Good morning and thank you for standing by. Welcome to the Worldline first half 2025 results conference call. Please be advised that this conference is being recorded. I would now like to hand the conference over to our speaker today, Pierre-Antoine Vacheron, Worldline Group CEO. Please go ahead.
Thank you. Thanks a lot. Good morning to all of you for this H1 call. I'm here with Grégory Lambertie, our Group CFO, for his last call with us. Probably the opportunity to thank Grégory for his dedication to the company in its various shapes over the last 10 years. Grégory has been Head of Strategy, then CFO during all the journey at Ingenico, then Worldline. I want to thank him for all his dedication until the very last moment. I think we can be very proud to have had Grégory with us during those times.
Thank you, Antoine.
Let me move now. Before we enter into our presentation for H1, I would like to start with four key messages. First, as you have seen in our press releases, Q2 has been very active on many fronts with a real sense of urgency so that we can turn around the company as soon as possible. Just to mention, entry into exclusive negotiation on METS, interim positive results on the audit of our merchant portfolio, the refinancing of the company, the assessment of our assets as part of our work on our strategy going forward, the reshuffling of the operating model in merchant services, and finally, the extensive renewal of our management team. Second comment, second message, we have strong assets and strengths. I can confirm that.
As H1 results show, we are facing several challenges that have to be overcome to restore the potential of this company in terms of growth and cash flow generation. Third, I still have uncertainty for the rest of the year, but I need to provide you with some visibility with the guidance, and I have to be cautious where I stand. Last, my objective is to have a robust groundwork when we turn the Capital Market Day on November 6th in Paris. I'm confident we are making good progress, and I have a strong and re-energized executive team joining on the same mandate in the coming weeks. Moving on now to H1 financials, let's look at the headline numbers reflecting the challenges identified and highlighted last April during our Q1 revenue publication.
In the first half, we posted EUR 2.2 billion in revenue, representing an organic decline of 3.4% compared with the prior year, a trend consistent in Q2 and in Q1. In net revenue terms, our revenue declined by 7.3%, impacted by the mix of products. On profitability, adjusted EBITDA reached EUR 401 million in H1, representing 18.2% in revenue. Based on net revenue, our adjusted EBITDA margin stands at 22.9%. The free cash flow stands at plus EUR 40 million, or a conversion rate at circa 10%, which is not a good trend, still impacted by Power24. Finally, normalized net income group share reaches EUR 121 million, with a reported net income group share that equals a loss of minus EUR 4.2 billion, impacted by a EUR 4.1 billion non-cash goodwill impairment, reflecting the evolution of the payment environment in Europe and also the consequences of the current performance and challenges of our merchant services business.
I would like to precise that following this impairment, the Worldline equity remains solid at EUR 4.9 billion. As I said, we've been very active during this first half, more particularly in Q2, with clear objectives, restore trust, and set the basis of our transformation. First, our immediate priority has been to address and fix the initial challenges presented last April. It has been a strong managerial focus and started to see the first tangible benefits. On the product side, we have made clear improvements. Regarding hardware, you will remember that we had significant issues across the board. The situation has been fixed in most of the geographies, with still a few terminals missing in Belgium and performance issues remaining in some markets on the enterprise segments. This is much better.
The first e-commerce offering for Crédit Agricole is live and has been rolled out in the Crédit Agricole branches and soon within LCL. This is based on our refactored e-commerce solution, which got, by the way, commitment from large merchants to migrate out of the SIBS platform to this refactored solution. We launched Wero payment method this summer in Germany with a planned rollout in Belgium in October and in France in early 2026. This will take some time, but based on the successes of Bizum and Twint in Spain and Switzerland, I'm quite optimistic that this will generate significant revenue going forward. Finally, on the acquiring fronts, we have started to deploy our UK offering to be able to operate there post-Brexit, and we have achieved end-to-end testing on Carte Bancaire in last June.
On SMB, we have started to stabilize our churn rate, especially in Switzerland, Sweden, and Germany, with better performance on small merchants than on mid-size, which leads to still lower volumes. Our Merchant Services operating model has been redesigned to drive more delivery and fast decision. The management team of Paul is being renewed with add-ons on Terminal Center of Excellence and on Regional Commerce beginning of September. Last, all action plans are operationalized to deliver the EUR 50 million cash cut savings plans that we announced in April with a clear objective to overdeliver it. To prepare the future, we have cleared the table on several topics, enabling us to move forward from a healthy base. On the portfolio pruning strategy, a very significant milestone has been reached on METS towards a disposal of the activity. I will come back shortly on that specific point.
