JCDecaux SE

Ladies and gentlemen, welcome to the GCE Decaux 2024 Half-Year Results presentation. I will now hand over to Jean-Charles Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.

Good morning, everyone, and welcome to our 2024 Half-Year Results conference call. The speakers today on this call will be Jean-François Decaux, Co-Chief Executive Officer, David Boulle, Chief Financial IT and Administrative Officer, and I. Remy Grisard, Head of Investor Relations, is also attending today's conference call. We are overall pleased with our H1 results, as all key metrics have significantly improved year on year, despite a challenging environment. We have enjoyed a strong momentum. Our revenue grew beyond expectation, increasing by 13.4% organically. This performance was mainly driven by the continued strength of digital, which grew by 27.8% and now makes up 36.8% of our total revenue. Programmatic advertising grew by 61.8% year-on-year, reaching 9% of digital revenue. We have also strengthened our portfolio of contracts with, for example, the wind of Shenzhen Airport and the renewal of the metro and buses of Rome during the period. We have also made progress in our best-in-class ESG initiatives with our carbon reduction trajectory being approved by the ESBTI. Profitability improved significantly. We have enjoyed a satisfactory level of operating leverage with our operating margin increasing by 28.7%, more than double our revenue growth. Operating cash flows increased by 21.5%, reflecting the improved profitability. CapEx were contained with a CapEx-to-SET ratio of 7.8%. Our free cash flow generation improved significantly, reaching a level that we consider satisfactory, given the seasonality of our activity. David, in fact, will further elaborate on these financial results. In slide five of our presentation, you will see that after our first quarter growth of 11%, organic growth accelerated to 15.4% in the second quarter, exceeding our guidance of 12%. This strong performance was driven by three factors. Continued strong demand from advertisers, particularly for digital advertising. The impact of major sporting events, namely the Olympic Games on the Euro Cup, in 2024, contributing around 1% to growth. Also, a positive portfolio effect starting from Q2 with the addition of the Shenzhen airport contracts in February and the end since April of the negative impact from the loss of the Guangzhou airport contract. In the next slide, you will see that the strong performance of the first half of the year was driven by all three of our activities each posting double-digit growth. Street furniture continued its momentum growing by 10.6% on an organic basis, starting from an already solid level in H1 2023. Transport continued to rebound with 18.8% organic growth, especially in the second quarter. This was due in part to improvements in China, including changes in our contract portfolio and global air traffic growth, which exceeded expert expectations with an 8.4% year-on-year increase in H1-2024. Billboard saw significant growth of 10.4% on an organic basis, a notable improvement compared to previous periods, plus 0.7% in 2023. However, this overall strong performance disparities between markets. Highly digitized markets like the United Kingdom experience very high growth, while France was flat as we continue to rationalize our inventory in line with regulations. Moving now to the next slide by geography. All geographic areas grew positively. The UK grew strongly by 28.1%. 29.8% organically. The rest of Europe, Asia Pacific, and the rest of the world also grew double-digit. Asia is now the only region remaining well below pre-COVID level to the slow recovery in China. Breaking down our total revenue by activity compared to H1 2023, the share of transport decreased slightly from 36% to 35.1%, still far from the 42.2% of H1 2019. Street furniture remains above 50% of revenue at 50.8, and billboards at 14.2%, close to its historical levels. By geographical areas, we are, as you know, well diversified. The United Kingdom area gains weight against H1 2023 from 9.2% of total revenue to 10.8%. France is our top country and stable and at 17.8%. If we look now by client categories on slide 9, you will notice that all sectors grew in this first half of the year. The luxury and beauty sectors slowed down slightly, but continued to grow faster than the group average at plus 16%. FMCG, Internet, and Telecom were the fastest-growing sectors at plus 26%, plus 19%, and plus 34% respectively. The automotive sector, represented