Earnings Call: Q2 2021

Jul 27, 2021

Good day and thank you for standing by. Welcome to the Wordline H1 Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Gilles Grappinet, Chairman and CEO. Please go ahead. Many thanks, operator. Ladies and gentlemen, good morning. This is indeed Gilles Grappinet speaking. Thank you for attending today's wireline conference call on our first half twenty twenty one results. As usual, I'm going to share the presentation with our Deputy CEO, Marc Andre Desportes and with Eric Arthur, our Group CFO. Well, to start, I have 4 key messages for you to highlight the main achievements of the 1st semester. And my first message is a message of satisfaction, both operationally and strategically. I'm really happy to report that this first half is solidly in line with the expected trajectory presented in February 2021. Indeed, despite a 3rd wave of COVID impacting our Q1 2021 performance, the group has been able to accelerate strongly during the Q2 with a double digit organic growth rate, fueled in particular by our merchant services activity. Hence, for the first half of twenty twenty one, we have enjoyed a slightly positive organic growth rate overall, above our initial expectation to be flat or slightly negative. On both OMDA and free cash flow, we have delivered a very solid performance, reflecting the group agility to deliver margin improvement and to produce a steady cash flow generation in this challenging COVID environment. 2nd message and second highlight of the semester is that as expected, we enjoyed a strong recovery of our transaction volumes in the course of the second quarter with 14% growth versus 2020. But maybe the most important point to flag here is the fact that since the end of March 2021, transaction volumes on our platform have been even above 2019 levels, illustrating the confirmed resilient change of consumer behaviors and the acceleration of cashless trends in our main countries. These facts fit the catch up opportunity for a company like Worldline when economies progressively reopen despite the fact that we do not feel any all the benefit coming from international travel. 3rd key message of the semester is related to our M and A activities. I dare to say that H1 2021 is probably one of the most successful semester ever of the group from an M and A standpoint, with no less than 3 acquisitions announced since January. This is highlighting the relevance and competitiveness of the wireline value proposition post Ingenico towards, in particular, bank partners divesting their payment assets and looking simultaneously to a long term reliable partner. In Southern Europe, as you already know, we signed the acquisition of Cardlink in Greece and more recently the acquisition of 80% of Acepta Italy, while setting a joint venture 8020 with the P and L Banking Group over there. In the Nordic region, we are proud to announce today the important acquisition of Anders Bank and Card Acquiring Activities and the signing of an alliance with this ID regarded banking group, which Marc Andre Deporte will detail further in a minute. These three recent operations are fully consistent with our expansion strategy after Ingenico and are addressing both fast growing and high potential markets where the group was either not present or where we can leverage an existing footprint such as in the Nordics, offering us in all cases very significant cost and revenue synergies while expanding our already unique pan European reach. 4th message is, of course, that with the materialization of our underlying scenario allowing us to deliver a solid first half performance and based on the most recent information available regarding the health situation, we can confirm our central assumptions for the second half of the year, implying a circa double digit growth rate in the months to come. Thus, we reiterate our full year guidance for this year. Going to the next page, I believe that our first half twenty twenty one figure reflects the group ability to accelerate growth in a more normalized macroeconomic context. Indeed, revenue for H1 2021 was €2,270,000,000 representing a slightly positive organic growth at 0.1% compared to H1 2020 at constant scope and exchange rates. More importantly, this first half performance embedded a strong organic growth of 10.1% in Q2, driven in particular by our merchant services activities, highlighting the group capacity to rebound very strongly as soon as our main economies reopen. Regarding our profitability, our OMDA reached €531,000,000 representing a 23.4 percent of revenue of 130 basis points improvement compared H120. This margin improvement is fully in line with our full year trajectory to grow our OMDA margin by circa 200 basis points, the second half being more favorably impacted by the expected strong growth of revenues and synergy delivery. 1st half twenty twenty one free cash flow was €268,000,000 representing a conversion ratio of 50.3 percent of OMDA, thanks to the strong cash management and control put in place by Tereq and Steve. Normalized net income group share reached EUR 276,000,000 representing 12.1 percent of revenue and normalized EPS reached €0.96 per share, up 55%, demonstrating the immediate and very positive contribution of the acquisition of Ingenico. As you can see, all our first half twenty twenty one objectives have been reached, reinforcing our full year trajectory. Marc Henry will now comment on the first half strategic, operational and commercial achievements before leaving the floor to Eric for the detailed H1 'twenty one figures. Thank you, Eugene, and good morning to you all. Let me start by the 2 successful strategic developments we have executed in Southern Europe with the acquisition of Carlinx in Greece and the joint venture with BNL Banking Group in Italy through the acquisition of Accepta Italy. The two operations fit perfectly with our strategic objective to further expand Worland's reach and scale in Europe and more specifically in Southern Europe, with the expansion of merchant services footprint in 2 promising and fast growing countries for electronic payments, driven by the cash to card shift, development of digital and online payments and the high exposure to credit cards with tourism representing a big driver of their economies. It has led a strategic long term partnership with a major of local banks leveraging their networks and offering added growth opportunity. You know the benefits of each transaction that we have already described it during the first half in dedicated announcement, but I would like to emphasize that these operations offer 2 solid consolidation platforms to further expand wireline presence in Greece and in Italy. The 3rd operation we announced today is the acquisition of Anders Banken Skard acquiring activities in the Nordics, as we see on the next page. This acquisition is a step further