Travelex Results for the half year ended 30 June 20152015/08/28 · 1 Travelex Results for the half year ended 30 June 2015 28 August 2015 Travelex, the world’s leading foreign

1

Travelex Results for the half year ended 30 June 2015

28 August 2015

Travelex, the world’s leading foreign exchange specialist, announces continued Revenue

growth for the six months ended 30 June 2015

Highlights

• Core Group Revenue increased by 2% to £347.7m (4% increase to £356.6m at constant

exchange rates)

• Revenue growth continues to be led by Retail, in all channels, with like-for-like revenue

growth of 3%

• Core Group EBITDA decreased by 13% to £31.9m (8% decrease to £33.9m at constant

exchange rates), in line with expectations

• Core Group EBITDA has declined reflecting a combination of the annualisation impact of new

rental terms at Heathrow, and the significant planned increase in Digital and business

development investment to enable the Group to capitalise on long-term growth

opportunities. Trading conditions continue to be challenging in Brazil due to weakness in Real

and inflationary pressures

• Further growth in sales via online and mobile with revenue from these channels up 17%

• 85 stores added in the period, including Detroit and Boston Logan international airports

• Announcement of the creation of one integrated Product and Marketing team under the

leadership of Sean Cornwell, CDO, to help achieve our customer-centric vision

Anthony Wagerman, Chief Executive, commented:

“Travelex has again delivered revenue growth and an underlying trading performance in line with

our expectations before the effect of foreign currency translation.

We delivered further growth in our Retail and Wholesale & Outsourcing operations which together

represent over 85 per cent of the Group’s Core Group Revenues. Core Group EBITDA from these

operations increased four per cent and seven per cent, respectively, in constant currency terms. In

Brazil, trading conditions remained challenging driven principally by the weakness of the Real which

significantly reduced banknote and prepaid card sales in the region although this was partially offset

by increased remittance volumes. Our Payments & Technology operations grew revenues by eight

per cent in constant currency terms and we significantly stepped up investment to strengthen our

digital capabilities across the Group.

Looking ahead, we remain focussed on delivering further growth from our operations and

maintaining the investment in digital enablement across our business. The strength of our brand and

the depth of our operations ensures we are well placed to withstand the impact from the headwinds

in Brazil while our investment plans will ensure we can continue to deliver the most innovative and

leading currency services to our partners and customers worldwide.”

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Enquiries

Travelex

Dani Filer, Communications Director +44 (0) 20 7812 5500

Tulchan Communications

Peter Hewer +44 (0) 20 7353 4200

About Travelex

Founded in 1976, Travelex has grown to become the world’s leading specialist provider of foreign

exchange. Travelex provides cash and prepaid cards across 29 countries. The Group has built a

growing online and mobile foreign exchange platform, across 21 markets, and developed a growing

network of over 1,400 ATMs and 1,500 stores at both on-airport and off-airport locations around the

world. It also processes and delivers foreign currency orders for major banks, as well as for travel

agencies, hotels and casinos. In addition, the Group sources and distributes large quantities of

foreign currency banknotes for customers including central banks and international financial

institutions. The Group is also active in the remittances and payments space and in the travel

insurance brokerage business in the United States.

OPERATING AND FINANCIAL REVIEW

Summary of financial performance

£m 6 months

ended

30 June

2014

6 months

ended

30 June

2015

% Change 6 months

ended

30 March

2015 (CER)

% Change

(CER)

Core Group Revenue 341.6 347.7 2% 356.6 4%

Core Group EBITDA 36.7 31.9 (13)% 33.9 (8)%

Statutory Revenue 329.3 311.7 (5)%

Statutory EBITDA 34.1 26.7 (22)%

Statutory loss after tax (86.2) (85.5) 1%

Overview of trading results

Travelex has delivered further growth in Core Group Revenue with the anticipated decline in Core Group

EBITDA reflecting a combination of the impact of new rental terms at Heathrow, and the significant increase in

Digital and business development resource to enable the Group to capitalise on long term growth

opportunities and challenging trading conditions in Brazil. Top line growth continues to be led by Retail where

like-for-like revenue growth was 3%; the acquisition of Arti Döviz (Turkey) in May 2014 contributed £2.9m to

the overall increase.

Core Group EBITDA for the six months ended 30 June 2015 decreased by £4.8m to £31.9m compared to 2014

(a decrease of £2.8m or 8% on a constant exchange rate basis (CER)). Weakness in the Brazilian Real has

severely impacted outbound sales volumes in Brazil and this together with the high inflationary environment

and relatively fixed cost base has resulted in a decline in EBITDA. Continued discipline over the cost base and

like for like revenue growth elsewhere in the Group partially offset the impact of these headwinds and of the

new rental terms at Heathrow Airport.

