Edenred SE (EDEN) Earnings Call Transcript

Ladies and gentlemen, welcome to the Edenred H1 2020 Results Conference Call. I now hand over to Mr. Bertrand Dumazy, Chairman and CEO. Sir, please go ahead.

Yes. Thank you. Good morning, everybody. Thanks for being connected this morning for the H1 2020 results of Edenred. I propose that we go to Page 2 of our presentation. And so the first message I want to share with you is, because Edenred is a digital champion with strong business and financial fundamentals, we have been able to overcome the COVID-19 crisis. What is a digital champion? First of all, we have a strong growth profile with a robust financial position. Then remember that we are a global player, operating in 46 different countries in vastly underpenetrated markets. We are also a tech leader, delivering innovation around specific purpose payment solutions. Hence, we are able to propose more than 250 solutions covering essential needs, such as Eat, Move, Care and Pay. Finally, we demonstrated, and we have been demonstrating, and we will continue to demonstrate that we are an agile organization, made of local entrepreneurs, operating on the ground and supported by e-quarter, scaling champions and technology experts. So thanks to all those fundamentals that are [indiscernible] the Edenred of today. We are able to post in H1 2020, strong results with some resilience and a sharp rebound in June in Europe. Our total revenue of EUR 696 million was down 4.8% like-for-like. Our operating revenue of EUR 675 million was down 4.6% like-for-like, reflecting -- sorry, a growth of 6.6% in Q1 and a decrease of 15.4% in Q2. We saw a sharp improvement in June, with operating revenue down 9% like-for-like. Our EBITDA level is at EUR 255 million, down 12.8% like-for-like. We generated some free cash flow in H1 2020 at a level of EUR 130 million versus minus EUR 13 million in H1 2019. And finally, our net profit group share is at EUR 100 million. So based on those H1 2020 results, based on the fundamentals of Edenred, how do we see the rest of the year? We believe that there will be a continued gradual recovery in H2, particularly in Europe, but with some uncertainties in Latin and North America. So the combination of all those elements should lead to a year-on-year like-for-like monthly operating revenue growth, superior to 0% at some stage in H2 2020. We are also able to confirm our EUR 100 million cost savings, cost avoidance plan and selective downward adjustment of our 2020 capital expenditure. All those elements lead us to guide you on the full year 2020 EBITDA estimate between EUR 540 million and EUR 610 million. And as to our leverage in 2020, it should be below 2.8x the EBITDA. Then what does it mean for the post-COVID world? Well, we think Edenred is a digital champion that is well positioned for this post-COVID world. The crisis, accelerating the need for earmarked funds to fulfill essential needs, coupled with an agile organization, combined with a technology platform, allowing the group to seize business opportunities. And finally, we have strong financials that allows us to pursue our product and technology investment strategy. So we do believe that Edenred has the capacity to rebound quickly, thanks to the resilience of our business model, thanks to the strengthening of our digital leadership, thanks to the accelerated deployment of earmarked funds programs and finally, thanks to our ambitious product and technology investment strategy. Now if we move to Page 5, to look into details, not into details, but to look at the highlights of the first semester of 2020. So Page 5. The first thing to remember is, we saw a sharp improvement in June, driven by the gradual end of lockdowns and short-time work schemes in Europe. So we have an overall resilience, thanks to the digital business continuity. I remind everybody that more than 88% -- 98% of our people were able to work remotely. We have been able to launch new initiatives around earmarked funds and products focus on essential needs, but do not stop completely during a pandemic like the COVID, essential needs in the Eat, Move, Care and Pay. So we saw a fast recovery in Europe since June, leading to a June month at minus 9% revenue -- operating revenue like-for-like versus minus 19% and minus 18% in April and May. After a month of March at minus 0.5%, and you'll remember that for the first 2 months of the year, we have been growing at double digits. So fast recovery in Europe in June due to the phase out of short time work schemes, due to the ability to move again and due to the higher spending volume at merchant stores. However, Americas is still highly impacted as COVID had still not peaked as of end of June. If we move to Page 6, the second comment is about the seamless business continuity that we have been able to demonstrate, thanks to agile teams and digital solutions. If we look at the figures, right now, at the end of H1 2020, 86% of total Edenred business volume is digital. And we saw a sharp increase in Employee Benefits digital adoption in Europe versus H1 2019, leading to plus 9 points. So that's for product and services, acceleration of the digitalization. As to our employees, close to 100% of Edenred employees have been able to work remotely. So we are a full digital company. The vast majority of our business volume is digital, and we are able to propose solutions that are fitting home and remote working requirements. Then if we move to Page 7. So on top of the digitalization, we saw a strong ramp-up of app-to-app payments, especially through the meal delivery platforms. So I remind everybody that Edenred is the everyday companion for people at work, that we are leveraging strong technological assets with our platforms. And on these platforms of intermediation, between our network of merchant partner and users in between, at some point of time, you need to pay. And more and more, the payment is digital, obviously, and more and more, the payment is app-to-app. What does it mean? It means that we saw a fast ramp-up of those app-to-app payments. So for example, in Brazil, with the launch of our partnership with Uber Eats, iFood and Rappi. We saw since the go-live in March 2020, more than 600,000 transactions. Indeed, globally, the number of transactions versus H1 2019 has been multiplied by 2, and we are now connected with 60 different partners and live in 6 countries, thanks