to European expansion in the Nordics market, which is a key strategic opportunity to leverage and accelerate the historical presence in the region. Partnering with Anders Banken, one of the leading banking group is the Nordics with strong position in Sweden. The key points to return on this operation are the Nordic region is a very attractive payment market driven by a strong GDP growth, a strong dynamic in digital payments expected to grow double digit and an accelerated growth in ecom growing 2 to 3 times faster than digital retail. In that market, under the Bank and Carla acquiring is a compelling merchant acquiring activity, bringing to warrant a reinforcement of our pan Nordic and recyclable market presence, a high quality diversified merchant portfolio delivering solid transaction volume flows and a long term relationship with Handelsbanken, one of the leading banks in the region to leverage existing offering to accelerate the growth profile. The strong market position of Anders Banken, coupled with Warline's global scale, best in class technology and payment expertise as well as the local excellence of former Bambora teams, now part of our groups in the acquisition of Ingenico, will allow the entity to grow revenue at a double digit rate in the coming years. This accelerated growth rate will be delivered leveraging our local operation and through the rollout of Whirlan existing successful one stop shop offering to the existing merchant portfolio for both SMBs and large retailers on top of a long term commercial partnership with the bank fostering growth opportunities I've mentioned. We expect to close the transaction by year end 2021 for a cash out of €195,000,000 At closing, Anders Bankerts, Casa acquiring will bring to our line circa €35,000,000 of revenues with a strong organic growth development flow synergies and an OMDA margin above 30% with cover expansion potential, thanks to the expected coming growth and surpass EUR 10,000,000 of synergies by 2025. Most important takeaway from Wallen M and A activity is the group's success in expanding its global European footprint in targeted geographies, while validating the bank friendly strategy and the preferred partner for payment asset outsourcing positioning. As you can see in the map on the front slide, Warline has massively increased its geographical footprint in Europe. It's not only a geographical expansion, it's also a significant upgrade of our global activities, improving strongly our offerings, both in store and online, the volume process on our platform offering efficiencies and our merchant exposure to leverage our solution. This meaningful scale offers definitely added growth opportunity with war lines through best in class global omnichannel offering for cross border machines, supporting them with full end to end solution fitting with our own European exposure. We will see in our pipeline large deal opportunities, thanks to our ability to deliver such offering at the European scale. The compelling scale and product offering matching that needs for large outsourcing deals today, our pipeline of commercial opportunity in financial services is reinforced both in quality and value with a higher proportion of new businesses versus renewal and the qualification for several significant outsourcing deals confirming the appealing profile of our platforms. The positioning of Roeland as a partner of course for several Fintechs willing to distribute their offering at scale with Verlan enriching the payment ecosystem with a pursuit of solutions to a very large merchant portfolio. And last but not least, the active involvement of the group in pan European and regulatory initiatives such as EPI or the Digital Euro being a prominent partner shaping the future of European payment market. The key point here is that we have transformed ourselves further into a strategic the key strategic partner, Central, is the European payment ecosystem, which allow us to seize other growth opportunities going forward, supporting our merchants and banking partners at scale. Now coming back to our first half performance. We will focus on our transaction volumes. As you can see on the left hand side chart, we have enjoyed since March 2021 an acceleration of our transaction volumes driven by the progressive reopening of economies in our core countries. It has been supported as well by the strong adaptation of merchants over the past 12 months after 3 waves of restrictions. The major points to underline are an acceleration for the semester of transaction volume with a strong pickup starting in March 2021. So positive signs on intra European travel and dynamic currency conversions at the end of June to be confirmed in the coming months and a market still driven by the shift of consumer habits, which is sustainable and COVID triggered and which results in a solid double digit growth in digital and online segments with in store activities being back to growth, thanks to a strong support of contactless transactions. But more importantly, I would like to point that since March 2021 and even more significantly so in June, our transaction volumes have been above the pre COVID level of 2019, illustrating the ability of payment markets to recover strongly upon normalization and the relevance of wireline offering in that environment, providing added value growth levels. Last but not least, this performance has been delivered despite the fact that we do not still have the full contribution of credit card transactions as intercontinental travel is not back, which we offer upside opportunities going forward. My most important takeaway from this slide is the strong capacity of group to deliver steady growth when the health situation normalizes, leveraging its global scale and reach to sales opportunities. Now let's have a look at Q2 commercial activities and achievements. On the commercial activity, I will be brief and highlight one key example of their business line, and you will find more on this slide. Commencing with Merchant Services, we continue to support merchant in their digitization acceleration. One notable example was when the largest European direct distributor of frozen fruits and ice cream, Bofrost, chose worldwide to implement a user friendly payment solution for the company's direct sales channel representing 130 distribution drivers in Switzerland. In financial services, we signed a 5 year agreement with Luminor Bank and Zobatics to unify and upgrade Luminor's current ATM network, offering to the bank customer a more customer friendly and newer ATM network. In MECS, we have been awarded an additional 5 year contract with a large UK train operator to deliver a seamless integration of systems and data flows for on the day operational controls and running trends, mitigating any disruption and providing real time frame, full visibility and full management for mobile