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Revenue and EBITDA by segment

£m 6 months

ended

30 June

2014

6 months

ended

30 June

2015

% Change 6 months

ended

30 June

2015 (CER)

% Change

(CER)

Core Group Revenue

Retail 232.6 239.9 3% 244.2 5%

Wholesale & Outsourcing 51.1 56.1 10% 56.8 11%

Payments & Technology 11.0 11.1 1% 11.9 8%

Brazil 29.3 22.9 (22)% 27.5 (6)%

Other Trade 17.6 17.7 1% 16.2 (8)%

Total 341.6 347.7 2% 356.6 4%

Core Group EBITDA

Retail 25.5 25.0 (2)% 26.2 3%


Payments & Technology 1.3 (0.8) n/a (0.7) n/a

Brazil 7.2 3.6 (50)% 4.3 (40)%

Other Trade 4.2 3.9 (7)% 3.6 (14)%

EBITDA Contribution 59.7 55.4 (7)% 57.3 (4)%

Central & Shared Costs (23.0) (23.5) (2)% (23.4) (2)%

Total 36.7 31.9 (13)% 33.9 (8)%

Retail

Retail Core Group Revenue increased 3% to £239.9m (5% on a constant exchange rate basis) due to continued

expansion of the Supermarket estate in the UK, strong performance across Europe and Australia and the

acquisition of Turkey. These factors more than offset the transfer of the Sainsbury’s contract from the Retail

segment into the Wholesale and Outsourcing segment. In addition, continued expansion in ATMs resulted in

revenue through this channel increasing by 15%. On a like-for-like basis Retail Core Group Revenue was up 3%,

with most regions across the Group’s global network delivering growth compared to 2014 compensating for

softer trading in the UK and North America.

Retail Core Group EBITDA decreased by £0.5m to £25.0m as a result of the impact of new rental terms at

Heathrow Airport partially offset by underlying revenue growth, the acquisition of Arti Döviz (Turkey) and

continued focus on the cost base. On a constant exchange rate basis Retail Core Group EBITDA increased by

£0.7m or 3%.

Consistent with the Group’s network expansion strategy, 85 stores added to our network, including Detroit

Metropolitan Wayne County Airport and Boston Logan International Airport. Furthermore, the acquisition of

75% of Arti Döviz in May 2014, added nine stores in Turkey’s three leading international airports and

contributed £4.0m to Core Group revenue and £2.6m to Core Group EBITDA in the six months ended 30 June

2015.

Wholesale & Outsourcing

Wholesale & Outsourcing Core Group Revenue increased 10% to £56.1m and up 11% to £56.8m on a constant

exchange rate basis. A large portion of this increase results from the transfer of the Sainsbury’s contract from

the Retail segment during the half year as a result of new contract terms. Wholesale & Outsourcing Core

Group EBITDA was up 10% on 2014, despite an increased upfront investment in business development

resource.

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Wholesale Core Group Revenue was flat on 2014 with lower banknote volumes from Nigeria being offset

partially by higher demand for Euro banknotes in the UK as well as strong performance of the cash processing

business in Nigeria. Wholesale Core Group EBITDA margins remained strong at 50%, and EBITDA grew by 11%

(£1.0m) and by 12% (£1.1m) on a constant exchange rate basis.

Outsourcing Core Group Revenue increased 16% to £36.4m compared to 2014 largely owing to the Sainsbury’s

contract transfer from Retail but also as a result of performance in Malaysia and strong supply volumes in the

UK to Supermarket partners and the Online channel. Margins have remained resilient at 38%.

Payments & Technology

Core Group Revenue increased 1% to £11.1m (8% to £11.9m on a constant exchange rate basis). Revenue

growth has been primarily driven by the Currency Select business which provides dynamic currency conversion

(DCC) solutions for ATMs, e-commerce and point of sale terminals to acquirers, merchants and business

partners. Currency Select Core Group EBITDA decreased 8% to £1.2m (flat on a constant currency exchange

rate basis). Payments and Technology Core Group reported an EBITDA loss of £0.8m reflecting growth in the

Digital team under the leadership of Sean Cornwell, CDO. Most key members of the Digital team are now in

place and building up the Group’s in-house capabilities. This investment will help secure our long-term position

and enable the development of new payments propositions in line with our growth strategy. During the

period the first product, Supercard, was piloted, and the Travelex Money App was launched in July. Supercard

is a unique combination of an App and card which enables travellers to spend money without incurring costs in

relation to any registration, administration or usage fees. The card was launched as a pilot via Money

Supermarket’s newsletter, and the pilot reached its full capacity within just 48 hours of the news being

released. Travelex’s Travel Money app was launched through a campaign across PR, email and social media

advertising. The app serves to help UK customers quickly and efficiently plan and purchase their cash in

advance of holiday requirements. The Group announced the creation of one integrated Product and Marketing

team under the leadership of Sean Cornwell to help achieve our customer-centric vision.

Brazil

Core Group Revenue for the six months ended 30 June 2015 decreased by 22% to £22.9m compared to 2014

and decreased by 6% on a constant exchange rate basis. Core Group EBITDA decreased by 50% to £3.6m and

by 40% to £4.3m on a constant exchange rate basis.

Brazil Retail Core Group Revenue for the six months ended 30 June 2015 decreased by 24% to £14.4m, and 9%

to £17.2m on a constant exchange rate basis. Cash and prepaid cards volumes were impacted by the weakness

of the Real against all major currencies since this business is predominantly outbound. The average exchange

rate to the USD for the six months ended 30 June 2015 was 3.01 compared to 2.28 for the same period in

2014. This decline was partially offset by increased remittance volumes. Brazil Retail Core Group EBITDA

decreased 69% to £1.0m (or by 63% to £1.2m on a constant exchange rate basis) as a result of the high

inflationary pressures on the fixed cost base and higher commissions payable to travel agents. Brazil’s

management team continues maintain a focus on tight cost control through these challenging trading

conditions.