Have in mind that other initiatives are getting mature with a strong momentum. We also have actively worked on our financing strategy, and the coming debt refinancing is completely secured. We have made, based on our strategic work, a deep work on balance sheet to clean up the basis after several years of market consolidation. Last, we have launched two external audits on our merchant portfolio with already interim reassuring results. I will focus on this topic. Regarding the HBR portfolio, as you remember, on July 2, we mentioned an audit to be commissioned to Accuracy on our remaining high-brand risk portfolio to confirm its cleanup and its alignment with our compliance and risk framework with a preliminary outcome today.
I am very happy to say and to share that based on the preliminary findings of Accuracy, which will continue their audit over the coming weeks, there is no need for material offboarding of merchants that have been identified so far in a regulated entity, and the group has confidence that it is not to be expected. This confidence is reinforced by the fact that with very seldom exceptions that have promptly been addressed when appropriate, the cases referenced in the recent press campaigns were not or no more in the books of the group. As shared in June 23 press release, the group has extended its review of the technical orchestration layer portfolio activity to assess and take actions from merchants potentially lacking proper gambling licenses in the countries they operate, but we do not anticipate significant impact in 2025.
In parallel to this, Worldline is undertaking a comprehensive assessment of its compliance and risk framework and its implementation, a task assigned to Oliver Wyman. As said, the main conclusions will be communicated alongside the group earning reports on October 21. By the end of October, any potential remaining weakness and improvement areas will be identified, and in such cases, necessary action plans will be executed to ensure optimal operational integrity. The Worldline top management and its board of directors are fully committed to strict compliance with regulation and risk prevention standards. Regarding METS, as we announced yesterday night, a major milestone has been reached in our simplification journey with the entry into exclusive negotiations with Magellan Partners regarding the divestment of METS activities and some financial services-related activities after a competitive process.
This transaction, when confirmed, will be fully part of our transformation roadmap and will enable us to refocus on payments, as already announced, through exiting from adjacencies with different types of business models, simplify group operations with a leaner organization, optimize the allocation of our resources with more focus on payments in terms of investments, while alleviating management bandwidth to be concentrating on the core. Finally, this will enhance our strategic flexibility with a reinforcement of Worldline liquidity through the cashing from the disposal. As announced yesterday, the divested activities generated revenue around EUR 450 million, employing some 3,800 people. The discussions are based on an enterprise value of up to EUR 410 million, including EUR 10 million earnout based on the 2025 operating performance of the perimeter.
This valuation represents an approximative 11 times pro forma standalone adjusted operating income for 2024, which is the relevant aggregate to look at in terms of valuation multiples. We expect to close this operation during the first half of 2026. I want to mention here that this is also a very good opportunity for METS and their teams with a more strategic focus on their organizational structure, dedicated innovation resources, and development in new markets and skills with a very strong and qualitative partner, Magellan Partners, who is quite renowned in digital transformation in France and in Europe. We will obviously keep informed the market in due time regarding the next steps of the process. In parallel of my business key findings, I decided to extensively renew our leadership team to drive the transformation of the company ahead.
After the disposal of METS, the DXCo will be made of eight members only, out of which six will have been appointed in the last nine months. After the arrival of Paul McClurkin to drive MS Business last November, and more recently, Candide Dion to improve our technology stack, I have the pleasure today to announce three newcomers who will be with us in the coming weeks. Frigant Sejradi will be the new Group CFO. With an audit background, he comes from a tough industrial environment, which was Alstom, and he will be key to run the ongoing finance transformation initiated by Grégory and the automation of our finance processes. He will bring as well a deep expertise in treasury and financing strategy. Anika Grant is Australian.
She will be the new Group People Officer, and she will drive the people equation to manage our people costs while retaining and attracting talents, key pillars in the creation of the new Worldline, with a very advanced digital DNA coming from Uber in the last years. Madalena Cascais will be the new Head of Financial Services. She will regenerate and reposition this activity, leveraging on her very strong expertise and reputation in the payment sector. Madalena did an extraordinary work to transform the SIBS Portuguese operator over the last years and to expand it internationally. Now, I think we will have, from now, the right leadership team to drive successfully Worldline transformation. Let's now go through our performance and key business highlights for Q2. In Q2, Worldline delivered external revenue of EUR 1.14 billion in line with our initial expectations.
