Ladies and gentlemen, thank you for standing by, and welcome to the Worldline First Half 2020 Results. At this time, all participants are in a listening only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star one on your telephone. I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker, Gilles Grapinet. Please go ahead, sir.
Many thanks, operator. Ladies and gentlemen, good morning. This is Gilles Grapinet speaking. Thank you for attending the Worldline Conference Call today on our First Half 2020 Results. I'm going to share, as usual, this presentation with Marc-Henri Desportes, our Deputy CEO, and with Eric Heurtaux, our Group CFO. I have three main elements to share with you as an introduction. Firstly, we do deliver today a set of numbers completely in line with the trajectory defined for the year 2020. These numbers reflect, of course, the very severe impacts of confinement and lockdowns of non-essential retail store during a part of the semester, but also the relatively rapid recovery of domestic transactions and growth in debit volumes since the confinement started mid-May. Second, commercial activity has been remarkable despite the crisis.
Our large sales engagements kept progressing as planned, thanks to the constant dialogue we could maintain between our sales force and our key customers. Many commercial successes were recorded this semester, as a matter of fact, such as, as a flagship contract, the new major outsourcing contract signed with UniCredit for Germany and Austria. Further significant progresses were made on other significant large, new outsourcing opportunities. Numerous new contracts were also signed all along the semester, and we renewed timely several key payment processing contracts. Marc-Henri will comment on it more in detail in a few minutes. Overall, our commercial perspectives are actually not depressed by the crisis, as it is worth mentioning that the level of our commercial opportunities is standing at its all-time high.
Some point during the semester, and despite the very special COVID context, we continued to fully focus on the perfect execution of all the components of our stated strategy. Of course, it starts by our obsession to bring to the finish line the strategic friendly Ingenico acquisition. We stayed 100% focused, hand in hand with the Ingenico top management, to stick week after week to our announced timeline. We want to ensure the closing of this strategic acquisition as fast as possible, and the opening of our public offer on Ingenico Securities is now imminent. This progress could only be reached thanks to the very strong mobilization of the two groups in an exemplary cooperation mindset, which creates a remarkable momentum for the success of the forthcoming integration.
We also made significant and very concrete progress on the integration and synergy plan with SIX Payment Services this semester, showing, by the way, already very tangible results, notably with signatures with Tier 1 retail brands across Europe. As you remember, we could also focus on properly bringing to its finish line the acquisition of the very successful company, GoPay, in Eastern Europe for online payment capabilities, reinforcement for Worldline, and we are extremely pleased with the way it develops, in a view of its closing somewhere in Q3. Last comment I would like to do as an introduction is I am also noting that this crisis does not stop. Actually, on the contrary, the strategic initiatives set in motion by large banks in Europe and beyond regarding the future of their payment assets.
We have been positioning ourselves in a capacity to seize every opportunity that may present itself in parallel of the closing of the Ingenico acquisition. So globally, and as the hypothesis we outlined during the Q1 2020 revenue publication are totally confirmed so far, I am also in a position to fully confirm all our 2020 objectives for the year. Moving forward, let me now come back on some key figures of this first half, which are, of course, reflecting the very unique context of the pandemic, with several months of confinement and store lockdowns.
Revenue for H1 2020 was EUR 1,089 million, representing an organic decrease of 5.7% compared to H1 2019 at constant scope and exchange rates, showing a strong and sharp negative impact on the number of transactions processed during the couple of months in the semester, but also the relatively fast return to a much satisfactory level of the domestic debit transaction during the month of June. Regarding profitability, our OMDA showed resilience and stood at EUR 246 million, or 22.6% of revenue, representing a decrease of 117 basis points compared with H1 2019, fully consistent with the margin profile we expect for the full year.
First half 2020 free cash flow was EUR 132 million, representing a conversion ratio at 54% of OMDA, in line, and in fact, slightly better than the one of H1 2019. Net income group shares to that EUR 53 million, and normalized net income group share reached EUR 115 million, representing 10.5% of revenue, slightly improving despite COVID-19. All in all, this H1 performance is totally in line with the scenario we shared with you in Q1. Moving forward, as I said in my introduction, closing the Ingenico acquisition timely has been our number one priority this semester, as its strategic and industrial rationale is even more compelling in the post-COVID-19 context than before, and I am pleased to report that we are perfectly on track.
As a reminder, this transaction is highly strategic, as it will combine two primary companies to create the world number 4 player in payment services, with circa 20,000 employees in approximately 50 countries with physical presence. Upon closing, the new combined group will offer best-in-class payment services to nearly 1 million merchants and 2,100 financial institutions, with estimated pro forma revenue reaching circa EUR 5.3 billion in 2019, out of which EUR 2.5 billion in merchant payment and transaction-related services. The success of this transaction and its compelling nature is also relying on the very high level of synergies expected at both revenue and margin level. Since the announcement, the transaction has been particularly well received by the customers and the key partners and stakeholders of both groups, highlighting its very compelling industrial, strategic, and business rationale.
Thanks to the full mobilization of the teams on both sides, fast progress has been made toward the closing of the transaction, and in particular, regarding the tender offer, Worldline general meeting approved in June with a vast majority of 99.59%, the issuance of the new shares required for the acquisition. On July 8, 2020, Worldline and Ingenico filed their respective required documentation with the French Market Authority. All required regulatory clearances pursuant to banking, financial, and foreign investment regulations have been already obtained. The social process for the acquisition has been completed as well. Hence, it is expected that the tender offer will be open in the coming days by end of July.
In parallel, an intense dialogue has taken place with the antitrust authorities over the last weeks and months, and the clearance under merger control by the European Commission is expected by the second half of September. The financing of the offer is now also well secured, and the pre-integration activities have now started in line with Worldline's Day One Readiness methodology and in compliance with applicable antitrust rules under the supervision of senior management from both groups. Eric will come back in more details with the financing aspects, while Marc-Henri will provide you with more colors on the pre-integration activity. We so confirm to target the closing of the transaction by the end of September or in the first half of October. Thank you for your attention, and Eric, I give you the floor to comment more in detail the H1 operational and financial performance.