applications. And in TSS, more than an example, I would like to underline that we have enjoyed a continuous contraction of the TAS offering with several contracts signed since the closing of Ingenico transaction, representing a TCV of above EUR 100,000,000 and delivering recurring revenues above EUR 70,000,000 Let's move to the Ingenico integration process to conclude this part. Our 2021 integration roadmap is in full motion. Our key achievements for the 1st part of 2021 are the following: the merger operated quarter in a single building by the end of 2021 is fully prepared, and we have launched numerous overall real estate convergence program. We have deployed a successful internal mobility program, enabling a risk killing of scale to new proposition. Our key internal IT processes and systems have been harmonized, such as the application landscape, including central ERP rollout, employee portal and payroll systems as well as the PC and Workspace. We have launched a structural project with the payment platform harmonization programs, particularly for the infrastructure, data center consolidation program, network unification and for the acquiring and acceptance platform conversions. Finally, we have defined a new CRM solution to foster the efficiency of the end to end sales process for implementation in 2020 2. All these progresses are fully in line with the full year synergy trajectory to deliver $66,000,000 impact that we confirm. And now I hand over to Eric to present you the details of our financial performance before our open conclusion from here. Thank you, Marc Henry, and good morning to you all. I will start with an overview of our revenue performance in H1 2021. During the first half, Warland revenue was €2,272,000,000 posting a double digit growth and a strong revenue recovery in the 2nd quarter, compensating the Q1 declines triggered by the 3rd wave of COVID. All services divisions are up in H1 and close or above 2019 H1. Overall, in the first half of twenty twenty one, organic revenue was slightly positive at 0.1%. I will come back with more details on the next slide regarding the phasing of the first half by division. Now regarding the OMDA performance. During the first half of twenty twenty one, Royal Enso NDA reached €531,000,000 representing a 23.4 percent OMDA margin. It represents 1 100 and 50 basis improvement in profitability. Let me now detail this number by business line. Here, I would like to cover the revenue and building blocks for the first half twenty twenty one and the phasing of our performance in Q1 that you already know and in Q2 where we enjoyed strong growth acceleration. As a reminder, our Q1 performance was a 9% organic decline as you can see in the chart with all GBL posting a negative evolution versus a rather strong Q1 2020, which was only impacted by COVID the last weeks of March. More important is the trend over the semester with the Q2 performance up 10.1% organically. Merchant Services enjoyed high double digit growth at 18.6% in Q2. The performance is fully driven by the recovery of the transaction volume as described earlier by Mark Horrie for both online and in store and as well across all underlying segments such as commercial acquiring, payment acceptance and digital services. I would like to highlight that in Euro Denominating, our Q2 performance of MS has probably compensated the combined drop of revenue experienced in Q1 by MS and CSS, illustrating the benefit of our strategic expansion towards merchant services activities. Financial Services showed circa 4% organic growth in Q2, compensating fully the Q1 performance. This performance has been driven by 1st, higher volume on our issuing and acquiring platform and as well the ramping up of new contracts. 2nd, a strong dynamic for digital banking activity driven by online authentication flows and increasing volumes on account payments. PSS activities are back to growth, up 1.6% organically in the 2nd quarter with an overall solid dynamic in Western Europe, Latin America and Australia, all regions fueled by the delivery of projects ensuring a strong pipeline for the 2nd part of the year. In parallel, the Chinese domestic market continued to decline on the back of a low investment level from banks. This trend has a limited impact on CSS profitability, however, China being a structurally low market for margin low margin market. Without China, TSS growth rate for Q2 will have been in the upper single digit rate. NPS revenue has been accelerated in Q2 with organic growth approaching double digit at 9.4%, mainly driven by a strong pickup of the transportation sector in the group key countries in Europe as well as higher fare collection in Latin America. It's also supported by steady double digit growth in trusted digitization, notably led by projects and improved volume in France, higher volumes on tax collection in Latin America and more project activity in e archiving solutions in Germany. Overall, our Q2 performance is solid and fully in line with our expectation of the progressive recovery of activities along the quarter. Now moving to the next slide regarding R and D. After having been impacted by top line negative evolution in Q1, profitability has raised significantly in Q2. Overall, in the context of slight top line growth in H1, our O and D is up 6% organically to €531,000,000 showing a 130 basis point improvement in terms of O and D margin reaching 23.4%. This performance is driven by the ability of our business line to deliver margin expansion through efficiency programs and synergy execution. In more detail, MS profitability is up 190 basis points to 22.9%, benefiting from cost control actions, the execution of synergies from Ingenico and FPS and ongoing transactional productivity improvement actions. The division benefited as well from its high cost base providing operating leverage over the course of the 2nd quarter. FSOMDA margin was down 80 basis points to 28.8%, still at a high level, impacted by the ramp up and build phase of new contracts as well as the soft start of new projects at the beginning of the period despite significant improvement of its cost base. CSS performance came with a 70 basis point improvement in OMDA margin to 25.7 percent, mostly driven by the product mix and the transformation of cost saving plans leading to a linear cost base. MTS profitability is up 60 basis points to 14.8%. The business line benefited from the positive trend in indicating mainly in the UK and LatAm fueled by transaction recovery post COVID and has been able to leverage the scalability of product investment plans on top of tight cost management. Finally, on the corporate side, we have pursued the strong actions taken to deliver synergies and streamline our cost base, reducing our corporate cost by €10,000,000 over the semester or an improvement of 50 basis points. Globally, it's a strong achievement