With MS decreasing by 3.4% or down 7.3% on NNR basis, revenue were slightly down by 0.3%, excluding merchant termination linked to HBR activities, as already announced, and the hardware-based effects. While the consumption environment in Europe is challenging, the slowdown in the underlying business reflects the elevated churn rate that we've known that we've encountered over the last month, especially in the SMB segment. The lag in NNR versus published revenue was mainly due to merchant and product mix, notably the low performance in hardware sales, which are full NNR. Financial services sales were down 10.6%, driven by the already highlighted reinsourcing in the account payment division. In the context of the high comparison base in issuing processing, excluding the reinsourcing impact, the decline in sales would be around 4%. Finally, METS was up around 2% in line with that plan.
Looking at the trends in MS by go-to-market in more detail, in enterprise, on the one hand, we had a positive momentum in travel and hospitality and good traction in acceptance generally. However, we were impacted, as expected, by lower terminal sales, and the acquiring business has broadly stabilized with the Nordics showing good resilience. As illustrated by the logos on the right of the slide, we had a number of new signings and upselling in the quarters, notably in EV charging, showcasing our acquiring capabilities in this segment. In SMB, our performance was affected by a drop in hardware sales, but POS terminals, as I said, are now available in key markets. Hopefully, we can look forward to a better momentum going forward as churn rates are stabilizing in the past few weeks and customer satisfaction is gradually improving.
While we underperformed in some core markets, we had good pockets of growth in the countries where we are more challengers, especially in Central Europe, but also in Italy, as well as in travel and acceptance. We also had good momentum with ILVs in the Nordics, where the group has pretty strong positions. Last, in our joint ventures, we had a strong performance driven by solid market share gains in Southern Europe, while benefiting specifically in Italy from the merchant portfolio migration from CCB and Credem and the benefits of our repricing actions in Australia. Germany was impacted by a strong comparison base and a less dynamic underlying performance, notably in acceptance.
Now, looking at financial services developments in Q2, the negative performance is mainly due to the reinsourcing impact in the account payment segment, together with low volumes and the comparison effect due to the signing of some licenses deals in the first quarter of last year. On the positive side, we have good growth in card-based payment processing supported by our next-generation card issuing platform, with strong demand in APAC and in Eastern Europe. Importantly, we secured a 10-year contract to manage account-to-account payments for BFF in Italy and renewed our partnership with Visa for the cloud-based ACS in France. These wins will help us to stabilize the business in the near future. The mobility and e-transactional services segment delivered 2% organic growth in Q2. This performance, in line with expectations, was supported by strong volumes in omnichannel interactions, especially with customers like SNCF, LCL, and BNL.
In transport and mobility, we had also a good performance driven by France with new mobility projects and ticketing systems, and by the UK with mobile ticketing systems. Trusted services was more challenging, with positive dynamics in markets like Spain, offset by lower activity in France of a high consolidation phase. On the commercial front, the dynamic remained positive, notably in the rail industry, as we partnered, for example, with TransPennine Trains Limited and Source System to provide their rail operations suite, leveraging on METS initial solution. I hand over to Grégory to talk about our H1 financial performance.
Thank you, Pierre-Antoine. Let's look at the management actions on costs and liquidity. In this environment, cash cost control has been a key area of focus. First of all, Power24 has enabled cash cost savings of EUR 220 million so far, with the full run rate to be reached by the end of 2025. Beyond Power24, we're being ruthless in cost control, and this materialized, as you remember, in our plan to cut cash costs by another EUR 50 million in 2025. Savings are already visible in the P&L, where we had a Power24 benefit of EUR 34 million in our cost base in H1, allowing us to fully offset line cost inflation. In our CapEx, which we managed to reduce by 16% in H1 in absolute terms, it's in line with our four-year trajectory. These efforts paid off, with free cash flow protected in H1 despite the challenging revenue picture.
Meanwhile, we've maintained exceptional liquidity, with cash of EUR 1.2 billion at the end of June pro forma the payback of the 2025 convertible bond, leaving us ample breathing room for our next maturities. Furthermore, the maturity of our EUR 1.125 billion revolving credit facility was extended by one year to 2030, with unanimous support of our lending banks. Moving on to H1 performance by business line. In MS, in the context of a 2.3% decline in sales, the segment's EBITDA fell 20% to EUR 311 million, equating to an EBITDA margin of 19.3%. The key drivers of this decline were some merchant dominations and, more importantly, a negative mix in terms of client and sector. For example, an underperformance of the higher margin SMB segment and, on the other hand, growth in the airlines or FMCG verticals, which carry lower margins.