on this picture from the Shenzhen Airport, grew at plus 31%, but remain outside of our top 10 categories for now. Digital revenue grew by 27.8% organically, well above the long-term average of 17%. Their share in total revenue increased from 32.7% in H1 to 36.8% in H1 2024. At the same time, and despite the conversion of some premium sites to digital, analog revenue grew mid-single digit. Our digital revenue breakdown remained very much in line with our business mix, proving that digital is relevant in our three activities, as we will see on the next slide. The share of digital revenue grew in our three main segments. In street furniture, digital revenue grew from 31% to 34.8%. Street furniture has the highest digital CAGR over the long period at 27.3%. In fact, cities enjoy also the flexibility of digital public message systems. In transport, our most digitized segment, digital revenue grew from 35.4% to 41.2%. We will continue to digitalize and to make the transport environments more premium especially in metros, as shown here in the metro of Sao Paulo in Brazil. Finally, in billboards, digital revenue grew from 32.3% to 33%, and the strong growth of billboards in the UK, which is pictured here in Manchester, proved once again the success of our digitization and de-identification strategy for this activity. And if we look on the next slide, you see that 60% of our digital revenue is coming from five countries only, namely the UK, the US, Australia, Germany, and China. While the UK and US are highly penetrated at 73% and 70% respectively, Germany is at 41%, and China remains relatively low at 27%, which shows that we will have a lot of room for future growth. On slide 13, now, you will see that programmatic advertising is obviously a key part of our digital ecosystem and continues to deliver on its promises. Programmatic revenue continues to grow strongly at 61.8% in H1 2024 to reach close to 60 million as it maintains its growth rate steady compared to last year on obviously a much larger revenue base. The share now of programmatic revenue in digital revenue has continued to increase to move from 7.1% in H1 2023 to 9% in H1 2024. Programmatic revenues remain so far mainly incremental, new money coming from targeted campaigns and from the long tail of advertisers, which enables us to generate higher yields for our digital inventory. On slide 14, this revenue development in programmatic is partly linked to our announced footprint. As you will see, the VIEW supply-side platform is the most connected supply-side platform of the market, now connected to 46 demand-side platforms. VIEW can now manage bookings on 51,000 screens around the world. Among these screens, obviously, 24,000 come from the inventory of JC Decaux spanning 21 countries across five continents. Regarding now our contract portfolio, since the beginning of the year and regarding the most significant contracts in China, we have won the airport of Shenzhen, we have renewed the Hong Kong MTR and the airport of Macao, which we have announced last Monday. In Europe, we have renewed the metro and buses of Rome with a contract which includes some renovation works of stations ahead of the Jubilee in 2025. More recently in Australia, we have renewed contracts for Sydney airports and Sydney buses. Moving now onto our climate prediction trajectory, you will see that our climate strategy aiming for net zero carbon by 2050, EA Scopes 1, two and three has been approved by the SBTI as announced earlier this week. This is another example of the excellence of our sustainable capabilities, recognized as best in class by extra financial rating agencies, including our placements on the CDPA list. Since the beginning of this year, our teams I've received multiple awards, and these awards obviously are a token of the great commitment and pioneering spirit of our corporate culture, which are key to continue to be innovative leaders in the OOH industry. As you can see, two campaigns have won Cannes Lions this year. First in Spain, and I invite you to look up the campaign about Marina Prieto, which is by using the Instagram profile of an unknown person, demonstrated the effectiveness of OH in metro environments. Also in China, a campaign in the Shanghai metro raised awareness about the Alzheimer's disease. Lastly, obviously, a note to the Olympic Games, which starts officially tomorrow, and this slide with two of our team members who have carried the torch in the Olympic torch relay. With that, I will now pass the torch to David for the financial highlights.

