 3.7%. Most of the growth and even more than most of the growth, all the growth and more than most of the growth is coming from LLS.
That is growing dramatically again, and we are confident that it will be able to swallow the decline, the fact that the IR business is a little down and TLS is flat. We are experiencing again a significant growth in LLS. At the end of the day, and we put that here, all the DIBS business in the group is now EUR 235 million, which represents 18% of the group revenue in Q1. That reflects the progressive transformation of the group and the capacity to take profit from the market evolution and digitalization. Obviously, we don't have this figure from 2018. We will be able, as the years go by, in the future, to populate this figure on a regular basis, and you will be able to follow that on a regular basis. Let's come to EWAP. EWAP, I am on page seven, we have announced a 2.8% like-for-like growth.
In fact, this figure is showing two things. The confirmation of the recovery in the North American domestic business, especially since the second half, and a continued, successful diversification of client portfolio, especially in retailing, healthcare, transportation services, and fast-moving consumer goods. Asia is growing dramatically, especially driven by Malaysia, with finally the rapid development of the multilingual hub in Penang. You have a decrease of the business in U.K. as weighted. We are close to double-digit down, and we have no more TP India in this division. If we would have had TP India in Teleperformance, the growth would be close to 5.3%, showing the decline of U.K.
If you, again, take a U.K. that would have been flat, we will be close to the 7% that we have experienced in last year in Q4. As a whole, the region is doing well, even if it has been hampered by the decline of U.K., which we believe is going to be continued in Q2 and with the disappearance of India. If we move now to Ibero-LATAM on the following page, I would say little pieces that you don't know already. The growth is 16.1% like-for-like, which has been, I would say, fueled by Portugal as always, but also with Mexico, Colombia that are growing in nearshore and Pan-American solution. Domestic market are good in Mexico, Colombia, and Argentina, and we are seeing a pickup in Brazil. When you look to this region, everything seems going well.
I would say same story for CEMEA on page nine, even if the figure is a little less, 16.1% like-for-like. Very solid sales performance among multinational clients. Good increase in revenue in Eastern Europe, but also in Turkey, of course in Greece with the multilingual hub. Finally, a good performance in France that shows also the growth that we are experiencing. Lastly, for the core and DIBS service, here you have the new sector, which is India and Middle East. In like-for-like, you have only here TP India. Before that was accounted in EWAP. The growth is absolutely amazing, 42.5%. That means that we are experiencing significant growth in India and to a lower limit also to a lower level, sorry, the same story in Praxidia significantly less. Strong growth of ex-Intelenet activities on a pro forma basis.
We are experiencing also on this business more than double-digit figures as planned at the time we make the acquisition. Let's move to Specialized Services. 3.7% here. Just to be clear, all the growth and more than all the growth is coming from LanguageLine Solutions, which return to normal growth after a more mixed performance in 2018. We are close to 7% again. TLS, there is modest growth as we knew. We have still the negative impact of the method of invoicing in U.K. BI that will continue at least in Q2, and we'll see what happens after. We have a revenue from debt collection, which is down year-on-year and showing a decline.
No major fear about Specialized Services, especially when you see to seeing the level of the growth of LanguageLine Solutions and the fact that the growth in the last, how can I say that? In the last months has been accelerated versus the first month of the quarter. All in all, we are happy with this Q1. Of course, it's just a Q1, but it's better to start this way than to start, that's good. We confirm, obviously, our full target like-for-like growth at least 7%, 20 basis point more in the EBITDA, continued good strong net free cash flow. We are reasonably confident on the year to come. That's where we are. Nothing really worried about that. Good performance. I'm open with the team here to answer your question.
Ladies and gentlemen, if you wish to ask a question, you may press 01 on your telephone keypad. We have one first question from Mr. Allard Says from UBS. Sir, please go ahead.