FS segment's EBITDA also dropped sharply by 27% to EUR 92 million on the back of a 9.8% sales decrease linked mainly to the last impact of the contract reinsourcing. Thus, the EBITDA margin reached 22.4% in H1. Lastly, METS EBITDA was broadly flagged at EUR 30 million, with a margin at 16.8%. Now, on the operational items of the P&L, the increase in EBITDA to EUR 324 million is linked to a big drop in the Power24 provision, which amounted to EUR 174 million in H1 2024 and was just EUR 16 million in H1 2025, while other restructuring costs rose slightly at EUR 61 million. Operating income was a EUR 4.06 billion loss due to the impact of the goodwill impairment of the same amount.
We decided to pass this impairment as we acknowledged that the change in the environment in Europe and in the payment market is long-lasting, and the group thus decided to draw the consequence on its long-term outlook, specifically in the MS business. Net finance costs reached EUR 183 million, mainly impacted by EUR 142 million fair value adjustment, TSF's preferred shares, reflecting the negative outlook of the terminal market. Income tax expense was EUR 10 million, with an annualized effective tax rate at 24.9% when excluding the goodwill impairment and the change in fair value of the TSF's shares. As a result, normalized net income group share reached EUR 121 million positive, while the reported net income group share equates to a loss of EUR 4.2 billion impacted by the EUR 4.1 billion non-cash goodwill impairment and the change in payment environment that is recognized through that impairment.
It also includes the EUR 142 million fair value adjustment of the TSF's preferred shares. Looking at the cash flow statement on the next slide, we generated EUR 40 million of free cash flow in H1 2025 or 9.9% of adjusted EBITDA. Here are the main elements in our free cash flow. Change in forwarding capital was an inflow of EUR 25 million after the normalization that occurred throughout the year. Tax paid decreased compared with prior year in line with the group's operational performance, but we expect catch-up payments to impact each. CapEx was lower in euro terms, as mentioned earlier, and our integration and rationalization costs are flat at EUR 58 million. Overall, H1 2025 free cash flow before Power24 stood at EUR 102 million or 25% cash conversion, while after the EUR 62 million Power24 execution cash costs, our reported free cash flow came in at EUR 40 million.
Finally, in terms of indebtedness, at the end of June, our net debt stands at EUR 2.1 billion, including IFRS 16 liabilities. This figure takes into account the EUR 135 million impact resulting from the acquisition of Credem and the reevaluation of put options linked to our Italian and Greek business. Our net debt thus equates to 2.2 times adjusted EBITDA over the last 12 months. On the debt management front, early June, we issued a new EUR 550 million bond under the existing EMTN program, maturing in June 2030 and bearing a coupon of 5.5% per annum. We then repurchased and canceled outstanding OCMs due July 2026 for a total consideration of approximately EUR 320 million. Worldline will continue to actively manage its debt maturity profile while maintaining a high level of financial liquidity. I'll now hand it back over to Pierre.
Thank you, Grégory. Maybe to conclude, I would like to come to our 2025 expected trajectory and my key takeaways. In terms of outlook, we expect to deliver for 2025 a top-line organic that overall should encounter a low single-digit decline with an H2 stable or slightly negative. That would lead to an adjusted EBITDA between EUR 825 million and EUR 875 million for the full year, and a free cash flow that would be stable for the full year if we reach the middle of the EBITDA guidance. To conclude, I would make four remarks. First, obviously, these are challenging times for Worldline, and I want to praise our various stakeholders, especially our teams and customers, for their engagement and loyalty while we are navigating in these troubled waters.
Second, we are in full motion to fix our challenges, refocus, restore, and build trust, and lay a solid groundwork to put this company back on track of growth and robust free cash flow generation. The projected disposal of METS and the interim results of our audit of our merchant portfolio are two strategic milestones in this direction. While we are turning to defining our mid-term roadmap that I will prepare with a narrowed, experienced, and diverse executive team all aligned on the same agenda with the same level of energy and sense of urgency, we will aim at putting Worldline back on track in terms of performance and meet our ambition of a European leader in payments. Thank you very much for your attention, and I'm now ready with Grégory to take your questions.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press *11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press *11 again. Mr. Mbao will compile the Q&A room study. It will take a few moments. We are going to take our first question. It comes to the line of Josh Levin from Autonomous Research. Your line is open. Please ask your question.
