Edenred's Half-Year Earnings Surpass Expectations Amid Cost-Cutting

Edenred's Financial Performance Overview

(Reuters) -French vouchers and benefit cards provider Edenred reported half-year core earnings above market expectations on Wednesday, citing strong performance in Latin America and a boost from its plan to cut costs.

Growth in Latin America

Early on Wednesday, Edenred's shares traded as much as 2.2% higher before paring gains to rise 0.6% on the day, as analysts cited uncertainties including caps on meal voucher fees.

Challenges in Europe

The group reported 14.4% organic growth in its earnings before interest, taxes, depreciation and amortisation to 654 million euros ($768 million), above the 636 million euros expected by analysts in a company-provided consensus.

Analyst Insights

Edenred, which helps companies to manage staff expenses and benefits and is known for its "Ticket Restaurant" vouchers, said in April it planned to carry out an optimisation programme called "Fit for Growth" to cut operational expenses.

The company confirmed its objectives for 2025, "while remaining vigilant on any further macro-economic deterioration in a disrupted environment," it said.

The headwinds include a 60 million euro EBITDA hit from the introduction of a cap on merchants' fees in Italy that takes effect in the third quarter, the group said.

Brazil is also considering capping fees.

Analysts at J.P. Morgan said in a note that the confirmed guidance should be seen as reassuring, considering past share performance. Shares in Edenred have dropped around 27% over the past 12 months, according to LSEG data.

"However, we are mindful of the ongoing regulatory overhang (still) weighing on the shares (mostly Brazil), and we would therefore not expect much from the shares today," the analysts added.

Benefits providers, such as Edenred and Pluxee, increasing rely on regions such as Latin America to drive profits, as they cope with a slowdown in their main business regions caused by economic uncertainty.

Edenred posted an operating revenue rise in Continental Europe, its main market, of 1.7% like-for-like, affected by a more challenging macro-economic environment in Europe, notably in France.

In Latin America, which represents 29% of group operating revenue, that metric rose 15.1%.

($1 = 0.8521 euros)

(Reporting by Dimitri Rhodes in Gdansk; Editing by Milla Nissi-Prussak, Rashmi Aich and Barbara Lewis)