Good day, and thank you for standing by. Welcome to the Worldline H1 2024 Results Conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gilles Grapinet, Worldline Group CEO. Please go ahead.
Thank you, Operator. Ladies and gentlemen, good morning. Thank you for attending today's Worldline Conference call on our first semester 2024 results. As usual, I'm with Marc-Henri Desportes, our Deputy CEO, and Grégory Lambertie, our Group CFO. This morning, we have issued our earnings press release announcing a good H1 performance despite a visible domestic consumption slowdown in many core EU markets of the Group during Q2 after a more positive Q1.
Briefly, our first semester revenue increased by 2.1%, of which 6.2% underlying growth at merchant services. Our adjusted EBITDA amounted to EUR 414 million, broadly stable compared to 2023, as anticipated, and free cash flow was EUR 82 million, i.e., 16% cash conversion of adjusted EBITDA.
In that still volatile macro context, we have set three very clear priorities for the management and the Group for 2024: the focus on our 2024 roadmap execution and our Group transformation, the focus on reinforcing our structural growth potential, and the focus on the strict management of our costs and free cash flow generation. First, we achieved important milestones on our Power24 roadmap this semester that will structurally improve the Worldline operating model and cost efficiency.
I report happily that all social processes are now fully completed. I'll come back to that in a minute. In parallel, we have pursued the development of our future growth engines, notably with the operational setup of CAWL, our joint venture with Crédit Agricole in France, and we confirmed its go-live targeted early 2025.
On top, we've been very active with the launch of new products and partnerships, expanding Worldline's value proposition and distribution partner network. Finally, we give an absolute priority in 2024 to free cash flow generation. On top of the structural transformation linked to Power 24, we continuously work on our cash cost base while improving operational cash generation levers. Grégory will come back in more detail on our additional cost and cash actions that we have decided to put in place.
As you know, 2024 is a critical transition year for our Group towards a more streamlined, agile, and efficient organization that will benefit powerfully from Power 24 as soon as 2025, and it will be having a much stronger operating leverage and free cash flow conversion in the medium term.
Thanks to progress done on Power 24, we confirm that we are fully on track in this accelerated transformation plan. Last, regarding governance, with the full support of our shareholders during our last AGM, let me remind that we have now a new board in place with Mr. Wilfried Verstraete, appointed Chairman of the Board. Now, let me dig into our 2024 focus in terms of execution, starting with Power 24.
We are now in full speed in the rollout of our plan. During the first semester, management has put a strong focus on Power 24's stringent execution with key milestones achieved during this H1 in line or ahead of plan, such as the full completion of the works council process.
All the social negotiations are also completed regarding severance conditions, and the new operating model design is live from August 2024, and hundreds of exits are already notified and start to be executed and will be executed all along H2. In parallel, we continued to successfully accelerate the ramp-up of our global competency centers in India, Romania, and Poland during the first half, with headcount reaching now above 5,300 people.
We confirm our objective to reach a third of our total headcount by 2025 in line with the transformation roadmap. Based on these achievements, developing as planned and supported by a strong mobilization across the entire organization, we now expect to deliver circa EUR 220 million rendered cash cost savings by 2025, or a 10% increase of the envelope versus our initially communicated target of circa EUR 200 million.
Last, in the current context, and as said sooner, we'll keep a very strong focus on cost and cash protection measures, and we have decided to implement additional measures, for example, to closely manage hirings, replacements, sub-contracts, and non-personnel costs in line with the close monitoring of the H2 macro evolution to fully secure the delivery of our cash objectives in all cases. During the semester, we also pursued the development of our future growth engines.
After the antitrust approval, our joint venture CAWL is now fully launched and works actively on its regulatory processes, sales strategy, product development, and recruitment plans to be in full operation as early as 2025, and to allow Worldline to access the very important French acquiring market. In parallel, Worldline continued its geographic expansion during the first half of the year, particularly in Italy on merchant services activities.
You remember the CCB organic partnership that we signed in Q1 and that will bring additional MSV by circa EUR 6 billion and circa 60,000 new merchants that we will start to migrate on Worldline platform in the course of the second semester. I want to highlight here that our Italian merchant services platform, Worldline Italy, has become in three years a remarkable growth and profitability engine of our Group, running in very strong double digits
. Reminding also some key H1 achievements, our Group was also very successful in executing its partnership and product development strategy. Among others, on the cross-border online, we announced a strategic partnership with Lidio to offer direct access to local Turkish payment means. This is now live. On the distribution front, Worldline reinforced its footprint in the fast food industry with Tabesto partnership, order-taking and payment specialists.
The ISV partnership will take place in 36 countries and will promote SoftPOS Worldline Tap on Mobile technology. In terms of new product releases, Worldline partners with Visa to launch a virtual card issuing solution for online travel agencies that will see first transactions taking place in H2. Last, on the new distribution channels, our combined payment solution for marketplaces and platforms with OPP is live and is now counting 165 partners.
Lastly, illustrating the relevance of our SoftPOS solution, again, we have now more than 6,300 micro merchants onboarded with a continued recruitment growth dynamic. As illustrated with these concrete examples, we are absolutely focused on reinforcing our growth potential and also to increase our competitive profile and making us very confident about our potential for strong growth reacceleration as soon as 2025.
Now, let me come to have a view on the current macroeconomic environment in Europe and what it means for the rest of the year at Worldline. After good MSV volumes over Q1, we saw a much softer consumer spending environment during Q2 in our core European markets and a particularly weak June, impacting negatively MSV dynamics all along the quarter, as Marc-Henri will comment in a minute.