Brazil Non-retail Core Group Revenue decreased by 18% to £8.5m, but only by 1% to £10.3m on a constant

exchange rate basis. Remaining relatively flat on an underlying basis was a result of the Bank also being

impacted by the weakened BRL and inflationary pressures on the cost base, in particular higher logistics costs.

Brazil Non-retail Core Group EBITDA decreased by 35% to £2.6m and by 23% to £3.1m on a constant exchange

rate basis.

Other Trade

Other Trade principally includes Travelex Insurance Services Inc. (TIS), a travel insurance broking business in

the United States. The decline in Core Group EBITDA is attributable to renegotiation of terms with

underwriters at the end of 2014. Underlying volumes remain resilient.

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Outlook

Travelex has again delivered revenue growth and in aggregate the Group is trading in line with management

expectations, before the impact of exchange rates on translation. The strength of our brand continues to

ensure we are well positioned to manage through the impact of the economic headwinds in Brazil and from

contract renewals. We have significantly stepped up our investment to strengthen our digital capabilities to

capitalise on growth opportunities and to ensure we continue to deliver the most innovative and leading

currency services for our customers.

TravelexResults Presentation

for the half year ended 30 June 2015

28

August

2015

2

Notice to Recipient

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3

2. Financial performance

3. Summary and conclusions

4. Questions

5. Further information

1. Key highlights

4

Six months ended 30 June 2015 – key highlights

Financial highlights Operating highlights

� Further network expansion – 85 stores added including Detroit and Boston

Logan international airports

� In July 2015 Travelex became the sole provider of Foreign Currency,

ATMs and DCC services across all five terminals in Heathrow Airport

� Acquisition of the remaining 51% of Grupo Confidence in Brazil

� Digital team recruitment ramp up with most key members now in place and

rapidly building capabilities in mobile, innovation and R&D, digital

marketing and international payments

� Expansion of digital product portfolio with launch of Supercard and a new

mobile application. Online and mobile sales up 17%

� Announcement of the creation of one integrated Product and Marketing

team under the leadership of Sean Cornwell, CDO, to help achieve our

customer-centric vision

� Continued optimisation of our Shared Service Global Delivery Centre in

Mumbai, which now has over 350 full time employees

� Core Group Revenue increased by 2% to £347.7m (4% to £356.6m at

constant exchange rates)1,2

� Core Group EBITDA of £31.9m, was £4.8m (13%) down on 2014 (8%

decrease to £33.9m at constant exchange rates)1,2, 3

� Core Group EBITDA has declined reflecting a combination of the annualisation

impact of new rental terms at Heathrow, and the significant planned increase

in Digital and business development investment to enable the Group to

capitalise on long-term growth opportunities. Trading conditions continue to be

challenging in Brazil due to weakness in Real and inflationary pressures

� Revenue Growth continues to be led by Retail, in all channels, with like-for-like

revenue growth of 3%

� Usable cash at 30 June 2015 of £60.7m (31 December 2014: £66.3m)

includes £19.3m of cash proceeds from the sale of our French business to

UAE Exchange Limited as part of the sale of the Group, and reflects the

continued investment to deliver the Group’s strategic priorities together with

costs associated with the sale of the Group

� In aggregate the Group is trading in line with management expectations for the

year to date, before the impact of exchange rates on translation

1 Core Group metrics include 100% of Revenue and EBITDA from Joint Ventures and Travelex’s French business which was sold to UAE Exchange UK Limited, a company of which Dr Shetty is also a shareholder. The French business remains in the Core Group results for management discussion and analysis purposes but is excluded from the Group’s statutory results

2 Results at constant exchange rates are Core Group metrics retranslated at the average rates for Q2 2014 YTD3 EBITDA is presented before exceptional items and non-underlying adjustments

5


1. Key highlights


4. Questions


6

6 months ended 30 June 2015 – Group financial performance

Financial Summary


2 Results at constant exchange rates are Core Group metrics retranslated at the average rates for Q2 2014 YTD3 Operating exceptional items and non-underlying adjustments principally relate to legal and professional fees incurred for corporate projects associated with preparing for and completing the sale of the Group and onerous

contract provisions relating to legacy airport contracts

£m, six months ended 30 June 2014 2015 Change 2015 CER2 Change

Core Group Revenue1 341.6 347.7 2% 356.6 4%

Core Group EBITDA1 36.7 31.9 (13)% 33.9 (8)%

Core Group EBITDA % Margin 10.7% 9.2% 9.5%

Operating Exceptional items and non-underlying adjustments3

7.4 42.3 472%

Capex:£m, six months ended 30 June

2014 2015 Change

System Development & Shared Service Migration / Finance Projects

11.3 1.3 (88)%

Expansionary & Maintenance 9.7 10.5 8%

Digital - 1.2 n/a

Total capex 21.0 13.0 (38)%

Balance sheet Dec 2014 Jun 2015

Usable cash 66.3 60.7

Net debt (254.0) (278.5)

