The First Edenred Investor Day Poised To Conquer 2012

 

  D. Developing a Public Social Programs offer

This priority concerns countries in which Edenred already operates and where the Group can leverage existing solutions, platforms and networks. These programs are designed to meet the needs of public institutions looking to improve the control and traceability of allocated funds.

 

The faster development and deployment of new solutions in 2011 and 2012 is intended to drive issue volume growth of 2% to 4% a year after 2012 . Little additional expenditure will be needed to create the solutions, which will be deployed via existing in-house platforms. Their gradual ramp-up will involve extra development and launch costs estimated at approximately €3 million in 2011 and €4 million in 2012 .

This capacity for innovation will enable Edenred to maintain a pattern of sustained, long-term growth, in line with its target of annual organic issue volume growth of 6% to 14% .

THE DIGITAL TRANSITION STRATEGY

The second priority of the "Conquer 2012" strategy is the transition to digital solutions. This represents an important technological turning point for all stakeholders in the Edenred business model - clients, affiliates, beneficiaries and public authorities - that want to cut costs, optimize processes, get convenient and simple solutions, and ensure the control and traceability of dedicated funds.

As a growth step up, the digital transition plays a key role in increasing issue volume, both by making deployment more efficient and by creating new capacity for innovation.

Over the long term, the digital transition will strengthen Edenred's business model by improving its ability to:

1. Generate additional revenue from affiliates, clients and beneficiaries, to offset the post-transition reduction in revenue from lost and expired products, thereby ensuring the stability of the take-up-rate ^[5].
2. Reduce the cost structure by around 5% to 10%, mainly by lowering production and logistics expenses .

Once the transition is complete, Edenred is aiming for an operating flow-through ratio ^[6]   of more than 50%.

Moreover, the increase in issue volume will offset the impact of 10% to 15% shorter float ^[7] holding periods (based on estimates for a 100% shift from paper to digital programs), thereby increasing the float value.

Deployment is now moving forward at a faster pace, leading to extra operating costs of approximately €10 million to €15 million a year in 2011 and 2012. However, no additional investment is planned beyond the recurring envelop set by the Group of €30 million to €40 million a year.

Based on this faster deployment, Edenred is confirming its goal of generating 50% of issue volume via paperless solutions by year-end 2012 and more than 70% by 2016.  

By the end of the year, the Group expects paperless issue volume to account for 41% of the total (versus 34% at year-end 2010), thanks in particular to Latin America , the most advanced region in this segment, where digital solutions are expected to represent 71% of the total by the end of the year.

The transition is underway in Europe , where paperless solutions should account for around 10% of issue volume by the end of the year. In this regard, the in-house authorization and redemption platform operated by PrePay Solutions, which partners with MasterCard in Europe, represents a considerable competitive advantage for the Group. Capable of connecting to the payment terminals installed at affiliated merchants by local and international acquirers or payment networks ^[8], PrePay Solutions will in time process all digital transactions in Europe while also contributing to Edenred's innovation drive. With ten years' experience in the business and with partners such as PayPal and Orange, PrePay Solutions has earned recognition as a vanguard innovator in prepaid technologies, in particular through its contactless mobile solutions and e-wallet offers.  

OUTLOOK: "Invent 2016"

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