What we saw in this slowing MSV dynamic in Q2 is clearly reflecting the reduced sales activity recently reported in their H1 earnings by many large consumer-driven companies operating in Europe, which have also adopted a more cautious stance for the rest of the year as the speed and amplitude of a potential sales recovery after the Q2 weakness remains today uncertain.
Looking at the reasons to be more optimistic, we can flag the first visible recovery of our own MSV during the first three weeks of July after the very low point of June. At this point, we can only acknowledge that there is a still significant level of uncertainty regarding H2 macro and consumption scenarios, and we decided correspondingly to cautiously adapt our full year 2024 guidance while giving priority to a strict control of our costs and to maintain our Free Cash Flow objectives.
Consequently, reflecting this overall uncertainty, we now expect for the full year an organic growth of circa 2% to circa 3%, an Adjusted EBITDA of circa EUR 1,130 million to circa EUR 1,170 million, and a Free Cash Flow maintained at circa EUR 230 million.
The low range of this full year 2024 updated guidance factors a muted macro and European domestic consumption environment in H2 as seen in H1, resulting in an MSV growth in the range of low- to mid-single-digit in H2. It would drive our merchant services underlying growth at circa 6% in H2 2024 and on the full year.
The high range, which is similar to the low side of our initial full year guidance, factors a sequential improvement in macro that would translate into an MSV growth in the range of mid- to high-single-digit during H2. It will imply an underlying growth of our merchant services at 7% or above. In both scenarios, we will pursue acting strongly on our cost base to mitigate this potential revenue impact on our profitability.
The most important point here is that whatever the scenario, as from the start of the year, the strong management priority will remain focused on our cash cost actions, allowing us to maintain in any case a free cash flow of circa EUR 230 million. To conclude this first part, let me remind you that thanks to the full benefit of Power24 in 2025 at EBITDA and cash level, thanks to the ramp-up of our new growth initiatives and the continuous reduction of our integration and cash costs, this will structurally reinforce
Worldline to be in a position to deliver a mid to high single digit organic growth, improve continuously our Adjusted EBITDA, and accelerate the free cash flow conversion towards circa 50% in the medium term. It's my pleasure now to hand over to Marc-Henri on the business and commercial dynamics of our activities.
Thank you, Gilles, and good morning to all. I would like to start today with an update on the MSV indicator reaching EUR 230 billion in H1 2024. The key takeaway regarding the MSV indicator is the following. After our Q1 in line with the end of last year, we observed the further deterioration in payment volumes along the quarter, particularly in June.
Household consumption in Europe during the Q2 was not dynamic, decelerating versus Q1. It has also been corroborated by the schemes. The trend is slightly better at the end of the beginning of July, probably helped by better weather conditions, but still remaining soft compared to a normalized trend across all the verticals. Overall, MSV growth in H1 reached circa 4% compared to H1 2023 and circa 3% in Q2 compared to the same quarter last year.
On merchant services dynamics with merchant KPIs, despite a contrasted semester in terms of MSV growth, as I commented, we have increased our merchant base with a net addition of 30,000 new merchants, pushing our merchant base at the end of the semester at 1.43 million merchants. Given the macro context, we are satisfied with this growth in H1 2024 because it is in line with our trajectory.
Our merchant base will as well continue to develop during the second half of the year, and we are going to start the migration of CCB customers on the Worldline platform. Let's turn now to our usual business activity slide. We had a dynamic quarter in Q2.
Before presenting the quarter's new commercial successes, I'd like to take a closer look at the EV charging vertical, a market in which Worldline is a major player, driven by the growing sales of electric cars and new government incentives with the new European directive. The EV charging market is an innovative market full of opportunities, with the number of charging stations set to quadruple by 2030. In this industry, a verticalized approach with a dedicated expert sales team and a full-service approach at European level has been key differentiating factors.
We already signed large deals with several major EV charging manufacturers, such as Alpitronic, enabling us to capture a market share in the region of 25% in this segment. In Q2, we signed EnerCharge, an Austrian vehicle charging station manufacturer, and we reached an agreement with Ampeco, a global EV charging software provider, to create a unified payment solution.
As you can see, we have experienced strong commercial dynamics. This trend will continue fueled by the privileged relationship we have now with all the major manufacturers of chargers for electric vehicles and a product tailored for market needs. For the other activities, many contracts were also signed in both online and in-store verticals. On the digital commerce side, we continue to strengthen our position in the airlines and travel vertical with the signing of Luxair, Luxembourg's national airline.
Once again, our reputation as a reliable partner in the market, coupled with our unique full-service solution offering, were a key factor in our success. Beyond airlines, we also had wins with Worldline payment orchestration platforms, and I can name Recharge.com or IWG. In the vending sector, we signed an agreement with Norb that will use our self-service accept and connect with local acquirers.
Lastly, we also signed an extended long-standing service partnership with leading e-commerce brand Cdiscount, focused on providing a seamless payment experience and optimizing performance and costs through a smart routing approach with local European acquirers. To end this presentation, I will come on the financial services and METS commercial dynamics. During the Q2 on the commercial front, financial services signed a significant contract with Raiffeisen Bank, the first client on Worldline cloud-based instant payment solution.
Using Worldline's modern cloud infrastructure, notably thanks to the partnership signed with Google at the beginning of the year, Worldline will provide the bank with the means to send and receive instant payment as mandated by the EU instant payment regulation. It's an offer we intend to continue pushing to Tier 2 and Tier 3 banks, and we have a solid pipe in this area.
On the acquiring and issuing processing side, the financial service division signed several contracts, first with Sonet to manage the entire processing of acquisition transactions. In Italy, we signed Market Pay and A-Tono. Lastly, we signed a partnership with RiskQuest to create an open banking-based risk credit analysis, thanks to our Credit Insight solutions. Regarding mobility and transactional services commercial activity, it has been solid, notably thanks to our Worldline Secure Safe solution, which has been key in the renewal of the contract with PMU.