7

Six months ended 30 June 2015 – financial performance by segment


2 Results at constant exchange rates are Core Group metrics retranslated at the average rates for YTD Q2 2014

Segmental results

Core Group Revenue1

£m, six months ended 30 June2014 2015 Change 2015 CER2 Change

Retail 232.6 239.9 3% 244.2 5%


Payments & Technology 11.0 11.1 1% 11.9 8%

Brazil 29.3 22.9 (22)% 27.5 (6)%

Other Trade 17.6 17.7 1% 16.2 (8)%

Core Group 341.6 347.7 2% 356.6 4%

Core Group EBITDA1

£m, six months ended 30 June2014 2015 Change 2015 CER2 Change

Retail 25.5 25.0 (2)% 26.2 3%


Payments & Technology 1.3 (0.8) n/a (0.7) n/a

Brazil 7.2 3.6 (50)% 4.3 (40)%

Other Trade 4.2 3.9 (7)% 3.6 (14)%

EBITDA Contribution 59.7 55.4 (7)% 57.3 (4)%

Central & Shared Costs (23.0) (23.5) (2)% (23.4) (2)%

EBITDA 36.7 31.9 (13)% 33.9 (8)%

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22.1 22.0 23.1

3.4 3.0

3.125.5 25.0

26.2

YTD Q2 2014 YTD Q2 2015 YTD Q2 2015 CER

Retail Online

Retail – Resilient LFL performance

Retail EBITDA1,2,3 (£m)Retail revenue1,3 (£m)

225.7

233.0

237.2 6.9

6.9

7.0

232.6

239.9

244.2


Retail Online

3%

1 All figures are shown on a “Core Group” basis i.e. including 100% of JVs and France2 EBITDA before Central & Shared Costs3 and 4 Q2 2015 CER shows results retranslated at YTD Q2 2014 average exchange rates. LFL revenue growth is also calculated at CER.

Key drivers YTD Q2 2014 YTD Q2 2015

LFL revenue growth (%)4 7% 3%

Rent as percentage of revenue 44.2% 47.0%

Other costs as a percentage of revenue

44.8% 42.6%

EBITDA margin (%) 11.0% 10.4%

Retail KPIs

5%

Commentary

� LFL revenue growth of 3% is underpinned by strong performances across UK

Supermarkets, Europe, MEIA and Australia. North America and the UK (excluding

Supermarkets) experienced softer trading. Turkey, which was acquired in May 2014 contributed a further £2.9m to overall revenue growth

� The Sainsbury’s partnership is now being reported within Wholesale and

Outsourcing as a result of new contract terms. This contract was previously reported

within the Retail segment

� Continued expansion in the ATMs network helped deliver revenue growth of 15% in

this channel

� Increase in rent as a percentage of revenue is attributable to the new terms across

two contracts at LHR from April 2014 and February 2015, which has also reduced

the overall EBITDA margin despite continued discipline over the cost base

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Wholesale

• Higher demand for Euro banknotes in the UK and strong profit performance of the

cash processing business in Nigeria is more than offset by the impact of lower

banknote volumes from Nigeria and transfer of UK Retail supply to the Outsourcing

segment in 2015. Underlying revenue growth is 3%

• EBITDA margin remains strong

Outsourcing

• Revenue growth in YTD Q2 2015 is attributable to the treatment of the Sainsbury’s

partnership as an outsourcing contract as a result of new contract terms. Thiscontract was reported within the Retail segment in the prior year

• Underlying revenue is broadly flat due to strong performance of the Malaysian

operations supported by growth in North America offsetting volume decline and

impact of a new contract in the Australian phone cards business

8.9 9.9 10.0

12.613.8 13.9

21.5 23.7 23.9


Wholesale Outsourcing

EBITDA

margin:42% 42% 42%

Wholesale & Outsourcing – Strong demand for Euro banknotes in the UK but lower volumes to Nigeria

Wholesale & Outsourcing EBITDA1,2,3 (£m)Wholesale & Outsourcing revenue1,3 (£m)

19.7 19.7 19.9

31.4 36.4 36.9

51.1

56.1 56.8


Wholesale Outsourcing11%

1 All figures are shown on a “Core Group” basis i.e. including 100% of JVs 2 EBITDA before Central & Shared Costs3 YTD Q2 2015 CER shows results retranslated at YTD Q2 2014 average exchange rates

Wholesale & Outsourcing KPIs

Sub-segments Key drivers YTD Q2 2014 YTD Q2 2015

Wholesale

Revenue growth (%) 10.0% -


Outsourcing

Revenue growth (%) (5.3)% 15.9%


Commentary

11%

10

1.3 1.2 1.3

(2.0) (2.0)

1.3 (0.8) (0.7)


Currency Select Digital

11.0 11.1 11.9


Payments & Technology – Significant ramp up in Digital investment in 2015

Payments & Technology EBITDA1,2,3 (£m)Payments & Technology revenue1,3 (£m)

1 All figures are based on a “Core Group” basis i.e. including 100% of JVs2 EBITDA before Central & Shared Costs3 YTD Q2 2015 CER shows results retranslated at YTD 2014 Q2 average exchange rates

Payments & Technology KPIs

8%

Commentary


Currency Select

Revenue growth (%) 9.0% 0.9%


Currency Select

� Strong growth across all revenue streams partially offset by impact of a margin reduction rolled out gradually through the first half of 2014

� EBITDA margin reduction due to greater mix of revenues from Acquiring, which is a

lower margin business stream, and the adverse impact of exchange rate movement

on scheme fees

Digital

� Significant ramp up in the investment to build in-house capabilities as part of the

Group’s digital strategy

� 44 full time employees recruited as at 30 June 2015. A proportion of this cost is being capitalised

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Retail

• Weakness in the Real against all major currencies continues to impact outbound

sales volumes in 2015. The average exchange rate to the USD for the 6 months

ended June 2015 was 3.01 compared to 2.28 for the same period in 2014. Spot

rate to USD at 27 August is 3.60

• Lower cash and prepaid card volumes are partially offset by increased remittancevolumes

