Teleperformance: First-Half 2016 Results

Teleperformance: First-Half 2016 Results

• SUSTAINED GROWTH IN LIKE-FOR-LIKE REVENUE*: UP + 6.8%
• FASTER GROWTH IN THE SECOND QUARTER: UP + 8.2% LIKE-FOR-LIKE
• FURTHER INCREASE IN EBITA MARGIN BEFORE NON-RECURRING ITEMS** TO 8.9% OF REVENUE
• ROBUST GENERATION OF NET FREE CASH FLOW***: €121 MILLION
• CONTINUED STRENGTHENING OF GLOBAL LEADERSHIP POSITION, NOTABLY IN CHINA, PHILIPPINES, BRAZIL AND PORTUGAL WITH MORE THAN 8,000 ADDITIONAL WORKSTATIONS
• 2016 OBJECTIVES CONFIRMED AND REFINED

Regulatory News:

The Board of Directors of Teleperformance (Paris:RCF), the worldwide leader in outsourced omnichannel customer experience management, met today and reviewed the consolidated financial statements for the six months ended June 30, 2016. The Group also announced its half-year financial results.

INTERIM FINANCIAL HIGHLIGHTS

(1) Operating income before amortization of acquisition-related intangibles and excluding non-recurring items.

NOTES:
* At constant exchange rates and scope of consolidation
** EBITA before non-recurring items as a % of revenue
*** Internally generated funds from operations (excluding interest paid) - WCR - Net capital expenditure

Paulo César Vasques, Chief Executive Officer of Teleperformance, said:

"We had a good first half with like-for-like revenue growth of + 6.8% and a further improvement in our EBITA margin before non-recurring items to 8.9%, which is in line with our 2016 targets. As expected, the pace of growth was faster in the second quarter than in the first, notably in North America and the Ibero-LATAM region. In addition, Continental Europe & MEA, China and India all continued to see double-digit growth in their operations over the period.
Our growth was not only profitable but also controlled, with improved margins and liquidity management discipline both reflected in robust cash flow generation. This very good performance stems from Teleperformance's unique global leadership position. In June, Everest Group recognized us as one of the world's top-performing Contact Center Outsourcing providers for the fourth year in a row. I would like to take this opportunity to thank all of our people for driving this performance and bringing us this recognition.
Backed by our encouraging first-half results, we are confirming and refining our full-year guidance, targeting like-for-like revenue growth of around + 7% and an EBITA margin before non-recurring items of at least 10.3%."

Daniel Julien, Executive Chairman of Teleperformance, added:

"Teleperformance has fantastic strengths on which it can draw to win new market share in an increasingly complex environment for our businesses, shaped in particular by the new needs of the digital revolution. Innovation, the core driver of our profitable, sustainable growth, is a key focus as we work to develop the most effective omnichannel strategies combining talent management and high value-added solutions to support the world's best-known brands.
Teleperformance also has a solid balance sheet and cash flow performance that allows it to take advantage of the many remaining acquisition opportunities in the still highly fragmented customer experience and business process outsourcing services market. External growth is another key value-creation driver for Teleperformance's shareholders and clients."

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FIRST-HALF AND SECOND-QUARTER 2016 REVENUE

CONSOLIDATED REVENUE

Consolidated revenue amounted to €1,689 million in the first half of 2016, representing a year-on-year increase of + 6.8% at constant exchange rates and scope of consolidation (like-for-like). On a reported basis, growth was + 1.8%. This was due to a €77 million negative currency effect arising from the decrease in certain currencies – primarily Latin American currencies such as the Brazilian real, and the Mexican, Colombian and Argentine pesos – against the euro.

Consolidated revenue for the second quarter stood at €845 million, an increase of + 8.2% like-for-like compared with + 5.5% in the first quarter. On a reported basis, growth amounted to + 2.1% due to the negative currency effect.

REVENUE BY REGION

In the first half of 2016, all of the operating regions reported satisfactory like-for-like growth, equal to or above the global market average.

The geographic breakdown continued to reflect Teleperformance's unique global leadership position. In first-half 2016, the English-speaking market & Asia-Pacific region accounted for 49% of consolidated revenue, Ibero-LATAM 24% and Continental Europe & MEA 27%.

• English-speaking market & Asia-Pacific

Compared with the prior-year period, revenue in the English-speaking market & Asia-Pacific region rose by + 4.2% like-for-like and by + 1.7% as reported. In second-quarter 2016, regional revenue increased by + 5.9% like-for-like and by + 1.3% as reported.

Growth slowed temporarily in the first quarter due to an unfavorable basis of comparison, but moved back into pace with the global market in the second quarter of the year. Regional business was driven, in particular, by the ramp-up of major domestic contracts in the United States in the healthcare, financial services and insurance sectors, as well as by new contracts with globally-recognized sharing economy brands. Growth was also strong in the consumer electronics sector.

During the first half, Teleperformance continued to diversify its client portfolio in the region, by reducing its dependence on the telecommunications sector (including pay-TV), which accounted for only 26% of the region's revenue stream in 2015 compared with 30% in 2014.