This product offers secure service to online gaming operators operating in France. We have as well deployed or integrated ticketing and payment solutions, signing a contract renewal with a major leader in ticketing for shows and sporting events. Finally, we signed an agreement with a major energy company to renew the maintenance and evolution contract for its payment and loyalty applications. Now, let me hand over to Grégory to walk you through our data and financial results.
Thank you, Marc-Henri. Good morning, everyone. Before I dive into detailed numbers for H1, let me share with you the headline numbers. In H1, we post EUR 2.3 billion in revenues, representing a growth of 2.1% or 4.2% excluding merchant terminations. On profitability, Adjusted EBITDA reached €514 million, representing 22.5% of our revenues. Based on Net Revenue, our Adjusted EBITDA margin is 27.7%. Free Cash Flow stands at €82 million or a conversion rate of 16%.
Normalized net income group share reached €211 million, representing 9.2% of revenue, while reported net income group share equates to a loss of €29 million, impacted by the €174 million non-cash provision related to Power24 implementation. Normalized diluted EPS stands at €0.75 per share.
On the next slide, you have the illustration of the strong cost control put in place and over-delivering in a number of key areas we wanted to highlight. First, on the P&L, in H1, by rigorously monitoring our personnel costs, we managed to absorb the rolling impact of the 5% salary increase from 2023, both through the first impact of Power24 and through a meaningful reduction of our high-cost country subcontractors.
In H2, as wage inflation normalizes and Power24 ramps up, this reduction should be even more visible. Second, on free cash flow. As previously discussed with a number of you, we remain very disciplined on two key lines of the free cash flow statement: CapEx and rationalization and integration costs.
On CapEx, in absolute terms, because of the accelerated transformation being implemented in 2024, we've already decreased by 9% compared with H1 2023, and CapEx intensity is down to 7%. Second, regarding integration and rationalization costs, excluding Power24, we are doing exactly what we said we would by reducing those by 41% year on year, reflecting finalization of the integration of past acquisitions and ahead-of-plan in that regard. Overall, we are set on reducing cash costs and structurally improving free cash flow generation.
Moving on to revenue performance by business line on the next slide. Our Q2 came in at EUR 1.2 billion, i.e., organic growth of 1.7%. This slowdown versus Q1 was anticipated mainly due to the full effect of merchant termination. Looking at it by business line, the main highlights for Q2 are MS at 2.6% or 5.9% excluding merchant termination, which effect is strongest this quarter.
Despite resilient performance, in particular in Italy or in verticals such as travel and gaming, performance was impacted by the macro environment with less consumer spending in Europe and the termination of online merchants. Looking forward and depending on the macro evolution, we consider that MS will deliver a minimum of 6% underlying growth.
FS is down 1.5% despite continued good dynamics in acquiring and issuing processing, more than fully offset by the impact of the earlier-than-planned reinforcing of certain contracts. As a result, FS should slow down in the second half and reach low single-digit decrease for the full year. Lastly, METS is up 1.3%, mainly driven by good momentum in trusted services. Looking forward, METS growth is expected to improve throughout 2024.
For H1, organic growth is at 2.1% or 1.4% on an NNR basis, with MS up 3.2%, i.e., 2.5% on an NNR basis, which means, excluding merchant termination, an underlying growth of 6.2% over the semester, thanks to strong commercial dynamics and good traction on select verticals, as I just mentioned. FS is down 1.5% throughout the semester.
Overall, METS is up 1%. Moving on to EBITDA. Adjusted EBITDA reached EUR 514 million or a 22.5% margin, 67 basis points down from H1 23. On an NNR basis, adjusted EBITDA margin stands 5 points higher at 27.6%. Looking at margin evolution by GBL, you have MS adjusted EBITDA reaching EUR 386 million or a 23.3% margin, down 161 basis points versus 2023, or 31.3% on an NNR basis. Financial services adjusted EBITDA came in at EUR 126 million or 27.7%. METS profitability is up 334 basis points to 17.1%.
Finally, corporate costs are under control at EUR 28 million compared to EUR 30 million in 2023. In terms of business dynamics and margin, for MS, adjusted EBITDA margin has been mainly impacted by the macro softness all along the Q2, as well as by the merchant termination. FS, an adjusted EBITDA improvement, is mainly related to the first benefits of cost actions implemented at the end of 2023. METS was driven by the strong improvement in workforce management, as well as the rationalization of our infrastructure costs.
Finally, on corporate costs, strong control is implemented for some time now. Now, from the P&L, looking at operational items, the largest impact in the P&L is clearly the EUR 174 million non-cash Power24 people restructuring provision. On integration and rationalization costs, as we already mentioned, they're down circa 40% to EUR 57 million. EBITDA, therefore, reached EUR 282 million.
Net finance costs increased by EUR 25 million to EUR 35 million, mainly impacted by negative FX impact and hyperinflation. Income tax expense was positive by EUR 13 million due to a loss before tax of EUR 51 million. The annualized effective tax rate was 24.7% compared to 23.8% for the first semester in 2023. As a result, net income group share stands at EUR 29 million and normalized net income group share at EUR 211 million.
Looking at free cash flow statement on the next slide, we generated EUR 82 million of free cash flow in 2023, or 16% of our adjusted EBITDA. Main elements of note in our free cash flow are the change in working capital, which is an outflow of EUR 42 million in line with expectations, the CapEx, which we are reducing in euro terms, as mentioned earlier.