to our unique technology called Edenred Digital Payment Services. Another example is in France, where now more than 30% of our Ticket Restaurant card users are now logged into this EDPS. And we will continue to invest and to increase the usage of the EDPS because we have an ambitious road map for H2 2020 and 2021. If we move now to Page 8. Another thing to mention in terms of highlight is our ability to propose innovative food solutions to replace school or office cafeteria. And if we take 2 examples, the first 1 in the U.K., where we launched in less than 15 days an innovative e-voucher system to replace free lunches for U.K pupils. So it's for 1.3 million British pupils as beneficiaries. It allows them to spend up to GBP 15 per week in a dedicated supermarket network for food. The initial project was only for April, we saw a first extension of our program until the end of June, and now it is extended to the end of August. It's a good illustration of our innovation, capabilities and high agility. The second thing, in the U.S., very interestingly enough, we saw the launch of a new food benefit program. Our first client is Spotify. It's a corporate mid car program to increase the employer's attractiveness and improve workers' productivity and well-being. It's particularly relevant for remote workers and when on-site food services are not available. Another way to say it is, you are an employee of Spotify, you used to get food in your offices, the offices are closed or you are in remote, you want to have access to some food. You will be able to do it, thanks to this new food benefit program. So it's a car meal program. One thing to note is we are able to push those programs that are a good replacement of the old way of doing, and there is no tax break. So the ability to earmark the funds and to give dedicated funds to employees for new ways of working is especially interesting for us and on the market that was not impacted by our solutions in terms of food, meaning the U.S. If we move to Page 9, the other thing to notice is our ability to ensure an efficient economic recovery via specific purpose solutions. So here, you see a few examples that are able to boost the tourism sector and promote a green recovery. So in Greece, we have been able to put in place a program since March 2020, up to EUR 300 per employee to be used only in a filter network of local travel agents, hotels and restaurants. It's a tax-exempted benefit. And in fact, it's the leverage of things we have been doing for years in holiday benefits programs, especially in Romania and Slovakia. So that's another example of what Edenred is able to do, i.e. to leverage solutions that we have in 1 country or another and to propose that to a government or private sector to promote the economic recovery. Another example is the Ticket EcoCheque in Belgium, where we saw some very strong performance in Q2, and in fact, the purpose of the Ticket EcoCheque is to stimulate green consumption and as a reminder, anytime anybody is spending EUR 1 via the EcoCheque solution in Belgium, you have 1 kilograms of CO2 that has been saved. So once again, it's the rollout of the existing range of benefits dedicated to environmentally friendly solutions that we saw increasing everywhere around Europe. Another example is the launch of the Ticket Mobilite in France. We did it in the U.S.A. with commuter benefits, but also in the U.K., in Belgium and Finland, and now France, since last March, is launching the same program. And of course, Edenred is on it. So the Ticket Mobilite, up to EUR 400 per year and per employee, to pay for mobility and soft mobility. So another way to say it, any time you are using an Edenred solution, you contribute to a better world or you contribute to the recovery of specific sectors that have been particularly badly hit by the COVID crisis. Not only we have been able to digitalize faster, not only we have been able to propose new solutions, not only anytime you are using Edenred solutions, you contribute to a better world, but Page 10, we demonstrate that we also have been able to have an active management of our P&L and cash flows. We are in business for business. So the P&L, in terms of P&L management, we have been very strong on our rolling forecasts by country and by solutions. We have been very strong on our EUR 100 million of OpEx savings and avoidance for the full year 2020. And in fact, we are well on track to reach this EUR 100 million cost savings target in 2020. So what does it mean in terms of cash flow after the management of the P&L and our spendings? In fact, we saw in H1 an increased float as a result of longer retention time due to lockdown measures. We saw that we are able to control our CapEx for 2020, and we revised that downward. But we take the commitment to make sure that we will never ever compromise the group capacity for technological innovation or growth. We want to be sure that we are absolutely ready for the rebound that will come. Then our float retention time will return to normal in H2 as the users will start to spend their funds again at merchant stores, but will be more and more open. And based on all of those elements, we are pleased to share with you that we don't have any risk to the group's liquidity. And we still have a strong financial position with our BBB+ strong investment-grade rating that has been confirmed by Standard & Poor's last May. Finally, Page 11, you'll remember that we put in place the More than Ever relief plan. It's a plan where we committed up to EUR 15 million to mitigate the consequences of the COVID-19 epidemic on Edenred ecosystem. We have 3 priorities: to protect our employees, and thank God, up to now, the number of Edenred employees that have been infected is -- has been very limited; the second objective of the plan is to support our merchants, the restaurant owners, but also some professionals like the truck drivers; and finally, we know that a world of prosperity for everybody, but also for Edenred, will only be possible when we will all have access to a vaccine. So we will support the scientific research to find a cure for the COVID-19. Those initiatives are at the number of 63. Both initiatives are at the local level, the way we like it at Edenred and things are put in place more, in fact, very shortly. After H1 2020, it's now time to listen to Patrick Bataillard for the H1 2020 results, Page 13.

