Travelex Results for the nine months ended 30 September 2015

27 Nov 2015

Travelex Results for the nine months ended 30 September 2015

27 November 2015

Travelex, the world's leading foreign exchange specialist, announces continued Revenue growth for the nine months ended 30 September 2015

Highlights

  • Core Group Revenue increased by 2% to £558.5m (6% increase to £578.8m at constant exchange rates)
  • After investment in Payments & Technology of £4.3m, Core Group EBITDA decreased by 6% to £66.4m (marginal increase to £71.1m at constant exchange rates)
  • Strong growth during the three months ended 30 September 2015, our peak trading period, in our Retail and Wholesale & Outsourcing segments
  • Retail revenue up 11% and EBITDA up 30% at constant exchange rates compared to 2014
  • Wholesale & Outsourcing revenue up 13% and EBITDA up 15% at constant exchange rates compared to 2014
  • Decline in Core Group EBITDA driven by the impact of the weakness in the Brazilian Real on sales volumes in Brazil as well as the step-up in investment in the Group's Payments & Technology segment to capitalise on a number of Digital opportunities
  • Retail like-for-like revenue growth of 4% with growth across all channels
  • Overall increase in Online and mobile revenue across all segments of 16%
  • 116 new stores opened in the period, including at Detroit and Boston Logan international airports
  • Based on current trading the Board expects to deliver full year results in line with expectations, before the impact of foreign exchange translation

 

Anthony Wagerman, Chief Executive, commented:

"Against some challenging trading conditions, Travelex has delivered a resilient performance and demonstrated strong growth across its largest divisions. Our Retail and Wholesale & Outsourcing operations showed double digit EBITDA growth in the three months ended 30 September, with Retail in particular benefitting from further expansion of our network and the continuing shift in consumers using online and digital platforms. We continue to build our Digital capabilities to ensure we can capitalise on the opportunities it presents.

Excluding the effect of foreign exchange translation on our results, the Group's EBITDA remained broadly in line with last year with the short term impact from our digital investment as well as the challenging trading conditions in Brazil offsetting the growth from our Retail and Wholesale & Outsourcing operations. Notwithstanding these challenges, the Group remains on track to meet expectations for the full year."

 

 

 

Enquiries

Travelex

Dani Filer, Communications Director                                                                        +44 (0) 20 7812 5500

 

Tulchan Communications

Peter Hewer                                                                                                                      +44 (0) 20 7353 4200

About Travelex

 

Founded in 1976, Travelex has grown to become the world's leading specialist provider of foreign exchange. Travelex provides cash and prepaid cards across 29 countries. The Group has built a growing online and mobile foreign exchange platform, across 21 markets, and developed a growing network of over 1,400 ATMs and 1,450 stores at both on-airport and off-airport locations around the world. It also processes and delivers foreign currency orders for major banks, as well as for travel agencies, hotels and casinos. In addition, the Group sources and distributes large quantities of foreign currency banknotes for customers including central banks and international financial institutions. The Group is also active in the remittances and payments space and in the travel insurance brokerage business in the United States.

 


 

OPERATING AND FINANCIAL REVIEW

Summary of financial performance

£m

9 months

ended

30 September

2014

 

9 months ended

30 September

2015

% Change

9 months

ended

30 September

2015 (CER)

% Change (CER)

Core Group Revenue

546.3

558.5

2%

578.8

6%

Core Group EBITDA

70.8

66.4

(6)%

71.1

-%

Statutory Revenue

526.6

498.7

(5)%

 

 

Statutory EBITDA

65.6

56.5

(14)%

 

 

Statutory loss after tax

(104.6)

(90.5)

13%

 

 

 

Overview of trading results

Travelex has delivered a resilient performance despite the continued strengthening of Sterling negatively impacting the translation of revenues and profits earned outside the UK and the impact of our investment in Digital. Adjusting for these items the Group showed an increase of 6% in Core Group EBITDA during the nine months ended 30 September 2015.

Core Group Revenue has increased by 2% for the nine months ended 30 September 2015 (6% at constant exchange rates), despite the continued challenges in Brazil and softer trading in North America.  Like-for-like Retail revenue growth was 4% overall with double digit like-for-like growth in Europe, the Middle East and Supermarkets.  In addition the UK operations benefitted from the impact of new stores in Heathrow and strong demand for Euros in the wholesale banknote business. There was also strong revenue growth from the cash processing business in Nigeria as well as the positive impact from new stores in Turkey. 

Core Group EBITDA for the nine months ended 30 September 2015 decreased by £4.4m to £66.4m compared to 2014 (an increase of £0.3m on a constant exchange rate basis (CER)). Weakness in the Brazilian Real has continued to severely impact outbound sales volumes in Brazil and this together with the high inflationary environment and relatively fixed cost base has resulted in a decline in EBITDA.  In addition EBITDA has been impacted by the anticipated new rental terms at Heathrow Airport and the Group's planned investment in Digital capabilities. Strong performance during the peak trading period from Retail and Wholesale & Outsourcing has reduced the impact of these factors on the Group's year to date performance.