Thank you, Gilles, and good morning to all of you. As usual, let me start by presenting to you the H1 2019 numbers I will use in my presentation. As you know, we measure our performance at constant scope and foreign exchange rates. There was no change in scope this semester compared to H1 last year, when foreign exchange rate effects that you can read in the FX column correspond mainly to the appreciation of the Swiss franc and the depreciation of the Argentine peso. This brings constant scope and exchange rate revenue for H1 2019 at EUR 1,156 million, and an OMDA at EUR 281 million, or 24.3% of revenues. Before going into further detail by global business line, I propose to give you an overview of our performance in H1 2020.
Despite the adverse economic environment linked to the COVID-19 sanitary crisis, Worldline's organic revenue decline was limited to 5.7%, to reach EUR 1,089 million, with an improving momentum observed at the end of Q2. This is fully in line with the underlying scenario of our guidance. While revenue for merchant services declined by circa 11% due to store lockdowns and confinement measures, the two other business lines of the group proved their resilience, with mobility and e-transactional services declining by only 3% and financial services succeeding in posting quasi-stable revenues. Regarding profitability, the group's OMDA reached EUR 246 million, or 22.6% of revenue, declining by 170 basis points organically, fully in line with the margin trajectory expected for the year, as H1 was the peak of the COVID-19 crisis.
Indeed, many of the strong actions taken to adapt the cost base, notably on discretionary and personal expenses that we presented to you during our Q1 communication, will bring their impact in H2, actually, even more than 50%. Let me now detail these numbers by global business line. In Merchant Services, revenue for the first semester of 2020 reached EUR 484 million, decreasing organically by 10.8% compared to same period last year. Of course, in this context, the main trendsetter for this semester has been Commercial Acquiring. After a steady growth recorded in January and February, we saw the impact of COVID-19 pandemic-related measures, such as confinement and store lockdown, as soon as March in most of our markets, with the lowest point in number of transactions acquired early April.
Then, after the ease of restrictions and a wider adoption of electronic payment, we observed a rapid and progressive increase in number of acquiring transactions, with volumes close to 2019 levels by end of June. All in all, the situation was contrasting, with travel and international hospitality heavily impacted, while we benefited from a strong growth in non-travel related online payment and in domestic payment transactions. Other market verticals are already back to growth, but not yet at pre-COVID-19 levels. Lastly, revenue in payment terminals showed resilience, with almost stable revenue benefiting from merchant demand for additional units and portable devices used for home deliveries and good market trends, notably for VALINA unattended payment terminals.
In terms of profitability, Merchant Services OMDA was EUR 103 million in H1 2020, or 21.4% of revenue, decreasing organically by 120 basis points during the first semester. Indeed, while the severe impact of COVID-19 on the revenue of the business line was impacted strongly, impacted strongly profitability, Merchant Services was able to limit the impact of this extraordinary revenue decrease through specific and operational cost control actions, notably on personal costs and discretionary expenses, such as marketing and communication, incremental synergies resulting from the second year of the SIX Payment Services integration program, and the impact of transversal productivity improvement actions. Financial Services showed resilience to the extraordinary COVID-19 context, thanks to recurring payment flows, newly signed large outsourcing contracts, and ongoing projects with banks and financial institutions.
As a result, revenue was nearly stable over the period, reaching EUR 443 million, slightly decreasing organically by 0.7% or EUR 3.3 million. In particular, account payments recorded a solid double-digit growth rate, primarily fueled by higher account-based payment transactions, quasi not affected by COVID-19, and the ramp-up of large contracts such as Commerzbank and UniCredit. Digital services grew double digits as well, fueled by an increase in strong authentication transactions required notably for e-commerce, with 44% altogether for ACS, trusted authentication, and wallet transactions. The strong growth performances were nonetheless offset by the high single-digit revenue decrease recorded in card-based payments. Revenue in issuing processing was impacted by lower card issuing transaction volumes and less project, while acquiring processing remained as expected, the division the most impacted.
Indeed, the number of transactions processed for various European acquirers decreased sharply as from March. The division also suffered from less cash withdrawal transactions at ATM. In terms of profitability, Financial Services was logically the most impacted business line, with OMDA margin decreasing by 310 basis points. This was due to the high proportion of fixed costs in this business and investment for the ramp-up phase of large payment contracts. Nevertheless, Financial Services OMDA remained high and the most profitable business line, reaching EUR 131 million, a profitability close to 30%. Strong measures were taken in terms of cost-based monitoring and workforce management in order to mitigate this effect, benefiting granularly over Q2 and with full effect expected in H2, 2020.
Moving to mobility and e-transactional services, revenue reached EUR 163 million, slightly down compared to last year, with contrasted evolution between each of its three divisions. E-consumer and mobility activities showed resilience in the COVID-19 context, and revenue grew at a low single-digit rate during the semester, notably thanks to good volume on the Worldline Contact platform, which was particularly useful for our customers to keep interacting with their own clients during the lockdown period. Revenue in trusted digitization remained stable. On the other hand, e-ticketing revenue declined double digits, suffering from the quasi complete stop of public transport networks and associated ticketing volumes in the United Kingdom and Latin America due to the COVID-19 sanitary context.
Despite these headwinds in e-ticketing, profitability was quasi stable year-on-year, thanks to the cost optimization plan, addressing fixed and variable costs, as well as productivity improvement reached through the scale platform and tighter workforce management. As a result, Mobility and e-Transactional Services OMDA is EUR 230 million, or 14.1% of revenue. Sorry, I mean EUR 23 million. Now moving from the OMDA to the other elements of the income statement. Non-recurring items reached EUR 84 million and consisted mainly in purchase price allocation amortization for EUR 37 million, mostly linked to the acquisition of SIX Payment Services, integration and acquisition cost of EUR 32 million, mainly related to SIX Payment Services, post-acquisition and integration cost, and some costs related to a contemplated acquisition of Ingenico. IFRS 2 equity-based compensation expenses for EUR 12 million.