Thank you, Bertrand. Good morning, everyone. Let's start on Page 13 with the H1 2020 operating revenue. So H1 2020 operating revenue was down 4.6% like-for-like, of which 15.4% in Q2 and down 10.2% as reported. We moved from EUR 751 million in H1 2019 to EUR 675 million in H1 2020. And this, I said before, there is a like-for-like decrease of 4.6%, the difference coming from the scope effect, which is slightly positive, plus 0.4%, and this is mainly explained by the last acquisition we've done. Such as Easy Welfare in Italy, EBV in Lithuania and Benefit Online in Romania. And then the main negative difference comes from the currency impact, minus 6% in H1 2020. Of course, we've seen some big difference between Q2 and Q1. Let's remember that in Q1, we had a practically normal quarter until mid-March, and then the crisis came with some lockdown measures in Europe. In Q2, we posted a minus 15.4% like-for-like, to be compared to the minus 20% we estimated at the beginning of the crisis. In Page 14, you see some -- the breakdown per business line. Employee Benefits, which is our legacy business, still represent 61% of the total H1 2020 group operating revenue. The like-for-like decrease in comparison to last year is minus 8.7%, which means that this is the most -- this is the business, which is the most affected by the crisis so far. And the reported decrease is minus 12.9%. Fleet & Mobility Solutions do represent 26% of the overall operating revenue. We saw some decrease of minus 1.4% like-for-like or minus 10.7% overall reported decrease. And then Complementary Solution, which is a mix of Corporate Payment services, Incentive & Reward businesses and Public Social Programs is now 13% of the overall group operating revenue. We posted quite strong growth both in like-for-like -- was like-for-like [indiscernible] with plus 11%, but as well as reported growth with plus 6.1%. If we now deep dive into the Employee Benefits, operating revenue in Page 15, we are temporarily impacted by furlough measures and delayed merchant revenue. So overall, operating revenue for H1 was EUR 412 million. It is minus 8.7% like-for-like. But we saw some big difference between the lockdown period and what appears after the lockdown. During the lockdown, we have a strong impact from the short time working, because the benefit allowance calculated are based on the number of actual days work. We saw as well some delayed merchant revenue due to limited traffic in-store, meaning that we are creating backlog, i.e., merchant revenue that will be recognized later when they are another. And then after the lockdown regarding the client fees, recovery is led by end of the furlough measures. And regarding merchant revenue, the recovery is fueled by traffic rebound in the reopened stores and in [indiscernible] Regarding Fleet & Mobility Solutions in Page 16, we have a mixed effect from stay-at-home requirements on heavy and light fleet segments. Overall, we posted EUR 173 million for H1 2020, i.e., minus 1.4% like-for-like, of which minus 14.3% in Q2 2020. During the lockdown, what we saw is in heavy fleet solutions, i.e., the trucking business, being more resilient than light fleet solution, mostly vans and small trucks. And after the lockdown, we saw some progressive rebound in heavy fleet solution, but fast rebound in light fleet solution as soon as stay-at-home measure were eased, especially in Europe, will be, with for the time being, the exception of U.K. But we pursue as well innovation strategy with, by example, the launch of a new fleet management platform in Europe in H1. Regarding Complementary Solutions on Page 17, we've launched some new specific purpose programs and we acknowledge as well some stronger appetite for digital secure corporate payment solutions, leading to plus 11% like-for-like operating revenue growth in H1. So overall, we did EUR 90 million in H1 2020 i.e., a plus 11% like-for-like growth, but as well plus 6.1% as reported. And as you can see, we posted both growth in Q1 2020 with plus 12.1% and Q2 2020 with plus 9.9%. We posted a strong performance of new specific purpose programs to combat COVID impacts, such as a free school meals program in the U.K., COVID-19 voucher relief program in Italy, NGO funded food cards in Brazil and childcare programs for caregivers in France. But more broadly, we see some increased attractiveness of digital corporate payment services, as an alternative to paper-based solutions, such as CSI B2B platform, virtual card issues or identified IBAN. Now let's have a look at H1 2020 operating revenue per region, starting in Page 18. Overall, Europe remains the strongest region for Edenred, with 61% of the total operating revenue. And a slight decrease of minus 3.5% like-for-like or minus 2.6% as reporting during H1 2020. Latin America is now down to 30%, with minus 8.1% like-for-like decrease in H1 2020, but minus 24.5% as reporting, meaning that we faced some strong negative ForEx impact, especially from the Brazilian real and the Mexican peso. And it's important to remind that Latin America was representing a bit more than 49% of the total operating revenue in 2014. So to a certain extent, we've derisked a lot of the business profile of the company from the growth we are posting in Latin America. In Europe, in Page 19, what we saw was a strong rebound in June, particularly in France. Overall, Europe posted