Retail

In the nine month period to 30 September 2015, Retail Core Group Revenue increased 5% to £394.0m (7% on a constant exchange rate basis) due to continued expansion of the Supermarket estate and the impact of additional stores at Heathrow where we are now the sole fx operator, strong performance across all channels in Europe, in particular VAT refunds, and in the Middle East, most notably in Qatar and Turkey.  These factors more than offset the transfer of the Sainsbury's contract from the Retail segment into the Wholesale and Outsourcing segment.  In addition, continued expansion in ATMs resulted in revenue through this channel increasing by 22%. On a like-for-like basis Retail revenue growth was 4%, with many regions across the Group's global network delivering double digit like-for-like retail growth compared to 2014 compensating for softer trading in North America and the UK. Excluding the impact of the Sainsbury's reclassification, Online revenue has increased by 10% in the Retail segment.

Retail Core Group EBITDA increased by £5.3m to £55.3m (£7.9m at constant exchange rates) mainly due to strong trading in Qatar and Europe, partially offsetting the new rental terms at Heathrow Airport. In addition, EBITDA benefitted from the accounting treatment of an airport contract now classified as onerous.

 

Consistent with the Group's network expansion strategy, 116 new stores opened, including Detroit Metropolitan Wayne County Airport and Boston Logan International Airport. Furthermore, our business in Turkey, which we acquired 75% of in May 2014, contributed £7.1m to Core Group Revenue and £5.0m to Core Group EBITDA in the nine months ended 30 September 2015.

 

Wholesale & Outsourcing

Wholesale & Outsourcing Core Group Revenue increased 10% to £89.8m and up 12% to £91.6m on a constant exchange rate basis.  A large portion of this increase results from the transfer of the Sainsbury's contract from the Retail segment in 2015 as a result of new contract terms. Wholesale & Outsourcing Core Group EBITDA was up 11% on 2014, despite an increased investment in business development resource. Excluding the Sainsbury's contract reclassification, the Core Group EBITDA increase would have been 8%.

 

Wholesale Core Group Revenue increased by 8% on 2014 with higher demand for Euro banknotes in the UK and strong performance of the cash processing business in Nigeria as well as the transfer of UK Retail supply to the Outsourcing segment in 2015. Wholesale Core Group EBITDA margins remained strong at 50%, and EBITDA grew by 18% (£2.4m) and by 20% (£2.7m) on a constant exchange rate basis.

Outsourcing Core Group Revenue increased 11% to £57.4m compared to 2014 largely owing to the Sainsbury's contract reclassification from Retail but also as a result of performance in Malaysia offsetting the impact of a new contract in the Australian phone cards business. Margins have remained resilient at 41%.

Payments & Technology

Core Group Revenue increased 1% to £16.3m (12% to £18.1m on a constant exchange rate basis). Revenue growth has been primarily driven by the Currency Select business which provides dynamic currency conversion (DCC) solutions for ATMs, e-commerce and point of sale terminals to acquirers, merchants and business partners. Currency Select Core Group EBITDA decreased 6% to £1.7m (increased 6% to £1.9m on a constant currency exchange rate basis) owing to contract wins in Australia being more than offset by exchange rates on translation. Overall Payments and Technology reported an EBITDA loss of £2.6m reflecting investment costs of £4.3m in the Digital team under the leadership of Sean Cornwell, CDO.  Most key members of the Digital team are now in place and continue to build up the Group's in-house capabilities. This investment will help secure our long-term position and enable the development of new payments propositions in line with our growth strategy. Overall increase in Online and mobile revenue across all segments was 16%.

 

The Travelex Money App was launched in July through an integrated marketing campaign across PR, direct marketing and social media. The app serves to help UK customers quickly and efficiently plan and purchase their cash in advance of holiday requirements. During the period our Supercard proposition was piloted in the business and development continued on our international money transfer product which we plan to launch in 2016.


Brazil

Core Group Revenue for the nine months ended 30 September 2015 decreased by 28% to £32.7m compared to 2014 and decreased by 8% on a constant exchange rate basis. Core Group EBITDA decreased by 55% to £5.3m and by 42% to £6.8m on a constant exchange rate basis.

 


 

Brazil Retail Core Group Revenue for the nine months ended 30 September 2015 decreased by 32% to £21.3m, and 12% to £27.5m on a constant exchange rate basis. Cash and prepaid cards volumes declined as they were impacted by the weakness of the Real against all major currencies since this business is predominantly outbound.  This decline was partially offset by increased remittance volumes.  The average exchange rate to the USD for the nine months ended 30 September 2015 was 3.22 compared to 2.29 for the same period in 2014. Brazil Retail Core Group EBITDA decreased 65% to £1.9m (or by 56% to £2.4m on a constant exchange rate basis) as a result of the high inflationary pressures on the fixed cost base and higher commissions payable to travel agents. Through these challenging trading conditions, Brazil's management team continues to focus on optimising the retail estate and tight cost control, including closing 15 loss-making stores, and product innovation and diversification through the development of an international payments proposition.