As a result, operating income for the first half of the year was EUR 82 million. Financial expenses amounted to EUR 12.5 million, which in particular, EUR 5.6 million of net cost of financial debt for the interest of the bonds and of sales issued in 2019, and foreign exchange loss of circa EUR 5 million. The tax charge was EUR 16.4 million, with a stable ETR compared to last year. We don't have non-controlling interest anymore since the acquisition of a minority shareholding in Worldline. As a result of the items above, net income group share was EUR 53 million, and the normalized net income to that EUR 150 million, or 10.5% of revenue, in line with H1 last year. Let's now move to a cash flow statement.
CapEx were EUR 65 million, representing 5.9% of sales. The change in working capital requirement in June 2020 translates a normalization following a particularly negative impact last year, and reflecting DSO and DPO comparable to H1 2019. Integration and acquisition costs were slightly up and related mostly to the integration of SIX Payment Services. All in all, the first half 2020 free cash flow was EUR 132 million, representing 53.5% of OMDA, an improvement of the conversion ratio by 120 basis points compared to H1 2019, positioning us well to deliver our 2020 stable conversion rate target. Finally, net material acquisition includes a price adjustment linked to the SPS acquisition for EUR 50 million.
This leads to a net debt at the end of June 2020 at EUR 469 million, and you can observe the fast deleveraging capacity of the group, even during adverse COVID-19 times. Regarding the balance sheet, at the end of June, compared to the end of last year, the main change to comment is in the borrowing line in liabilities and the cash line in assets. It relates to the two bonds issued in June 2020 for EUR 1 billion in order to pre-finance the planned acquisition of Ingenico. Talking of the planned acquisition of Ingenico, let me please update you on its financial aspect on the next page.
As a reminder, the financing is secured by a bridge financing signed by a pool of eight banks for an amount up to EUR 1.6 billion, available for a duration up to 2 years, and by the issuance on June 23rd, of fixed-rate senior unsecured notes for a total value of EUR 1 billion in two tranches, EUR 500 million maturing in 3 years with a 0.5% coupon, EUR 500 million maturing in 7 years with a 0.875% coupon. As expected, we maintain our strong investment grade profile by S&P, which confirmed our BBB rating with a stable outlook. Last, I take this opportunity to update you on the expected transaction cost, that should reach circa EUR 50 million in total over 2020.
Indeed, moving fast towards closing, associated with a good cooperation between Ingenico and Worldline's team, has enabled us to keep this cost very reasonable, given the size of the transaction, actually, even below SPS transaction cost as a percentage of the consideration paid. To conclude, I would like to remind you that we did our guidance for the year on a scenario and hypothesis that we developed during the Q1 2020 revenue publication. Already at that time, we anticipated that activities would remain severely impacted in all our frequencies in Q2, with lockdown and non-essential re- of non-essential retail and free confinement, and social distancing measures maintained during most of the quarter. For H2 2020, we base our scenario on the progressive list of government constraints and sanitary measures.
Concretely, it means that general retail and domestic activities will stay open, generating a steady increase of domestic payment flows, while international travel, tourism, and related businesses are anticipated still very low during the whole semester. We do not foresee a full return to pre-COVID trends before 2021 at best. As the market trends that we are currently observing so far, are confirming this scenario, we are in a position to confirm all our objectives for the year and to expect the full year 2020 financial performance broadly in line with 2019, as shown on this slide. Thank you very much for your attention, and I now give the floor to Marc-Henri for a commercial and operational update.
Thank you, Eric, and good morning to you all. As we are now moving forward out of the peak of the COVID crisis in our core European geographies, we are observing some remarkable trends I would like to share with you. First, about e-payment transaction level. After the massive drop at the end of Q1, very beginning of Q2, we could monitor on our platform a steady rise, up to a point where debit card transactions are now above what they were one year ago. As the economy is still down, this reflects, in our view, a real shift to contactless and e-payments in general, which we believe will remain as a sustainable change of habits post-COVID. E-commerce logically moved up significantly in most of the verticals, and we observe that more and more merchants are converting to it. COVID, again, acting as an accelerator of their digital agenda.
This client focus on digital solution resulted in an intense sales activity, and we come back on, our various initiatives to serve these new needs in a minute. But bear in mind that this H1 was at an all-time high in terms of level of commercial opportunities. Of course, during the quarter, revenue were impacted, as Eric showed to you, and we adapted consequently the cost base, while not compromising on service and continuity of operation. This was done according to our targets. We also maintain our cost transformation programs, including the SPS integration, to secure this year and the next year margin improvements. This goes without saying for the Ingenico pre-integration as well, and I will come back to it in a minute. I will now focus further on transaction volumes.
This chart is comparing the growth in number of transactions versus the same period last year for Q1, Q2, and June. As you can see, account payments were not significantly impacted, and June showed a good comeback to pre-COVID trends. On topic related to e-commerce, like SES, we even experienced a positive impact, reinforcing in June as the economy restart progressively. For the card transactions, quite similarly in issuing and acquiring, Q2 was indeed decreasing, but June showed a good dynamic, with debit card already well above last year, while credit card remaining still below, as they are more used for travel, restaurants, and hospitality. This being said, the trend in the verticals, in this vertical, after a close to zero situation in April, is now moving upwards and steadily.
It is overall well in line with our scenario for 2020, and gives us confidence on the full year guidance. Coming to the Q2 wins, we are sharing here deals of particular relevance for our strategy. We won top international fashion and luxury brands, Kering and another premium designer brand, both deals thanks to our Pan-European presence and relying on our ability to serve physically and online international merchants. You know, this is a pillar of our merchant service strategy. We also signed with Axis Bank and Mastercard, a deal to launch SoftPOS solution in India, allowing merchants there to use their own smartphone as a payment device. This is particularly relevant in the COVID context, and for a country where POS cost is still an entry barrier for many small businesses.