EUR 411 million in H1 2020. And as you can see, we see some strong difference between Q1 and Q2, of course, but as well a strong difference between France with minus 31% in Q2 and the rest of Europe with minus 5.9%. So in France, most probably this country was 1 of the hardest hit countries by stay-at-home and short-time working measures in April and May. We saw a strong rebound in June as client orders returned to positive territory. In Employee Benefits, especially merchant revenue is still delayed in June, but the situation is improving, thanks to a debit pending cap that has been revised up from EUR 19 to EUR 38 in restaurants. And this has a huge impact on our business. As an example, the average digital transaction value in restaurants is up 50% in June versus the pre-COVID situation. And in Fleet & Mobility, it has be noticed that we have a positive performance in June versus last year. Regarding the rest of Europe, in Employee Benefits, we see some mix situation with gradual recovery at different level from 1 country to another, depending on timing and conditions of the lockdown easing. And for Fleet & Mobility, we have an ongoing strong recovery in Continental Europe, while TRFC in the U.K. is still impacted by the lockdown. Let's move now to Latin America in Page 20. Here, unfortunately, the peak of COVID crisis is not yet reached at the end of June. Overall, we posted EUR 203 million in H1 2020, i.e., minus 4.5% as reported with stronger ForEx impact that I've mentioned before, coming from the Brazilian real, that devaluated from approximately minus 20% in H1 2020 to -- in 10% to H1 2019, and Mexican peso, minus 9%. In Brazil, the peak of COVID crisis has not been reached at the end of the period. The Employee Benefits is impacted notably by closed restaurants, but we saw some fast adoption rate of meal delivery platforms, app-to-app payment solutions, with more than 600,000 transactions, as mentioned before by Bertrand since the launch of this solution in March. In Fleet & Mobility, we saw a better resilience of heavy fleet versus light fleet solutions. And this is especially explained by the fact that we saw some positive effects from a particularly good harvest season. And of course, we are a bit negatively impacted by the retail fuel price in H1. In the rest of this area. In Hispanic Latin America, we are facing an overall lack of control of the spreading epidemic. And Mexico is especially strongly impacted by epidemic and as well by negative retail fuel price that had some effect in Fleet & Mobility Solutions. Let's move now to the other revenue, formerly called financial revenue, in Page 21. Here, what we saw is a higher float that was more than offset by lower interest rates and strong negative currency effects from Latin America. We posted EUR 21 million in H1 2020, to be compared to EUR 26 million in H1 2019 and the main differences came from higher float in 2020 due to the extended Employee Benefits retention time, lower interest rates worldwide, especially in the non-Eurozone and non-European countries. And of course, some very strong negative currency impact in Latin America. Let me remind you, especially our float investment policy, as described on Page 22. What is interesting to keep in mind is that the vast majority of our float is managed in Europe with approximately 80% of the total money. Latin America does represent a bit less than 15% of the total float. We still have a very cautious investment policy, with centralized cash management. But as well, all the investment in money market instruments are done in local currency only. We mostly use a bank term deposit with no risk on capital. We never do any float transfer between currency, and we try to diversify and choose the high-standard counterparties, mainly international banks. So to sum up the total revenue. In Page 23, i.e., the operating revenue plus the other revenue, formerly called financial revenue. So H1 organic resilience is hindered by negative ForEx changes in Latin America. Overall, H1 2020 total revenue was EUR 696 million to be compared to EUR 770 million in H1 2019. The biggest difference on top of the like-for-like decrease was minus 4.8% coming from the scope with a positive effect. And the currency impact, i.e., minus EUR 47 million, mostly coming from the Brazilian reals and the Mexican peso. Let's move now to the EBIT in Page 24. So total EBIT in H1 2020 was EUR 192 million. We have a high seasonality of operating leverage this year. With encouraging signs of rebound and EUR 100 million cost savings or cost avoidance plan that should pay off in H2. You see some difference between the like-for-like change in total revenue, that was minus 4.8% in H1 2020 and the EBITDA for which the like-for-like change has been minus 12.8% or minus 17.8%, meaning that the total EBITDA was in H1 2020, EUR 255 million. And the EBITDA margin, it go down for minus 2.3 points. EBIT as well posted a minus 17.7% like-for-like decrease or minus 22.8% reported change. Meaning the total EBIT was EUR 192 million, to be compared to EUR 249 million in H1 2019. If you try to understand the cost dynamics, we had some increased cost base in Q1 versus 2019. Because we have a strong double-digit growth until mid-March. And of course, we had an additional cost to bear that growth. Then we have a fast response, with EUR 100 million of cost savings and cost