Good morning. Two questions from me. You're laying the groundwork for what seems like will be a multi-year turnaround plan. For shareholders and debt holders, how do you balance the opportunity and risks of trying to execute that plan with just selling the company now and trying to get the value you can? I guess, I mean, I know you're relatively new here, but I guess why should investors be confident that the turnaround will create more value than just trying to sell the company today? Just one clarification on your strategy. It sounds to me like you intend to focus more on SMBs and less on medium to large businesses. Is that correct? Thank you.
Thanks a lot for your question. The company has, after five months, very strong assets. We have a pretty unique multilocal positioning in Europe with very strong positions, not only on the merchant services side, but also on financial services in very important countries from a demographic standpoint like Germany, France, but also the Benelux and Switzerland, obviously, and a quite promising position in more emerging countries for us like Southern Europe and Eastern Europe. This multilocal is a real asset. The second point is that we have, from an acquiring perspective, a massive presence. We are processing EUR 500 billion of acquiring, all this converging step by step on one single platform, which is already processing something like 60% of our volumes.
In some geographies like France, in terms of acceptance, we have more than 50% of the market through our AXIS platform, which has processed, as you may have seen, 5 billion transactions in just the first half of this year. We have those assets. My take is that the situation today is challenging because of, I would say, the last two years, difficult times that the company has encountered from a management standpoint. Clearly, the light is not far away. It will take time to have the right level of performance. Considering the assets that we have, I'm absolutely confident that we will make it. The upside is really significant for the shareholders, no doubt about that. On your second question, which is, do we overprioritize SMB versus the rest? No, the answer is no.
We have a clear, strong position on global e-commerce, especially in some verticals like travel, hospitality, digital. We can do much more than what we are doing based on the better integration between our global collect product and our own merchant acquiring and our issuing processing capabilities. We can really have a very strong USP in terms of performance, in terms of success of transactions, and that can drive great growth. In the rest of enterprise, which is regional commerce, this is an area where we've been probably not investing enough in the recent years. That's also why we are changing the management on that front. That would come at the beginning of September. Considering the size of Worldline, we will address those three segments concurrently.
While I'm insisting more today on SMB, it's just because we have started the turnaround on SMB during Q2 with the new management, and that starts to pay and to give results.
Thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes to the line of Justin Forsythe from UBS. Your line is open. Please ask your question.
Thank you very much for letting me on. Really appreciate the time. Just a couple of questions from my end. I wanted to talk about cash flow and the liquidity position. First, I believe you have, and Grégory, can you please explain this a little bit more so than is in the financials, an overdraft at the top co-level of EUR 1.6 billion and a consolidated of EUR 250 million-ish. Can you just help us understand the terms there, the dynamics at play? I think it implies there's quite a bit of cash sitting at the subsidiary level. Can you talk a little bit about the accounting nuance that underlies that policy and perhaps the interest rate associated and who holds the overdraft? Further on the liquidity position, I hear you saying frequently suggestions that you have sufficient liquidity.
I think we heard this first back in 2023 when the Crédit Agricole investment materialized. It may have the opposite effect, people believing perhaps that you do not have sufficient liquidity. You have, it seems, more than EUR 1 billion in cash post-repayment of the converts. Understood there are EUR 400 million in bonds coming due next year. It seems like you have cash coming in from the sale of METS. Is there something else that we should be considering when we think about the liquidity position going forward other than those items? It would seem still you have quite a bit of liquidity to handle upcoming maturities. Thank you.
Sure. In terms of, and thank you for your question, Justin. In terms of our position at the end of June, it was EUR 1.6 billion. There is an overall cash pool that is held with BMG, Bank Mendez Gans, a subsidiary of ING. The way it works is subsidiaries put their cash on a BMG account, and the liquidity is being used at the hold co to effect sell. That's the overdraft you're seeing. The hold co, Worldline SA, effectively defines the investment policy in short-term deposits and so on. If you look at the balance sheet of the hold co, you'll have around EUR 1 billion that is invested in short-term deposits. Effectively, what you have is a cash pooling that has around EUR 200 million net amount with negative position at hold co, positive positions in subsidiaries.
The rest of the liquidity is held through the short-term deposits and some investments, so the EUR 1 billion short-term deposits and the cash that we have in the subsidiaries. That's the setup. Indeed, you're right. Post the reimbursement of the 2025 convert, we have EUR 1.1 billion ready to deploy. That's enough to meet the 2026 maturity, especially with the proceeds from METS, as you rightly say.
