Edenred SE (OTC:EDNMF) Q2 2024 Earnings Conference Call July 23, 2024 2:30 AM ET
Company Participants
Bertrand Dumazy - Chairman and Chief Executive Officer
Julien Tanguy - Executive Vice President, Finance
Conference Call Participants
Julien Richer - Kepler Cheuvreux
Pravin Gondhale - Barclays
Ed Young - Morgan Stanley
Estelle Weingrod - JPMorgan
Hannes Leitner - Jefferies
Justin Forsythe - UBS
Operator
Hello and welcome to the Edenred Half Year Results Call. My name is Saskya and I will be your coordinator for today's event. Today's call is being recorded. [Operator Instructions]
I will now hand you over to Bertrand Dumazy, CEO of Edenred to begin today's conference. Please go ahead.
Bertrand Dumazy
Ladies and gentlemen, good morning. Thank you for being with us for the Edenred H1 2024 results. Julien Tanguy, the CFO of the group and myself, we are very pleased to present you our performance in H1 2024.
I propose that we move directly to Page 5 of the presentation where you have a summary of our results. And I'm pleased to share with you that Edenred confirms the strong momentum of the last half year. The total revenue has grown by 19% reported, the EBITDA has grown almost 24% versus H1 2023. Our generation of cash, the FFO fund from operations has grown by 18% versus H1 2023 and our net profit has grown by 16% reported versus H1 2023.
If we move to Page 6, in fact, what did we do in the H1 2024 versus our Beyond strategy. We did three things. First of all, we further penetrate our core markets, what we call scale the core. Indeed, we continue to have a strong business momentum on our highly attractive core Meal & Food solutions, but also Energy cards. And remember that we are operating on vastly underpenetrated markets.
In terms of acquisitions, we made the acquisition of IP's Energy card business in Italy to accelerate our penetration of the Italian B2B mobility market. Thanks to this acquisition, we moved from the number six position to number two position in Italy.
The second thing we did in H1 2024 is to see external growth opportunities to grow beyond. So Beyond Fuel, we made the acquisition of Spirii to bolster our e-mobility offering, and we launched the Spirii offer in France and in Germany in May 2024. An example is we have been able to sign a new contract with Audi in Germany for the management of their EV charging points. Beyond Fuel represents now more than 30% of our core activities.
We also accelerated in Beyond Food. For example, we made the acquisition of RB to reinforce our transport benefits in Brazil. And as to Beyond Fuel, Beyond Food represents now more than 30% of our offer in the food vertical segment.
The third thing we did is we leveraged the Reward Gateway acquisition successfully. We celebrated a few weeks ago, the anniversary of the one year of this acquisition. I remind that Reward Getaway with SaaS platform enabling Edenred to extend its attractive benefits offer towards engagement.
We had three objectives. First of all, a strong financial delivery with double-digit growth, done. We want to generate some synergies on the UK market and we are well advanced on the delivery of those synergies. And finally, we deploy the offer on Continental Europe and in fact, it's done in three countries, mainly France, Italy and Belgium.
I propose to move to Page 7. So Page 6 is the description of what we did as to the Beyond strategy from an activity point of view. Page 7 is what did we do in terms of capital allocation in H1 2024 and as regard to the Beyond strategy.
In fact, we did four things. Priority number one is the organic growth to generate double-digit growth we need to invest and so our CapEx to total revenue is within the expected range, i.e., between 7% and 8% of our total revenue in H1 2024.
Our priority number two is growth by acquisition and we cash out EUR143 million of acquisition in H1 2024. Priority number three is the return to shareholders. And in fact, we returned EUR496 million to our shareholders via paid dividends for EUR304 million, but also share buyback for cancellation purposed for a total amount of EUR115 million.
Finally, the demonstration of the strong balance sheet has begun with the confirmation of our A- rating by S&P in April 2024. So what does it mean. At Page 8, in terms of our ability to generate sustainable and profitable growth in 2024. Thanks to our results in H1 2024. We are pleased to share with you our EBITDA estimate for the full year 2024 and our EBITDA lending should be between EUR1.230 billion and EUR1.3 billion. And I remind that in 2023, we ended at EUR1.094 billion.
If we now look at what is behind in fact this like-for-like growth double-digit in H1 2024 and we move to Page 10. So, first of all, if we look at the operating revenue, as you see, our Q2 operating revenue has been growing at 14% like-for-like and leading to an H1 performance growth of operating revenue of 15.4% in H1 2024.
Indeed, we have a strong business momentum, thanks to new client wins in every business line, Benefits and Engagement, Mobility and Complementary. And you have some examples here of, let's say, iconic brands who decided to join the Edenred family, not only in every business line, but also in every segment, large accounts, middle market, but also SMEs.
And if you look at our performance in SMEs, the ARR in the first half of 2024 in terms of new contracts post performance of growth of 17%. So, yes, Edenred continues to win new clients, especially on the SME market that is vastly underpenetrated.
As you know, we are very keen to go beyond as well. And here we are pleased to share with you that we signed a contract with Audi to manage, in fact, their supercharger stations in Germany. So Edenred with Spirii will be in charge of the software management of the supercharger stations.
If we move now to Page 11, the double-digit growth that we had in H1 2024 is in Benefits and Engagement but also in Mobility. As you can see, Benefits and Engagement, which represent 65% of our operating revenue, has been growing at almost 16%. The Mobility segment has been growing at 21%, knowing that Mobility represents 24% of our total revenue.
If we move to the next page, you see that the growth is across all geographies. In Europe, we grew like-for-like by almost 11%, in Latin America by 22%, and Rest of the World by 26%. Europe representing 61% of our operating revenue; Latin America, 29%; and the Rest of the World, 10%.
Now if we look at the evolution of the EBITDA, Page 13. Few things that I want to share with you. First of all, we post a strong growth like-for-like of our EBITDA. It's a growth of 26.2%. The second thing is our EBITDA margin once again is up moving from 41% to 42.8%, which is an improvement published of 180 basis points and like-for-like it is an improvement of 270 basis points.
Behind or below the EBITDA, you see that we also have our operating leverage. And in fact, the operating EBITDA margin has increased by 140 basis points like-for-like in H1 2024. So not only from an economic point of view we did well in H1 2024, but also from an extra economic point of view, Page 14, and H1 2024 marks the further recognition of our ESG commitments.