Thank you, Jean-Charles. Hello, everyone. First, the summary of our financial results with all our KPIs improving sharply over the period, reflecting the ongoing rebound in our activity. Double-digit revenue growth of plus 14%, which has been already commented by Jean-Charles, with a positive scope and currency net impact limited to plus 10.9 million, plus 18.2 million for the scope effect with the integration of Kirchner and Italy and Publigraphic, minus 7.3 million for the currency effect. Overall, no material impact on margins. An operating margin up 28.7%, twice as much as revenue growth, which reflects good operating leverage across all business segments. EBIT increased by 100 million, with 58 million coming from the increase in the operating margin, the rest mainly from the capital gain on the sale of some of our shares in APG. Net-in-group group share improved accordingly by 56.6 million, 68 million before impairment. Cash generation also improved sharply over the period. Operating cash flow increased by 21.5% in line with the evolution of the operating margin. Free cash flow was up 88.8%, an increase of €160 million, in line with the evolution of the working capital requirements, but I will come back to this in the next slide. This resulted in a net debt at €956 million, a decrease of €211 million compared to June 2023, an evolution that also benefited from the proceeds of APG transactions. Let's now take a look at the evolution of our operating margin. As you can see on this slide, page 22, rents and fees increased by 14.1%, aligning closely with the 14% increase in revenue. The rents and fees should normally increase at a lower pace than the revenue, but this 14% growth is also driven by a lower level of relief obtained in 2024 due to the recovery of our activity, particularly in the transport business segment, and a base effect in 2023 related to the positive one-off impacts from the renegotiation of some street furniture contracts. In contrast, our other operating costs increased less than our revenue growth at plus 9.4%, an increase of 62 million euros. Two-thirds of this increase is due to an organic increase in salary costs for about 11%, driven by a 4% increase in workforce to support higher level of activity, and about 7% related to wage increases. One quarter of the 62 million increase comes from the cost of goods sold, mainly driven by non-advertising revenue, which was boosted during the period by the sale to the city of Paris of the next generation of automatic public toilets. Excluding staff cost and cost of goods sold, it is to be pointed out that we successfully controlled our operating expenses, limiting their increase to 2.2% over the period. As a result, our operating margin reached 261.4 million, an increase of 28.7%, twice as much as the revenue growth rate, demonstrating a good operating leverage, as highlighted in my introduction. Looking at the EBIT now, as you can see on this slide, it is at 112.6 million before impairment and therefore improves by 100 million mainly due to the increase in the operating margin for 58 million and the capital gain on APG for 45 million, a capital gain which is positioned in the line other items in the table on the screen. For the net charges between operating margin and EBIT, you can note the 7.3 million increase in net amortization, which is partly related to the effects of the integration of Clear Channel Italy and Publigraphic, the capex also related to contract wins and renewal, and the right of use on real estate and also vehicles rentals as part of the electrification of our fleet. At the bottom of the table, the net impact of impairment charge represents a net income of $6.4 million in 2024 compared to the $21.9 million in H1 2023, a decrease of $15.5 million mainly related to the reversal in H1 2023 of the provision for onerous contracts recognized on Guangzhou Metro at the end of 2022. This brings the improvement in adjusted EBIT after impairment charges to 84.5 million, which stands at 118.9 million or 6.6% of the revenue. Let's now move on the evolution of our margin by business segment. On the left of the slide, the overall operating margin rate increased by 170 BP to 14.5%, coming from all business segments, but especially from transport and billboard, as you can see on the slide. For street furniture, the improvement is limited to 70 BP, despite a double-digit revenue growth, due to the base effect already mentioned related to the one-off positive impact from the contract renegotiation in H1 2023. For transport, we note an improvement of 180 BP, which