Good evening, everyone. Just three questions from my side, just trying to dive a bit deeper into the growth within Specialized Services. On LLS, you kind of suggested it was at 7%. Was that helped by a reversal of the 2% drag you had from a technical issue last year? Did you see any notable calendar impacts within LLS this year? Second question on TLScontact, can you perhaps talk a bit about the pipeline for any material visa application contracts that might be coming up for tender, and your perhaps your outlook post 2Q for that business? Lastly, I appreciate there's quite a few moving parts within the reclassification of Intelenet, but when you acquired it, I guess the message was that they should be growing at 10%-12% organically. On a pro forma basis, how's that growth tracking ahead of 3Q? Thank you.
LLS, of course, you have an impact only on March, because it was March last year. As a whole, this is not explaining the reason of the growth. It has a positive effect. I'm sure you have understood that. The growth is significantly beyond that point. We are seeing, again, a better growth in LLS. I'm confident that this will continue over the next month. Of course, you never know, but we see a good momentum in LLS so far. As far as TLS is concerned, we are, as you know, competing on some specific contract. I have nothing new to tell you that have been said to the market at the time of the release of the result early March. We are on it. It's too early to tell. Your third question, I'm sorry, I missed it, was on the-
Intelenet.
Intelenet. Intelenet, we are experiencing an Intelenet growth which is not the way we follow now the business. You have understood that we cut the business in piece across all different region, but the Intelenet business is growing above 10% as planned, and we are reasonably confident that it will be exactly like that for the full year. We are exactly on track of what we said.
Brilliant. Thank you very much.
Thank you.
Thank you, sir. We have another question from Mr. Edward Stanley from Morgan Stanley. Sir, please go ahead.
Evening. I've got three as well. Firstly, on EWAP, despite the easier comps in Q1, you flag only really Brexit as being the negative headwind. In the past, you've said that the U.K. is a pretty small portion of that group. Explain 170 basis points, which is basically what you're saying is the step down because of Brexit.
I don't know it's only Brexit. Brexit has a large shoulder, and you know that better than me living in U.K. I'm just saying that U.K., it's a significant part of the business, of course. It's the most, I should not tell that this way, but probably the most important European company in the group. This company is down in Q1 and probably will be down in Q2 also. It has an impact on the EWAP, yes. Clearly.
Okay.
Whether it's only Brexit or global mood, I don't know, to be frank. It has clearly an impact, yes. In terms of figure, U.K., I'm delighted to say that it's still important for us.
Sure. The fact that you're saying it'll last into Q2, but if it is Brexit related, then presumably we should, if we're being conservative, assume that it lasts into Q3 as well.
I'm just saying that I know that Q2, you're probably right. I'm not sure the trend of this issue will be as so bad in Q3 than it has been in Q1 and probably in Q2. Frankly, I don't know. You could be conservative too, of course. You can be conservative. You are, if I may say, much more pleased than me to have an idea of what is going to happen in U.K.
I'm not sure I am. Secondly, on debt collection, I know it's a small part of the group, but it appears to have been a drag for about six quarters now. Is there any update on when you think this can drop away?
What has been done, and I'm sure you have noticed that Specialized Services is now under management of the manager of LLS. That not only overseas LLS, but also TLS and IR, that's the debt collection business. Again, I believe this is going to suffer in Q2. I believe it's going to progressively come back to a better solution in Q3. You're right.
Okay. Finally, I know we're not allowed to talk about Intelenet because we have to talk about DIBS now. If I think about the business and your integrator is on track. Are there any positive or negative surprises that you've found within that business now that you've had it for a while? Secondly, roughly when do you think you'll get a feel for how much synergy could be delivered across integrating that into the group?
Absolutely no surprise, for different reason. The quality of the team, the quality of the business, these people, I am sure you know that they know how to work with different shoulder. They are able to adjust very quickly. Here we are shaking a lot the coconut because we are cutting the business in parts, putting in a part in Europe, a part in LATAM, a part somewhere. Giving them also business that we are not imagined by them. This is doing well, frankly. Of course, the idea is to develop synergies. There are a lot of things that are going on as we speak. There are some stuff that have been materialized, but nothing that could be told properly.
We are thinking, this is not announcement, we are thinking to make something much more precise and much more detailed during Q3, probably in U.S., on the DIBS and on the synergy and on the digital approach.
Sorry, what does that mean? You are going to do an investor day on it? Or?