If you look at the Ecovadis, we increased our score by four points versus 2023. And if you look at Sustainalytics, in fact, we increased our ranking by 160 basis points. So, yes, we made significant improvement in our ESG delivery in H1 2024.
I propose you now focus on Benefits and Engagement. If we move to Page 16, you'll remember that, in fact, part of our business is regulated, but a good chunk of our business is not regulated, especially the Engagement part with the employee savings, the reward and recognition, the well-being and the employee communication.
And you'll remember that we made two acquisitions to accelerate in the unregulated part of our business, GOintegro is commercialized in seven countries, and Reward Gateway is now commercialized in six countries on top of the historical countries, which are the UK, the US and Australia. We are pleased to share with you that it has been deployed in France, Belgium and Italy as we shared with you before.
If we now zoom Page 17 on the regulated part of our business, in fact, we have a broadly favorable environment. First of all, on the left part of the slide, you remember that we proposed more than 100 specific-purpose payment programs. And those specific-purpose payment programs are deployed in more than 30 countries.
And the Beyond Food, a part of those solutions represent now 31% of the Benefits and Engagement operating revenue in H1 2024. The second thing is, yes, there are some long-term drivers supporting the demand. There is a strong incentive for increasing Benefits and Engagement on both vastly underpenetrated markets.
Why? First of all, because our digital solutions are proposing additional purchasing power for employees. Then because specific-purpose money is fueling the local economy. And finally, those digital services are a very efficient tool to increase the magic equation made of companies' attractiveness, employees' retention and employees' engagement.
Finally, yes, we have ongoing discussions to modernize the benefit schemes. And the first thing to remember is the regulatory framework is very supportive for our benefits offer. All the discussions are around increasing the maximum face value. They are also about the strong push for full digitalization, but also around, can we invent some new benefits to embrace new trends for employees everywhere around the world such as the employee mobility or the work from home.
And finally, because both programs are social programs, we see a reinforcement of the prepayment, which is very good for our other revenue part of the P&L, but also from a cash generation point of view.
But we also have some ongoing discussions around the modalities. First of all, discussion on the rebalancing between the upstream and the downstream fees, who is paying what and how much. And we have conversations on the conditions of the usage of solutions, which type of merchants, what is the maximum daily spend. And so those ongoing discussions around their modalities to modernize the benefit schemes, as you know, we have conversations in Brazil, in France but also in Italy.
Then if we move to Page 18 and to the unregulated part of our business, and Reward Gateway with our engagement offer is a good example of that. As previously shared with you, we achieved major milestones during the first year of the integration. Objective number one, the financial performance. And, yes, we post a double-digit growth in H1 2024 in the UK, Australia and the US, fueled by a solid business momentum.
The second thing is, yes, we generated the synergies we are looking for on the UK market. And in fact, we delivered more than 60% of the expected 2025 annual synergies in the first semester of 2024. So the UK integration is well in line with our initial plan.
Finally, the third objective was the rollout in Continental Europe. So, yes, Reward Gateway solutions have been launched in France, Belgium and Italy in Q2 2024 and we are getting ready to launch those solutions in Luxembourg, Spain, Germany and Romania by the end of 2024.
It's now time for me to let Julien Tanguy, the CFO of the Group, to explain the detailed financial performance of Edenred in H1 2024.
Julien Tanguy
Thank you, Bertrand. Hello, everyone. I'm very pleased to be with you this morning to share this first half of the year results. So starting with the detailed financial performance, I will cover today the first half 2024 top line, the Edenred P&L, Edenred net debt, and I will elaborate about our tech and product investments.
A quick reminder before jumping to top line performance, 2023 figures are adjusted to reflect new revenue recognition methodology in Brazil and you can find all the tables with both adjusted and published figures in the appendices.
So we'll start with the top line and Q2 solid performance on Page 20. Total revenue is up 16.3% in like-for-like and plus 15.8% in published. Scope effect is plus 2.3% and FX effect is minus 2.8%. The two effects neutralized each other. I remind you, scope effect mainly comes from Reward Gateway and Spirii acquisitions. Knowing that Reward Gateway we have been consolidated as from mid-2023, Reward Gateway is part of like-for-like growth since May 2024.
On Page 21, you will find the H1 2024 top line performance. Here again, performance is strong. Total revenue grew by 18%, thanks to both operating revenue, up 15.4% and other revenue, up 58%.
Let's move now to Page 22 and to Edenred's good performance in Europe. So in H1 '24, the like-for-like operating revenue is up 10.7%. In France, the growth rate is around 8%. This growth is supported by strong performance in Beyond Food solutions, driven by the success of the digital platform for work councils.
On this market, we take advantage of our leadership position to increase penetration and renew our contracts with historical clients. New software contracts will allow us to grow get volume in the coming years.
We still suffer from negative impact of the end of Action Logement contract and CESU Social discontinuation. This impact is also visible in the performance of complementary solutions. And Ticket Restaurant is delivering double-digit growth, thanks to accelerated expansion within SME market and new large account wins as explained by Bertrand earlier.
In the Rest of Europe, we grew our operating revenue by 11.7% in H1. Edenred delivered double-digit growth in Benefits and Engagements driven by double-digit growth in Ticket Restaurants despite high comparison basis effect in Q2 with sustained commercial dynamism and contribution of higher maximum face value usage.
Italy delivered double-digit growth, driven notably by strong performance in Benefits and Engagement. Thanks to both meal voucher and welfare solutions. Beyond Food solutions have great success delivering double-digit growth in all major countries. And in Mobility, Edenred delivered double-digit growth, thanks to good dynamics in Fuel Solutions and the success of Beyond Fuel solutions.
Toll in Germany benefited from new regulation incorporating a tax based on CO2 emission in the calculation of toll tariffs. After Europe, we moved to Latin America on Page 23. Latin America growth is plus 22.1% in H1 2024, including Brazil with a performance of 8.7% over the semester.
This performance in Brazil is driven by double-digit like-for-like growth in Benefits and Engagement, thanks to the continued penetration of the market and the ongoing success of the Itau partnership. We are celebrating the five years of this contract with this major Brazilian bank this year.
