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Worldline’s Q3 23 results were disappointingly weak. The French company reported results below the consensus expectations across all three of its business units. These negative outcomes can be primarily attributed to macroeconomic challenges, with a particular focus on Germany. The company updated its target for FY23, expecting lower revenue growth but more importantly lower margins, which runs counter to the Worldline growth story.
Companies: Worldline (WLN:EPA)Worldline SA (WLN:PAR)
AlphaValue
Worldline released its Q3 2023 financial results, which fell below both the consensus and our own estimates. Additionally, the company revised its revenue growth guidance for the fiscal year 2023, reducing it from the previously anticipated range of 8-10% down to 6-7%. What Is even more unexpected is that the company now foresees a stagnant OMDA in absolute terms for FY23, indicating a 150bp decline in margin. We do not anticipate a substantial improvement before the second half of 2024.
Worldline’s HY 23 results came broadly in line with expectations, albeit well ahead of our forecasts at the bottom line. The firm continues to deleverage and recorded improving profitability – as planned. However, we do not see any changes to our investment case nor in the management’s speech, implying that we confirm that the shares are currently fairly priced.
Worldline’s Q1 23 trading update has beat expectations (ours and those of consensus). While we believe that re-pricing and inflation have sustained volumes and revenues, previous merchant wins – on the back of an attractive product – have boosted merchant counts and volumes. We confirm our case that Worldline has a great Legacy product, which should continue to gain market shares from banks, but which is operated at slowly improving margins (or slower than hoped for).
Strong Q1 23 trading update published by Worldline. While Financial Services and Mobility revenues were fully in-line with our estimates and the consensus, Merchant Services (MS) posted a strong beat vs. expectations. This performance from MS comes from sustained processed volumes, where we believe that inflation played a part and expect the comps. to toughen from Q2-Q3 onwards. We confirm our case in that Worldline’s issue does not come from revenue generation but rather OMDA margin expans
Worldline has released Q1 23, FY 23 and FY 24 company-compiled consensus figures. As in our comment on the Q4 22, the consensus is steadily being revising downwards in terms of the forward-looking estimates of profitability and we are too. As of today, a miss on the firm’s CMD OMDA margin objectives is expected. Our change of opinion on Legacy payment firms, initiated in mid-January, is confirmed. We believe that inflation and the stacked back-end infrastructure of Worldline (stemming from its
Worldline’s results were slightly ahead of our expectations and those of consensus. However, while Merchant Services (MS) performed strongly, the rest of Worldline could not keep up. Despite the decent figures reported and the potential delivery of its plans, uncertainty lies in the realisation of such objectives. Also, we believe that the firm’s long-term margin expansion will not be so radiant (as per our sector downgrade paper). We maintain our negative opinion.
Worldline has released the company-compiled consensus for Q4 22. The figures have been trending downwards since the start of 2022. We confirm our bearish case for the firm: despite quality and brand recognition, it is too expensive when considering the challenges beyond 2023 and forward.
Worldline released a strong Q3 22 trading update but the market has reacted negatively owing to several reasons we believe: no guidance uplift despite the top-line growth well ahead of the plan, an inconsistent message vs. the previous quarters and no outlook for 2023. Despite this, we firmly believe that the market reaction is unjustified, and we reiterate our strongly positive opinion on the stock.
Worldline posted a very satisfactory set of Q2 results, implying a strong H1 22. While the firm keeps on growing organically and delivering on its guidance, we believe that today’s share price reaction (+14% at peak) embeds a catch-up on the previously low market valuation.
Companies: Worldline SA (WLN:PAR)Worldline SA (0QVI:LON)
Worldline’s Q1 22 Revenue release came with a beat. The firm disclosed strong volumes and outperformance in all of its business lines. The firm confirmed the strong momentum occurring in the transition to cashless transactions and, so far, does not seem alarmed by the potential consequences of the Russian-Ukrainian conflict. Guidance confirmed.
Worldline’s release of its Q4/FY results comes with no surprises but with a slight beat, delivering on the firm’s promises. Coupled with yesterday’s announcement of TSS’s disposal, as well as the much-appreciated improved transparency over market shares, processed volumes and transactions, Worldline is on its way to regaining the market’s confidence.
Bloomberg reported that those people in the know have said that Worldline’s sale of its Terminals business may be imminent. If this is confirmed, the drag on Worldline’s share price would be lifted and finally positively oriented.
Worldline’s announced guidance for the years 2022-24 is fair, from the moment the firm is considered as what it actually is: not a Tech pure play. We are pleased with the top-line CAGR of 9-11% over the period as well as a 50% FCF conversion rate, however, we are slightly disappointed with the OMDA margin target trending towards 30% by 2024. Beyond that, we can expect Worldline to keep on growing with acquisitions, however, with more limited means than historically.
Worldline’s results, although in line with the guidance for Q3 21, were disappointing as the market expected a stronger sign after the guidance uplift. We believe Q4 will be better than that implied by the guidance. Although the Board has approved TSS’s disposal, we do not believe that much progress has been made and do not foresee a happy ending considering the combination of anticipated sale price and accumulated delay in selling the unit.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Worldline SA. We currently have 48 research reports from 4 professional analysts.
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Hardman & Co
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