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Teleperformance H1 Results: Recent Acquisitions Look Set to Bear Fruit

With like-for-like growth of 10.3% this is another strong quarter for Teleperformance although it continues to be challenged to its exposure to exchange rate fluctuations in the LATAM region resulting in reported revenue growth of 4.1%.

Its Brazil business is contending with a stalling economy and a sharply depreciating currency, although it is still profitable and remains a core focus for Teleperformance. The currency fluctuation in the Argentinian peso (with the currency depreciating by ~40% this year) has continued to dent Teleperformance's reported Ibero-LATAM revenues for the third consecutive quarter. The Mexican and Portuguese businesses continue to perform well this half.

Teleperformance's Chinese operations are seeing y/y growth of nearly 30% y/y, albeit from a small base with revenues approaching €30m annually. Much of the contract wins in this region are with local operations of U.S. multi-nationals. The Aegis acquisition, expected to close by August 1, will increase the company's revenue contribution in its English Speaking & Asia Pac business from 39% to 45%; it will also increase the proportion of revenues from offshore/nearshore delivery from 29% to 32%. This region has also benefitted this half from new contracts won in the U.S. in the healthcare, banking, insurance, and retail sectors during 2013.

The Continental Europe and MEA region experienced the greatest growth this half in spite of France continuing to be an area of concern due to volume reductions in the telecoms sector - although France is no longer a major market for Teleperformance, who now has just around 4k agents in France (plus around 5k in Tunisia). The company made a loss of ~€14m in the country during 2013; this is expected to decrease to a net loss of ~€10m in 2014, New sales initiatives, likely aimed at diversifying vertical spread, should start to bear fruit by the end of the year. The region has grown significantly in the Netherlands, Russia, Italy, Greece and Turkey. The "TLS Contact" account is not only enjoying revenue growth of over 100%, it is also generating significantly higher margins than other Teleperformance business units, although due to the spring time bias in this market's seasonality, this growth should soften slightly in H2.


Teleperformance has uprated its EBITDA margin outlook for the full year to at least 9.7%; this is likely largely due to the acquisitions of Aegis and City Park Technologies as the company has previously been unable to make a significant impact on margin improvements in H2.


The City Park acquisition, a move to build U.K. market share, will push Teleperformance into the top three U.K. CMS BPO vendors by headcount, ahead of Serco and Capita (both of whom have grown in the U.K. through acquisition in recent years). City Park Technologies industry focus in BFSI, telecoms, retail, travel and utilities is broadly similar to Teleperformance's current U.K. vertical presence. City Park is expected to add $26m to annual revenues.

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