is quite encouraging due to the slow recovery in China, the reduction in rent relief, and the deductive impact of new contracts starting, such as Shenzhen Airport. Finally, the increase of 610 BP in the billboard business segment is mainly due to revenue growth from the most digitized countries and the first positive effects of the rationalization plan implemented in France. The EBIT margin trajectory before impairment by business segment, shown on the right of the slide, broadly aligns with the operating margin rate, a bit more pronounced in the transport segment at plus 410 BP mainly due to termination cost for the Guangzhou airport and metro contracts in the first half of 2023. Excluding the capital gain from the APG transaction, the group's EBIT margin is 3.7% compared to 6.2% with this capital gain included. Regarding the evolution of the net income group share, as you can see on this waterfall graph, an increase of 55.6 million, which is mainly driven by the improvement in the EBIT that I have just commented on. This is partly offset by a base effect of 41.2 million in the IFRS 16 adjustment as H1 2023 benefited from the cancellation of these liabilities related to the last year contract renegotiations. Also note on this graph a favorable change in tax of 9.2 million despite the improvement in taxable results due to the reversal of deferred tax provisions in line with the improvement of our earnings forecast. A positive impact of 5.2 million from the result of companies with joint control and significant influence mainly due to the improvement in the performance of those companies over the period. And finally, a slight improvement in financial income of 1 million. Our interest expenses on our financing remained virtually flat with average net debt over the period broadly stable compared to 2023, while we benefited from a higher rate in 2024 on our liquidity. In the end, net income group share for the first half of the year is at 94.4 million euros. It benefited from the positive impact of the APG transaction and the improvement of our operational performance. Turning now to cash flow generation, first of all, in the middle of the table, our operating cash flows amounted to 138.9 million, an increase of 24.6 million, resulting from 58 million from the improvement in the operating margin, but partly offset by the increase in net interest paid and the increase in tax paid. The increase in net interest paid for 24.1 million is related to the annual payment in January 2024 of the interest coupon on our January 2023 bond. The increase in tax paid for 8.9 million is mainly due to the positive impact of tax refunds received in certain countries at the end of June 2023. Below the operating cash flow, net capex amounted to $140.7 million over the period. The ratio capex to sales contained below 8%, despite our ongoing investment in our digital ecosystem. Digital representing 36% of our total net capex. the impact of the change in working capital requirements was limited to minus 18.2 million euros despite the strong revenue growth over the period due to our ongoing strict strict management over our trade receivables trade payables and inventories compared to the end of june 2023 there was a favorable variation of 154 million which is also explained by the past rental payment in H1 2023 for around 100 million related to some contract renegotiations. The result is a free cash flow of minus 20 million, negative but a satisfactory level at this time of the year given the seasonality of our business. The free cash flow up sharply by 160 million euros compared to 2023. Finally, to conclude, an update on our financial structure, which is being reinforced. Our net debt improved by almost 50 million euros compared to the end of December 2023, due in particular to APG transaction for a net proceed of 88 million, partly offset by the negative free cash flow of 20 million that I have just commented on. Our net debt amounts to 957 million, representing a leverage of 1.3 times the last 12 months adjusted operating margin compared to 1.5 times at the end of 2023. Improved credit ratings with a stable outlook from both S&P and Moody's. A well-balanced debt profile with mainly fixed rate debt and an average maturity of more than four years after the repayment of our 600 million euros bond to come in October 2026. And finally, a strong liquidity of 2.5 billion, 1.7 billion available cash, and 825 million in confirmed undrawn revolving credit line with a maturity of mid-2026. On that note, I will now hand over to Jean-Francois for the outlook.