Mirroring the P&L trend and excluding Power 24, our integration and rationalization costs down by circa EUR 40 million. Overall, H1 free cash flow before Power 24 stood at EUR 124 million, or close to 24% cash conversion. After a deduction of Power 24 cash costs, our reported free cash flow came in at EUR 82 million or 16% conversion.
One final comment: free cash flow focus will remain in H2, allowing us to maintain our free cash flow ambition of EUR 230 million. Finally, in terms of net debt, at the end of H1, our net debt stands at EUR 1.7 billion, or 1.5 times adjusted EBITDA on an LTM basis. On the debt and liquidity management front, we've been very active by refinancing and securing a new RCF and signing the new 1.125 RCF with a maturity extended to July 2029, with a two-year extension at the lender's discretion.
The RCF replaces and upsizes former facilities and is supported by a pool of 17 international banks, including new lenders. This is part of the global financing strategy of Worldline to actively manage our debt maturity profile and further strengthen our financial liquidity. Now, let me hand over to Gilles to conclude.
Many thanks, Gregory. To conclude this presentation, let me share with you that this H1, we believe, shows that we are actively executing all the transformational actions needed to improve our long-term business and financial performance. We have a particularly strong emphasis this year on execution to reap the full benefit at productivity, efficiency, and cash level as soon as 2025. Benefiting from the accelerated transformation of the group through Power24, our priorities are unchanged.
We will pursue focusing on adjusting constantly our fixed cost base and cash generation potential, optimizing our current and future growth levers to also benefit from the increased agility that we will gain through our simplified and streamlined operational model.
In parallel, we are clearly preparing also for the future of the company by maintaining the proper and selective level of investment on our organic growth and reallocating our resources with a strong and reinforced focus on innovation, product, and distribution, an acceleration of the key strategic initiative, notably through the execution as planned of our strategic joint venture with Crédit Agricole in France, and also a reduction in the former M&A focus of the group, which is now concentrated on much smaller transactions targeting distribution channels or technology.
The implementation of this roadmap will structurally improve the group operating and financial profile with full run rate benefit to be reached as soon as 2025. We will present more in detail this ambition during an investor day to be held on November 26, 2024. Thank you very much for your attention, and I am now ready with Marc-Henri and Greg to take your questions.
Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take the first question from the line of Frédéric Boulard from Bank of America. Please go ahead. Hi, good morning. Two questions, please.
First of all, around if you can come back on what happened in June in terms of macro and consumption trends in these specific countries or segments you want to call out and the assumptions you've taken in this kind of low and high end for H2? And then on the guidance on EBITDA and free cash flow, at EBITDA level, we need to deliver about 8% EBITDA growth at the midpoint in H2 on similar revenue growth.
Can you discuss the key moving parts here from a cost perspective that will give you confidence to reach that? In terms of free cash flow, you probably need about €70 million higher free cash flow in the second half versus H1. So it would be great to have a bit of key points around assumption there to see that progression versus H1. Thank you.
Hello, Frédéric. Gilles speaking. I guess Greg will come back on your second question, and maybe I can start with the first one. Clearly, what we have seen in terms of volume evolution, as Marc-Henri covered, is a significant intra-semester volatility with a very different pattern dynamics between Q2 and Q1.
Indeed, we saw a constant decrease of transaction volumes from the former 4 plus MSV level that we had during Q1 to the circa 3 average in Q2 and this very low point in June. This has been observed largely across many verticals that are consumer-driven that we follow. And I must say this pattern has also been largely spread over many European countries.
When we've been trying to look at what was the reason for this slowdown and this volatility, a part seems, when we look at the H1 release from consumer-driven corporate organizations that have been releasing recently in July, their earnings for H1, that many are, for example, talking about the very poor spring weather in Europe.
It seems also that promotional activities and sometimes lack of activity in malls, in particular, has also been spotted. Up to what extent this is purchasing power related or linked to the weather. But clearly, this volatility is somehow significant. Given that we see that it can happen quarter on quarter, moving circa 2% of MSV level, we took, as you understand, a more cautious stance. We don't want to bet on the H2 macro to deliver the year.
So we decided to cautiously adapt also to what we heard in terms of anticipation from these consumer-driven businesses for H2. Weather has certainly played a part, so this one may fade away. July, as we mentioned, is already significantly better than June. So that's an encouraging sign, but it is only one month. So this is clearly something that we will monitor closely, and certainly we'll have the opportunity to report later on during the conferences of September and the further meeting with you guys.
On your second question, Fred, I think there's two parts. There's the EBITDA part and the Free Cash Flow part. So first of all, it's important to bear in mind that H1 is not normative with the full effect of 2023 wage inflation, maximum merchant termination impact, while only a small portion of the Power24 benefits. H2 will be the opposite.
It will benefit from four main parameters. There will be less merchant termination impacts. There will be less rolling effect of the 2023 inflation on people cost. There will be a bigger impact of Power24 contribution on the cost base. And we're taking additional cost measure containment. And on top of that, as we said, we're remaining cautious on the macro outlook, but we cannot exclude improvement throughout H2 to reach the top end of the guidance and deliver more EBITDA
. On the free cash flow front, we are taking measures on the integration cost side as well as on the CapEx side. Strong discipline there. Also, taking strong action on the working capital, in particular on terminals inventory, but also focusing on faster onboarding and reduction of DSO as we are moving faster through the target platform. These are the two components to your answer, Fred. Okay.
Thank you, Gilles. Thank you, Greg.
Thank you. We will now take the next question from the line of Antonin Baudry from HSBC. Please go ahead.