in the current phasing of the first half and this evolution fully confirms our full year trajectory. Now moving from the OMDA to the other element of the income statement. Non recurring items reached €250,000,000 and consisted globally of purchase price allocation and amortization for €151,000,000 mostly linked to the Ingenico acquisition and integration and post acquisition cost of €51,000,000 corresponding to Ingenico integration cost and the remaining part of fixed payment services integration costs. All the increase of this 2020 statutory number can be explained by Ingenico Combination and synergy plan. As a result, operating income for the first half twenty twenty one was €144,000,000 Net financial expense amounted to €13,000,000 in particular due to the net cost of financial debt of €23,000,000 for the interest of Ingenico bonds, the bonds and ASEAN issued in 2020 and the full effect of the ones issued in 2019, partly offset by the favorable effect of the fair value on Visa shares. The tax charge was €31,000,000 with an EBITDA of 23.3 percent in H1 2021, in line with H1 last year and consistent with our objective to maintain the full year rate close to 2020 level. As a result of the items above, net income group share was €102,000,000 The normalized net income to the 276,000,000 representing 12.1 percent of revenue versus 10.5 percent in H1 2020. And our normalized diluted EPS reached $0.96 compared to $0.62 in H1 2020, representing more than 50% improvement and illustrating the benefit at EPS level of the acquisition of Ingenico. Regarding the cash flow statement, the main parameter of our free cash flow generation are CapEx at €108,000,000 This amount should pick up in H2 'twenty one with the expected growth acceleration and our objective of 5% to 6% of revenue. The change in working capital requirement in June 'twenty one brings as anticipated a positive contribution of €58,000,000 reflecting the alignment of contractual T and Ts between Worland and Ingenico. It should normalize in the second half of twenty twenty one. Integration costs were fully in line with expectations and mostly related to Ingenico post acquisition integration. Overall, the H1 free cash flow was €268,000,000 representing 50.3 percent of OMDA supporting our full year trajectory. It's a strong achievement affecting our ability to deliver quick wins on the synergy side while optimizing implementation costs and a free cash management policy. Let's now look at the net debt evolution on this slide. The group net debt decreased to 2.939 €9,000,000,000 against €3,211,000,000 at the beginning of the year. The main driver of this evolution is the strong cash generation we have delivered during the 1st half 2021. Our net debt trajectory is well in line with our expectations at the end of the semester. As I'm describing the first half of the year, let's now move to H2 21 and what we expect in terms of revenue scenario. I remind you that the events of the 1st semester were fully in line with our initial scenario, allowing us to deliver a solid performance accordingly. For the second half, based on the most recent information available to date regarding the health situation, our scenario presented in February 2021 remains unchanged and assume the following hypothesis: the easing of domestic restrictions with end of lockdown for non essential merchants and of curfew and border restrictions Intra European travel allowed and a progressive return to normal level of travel flows without significant intercontinental travel. Based on these assumptions, we expect to pursue the acceleration experienced in Q2 with a circa double digit growth rate in H2. Here you have now the full scenario trends we have taken into account to build our full year guidance, and I hand over to Gilles for the conclusion. Many thanks, Eric. And now moving indeed to the conclusion and the key takeaways of the 1st semester. I would like to start with the strong execution of the Wildline strategic initiatives. Regarding first the TSA strategic review, we have made significant progress in the context of a successful initiated transformation path towards more recurring revenue in this business division. By the end, we will have decided and probably started to execute between 2 main options. The first one would be to rely on a new owner of quality to drive this TSL transformation in the coming years through the execution of its new development projects. Or, which would be the second option, to decide to keep it within the group and progress one step further on this promising transformation journey to TETAS and PPAS before reconsidering an exit in a more stable post COVID macro environment. On the M and A front, the past 8 months have been amongst the most successful ever for our group. It reflects in particular the relevance of our new group and hence value proposition towards divesting banks. This successful go to market is, as you know, orchestrated by our central M and A team jointly with our newly created division, Merchant Services for Financial Institution Business Unit within our MS organization. As you know, since the closing of Ingenico, we have with the collaboration between these two entities successfully executed 4 acquisitions, out of which 3 joint ventures or bank partnership. It is a splendid start for this MSFI business unit. And now if I want to take a step back and to share with you a broader view of these achievements and the very material add on it represents for our worldwide Merchant Services BU, I can share with you first that through the 4 acquisitions signed since the closing of Ingenico including AMD, we strongly extended our geographical presence. We brought an additional 375,000 merchants to our 1,000,000 merchant portfolio at the closing of Ingenico. And we are adding 3,300,000,000 transaction versus the 19,000,000,000 transaction at the closing of Ingenico. Financially speaking, these 4 acquisitions combined are representing €300,000,000 added revenue to our Merchant Services business unit, this revenue growing double digit and generating an average 24% OMBA margin with potential upside fueled by operating leverage and combined €50,000,000 synergy. 3rd message. While we won these deals through competitive divestment processes against the U. S. And European peer, These transactions have been executed at an average OMDA multiple of circa 15 times before run rate synergies, which is well below the group average and thus creating immediate value for all stakeholders, which is clearly showing the ability of Roadline to convince banks without overpaying. And to make a last comparison and repositioning the size of these combined operations, the combined contribution of these 4 acquisitions are representing circa 60% of what SPS 6 payment services brought to Irvine at the acquisition time and circa 14% of our Merchant Services 2020 pro form a figures. We are with the team in full execution of our strategic roadmap in parallel of the Ingenico integration, pursuing the expansion of our merchant services activities all across Europe to provide upscale our offers to merchants and now numerous bank partners. Now turning to the operational takeaways. 