With Postbank, we won a contract to enable them to offer payment initiation service and account information service to their own customers. This is continuing on our success story in account payments for our financial service division. We also signed a new contract deal with BNP Paribas Fortis, and continuing the growth of our contact solution in the banking sector, allowing banks to manage their customer relationship with a SaaS solution able to endure the most secure interactions. Overall, these deals are only a few examples of all the wins of the semester, starting with the huge UniCredit deal, and amongst our best sales performance ever.
As I said in my introduction, our product and sales team put a massive amount of energy in bringing to the market a new set of sales campaigns designed to suit the new needs of our customers facing this special period. In these particular circumstances, merchants expect more and faster contactless and e-commerce solutions, more un-unattended vending machines, and business resilience solutions in general. So we adapted our order picking solution to smaller merchants to help them to go online with a complete e-commerce suite. We created and sold a Pay by Link service, helping very small shops to get remote payments through a very simple cell phone onboarding process. We, of course, gave special conditions to merchants wanting to start a mobile payment device for home delivery, or simply offer a safer sales organization inside the store.
Other example of our digital services that received additional attention from our customers are mentioned in this slide. Coming now to our cost actions. We did implement our plan in line with our expectations. We proactively reprioritized significant temporary reduction of our workforce, with combination of restricted hours, subcontractor reductions, and more holiday for our employees. We also had the expected impact on travel and minimal use of our facilities and overall discretionary expenses. We logically leverage as well, the special times to get additional support from our main suppliers. On top of this work, of what is primarily a rather fixed base, fixed part of our cost base, we have the mechanical impact of lower volumes on our variable costs.
In this category, as Worldline bonuses are calculated against the target of the semester, we have an impact of lower numbers on management variable pay, logical. Regarding all these actions, many will have an even greater impact in H2, and in particular, the postponement of salary increase, the hiring freeze, and for accounting reasons, the holiday peaks in H1. This give us confidence on the full year impact of the plan. Coming now to the Ingenico pre-integration work. I'm glad to share we could follow our plan and did not slow down the progress because of COVID. I said it - I said earlier, that excitement is there about the potential. It is indeed shared on both sides, and it's really pleasant to see we progress in a very good collaborative spirit.
Our integration culture and methodology, open to best fit for the job profile and asset, is well understood and clearly helps. As always, we respect antitrust rules that prevent us from exchanging still detailed information of starting in execution mode, and we limit ourselves to preparation for a faster path to execution post-closing. Coming to detail, 33, 33 streams are now launched with exploratory know-each-other phase. The first draft of day one organization was produced, and the dedicated social approval process is engaged. All streams are now refining their detailed synergies implementation plan. The future organization includes a redesign of Merchant Services global business line based on grouping platform delivery to ensure technology stack convergence, cost synergies, and best features combination. In parallel, a new group of sales teams, of sales teams organization has been defined by verticals and markets to ensure client expertise and cross-selling.
At this stage, we confirm a high level of complementarity in terms of market position, technical platform, skills, and expertise, and with our new organization, we feel we have the perfect setup to turn it into a new growth momentum. Thank you for your attention, and now I give the floor back to Gilles for the conclusion.
Many thanks, Marc-Henri. And indeed, I would like to conclude with some key takeaways of our joint presentation. First, obviously, the most recent developments of the pandemic and related sanitary measures have so far fully confirmed all the major assumptions we have shared with you since the end of March. The start of the visible and progressive recovery with steady increase of domestic payment flows give us visibility and confidence for the rest of the year as per our confirmed guidance. Second point, maybe more important beyond the short term, is that we can also confirm that it is our very strong belief that the post-COVID-19 environment will even further improve the medium to long-term perspective for our digital payments industry.
With an already visible acceleration of changes in payment habits, in point of sale, both online and offline, and the structural transition toward more cashless societies is probably accelerated by a few years. By the way, extending this comment, the new macroeconomic context triggered by the pandemic creates also new challenges for the profitability and the valuation of the banking industry that we believe, and more than we believe, we observe, is also creating an even more favorable environment for payment outsourcing and further divestment of bank-owned payment assets.
It's why, with all that in mind, you can understand why we believe that the upcoming transaction with Ingenico is more than ever relevant, more than ever, a decisive strategic play for Worldline to reinforce our well-established European leadership with a new level of global ambitions, and that we will be better positioned than ever to play a central role in the next wave of consolidation of the electronic payment industry in Europe and beyond. Thank you very much for your attention, and with the team, we are happy to take your questions.
Thank you. Ladies and gentlemen, we now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question. And we have a few questions just now. So the first question comes from James Goodman from Barclays. Please ask your question. Your line is open.
Yeah, good morning. Thank you. Yeah, Marc-Henri, thanks for the detail around the exit rates. If I've understood that correctly, those are volume-based measures, and of course, we've seen an increased adoption in lower value transactions. So I just wondered if you could give a little bit more detail, maybe in terms of a value-based approach, what you're seeing in terms of exit rates and, you know, maybe what that implies from a revenue perspective as we look out into Q3 versus Q4? And secondly, Gilles, you made some comments at the beginning of the call. I'm afraid I didn't fully catch them, but regarding progressing, I think, strategic opportunities coincident with the closing of the Ingenico deal, I think you made the point that the COVID situation hadn't meant conversations in that direction had stopped.
Can I just ask you how we should interpret those remarks? Is that mainly confirmation of your thinking around the terminals assets, or are you referring primarily to the sort of broader M&A opportunities that we know are out there over the coming period? Thank you.
Hi, good morning, James, and thank you for both questions. I will take the second one, of course, and I will maybe give the floor to Marc-Henri on your first one.
Yeah. Thank you, James. Indeed, in terms of the numbers I gave, it was in terms of numbers of transactions, and for sure, we have a particular positive impact on debit transaction on the rise of limits for contactless, so more contactless adoption, a big increase in smaller amount transactions. While, on the full quarter, we still have a period where the use of payments in general and the economy was lower. So, that's the first point. Second point, in terms of volumes, the situation is a bit different, because the high amount transactions are more credit transactions.