avoidance plan versus budget, designed via a bottom-up approach in all other geographies, including the headquarters. And what we can say now is that we are well on track to reach this EUR 100 million cost avoidance target in 2020, meaning that the operating leverage was quite negative in H1 2020. But it should be positive in H1 -- in H2 2020. Another way to look at it is the bridge, you can see on Page 25. We moved from EUR 249 million in H1 2019 EBIT to the EUR 192 million in H1 2020. And of course, this is explained by the lack of EUR 42 million of operating EBIT to be compared to the lack of EUR 35 million like-for-like operating revenue downwards. Operating revenue is minus EUR 2 million without the ForEx impact. Change in scope hopefully is positive at plus EUR 6 million coming from all the last acquisition we've done, i.e., Easy Welfare in Italy, EBV in Lithuania and Benefit Online in Romania. And then we saw some strong negative currency effect of minus EUR 19 million in H1. If we try to understand how we move from EBITDA to net profit in Page 26. As you can see, we moved from EUR 255 million EBITDA to EUR 100 million net profit group shares to be compared to EUR 146 million in H1 2019. The main difference coming from not the D&A and PPA amortization that are quite stable in comparison to 2019. And that should be the case in H2 as well. You see slightly more other income and expenses totaling minus EUR 13 million in H1 2020 and this is a mix of very different things, but it is mainly explained by technology asset write off, software, et cetera, totaling minus EUR 14 million. On top of that, we have some restructuring cost for minus EUR 4 million in H1 and we have a positive one-off reversal of provision of plus EUR 6 million relating, that the litigation we had against the Hungarian State, which is totally ended now. Looking at the net financial expense. H1 2020 is minus EUR 15 million to be compared to minus EUR 14 million in H1 2019. Surprisingly enough, the cost of [indiscernible] is sharply going down during the period. But the interest we get from the cash is slightly -- is sharply going down as well, explaining almost no difference between H1 this year and H1 last year. Let's look now at Slide 27, to understand how we succeed in producing from free cash flow, some positive free cash flow in H1 2020, because our business model ensures profitable growth, but as well cash generation and this is not generally the case every year in H1, but this was the case in H1 2020, with free cash flow of plus EUR 113 million, which is a very good use flow in my view. This is explained by the fact that the float increased a lot due to higher prepaid solution retention time, minus EUR 313 million to be compared to -- sorry, plus EUR 313 million to be compared to minus EUR 256 million last year, for instance. But of course, we -- but as well, we had much more restricted cash this year than last year, which is good news to prepare the future. We estimate that the float retention time may return to normal by the end of the year. What is interesting as well is that you see that H1 FX reflects the ongoing technology development during the period. Said simply, we did not stop the strategic investment we are doing around CapEx even if we stop some non-strategic CapEx during the period. Overall, what we estimate is that in H2 2020 CapEx should be lower than what we posted in H2 2019, i.e., last year before the crisis. If we look now at the net debt as of June 30, on Page 22 -- sorry, 28. Overall, net debt was EUR 1.501 billion. i.e., a lower net debt, thanks to high level of cash flow generation in H2 2019, a strong business resilience and the longer float retention in H1 2020, despite the strong negative ForEx impact. It's probably more interesting to compare this debt to the one we had at the end of June last year because of the seasonality we have between H1 and H2 that we generate. So the bridge is explained by strong free cash flow. Overall, EUR 526 million over the last 12 months. Acquisition were pretty low, with minus EUR 14 million over the last 12 months, but this is partly explained by the positive impact we have from the exercise of the UTA put option. Shareholder return overall was minus EUR 151 million. And as you can see, we have very strong negative ForEx impact. And here, we are looking at the fixing rate and not only the average rate during the period, meaning that the sole ForEx impact were minus EUR 194 million over the last 12 months. Finally Page 29, I would like to say very simply to you that I have absolutely no doubt about the fact that we have a very robust financial position, with a high level of liquidity and a solid balance sheet. We have more than EUR 4.6 billion cash in the balance sheet. In fact, we have more than EUR 1.5 billion short-term financing options with undrawn revolving credit facility and commercial paper authorization. We have no financial covenants, not at all. And we succeed in issuing in June, a new EUR 600 million 9-year bonds at a very low interest rate, increasing the debt maturity while optimizing the cost of debt, which is roughly 0.9% growth currently. We have as well a strong investment-grade rating, as mentioned by Bertrand previously. The BBB plus rating outlook stable has been confirmed by Standard & Poor's last May. So quite recently, and we have no major reinvestment before 2024.