• EBITDA margin deteriorated due to inflationary pressures on the cost base andhigher commissions payable to travel agents

Non retail

• Revenue performance for the Bank also impacted by the weak Real. EBITDA

margin reduction compounded due to inflationary pressures on the cost base, inparticular higher logistics costs

3.2

1.0 1.2

4.0

2.6 3.1

7.2

3.6

4.3


Retail Non Retail

EBITDA

margin:25%

16%

16%

(40)%

Brazil – Depreciation of Real against USD significantly impacting Revenue

performance. Store portfolio being optimised for current trading outlook

Brazil EBITDA1,2,3 (£m)Brazil revenue1,3 (£m)

18.914.4

17.2

10.4

8.5

10.3

29.3

22.9

27.5


Retail Non Retail

(6)%

1 All figures are shown on a “Core Group” basis i.e. including 100% of JVs 2 EBITDA before Central & Shared Costs3 YTD Q2 2015 CER shows results retranslated at YTD Q2 2014 average exchange rates

Brazil KPIs


Retail

Revenue growth (%) (20.9)% (23.8)%


Non Retail

Revenue growth (%) 38.7% (18.3)%


Commentary

12

4.2 3.9 3.6


Other Trade – Principally Travelex Insurance Services (TIS)

Other Trade EBITDA1,2,3 (£m)Other Trade revenue1 (£m)

1 All figures are based on a “Core Group” basis i.e. including 100% of JVs 2 EBITDA before Central & Shared Costs3 YTD Q2 2015 CER shows results retranslated at YTD 2014 Q2 average exchange rates

Other Trade KPIs

17.6 17.7 16.2


(8)%

Key drivers YTD Q2 2014 YTD Q2 2015

EBITDA margin – insurance (%) 23.7% 22.0%

24% 22%

Commentary

� Insurance revenue and EBITDA have been impacted following the renegotiation of terms with underwriters at the end of 2014.

� Under the old contract terms EBITDA would have been £0.9m higher at constant exchange rates

� Underlying volumes remain resilient

22%EBITDA

margin:

(14)%

13

Central & Shared Costs

YTD Q2 2014 YTD Q2 2015

Central 6.4 6.3

Shared 14.5 15.4

Total Central and Shared(excl. Bonus)

20.9 21.7

Bonus provision 2.1 1.8

Total Central and Shared(incl. Bonus)

23.0 23.5

Central & Shared Costs

� The Group substantially completed its Systems Development and Shared

Service Migration initiative in 2014. Opportunities to offshore additional

activities continue to be assessed on an ongoing basis

� Centralisation and offshoring of back office functions has led to an increase

in costs reported within Shared. Overall centralisation and offshoring costs

continue to reduce overall functional costs, with savings being realised

principally in the trading segments of Retail and Wholesale & Outsourcing

and consequently higher Shared Costs

Commentary

14

Operating activities:

� Cash in tills and vaults have decreased in the six month period ended 30 June 2015 due

to seasonal requirements.

� Other movements in working capital relate to the timing of wholesale bank note and

international payment orders with a corresponding effect on available for sale

investments which reverse shortly after month-end and the seasonal movement inpayables to bank note suppliers.

� Net cash flows with joint ventures consist of dividends received from joint ventures(2015: £0.3m; 2014: £0.5m), loans received from joint ventures (2015: £4.6m; 2014:

£nil) and joint venture funding (2015: £nil; 2014: £1.7 outflow).

Investing activities:

� Cash tax payments were lower in the six months ended 30 June 2015 due to Brazil

(£1.4m), Australia (£3.2m) with tax paid in 2014 relating partly to prior year assessments

and lower net cash paid in the Netherlands (£1.9m) as it is net of a prior year tax refund.

� Capital expenditure represents amounts primarily in respect of expansionary and

maintenance, digital spend and finance projects. Expenditure was higher in 2014 as aresult of the Shared Service Migration project.

� On 29 January 2015, in connection with the sale of the Travelex group, Travelex FranceHoldings Ltd sold Banque Travelex SA and its 100% subsidiary Travelex Paris SAS to

UAE Exchange Ltd recognising usable cash proceeds of £17.7m.

� Other net investing activities outflow of £31.0m relates to the purchase of Brazil

government bonds which are classified as available-for-sale investments for short

periods as a result of the timing of international payment orders at period end which are

settled shortly after.

Financing activities:

� Interest payments relate to the £350m senior secured notes which were issued in

August 2013. The notes comprise £200m at 8% fixed rate payable semi-annually plus

£150m at a floating rate of 3 month Libor plus 6% payable quarterly. In 2015 interest of

£0.5m was paid on the funds drawn-down on the RCF.

� The Group acquired the remaining 51% interest in Brazil on 2 February, 2015 for

£47.4m in cash. This has been recorded in financing activities in accordance with IFRS

as it relates to the acquisition of a non controlling interest.

� One-off items include exceptional costs relating primarily to corporate projects including

the sale of the business in 2015.