Brazil Non-retail Core Group Revenue decreased by 21% to £11.4m, but increased slightly by 1% to £14.7m on a constant exchange rate basis. Brazil Non-retail Core Group EBITDA decreased by 46% to £3.4m and by 30% to £4.4m on a constant exchange rate basis. The decrease in EBITDA on an underlying basis was a result of the Bank also being impacted by the weakened BRL and inflationary pressures on the cost base, in particular higher logistics costs.

The Group is in the process of completing the acquisition of Renova Servicos in Brazil which is anticipated to complete on 30 November 2015.  The transaction will comprise the acquisition of Renova Servicos and the trade and assets from Renova Corretora from an associate of Dr Shetty, the Group's ultimate controlling shareholder. Renova operates 41 stores in five States across Brazil with a strong remittance and business to business foreign exchange offering which is complementary to the Group's existing operations in the country.  The acquisition is expected to benefit our operations through increased diversification in the Brazilian market, knowledge sharing and synergies and will be funded through the issue of loan notes constituting subordinated shareholder funding in favour of Dr B. R. Shetty.

Other Trade

Other Trade principally includes Travelex Insurance Services Inc. (TIS), a travel insurance broking business in the United States. The decline in Core Group EBITDA is attributable to renegotiation of terms with underwriters at the end of 2014; under the previous contract terms Core Group EBITDA would have been £1.0m higher than 2014, at constant exchange rates. Underlying volumes remain resilient.

 

Corporate developments

A wholesale banknote supplier of the Group has served notice to change the terms of the agreement to supply banknotes to one of the Group's UK subsidiaries, in accordance with a contractual break clause.  The agreement on the current terms is due to terminate at the end of June 2016. The Group is still in discussion with the supplier and is considering other alternatives.  

 

Outlook

Travelex has again delivered revenue growth and a strong performance during the peak trading period. In aggregate the Group is expected to deliver full year results in line with management expectations, before the impact of exchange rates on translation, which amounted to £4.7m on Core Group EBITDA for the nine months ended 30 September 2015.  The strength of our brand continues to ensure we are well positioned to manage through the impact of the economic headwinds in Brazil as well as from contract renewals.  We continue our investment to strengthen our digital capabilities and capitalise on growth opportunities to ensure we continue to deliver the most innovative and leading currency services for our customers.

 


 

Appendix

Revenue and EBITDA by segment for the nine months ended 30 September 2015                                                           

£m

9 months ended

30 September

2014

9 months ended

30 September

2015

% Change

9 months ended

30 September

2015 (CER)

% Change

(CER)

Core Group Revenue

 

 

 

 

 

Retail

376.6

394.0

5%

403.3

7%

Wholesale & Outsourcing

81.7

89.8

10%

91.6

12%

Payments & Technology

16.1

16.3

1%

18.1

12%

Brazil

45.7

32.7

(28)%

42.2

(8)%

Other Trade

26.2

25.7

(2)%

23.6

(10)%

Total

546.3

558.5

2%

578.8

6%

 

Core Group EBITDA

 

 

 

 

 

Retail

50.0

55.3

11%

57.9

16%

Wholesale & Outsourcing

35.8

39.7

11%

40.3

13%

Payments & Technology

1.8

(2.6)

n/a

(2.4)

n/a

Brazil

11.7

5.3

(55)%

6.8

(42)%

Other Trade

6.2

5.8

(6)%

5.4

(13)%

EBITDA Contribution

105.5

103.5

(2)%

108.0

2%

Central & Shared Costs

(34.7)

(37.1)

(7)%

(36.9)

(6)%

Total

70.8

66.4

(6)%

71.1

-%

 

Revenue and EBITDA by segment for the three months ended 30 September 2015                                         

£m

3 months ended

30 September

2014

3 months ended

30 September

2015

% Change

3 months ended

30 September

2015 (CER)

% Change

(CER)

Core Group Revenue

 

 

 

 

 

Retail

144.0

154.1

7%

159.6

11%

Wholesale & Outsourcing

30.6

33.7

10%

34.7

13%

Payments & Technology

5.1

5.2

2%

6.2

22%

Brazil

16.4

9.8

(40)%

14.7

(10)%

Other Trade

8.6

8.0

(7)%

7.3

(15)%

Total

204.7

210.8

3%

222.5

9%

 

Core Group EBITDA

 

 

 

 

 

Retail

24.5

30.3

24%

31.9

30%

Wholesale & Outsourcing

14.3

16.0

12%

16.4

15%

Payments & Technology

0.5

(1.8)

n/a

(1.7)

n/a

Brazil

4.5

1.7

(62)%

2.5

(44)%

Other Trade

2.0

1.9

(5)%

1.7

(15)%

EBITDA Contribution

45.8

48.1

5%

50.8

11%

Central & Shared Costs

(11.7)

(13.6)

(16)%

(13.5)

(15)%

Total

34.1

34.5

1%

37.3

9%

 

 

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