In the Asia-Pacific region, Teleperformance continued to enjoy robust business growth in China, notably with locally based North American multinationals, as well as in India.

• Ibero-LATAM

Operations in the Ibero-LATAM region expanded at a sustained pace in first-half 2016, delivering growth of + 6.9% like-for-like. On a reported basis, however, revenue declined by 5.3% from the prior-year period due mainly to a particularly unfavorable exchange rate environment shaped by the decrease against the euro of certain currencies, including mainly the Brazilian real and the Mexican, Colombian and Argentine pesos.

In the second quarter, like-for-like revenue growth accelerated significantly to + 9.8% compared with + 4.0% in the first quarter. Reported revenue declined by 2.0% over the period due to the adverse currency effect.

A very good performance from operations in Portugal fueled most of the upswing. Business is expanding at a very swift pace, lifted by recent major contracts in a variety of areas, notably among globally-recognized sharing economy brands and in the leisure sector. This new volume is being handled by multilingual hubs in Lisbon, including the newest site – City Center – which came on stream in 2015 with 1,800 workstations.

Although the economic environment remains depressed in Brazil, Teleperformance continues to enjoy satisfactory business growth lifted by both domestic premium clients and by the ramp-up of new contracts with North American multinationals in the financial services, consumer electronics and sharing economy sectors.

• Continental Europe & MEA

Regional revenue rose by + 11.8% like-for-like and by + 9.3% as reported in the first half, and by + 10.8% like-for-like and + 7.8% as reported in the second quarter.

This strong growth reflects an ongoing network effect with global clients in several markets, in sectors ranging from consumer electronics and Internet services to e-commerce and financial services.

Performance was led by operations in the Netherlands, Greece (where clients are served by premium multilingual hubs located in Athens), the Middle East – notably Egypt and Dubai, where recently opened centers serve major Internet and consumer electronics firms – and Eastern Europe (Russia and Poland).

Revenue from the French-speaking market advanced at a satisfactory pace in the first half of 2016, driven primarily by offshore business in Morocco and Tunisia.

Teleperformance continues to support the market's growth by opening new sites, most of them offshore, and extending existing sites. Following on last year's openings in Albania, Dubai, Egypt, Lithuania and Suriname (which serves the Dutch market), Madagascar was chosen as the latest location for a new site that opened in first-half 2016.

The expansion of TLScontact, which provides visa application management services for governments, continued to have a positive impact on the region's growth, albeit less than in 2015, a year shaped by the rapid ramp-up of a contract with the British government. The strong performance in the first half of 2016 was spurred by a still high volume of visa applications from China and North Africa and by the development of new services.

FIRST-HALF 2016 RESULTS

EBITA before non-recurring items stood at €150 million, up + 4.5% from the €144 million reported in first-half 2015. EBITA margin before non-recurring items widened further to 8.9% from 8.7% in the year-earlier period.

EBITA BEFORE NON-RECURRING ITEMS BY REGION – EXCLUDING HOLDING COMPANIES

• English-speaking market & Asia-Pacific

The English-speaking and Asia-Pacific region achieved EBITA before non-recurring items of €65 million in the first half of 2016, compared to €75 million in the prior-year period. EBITA margin before non-recurring items stood at 7.9% versus 9.2% in first-half 2015. This decrease is primarily attributable to:

• An unfavorable basis of comparison mainly in the first quarter, stemming from a temporary decline in volume with a major client in the telecommunications sector in the United States.
• An unfavorable geographic mix effect related to significant growth in domestic business in the United States, notably in the financial services sector.
• The gradual ramp-up of new facilities that opened recently in Australia and China.
• The ongoing two-year increase in security costs, which began in 2015.

In the second half, Teleperformance aims to stabilize the region's margins in relation to the prior-year period as the basis of comparison becomes more favorable and the new facilities become fully operational.

• Ibero-LATAM

EBITA before non-recurring items in the Ibero-LATAM region amounted to €43 million in the first half of 2016, compared to €44 million in the prior-year period.

EBITA margin before non-recurring items remained high, rising to 10.7% versus 10.4% in the first half of 2015, mainly due to the strong and profitable growth of operations in Portugal and Colombia, good resilience in Brazil, and favorable currency trends for offshore business in Mexico serving the US market.

• Continental Europe & MEA

With EBITA before non-recurring items of €25 million, for a margin of 5.4% versus 2.1% in the prior-year period, the Continental & MEA region remained on the steady upward trend in profitability that began in 2012. Positive factors contributing to this growth included:

• An ongoing improvement in the French-speaking market's profitability, with a full-year objective of breaking even at the operating profit level.
• Good business growth and satisfactory cost discipline in a number of countries in Southern and Eastern Europe, such as Greece and Russia.
• Improved profitability for TLScontact's outsourced visa application management services.

Operating profit (EBIT) amounted to €131 million, up + 4.0% from €126 million in first-half 2015.