We recorded good sales momentum in Mobility with the increasing success of Beyond Fuel solutions, toll and maintenance and despite the flood in the South of Brazil in the State of Rio Grande do Sul in April and May impacted the business and our operations. I remind you that part of our team is located close to Porto Alegre, where flood happened.
Regarding Hispanic Latin America, the growth is plus 52% like-for-like and is supported by robust growth in Benefits and Engagement, supported by good momentum in Mexico and commercial successes in the SME segment.
And we also have strong momentum in Mobility, thanks to good traction in new sales, especially in key accounts in Mexico and success of maintenance solution in this country. After the operating revenue, we move to other revenue, and I will start with our performance in H1. I will give you more visibility on our expectations for H2 2024 and for the year 2025.
I am on Page 24. H1 2024 is another semester of strong growth in other revenue. Other revenues stand at EUR124 million in H1 versus EUR82 million in H1 2023. This strong growth is a result of sustained business momentum, positively impacting the float, and higher interest rates in H1 2024 versus last year in the Eurozone. I remind you, ECB decided interest rates increased all along H1 2023.
As you can see, the trend is positive in every geography with like-for-like growth rate between 32% and 150%. After H1 2024, let's move to other revenue projections for H2 2024 and 2025 on Page 25. In 2024, other revenue is expected between EUR230 million and EUR240 million, i.e., double-digit growth versus 2023. This level at the end of the year implies other revenue between EUR106 million and EUR116 million in H2 to be compared to EUR121 million in H2 2023.
In fact, in Eurozone, the last ECB rate increase happened in September last year, reaching a peak. ECB started to cut rates in June this year, increasing the gap versus last year's interest rates. On top of ECB decisions, interest rates started to be reduced in many geographies, including Brazil, and we expect ECB to cut interest rates twice before the end of this year.
So if we do the math, taking into account the midrange of our 2024 EBITDA estimate of EUR1.230 billion and EUR1.3 billion and taking into account of projection of other revenue for H2, operating EBITDA is expected to grow 14% reported in H2 2024. At the top range of estimates, operating EBITDA growth would be around 20% in H2.
If we project ourselves to next year of best estimate as of today for full year 2025, other revenue is a minimum of EUR210 million. We expect 2025 to be a floor that will apply in 2026 due to increasing level of activity and flattening of interest rates. Therefore, Edenred will benefit from a minimum of EUR210 million EBITDA coming from other revenue in 2025 and 2026.
I hope this visibility will help you to better understand and forecast our financial trajectory. After these comments on other revenue, let's come back to H1 2024 performance on Page 26. Operating and other revenue growth translate into faster EBITDA growth. Total revenue is up 18.3% like-for-like, while EBITDA is up 26.2%. This strong performance is a consequence of a good control of operating expenses.
Thanks to this cost management, the operating EBITDA margin is up 62 basis points. Edenred is delivering operating leverage. After the EBITDA, let's look to Edenred's net profit group share on Page 27. Let me comment the main variation of our P&L versus last year. As already seen, the EBITDA is up 23.7%. EBIT growth stands at 22.4%, impacted by Reward Gateway PPA depreciation. And as I already said, we closed this acquisition in May 2023.
Net financial expense moved from EUR58 million to EUR98 million, impacted mainly by the financing of Reward Gateway acquisition and the impact of interest rates increase on our floating rate gross debt. As a consequence of those variations, our net profit group share is up 16.3% versus last year, moving up from EUR202 million to EUR235 million.
Regarding the assumptions to build the full year 2024 Edenred net results, I give you a few indications to help you to go from EBIT to net result group share. Those numbers are our best estimates as of today.
Other income and expenses should be between minus EUR30 million and minus EUR35 million. Net financial expenses should be between minus EUR195 million and minus EUR205 million. Effective tax rate should be between 30% and 33% and minority interest should stand at minus EUR45 million.
So after the P&L, we move to free cash flow on Page 28. So our EBITDA is close to EUR600 million and our funds from operations stands at EUR400 million, up 18% versus 2023. I remind you that funds from operation is the first free cash flow generation engine.
In 2024, Edenred's total working capital variation is comparable to 2023. The working capital variation is minus EUR285 million versus minus EUR248 million last year. Change in float is minus EUR121 million, reflecting the seasonality of our gift card business. Cards are issued, unloaded in Q4 and users spend their benefits mostly in Q1 and Q2 the year after.
The increase in working capital of excluding floats of EUR240 million decreased, sorry, of working capital excluding float of EUR240 million is mainly due to our business with digital banks. Those clients have less cash sitting on our platform compared to end of December last year. I remind you that PayTech is serving digital banks.
The variation of plus EUR76 million in restricted cash is the result of variation of regulated products in both float and working capital, excluding float. Last line of the free cash flow is CapEx. The level of CapEx in H1 '24 is EUR97 million. It is 20% above the level of last year and represents 7% of our total revenue in H1.
So now we move from FFO to net debt on Page 29. On this slide, we present a bridge of our net debt from June 2023 to June 2024. So first the net debt is stable at EUR1.9 billion. Since June 2023, Edenred generated more than EUR900 million of free cash. Edenred returns to shareholders around EUR500 million, of which more than EUR300 million of dividends, and we bought back more than EUR100 million of shares for cancellation purpose. And we made acquisitions of around EUR140 million.
At the end of June 2024, Edenred net debt is EUR1,880 million. And after that, let's look at the balance sheet of Edenred, and this balance sheet is solid. In terms of debt maturity, the average net debt is 3.2 years. You know that the convertible bonds of EUR500 million is coming to maturity in September, and we work on the refinancing of this debt.
When it comes to our balance sheet, we have EUR5.2 billion of cash and restricted cash. We have additional short-term financing options with our undrawn revolving credit facilities of EUR750 million. We have access to Neu CP market for another EUR750 million. We have no financial covenants and S&P confirmed A- rating in April this year.
Let's go to the following page and on Page 31, a presentation of our well-balanced capital allocation with our clear priorities. So as explained by Bertrand, our first priority is to generate organic growth and innovation. We invest continuously in product and technology with EUR480 million invested in 2023. I will come back to that on the following pages.
