Worldline Shares Plunge by 55%

Shares in the French online payments company, Worldline, experienced a significant drop of 55.63%, resulting in a suspension of trading. This drop is attributed to lower earnings expectations for 2023, which have been announced by the company.

Lowered Expectations Amid Economic Deterioration

Worldline cited a sudden deterioration in the economic environment, particularly in Germany, for its lowered expectations. There has been an observed increase in cybercrime which forced the company to cancel several contracts. Furthermore, a macroeconomic slowdown has been noted in some of the company’s core countries, including Germany, impacting growth and profitability.

Impact on Company’s Financial Projections

The payment processing company, one of the biggest in Europe, now expects an organic growth of between 6% and 7% for 2023, a decrease from the previously projected 8 to 10%. The company also anticipates a gross operating surplus of around €1.1 billion and a free cash flow conversion rate of between 30% and 35%. This is a significant drop from the previous estimates of 46% to 48%.

The cessation of services to certain customers will result in a turnover loss of €130 million in 2023. The company, however, has announced a €200 million cash cost savings for 2025.

Q3 Earnings and Future Expectations

Worldline recorded a turnover of €1.18 billion during the third quarter, a 4.8% increase at constant scope and exchange rates. However, this fell short of the expected 7.2% consensus.

The Jefferies bank noted that this revision to full-year guidance implies a Q4 organic growth of 2 to 5%, rather than the consensus of 8.4%. It added that cost-saving initiatives would help mitigate the impact, but concerns over a prolonged downturn could lead to further uncertainty.

Reaction from Analysts

Investor sentiment in Worldline was already deteriorating, following a profit warning from Adyen in the summer. Citi analysts reported that the miss and softer outlook were worse than many had expected, and will likely lead to consensus downgrades. JPMorgan also noted that the new free cash flow guidance would be 38% below the current consensus, leading to a significant cut in earnings estimates for 2024.