Thanks, David, and good morning, everyone. Out-of-home media is more than ever a growth media driven by both increasing audiences, which is the premium nature of our media, and digital. As shown on this slide, Group M, the world's largest media buyer, forecast digital out-of-home to be the fastest-growing media segment over the next six years outpacing online with a plus 9.1% CAGR. Out-of-home media is expected to grow by plus 7.3% CAGR, including a solid performance from analog growing at plus 6%. This clearly sets us apart from other traditional media, which have more modest growth prospects. Our business model, invented by our founder, Jean-Claude Decaux, also sets us apart we are highly integrated in the circular economy for the benefit of all stakeholders we support public transport systems both with the light infrastructures and revenue sharing this helps fight climate change as acknowledged by the eu green taxonomy we have 48 of our revenue is aligned compared to around 15 on average for all the companies and even less in the media sector. We also support soft mobility through our public bike systems, and we contribute improving the cleanliness and hygiene in cities through automatic public toilets. On slide 31, we present the evolution of air traffic worldwide. Air traffic has once again beaten the forecast of experts by growing at 8.4% year-on-year in H1 2024 worldwide, and is now above pre-COVID level. It is forecasted to continue growing strongly at around plus 8% per year in 2025 and 2026. This is a clear positive for our airport business. Moving to slide 40, here's a quick update on China. First, regarding our position. Over the past three years, we have strengthened our leadership position in the country by winning and renewing major contracts, including the win of Shenzhen Airport and renewal of the Macau Airport announced this week. We cover 21% of the urban population and are active in 12 cities. This includes the Shanghai Metro, one of the largest metro systems in the world, with 14 million daily passengers. An important point to note is that digital out of home remains quite low in China at 27% of revenue in H124 in a country where more than 90% of our business is in transport. The gradual increase of digital penetration should support our growth and help us offset some of the macroeconomic headwinds. We remain very confident that our presence in China is a strategic strength for the future. Now, regarding the current level of activity, our revenue in China grew by plus 11% in H1, 24, close to the group average over the period. This includes stronger growth in Q2, driven by changes in our contract portfolio, with the positive impact from Shenzhen Airport starting in February, and the end of the negative impact of the loss of Guangzhou Airport in April. On the same scope basis, Our business in China grew mid-single-digit year-on-year. Domestic mobility has now recovered fully, and international air traffic continued to recover from 51% in Q4 2023 to 69% now in Q2. In the current macro environment, consumers and advertisers are cautious, which explains the soft consumption and low visibility on our activity. The next slide presents the programmatic opportunity, a key growth driver of our business with a huge addressable revenue pool of $300 billion, 85% of global online advertising. Capturing a fraction of this market could boost the growth rate of our media. In the first half of the year, programmatic represented 9% of our total digital revenue. It is already much more important in some important countries, reaching 33.8% in Germany and 27.5% in the Netherlands. We think that the penetration of programmatic will continue to increase and should double to reach around 20% in the near future. These programmatic revenues are generated through a dedicated ecosystem with different types of players, each taking a share of the advertising investments made by advertisers. We are the only out-of-home media company which owns leading open solutions for every step of this growing value chain. On the demand side, Displace, a DSP, is connected to seven SSPs, including VIEW. On the supply side, VIEW is connected to 47 DSPs, including Displace. It offers the Jesse Deco inventory, but also inventory for multiple other out-of-home media owners. We are in control of our future and will benefit fully from this digitization. Brands can now enjoy the same ease of access to our inventory as for any online media through their preferred buying platforms, leveraging audience qualification, contextual data, and attention metrics, positioning digital out-of-home as a strong complement to online advertising channels. On the next slide, you will see that the level of activity remains high for tenders. Among the most significant, we can note TFL in the UK, both for the bus shelters, where we are the incumbents, and for the London Underground, where operated currently by Global. Stockholm, both for bus shelters and the metro, and for the metro, which are currently operated by Clear Channel. Most of these tenders now include a significant share of digital. On the next slide, looking at our competitive landscape, as announced in May, we have now sold some of our shares in APG SGA, reducing our stake in the company from 30% to 16.44%. This is a capital allocation decision looking at growth opportunities around the world. We did this transaction based on the multiple above 13 times ABDA, and we believe that we can reinvest these proceeds at a better return in M&A, for instance, with a much lower multiple at around 6-7 times ABDA pre-synergies. We welcome the arrival of NZZ at our side as a strategic shareholder of APG SGA. NZZ is a renowned press company with a deep knowledge of the media landscape in Switzerland, which will contribute positively to APG's development. Overall, we consider that our competitive position is now strengthened given some difficulties faced by our local competitors in China and the planned exits of Clear Channel from all non-US markets. Finally, I would like to conclude this presentation by some short closing remarks. First, our business momentum has been strong in Wage One 2024, driven by digital despite the challenging macro environment and geopolitical tensions. Second, programmatic continue to significantly gain share in our digital revenue. Third, we have enhanced our profitability. We improved metrics across all key items. Fourth, we maintain strict control of our capex and selective allocated our capital, as evidenced by the APG SDA transaction. And finally, for Q3 2024, we now expect an organic revenue growth around plus 10%, driven by strong digital revenue growth across all business segments, and including the positive impact of the Paris Olympic Games in France. Thank you for your attention. Jean-Charles, David, and myself are now ready to take your questions.