And from that point of view, the level of credit transaction, as I said, is still a bit lower, and you could see the number moving upwards. But even in June, we are still 14% below last year. This being said, it was much, much more in April, and the drop as sectors like travel and hospitality were really nearly at zero level. In terms of evolution into Q3, we see now the good momentum in debit kind of stabilizing, still moving upwards, but slowly, while on credit, we remain low, as I said, but steadily upwards. And we start to see transaction in the transportation and hospitality sector.
In particular, airlines start to see booking for the end of the year are more than for the summer, I must say, but these transactions are starting to take place. So we see this volume evolution moving up. This being said, we don't foresee MS already in a growth pattern in Q3, rather the peak for Q4, as per our plan, and you can imagine that it's quite related to volumes. So the volumes evolution is in the same same directions.
Many thanks, Marc-Henri. James, to your second question, sorry if I was not clear. I was actually referring to the broader M&A landscape, and just reconnecting dots here.
In Q1, we mentioned that there were discussions before the COVID-19 outbreak that were frozen by banks because, of course, of their urgent focus on operational continuity and, of course, immediate short-term priorities. What we can share with you at that point in time is that this freeze period is over, and actually, this discussion has been reinitiated by these banks. Sometimes, of course, with us, where when we talk about processes that were relatively more advanced than others, or that some large banks in Europe are setting themselves in motion to actually pursue the strategic initiative they've been starting to explore before COVID-19 actually did appear in our lives.
So for me, it is really showing that this was a type of temporary interruption of these strategic initiatives in M&A for Worldline, with relatively mid to large size banks in Europe or beyond. And as we speak, things have fully come back to normal, and of course, we will do what we have to do to make sure that where it can create value for us, we will be in a position to participate actively as we are doing with some of these initiatives, as we speak, to make sure we don't miss any significant opportunity for the group and for the large group in particular.
Thank you for the commentary. Very clear.
Okay.
The next question comes from the line of Josh Levin, from Autonomous. Please go ahead, ask your question.
Thank you. Good morning. I have two questions. The first question is on OMDA margin. In the first half of the year, it was 22.6%, and you're guiding to 25% for the year. So can you walk us through in a bit more detail how you get there? And then the second question is, Gilles, on the European Payments Initiative, you've, I guess, been supportive of it, and I wonder, why do you think consumers and merchants would adopt it, given, given the role that Visa and Mastercard and, and other payment methods already play and, and are embedded in consumer wallets? Thank you.
Hi, Josh. Josh Levin, I am pleased to see that there is also a French tone in your name sometime, Josh. It was really nice. I will give the floor to Eric for your first question, of course, and we'll take your second.
Hi, Josh. Indeed, we have a plan to deliver our guidance based on the fact that we have a natural step up between H1 and H2 in term of profitability. This is what you can notice for years now following us. And this year, in particular, the step up will be even higher due to more favorable volume effect in H2, with operating leverage effect, in particular, in FS, but as you know, in all of our business division, and therefore, higher contribution margin. The second piece of lever is associated with SPS synergies that will continue to materialize and bring some additional improvement.
And last, we will, of course, continue as much as needed, the H1 cost control actions we have implemented. And on top, we will benefit in H2 from actions we have launched in H1, that will have continued impact on the second semester. So all in all, we are confident that indeed, we can realize this step up that you are mentioning. Quite usual in our margin profile for the year, in 2020 as well.
Many thanks, Eric. Regarding EPI, which is actually this recently formally announced initiative by 16 European banks to create in Europe a new common Pan-European payment brand that would replace, in the medium term, all the existing national domestic payment brand, like Cartes Bancaires in France or Bancontact Mister Cash in Belgium or Girocard in Germany, and so on. You are raising an important point, which is there is clearly a will of the banks to try to complete the overall European payment architecture of the euro.
You have the euro, you have now some very large-scale industrial processors like ourselves, and large-scale pan-European acquirers at industry level. But in the middle, there is this curious situation where Europe is the only significant superpower, big region of the world, which is not having its own regional cross-border domestic payment brand like Russia is having Mir, like the U.S. are having Visa, Mastercard, or Discover for years, or India is having RuPay, or China, UnionPay, or Japan, JCB, and so on and so on. So they want to fix that point, which is, of course, an important initiative. And indeed, you're right. The question of the success in the end will be measured by the adoption.
Adoption by customers, there the banks has a key role to play because they still equip 99% of the European retail customers with their main payment means. So of course, banks here, apparently, are in the right driving seat to actually equip customers. But then there will be the adoption at the point of sale, both online and offline. And there, there are a lot of details, of course, that need to be fine-tuned going forward. It's why also, the 16 banks want to set up an interim company for the next nine months to actually go more in details into everything that is needed to make these products the relevant product for the European payment landscape, from a pricing standpoint, from a feature standpoint, from, of course, an executability standpoint in terms of investment cost, and then payback for all the stakeholders.
As a matter of fact, I can share with you that we are invited to participate into this interim company as Worldline, and we want, of course, to answer it positively, because we believe we can contribute a lot to help to shape the right payment method for the European payment landscape for all the stakeholders, including, of course, the large acquirers that we are. So it is, I think, something that is in the, in the making. The proof of the pudding, as you say, will be in the eating. But at least there is a big initiative that can represent many opportunities, if it is, if it is well done, and then we will see where we are in 12 months' time.
Thank you very much.
Okay.
Yeah, thank you.
Your next question comes from the line of Emmanuel Matot from Oddo. Please ask your question.
Yes, good morning, Emmanuel Matot from Oddo. Three questions for me, please. First, can you come back, Gilles, on this European payment initiative? Do you think that it can put more competition in Europe? Because with one single platform, anyone could be able to make easily business in Europe, which was not the case before with so many local scheme. And could that also help PSPs to rationalize their cost structure and notably for Worldline? Second, Ingenico were speaking yesterday about lowering cost actions related to COVID-19, if positive trend for the business in H2 are confirmed in the coming weeks. Is that something you are also considering at Worldline?