1st, we have delivered, as you could see with Eric comments, a very solid organic performance over this semester on all parameters. And 8 months after the closing of the Ingenico transaction, this is definitely highlighting the relevance and all the benefits that we start to harvest from this remarkable combination. 2nd is that we are in full speed regarding the execution of the Ingenico synergy roadmap. Marc Henry mentioned it we are fully confirming our €66,000,000 objective for 2021 and these synergies, I'll remind, will come on top of the 3rd year of the 6 payment services synergy plan contributing for an additional €27,000,000 this year. Last and certainly the most important, Roamund is fully ready at the turn of the 2nd semester to take advantage and capture the strong post COVID growth momentum during the second half and beyond in the coming years and to continue a very robust margin expansion and solid free cash flow conversion. So based on the solid H1 2021, with the ongoing recovery in transaction volumes seen starting from the end of March and the modeling presented by Eric earlier, I fully reiterate our 2021 guidance with at least mid single digit revenue organic growth and OMDA margin improvement by circa 200 basis points compared to the 2020 pro form a margin of 23.9%, including Engines for a full year basis. And finally, an OMDA conversion rate into free cash flow of circa 50%. And now to conclude, I am very pleased to announce that we will hold our Investor Day on October 27, 2021 in Paris, during which we will present our new 3 year strategic plan. Hopefully for the time being, it would be a live and in person event with our leadership team presenting you the new worldwide and its mid term ambition. We will come back to you in the months to come with all the details. Thank you very much for your attention so far and I am now ready with Marc Henry and Eric Thank you, sir. Your first question comes from the line of Josh Levin from Autonomous Research. Please ask your question. Hi, good morning. Excuse me. I have two questions. Gilles, as you pointed out in recent months, you've announced deals in Italy, Greece, now the Nordics, but they've all been on the smaller side. Does this mean the era of big transformative acquisitions is over and the strategy going forward will likely focus on consolidation through multiple smaller acquisitions and deals? And then the second question, on Slide 9, you show how 2021 volumes have tracked above 2019 levels year to date, even much more so in 2Q 'twenty one. Some of your peers in Europe have only seen positive volume growth versus 2019 starting in May, and yet they've given a higher revenue growth guidance than you have. So how can we reconcile that? To what extent have you baked in conservatism into your guidance? Or is it maybe the take rate on these volumes is lower or something else altogether? Thank you. Hi, Josh. Good to hear you. And well, I will take your first question. I will probably then give the floor to Eric for the second one and maybe also add my own comments. Well, I mean, what I can say to your first question is that we have clearly 2 tracks in action. Indeed, what I wanted to share with you is that we actually have a very significant stream of bank divesting, let's call them medium sized portfolios or payment activity. It is a great, great journey to go after country by country these local portfolio because reality is that this is also the way Europe is structured. You have still many domestic banks having primarily a local position or just a big position in the country and sometime adjacent position in the neighboring countries. And if you want to consolidate European payments, you need also to go after these assets. The good news here, as you could see over the last month, is that there is a very, very solid trend for banks and local domestic champions divesting these payment activities and we want absolutely to go after these ones. It is also one of the ways to build a big champion for European payments. It is made also of this series of medium sized acquisition. The benefit, as I mentioned in my last comment in the conclusion, is that if you look at it from a financial standpoint, it represents a super, super opportunity for the group, not only in terms of business because in the end, if you pilot these deals, you start to have something which is very material in terms of impact to the business, the geographic reach of our line. But also financially speaking, it is fantastically value creative for our stakeholders given the average multiple at which we can acquire these assets versus our current multiple. And on top of that, the very huge synergy potential these deals represent. Not even talking about the fact that being medium sized, of course, execution risk is extremely, extremely well controlled. So for all these reasons, this leg will go on and we are extremely keen to pursue having these medium sized deals piling up together to pursue expanding the group presence wherever these opportunities will appear. This said, of course, the era of big transformative deal is absolutely not over at all. The consolidation trend is still there. Large objects will also participate into this game as you know as they started in some countries or in the past years. It happens just that these opportunities are by definition a bit less emerald than the medium sized ones. It is also a growth curve in terms of concentration of the payment volumes, but it will take place. We are also working on this. And of course, there can be also as we saw in 2019 and in 2020 mergers between pure players, not related to bank ownership here, but as we saw in the U. S. Or in Europe, the next big era of big deal can also take place between pure players. It is clearly an M and A strategy with 2 legs, but we wanted to industrialize with the creation of the merchant services for financial institution. We wanted to industrialize our go to market to capture the medium sized deal and we are super happy to see how well it works. Eric? On the second question, indeed, we have enjoyed growth versus 2019 in numbers of transaction, which translated also in growth versus 2019, as I said, or close to growth in most of our service units in H1. We have seen as our peers an acceleration, of course, in May June. And we ended up with a very strong growth in Q2, as you could note, in particular on MS, where our growth rate for the quarter reached 19%. And I think this is to this number that most of our peers compare to on sales, they are more skewed towards these activities. Now