First-half 2016 EBIT reflects the amortization of intangible assets in an amount of €11 million, on a par with the prior-year period, and an €8 million accounting expense on performance share plans.

The financial result represented a net expense of €10 million, versus €4 million in first-half 2015, when the Group benefited from foreign exchange gains resulting from its active hedging policy. .

Income tax expense amounted to €34 million, corresponding to an effective tax rate of 28.0%, versus 31.6% in the prior-year period.

Minority interests in net income amounted to €1 million.

Net profit - Group share increased by + 3.7%, to €86 million from €83 million in the prior-year period. Diluted earnings per share stood at €1.48, up + 2.1% year-on-year.

CASH FLOWS AND FINANCIAL STRUCTURE

Cash flow excluding interest paid and after tax rose to €176 million from €167 million in first-half 2015. Change in consolidated working capital requirement was an inflow of €20 million, on a par with the prior-year period. This good performance reflects, in particular, the success of the policy deployed to improve the Group's liquidity.

Net capital expenditure amounted to €75 million, or 4.4% of revenue, versus €86 million and 5.2% in first-half 2015. While maintaining good financial discipline, Teleperformance continued to create or expand contact centers to support clients in all markets, notably in the Asia-Pacific region (see Recent Developments below).

In all, net free cash flow increased sharply, to €121 million from €104 million in the prior-year period.

Financial investments, which totaled €50 million in the first half, included outlays related to TLScontact earn-out clauses and purchases of treasury shares.

After the payment of €68 million in dividends, net debt stood at €356 million at June 30, 2016. The Group's financial structure therefore remains very solid, with equity of €1,727 million at end-June.

RECENT DEVELOPMENTS

In the first half of 2016, Teleperformance continued to deploy its strategy of expanding worldwide by opening new facilities in:

• The English-speaking market & Asia-Pacific region– in China, Philippines and Australia
• The Ibero-LATAM region – in Brazil
• Continental Europe & MEA – in Madagascar. The latter is designed to strengthen and diversify the offshore network serving the French-speaking market.

The number of workstations has also been increased at existing facilities in the English-speaking market & Asia-Pacific region (in the United-States, Canada and China), in the Ibero-LATAM region (in Colombia, Mexico, Brazil and Portugal) and in Continental Europe & MEA (in Albania, Lithuania and Russia)

In all, more than 8,000 new workstations were installed during the first half.

2016 OUTLOOK

In light of the encouraging first-half results, Teleperformance confirms and refines its full-year guidance, targeting:

• Like-for-like revenue growth of around + 7%.
• An EBITA margin before non-recurring items of at least 10.3%

In addition, Teleperformance expects to maintain a high level of net free cash flow in 2016.

DISCLAIMER

All forward-looking statements are Teleperformance management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a detailed description of these factors and uncertainties, please refer to the section “Risk Factors” section of our Registration Document, available at www.teleperformance.com. Teleperformance undertakes no obligation to publicly update or revise any of these forward-looking statements.

RESULTS PRESENTATION AND DOCUMENTATION

A conference call and webcast will be held today at 6:15 PM CEST
The webcast will be available live or for delayed viewing at:
http://teleperformance.webcast.ldvproduction.com/Index.aspx?eid=149&LngId=en

The half-year financial report and presentation materials will be available after the conference call on www.teleperformance.com at:
https://www.teleperformance.com/en-us/investor-relations/press-releases-and-documentation/annual-and-half-yearly-information

INVESTOR CALENDAR

Third-quarter 2016 revenue: Monday, November 14, 2016

ABOUT TELEPERFORMANCE

Teleperformance (RCF - ISIN: FR0000051807 - Reuters: ROCH.PA - Bloomberg: RCF FP), the worldwide leader in outsourced omnichannel customer experience management, serves companies around the world with customer care, technical support, customer acquisition and debt collection programs. In 2015, it reported consolidated revenue of €3.4 billion ($3.7 billion, based on €1 = $1.11).

The Group operates 147,000 computerized workstations, with close to 190,000 employees across 311 contact centers in 65 countries and serving more than 160 markets. It manages programs in 75 languages and dialects on behalf of major international companies operating in a wide variety of industries.

Teleperformance shares are traded on the Euronext Paris market, Compartment A, and are eligible for the deferred settlement service. They are included in the following indices: STOXX 600, SBF 120, Next 150, CAC Mid 60 and CAC Support Services. They also have been included in the Euronext Vigeo Eurozone 120 index since December 2015, with regard of the Group’s performance in corporate responsibility

For more information: www.teleperformance.com
Follow us: Twitter @teleperformance

APPENDICES

CONSOLIDATED INCOME STATEMENT

€ millions

CONSOLIDATED CASH FLOW STATEMENT

€ millions

CONSOLIDATED BALANCE SHEET

€ millions

N.B.: The half-year financial statements at June 30, 2015 and June 30, 2016 have been subject to review by the auditors.

TELEPERFORMANCE
INVESTOR RELATIONS AND PRESS
QUY NGUYEN-NGOC, Tel: +33 1 53 83 59 87
quy.nguyen@teleperformance.com

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