Usable cash flow statementSummary consolidated usable cash flow statement Commentary

£m, six months ended 30 June 2014 2015

Core Group EBITDA 36.7 31.9

Less: Unconsolidated Joint Ventures and disposal of France (2.4) (4.9)

Net cash flows with Joint Ventures (1.2) 4.9

Movements in cash inventory (cash in tills & vaults) (31.9) 9.3

Other movements in working capital (net of cash in transit & FX) 49.6 56.2

Net usable cash inflow from operating activities 50.8 97.4

Taxation paid (9.3) (2.3)

Purchase of PP&E, software & development (21.0) (13.0)

Proceeds received on disposal of subsidiary (net of usable cash of

£1.6m)- 17.7

Net cash paid on investment in subsidiaries (24.6) -

Other net investing activities 0.4 (31.0)

Net usable cash (used)/generated in investing activities (45.2) (26.3)

Interest paid (13.0) (13.5)

Repayment of shareholder loans (4.5) -

Dividends paid to non-controlling interest (1.7) (1.5)

Net cash paid on investment in subsidiary - (47.4)

Drawdown of RCF - 20.0

Purchase of own shares for employee share schemes (0.4) -

Capital element of finance lease payments (0.5) (0.3)

Net usable cash used in financing activities (20.1) (42.7)

Net usable cash outflow from one-off items (8.8) (28.1)

Exchange gains/(losses) on usable cash 1.4 (3.6)

Net (decrease)/increase in usable cash (31.2) (5.6)

Usable cash at the beginning of the period 140.1 66.3

Usable cash at the end of the period 108.9 60.7

15

Usable cash, free cash & net debt

Commentary

� Cash and cash equivalents includes banknote prepayments and prepaid debit card

float balances which are deducted in arriving at unrestricted cash. The reduction in

prepaid card float is due to the timing of amounts being held on deposit

� Free cash – adjusts unrestricted cash for cash allocated to working capital (cash in

tills, vaults and transit) and management’s estimate of cash required locally for

regulatory purposes

� Usable cash – adjusts free cash using a notional estimate of local working capital

requirements. We estimate that two thirds of this cash is not readily accessible as it

is required for working capital requirements of the business

� Lower usable cash at 30 June 2015 reflects cash paid on the acquisition of Brazil

(£47.4m), interest payments (£13.5m), legal and professional fees associated with

the sale of the business (£22.4m) as well as other corporate projects, partially offset

by proceeds received on the disposal of Banque Travelex (£19.3m) and the draw

down of the RCF (£20.0m)

Free cash & usable cash£m

31 Dec 2014 30 Jun 2015

Cash and cash equivalents 505.3 510.4

Cash classified as held for sale (France) 9.7 -

Ring-fenced cash and term deposits (39.9) (34.4)

Short-term bank borrowings (3.2) -

Prepaid debit card floats (146.6) (158.7)

Banknotes prepayments (20.9) (4.1)

Unrestricted cash 304.4 313.2

Cash in tills, vaults and transit (198.6) (211.2)

Management estimate of regulatory cash (15.0) (15.0)

Free cash 90.8 87.0

Cash in business (24.5) (26.3)

Usable cash 66.3 60.7

Net debt£m

31 Dec 2014 30 Jun 2015

Fixed & floating rate notes (343.4) (344.5)

Drawn down RCF - (20.0)

Finance leases (1.4) (1.0)

Gross debt (344.8) (365.5)

Free cash 90.8 87.0

Net debt (254.0) (278.5)

16


1. Key highlights


4. Questions


17

Summary and conclusions

� Revenue growth and a resilient underlying trading performance, in line with expectations, with the exception of Brazil

� Core Group Revenue of £347.7m, up 2% (£356.6m, up 4% at constant exchange rates)

� Core Group EBITDA of £31.9m, down 13% (£33.9m, down 8% at constant exchange rates)

� Core Group EBITDA has declined reflecting a combination of the annualisation impact of a major contract

renewal in Retail, and the significant increase in Digital and business development investment to enable the

Group to capitalise on long-term growth opportunities

� Challenging trading conditions in Brazil due to weakness in Real and inflationary pressures

� In July 2015 Travelex became the sole provider of Foreign Currency ATMs and DCC services across all five terminals

in Heathrow Airport

� Acquisition of remaining 51% of Grupo Confidence in Brazil

� Significant ramp-up in the Digital Team under the leadership of Sean Cornwell with recruitment of key team members

largely complete

� Announcement of the creation of one integrated Product and Marketing team under the leadership of Sean Cornwell,

CDO, to help achieve our customer-centric vision

� Continued optimisation of our Shared Service Global Delivery Centre in Mumbai, which now has over 350 full time

employees

Our debt investor relations website can be found at http://www.travelex-corporate.com

18

1. Key highlights




4. Questions

19


1. Key highlights



4. Questions

20

Summary balance sheetSummary consolidated balance sheet Commentary

£mJune

2015

Travellers’

Cheques1Apax

Goodwill

June 2015 excl. Travellers’

Cheques and Apax Goodwill

Dec 2014 excl. Travellers’

Cheques and Apax Goodwill

Intangible assets 400 - 239 161 177

Property, plant & equipment 45 - - 45 42

Investments 23 23 - - -

Financial assets 104 104 - - -

Other 27 - - 27 30

Non current assets 599 127 239 233 249

Assets included in disposal group HFS 2 - - - - 25

Trade and other receivables 152 4 - 148 86

Cash and cash equivalents 510 34 - 476 465

Other 53 4 - 49 13

Current assets 715 42 - 673 564

Trade and other payables (792) (243) - (549) (374)

Provisions (22) - - (22) (16)

Financial liabilities (3) - - (3) (48)