We also put in place systematic validation process for an Investment Committee at group level to give a go before any large project is launched. Second priority is M&A with a stringent financial and strategic discipline. Key objectives of M&A is to deliver growth and create value for Edenred. IRR from acquisitions over the last eight years is twice Edenred WACC on average. Acquisitions have to be accretive in terms of EPS.
Third priority, we have a progressive dividend policy. And our dividend per share has increased by 14% CAGR since 2020. For priority share buyback, you know that you will do that in case of excess cash. Our first share buyback program has been launched in March 2024 for EUR300 million over three years.
At the end of June 2024, EUR115 million have already been about on the market. So after the presentation of our main KPI in terms of financial performance, I will spend a couple of minutes talking of our product and tech spend and our level of CapEx.
As we had some comments coming over last month, I want to give you more information about the CapEx trajectory. I am on Page 33. As you all know, Edenred is a global platform connecting 60 million users to 2 million merchants to 1 million corporate clients. As a platform, we are proposing smooth user experience and we can connect to many partners including other large digital platforms such as Uber Eats, Deliveroo or Nubank.
Being a state-of-the-art platform means we need to maintain constant effort to fuel double-digit growth. I am on Page 34. In 2023, our product and tax spend was around EUR480 million, of which 30% is CapEx. And I remind you, CapEx are spent to enrich the platform in terms of features and connectivity capabilities and 60% of our spend is operating expenses. Operating expenses are here to support our daily business.
In terms of destination, 70% of our costs are dedicated to the platform as an application, 20% goes to infrastructure and 10% goes to security and compliance. Regarding OpEx, most of our products are supported by applications hosted in the cloud. As we are working with Azure or AWS, cost of the platform are following our business volume trajectory. It must be considered as a running cost.
On top of those cloud costs, operating expenses include the platform maintenance and external software costs, such as Salesforce or Microsoft, those software costs are charged to us mainly with a subscription model. The more employees we are, the higher the OpEx are.
Regarding CapEx, we have accelerated in data and in the transformation of core platforms to prepare future growth and scalability. We also invested in cloud migration, allowing smoother ecosystem integration and we made of PayTech, our mutualized specific-purpose payment factory.
Finally, regarding security and compliance were multiplied by three our resources in security over the last three years and 100% of our BV process is processed on security-certified platforms. Trust is key in our business.
To focus on CapEx trajectory, I propose we move to the following page, and I am on Page 35. Three pieces to understand our CapEx trajectory from 2020 to 2024. First, internalization of key skills. Second, the CapEx to tech spend ratio. Third, the percentage of total revenue we decided to invest in CapEx.
Regarding internalization of skills. As we want to reduce the dependency to external suppliers, we have internalized key skills. As a technology company, we need to keep the know-how on our core assets in-house.
Regarding the CapEx to tech spend ratio, it stands at 39.6% in '23 coming from 41.1% in 2021 -- in 2020. This ratio remained overall constant over the past four years and it reflects the CapEx destination of some of our tech costs.
And finally, our CapEx moved from EUR104 million in 2020 to EUR190 million in 2023. The invested amount has increased in line with our top line and the ratio CapEx to total revenue stays between 7% and 8% in line with Beyond 2025 guidance.
This is it for the financial performance parts. I hope this set of comments will help. And I hand over to Bertrand for the last part of the presentation.
Bertrand Dumazy
Thank you, Julien. So if we move to Page 37, basically, what we want to do to further generate sustainable and profitable growth three things. First of all, we want to continue to scale the core. As you know, we are the leading platform for Benefits and Engagement, but also for Mobility. So we want to further penetrate our markets and notably in the SME segment.
The second thing we will continue to do is to go beyond. We want to extend our portfolio in the Beyond Food, but also the Beyond Fuel solutions, while we want to leverage the recent acquisition of in employee benefits, RB, in Brazil, employee engagement, Reward Gateway, and e-mobility with Spirii.
And finally, we want to continue to scale our platform. Once again, the platform business is a scale game. The Beyond strategy is delivering. And to give you a point of reference, we started Beyond January 1st, 2022. So if you take as a year of reference 2021, if you think about our lending in 2024, you take the 2021 number, you multiply more or less by two and you have our lending in 2024.
So to make a long story short, the Beyond strategy is delivering and is delivering results that are doubling the size of the company in three years. So we will continue to do so. That's why for 2024, so Page 38, our estimate in terms of EBITDA lending is between EUR1.230 billion and EUR1.300 billion and we are on our way on the path to EUR5 billion plus total revenue by 2030.
Thanks a lot for your attention to the H1 2024 Edenred results. Julien and myself are now all yours to answer any questions you may have.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And our first question comes from Julien Richer from Kepler. Please go ahead.
Julien Richer
Good morning, everyone. I have three questions, if I may. The first one, you talked about the discussion around modalities to modernize benefit scheme. And you mentioned rebalancing upstream, downstream, any change on government view on merchant fee? Does that mean that in France, this topic is now back on the table? More generally speaking, can you please give us an update on the regulation situation in France and the ongoing investigation in Italy also. The second question is on the operating EBITDA margin. So it improved 60 basis point plus in H1. What is the trajectory going forward? I mean do you have any specific number in mind on what kind of level it should reach in the medium term or the improvements on a yearly basis that you think is achievable? And the last one is on the face value increase or the contribution on the face value increase, what has been the contribution in H1 and what you expect for, going forward, H2 and '25? Thank you.