Got it. Thank you very much for that. Just a quick one on the terminals in Belgium. Maybe Pierre-Antoine, you could just articulate a little bit. Is this a supplier challenge? Is it something with Worldline? Is there a design issue? Is there something down the supply chain as tariffs are hitting that are causing this? Maybe you just articulate what's happening and how that's now turning around. Thank you.
Yeah, sure. You know, all the market in Europe is shifting to Android terminals or has been shifting to Android terminals. We've been relying on one partner that has been itself encountering challenges. You know that what matters is not the hardware, but more the software that is on the terminal. That software is specific to each geography because in each geography, in each country in Europe, you still have specific standards, specific protocols. There were delays on the supplier side, but also to be very transparent on the Worldline side. We've been managing that very, very tightly over this full Q2. Step by step, terminal by terminal, we are fixing the issue. We still have some lacks in Belgium for one terminal. We are still improving the transaction speed on some enterprise terminals, especially in Germany. We are getting there.
Great. Thank you so much, both. Cheers.
Thank you. Now we're going to take our next question. The question comes to the line of Grégoire Herrmann from Barclays. Your line is open. Please ask your question.
Good morning, everyone. Three questions for me, please. The first one will be under guidance. Could you please give us some color on how you think about the phasing of growth in Q3 and Q4? On your third-party audit outcome, I think you mentioned you were not expecting substantial terminations to come. Can you tell us whether, as part of your guidance, you embed any terminations at all? I guess we can find a nuance in what you mean by substantial. Finally, on your disposal of METS, I think you said you would use part of the proceedings to redeploy that into the business. Can you expand a bit on how you think about reinvesting that money, please? Thank you.
Okay. On the first point on the guidance, we are effectively, I mean, the idea is that Q4 should be better than Q3. There are many actions on the way. I still need some time to have enough fine feeling of what's happening to be too aggressive in the guidance. I prefer to be cautious. We did take into account some indirect implications of all this media campaign by potential loss of business, but that would be more indirect than a cleanup of the portfolio. All this goes then to the EBITDA and to the free cash flow. Obviously, as you noticed, the guidance is quite wide at this moment for H1. Considering all the uncertainty and all the actions which are underway, I prefer to be still conservative on the level of commitment. Obviously, we will narrow the guidance in Q3.
On your second question, I think I already answered. Do not anticipate, again, material offboarding going down the road. It's more in the range of classical hygiene of the portfolio management, so business as usual. As I said, we are also extending our review on non-regulated businesses, especially the orchestration layer that the press made echo of. We are assessing if all the merchants have the regular licenses they need to have to operate their stamping activities because we are talking of that. I do not anticipate any significant impact again in 2025. We'll assess what we do with this business in the coming months. Regarding METS and the use of proceeds, we have not explicited yet the use of proceeds of our pruning strategy. We will have a systematic position, I would say, during the CMD.
Okay, thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The question comes to the line of Handel Leifa from Jefferies. Your line is open. Please ask your question.
Yes. Good morning. I have also a couple of questions. The first one is on the METS sale. You, I think, talked about $450 million of revenues in pro forma 2024. That would imply around $99 million in financial services. Maybe you can talk about the expected growth for the combined businesses, in particular with METS coming to maybe a little bit of an Olympic headwind in Q3. For the financial services stuff and how to get to that $100 million EBITDA revenue, that's the first question. The second question is around the divergence between the NNR performance and the organic growth. Maybe just like two small ones. On the Indian sale, any progress on that? The preferred share has been reduced again, as you commented. Maybe you can talk about that a little bit more in detail.
Is that now completely written off, and is that because of the underlying performance of Ingenico? Thank you.
Okay. Thanks a lot for your questions. On the first question, NNR versus external revenue, you have two dimensions here. One is obviously linked to the fact that Q2 2024 was very strong in terms of hardware sales. When we are in hardware sales, we have a very strong congruence between NNR and the external revenue. The second component is linked more to the mix of revenue in terms of services that has evolved, and that was already the case in Q1 with this low performance that we've been encountering in SMB and higher performance in segments, especially like travel, airlines, or cross-border e-commerce where the level of skimpy is pretty high. Also in enterprise, in-store enterprise, we've been more performing in segments where the use of international card schemes is high as compared to local schemes. That is really this question of mix. This will be reversed.