Thank you. As a reminder, to ask a question, you need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question. And the questions come from the line of Julia Roche from Barclays. Please ask a question. Your line is opened.

Yes. Good morning, everybody. My first question is, what is your target in terms of digital penetration, either overall or by division and by when? Second question for David, can you tell us how much factoring you did in the first half, if any? And then third question is, can we have some update on Spain? Because it's not been quite a long time since you bought the Kettle Channel assets. So I wonder where you are in terms of regulatory review there.

Okay, Julien. So on digital penetration, Jean-Francois, we'll take on your questions. David, we'll take on the second one, and we'll have the pleasure to take the third one.

Good morning, Julien. As you said in your note this morning, which I read carefully, only good news. And that also applies to the digital penetration. The digital penetration is, as you can see, growing very strongly. It is above 70% in markets like the UK. And it will continue to grow in other markets which are less penetrated. And the good news is that programmatic trading is growing as a percentage of digital revenues. And most of this growth is incremental. So we have a lot of markets where there is a significant potential. Of course, those markets are smaller markets. But if you add all these markets, it gives us, I think, a good potential for future growth. given our geographic diversification, which, by the way, is a strength of our business, because as you can see, many years ago, China was a growth driver. Now it's no longer a growth driver, but hopefully it will come back. But Europe is very strong. Some markets are, as you can see, UK was on fire in the first half. So we are all positive in terms of our digital penetration, but it's fair to say that the analog is pretty resilient, especially when you consider that China most of the key locations are digitized now. If you take London, for example, Oxford Street is 100% digital. King's Road is 100% digital. New York, Fifth Avenue, 100% digital. Madison Avenue, 100% digital. And despite the conversion of these high-profile locations, which are obviously the key locations in our networks, our analog business is growing and indeed generated more than 5% growth in the first half. So overall, as you said in your note, only positive news.

Regarding your question on factoring, Julien, as you know, the factoring is part of our working capital management policy. At the end of June 2024, we did an operation of about 250 million euros. And just for reminder, we did a factoring for 256 million in 2023. Maybe I take this opportunity also, Julien, just to highlight the fact that out of the 155 million variation in the working capital that you can note on the presentation compared to June 2023. The impact of the factoring is only 7 million. The rest is mainly coming from, you know, the one-off rental payment that we made last year in the context of some contract renegotiation for 100 million. and the rest coming from a good working capital management on the trade receivables and inventories.

On your last question, Julien, on Spain, we fully share your view that sometimes antitrust authorities are far too long processes, but we have to respect those institutions. And as you know, We are in phase two in Spain, and so at the moment we have no news. We hope to have some more news in the coming weeks on this transaction. That's where we stand at the moment, but currently it's quite, I would say, usual that those kind of, I would say, antitrust discussion takes basically between, as you know, 14 months to 16 months. So we are in the range, and we are progressing in obviously in those discussions, which are always taking a bit too long. I agree with you, but that's what it is in Europe at the moment. Hopefully one day this will change to be more or to be faster, but that doesn't depend on us.

Great. Coming back on factoring, I know it's a small number, but in your annual report, factoring was 249.3 at the end of full year 23, and David, you said 250, so that would mean no factoring impact in the first half, but you said there was a 7 million benefit?

Yes, because what you are taking into account is the factoring, excluding the factoring that we are implementing in our joint venture that we consolidate on the proportional basis.

Okay.

Okay, very clear.

Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Conor O'Shea from Kepler Chevrolet. Please ask the question.

Yes, thank you. Good morning, everybody. Three questions from my side as well. First question just on luxury. I think, Jean-Charles, you said that it grew faster than group average in the first half of the year, but obviously seeing some of the reporting from that sector being more to say the least. Concerned about that in the second half of the year. Are you seeing any signs of a potential slowdown in spend going into Q3? And then two questions maybe for David. First question, maybe I missed it, but did you give any indication about CapEx for the full year as a percentage of revenues or in absolute terms for 2024? And also, could you give us maybe just a ballpark sense of In the transport business, maybe the proportion of your contracts that you're still paying minimum guarantees with revenue still overall below pre-pandemic would be interesting to know what proportion are under minimum guarantee rental payments. Thank you.

Thank you, Conor. I will take the first question and David will take the second one. On the luxury, Conor, yes, you're right, we see some of our clients at the moment getting into a more difficult environment. Having said that, as you know, they've been also very dynamic over the last three or four years, so we have to take things on a relative basis. They are still basically dynamic in most of our markets around the world, with obviously difficulties in China for example but you have other markets quite dynamic so we don't we can't say at the moment that we see basically a major change in Q3 or Q4 in our portfolio even though obviously we can imagine that maybe some decision will be taken later on but at the moment I would say that the the dynamic in our portfolio remains quite good. On the CAPEX side?

Yes, regarding the CAPEX, as you have seen, the ratio of CAPEX to sales has been contained to 7.8% in the first half of the year. As we said at the end of last year, even though we are not providing any guidance to the market, we are working hard to stay in the capex to sales ratio for the capex around 8%. And this is more or less what we could expect for the end of the year.