Yeah. What we call a digital day or capital market day. We have not defined because it is not totally defined for different reason because we wanted to make it probably in U.S., and we need to have some things that need to be finished in term of CapEx, we hope to be able to do that in October.
Okay. Thank you.
Thank you, sir. We have another question from Mr. Christophe Chaput from Oddo BHF. Sir, please go ahead.
Yes. Good evening, Quy and Olivier. Two question for me. The first one is again on LLS. I just want to understand the plus 7% that you mentioned. Is it linked with new clients, more business with actual client, or is there as well a price effect linked to the video development? The second one is just to understand and to come back on Intelenet.
You implement the Spanish language, if I remember well. Do you see the first.
We stopped.
Yeah. That's a part of my question. Do you see a first sign in Q1 of additional revenue, or we are going to see it in Q3, as you said?
Nothing in Q1, maybe in Q2, but I'm not expecting a significant number. There are some things that are signed or under scrutiny or under RFP, under negotiation as we speak, but nothing that is material that you can take into account in this figure.
Okay.
As far as LLS is concerned, you're right, the video is increasing significantly. It helps in terms of volume and in terms of price. I don't know. It's difficult to tell whether it's new client or not. When you look LLS, the portfolio of clients is so big.
Sure
The size of the clients compared to core business are smaller. It's difficult to tell whether There is nothing material. What we see that the volume, the minutes plus the video, are increasing. There are two reasons. In this business, not only you need to have the client-
You need to be able to answer them at the time when they call you or when they FaceTime you.
If you have not the proper organization, you are missing sales. I believe that we have been able, in this first part of the year to-
To be better on these two elements. It's clear video is increasing significantly, at higher speed than the voice, than the phone part.
Okay. Thank you for those answers. Thank you.
Thank you, sir. We have another question from Mr. Patrick Jousseaume from Société Générale. Sir, go ahead.
Yes, good evening. My first question is on U.K. Just wanted to know why the revenue is down 10%. Is it a question of volume, price, or decisions that you have taken to get rid of some contracts? Could you give us more details about that?
Volume.
Volume? Okay. Very clear. My second question.
No, volume is made of two things. It is made of volume of a client that you get and sometimes the client that you lose. It's a mix of both.
That was my question. Okay. My second question is about EMEA, we see quite a strong revenue growth. Could you elaborate a bit on this, and especially about the potential improvement that we could see on margin in this geography, where the margin was the lowest last year?
Okay. You have in EMEA, the same, I would say, pattern that we had in Q4. That means you have the multilingual hub that is going well, the east part of Europe that is going well, including Egypt, including eastern countries in Europe. Speaking of all the eastern countries. Nordic is doing reasonably well. France is back on track. Italy even is growing a lot. I would say, is growing. Germany seems to be a little better, too. You have roughly the same pattern that you had in Q4. Of course, if it's continued all along the year, it should have a positive impact on our margin. Clearly.
Thank you.
Thank you, sir. We have another question from Mr. Dan Hampton from Credit Suisse. Sir, please go ahead.
Oh, hi. Yeah, Dan Hobden from Credit Suisse. Just two questions, if I may. The first one is on the India and Middle East, and obviously the amazing like-for-like growth rate. With it being a new division, I was wondering, is that the sort of growth rate you'd be expecting throughout the course of 2019?
No. What's happening in Middle East? In Middle East, in fact, you have like-for-like, only what we called, what was named before Teleperformance India. You have also India. All this zone is mainly Intelenet except Teleperformance India. Here you have as a like-for-like only TP India. TP India, we knew that we wanted to invest a lot in this country. We are experiencing a significant growth in TP India since now close to one year and half. We are very confident about the fact that we are here serving some non-Indian company from India. That is now managed by Middle East, India, TP India and Middle East under the management of the previous manager of Intelenet. That was the decision that we have made last year, on to invest so much and to develop so much India.
Okay. The second question, if I may. I think you mentioned that LLS was growing stronger in the third month of the quarter than the first month. I was wondering, in terms of an exit rate in general for the group, are you able to give us some guidance as to what sort of rate March was growing at a group level?