All this bad trend, to some extent, will be that you don't see with our competitors because our competitors publish only on NNR. This bad trend will be reversed with the improvement of the SMB business. That is why we are insisting a lot on this effort on SMB, but also potentially improvement in the way we invoice the merchants. Regarding India, I prefer not to comment on this. As I said in my introduction, we are working on various processes, very active. Obviously, as soon as we have some news and some good news, we would share them. Regarding the preferred shares of Ingenico, we performed an assessment based on the trajectory of payment terminal in general. Also the fact that, as you know, it's preferred shares where we are behind the proceeds of the private equity. We prefer to take a more conservative option in terms of valuation.
On the METS, that was actually my original question.
yeah, sorry.
Sorry. The scope and what was last year in it, the part within Financial Services, which they sold, what is the growth rate? Did we assume the similar FS margin in that business? Is there a little bit more detail, please?
Yes. I mean, the FS part is more related to digital banking type of assets. It's a bit specific, and it's quite linked to METS. The profile is broadly the same as the rest of METS. It's a low, low, but more constant growth. It's a part of the business which is very consistent with what you knew of METS.
We should assume the similar margin profile and similar growth for 2025.
Yeah. Yeah.
Maybe just last question. On MSV, you reported 2.6% organic growth in Q2. That has been seeing some tailwinds on the consolidation of Credem and another book, about EUR 20 billion TPV. Maybe you can talk there a little bit about the organic performance within that segment and any other particular items in Q2. Thank you.
Globally speaking, the MSV has been slowing down and probably quite in line with what you've seen from the publications of our competitors. We've been witnessing some slowdown at constant merchant base in the MSV in the last weeks. Is it linked to consumer behavior? It might be, but we see the same trend as what the competition has published recently.
Thank you.
Thank you. Now we're going to take another question, and it comes to the line of Alexander Fehr from BNP Paribas. Your line is open. Please ask your question.
Hi. Good morning. Thanks for quizzing me in. I've got about three things. One is following up on something you just mentioned, Pierre-Antoine, when you say that in for your guidance, you incorporate some caution when it comes to your salespeople's ability to close deals following those bad press articles at the end of June. Is this some extra caution, or are you already seeing some of that in July, some of those challenges in closing sales? Second point would be on the METS period that you're divesting, and you talked about EUR 100 million of EBITDA in 2024. How much would that be in terms of free cash flow? Would that be helpful? Lastly, I wanted to double-click a bit into that 0.3% decline in merchant services underlying net revenue growth that you call out in the press release. I suppose this includes the transfer of CCB merchants, right?
Could you remind us how much of an impact, how much of a tailwind that was in Q2? If there's some further impact to come in Q3? More broadly, maybe in that negative 0.3%, you know what are the benefits and drags that we should have in mind? Thank you very much.
Sure. On the first question, obviously, we've been very active. The good news is that it has been the opportunity for me to enter in touch directly with some customers. We've been very active in cocooning our customers during the period. At this time, our customers are loyal. They were clearly expecting the outcome of the audits and so on. We have a robust and loyal customer base, which is good news. Also, on the SMB front, we didn't see any movement resulting from this campaign. Now, speaking about not-yet customers, but more prospects, it is obvious that we have suffered some on-hold decisions on a few RFPs and a few decisions at the same time on the FS side and on the MS side. That is impacting our expectation for the year as compared to what we had initially in our mind.
Obviously, my objective is to resume those discussions as soon as we can with all of them. On the second question, which is the free cash flow generated by METS, if I'm not mistaken, it's something between EUR 20 million and EUR 30 million for this EUR 100 million of EBITDA. Regarding your last question, the impact of Credem migration is not significant at the scale of the group. It's boosting the Italian performance, but it's not significant at the scale of the group.
Got it. Thank you very much.
Thank you. Now we're going to take our next question. The question comes to the line of Manuel Mató from Oddo BHF. Your line is open. Please ask your question.
Good morning, Pierre-Antoine. Good morning, Grégory. Thank you for taking my questions. Three questions. First, can you explain the significant differences between your new 2025 guidance and that initially communicated in February from the previous top management? What are the main new negative impacts taking into consideration? I understand there are some old decisions from prospects, but what else? Second, do you expect any capital gain or loss from the disposal of your non-payment assets, METS? Third, Pierre-Antoine, you have now been working at Worldline for five months as CEO. You're going to present your roadmap in November. Do you believe that the group has long-term means to achieve financial performances comparable to your main competitor, Nexi? Are the structural differences between the two companies too significant according to you? Thank you.