OK. And on the minimum guarantees?

Ah, yes. So for the minimum guarantees on the transport business, You know, the main region where we are hitting the minimum guarantee is China, due to the soft recovery as it has been mentioned and presented by Jean-Francois in his section. Now, related to your precise question on the portion of the contract which is hitting the minimum guarantee, this is not a detail that we are providing, This is the only region today where we are still at the level of activity, which in some contracts, we are hitting the minimum guarantee.

Okay, understood. Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Annick Maas from Bernstein. Please ask your question. Anik Mas, your line is open. Hello, Anik, your line is open. You may be on mute. Please unmute your line. OK, we are now going to proceed with our next question. The next question comes from the line of James Tate from Gorman Sachs. Please ask your question.

Hi, thank you. Good morning, everyone. It's James from Goldman Sachs. Just a couple of questions, please. Firstly, in Billboard, margin improved really strongly by six percentage points year on year in H1. And you mentioned that you only have started to see the benefit from the rationalization plan in France. Could you help provide some more color on the benefit to margin that we should expect to see going into H2? And could it be a greater impact from the rationalization plan? And then secondly, as growth in China continues to improve, Could you give some color on the profitability of the China business versus pre-COVID? Thank you.

Thank you, James. I will take the first question, and David will take the second question on the China profile profitability for the future. On France, it is fair to say that the rationalization that we are going through in the French billboard segment is something that, as you know, has been ongoing for quite some time now. When you are looking at the French billboard business, you have to take into account that this is certainly one of the few countries around the world, if not almost the only one, where we can't really digitalize our billboard footprint in France. We don't think this is worth investing given the quality of the portfolio we are enjoying in France in street furniture, given also our position in the airport environment, and we think that the nature of the billboard business in France is not really welcoming sometimes because of regulation on one side and because also of the rate basically on the billboard which are more under pressure than in other countries and because of the size also of the billboard which is much smaller than in other markets, so less impactful, we don't think in our CapEx allocation that this is a segment in which we want to really invest in digitalization. So we are basically working on our capabilities to optimize our existing footprint, given the regulations, given also, as we said, our priorities. And this is fair to say that we have been able to work mainly on the rent, where we have been able to optimize our rent position in the billboard business across the country. And this is more coming from the synergies and the cost base of that business than from the top line. So this is, I would say, quite different exercise than the one we did over the last 10 years in the UK, which has been, I think, impressive transformation of our portfolio in the UK by one digitalizing our portfolio and two basically having much more Development on the billboard section in the UK going through the cost base But more importantly also to the top line where in France is more through the cost base and through the top line So I think this summarizes that in that sense We can't really compare in the billboard market one market to another because the regulations, sometimes the size restrictions, as I said before, in France, which is limited to the eighth square meter, makes basically this segment a bit peculiar, let's say, in our own territory. On the other side, you have a very strong and very powerful street furniture segment in France, which is basically today the biggest segment among the OH industry. So to make a long story short, for the billboard business, you will continue to see improvement in our margins in France in billboard, mainly coming through the cost base, but we can't obviously give you an exact figures on this one, but we are working hard as it has been shown on the numbers to gradually improve our profitability on that business. Moving to the China profile, David?

Profitability, yes. Regarding China, as it has been presented and as you have certainly understood during the presentation, China has been growing at the same pace as the group average during the first the first half of the year but with a much lower base. As it has been mentioned by Jean-François, the recovery is soft and we are still quite far behind the level of revenue pre-COVID, still at minus 40%. We have worked very hard and our team locally has done a great job in order to renegotiate the contracts and rents and fees during the COVID period. This year was not considered anymore as a COVID period. So the margin has been affected, as I mentioned during the presentation, by a lower level of rent relief compared to what we obtained in 2023. So in terms of margin, basically we have not improved the margin compared to 2023 in this geography. I cannot provide any more details because, as you know, we are not providing performance by country, but I think you will understand the message. So far, on the bottom line, even though there is a soft recovery in China, the margins have not yet improved. So we are expecting, you know, China to recover at a stronger pace in the coming months in order to really improve the margin, which will impact very positively our group margin, because as you know, pre-COVID, it was a significant contributor to our group margin.