Yes. Good morning, everyone. And thank you for taking my questions, too, if I may. My first question is about long-term trends on what you see in European payments. Compared to before, we now see a lower consumption to have an impact on merchant services, and we see some reinsourcing of some contracts in issuing rather than outsourcing.
I just wanted to know if these trends in both businesses were temporary in your view and related to current environments, or if there was something more structural there, as penetration of digital payments versus cash in Europe is higher, and banks may have changed their strategy on issuing.
My second question is on Power24. You announced an increase of efficiency targeted by 10% to EUR 220 million. Is there any additional cost related to that? And when do you expect to cash out this cost? Thank you.
Sure. Hello, Antonin. Thanks for the question. Maybe Marc-Henri and myself will take the first one, and I will let Grégory with the short take on the second one. No, there will be no additional cost. This one we can already deal with. It is just the fact that we are in advance in the way we execute the plan, and we feel comfortable to actually increase the target. We see the efficiency of the measures, which are very closely monitored and tracked. So that's where the uptick of 10% comes from.
Your first question, the long-term perspective, they are still good, we believe, for payment activities. Just, it's true, and I will give the floor to Marc-Henri, that for the time being, the macro environment is showing unexpected volatility.
To be fair with European consumers, the sequence in which we've been having since the start of the war in Ukraine, which has generated a hyperinflation, which is at a level which is unprecedented for decades, has clearly been having a massive impact on purchasing power of tens of millions of low-income households in Europe, and maybe also to a certain extent on middle class with interest rates rising and so on.
So we should acknowledge all together that the macro environment is absolutely not normative and that hopefully moving forward with the progressive taming of inflation, interest rate coming back to long-term guidance by the regulators and the ECB, we should have a more traditional pattern for payment in which cashless momentum will go on and with less volatility in terms of consumer spending patterns.
These days, we want to acknowledge that this volatility is still there. We don't want to take extra risk versus the initial guidance. That's the only thing we do today. All the rest is under control. We still believe these businesses have strong medium to long-term growth potential and certainly cash and cost efficiency. I give now the floor to Marc-Henri for more vertical queries on the way we see the market evolving, both MS and FS.
No, indeed. I would really share the view that what we observe in H1 is certainly not the reflection of any change of long-term perspective, but more a specific consumption momentum that was a bit soft, in particular in June, as we mentioned. It's good to see a different trend in July, but it's true that Q2 was a disappointment that we saw.
No, if there are some long-term trends in payments, it's more around the emergence of diversity of payment means, which we like to cover with our different offer and solution. And we see a growth of alternative payment methods on our platform, which is in the range of 50%. And so it's a very, very important growth.
We, as a provider serving a vast number of merchants, as we shared on previous call on this new payment method, we are able to have pricing models that are very similar with what we had with previous payment models. It's not a negative trend. It's rather something which rebalances a bit the ability to manage complexity and to deliver more value in or part of the value chain.
Another long-term momentum is the fact that payments move from being something a bit isolated, a payment device receiving only one data of payment instruction from electronic cash to something much more integrated in a value chain, a deep integration with EV charging station, as I mentioned, or with other software layer, allowing our ability to combine this value and to grow this value in the service we deliver.
So from that point of view, we see in this integration and this technology dimension of the payment market evolution a potential for us as a company with deep technology roots and strong product capabilities. And so it's something on which we are working, and we'll be glad to share some important progress at our coming CMD, in particular in the field of market share and embedded payments, where we signed a lot of partnerships
. I think typically our software solution to get payment on Android tablets or iOS iPhones has now signed up to 200 partners. And it's more and more a deep integration and our ability to have this integration and easy APIs, which is making the difference. So for me, that's a long-term trend that's a driving force on this market. On the reinsourcing, you mentioned the point. You mentioned in, sorry, issuing.
Issuing, we have a solid and close to double-digit growth in this activity. So we don't feel a pressure or a trend of insourcing. It's more in the field of account payments that we see less potential in this dimension. But you still have a lot of banks. The good thing in Europe has 3,000 banks, Tier 2, Tier 3 banks, where there is potential to serve them, and they don't want to insource these capabilities. And the instant payment solution we mentioned in the call is typically tailored for this kind of banks. We will never insource their solutions.
And in general, just to add one word here, is that regulation will still drive the FS business, but of course, it is depending on regulation innovation. So of course, in the next five years, for example, the Digital Euro implementation may represent for the FS vertical in Europe a significant opportunity to support banks in implementing the potential future Digital Euro, both at the EU level, but also in each and every bank. And the same, of course, for new payment solutions that may be encouraged by the regulators.
Marc-Henri mentioned instant payment, of course, but the Payment Services Directive number 3 is in the making and may come also with further novelties for the banks. Some will be mandatory. Some will be optional. But in any case, this is also things that are driving the demand and our capacity to serve.
Thank you.
Thank you. We will now take the next question from the line of Orson Root from Barclays. Please go ahead.
Hi, Orson here from Barclays. Thanks for taking my question. First one from me is just on Turkey, which was again called out on the call as a key strength. I was wondering if you could disclose how big the exposure is there now and how fast Turkey is growing because, of course, inflation there is still very high, above 60%.
And I was wondering how much is that sort of inflation dynamic in Turkey adding to the merchant services organic growth. That's the first one. And then the second one is just to come back on the financial services division. And I'm wondering if you could give a bit more color on sort of the shape of recovery because I think you mentioned on the call that you're expecting now earlier than expected reinsourcing. Does this imply we should also expect earlier than expected recovery, and how should we think about sort of the rebound of financial services into 2025? Thank you.
Thanks, Orson. On Turkey, no, it's not a very sizable business for ourselves. It's really a small share of the overall MS. It's a business in which we have a very differentiating technology solution with a very strong integration into all the specific fiscal requirements of the Turkish government. So it's a good place for growth, but it's not a big contributor to the overall MS share.