Other (23) 2 - (25) (2)

Current liabilities (840) (241) - (599) (440)

Net current (liabilities) assets (125) (199) - 74 124

Borrowings – non-shareholder (345) - - (345) (343)

Borrowings - shareholder (600) - - (600) (1,178)

Other (30) - - (30) (27)

Non current liabilities (975) - - (975) (1,548)

Liabilities included in disposal group HFS 2 - - - - (18)

Net liabilities (501) (72) 239 (668) (1,168)

� The assets and liabilities relating to

the Travellers’ Cheques business are

excluded from the “Core Group”

� Intangible assets at Jun-15 include

goodwill of £239m relating to the

2005 acquisition by funds advised by Apax Partners

� Trade receivables include amounts

due from certain wholesale banknote

customers which are settled within less than one week of being initiated

� Whilst the Core Group holds £510m

of cash and equivalents at Jun-15, the amount that is classified as

“Usable Cash” by management is

lower (£60.7m at Jun-15)

� Other current assets includes taxes

receivable and available for sale

investments.

� Trade and other payables include prepaid card loads awaiting

redemption, trade creditors and

accruals

� On 29 January 2015, the Group was

sold to Dr B R Shetty and Mr Saeed

Bin Butti, Chairman of Centurion

Investments. On completion, part of

the existing Shareholder Debt was

waived and part was retained in favour of UTX Holdings Limited on

the same terms

``

1 Includes Travellers’ Cheques business outside of the core group; no adjustment has been made for intercompany balances which eliminate on consolidation2 On 29 January 2015 the Group sold its operations in France for €26.0m to UAE Exchange UK Limited, and these were classified as Held for Sale as at 31 Dec 2014

21

Working capital

Working capital componentsCommentary

� Cash in tills and vaults has decreased

from December 2014 (after the effect

of cash in transit (‘CIT’)) due primarily to the sale of France as well as

foreign exchange fluctuations.

� Movements in total debtors driven by the short-term timing of wholesale

bank note orders.

� Trade payables have increased from

Dec 2014 to June 2015 due to the timing of month end in relation to the

seasonal movement in banknotes

supplies as well as the timing of

wholesale bank note orders.

� Cash in transit amounts have been

excluded as they have a neutral

working capital impact.

£m Q2 2014 Q3 2014 FY 2014 Q1 2015 Q2 2015

Cash in tills and vaults (incl Held for

Sale; excl. CIT)180.0 177.1 195.3 150.7 181.2

Debtors

Trade receivables (incl. CIT) 158.6 89.2 44.1 75.8 104.8

Less: Cash in transit (12.6) (0.3) (3.7) (0.1) (1.9)

Trade receivables (excl. CIT) 146.0 88.9 40.4 75.7 102.9

Other receivables 32.9 35.2 21.8 40.5 23.3

Prepayments and accrued income 31.8 26.3 20.9 27.1 19.7

Less: Travellers’ cheques amts. (2.9) (2.7) (2.5) (4.5) (4.2)

Less: Brazil acquisition prepayment (8.5) (8.0) (7.7) - -

Total debtors 199.3 139.7 72.9 138.8 141.7

Creditors

Trade payables (incl. CIT) (264.2) (168.4) (127.5) (233.8) (267.8)

Less: Cash in transit 21.6 17.7 6.9 60.4 31.9

Trade payables (excl. CIT) (242.6) (150.7) (120.6) (173.4) (235.9)

Other payables (40.5) (37.7) (31.0) (48.0) (50.1)

Accruals and deferred income (105.9) (106.5) (90.1) (85.3) (89.7)

Banknote prepayments 0.3 14.2 20.9 12.4 4.1

Less: Travellers’ cheques amounts 30.5 31.8 29.6 29.5 30.6

Add: Brazil prepaid card float liability (25.6) (21.5) (18.8) (15.2) (12.9)

Total creditors (383.8) (270.4) (210.0) (280.0) (353.9)

Net working capital (4.5) 46.4 58.2 9.5 (31.0)

22

Reconciliation from Core Group Revenue to Statutory Revenue

£m, half year ended 30 June 2014 2015

Core Group Revenue 341.6 347.7

Joint Venture adjustment for equity accounting (15.3) (19.9)

Travellers’ Cheques 1.1 1.3

Disposal of French business - (18.2)

Other adjustments 1.9 0.8

Statutory Revenue 329.3 311.7

Reconciliation to Statutory Revenue1

1 Historical FX rates used are actual average rates for each period

Joint ventures in UAE, Africa, Qatar and Malaysia are not consolidated in the statutory accounts.

23

Reconciliation from Statutory EBITDA to Core Group and Adjusted EBITDA

£m, period ended 30 June 2014 2015

Operating profit/(loss) 15.7 (27.1)

Depreciation and amortisation 11.0 11.5

Exceptional items and non-underlying adjustments 7.4 42.3

Underlying EBITDA (per the interim financial statements) 34.1 26.7

Joint Venture adjustment for equity accounting2 2.4 3.6

Adjustment for French disposal - 1.3

Travellers’ Cheques (0.1) (0.5)

Share based payment charge (non-cash) 1.1 0.8

Other adjustments (0.8) -

Core Group EBITDA (100% of JVs) 36.7 31.9

Adjustment for proportion of Non-Consolidated JVs (1.2) (1.7)

Adjustment for French disposal - (1.3)

Other adjustments 0.8 -

Adjusted EBITDA** 36.3 28.9

Reconciliation to Statutory and Adjusted EBITDA1

1 Historical FX rates used are actual average rates for each period2 Net of recharges

**Core Group EBITDA consists of EBITDA adjusted to include 100% of the EBITDA of our joint ventures, share-based payment incentive charges, and Banque Travelex SAS which was disposed of in 2015 but is continued to be managed by the Group, and excludes EBITDA attributable to our travellers’ cheques business, which does not form part of the Restricted Group. **Adjusted EBITDA consists of Core Group EBITDA adjusted for the share of non-consolidated joint ventures that are not attributable to the Group and excludes the EBITDA of BanqueTravelex SAS, which was disposed of in January 2015 to UAE Exchange Limited in connection with the sale of the Group.