Patrick, thank you. If we move now to Page 31, for the 2020 outlook. The first thing to share about the operating revenue. So what we see for the H2 2020 is a continued gradual recovery in Europe, but still some uncertainties in the Americas. If we look at the breakdown per product line after the geographies. In employee benefits, some delayed user spending in H1 will generate merchant revenue in H2. We will also see the ongoing positive effects of innovation and digitalization process in Europe, the more digitalized Edenred is, the better it is for our operating revenue and our level of EBITDA. But as previously said, LatAm will still be impacted by lockdown measures, probably in Q3. As to Fleet & Mobility, we will see the gradual recovery in Europe, but just like for Employee Benefits, in LatAm, is going to be impacted by the lockdown measures that could continue in Q3. Finally, as to our third business line, the Complementary Solutions, we will see the further contribution from new specific purpose programs, coupled with corporate payment that will be unfortunately still impacted by some specific verticals in North America, the media, the hospitality and the travel that are very low. So the combination of all those elements per geography and per product line, lead us to think that the like-for-like monthly operating revenue growth should be superior to 0 versus last year at some stage in H2 2020. So back to growth somewhere along the line of H2 2020. Then if we move to Page 32, the outlook in terms of profitability based on this continued gradual recovery in H2 2020 and combined with the EUR 100 million cost savings, cost avoidance plan with a stronger operating leverage in H2 should have a positive impact on our results. And so what we say is the full year 2020 EBITDA estimate should be between EUR 540 million and EUR 610 million. Then Page 33, what does it mean in terms of cash flow? As you know, cash is king, so H2 2020, the combination of the gradual business recovery with a float retention time that should return to normal after a longer retention time in H1 due to the lockdown, with the further negative FX impact on the float, but CapEx in H2 2020 -- sorry, CapEx in H2 2020, that should be inferior to H2 2019. And some limited M&A transactions, the combination of all those elements should lead us to a full year 2020 leverage inferior to 2.8x the EBITDA. Finally, and to conclude before answering all your questions, Page 34. What you saw in H1 2020, with Edenred is a digital champion with strong fundamentals, that allowed us to overcome the current crisis, but also that puts us in a very good position for the post-COVID world. First all, as initially said, we are a company with strong business and financial fundamentals. Why? We have a strong growth profile, a robust financial position. We are in 46 countries in underpenetrated markets. We are a tech leader, and we are delivering relentless innovation around specific purpose payment solutions. We are able to manage 250 solutions that are covering essential needs such as the eat, the move, the care and the pay. And finally, we are a very agile organization made of local corporate entrepreneurs that are stimulated by scaling champions and technology experts. So if you take all those fundamentals that allowed us to overcome the current crisis, plus the fact that due to our agility, we are able to seize business opportunities whether they are short, medium or long term. And at the same time, thanks to our financial business and visibility we are able to pursue the product and technology investment strategy. If you combine all of those, we are absolutely convinced that we are able to rebound quickly, thanks to our resilient profile, thanks to the strengthening of our digital leadership, thanks to the accelerated deployment of earmarked funds programs that are more and more asked by different private and public organization to make the inclusion of cash more efficient and thanks to our ambitious product and technology investment strategy. Thank you for your attention. Patrick and myself are now ready to answer all your questions.