What I can add is that, and maybe you will give a color, Grégory, but what I can add is the fact that we invested to have specific integration for this market, which is very big in terms of number of inhabitants and dynamism, was particularly interesting for Google in our partnership and to serve online flows with the highest authorization rates versus the competition. And it's there that we start the partnership with Google to serve the Turkish consumers in their ability to perform online payments to access Google services
And just to give you a sense, Turkey is less than 2% of our overall group sales. And given the hyperinflation you rightly called out, it creates an impact in the financial result of the group, which is limited to the tune of EUR 10 million or thereabouts.
Now, on your second point, which is when is the FS rebound expected, what we see is a back-to-growth during 2025 with major opportunities that Gilles alluded to in the previous answer within the banking sector, like mandatory instant payment implementation by year-end 2025 or the EPI launch in participating countries or the digital euro. So that's the curve with a slow H2 and improving throughout 2025.
Okay. Helpful. Thank you.
Thank you. We will now take the next question from the line of Hannes Leitner from Jefferies. Please go ahead.
Yes. Good morning. Thank you for letting me on. Here are a couple of questions. You basically kept the low end of the free cash flow guidance. Maybe you can talk about the one-off implementation cost of Power 24, what do you expect for the second half, given the previous guidance was like EUR 150 million-EUR 170 million.
Can you explain to us how you will achieve merchant services to accelerate or to maintain its growth, its organic growth on the backdrop of an MSV? Do you plan to push through price increases, or is there different parts within merchant services which drives the growth here? Maybe just last thing is what caused the reason to upgrade the RCF, given it seems like a little bit of a lower cadence of growth of M&A activity going forward?
Thank you.
I'll take the first and the last one, and I guess Marc-Henri will take the second one. On your first one, as we mentioned previously, and given the EUR 42 million spend in H1, we expect the spend in H2 to be around EUR 100 million thereabouts. That's the first point. Still consistent there.
In terms of the RCF, it's really about maintaining the overall liquidity of the group. It's marginally increased. As you may remember, we had two RCFs previously, one for EUR 600 million, the other for EUR 450 million. It was really a matter of optimum in terms of supply demand and pricing here.
Yeah. Coming to MS in terms of acceleration, clearly, our guidance this year is not relying on a strong acceleration on the underlying MS. You have a mechanical acceleration linked to a less impact of comparison impact of the merchant termination portfolio as we have started it middle of last year. So that being said, then MS will, of course, accelerate further in 2025 based on our work. So price increase, not significant, and it's more business as usual in our activity now.
There are a couple of geographies, I would say, far-away geographies, not European geographies, where we did not fully pass the impact of the inflationary increase. So this will be a catch-up to perform that will provide a small contribution to this overall organic growth. But overall, no, it's not the price increase that will drive the evolution of MS organic growth.
It will be rather through the launch of new products, the development of our online activity, the delivery of contracts we signed over the last years, and that takes time to ramp up with big customers on their—and we're thinking in particular about big airlines or big technology partners that are still in their ramp-up phase.
And overall, an across-the-board work on partnership and digital onboarding to accelerate the intake of customers on our target platforms, which are extremely cost-competitive and price-competitive and help us to make a difference as we speak.
Thank you.
Thank you. We will now take the next question from the line of Hervé Drouet from CIC Market Solutions. Please go ahead.
Yes. Good morning. Thank you for taking my questions. First one is if you can come back on the charge you are taking for Power24. Am I correct in saying that for the full year, you are considering EUR 250 million? So you have taken already EUR 70 million of it in non-cash, and only 30% remains for H2, and then that would stop there, or do you think there could be some continuation after 2024?
On the cash portion of it, I mean, it looks like there's 25% which is booked as cash restructuring in H1. Is this ratio going to stay over time or for how long? So this EUR 42 million cash charge related to it? And the second question is in terms of new way of payment, I mean, there were some new way of payment that were highlighted, I mean, in specialist press and recently in France with some big retailer regarding paying with your hand, with a palm. I was wondering, are you involved in those projects, for example, with Carrefour, or what do you think about this way of payment? Thank you.
So just to clarify on your first question, the charge on Power24, so in terms of P&L, we booked the full cost of personnel exits for the plan in H1 this year. So within the EUR 174 million, you have EUR 132 million, which is the full cost of the exits for this year and next year. But there is also transversal cost, and there is also amounts that we spent in 2023. So just to remind you the sequence over 2023, 2024, 2025, we spent EUR 23 million last year towards Q4 for implementation costs in cash.
We're spending EUR 42 million in H1, and we'll spend north of EUR 100 million in H2. And we have a stub of EUR 60 million-EUR 80 million in H1 Q1 2025. That's the sequencing of the overall EUR 250 million implementation costs.
Okay. Yeah. And also for the new ways of payments, yes, it's typically the kind of things we do. We have this technology background, so we explore a bit all the new shapes and ways. The palm vein payments is something we had in our innovation center for a couple of years now. So I'm not allowed to comment on specific cases, but what I can say is we work on the technology chain to do these kind of things, and big players indeed like to get your help to make it happen.
I don't know if people will love palm vein payments. We don't take bets that one will be much more successful than another in one line. We tend to prefer covering the full shapes and forms, be very open-minded, and see what are the most successful ones. If I can give a very simple example, many believe the QR code-based payments were something a bit beyond the curve and not to be successful or reserved to Asia, for example.
And when we see the success of TWINT, which is a very strong partner of us in Switzerland, it has got a huge market share, and people got used to these QR code payments and like it in one of the most digitally advanced European geographies. So I think there is no preconceived ideas about what way of paying will be successful or less successful. We are technologically able to support and help all players to deliver these kind of things.
