JCDecaux SE

Good morning, everyone, and welcome to our 2025 half-year results conference call. The speakers on this call will be Jean-Charles Decaux, Co-CEO, David Bourg, Chief Financial IT and Operations Officer, and myself. Rémi Grézard, Head of Investor Relations, is also attending today's conference call. Moving to slide four of the presentation, You can see that our unique and well-diversified premium out-of-home global media footprint recorded in the first half a very strong robust revenue growth and a strong operating leverage in a very challenging and uncertain macroeconomic and geopolitical environment despite a mid-single-digit decline in China. Our revenue increased by 3.4% year-on-year in H1 2025 and by 3.3% on an organic basis driven by digital out of home, which rose by 12.2% to nearly 40% of total revenue, with programmatic digital out of home up an impressive 25.2%. Key operational indicators showed strong double-digit growth, with over 75% of our revenue growth translating into operating margin. As a result, we increased our operating margin by 17.6%, with a year-over-year improvement of 200 basis points as a percentage of revenue, a significant step up. Our EBIT before impairment charges grew by 11.6% to 125.6 million euros and even more by 114.7% when excluding non-recurring items. Finally, our operating cash flows also rose by 10.7% but David will cover that in more detail in just a moment. On slide five, you can see that we recorded an organic growth rate of 3.3% in the first half of 2025. We had a very strong first quarter with 5.5% organic growth, and Q2 followed through nicely. In fact, we delivered a record second quarter revenue growing by 1.6% organically, right in line with our guidance of low single-digit growth. If we exclude the one-off impacts from UEFA Euro 2024 and the Paris Olympic Games, organic growth in Q2 would have been closer to 3%. Compared to Q2 2023, we delivered a strong double-digit revenue increase, which really highlights the robust level of activity this quarter, It's especially encouraging when you consider we are still facing macroeconomic headwinds, including tariffs and the decline in revenue from China. Overall, it's a solid performance driven by digital and geographic diversification with both Jesse Decaux and the broader out-of-home media market continuing to gain market share during this period. On slide six, let's now move to the half-year performance by activity as shown on the next slide. Organic and reported growth were quite similar overall, as the positive impact of our acquisitions was offset by negative foreign exchange effects. Street furniture maintained its strong momentum with 4.3% organic growth, even against a base that had benefited from sporting events in Europe last year. Transport continued its rebound, growing plus 3.2% organically, despite a mid-single-digit revenue decline in China. Outside of China, growth was much stronger, reaching plus 6.4% organically. Billboard remained broadly stable with flat organic growth, mainly due to tough comparables in France and the UK. On the next slide, you can see that all geographic areas experienced growth in this first half, except the UK, which decreased by 2.9% due to a very high comparable from 29.8% increase in H1 2024. North America was the fastest growing region, expanding by 11.8%. We saw no impact on tariffs on advertiser sentiment. The rest of the world grew by 6.8%, driven by dynamic performance in key countries across both Latin America and the Middle East. France and the rest of Europe aligned with the group average, despite the impact of 2024 sporting events. Asia Pacific, grew by 1.3%, experiencing high single-digit growth when excluding China. Our unique business global premium out-of-home model is well diversified by activities as well as by geographies. Street furniture now constitutes 51% of total revenue. Transport, at 35.2%, has not yet recovered its 2019 revenue share of more than 40%. Billboard remains our smallest segment, accounting for 13.8% of total revenue. France is our largest country, representing 17.6% of total revenue, while Europe takes up nearly 50%. The UK ranks as our second largest country. We have decreased our exposure to China from 18% of revenue in H1 2019 to just 10% in H1 2025. Turning to the next slide, our client portfolio is well diversified, with our top 10 clients contributing to less than 13% of revenue. We observe a healthy rotation among leading advertising categories. Fashion, luxury, and personal care, our largest category at 18% of sales, turned slightly negative at minus 2%. Meanwhile, two categories show double-digit growth, finance at plus 14%, and services at plus 13%. It is interesting to note that consumption-related categories like FMCG and retail continue to show strong growth. Meanwhile, automotive has made a comeback into the top 10 after a long absence taking the place of governments. Digital out-of-home remains a key growth driver as it grew by plus 12.2% organically in H1 2025. Digital revenue penetration rose by almost three percentage points year on year, reaching 39.6% in H1 2025 and 40% in Q2. Our digital revenue distribution closely mirrors our business mix, highlighting how relevant digital is across all three activities. The next slide demonstrates that digital penetration increased across all three business segments. In street furniture, Digital revenue climbed to 37.5% compared to 34.8% a year earlier. Digital revenue in transport, our most digitized segment, grew from 41.2% to 44.5%. In billboard, digital revenue reached 35.4%. Large digital structures, such as the one represented here in Melbourne, significantly improved the profile of this activity. By country, our digital penetration also increased but remained concentrated, as five countries, namely the US, the UK, Australia, Germany, and China, still account for 59% of total group digital revenue. We still have a lot of room for growth. As you can see, some countries are quickly catching up, such as Germany, where the digital revenue share increased from 41% to 47%, and China from 27% to 32%. Brazil, represented here by the Sao Paulo metro, also demonstrates strong digital revenue generation at 76%, although it's not among our top five digital markets in absolute terms. Let's move on to the next slide with programmatic advertising, a fast-growing area contributing to our digital revenue growth with higher yields. Programmatic revenues sold by 25.2% in H1 2025, reaching 74.7 million euros, or 10.1% of our digital revenue, up from 9% the previous year. Programmatic revenues remain primarily incremental, sourced from smaller advertisers or from existing brands, launching new campaigns, employing more dynamic and refined targeting. This slide features an expresso campaign targeting coffee enthusiasts aged 18 to 44 in Germany during morning hours, integrated with other media formats, including analog outdoor. We anticipate continued strong growth for programmatic revenue, with leading countries such as Germany at 35.9% and the Netherlands at 29.2%, surpassing the group average of 10.1%. We expect programmatic penetration to continue to rise and may double around 20%. Here, a campaign from France in Cannes demonstrated the real-time content adaptation between two visuals based on temperatures below or above 24 degrees Celsius. Even in countries with a low digital penetration, this clearly demonstrates how relevant programmatic can be for advertisers. You will see on the next slide our most important contract news for the first half of 2025. In street furniture, we have worn the freestanding panels of the city of Rennes in France, the city of Odense in Denmark, and Bachelet in Firenze, Pisa, and Prato in Italy, as well as Fukuoka in Japan. Regarding transport, we have won the Northern Rail contract in the UK, and we announced two days ago the renewal of Brussels Airport. Finally, we have confirmed our excellent ESG performance. Our performance was recognized as best in class by extra financial rating agencies, including our placements on the CDP-A list for the second year in a row, and the gold medal status from Ecovallis. We have received as well, again, the best score, AAA, from MSCI and Systematics rated us as a low risk company among the media. This clearly puts ahead of the competition in the media market by leading the way on ESG. Having said that, public procurement and advertisers have not fully affected this into their decision making, at least not yet. But we are committed to pushing this forward because we believe ESG will become a key differentiator in the future. More broadly, I would like to emphasize that out-of-home media is among the least carbon-intensive media formats for advertisers. I will now hand over to David for the presentation of our financial highlights of the year.