24

Statutory EBITDA and earnings are impacted by non-cash and exceptional items

£m, half year ended 30 June 2014 2015

Core Group EBITDA 36.7 31.9

Adjustments to arrive at Underlying EBITDA(see further reconciliation on previous page)

(2.6) (5.2)

Underlying EBITDA (per the Q2 2015 statutory accounts)

34.1 26.7

Operating exceptional items and non-underlying adjustments

(7.4) (42.3)

Operating profit/(loss) before depreciation, amortisation, interest and tax

26.7 (15.6)

Depreciation (6.1) (6.4)

Amortisation of intangible assets (3.3) (3.7)

Amortisation of customer relationships and other intangible assets acquired in business combinations

(1.6) (1.4)

Share of profit in equity accounted investments

1.0 1.4

Net finance costs (cash – pay) (12.8) (13.4)

Net finance costs (non-cash – pay) (72.6) (42.5)

Exceptional items and non-underlying adjustments reported within finance income (costs)

(12.7) (1.0)

Tax (5.4) (3.4)

Discontinued 0.6 0.5

Statutory loss after tax (86.2) (85.5)

Financial summary Commentary

� Depreciation and amortisation of hardware and software has increased in

Q1 2015 compared with the prior year largely due to bringing into use items

related to System Development and Shared Service Migration at the end of

2014.

� Finance costs relate to cash-pay debt, which is debt that requires cash interest payment, and non-cash pay debt which is debt whose interest

compounds and does not require settlement until maturity – see next slide

for further analysis of finance income and finance costs

� Exceptional items relate primarily to legal and professional fees incurred for

corporate projects associated with preparing for the sale of the Group to

UTX Holdings Ltd.

25

Net finance costs include significant non-cash pay amounts relating to shareholder loans


Finance costs

Shareholder Loans and preference shares 69.5 43.0

FX losses - -

Movement in Brazil Redemption Liability 1.3 -

Interest on senior secured notes 12.9 12.9

Interest on RCF - 0.8

Other interest costs 2.6 1.6

Non underlying adjustments 12.7 1.0

Total finance costs 99.0 59.3

Finance income

FX gains 0.7 2.1

Interest receivable 0.2 0.3

Total finance income 0.9 2.4

Net finance costs 98.1 56.9

Analysed as:

Cash- pay 12.8 13.4

Non cash pay 85.3 43.5

Finance costs and income Commentary

� Ongoing cash-pay finance costs include:

� The cost of the senior secured notes.

� The cost of the funds drawn down on the RCF.

� Other interest costs in the quarter relate primarily to the fees incurred on

non-utilisation of the RCF prior to draw down.

� On 29 January 2015, the Group was sold to Dr B R Shetty and Mr Saeed

Bin Butti, Chairman of Centurion Investments. On completion, part of the

existing Shareholder Debt was waived and part was retained in favour of

UTX Holdings Limited on the same terms. Total shareholder debt

decreased from £1,177m at 31 December 2014, to £599.6m at 30 June

2015, resulting in a reduction in non-cash pay finance costs.

26

Further reconciliations

Usable cash flow from operating activities to statutory measure


Usable cash flow from operating activities 50.8 97.4

Cash paid on investment in joint ventures net of dividends and loan received

1.2 (4.9)

Movement in cash held in tills and vaults (excl. CIT)

32.5 29.1

Movement in banknotes prepayment (12.5) (16.8)

Movement in cash and deposits held for the Travellers’ Cheques business

(9.1) (5.6)

Movement in prepaid card float deposits 9.4 14.4

Movement in cash in business 1.9 4.9

Less: cash exceptional items (8.8) (28.1)

Cash flow from operating activities (statutory) 65.4 90.4

27

Average FXrate for the six months ended

30 June 2014

Average FX rate for the six months ended

30 June 2015

% movementFX rate as at

31 December2014

FX rate as at 30 June

2015% movement

EUR 1.22 1.38 13% 1.29 1.41 9%

USD 1.68 1.53 (9)% 1.56 1.57 1%

JPY 171.16 184.05 8% 186.94 192.42 3%

AUD 1.83 1.97 8% 1.90 2.05 8%

BRL 3.82 4.59 20% 4.14 4.88 18%

TRY 3.61 3.96 10% 3.65 4.22 16%

FX Rate Summary

1.PRESS RELEASE - Q2 announcement FINAL2.Q2 results presentation - 27-08-15 (FINAL)3.THL interim financial statements Jun 2015 FINAL

Documents

Travelex Results for the half year ended 30 June 20152015/08/28 · 1 Travelex Results for the half year ended 30 June 2015 28 August 2015 Travelex, the world’s leading foreign