Could you quantify the specific savings you have achieved in H1 related to the pandemic? And my last question is about 2021, because COVID-19 is clearly an accelerator to cashless trends. Thanks to that, do you think Worldline can be back next year to pre-crisis organic growth, with the usual leverage on margin, in a scenario where the pandemic will still be there? I mean, not implying a global shutdown, as we had in April, but implying a very limited international travel, tourism, and related activities, and no large conventions and events. Thank you very much.
Hello, good morning, Emmanuel. Thanks for your question. I will take the first and the third one, and I will let the team handle your second one. Regarding EPI, you, you're right. I mean, definitely, EPI will probably allow to have more competition, which I think is a positive for a company like us. Because in the end, if we can operate on a Pan-European scale with a unified payment brand in a few years' time, it will help, of course, the companies that will have the biggest volume, because in the end, this is a game of volume. You all know that.
The current fragmentation of the payment landscape is fragmenting also the volumes and creating some type of protection, sometimes for some regional markets, where it is hard to create a case to go after specific local volumes, where you need to build from scratch a platform to be compliant with the small local payment brand. So it's why, for us, EPI is fundamentally this missing piece of our architecture. And again, let's see the details when they will be decided by the banks, and hopefully, we will participate to that. And when the formal launch of EPI will be officially confirmed somewhere summer next year, because the interim company has a lot work to do, and particularly to bring the decision then to a go, no-go type of thing at summer 2021.
So we will be in 12 months' time in a better situation to assess. But directionally speaking, yes, it should ease really the operation of a payment service provider at the Pan-European level with a streamlined architecture in the medium to long term, once the migration will be done, which I see as a very strong positive for the largest Pan-European players, and of course, us with Ingenico will clearly be the one absolutely ticking this big box. So it's why I, I believe there is a, a real common interest in putting this thing into motion. And, of course, a lot of detail work has to be done to make sure it is the right product for the European landscape, with the right level of pricing and the right architecture and features.
This being said, to your second point, indeed, it will if it is really well structured, it will have clear it will create a new operational lever on the cost side, because it will allow to eliminate existing local complexities in favor of one Pan-European payment brand, which will be probably the dominant domestic payment brand for debit activities, certainly. So it's the way we look at it, significant strategic and industrial initiative, with still many details to be discussed, agreed, and negotiated between the various stakeholders. But at least it gives a chance to create something which is a payment brand of the twenty-first century for this region, and I cannot see how it could be seen negatively at this point in time. Ingenico's take it, maybe Marc-Henri?
No, on the cost actions, and their profile throughout the year, I think we mentioned it in the presentation. Their financial impact for us, given their nature and the content of what we have done, will be more in H2 than in H1. So the majority of the impact will fall in H2, and it's part of the profile of the year and what brings us to our margin targets. This being said, in terms of content of execution, I mentioned that we had additional holidays in Q2, also restricted hours. That was due also to leverage a situation of much lower activity.
Typically, when stores are stopped, you lower your customer service to the bare minimum, as you don't receive calls anymore and this kind of thing. So some of these actions are not coming in the same shape in H2. This being said, on more structural measure, we are of course going to remain typically hiring or salary postponement. We are going to remain extra cautious in H2 as long as we don't see the sufficient momentum of recovery. We do and we have made the decision of maintaining continuity of operation and growth-sustaining initiative everywhere, as possible. And this is not as part of our plan, but for more operational reasons, some of the actions, it will be a bit less in H2.
But again, the financial impact is a different story. The majority of it hit in H2.
We remain agile and adapt ourselves to real-time conditions of the evolution of the crisis, of course.
Yeah.
Regarding your sub-question regarding 2021 perspective, of course, it is too soon for us to start shaping a budget. But to go in your direction, I say that as a general trend, yes, we believe that even if the pandemic stays around, that we do not have yet a fully certified cure or vaccine, as long as the economy is not fully stopped again in significant countries for us, with new wave of hard confinement and re-lockdowns of non-essential stores, we believe we can progressively resume to pre-COVID type of overall growth trends and, of course, corresponding impact at profitability level. The big point on which we still lack visibility is the speed of recovery of things related to international travel, hospitality, professional events, which are, of course, significant providers of credit card-related activities and dynamic currency conversion-related benefits.
So of course, this may go faster or slower with, I would say, an impact on the speed of this recovery. But financially, you're right, 2021 should progressively bring us back under these conditions and assumptions, progressively versus what we were before COVID-19. And of course, even in the case, international travel would not come back quick and fast as it was really before, of course, we would not stay, immobile, just waiting for Chinese to go back in Europe. The money will go somewhere, and we would also adapt our commercial positioning to try to reposition the company where things are more happening than where things are obviously going, in slower.
It is, of course, a part of the things we will explore with the new Ingenico colleagues, as soon as the closing will take place, which is to also adapt the commercial strategy of the company to the context in 2021, whatever it will be. But the money will go somewhere, always, and the point is to position ourselves where transactions will be happening.
Thank you very much.
Thank you. The next question comes from the line of Sandeep Deshpande from JP Morgan. Please ask a question. Your line is open.
Yeah, hi. Thanks for letting me on. My question is on financial services, Gilles. I mean, in terms of the recovery in financial services in the second half of the year, how do you see that progressing? I mean, there is the element of merchant card process- I mean, card processing, both on the issuer side as well as on the merchant side, I mean, which was depressed in Q2, and how do you see that going? I mean, in terms of transaction volume, et cetera, going forward, and how you get paid on that, and then the other businesses there, in terms of how that progresses? And my second question, I mean, I just want to have a follow-up on this European Payments Initiative.
I mean, I always thought that the European payment service providers had an advantage in Europe because they were doing local payments. Does this standardization of payments across Europe not actually disadvantage a European payment provider versus, say, a global U.S. payment provider?
I will come back on your second question, of course. I will give the floor to Eric on the first one, on FS, which is, as you know, the factory of the group, and it is there that we have the highest proportion of fixed costs in FS now because it is the factory, so we don't close the factory when we have less volume. So it-
But based on your question and what we should anticipate for H2, I think we should expect a positive growth for this division. We expect the card processing business to improve aligned with the improvement that we saw for ourselves as an acquirer in the merchant services division. When we expect the good trends in account payment to continue, there is no reason to expect the number of transactions, account to account, to all of a sudden change directions. And we are still in the ramping up phase of our large contract with Commerzbank and UniCredit.