[Operator Instructions] We have the first question from Simon LeChipre from MainFirst.

Yes. 3 questions, please. First of all, regarding the return to growth in H2, as you expect, Latin America to remain impacted by lockdown over Q3. Does that mean you anticipate a return to monthly growth to happen only during the course of Q4? And how confident are you on this return to positive territory given all these uncertainties coming from Latin America? Secondly, what are your expectations for financial revenue over H2, which are part of your EBITDA guidance? And lastly, you talked about those programs you put in place with government. Could you please share any details on the economics of these programs and especially how it compared with your more traditional solutions?

Simon, thank you for your questions. I propose to answer the #1, Patrick, the #2, and then I'll take care of the number three. So the return to growth. Yes, you are right. We are confident in Europe and we have some uncertainties in Latin America. That's why we said somewhere along the line in H2. Now as to Q3 or Q4, it's too early to say. But remember that Latin America represents 30% of the contribution to our total operating revenue. So even if there are some uncertainties in Latin America, Europe is now the lion's share of the group, and we have more certainties in Europe than we have in Latin America. So it's going to happen. It's going happen in H1, when, it's too early to say because we are in the middle of the storm in Latin America. But thanks to the fact that 60% of our operating revenue is made in Europe, we have a good level of confidence.

Regarding other revenue, what we call the financial revenue in the past. My best guess is that H2 should be comparable to H1, maybe slightly down because unfortunately, we are still relying on the ForEx impact. And as you can see, the fixing impact coming from the Brazil Real and Mexican peso, where losses we are seeing are quite a high level of financial revenue is still down in comparison to the average we had in H1. So overall, pretty similar amount, slightly down most probably.

As to your third question, Simon, the economics behind the programs of specific purpose money for the public sector. What I can share with you is, first of all, globally, the economics on those programs are pretty similar to the ones we have on, let's say, the private programs. Then you have to deleverage, we have certain programs on, which our margins are very low, but we consider it's our social responsibility during crisis like that to make sure that everybody can be -- can benefit from our technology. Another way to say it, thanks to the digital technology, we are able in 48 hours to put in place a program in France for 40,000 students who cannot go back home and so have limited resources, a program where they receive up to EUR 70 per week to have access to food and the minimum they need to continue living. And on those programs, it's our honor and our duty to mobilize our resources to make sure that it happens. And so yes, on those programs, the margins are low, but the pride of all our colleagues in France is very high because nobody else could have been able to do that in 48 hours and only our digital solutions are able to answer those needs. So it's a mix, but it's a choice that we are doing program by program. But globally, the economics are the same. But for certain programs, we accept to work at low-margin because it's our honor and our duty to do it in crisis times like that.

Next question from Paul Sullivan from Barclays.

Just a few for me. Firstly, can you give us a sense of the issue volume or business volume trends for Employee Benefits going into July and August? And sort of how you see unemployment weighing on growth once the catch-up on reimbursement washes through? I'm trying to get a sense of those -- the 2 sort of underlying drivers of the Employee Benefits business and how they're interacting as we go through the third and fourth quarter. And secondly, in terms of your upper end and the lower end of your EBITDA range, what assumptions really underpin that? So I don't know if you could just share more in terms of the extremes of the range? And then just finally, looking through this and sort of, whether we see a more permanent shift to work-from-home. Are there any difference in your view by geography between in work and in workplace benefits? Because in theory, work-from-home should be good to you versus canteens. But do some markets differentiate between in work and in workplace benefits?

Okay. So maybe we can start with the lower range of our guidance, Patrick.

Yes. Overall, what we take into account is that we don't see -- we don't anticipate some second strong wave in terms of COVID crisis, in fact, we have some temporarily, lockdown measures in some European countries, but we see -- we do not take that into account as a general measure everywhere in Europe. And what we anticipate as well regarding the ForEx impacts and the interest rate, we extrapolate the level of rates we see currently. These are the main difference we take into account, in fact. And of course, we have more instability than in a normal layer, meaning that the bracket is quite wider than the 1 we used last year, for instance.

Okay. So then Paul, I'll try on question #1 and 3. And in fact, there is a correlation between the 2. Yes, it is true that due to the COVID crisis, we have some headwinds, and we will have those headwinds in the future. And 1 of the main headwind is the level of unemployment. So that's something we will have to face because it's highly probable that the level of unemployment is increasing sharply, everywhere in Europe, everywhere in the world, but also in Europe. Having said that, remember that we are on vastly under-penetrated market. So yes, it's a headwind, but we have some tailwind as well. First of all, the under-penetration of the markets we are dealing with. The second thing that's going to be a tailwind for us is the fact that we are a tech leader, and we are the most advanced player in our industry in terms of digitalization. And in fact, we have more and more people who are working remotely. So they are looking for solutions where they have access everywhere, anywhere, anytime to our solutions, and we are the #1 provider. To give you an idea, in France, we have 40% market share, but our market share of the digital solutions is about 60%. So our tech leadership is recognized on every market we are. And we know that the more it goes, the more people will look for some digitalization due to the remote working. And you also know that when you are a tech leader, you tend to increase your differentiation during those period of, let's say, deep transformation. So it's not absolutely crazy to think that the technological leadership of Edenred will increase in the future. The third thing to take into account, you heard us, and you see that in the figure, we want to continue to invest. We are lucky to have entered the crisis in a very good financial state. And we are lucky to seek a rebound that happened pretty fast in Europe. So based on that, we decided early in the crisis to continue to invest. Why? Because when the wind will start blowing, we want to be the first 1 to benefit from that. So yes, unemployment is a headwind, but there are many tailwinds, tailwinds based on the under-penetration of our market, our ability to continue to invest, a technological leadership that will, let's say, most probably increase versus our main competitors. And finally, we are the worldwide champion of earmarked funds, and we see more and more, let's say, private ecosystems of payments, but also public let's say, organization looking for earmarked funds and the ability to track where the money is coming and where the money is going. So we see more and more interest into our solutions. So the combination of all those elements makes us very confident in our ability to rebound. Then to focus on the remote working, I'm not sure -- well, globally, we are convinced that remote working will accelerate. And remote working is very, let's say, positive for universal and digital accounting like the ones we proposed. So we saw for the last few weeks and months, some of our clients accelerating their move to digital in Europe, that's why you saw the level of digitalization in our benefit solution in Europe in H1, moving up by 9 points. So it means that in 1 semester, we did the work of 2 or 3 years, which is very positive for our model. So -- and it's partly due to the fact that remote working, everybody wants to be ready for that in case of another wave of COVID or because now it's part of the way people are working. And remote working is the best ally for universal and digital canteen and probably the best enemy of, let's say, a physical canteen. Then you asked 1 last question, and I'm not sure I understand the differentiation you are doing in remote working. So would you be kind enough to exposit it a little more if I want to be able to answer?