Bertrand Dumazy
Okay, Julien, thank you for your question. I will start with the first one and then Julien for the second one and maybe both of us for the third one. So as you know, we are on a market where the merchants are contributing, but also the companies because we put in place the program and we manage the program. So in France, there were some, a lot of work to explain how it works to the government and to the Minister, Ms. Olivia Gregoire. And in fact, the good news is a consensus was reached right before the European election. The consensus, and it is our understanding -- the consensus based on, first of all, the Minister said again and again and again, we want more Ticket Restaurants in France. Why? Because you still have in France, more than 20 million workers who do not have access to this solution. And this solution is good for the workers, it's good for the employers, it's also good for the state because I remind everybody that in terms of fiscal exemption, it is an investment of the French state of about EUR1.4 billion, but in fact, they are getting EUR2.4 billion, so net it's EUR1 billion. So not easy to find a consensus because you have the employers, you have the employees, you have the issuers, you have the merchants and you have the state, so you have five different stakeholders. And in fact, the Minister and the Cabinet of the Minister reached a consensus between each of us saying we want more. Secondly saying we want it full digital because the total cost of ownership will decrease by being full digital, knowing that in France you have 13 different issuers. So when you have 30% of the market that is still in paper, it's a hassle for the merchants and it's a hassle for us as well. So we have a common interest. The other thing that was put on the table was clarity as to the fees and an incentive to rebalance the cost between the merchant and the employers. And we heard, we don't know it for sure, that discount at employer level could be banned, which is a very good thing for the entire industry. So a consensus was reached. The consensus is good for the industry. So it's good for Edenred. Digitalization is good for Edenred. Good economic conditions is obviously good for us. What we heard is it was supposed to be announced right after the European election. Unfortunately, things did not work politically as expected. So you know that we are now in a situation where we don't have a new government. So as to the reform, we'll see how it goes. For me, two conclusions. First of all, the current system is very okay for Edenred and for the industry. And it would be better for the industry and for Edenred if the reform is voted, but we can leave without it. The second thing is the reform is, let's say, it's not a political reform. It goes beyond every political parties in France because everybody wants more purchasing power for the French workers. And by the way, purchasing power was the item number one debated by the political parties because it's the number one concern for the French people. So the reform is a good reform. The reform is a consensual reform, if I may say so, then we'll see when it goes and how it goes. But if it doesn't go due to political uncertainty, we can leave without it as well. You had a third question as to the investigation in Italy. Nothing new under the sun as compared to what we said about the Consip 9. First of all, the business is doing well in Italy. We are growing at double-digit. Second thing is Consip 9 is working with Edenred and Consip 10, which was the next contract confirmed the fact that we are their preferred supplier and we continue to win many accounts in Italy. So as to the investigation, nothing new under the sun as to the business in terms of the momentum of Edenred, commercial momentum, nothing new under the sun because we are growing at double-digit. Then the second question was as to the operating EBITDA margin and our operating leverage, Julien?
Julien Tanguy
Yes. Thank you, Bertrand. Yes. Thank you, Julien, for your questions. So first, as I said during the presentation, our operating EBITDA margin is up in H1 2024. It's plus 62 basis points. And you've seen that we've been able to achieve this improvement of operating EBITDA margin with a solid growth in top line and a good control of our costs. So if we look at the full year 2024, both EBITDA and operating EBITDA margins will be up versus the end of last year. Why? Because the trend we see in terms of top line in Q2 is a good reference for what we will have in Q3 and Q4 in terms of top line growth. And then because we are going to manage our cost to play the operating leverage and to be sure that we'll be able to improve our operating EBITDA margin. So this is for 2024. And then regarding 2025, which is quite far from where we are today. We think that this strong momentum we have today is we expect it to continue. So solid top line growth and good cost management. So even if we know that other revenue will be down next year, we will manage the company to improve the operating EBITDA margin. And then you had a third question?
Bertrand Dumazy
To the face value revisions.
Julien Tanguy
Yes, Bertrand?
Bertrand Dumazy
As you know, in many countries, we have some face value increase. And as you know, it takes about two years to go after the full potential of the face value. So if I give you an example, in France, the legal face value is about EUR14. And when we look at the average usage, it's less than EUR10. So what does it mean? There's still a long way to go to convince the employers to give more within the legal envelope that is available. It's true for Ticket Restaurants, but it's also true for all the other products. So if I take the example of France, as you know, Ticket Restaurant, represent about EUR2,000 per year and per employee and the total solutions that we proposed with some fiscal exemption represent about EUR6,000. And we are still very, very far from the total usage of the EUR6,000.
Julien Richer
Okay. Thank you very much.
Operator
Thank you. And our next question now comes from Pravin Gondhale from Barclays. Please go ahead.
Pravin Gondhale
Hello. Thank you very much for taking my questions. First on operating like-for-like growth, can you share some more colors on contribution of different buckets, like face value revisions, new business, et cetera, to the like-for-like growth in H1? How should we think about those two trends in the second half, especially the face value revisions? I know you talked about the headroom there being still there for the utilization of face value. But then how the inflationary trend on face value -- face value revision trends have been shaping up in different markets for your employee benefits division? That's one thing. And then secondly, on the capital allocation and M&A framework, I mean the Complementary Solutions organic growth continues to be subdued for past few quarters. And in the past, you talked about higher valuation in the space being a barrier for you to do M&A. But if you think other way around, would you consider disposing the business in part or fully to benefit from such higher valuations and use that cash to do M&A Benefits and Engagement or Fleet and Mobility businesses or for the cash returns to shareholders? Thank you.