Thank you. That's a very clear answer. Thank you
. But it connects to a previous point of Marc-Henri. Payment will constantly get to become more complex. It's true for the form factors. It's true from the authentication system. It is true also for the payment rails: card, non-card, instant, deferred, prepaid, and so on.
And one of the real value propositions of large-scale payment specialists like ourselves is this possibility to make what is very complex in terms of diversity simple when it comes to be integrated for a given merchant or bank at point of sale. So that is really a very important long-term driver. The more complex the ecosystem, the stronger we are by making it simple for the merchants and ultimately for the end users.
Thank you.
Thank you. We will now take the next question from the line of Josh Levin from Autonomous Research. Please go ahead.
Good morning. I think there's a concern among investors that merchant services may be losing market share. I know you had that slide about merchant adds, but we don't know anything about the size of those merchants. How would you address the concern about losing share? Any specific data points you can provide? That's the first question. Thank you.
Right. Yeah. No, on the specific dimension, what we in particular, when we saw the MSV evolution throughout the semester and we wanted to confront a bit of data point, we look also at the issuing data because we are an issuer. So as an issuer, we know how much people use their card and what is the MSV evolution from the issuing side or the transaction number evolution from the issuing side.
And when we compare the market we operate and we adapt the geo mix on the market where we operate, we see that our evolution is very, very much correlated. Our MSV evolution or acquiring evolution, MSV evolution is very much correlated to the issuing market. So it's not something where I would say across the board on the Worldline geography, you have a disconnection.
This being said, we have different geographies inside the Worldline scope. So we have geographies where we have a very high market share. We are more in a market share defense mode and areas where we are more a challenger where we can really play the game of our new products, new approach, new distribution models, and where we are growing much faster.
Typically, we mentioned the case of Italy. I think in Germany, if I look at the results of H1, we are also having a growth which was clearly above and very close to the double digit on the underlying revenues of MS. And so globally, very good momentum in these markets, for example. So it's what I can highlight on this specific topic.
And just to add to that, Josh, good morning. Comment that is fairly obvious here, which is complementary to what Marc-Henri said and to your question. The 30,000 net merchant add is typically mass market merchants, as you can guess, just of all sizes. And the current situation is not that we don't onboard new merchants. It's the fact that what we've been seeing for a few quarters, but particularly during Q2, is that each and every merchant on average is just transacting less than in Q1.
Once that will be behind us in terms of macro uncertainties and evolution, all this machinery will start transacting more moving forward, and it will also be an important structural support to the long-term growth of the business. It's why we will never give up in pursuit of our sales activity, marketing activity, digital onboarding, going for the micro merchants.
It is clearly for us an important area of investment, and I can only invite you, and I hope that you will be available for the 26th of November, Josh, with your colleagues, so that you can have a much more detailed view of all the product distribution strategy, connection to ISV that we've been growing over the last years to exactly adapt to the next new normal of the payment ecosystem in Europe.
That's helpful. Thank you. Just one more, if I might. Worldline had a very brief outage in the U.K. in July. Is there going to be any impact from that?
No, it was indeed, as you said, very brief. Number of customer impact are pretty limited. We handle it very professionally, keeping a very good engagement with our customers. Impact is limited. Outages, unfortunately, in our industry, it happens from time to time, even to the biggest ones in the tech industry. You may have noticed it as well.
Of course. Thank you very much.
Thank you. We will now take the next question from the line of Alexandre Faure from BNP Paribas. Please go ahead.
Good morning. Can you hear me?
Very well. Yes.
Fantastic. Thanks very much for squeezing me in despite technical difficulties. A couple of things, if I may. One is just a follow-up on an earlier question around that softness in consumption you've seen over the course of a quarter. Could you comment a little bit by channel? Because PayPal, for instance, was quite constructive on the e-com channel in Europe. So wondering if you've seen any differences worth calling out between in-store and e-com.
And my second point would be if you could comment a little bit on the revenue content by depending on your mix between domestic and international schemes, because it feels like international schemes keep raising their fees. And maybe more broadly, how you see domestic schemes fighting back on the innovation front. I think that Cartes Bancaires came up with their own version of tokenization recently. So any thoughts there could be very helpful. Thank you.
Maybe I will answer your question. For sure, in-store and online are differentiated momentum in H1, in particular in Q2. In-store was, in terms of volumes, good, double digit. So probably, and we don't have a demonstration, so we don't come immediately with that, but it could maybe correlate with the fact that this weather condition in particular explains the super weak months of June. But yes, there is a differentiation around channels.
No ambiguity there. In-store was, sorry, online was less impacted in H1, and online, I said, yeah, was less impacted in H1 and progressing well. In-store, much more impacted. So just to clarify indeed, in-store was more impacted. We believe it may be correlated to weather. Online was doing better because less exposed to weather conditions. That's one of the explanations maybe. Okay. Regarding international schemes, it's clear that in terms of MSV evolution, it's much closer to double-digit evolution on the international schemes. So they are gaining market share all across the European geographies.
It's not deniable, but you have differentiated momentum. You mentioned Cartes Bancaires. Cartes Bancaires is doing very well, benefit from a strong support from the French banking community, push innovation. We work, by the way, a lot for them to support this innovation and this specific way of paying.
It's a very cost-effective way of paying for retailers and as a consequence for us as well. And so they are able to defend their market share from that point of view. We see different situations. Typically, in Italy, as we speak, the banks are really on a very strong strain of issuing only international scheme-branded cards. And the domestic scheme is losing a lot of market share as we speak, which indeed creates an additional pressure.