we have a blend of activities within our portfolio, which gives us also some resilience. You remember that last year, we resisted quite well to the tough period we experienced. And all in all, this is this blend with, of course, MS being at the forefront that brings us to believe that we should grow double digits in H2. Thank you. And I would like just to add as a last comment that the guidance on the revenue, as you certainly noted, Josh, is very carefully crafted and it says at least mid single digit. And so I believe you can see what it means. It will also a bit depend on the robustness of the recovery that we've been able to. Thank you very much. Your next question comes from the line of James Goodman from Barclays. Please ask your question. Good morning. Thanks very much. Congratulations on the deals this quarter. Maybe starting with one actually on the acquisition that you've announced in Italy. Clearly, there's a very strong competitor in that market. I'm not asking you to comment too explicitly on that. But we've seen you defend your strong positions in places like Belgium and Switzerland very well over the years. Really, I guess, this extends to some of the other markets where you're entering with the sort of smaller positions initially. Can you just talk about your aspirations in somewhere like Italy and the extent to which you think you can compete against some very strong sort of domestic distribution in that market? And maybe as a follow on more explicitly to the Italy question, you've historically not competed in that market because of the processing arrangement that Equinz has with Nexi. I mean, should we just take this as confirmation that, that relationship is fully ending at the end of this year? And can you just confirm that any sort of headwind from that is fully within your expectations? And then secondly, if I could come back on the terminal strategic review and Gilles picking up on your commentary near the end of the pre prepared remarks around 2 options for that unit. To some, it might sound like a slightly increased preference perhaps for keeping it. So wondered if you could comment on whether there's been any change in your thinking for any reason as you progress that review, whether you sort of see a strong recovery in that asset that you sort of want to benefit from or anything like that. And the French press is talking about one main bidder remaining for that. Anything you can confirm or deny there in terms of reaching exclusive negotiation? Thank you. Many thanks. Good to hear you. Marfondry maybe on the first one. Yes. On the first one, so on the position to it's true we managed to hold very well our position where we had a much bigger market share in Belgium and Switzerland. This being said, we grew even more where we had a challenger position. Typically, historically in Germany, now it has it's with a much bigger position since the merger with Ingenico. But before that, we were since the merger with Ingenico. But before that, we were growing very well and now we are even growing slightly faster, but not having a dominant market share in Germany, We grew much faster than the rest of the group in Czech Republic. Of course, in the Nordics, overall, was growing faster than the rest also. So when you have a change of position and the strength of the global platforms, good product mix and global solutions, you can definitely do better than a player with a much bigger market share. We have done it in the past, so I don't see any reason not to do it again. And I can add to that that we were in fact having a circa 1% market share in Italy before this year. So Italy being a big country, it's not that small and we were growing with a very, very solid double digit sometimes nearly in some years, nearly triple. So it was a very good position for us and we believe that through our knowledge for its historical track record in countries where we had a change of position, the potential is absolutely extremely big, and we are very confident in delivering our plan. The relationship with Nexi, part of it historically has been renewed over the past year. Part of it, obviously, they stated in their plan that with the merger announced merger with Sia will be discussed. I must say the question will be when this deal is materializing and how fast do we want to materialize this evolution. It is obviously their decision from that point of view. But we are very much willing to continue working with them in a logic of co position that we see currently in the payment market. So it's not as simple as ending relationship. It's not what we are foreseeing. Many thanks, Martin. And regarding your question on GSS, James, I mean, as a matter of fact, the strategic review has been going through steady progresses over the H1 and we have eliminated many options. It's what I'm sharing with you today when I say we have only 2 remaining options on the table now, which is either a divestment to a new owner of quality that we would trust to drive TSS transformation based, of course, on the solid partnership with RoarMoney for the years to come because we would source from incentive fee for the years to come Or to keep it within the group to initiate further the transformation to bring it to the next level, also to go into a more stable post COVID environment and revisit at this moment in time the shareholding issue. But nonetheless, we have made very clear in our mind that we want to also now close many other options that won't be any longer on the table like an IPO, like the minority partnership, like partnering with strategic players, like the distribution to our worldwide shareholders. Well, we've been making a very, very thorough analysis and now are only on the table remaining these two options. Of course, I'm not going to comment on any particular rumor. I can only say that we have 2 solid streams on the table and indeed we are confident that in both cases, we can create value. So the only question remaining is where do we find the most value, but we know that we would create value in both cases. Okay. Appreciate it. Thank you. Your next question is from the line of Stephane Houri from ODDO. The first one is a follow-up from the previous one on TSS about the time line that you are setting for yourself. Are you now saying that you may not have executed the strategic option before the end of 2021 and that it could be in H2 2022? That's the first question. And the second question is on the impact on the Delta variant on the HTO outlook because when you reiterated your guidance at the end of Q1, the outlook was more to think that there will be a collective immunity in the second half. Now we have this 4th wave that is coming. This scenario of collective immunity is unlikely in the short term, but you are still reiterating the guidance. So can you share with us what are the moving parts here? Thank