Julien Tanguy
Okay. So let's start with face value and the question about the impact of face value on our growth. As Bertrand explained, in many countries, we are still far from the full usage of face value. And even inflation has decreased, it is still there. So we see that we are able to push additional face value to our clients. Then it's true that it's not at the same level as we did it in 2022 and 2023 because the level of inflation is a little bit lower. But we see that in many countries, we are still able to push those face value increase. And if I do a comparison, because face value increase is not something new at the Edenred. Before 2019, we were pushing face value increase to our clients, and we were successful with that. The point is that the face value increase in terms of percentage was much lower compared to what it is today. So face value increase is still there. As Bertrand said, in France, we are still far from the maximum face value available on more than EUR14. So we have opportunities to ask our clients to increase the level of face value. And as I said, we still have inflation in some countries. So the employers still needed to protect the purchasing power of their employees. So contribution of face value is still there even if it is lower compared to what it was. Second thing is new deals. We shared a few numbers during the presentation. One of them is about the SME penetration and the fact that we are still successful when it comes to sale of products to SMEs. You see that we've been able to increase the ARR coming from new SME contracts by 17% in H1 this year compared to last year. So it is a good demonstration of the attractiveness of our products on the market. And, yes, we have the ability to conquer our new clients. And as we already shared, we are doing that with SME, but we are also able to conquer a new large accounts to grow. What we see for the next quarter is still a strong momentum and our capacity to further penetrate our markets that are still vastly underpenetrated. So this is it for our capacity to grow, thanks to both face value and new business. And then you had a question about capital allocation and our capacity to do acquisitions. So as we explained, the first priority in terms of capital allocation is to fuel the organic growth. We've been able to grow organically at a pace above 10% over the last few years and our ambition is to keep on doing that. And to do that, we need to invest in our product and tech, as I explained during the presentation. It's key for us to be sure that we come to our clients, users and merchants with the right product and the right, let's say, features. So we are working on that. And then second priority is M&A. And I think that what we've done over the last, let's say, 18 months is a good demonstration of our strategy. First thing, we did two strategic acquisitions, the first one being Reward Gateway for Benefits and Engagement allowing us to propose to our clients a fully, let's say, platform with all the features that are available on the market in terms of Benefits and Engagement. And the second strategic acquisition we did is Spirii in EV. So Spirii is a company that is managing a software for the charge points. It is the operating system of charge points. And so those two acquisitions are key in our Beyond strategy. And on top of that, we did acquisitions to scale the core. And let's take two examples. The first one is IP in Italy. We know that we're going to become the number two on the market, thanks to this acquisition. And it's an acquisition that will allow us to scale our operations and to improve our capacity to help our clients to migrate to EV. And second acquisition we did in our scale the core strategy is the acquisition we did in Brazil with RB, which is a transportation voucher. The acquisition will be closed in the coming weeks. And this is also a good demonstration of our ambition to keep on growing on our Benefits business. So then what will we do? So we still have cash. As you have seen that our level of debt at the end of June 2024 is the same as it was one year ago. And we'll see if we can face opportunities to scale our platform and to, let's say, concern our leadership position on the market where we are.
Pravin Gondhale
Sorry, just to clarify on that. So I was asking about Complementary Solutions business, which has been underperforming for the past few quarters. And previously, you did talk about the higher valuations in Complementary Solutions space, which is being a barrier for you to do M&A. But on the other way around, would you consider disposing the Complementary Solutions business in part or fully to benefit from those higher valuations and use that cash, let us say, for further share buyback given the subdued share price currently?
Bertrand Dumazy
Pravin, in fact, in Complementary Solutions, you have many different activities. So when you say sell Complementary Solutions, we have, for example, public social programs that are part of Complementary Solutions. So if I understand your question, you were talking about Corporate Payments in the US. Corporate Payment in the US. Yes. So it's only one part of Complementary Solutions. When you are saying underperforming, it's because, first of all, as to the other things as CSI. In fact, you have some public social programs that we stopped. So for example, in France, we stopped a program that is called STR because that was the end of the program after five years. And so it has an impact on the performance of the Complementary Solutions. You have to deaverage. As to CSI, we are growing at double-digit. So do we consider to sell some activities of Complementary Solutions? Not really. But are we managing actively our portfolio of solutions? The answer is yes. That's why, for example, it was the end of STR, and we continuously review our portfolio. To give you another example, CESU Social in France, we decided to stop because when we look at the potential and the margin, we said, it's not a business for us. So to make a long story short, do we manage actively our portfolio of activity? Yes, depending on the growth opportunities and the EBITDA generation activity. Do we want to give back to our shareholders? Yes, and it's what we are doing via our progressive dividend policy and if needed, some share buyback.
Pravin Gondhale
Thanks. This is really clear. Thank you very much.
Bertrand Dumazy
Thank you.
Operator
Thank you. And up next, we have a question from Ed Young from Morgan Stanley. Please go ahead.
Ed Young
Good morning. Thank you for taking my questions. The first one is back on the change in modalities. You mentioned the potential, these conversations about potential changes to the system and upstream and downstream. You did also mentioned and it's -- I don't think we've really discussed beyond the specific criminal case sort of wider potential reform in the market. So I wonder if you could elaborate on that and say if there are any sort of common themes being discussed across these different geographies? Second, on Brazil, first of all, thank you for the restatement regarding the use of the compensation in the market. It's very useful. I want to ask, do you think this is the new normal for the market? Or do you think there's any chance of a clarification that could ban the use of compensation practices? Some of your competitors think it works contrary to what the law initially intended? And then two very small clarifications, if it's possible. First of all, Julien, at EBITDA, other move to plus two from minus seven? Can you give us the moving parts now which I think the evolution of that in H2 and in out years? And second of all, I don't think there's any change here, but the question has been asked this morning. If there's any change to your free cash flow conversion target under your Beyond plan? Thanks.
Bertrand Dumazy
Okay. So as to the regulation, once again, part of our business is regulated, especially the Ticket Restaurants. And it's about 40% of our total revenue. And as I said, we manage more than 100 programs everywhere around the world. And as I said, because it's a slightly regulated market, there has always been some conversation about the system and the modalities of the system. And if you look at it based on the history, at the end of the day, the conclusion is more or less the same. We want more. And that's why we have been growing so much, and that's why we will continue to grow a lot on this market because it's vastly underpenetrated. As I said, in France, 20 million workers do not yet have access to a solution like Ticket Restaurant. And what I'm saying is true everywhere around the world and it is also true in Italy. The second thing I said is as it is the case in France on a regular basis, there is some conversation on how it works, do we need to change the mobilities? Is there a way to make sure that it's well balanced between the employers and the employees? It is true in France. It is true in Brazil. It is true everywhere around the world. And it is also true in Italy. And if you take the example of France, conversation, unfortunately, it did not conclude that yet, but we know that the arbitrage that were given in France are very positive. So it's true in France, but you saw also in Brazil. There were some questions asked, some answers, then some working tables. And if you look at the growth we have in Brazil, you see that under penetration and the willingness to have a regulation allowing even more penetration is very positive. And so what is true in France, what is true in Brazil, is also true in Italy, but many other countries around the world. So to make a long story short, it's business as usual in our industry. So that's for regulation. Then I'm not sure I got your second question about Brazil and what you call the new normal?
Ed Young
What I meant was as per your restatement, there's been a ban of negative commissions and there's been instead a market practice of using compensation to sort of put in this place. I just wondered if you thought this was the new normal incentive. Do you expect this to continue for forthcoming years? Or do you think there's a chance that it will be clarified that the use of compensation isn't allowed in the same way there's some discussion of that in the market?