That being said, in these geographies, like in many others, we are massively on a pricing model which is Interchange Plus-Plus. So we are in a position to adapt to this evolution. And we are pleased to work with the international schemes that have a strong firepower to innovate, to develop new products, new solutions. So in an ecosystem like ours, it's very important to work with all partners, all solutions, adapt to all market evolutions that are not fully under our control.
And to expand on that remark, it is, as I mentioned sooner, from a strategy standpoint, we want to encourage diversity and competition in the payment schemes. That's the interest ultimately of the acquirers, that there is always multiple routes for a given transaction, and so as to allow also the merchant to get the best possible rate as ourselves. So it's also why, as you know, we also are a strong supporter to EPI, the European Payments Initiative, that we believe in the long run will take a fair share also, of course, by the transaction in Europe, whether it is in-store or online.
And we will also pursue advocating for any significant domestic initiative that needs to be supported or to work with non-European payment schemes that want also to gain access to the merchant point of sale like we do with Alipay, WeChat Pay, now the Indian scheme, RuPay, and so on and so on. It's part of our playbook also from a strategy standpoint to make sure that there is diversity at point of sale and that there is never one monopoly route that is going to impose its condition on the entire ecosystem. That's very clear.
Thanks very much.
Thank you. We will now take the last question from the line of Antonella Frangillo from Intesa Sanpaolo. Please go ahead.
Good morning, everyone. Two questions on my side. The first one is on follow-up on your comment on July. Could you give us more color on that in terms of speed of the deceleration compared to June, countries, channels, and so on? So just to understand if there is a further deterioration in July and where compared to June, or if it's a similar trend, just to have this update. And the second question is on competition. I have seen the announcement of BNP Paribas on the payment division and in particular their ambition to become a leading player, not only in France but also outside France, in particular Italy and Belgium. Could you comment on that?
Yeah, sure, Antonella. Good morning. Well, what we saw in July, basically, is a significant recovery versus June, but June was clearly probably not a normative level of MSV volume. So we are basically trending back toward what we were having, a bit below what we were having in Q1.
So it is basically a significant improvement, let's say 70%-80% more in relative gross rate versus June. So we've been moving now circa to what we were having in Q1. Still not exceptional, but I think much better than June. So that's only one month. And the fact that we want to stay cautious for what it may mean for the rest of the year. I think, as always, vacation is one specific period, the summer, let's say, July and August, where people are not in their domestic countries for a number of millions of people.
And of course, in parallel to that, what will be the next four months, when September will start? And in the end, Q4 dynamics with the typical very intense commercial activities around the Black Fridays, the Cyber Mondays, the Christmas preparation period, etc., etc. So still quite some uncertainties moving forward.
It's also why, in that context, even we are happy to see July being really clearly recovering, which gives us hope that we can absolutely also get to the upper end of our updated guidance on all parameters. I hope that we conveyed this message clearly this morning. We are focused on the transformation of the group to make it much stronger for 2025 and for 2024. Our absolute focus will be to deliver the free cash flow we wanted to deliver at the start of the year, whatever. This is a lot by the fact that we progress extremely well on all fronts when it comes to cash generation.
The progression, of course, is also the very deep progression we do on the platform convergence that is progressively less cash-consuming, the integration effort that we execute very well, and of course, the attention we pay in everything we do in the company for cash generation. So it's why we acknowledge uncertainties at the top-line level, but the costs are extremely well managed and the cash even more so. So the company is well on track to deliver a very powerful transformation that we'll pay very quickly as soon as 2025, and even more so if macro wants to be a little bit favorable. And regarding BPC and BNPP, at least BPC, sorry, BNPP, as you mentioned, yes, clearly, we see that they have some ambition in payments.
They are an important player in the French market, but from 2025, of course, they will have in front of them CAWL, our JV with Crédit Agricole, which is set to be a very, very strong performer in the French market. And I can tell you that with our friends at Crédit Agricole, we are sparing no effort to make sure that we will have a winner here. And the market, as you know, is open and competitive everywhere. The debate on competition, to be frank, has not been that much between Worldline or Nexi and banks over the last years. Banks structurally have a role to play in the value chain. We recognize banks are extremely powerful distribution organizations. And so we all respect all competitors.
If they do the right things on the product, on the technology, on the partnership strategy, on their ability to expand their value proposition, there is no reason a bank cannot be good in payments. In reality, it is quite a journey to create a scale player in Europe, and there are only a very limited number of banks that can claim to reach the level that is expected in the coming years to be a high performer in European payments.
Maybe a few will play very well their cards. I just observe that most of the banks have also recognized that strategic partnerships with companies like ourselves is the way to go. And we are absolutely convinced it is indeed the winning formula associating superior products, phenomenal reach, plus the power of the banking distribution network and the trusted brand they do represent in a given country. And this is exactly what we've been building for years.
Thank you. I would now like to turn the conference back to Gilles Grapinet for closing remarks.
Yes. Many thanks. Just expanding from what I shared with you and bouncing back onto Antonella's question, the company is absolutely engaged relentlessly on its transformation. Everything has been progressing as per plan or better. The transformation of Worldline is delivered, will be further delivered in H2, where we will start to see much more P&L benefits from the hundreds of levers that will actually take place in our H2, contributing to a much more normative financial profile as soon as 2025, both at margin and cash level. In between, we will deliver the target we have set to ourselves for the cash during 2024, whatever.
We will, of course, update you on the macro evolution that is still uncertain as we speak today, but we will get clarity on that moving forward into H2. Thank you very much for having been with us today and looking forward to our nearest interaction, guys.
This concludes today's conference call. Thank you for participating. You may now disconnect.