you. Yes. Sure, Stefan. Good morning to you. I will take both questions as a matter of fact. On TSS, let me be very clear, we don't change at all the timeline. We still expect to have made the decision and started to execute on this decision this year in 2021. Regarding the Delta variant or what could be the so called 4th wave, What I can say is the following. We are strongly believing in our guidance in the current context and given the information we have and the analysis we are having internally and of course looking at cross checking many information with the outside world. For the time being, we have not seen any significant governmental measures that is refraining the actual reopening of the economies that scale in our major countries. Governments are obviously unanimously pushing hard on vaccination deployment with whatever type of measures, health path, mandatory vaccination, etcetera, to protect precisely economic recovery and avoid to impose on their population any significant widespread care lockdowns or confinements like the one we saw over the last waves. And it is very I think France is where you also is a very good example of this willingness of governments even to face some time contestations locally, but to protect the economy and to protect the freedom of the citizen and the business. And by the way, all what we see is totally consistent with the underlying scenarios that have been shaped by the group and remembered by Eric in his comments. And so by the way, as additional comment I want to share with you, Stephane, is that all the trends on transaction volume, the trends that we are measuring until mid July remain very strong, always also well above 2019 level, despite the fact that already in certain countries the data variant has made some progress in. So at this stage even when we are looking at the travel side of the business, we have not seen any significant impact on the recent evolution of the data variant and the health situation, I. E. No de booking of what we could observe on our main travel related sectors, whether it was airline or hotel stay, etcetera. I believe that only a massive stop in the vaccination ramp up or strict lockdown generalization could probably interrupt the expected normalization that is supporting our guidance. Okay. Thank you very much. That's very clear. Thank you. Your next question comes from the line of Gautam Delay from Goldman Sachs. Please ask your question. Yes. Hello. Hi, Teel. Hi, Makanri, Eric. Thanks for taking my questions. Firstly, I had one of the margins. Can you give some color on how much of the margin expansion in the second half is coming from revenue acceleration dropping through? How much is coming from synergies and any other OpEx optimization? Secondly, can you provide an update on large bank outsourcing contracts in the pipeline? Perhaps you can provide some color on which countries you are most active in terms of discussions. And finally, following up on the terminal comments, can you give some color on the reason for not considering the other options? Is it valuation driven or is it more strategic? Thank you. I will take the first one. Eric speaking. So actually in terms of margin evolution for H2, it's probably a combination of the 3 items you mentioned, not surprisingly. But what you can guess is that the most secured one is the synergy from the presentation of Marconry. You understand that we are very confident on this 1st year of synergy and that this one is now fully secured. So this one is definitely there. There is also some top line extension we expect. You got it. We expect a double digit growth and operating leverage. This should generate some margin expansion as well. I think the last one, which is more an adjustment variable that we may use is the OpEx. Of course, if the situation was tougher on the top line, we may decide to optimize a bit more our cost. When at the opposite, and this is the scenario we would prefer, in case the top line is evolving very well, we would reinvest in order to be able to take benefit of the top line in STU, but also next year. So this is really a full combination of both 3 that we would be in a position to deliver significant improvement for the full year reaching this 200 bp that we are factored in our guidance. Thank you, Eric. Marc Ory? Yes. On the larger sourcing deals, as I said in my presentation, we are enjoying a very solid pipeline, which improved both in quality and value over the recent period in the financial services business, a lot of new business. We have a good diversification of types of deals, some are on back office of payments, account payments, overall in card payments, issuing payments in particular. And we also have we announced a deal on Luminor. We have some others on ATM Outsourcing, which banks now tend to consider as a commodity and they are looking for partner to modify this part of their portfolio. So diversity in type of deals, diversity in geographies, in a lot of our core classical geographies, Northern Europe, Germany and others. So there is diversity, there is in the mix of countries and types of deals. What we can say maybe, Marcon, is that there are, I think, a few banks that are also putting on the table things that we did not see in the past years recently, for example, pan European consolidation, outsourcing opportunities, banks that are having multiple operation in different countries, trying to regroup all that under one contract with 1 of the processor. Yes, so to an evolution linked to probably strategic consultants that now managed to convince bank, I would say, top management that a deeper strategic review of our portfolio would make sense and there is more value to be created by a strong outsourcing, which is a momentum that has taken probably a new moment, a new dimension, thanks to the COVID pressure. Yes. And regarding your third question on there are some reasons for which we actually do not retain certain options of the future of PSS like an IPO, for example. Clearly, I believe for an IPO the time the window is not there, but it can be a very valid option for a business like TSS. It has the size, it has the global reach and it has the leadership position. We believe it would be probably better in a post COVID normalized environment to present the case to investors and also probably to wait that we have 12 to 18 months more of the transformation on PPAs and thus with further proof points for an IPO, for example. We have been looking at the minority shareholding. Minority shareholding would not really bring the extra boost of a majority financial sponsor would bring to the business. So we tend to believe it would be a less favorable option. So we try also to make our life simpler with 2 very clear cut options. Israel divestment of a controlling stake with the financial sponsor that could bring extra muscles, more investment and support