Bertrand Dumazy
Yes. I think there will be some clarification because basically, what the law is saying is you cannot give discount at the employer level, which is a very good thing for the industry and so far the Edenred. But you can give some incentive considering products around the health of the employees. So basically, the competition is harsh and people are playing with this angle of the law. So I do believe that the regulation will look at it, and we will state more clearly what is feasible and what is not feasible. I don't expect regulation to come back on the ban of discount in forms of cash. Cash discount is forbidden for the social program of food and meal benefits in Brazil. I don't expect the regulation to come back. I expect the regulation and it's a very good thing to be more precise and clear on what can be done in the form of some other incentives that are not cash incentive. Then you had the third question as to the free cash flow.
Julien Tanguy
Yes, the free cash flow, I think there was a question about the line that we have in our presentation that EBITDA others. And so maybe one comment about that because EBITDA others is EBITDA that is generated at, let's say, headquarter level. So why do we have a plus EUR7 million? It's mainly because we have improved the way we reach out the countries with what we call master service agreements. So it is you know what the countries are paying for headquarter services. And it is the reason why you see this increase in EBITDA others. Then regarding the last question about free cash flow. Our ambition is to generate free cash flow and to get a free cash flow conversion ratio above 70%. And our target for this year is, of course, to be above the 70%. And also to stay at this level for 2025. As I explained when we look at our, let's say, forecast for 2025, even if it's too early to say, we have a strong sales momentum. Our H2 2024 will be solid and we will be able to grow double-digit and we will enter 2025 with this momentum. And we will deliver the free cash flow conversion as we explained with our midterm targets.
Ed Young
Thank you, both for the detail.
Operator
Thank you. [Operator Instructions] And we're now moving on to our next question, which comes from Estelle Weingrod from JPMorgan. Please go ahead.
Estelle Weingrod
Hi. Good morning. I have two questions. I mean, the first one, Julien, do you mind repeating the below EBITDA elements of guidance and for net financial expense next year how should we think about the refinancing of your converts and the impact it should have on that line. Also my second question would be, can you comment quickly and just on the working cap. The outflow was much higher this first half versus last year at EUR361 million versus EUR120 million. Just want to understand better. And I'll just sneak just a third question, just in case you have a second. Just about your underlying like-for-like in France adjusted for the one-off CESU, Action Logement and Cleanway, please. Thank you.
Julien Tanguy
Okay. So regarding below EBITDA numbers I get to you. First, we're going to refinance the convertible. But in terms of cost, the impact is not that big because you know in IFRS the convertible is translated into a straight bond. Then for sure, the cost will be a little bit higher compared to what it was a few years ago. But when I look at the financing costs for next year. So as I explained, other revenue will go down because interest rates in Eurozone will go down. Then we know that the financing costs will go down too. So there will be, let's say better than what they are this year because we will take benefit of the interest rate decrease. What is true for other revenue is also true for financing cost. So next year financial expenses will be lower compared to what they are today -- of what they are expected to be in 2024. Then regarding the free cash flow. Yes and for other income and expenses, we will be between EUR30 million and EUR35 million for this year. And maybe I'll give you the other numbers. So effective tax rate is expected to be between 30% and 33%, and a minority interest should be around EUR45 million. Then regarding your question about working capital. Could you ask it again because I did not get it?
Estelle Weingrod
Yes, sure. I mean it's on Slide 48 of the -- in your free cash flow table, the decrease in working cap EUR361 million versus EUR120 million, the previous year?
Julien Tanguy
Yes, for sure. So these are the same numbers as we have on Page 28, but you have the split between floats and working capital, excluding floats on Page 28. So the EUR361 million has to be looked at with float first. So it is minus EUR121 million. As you know, we have this week activity. And as I explained, we load the cards of our users in Q4 for the what we call the peak season, which is Christmas season indeed, where we sell a lot of gift voucher of these cards and then users are spending the money in Q1 so most of the time in Jan or Feb. So you have the cash in that is in Q4 last year, and then you have the cash out from Edenred perspective that is in Q1. So this is for the floats. And then regarding working capital, excluding floats. You know that at PayTech, which is our, let's say, a payment platform, we have external clients and those external clients are digital banks and we are doing the issuing and the processing for those clients. So it means that when you have an account with monies are tied, you put your money on the Edenred platform. And when the clients of those banks are spending their money or when those banks are moving to another issuer, because when they are becoming bigger, they can decide to have their own platform, it has a negative impact in our working capital. So the money is going out of the platform. But because it is regulated, we have the opposite movements in restricted cash. So at the end of the day, it has no impact on our free cash flow.
Estelle Weingrod
Okay. Thank you very much.
Operator
Thank you. And we now move on to a question from Hannes Leitner from Jefferies. Please go ahead.
Hannes Leitner
Yes. Thank you for letting me on. Just I think I'm not sure if you answered it, but did you keep up the free cash flow conversion guidance, as I was missing that in the slide deck or in the press release. And then the second thing is, maybe you can talk a little bit about the 12% EBITDA like-for-like growth ambition going forward? What are the moving parts as you expect next year NII to turn a headroom. So maybe you can talk about the divisions where you expect the growth to come and then maybe also by geographies. Thank you.
Bertrand Dumazy
Okay. So Julien, quickly on the free cash flow conversion.
Julien Tanguy
So I already answered some questions. So free cash flow conversion will be above 70% and we stick to our midterm target, as I said, both for 2024 and 2025.