I'm not telling it. I'm not going to mention it by months, because if I'm starting to give you the figure by months, you are going to call me every month to have that. What I just wanted to give you as an idea, that what we are seeing, that increased business in LLS, especially in March. A part of that is coming from the one-off that we had last year, but it is going beyond the one-off. What I'm just saying that forecasting a higher figure for the full year in LLS than we had last year, seems at least reasonable. That's the message that I wanted to convey during this sentence.
At the group level, obviously 9.9% for the quarter, there's nothing you draw out there about it slowing or speeding up throughout the course of the quarter?
Of course, the quarter just started. We have just even not finished the first month of the quarter. The trend seems to be good. Where we are going to land this second quarter, it's too early to tell you. Clearly we have a good start. The second quarter is never the biggest one of the group, as you know. In term of volume, not mathematically in term of growth. We have not seen a big change in the second quarter so far. Again, we are just 25th of March or 24th of April, sorry, so it's not over, clearly.
Cool. Okay, thank you.
Thank you, sir. We have another question from Mr. Laurent Gélébart from Exane. Sir, please go ahead.
Good evening. Three questions on my side. The first one is on Brazil. If I remember well, it is a decent chunk of your Ibero-LATAM business.
Yeah.
I would like to know what was the level of organic growth there, and if you think it is sustainable. The second question relates to India. As you are becoming Indian in India, with the acquisition of Intelenet, do you believe those guys are helping you to develop further the business? Do you believe the growth was just because of what you have been doing in the past year and a half? Finally, Turkey, I think it's the first time you mentioned Turkey, could you let us know what do you do there? It is nearshore, offshore, or it is for the local market?
Brazil, I'm not going to give you the precise figure of Brazil, I know that it was a concern by a lot of your colleagues about what's happening in Brazil. In fact, we made a decent year last year in Brazil, it seems that Brazil is doing so far not badly, and we hope that it will continue. There was a lot of question about Brazil, it's much more the uncertainties, and it seems that despite what people might have in mind from the new government, it seems that in term of business, the business seems to be reasonably good. We hope that we will be able to get that all along the year. That's the first plan.
In India, of course, here the like-for-like growth is only capturing what has been decided for India, because it, by nature, it doesn't mean that the Indian business is not doing well at all. In fact, you have different business in India. You have the international business and the domestic business. If you want to grow dramatically in domestic business in India, we might say it's not so difficult. The idea is not to grow so much in domestic business with low margin. The idea is to select precisely for the domestic part with whom, at what margin you want to work. This is under control. We are looking that precisely to develop the business. The growth that we have in India for the Intelenet business, whether it's domestic or non-domestic, is not at 45% like India, which is smaller, but at a good rate.
Frankly, we have a good rate, too. As far as Turkey is concerned, I mention it, I should probably not. It's doing well. It's not a big business. We are doing offshore, nearshore, I would say, mainly. It's not a huge business. We do believe that this country, one day will grow significantly, much more than what is the size today. We are working on it.
Thank you.
I think this is the last question.
We have no other question, sorry for that.
Oh, that's great. All in all, I just wanted to say that, first of all, I want to thank you for all your participation and your interest in Teleperformance. Quy is going to give you some detailed agenda of what is going on for Teleperformance. Again, I wanted to highlight this is a good quarter, a good start of the year. We are happy with that. We do believe this is a good start of the year. There are issues, we mentioned them sometimes, but as a whole, we are more than satisfied with the beginning of the year. Quy, anything to add?
Yes, thank you, Olivier. I will give you a few key dates for the coming month. Indicative agenda. Teleperformance holds its annual general meeting on ninth May in Paris. We invite our shareholders to participate to the event and actively take part to the resolution voting site or through our dedicated voting platform. All the details to participate are available online on Teleperformance website. Please also save the date of the 2019 half-year results publication on 25th July 2019. Of course, in the meantime, Teleperformance continue. We continue to participate to numerous conferences organized by brokers, and of course, we will be happy to see you there. Thank you. Thank you all, and see you in a few weeks and coming months. Bye-bye.
Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect your