Teleperformance: First-half 2020 Results:
The Board of Directors of Teleperformance (Paris:TEP), a leading global group in digitally integrated business services, met today and reviewed the consolidated financial statements for the six months ended June 30, 2020. The Group also announced its half-year financial results.
Highly resilient financial results in first-half 2020
Teleperformance achieves agile transformation to overcome the global health crisis
Outlook for 2020
2022 financial objectives
* At constant exchange rates and scope of consolidation ** EBITA margin before non-recurring items
Commenting on this performance, Teleperformance Chairman and Chief Executive Officer Daniel Julien said: "We had a very robust first half, with like-for-like revenue growth of +5% and a satisfactory operating margin, despite the full impact of the Covid-19 crisis in the second quarter. This performance was led by the Group's agility in responding to an unprecedented crisis, in particular by deploying more than 200,000 home workstations in less than two months. This transformation not only safeguarded our employees and their jobs, but also strengthened our growth model by ensuring business continuity for new and existing customers.
As a result, Core Services & D.I.B.S., which represent nearly 90% of our business, never stopped expanding, even in the depths of the crisis when some of our facilities were closed, for example in Tunisia, India and the Philippines. TLScontact's visa application management business was the only activity fully interrupted, due to the travel restrictions enforced around the world.
The crisis has given us the opportunity to get closer to our partners. We are proud that so many companies and governments have recognized the quality of our support and assistance during the crisis, and particularly our ability to rapidly deploy digital and work-from-home solutions around the world. The large number of Great Place to Work® certifications that we've earned or renewed since the beginning of the year also offer compelling recognition of our constant commitment to our employees and the quality of our training programs, career development systems and workplace environment. These certifications further attest, in very real terms, to our priority to social responsibility, to the extent that today, on five continents, more than 70% of Teleperformance employees work in a subsidiary that has been specifically honored for its workplace environment.
At a time when the world's economies are beginning their gradual, yet uncertain recovery, we are still well positioned to gain market share as a global leader present in 80 countries. We are continuing to grow our business in the global customer experience market, which remains dynamic. Building on our first-half growth, as well as on the outstanding, unflagging dedication of all our employees throughout the crisis, we are confident that we will deliver even greater momentum in the second half of the year. We are once again issuing our guidance for the year and adjusting our three-year objectives, led by our sustainable, profitable growth."
FIRST-HALF AND SECOND-QUARTER 2020 REVENUE
Consolidated revenue came in at €2,660 million for the first half of 2020, representing a year-on-year increase of +5.0% at constant exchange rates and scope of consolidation (like-for-like) and of +3.7% as reported. The unfavorable currency effect, which totaled a negative €31 million, primarily stemmed from the decline against the euro in the main Latin American currencies and the Indian rupee, despite the positive impact from the stronger US dollar.
Month by month revenue tracked a V-shaped curve, bottoming out in April in the depths of the health crisis. After two and a half months of more than +7% like-for-like growth, the Covid-19 crisis broke the trend from mid-March onwards, with declines varying by country (depending on the extent of their lockdowns) and customer segment. The Group's business cooled slightly in April, mainly due to the near shutdown of TLScontact's visa application management activities (Specialized Services). Performance then steadily improved in May before returning to very strong growth in June.
Second-quarter 2020 revenue came in at €1,307 million, representing a year-on-year increase of +3.8% like-for-like. Reported growth of +1.1% reflected the unfavorable currency effect caused by the decline against the euro in the main Latin American currencies and the Indian rupee, despite the positive impact from the stronger US dollar.
Revenue by activity (1)
* Digital Integrated Business Services
Core Services & D.I.B.S. revenue amounted to €2,344 million in first-half 2020, a year-on-year increase of +7.3% like-for-like, above the initial +7% Group guidance despite the depths of the Covid crisis from March 15 to May 30. Reported revenue growth was limited to +5.6%, primarily due to the decline against the euro in the main Latin American currencies and the Indian rupee, despite the positive impact from the stronger US dollar.
Beginning in March, like-for-like growth declined sharply across every region due to the Covid-19 pandemic. Revenue growth nevertheless remained positive in Core Services & D.I.B.S. in March and April, albeit at a slower pace than in the prior-year period. It then gradually improved to a new high in June, led by the ramp-up of recently awarded contracts and the start-up of new contracts signed during the crisis.
Performance varied by region, with Ibero-LATAM delivering the strongest gains, and India & Middle East reporting a steep decline after lockdowns forced the closure of certain facilities.
In first-half 2020, revenue for the region came to €856 million, up +4.8% like-for-like and +6.9% as reported, lifted by the dollar's rise against the euro.
In the second quarter, revenue rose by +4.9% like-for-like, despite flat growth in April due to the impact of Covid-19 on business in North America. Growth for the region was especially robust in June.
In North America, the global health crisis weighed especially on travel and accommodation industries. However, business in healthcare, internet and automotive segments was buoyed by the speedy ramp-up of recently signed contracts
Business in Asia returned to robust growth after the strictest health measures were lifted in China in March. Operations in Malaysia enjoyed very strong growth throughout the first half, led by the contribution of recently signed contracts in the social media industry. Lastly, in Japan, where operations got underway in 2019, business is expanding quickly, in particular with new contracts landed in the consumer electronics and online entertainment industries.
Business in the United Kingdom remained brisk throughout the first half, mainly supported by the deployment of Covid-19 helpline services for the government. Business is also ramping up quickly in the construction and automotive markets.
First-half 2020 revenue for the Ibero-LATAM region amounted to €711 million, a year-on-year increase of +18.5% like-for-like and of +10.2% as reported, mainly due to the decline in the Brazilian real, the Colombian peso, the Argentine peso and the Mexican peso against the euro.
Second-quarter revenue growth came to +18.8% like-for-like, confirming the positive first-quarter trend despite the rapid spread of Covid-19 across the region. Growth gained momentum to reach a new peak in June, spurred by new contracts primarily won in the digital economy ecosystem.
The fast-paced deployment of work-from-home solutions in the region to meet sustained client demand helped to drive double-digit business growth throughout the first half.
Growth for the region was mainly led by operations in Colombia and Brazil and the nearshore business in Mexico. In terms of client industries, there were solid gains in financial services, e-tailing and online entertainment, and fast growth in the automotive segment.
Revenue for the CEMEA region totaled €562 million in first-half 2020, representing year-on-year growth of +8.3% like-for-like, significantly above market, and +8.1% as reported. Like-for-like revenue growth in the second quarter came to +12.9%, with a significant surge in June thanks to new contracts.
On the whole, Covid-19's impact on business was less severe in CEMEA than in the other operating regions, mainly because situations contrasted widely from one country and one industry to another. In countries that enforced the strictest lockdowns, such as Italy, France and Tunisia, business contracted significantly between March and May.
In other countries, business rose steadily over the period, supported by satisfactory contract wins from multinational clients, particularly in the online entertainment and e-tailing industries. This was the case in Greece (multilingual hubs), Scandinavia (Sweden and Denmark), Germany (offshore activities in particular), as well as in Turkey, Egypt and Russia, where the Group recently opened new facilities.
Business in the Netherlands was also robust, in particular with the deployment of Covid-19 support services for the government.
In the first half of 2020, operations in the India & Middle East region generated €215 million in revenue, a year-on-year decline of -13.3% like-for-like and of -15.5% as reported. Adverse currency effect stemmed from the decline in the Indian rupee against the euro. The like-for-like decline came to -19.8% in the second quarter.
This decline in business since March was primarily attributable to the drastic lockdown measures deployed in India, some of which are still in effect. The closure of many facilities had a particularly adverse impact in the financial services and transportation segments, despite the expansion of work-from-home solutions in response to client demand.
Initiated in late 2019, the process of terminating low-margin contracts in domestic activities in India was stepped up in first-half 2020 during the pandemic.
Revenue from Specialized Services stood at €316 million in the first six months of 2020, a decline of -9.7% like-for-like and of -8.1% as reported, due to the increase in the US dollar against the euro. In the second quarter, business fell by -21.0% like-for-like, primarily due to the near shutdown of TLScontact's operations since April in the wake of travel restrictions and border closures. On the other hand, LanguageLine Solutions overcame the impact of the health crisis in the healthcare segment (postponement of many non-essential medical procedures at the height of the crisis) and returned to strong growth in June.
LanguageLine Solutions' activities proved particularly resilient during the crisis, thanks to a portfolio of services delivered by 11,000 interpreters working from home to ensure the smooth, uninterrupted flow of business.
Revenue from the Group's debt collection operations in North America was down year-on-year in the first half of 2020.
FIRST-HALF 2020 RESULTS
EBITDA before non-recurring items stood at €450 million for first-half 2020, down -10.8% from the prior-year period.
EBITA before non-recurring items declined by -22.8% to €253 million from €327 million in first-half 2019, representing a margin of 9.5% versus 12.8% the year before. This was primarily attributable to the near shutdown of TLScontact's operations in Specialized Services from April, as well as to the impact on Core Services & D.I.B.S. of the lockdown policies that forced many facilities to close, particularly in India, the Philippines and Tunisia.
Earnings by activity (1)
EBITA before non-recurring items by activity
* Digital Integrated Business Services
For Core Services & D.I.B.S., EBITA before non-recurring items came to €171 million in the first half of 2020, versus €215 million in the first half of 2019. The margin narrowed in the first half, to 7.3% from 9.7% a year earlier, primarily due to (i) the impact of the lockdowns implemented in India, the Philippines, Tunisia and many other countries and (ii) the cost of rapidly deploying, in a challenging environment, a work-from-home model for most agents.
The EWAP region generated EBITA before non-recurring items of €44 million in first-half 2020, compared with €58 million in the prior-year period, while the margin declined to 5.1% from 7.2% the year before.
In the English-speaking market, profitability was impacted by lockdowns, particularly in the Philippines. In the Asia-Pacific region, the margin continued to improve thanks to robust, profitable growth in Malaysia, where the contact center industry was not locked down, and the return to sustained growth in China since March when the strictest health measures were lifted.
EBITA before non-recurring items in the Ibero-LATAM region fell to €62 million in first-half 2020, from €69 million in the prior-year period, representing a margin of 8.7% versus 10.7% the year before.
The margin weakened in most countries in the region, mainly due to the cost of deploying local work-from-home solutions and the start-up costs on many new contracts. However, margin remains high and resilient in Colombia, bolstered by the very vibrant business development drive, essentially in the digital economy.
In first-half 2020, EBITA before non-recurring items in the Continental Europe & MEA region came to €22 million yielding a margin of 3.8%, versus respectively €32 million and 6.2% in the prior-year period,
The margin erosion in the region stemmed mainly from the impact of the lockdowns, which were strictest in the French-speaking operations in Tunisia and, to a lesser extent, France, and work from home transformation costs. This impact was partly offset by increased profitability in some countries like Germany, in particular with nearshore activities, Benelux and Albania.
EBITA before non-recurring items in the India & Middle East region amounted to €18 million in first-half 2020, versus €39 million in the prior-year period, feeding through to a margin of 8.4% versus 15.3% in first-half 2019.
Margin was heavily compressed by the numerous facility closures resulting from the enforcement of drastic lockdown measures in India. International offshore contracts were prioritized in the gradual deployment of work-from-home solutions.
Specialized Services reported EBITA before non-recurring items of €82 million and a margin of 26.1% in first-half 2020, representing a decline from the 32.6% reported for the prior-year period.
TLScontact's margin contracted sharply in the first half following the shutdown of its visa application management business starting in March, even though cost-cutting measures were very quickly implemented to attenuate the impact.
At LanguageLine Solutions, EBITA rose further over the period and margin, which remained high, proved to be particularly resilient during the crisis. This reflected the fact that the company's services are delivered by 11,000 interpreters who were already working from home before the pandemic and were therefore able to ensure the smooth, uninterrupted flow of business.
Other income statement items
EBIT amounted to €154 million for the period, versus €255 million in first-half 2019. It included:
• amortization of acquisition-related intangible assets in an amount of €54 million, unchanged from first-half 2019;
• €10 million in accounting expenses relating to performance share plans;
• €34 million in other non-recurring accounting expenses, mainly corresponding to impairment losses on goodwill recognized mainly on the French-speaking operations.
It also includes expenses generated by the health crisis, incurred to protect employees and deploy work from home solutions for 22 million euros, as well as write-downs of receivables related to certain clients in receivership for around 10 million euros. The group did, however, benefit from rent reductions for 3 million euros and various government support measures for 4 million euros.
The financial result represented a net expense of €50 million, versus €47 million in the prior-year period. However, net financing costs related to debt before the impact of IFRS 16 declined over the period.
Income tax expense amounted to €41 million. The Group's average tax rate stood at 39.5%, up from 30.1% in first-half 2019, owing to the impairment losses on goodwill.
Net profit - Group share totaled €63 million, compared with €145 million a year earlier, while diluted earnings per share came to €1.08, versus €2.48 in first-half 2019.
Cash flows and financial structure
Net free cash flow after lease payments, interest and tax paid amounted to €192 million, versus €172 million in first-half 2019, representing an +11.6% increase despite the negative impact of the crisis on the interim accounts.
The change in consolidated working capital requirement was an inflow of €80 million in first-half 2020, compared with an outflow of €13 million a year earlier. The swing mainly reflected the attention paid throughout the period to outstanding receivables, as well as the postponement of payments on certain tax liabilities.
Net capital expenditure amounted to €120 million, or 4.5% of revenue, versus €101 million and 3.9% in first-half 2019. Excluding the impact of outlays committed to deploy home-based working solutions during the health crisis, capital expenditure was slightly lower for the period. It was nevertheless maintained at a high level, reflecting the robust growth in demand in the Group's markets.
After the payment of €141 million in dividends, net debt stood at €2,535 million at June 30, 2020.
The Group now has more than €1.5 billion, including cash and cash equivalents, to cope with crisis contingencies. In April, Teleperformance notably secured a line of credit of €655 million.
The Group's financial strength has been acknowledged by the S&P rating agency, which on April 14, 2020 affirmed Teleperformance's BBB- Investment Grade credit rating with a stable outlook. The confirmed rating means that the Group can continue to diversify its sources of financing on the best possible terms.
A dedicated internal organization led by the Chairman and Chief Executive Officer and the Executive Committee, in close collaboration with the Board of Directors, was set up at the start of the crisis to track the course of the epidemic, its impact on the Group's operations and the effective implementation of operational measures to deal with the virus. It is built around an extended management committee of 35 top managers, the Crisis Transformation Committee (CTC), a global task force comprising the 100 key Group managers under 45, and the country chief executives. Today, this organization is focused on pursuing the Group's transformation based on a value creation model that has been reinforced by the crisis.
The rapid, large-scale development of work-at-home capabilities, now being used by nearly 220,000 employees, i.e., more than 80% of the active workforce, was one of the main initiatives taken by the Group to protect its employees. These solutions significantly increased the space between employees remaining on-site in compliance with social distancing standards. The transformation was facilitated by the Group's close relationships with its clients, 90% of whom are now served with work-from-home solutions.
The Group's goal is to eventually enable more than 50% of its operational workforce to work at home, thanks to the wider deployment of TP Cloud Campus, its new international cloud campus solution.
Launched in late 2019 in Portugal, TP Cloud Campus is an optimized model for working with remote, connected teams based anywhere in the world, that improves the customer experience and operational performance, while enhancing employee well-being and engagement. At once unique and highly flexible, this new cloud solution is based on Teleperformance's proprietary TAP™ (Technology, Analytics, Process) tools and other highly advanced technologies. TP Cloud Campus is suitable for every industry, every market and every program.
The Group is a leading global reference for work environments. Teleperformance operations are currently recognized as top employers in 23 countries by third party evaluators including: Albania, Argentina, Brazil, China, Colombia, Costa Rica, Dominican Republic, Germany, Greece, El Salvador, India, Kosovo, Lebanon, Madagascar, Malaysia, Mexico, Morocco, Philippines, Portugal, Saudi Arabia, Spain, Tunisia and United Arab Emirates. In total, more than 70% of the Group's employees now work at a subsidiary certified as a Great Place to Work®. So far in 2020, Teleperformance has renewed or earned Best Employer certifications in 17 countries, attesting to its constant commitment to employees during and after the crisis.
In the first half of 2020, Teleperformance continued to deploy its strategy of expanding worldwide, with the installation of around 9,000 new workstations.
New workstations installed in new facilities in:
- the English-speaking & Asia-Pacific (EWAP) region: in the United States;
Increase in the number of workstations in existing facilities in:
- the Ibero-LATAM region: in Brazil;
Based on its resilient, promising first-half performance, led by the successful worldwide adaptation of its portfolio of solutions to the health crisis context and by its business momentum remaining strong, the Group is confident that it will deliver even faster gains in the second half of the year. As a result, it is once again able to issue guidance for the current year:
- Like-for-like revenue growth of around +6%
Based on these new 2020 objectives, the Group has adjusted its medium-term targets for 2022 and reaffirmed its commitment to pursuing sustainable, profitable growth in its business:
- Revenue of around €7 billion in 2022, including targeted acquisitions in high-value services
All forward-looking statements are based on 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 "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.
Conference call with analysts and investors
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:
The half-year financial report and presentation materials will be available after the conference call on http://www.teleperformanceinvestorrelations.com/en-us at:
Indicative investor calendar
Third-quarter 2020 revenue: November 3, 2020
About Teleperformance Group
Teleperformance (TEP - ISIN: FR0000051807 - Reuters: TEPRF.PA - Bloomberg: TEP FP), a leading global group in digitally integrated business services, serves as a strategic partner to the world's largest companies in many industries. It offers a One Office support services model combining three wide, high-value solution families: customer experience management, back-office services and business process knowledge services. These end-to-end digital solutions guarantee successful customer interaction and optimized business processes, anchored in a unique, comprehensive high tech, high touch approach. The Group's 331,000 employees, based in 80 countries, support billions of connections every year in over 265 languages and 170 markets, in a shared commitment to excellence as part of the "Simpler, Faster, Safer" process. This mission is supported by the use of reliable, flexible, intelligent technological solutions and compliance with the industry's highest security and quality standards, based on Corporate Social Responsibility excellence. In 2019, Teleperformance reported consolidated revenue of €5,355 million (US$ 6 billion, based on €1 = $1.12) and net profit of €400 million.
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: CAC 40, CAC Support Services, STOXX 600, S&P Europe 350 and MSCI Global Standard. In the area of corporate social responsibility, Teleperformance shares have been included in the Euronext Vigeo Eurozone 120 index since 2015, the FTSE4Good index since 2018 and also the Ethibel Sustainability Excellence Europe index (confirmed in 2019).
For more information: www.teleperformance.com Follow us on Twitter: @teleperformance
Appendix 1 - Quarterly and Half-Yearly Revenue by Activity
Appendix 2 - Simplified Consolidated Financial Statements
Consolidated income statement
Consolidated balance sheet
Appendix 3 - Glossary - Alternative Performance Measures
Change in like-for-like revenue:
EBITDA before non recurring items or current EBITDA (Earnings before Interest, Taxes, Depreciation and Amortizations):
EBITA before non recurring items or current EBITA (Earnings before Interest, Taxes and Amortizations):
Non recurring items:
Net free cash flow:
* Excluding lease liabilities
Diluted earnings per share (net profit attributable to shareholders divided by the number of diluted shares and adjusted):
On Premise Strategies: CBRS and Private LTE
Leverage Data for New Profit Centers