So all in all, it's rather positive perspective for this division, benefiting from the overall improvement associated with merchant services and acquirer, and continued good trends on the other division. That's why we are confident that we should grow to a low single digit on a three-year basis for financial services.
Sandeep, your comment is right, in the sense that, indeed, when the payment industry was also hyper local, i.e., more or less every payment service provider in Europe was also a national champion with minimum or inexistent cross-border activity. Of course, in such a world, a Pan-European payment brand could have been seen for them as a threat because they would have been potentially in a tougher competition in their local market, where they were entrenched behind the local domestic payment brand. My view on that is, of course, totally different now that we are Worldline, and certainly Worldline with Ingenico, having a Pan-European presence. Payment stays a game of volume. If I process the largest Pan-European volume on a single payment brand, normally, I should have the best competitive advantage to operate the cross-border.
Of course, I may receive somewhere, here and there, more competition for guys wanting to crack a new geography, but I can do the same in geography where I am not today. More importantly, in the end, as volume matter in payment, I believe that we are doing exactly what we need to do in term of consolidation, to make sure that whatever the payment landscape in term of brand tomorrow, we will always be having, in Europe, the largest volume, and consequently, normally, the best ability to compete everywhere. That's my view on it. But should it have been the same Worldline than 10 years ago, having only one presence in Belgium like it was in 2007, I could fully concur to your remark. With the Worldline we are building after 10 years, and certainly post-Ingenico, the game is radically different.
Thank you.
Thank you. And the next question comes from the line of Alexandre Faure from Exane. Please ask your question.
Good morning, and thank you very much for squeezing me in. I had a small follow-up on consolidation. I think, Gilles, you mentioned in your prepared remarks, that you, you're seeing opportunities in Europe and beyond. I think you mentioned it twice. You talked about global ambitions as well, so maybe a bit of a change in the tone here compared to being a pure European player in the past. So what should we understand by beyond Europe? Is it mostly North America? Could it be APAC? I mean, what are you, what do you have in mind from that standpoint? And I have a second question, if I may, on the Merchant Services contract you announced with Kering for Pan-European services, if I got it well.
Just curious to have some background on this deal, what the competition was like, or why do you think you won? Any additional color would be most helpful. Thank you very much.
Okay, Alexandre, I will take the second one. Alexandre, indeed, I mentioned that we are starting to look beyond because, of course, in the context of the Ingenico acquisition, we become definitely a more global group. We will have operations in more countries. That can create, of course, opportunities of synergies, of having a local management team that can support acquisitions that would have been tougher for us to contemplate in the previous, largely European-only setup of Worldline. So it's why we believe it is time for us, in anticipation of the closing of Ingenico, not to be shy, to look where we could go, thinking that with Ingenico teams, we may have opportunities that would have been less favorable for us that need to be explored.
So clearly, North America is not the first obvious play, as I many time mentioned to you guys, because of course, that going in a market dominated by the largest players of the payment services industry, it is a bit counterintuitive when we think about competitive advantage versus them in the North American market itself. But there are many other geographies where we can find significant industrial synergies, given the type of payment brands that are operated there, the type of maturity of the market. And this is exactly where we are currently looking beyond Europe, in geographies where the nature of the payment brands, the nature of the technologies, the maturity of the merchants, the market, or the banks with whom we could partner, is creating more or less equivalent opportunities in term of synergies and value creation that we would find in Europe.
So I don't want to be more explicit, sorry for that, because it could clearly pinpoint specific situations. But, it's not North America, but there are interesting countries anywhere, anywhere, where we can find such type of opportunities, and it is time for the group to really look beyond Europe sometimes, particularly with the support of future Ingenico colleagues.
Answering, Alexandre, a few words. Of course, we are not always informed about the exact sort of competitor, but from what we see, the full profession was there, from global players to local banks. And what we believe has made the difference, at least what we receive as feedback, is our ability to handle the cross-border, as I mentioned, in a particularly efficient way. So what does it mean for a merchant? It means to have one single contract, it means to have a centralized reporting, it means to have a very accurate reporting and view on all the different kind of payments, their breakdown, their composition.
It means also to have the best and fastest local implementation to accept in the most efficient way the local brands, and with all, all, all local and physical presence, it plays a very important role. And last but not least, maybe probably one of the most important for this kind of brand, our ability to manage the international travelers with their best payment habits, in particular, the Chinese and other various payment means. This is very interesting because, you know, for a decision made in the peak of the COVID, it is based upon things that will happen post-COVID, that they believe that, of course, medium term, the world is going back to normal. This dimension of payments will be back and will be a significant contributor to their revenues.
They need it, and they bet on it. So, that has also played a very important role. I'm not mentioning price, but, of course, price is important, but I think it is a mix, and the first parameters are absolutely instrumental to winning such deals.
Got it. Thank you very much.
Thank you. And the next question comes from the line of Jeff Cantwell from Guggenheim. Please go ahead, ask your question.
Hi. Thanks for the call you're giving us today, and thanks for taking my questions. I wanted to circle back to something you talked about earlier. I wanted to ask if you could talk to us about what you're seeing right now in terms of e-commerce transactions. Now you're mentioning that your e-commerce is significantly up during this pandemic. So maybe first, do you think that's a permanent shift in consumer activity? Can you just give us your thoughts there? And then second, you know, as you think about the second half of this year, and we think about 2021, are you maybe seeing, you know, some opportunity within your footprint and within your operations to grow e-commerce more quickly than you have in the past?
I guess I'm just curious if you could give us some color on the e-commerce opportunity you're seeing going forward, and help us think about that to a greater extent. Thanks.
Hi, Jeff. Sorry, the line was breaking up, but we understood that your question was related to the trend that we observe in the post-COVID environment regarding e-commerce. And if I'm correct?
How long lasting should it be, or where, what would we, what could we do to take advantage of it? Is it correct?