Bertrand Dumazy
When you look at our generation of cash in H1, think about it, basically, our level of debt is stable between 2023 and 2024. And in between, we made some acquisitions, and there was a historical return to the shareholders via share buyback and an acceleration of our progressive dividend policy. So I guess that's the proof in the pudding in terms of our ability to generate free cash flow with a high free cash flow conversion above 70%. As to the second question, our guidance, not guidance, but indication of our ability to generate 12% EBITDA like-for-like growth, we did for many years in a row. And when we look at the different engine of growth that we have, we are confident to continue to generate that level of growth after 2024. Why? First of all, as I said, there's still a lot to do to scale the core vastly underpenetrated market. So many clients to go after times more services that we propose to those clients. When you look at our portfolio of solution, our portfolio of solution is widening year after year, thanks to our innovation, but also thanks to our ability to distribute digital services that have been developed by others. So the combination of more clients times more solutions that is sold to those clients is the number one driver. The number two driver is when you think about the different acquisitions that we made, and it's what we call to go beyond basically what happens when you look at the EV revolution. In Europe, when you look at two equations that we are trying to solve on Benefits and Engagement, equation number one for the HR directors being how to be more attractive, how to be able to retain the employees and also how to be able to engage. We know that this trend is a long-term trend. And this trend is good for Edenred because we are providing a portfolio of solutions, allowing to answer to each piece of the equation. The second equation we are solving for the employees is on top of an equation of purchasing power. The only asset you have in your health and health is the combination of, first of all, with times physical activity, times well-being. And as you can see in the portfolio of Edenred, we have solutions for each piece of the equation. So where is the growth, where will the growth come from after 2024? The growth will come from every business line because we have a lot to do on Benefits and Engagement and we have a lot to do on Mobility. Then if you go into the details behind that, more clients times more services lead to more revenue per client. And as we said, it's coming from each piece of the equation. And on top of that, you have some face value increase that are happening every year and some work that we are doing to make sure that the employers are going after the face value. And finally because we are more and more a platform, we are able to price as a platform with some new fees as well. And we have some other levers that are very powerful, the cross-selling and the upselling. Remember that we are serving 60 million users around the world. So the combination of all those elements, which are true for every business line will lead to double-digit growth. By the way, double-digit growth is what we have been doing for the last nine years, quarter after quarter, semester after semester at the exception of the year of the COVID. So, yes, based on our strategy, which is working, once again, you take the numbers of Edenred in 2021, you multiply by two, more or less, you have the lending in 2024. So this strategy per business line is delivering and will continue to deliver in the coming years.
Hannes Leitner
Thank you so much.
Operator
Thank you. And from UBS, we have Justin Forsythe with our next question. Please go ahead.
Justin Forsythe
Thank you very much, Bertrand and Julien. Just a couple for me. So pretty impressive 20% operating EBITDA growth like-for-like. Just I believe that's a little bit of a change in terms of the unlocking of the operating leverage that we were talking about last year. I remember you saying that you're willing to put investments behind the platform. Maybe you can just talk as to whether there was a little bit of a change in ethos this year and how you plan to attack that going forward, if there's more investments to be made or if you believe you can continue to unlock that operating leverage? And also on that point, if there's anything to call out in terms of the dilutive impact of M&A or margin expansion versus FX impact on operating EBITDA margin? That's the first question. The second question is relating to the EV charging side actually. It seems like Audi has a pretty big scale across Europe in terms of charging. So maybe you talk a little bit about how that revenue model works. Is it ARR or transactional? And at a higher level, how are you thinking about the size of this TAM? Where do you believe the majority of the TAM sits? Is it on the charging points, on the Road solutions or at home in the context of the new Spirii acquisition? Thank you.
Bertrand Dumazy
Okay. Thank you for your questions. So first of all, our strategy did not change. As explained by Julien, you need to invest in the platform to run the platform because the platform is growing. So you have growing running cost and then you have to invest to prepare the future growth of Edenred. And basically, when you look at H1 2024, we are exactly in both lines, i.e., in terms of CapEx, we invested between 7% and 8%. And we know that the entire year-on-year is going to be between 7% and 8%. But then we generate an operating leverage because we start seeing also the return on investments of all the investments we made the previous year. So for example some of the investments are done to fuel the convergence of our different platform under one single platform. So what you see in H1 2024 is the same strategy in terms of investment, which is a platform strategy, generating double-digit growth but also generating an operating leverage that we start seeing and we will see that along the years because all the investments we have been doing are paying off, not only in terms of growth, but also in terms of our level of OpEx versus the revenue that we are generating. So there is no change in our strategy. Then your second question is about EV charging? How does it work? In fact, you have a few pieces. First of all, we are in the B2B business. So basically, our clients are the corporate clients, companies. For the companies, what they are looking for is a charging solution mainly on-site because in fact, 60% to 70% of the recharge is done on site. So we had a solution on road, which is our multi-energy card giving, in fact, access to more than 600,000 charging points in Europe. And now thanks to Spirii, we have a solution on site. What does it mean? First of all, we are the orchestrator of the installation of the charging point on site for our corporate clients. Second thing is we are managing what we call, in fact, the operating system of the charging point, when it works, it doesn't work. It's a software business. And then on top of that, you have the consolidation of how's charging when, at which price and who is paying what, which is a consolidation via the cloud, which is an application business. And what we provide with Spirii is, in fact, the three things, and some clients are choosing full monty and some of them are saying, okay, I will take care of the installation of the charging point myself. I don't need your advice on that. But then I want you to be in charge of the CPMS so charging point managing system or I want you to be also in charge of what is called the eMSP, i.e., the consolidation via the cloud of the activities and the payment behind that. And we are able to provide a full monty or some pieces of the equation. And so what is the business model behind that? It's a mix of fixed fee and variable fee depending on the solution you choose from Edenred. And obviously we modulate that depending on the market conditions and the competitive landscape.
Justin Forsythe
Thank you very much. Appreciate it.
Operator
Thank you. Unfortunately, that's all we have time for today for the Q&A session. But for any further questions, please don't hesitate to contact the Investor Relations team for any further questions. And with that I'd like to hand the call back over to you Mr. Dumazy for any additional or closing remarks.
Bertrand Dumazy
Okay. So thank you for the time you spent with us. As you see, we are very pleased by our H1 2024 results. It's the confirmation of our Beyond strategy, the ability to generate double-digit growth in a sustainable and profitable manner. We have good guides for the second half of the year. Once again, because we are able to grow on every business line, in every country because there are a lot of tailwinds in terms of more Benefits and Engagement, Digital Services provided by the leader of the market, which is us. And because we are moving fast in Mobility surfing on the EV revolution. We are also very pleased to see the acceleration of our Beyond program, Beyond Food and Beyond Fuel. And we are very pleased also by the equilibrium of our P&L and our ability to generate strong cash flow in H1 2024 and for sure for the rest of the year. Thank you for your attention and see you soon. Bye-bye.
Operator
Thank you for joining today's call, ladies and gentlemen. You may now disconnect.