Sorry, Bertrand, I wasn't probably very clear. But I thought in some markets like Italy, there was some confusion as to whether you would get the benefits as an employee, if you permanently work from home. Whereas in France, it feels like you do get it if you work-from-home?

Yes. In fact, it's true that the situation is, let's say, the size of the remote working was not expected. So sometimes, you have some lack of clarities on, if I am a remote worker, do I have access to my benefits? And so that's why some employers tried not to, let's say, to continue the benefits during the remote working crisis. Fortunately, the employees and, let's say, the trade unions and in all those countries, the governments are now clarifying the situation. So be sure that when you are a remote worker, whether it's only a few days per week or the entire week, we are in the middle of a process of clarification. And so those people will have access to the benefits. And in fact, it explains a little bit the rebound we had in Europe, and for example, in France, where a few employers decided to wait and see and boom, in June, they are repaid for all the things they didn't pay, for example, in April and May. So it's in the middle of the clarification. And yes, when you are a remote worker, you will have, and you have access to your benefits, and especially the food benefits.

Okay, super helpful. I could just -- just a quick follow-up. The June exit rate of minus 9%, was issue volume better or worse than that in Employee Benefits?

So in fact, you'll remember, we communicate on the issue volume, in fact, once a year on benefits. Because what happens in June? Or let's say, what happens in 1 month? And in terms of issue volume and business volume, doesn't mean a lot. Having said that, in fact, and the business volume, as you remember, is made of the issue volume. So what we get from, in fact, the companies and then the reimbursement volume, what is going through our systems. To make a long story short, 3 things to share with you, Paul. First of all, the growth of operating revenue is higher than the growth of, let's say, business volume in H1 2020. Why? Because you see that our take-up rates are up and in fact, they are up because the digitalization allows to price higher. Okay? So when you see a number, most probably the business volume behind this number is slightly less, thanks to the positive impact of the digitalization on the take up rate. Okay? Then as to the month of June, the issue volume was higher. Why? Because as in the phenomenon, I explained to you a few minutes before, some companies were late into charging the accounts of their clients waiting for the clarification. So the issue volume was higher, but it doesn't mean -- and in fact, the issue volume was, for example, in France, positive in June. But it doesn't mean that you can extrapolate too much on that because you had an effect of what has been lagged behind in May and April. But to make a long story short, we see a rebound of our issue volume. The rebound is higher than the reimbursement volume because you still have money to be spent. And this money is on our accounts. So it's going to be spent, and you see the effect on the free cash flow.

Next question from Ed Young from Morgan Stanley.

The first is on the cost savings phasing. You mentioned you're expecting positive operating leverage in H2. But I wondered if you could be a bit more specific in terms of what you've booked in H1 in terms of those cost savings, looking at the CapEx cadence, it looks like it's going to be relatively H2 weighted, if that's similar. My second was on France versus rest of Europe, a very strong difference between those 2 regions. I imagine some of that is mix, but if you could give anything else in terms of background of why you think that is -- that will be useful. And the third is on the sort of post-COVID digital mix, I guess. You've already spoken about a couple of the benefits, including pricing and obviously negative for fluctuation, but it should be, I'd imagine, positive for growth and for the cost structure. Can you predict on the cost structure side, can you just remind us on what the benefit will be of reducing the sort of dual cost structures of running a paper and a digital voucher business. And do you have sort of line of sight to when you think you might be able to push the business towards going on 100% digital, given the huge gains you made this year? Or is that aspirational in the future?