On the first question, I would not comment too much on the initial guidance. Probably, there were some assumptions in terms of potential speed of rebound that were a bit optimistic. I don't want to comment too much. I suspended the guidance when I joined, and this is my guidance. On the second question, capital gains, yes, we are anticipating capital gains. It's too early to share them, but there is limited goodwill in this business. As you know, it's a complex transaction because it's a carve-out that we need to execute and to deliver. We need a bit of time to have complete visibility on the accounting. It would be positive, no doubt about that. On your third question, if I did not believe in it, I would not be there. Clearly, this company has the assets to be back to growth and to be cash flow generative.
There's a lot to optimize. There's a lot to streamline. It's not rocket science. It's a very methodic and determined approach that we need to enforce. That's why I think I have the right management team coming in with me with the right skills for that. It will be a team effort. It will take a few years, but a limited number of years. Considering our positioning, the technologies that we have, the expertise that we have in-house, we will be clearly one of the champions in this industry in the coming three years.
Thank you very much.
Thank you. We are going to take our last question for today. It comes to the line of Craig McDowell from JP Morgan. Your line is open. Please ask your question.
Thank you. Good morning, gentlemen. Thanks for taking my question. Mostly taken, but just two further ones from me. Firstly, Grégory, wondering if you could give us a bit of a sense of the moving parts from on the bridge from EBITDA to free cash flow. That'd be helpful. I know you mentioned tax, so you catch up on cash tax there. Also, we've got restructuring at $150 million, but other pieces would be helpful. Secondly, on the external audit by Accuracy, can you give a sense of how the audit work is structured? Which countries or businesses have already been reviewed? Just trying to get a sense of how far through the review is and what possibly could come with the full readout in Q3. Thank you.
I'm sorry. The first question was on the audit. There's one on free cash flow bridge. The other is on Accuracy. We didn't get the Accuracy question.
Yes, on the audit question, just trying to get a sense of how the audit work is structured, what entities or countries have already been reviewed, what's still to come, and what should we expect in the Q3 full readout?
Okay. I don't want to be too specific, but it is a systematic review of all our regulated entities, which is performed, plus the orchestration layer that I already mentioned. As you know, this type of audit, you start with a risk-based approach. Step by step, you focus on the areas where you consider that you have more risk and more chances of finding things. We are at this moment, and we have an interim report from Accuracy linked to that. I would say that the picture is clear enough so that we can have the communication that I'm making today and be reassured on the situation of the portfolio, which is to us not a surprise because it's fully consistent with what we said in terms of having cleaned up the portfolio over.
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Hello?
We're resumed. Thank you. Please proceed.
Okay. Sorry, it seems that the sound was off. I will start from the beginning because I don't know where I was when you lost us. As I said, this type of audit starts with a risk-based approach. It has been done on the full scope of our regulated entity, plus the orchestration layer that I mentioned, which is not regulated, where we don't have the same obligations, but still. It starts with an analysis of the overall portfolio, behavior of the portfolio, to identify zones of areas of potential questions and need for deep investigation. We move to deep investigations on those potential cases. A very classical way of performing an audit. As I said, the good news is that already at this stage, the picture is clear enough so that we do not anticipate any deviation from the communication that we've done when the campaign started.
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Okay. I don't know if you've been heard or that's the second time. It's a bit, it's a bit painful.
Yeah, that's helpful.
You understood? Okay.
Yeah.
Okay, fine.
Free cash flow.
You had a question on free cash flow then.
Mm-hmm.
Just on the first half on the free cash flow, we dropped EUR 42 million versus last year. This is entirely explained by the EUR 113 million drop in adjusted EBITDA, partly compensated by change in working capital. Last year, we had a EUR 50 million impact of the advances we get from banks and what we got from the bank that internalized their business in particular. This year, we don't have that impact, and it's therefore a better working capital performance. That's for H1. For H2, as you know, we have a EUR 50 million delta between the low end and the top end of the guidance, which means being between EUR 420 million plus to EUR 470 million plus for H2. If you look at the various components of the free cash flow, I think CapEx should be in line with what you've seen generally. Same thing for leases.
Working capital should be a slight drag. Power24 should continue to cost us as we're finalizing the last exits. It should cost us around EUR 30 million. The taxes I mentioned, we have a lower skew for H1 this year with around EUR 50 million paid in H1, and we expect around double that in H2. Finally, cost of debt is pretty mechanical, should be around EUR 40 million.
Super. Okay. Thank you. I think it's the last question. Thanks a lot for this long call and for your interest. I wish you a great day and a great summer if you have not taken the break yet. Have a good day.
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