Yeah, no, yes, that's correct. That's correct. Yes. Yes.
Okay. Now, for sure, we see this shift, and if we take all the dimension of our e-commerce activity, it is a good, solid double-digit growth in this domain. And for sure, when we moved out of the peak of the COVID, we did not see a decline in any shape or form. We are still missing. As I said, we are steadily rising, but starting from a very low point, we are still missing significant volumes on travel and hospitality, typically. So, we are quite confident this shift to online will remain.
We think that that's a very first estimate, but we think that the share of online in Worldline is now closer to 25, coming to closer to 20% before COVID. This being said, looking at the future, of course, I mentioned a lot of the campaigns we did to push various e-commerce solution for a wider scope of customers. But what will come as a step change is the integration with Ingenico. Ingenico has a much stronger online exposure. You could see in the results that this online is helping them in this moment, and that same as for us, when the travel dimension of e-ticketing will be back, we will have the full boost impact.
So overall, we think that, in terms of, and that's the work we are doing also in the pre-integration and looking at the platform, their feature, their complementarity, the way we can combine them. And I can say in simple terms, that in acceptance, they had much stronger position than we had, while in e-acquiring, we were better equipped than with our cross-border e-acquiring, global platform. And the combination of both is hyper powerful. So I'm very positive about the way it will work, post in Q4, post-integration, and I think we will have a strong booster to get a much better benefit of this switch to online.
Okay, great. That's, that's very helpful. Thanks for that. And then secondly, I just wanted to ask you another one on financial services, and the outlook there, which, which you've been touching on. You know, you've mentioned several wins in financial services, which, which indicates that your strategy is doing quite well. Could you maybe help us think about that going forward? I just wanted to see if you could provide any sort of color on the size and the impact of those wins, and help us to understand the, the potential impact on revenue growth in financial services.
I know there's a lot of moving pieces to that question, but what I'm trying to get at is whether you think you can accelerate your growth in financial services revenue, you know, as there's a resumption in economic activity, plus, plus the new wins you've been discussing in financial services. Thanks again. Thanks very much.
No, indeed, we had this win, so, the Commerzbank ramp-up now is well engaged. A large part is behind us, while the UniCredit ramp-up, we still have some start of activity in the preparation phase of the big switch. The shift that started in H1, and that should get more traction in H2, probably more in the second half of H2 than in the first half, when it comes to UniCredit. This being said, it is in an overall mix of activity in financial services, just like Eric said, where you have the situation on volumes we shared with you.
A bit of a question mark on bank discretionary projects during H2, which one they will accelerate, which one they are putting on hold, given their financial situations. So we saw that there was not too much of a turnaround of projects in H1, which was a positive, but we cannot fully predict what will be their granular decision in H2. So we'll have a combination of policies mix, which is underlying the projections that Eric did for you for H2. Coming to a longer-term situation, I think what we shared with you with the three years plan still remains the mid-single digit growth. This is really what we are looking at for FS for the medium to long term. Okay. Thank you, Jeff.
Thank you very much.
Maybe we can take one last question, I believe, given the time. Operator?
Yes, we have another four questions on the line. So the next question is Johannes Schaller from Deutsche Bank. Please ask a question.
Yeah, thanks for taking my questions. Two quick ones, if I may. I mean, firstly, if you could comment maybe a little bit, I think, and Daniel also did that yesterday, on the Wirecard situation and how you think that is impacting your business currently? Not so much talking about the M&A speculation that is out there, but really organically, given some of the contracts they have, for example, in France, what the opportunities are you see here and how you're kind of working on those. And then secondly, you talked about M&A, and I think to, for you to do the next step, you probably have to make a decision on the banks and acquirers business and the strategic review.
If you could give us a bit of an update here on the strategic review and where you are, I think that would be helpful. Thank you.
Hello, Johannes, thanks for your question. As a matter of fact, I will be short and sorry to frustrate you regarding Wirecard, but my only comment will be, we do what we have to do in front of this situation. It was totally unexpected, of course, there is a bankruptcy in the industry. It creates needs for customers, and we do what we have to do when we are approached by customers looking for continuity of their operation. Nothing more, nothing less, and you know, there are specific situation in various countries, which need also to be assessed by these customers of Wirecard before they decide to move forward their initiative that were initiated with Wirecard. So we will be always there to answer if we are approached. Maybe just on Wirecard, an additional word.
We sometimes see the question around the rise in regulation. We believe it should be a rise in accounting regulation, because it's basic accounting fraud rather than a sophisticated payment feature, as far as we understand at this stage. That being said, it would not be surprising that there is a bit of more attention and more regulation in our domain. Our view of it is rather positive, because we are already hyper-regulated in Worldline, given the fact we bought some banking business historically. A vast number of regulators are already receiving a report, doing audits, and so on. We are equipped to do that in a very efficient and industrial way.
So another layer would not make a big difference. What we think it is somehow acting as a barrier to entry to less serious players, and that some fintechs will may not be on the market anymore after the pressure has been raised, which I think would be a good thing for the market in general. So, probably, it may also do a bit of cleaning in the competitive landscape. Scale matters also from that standpoint, indeed. Regarding the strategic review, I totally confirm what we consistently said, is that this strategic review will be undertaken as soon as the closing of the transaction takes place.
There also, during the COVID, I can just share with you that we've been clearly receiving marks of interest from the external world, either directly or through bankers, who are doing what also they have to do. I believe that it will be a strategic review offering exactly the range of opportunities we are looking for to make the best decision, both for this business with the B&A business, but also for the rest of the group in view of its overall strategic agenda. So it is one of the most important things we will initiate, of course, post-closing, on top of ensuring that the actual integration is properly set in motion.
That's helpful. Thank you. Thanks, Marc-Henri.
Okay, many thanks, guys. Many thanks for your question and for the quality of these interactions, as usual. Sorry that we could not see each other in person in this particular time. Looking forward to it anyway. And, in between, take care. Bye-bye.
That does conclude our conference for today. Thank you for participating. You may all disconnect.