Thank you.

Thank you. We are now going to proceed with our next question. The questions come from the line of Annick Maas from Bernstein. Please ask your question. Your line is opened.

Good morning. I was disconnected a few times, so I hope my questions weren't asked yet. But the first one is, so if I look at your revenues today in Q2, we are in line with 2019, yet on the operating profit, you're still tracking quite behind. What is needed except a China recovery to get to the operating profit level we've seen in 2019? My second one is on China. Can you give us an indication of how much China is making up of group revenues on a H1 or Q2 basis? And the third one is on billboards. So we've seen now a few quarters where billboards suddenly have done quite well. How much more is there to come? Can you point us to different countries where you're strong in billboards and where you're digitizing or give us a bit more of an idea what is more to come? Thank you.

Thank you, Annick. David will take the first and the second one. The second one, and Jean-François will take the third one on Billboard. David?

Yes, Jean-Charles. Regarding the operating margin versus 2019, as you mentioned, the first point will be the recovery in China to get back to the 2019 level. And the second point, it will depend also from... The mixed revenue, as you know, the margin from the street furniture is better than the transport and the billboards, so if the street furniture will continue to grow significantly, it will have a positive impact. But basically, it is mainly the recovery from China. Can you repeat, please, Annette, your second question?

No, it's just if you could tell us, either on a Q2 or on a H1 basis, how much China revenues made up of the group?

We are at about 11% of the total audience. A bit less than 11%.

On your third question, digital billboards are mainly in the UK, Australia, Latin America, more specifically Mexico and Central America, and a small footprint in the US in Chicago. So those regions, countries I should say, are the most dynamic in terms of growth. But we are also starting to digitize in some European countries where we have a big European billboard footprint. But as explained by Jean-Charles responding to the previous question, it is not an option for France for the time being. It's not really an option in the southern part of Europe except in Portugal, where after winning the Lisbon contract for large format, meaning billboards, If you happen to be in Lisbon recently, you will understand visually what I'm talking about. So there are some, in European, some pockets of potential digitalization, depending on the evolution of the traditional billboard sector, where less is more. So if in countries where there is no, where there is no, I should call it culling exercise, whether it's by legislation like in France, driven by the local authorities or central governments. And in those countries, as a result, an oversupply of billboards, plus the limitation in size, as indicated by Jean-Charles previously, it doesn't make sense to digitize because there is no return on investment. So in those countries, the name of the game is to renegotiate the rent level and in the other countries we continue to digitize as indicated in the first part of my reply.

Thank you very much.

Thank you. As a final reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our next question. The questions come from the line of Nisla Nezer from Deutsche Bank. Please ask your question.

Great. Thank you. I have two questions from my end. The first is on the Olympics impact in Q3. Could you remind us again the absolute impact that you're expecting? And is this a full pull forward of advertising in the sense would Q4 be weaker in France as a result of advertisers spending more in Q3 versus Q4? Or is this purely incremental? Some color there would be great. And secondly, there's been lots of recent contract wins and extensions. Could you remind us what's been the most meaningful in terms of absolute revenue contribution among the ones that you've reported in the last couple of quarters? Thank you very much.

Thank you. David, we'll take the first on the Olympics and then we'll take the contracts.

David? Yes, regarding the impact of the Olympic Games, it will be mainly impacting France for the months of July and August. As you remember, last year when we announced our Q3 revenue growth, We had already an impact in August 2023 related to the Olympic Games, and currently what we could expect is a positive impact on the revenue growth rate for Q3 of about 100 basis points coming from the Olympic Games.

On your second question regarding the new contracts, I would say that the biggest one was on Shenzhen in China. As you know, we don't disclose revenues projection by contract for obvious reasons, but this will certainly be the biggest win in the first half of the year. The rest is renewal and extensions, most of the time. So, no much, basically, impact on this one, except the Shenzhen one.

Understood.

Thank you.

Thank you.

Thank you. We are now going to take our next question. We have no further questions at this time. I will now hand back to Mr. Jean-Charles Decaux for closing remarks. Thank you.

So thank you, and we wish you a good summer. And we will see you certainly on the road at the beginning of September and during the month of September during our roadshow. Enjoy the summer. Goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.