the management team and of course a solid partnership with LoRaWAN for the business or we keep it, we initiate the transformation and let's say in 18 months maybe we revisit the topic depending where we are both in the macro environment around us and in terms of success on the transformation. In both case, by retail, we are very comfortable that we have very creative options ahead of us, and we are ready to execute on the timeline I already mentioned, answering Stefan's question. Your next question is from the line of Sandeep Deshpande from JPMorgan. Please ask your question. Yes. Hi. Thanks for letting me on. My question is, maybe you're going to answer this at your Capital Markets Day later in the year. But when you look at Worldline today, it is a merchant services activity, financial services activity. Do you plan to get into other parallel activities along with this along this journey? I recognize, Sandeep, the depth of your understanding of the payment market. I mean, let's wait for the Investor Day indeed. There are interesting adjacent sectors that are that could be addressed by a company like Vorona and I don't want to disclose here earlier than in the Investor Day what we could do in the vast payment ecosystem, but you're right, we are working hard ourselves on the strategic ecosystem, but you're right, we are working hard ourselves on the strategic direction we could give to the business. We both know because we talked about it together already that there is, for example, a segment that we have not really seriously addressed. We are primarily a retail payment organization, but we know also that there is a vast market that is much less structured, that is B2B payments. For example, it is also a topic that we are monitoring very closely with our strategy team and business team. But I mean, let's get back together in person fully on the 27th October to share with you some thoughts and some action that the company could initiate in the coming years. Thanks, Jill. I mean, you've announced the Handels banking deal today. I mean, are there more such bolt on deals in the pipeline that you are working on at this point? Yes, indeed, there are. Thank you so much. Thank you, Sandeep. Last question maybe guys because we are coming to the end of this hour. Okay, sir. Your next one comes from the line of Alexandre Faure from Exane BNP Paribas. Please ask your question. Hi, good morning. Thanks very much for squeezing me in. I've got a couple of follow ups and questions. So one is on this M and A around bolt ons. As you highlighted, you announced 4 deals this year, I think, so far, perhaps we see a little bit more. When you look at your group and this new business unit, Merchant Services, FI, how many bolt ons do you think you can actually integrate into the Worldline Group every year? So that would be my first question. 2nd one would be a bit more detail on those larger deals in FS, Marc Henri, if you can. I think in the past, you used say that large deals could be sort of €200,000,000 of TCVs over 10 years. The group is now quite a lot bigger. So is it still the sort of rough number we should have in mind? Or could this be even larger? And finally, my one question would be around this growth rate you're guiding for your acquisition in the Nordics of double digit. Could you please unpack this a little bit for us? What's coming from market growth? What could be upsellcross sell, what would be share gains, just trying to understand the dynamics here? Hi, Alex von Faurit. Good morning. Just Alex, maybe on the first one, I mean, the point of MSFI is to try to make well known for this type of medium sized deal really a plug and play platform. It is really what we are striving for and to be able never being constrained by our ability to do this is also I mentioned sooner that we love this deal because there are much less execution risk and also much less complexity sometimes in a very large scale deal. On top of being super interesting financially, they are very attractive. If you compute the synergies, you can see that my circa 15 times, which before synergy can go much lower than that both synergy in run rate. So this is really super lucrative. Macquarie, maybe I'll let you take the floor from there. No, no, Marc, clear. And this is a team that has grown superbly over the last month and has shown a capacity to grow and to integrate talents coming from the post merger integration pool and also talents from deal making. So I think already in a momentum of continuing our growth in the journey. We don't put to this team a limit. Coming to FX outsourcing deal, I think the driver of the size of the deal is the market and rather than our side. Our side can allow us to have a stronger reach and to be even more connected and more relevant for deals. But I think when we announced the UniCredit deal, it was the biggest deal on the European market. So it's not us who are a limiting factor, right? It is a market we need to evolve and to mature. And from that point of view, we see, as Gilles was mentioning, it's an evolution. It will evolve at the it's an evolution. It will evolve at the rhythm of the market. But at this stage, we are still glad to see 3 digit number deals as big deals and we continue looking at them in this way. Last question maybe was maybe more for you, Eric. So on the growth of the Nordic, actually indeed your question is very valid because you know this market is already very penetrated, still growing so that the market trends will continue to support the growth. But you're right, this is mostly through the combination with our Bambora platform, which is a fantastic growth engine that have inherited from Ingenico, but we believe we can boost the growth for this acquisition through upsell, cross sell and market share gain. So this Bambora itself was growing significantly more than the market and we believe that we can apply this recipe on a larger scale integrating indeed Andres Bank. And it is not only us believing so because I think that also was one of the reasons of the choice by Anders Banken of our line is precisely Yes, the commercial. We have a commercial alliance with them and of course double digit track record in the Nordic market has been I guess also a proof point of our ability to be the right partner. Got it. Thank you. Many, many thanks for your question and being with us this morning for this important rendezvous of the group. We really look forward confidently hopefully in H2 to roadshow with you in person and to more importantly maybe again welcome you in person at the time of our Investor Day at the end of October. Stay safe, enjoy the summer break and maybe of course in the coming days happy to interact with you at part of the roadshow for the interaction with our RIT. Goodbye. Bye. This concludes today's conference call. Thank you for participating. You may now disconnect.