Thank you, Jean-François. Hello, everyone. First, let's have a quick look at the summary table of the financial results. As Jean-François said, a solid set of results, especially with a strong operational leverage resulting in a double-digit increase in our key operational indicators alongside a 3.4% revenue growth. Our operating margin improved by 17.6%, EBIT before depreciation went up by 11.6%, and our operating cash flow strengthened by 10.7%. Our net income shows a decrease compared to H1 2024, but this is largely due to one-off factors. Same for the free cash flow due to timing differences in our working capital, on which I will come back further in the following slides. Finally, we continue reducing our net debt by nearly 44 million compared to June 2024, bringing it down to 912.9 million euros despite resuming dividend payments in May 2025. On the next slide, let's take a look at the evolution of the operating margin. It has increased from 261 million to 307 million euros, an increase of 46 million compared to 2024, representing 76% of the revenue growth. Once again, this underscores our strong operational leverage thanks to the impact of a robust revenue growth on an effective cost management as illustrated on the graph to the left. The growth in rents and fees during the period was limited to 1.3%, mainly due to contractual conditions in some concessions adjusted to the level of activity, especially in China. Other operating expenses were virtually stable at plus 0.2%. Consequently, our margin ratio has increased by 200 bps, reaching 16.5% with growth across all business segments, as shown on the graph to the right. The transport segment in particular has a more significant increase of 380 BIPs benefiting from the contract adjustment in China that I have just commented. Regarding our EBIT on the next slide, it stands at approximately 126 million euros, a 6.2% increase, but plus 11.6% before impairment due to the reversal of provision for loss making contracts in 2024. When adjusted for one-off items like the capital gain from the partial sale of APG SGA for 45 million euros in 2024 and reversal of provisions and asset disposal, our EBIT excluding non-recurring items growth by 140.7% plus 47.4 million euros. This growth in absolute terms aligns with the increase in our operating margin thanks to the relative stability in our depreciation and maintenance spare parts. Referring to the net Income group share, on the next slide, it is reported at 76.4 million euros before impairment, as you can see at the bottom of the table on this image, reflecting a decrease of 15% of 13.5 million euros compared to last year. However, after adjusting for non-recurring items, such as the capital gain on APG-SGE in H1 2024, we actually observe a growth of 86.1%, broadly consistent with the evolution of the EBIT before non-recurring items, which I presented in the previous slide. A few points to highlight between the EBIT and the net result. First, the income tax with an 18.7 million increase stemming from the increase in operational results and a less significant activation of deferred tax asset on loss carried forward than in H1 2024. Looking at the financial results year on year, things are overall stable. We saw a 2.7 million euro drop in IFRS 16 discount cost thanks to a reduction in lease liability On the flip side, there has been a €3.3 million increase in net financial interest, which is mainly due to lower interest received on invested cash. But the cost of our net debt remains good at around 3.4% in H1 2025. Finally, there is a €5.1 million improvement in our share of net results, from equity affiliates, driven by improved operational performance from affiliates, mainly linked to contract adjustments in China, also reflected in the evolution of the restatement of the joint control entities at the top of the table. Let's now dive into the cash flow analysis on the next slide. At the center of this slide, our operating cash flow amounts to 153.7 million euros, a robust double-digit increase of 10.7%, but less pronounced than the increase in operating margin for two main reasons. First, there is an increase in net financial interest paid of 10.7 million due to a temporary mismatch between paid and received interest. this should ease in the second half of the year as we no longer have to pay the coupon on the 600 million euro bond which was paid in last october then there is an unfavorable variation on the line other items amounting to 5.9 million euros mainly due to reduced dividends received from apg sga following the sale of part of our shares in 2024, as well as one-off bank fees related to the refinancing of our revolving credit facility. Below our operating cash flow, our net capex was lowered to €118.8 million over the period, representing 6.4% of the revenue against 7.8% last year at the same time of the year. Therefore, our cash flow after CAPEX, but before change in working capital requirements, turned positive to 36.8 million, whereas it was slightly negative in the first half of 2024. While a negative free cash flow is usual at this time of the year due to the seasonality of our activity, Timing differences in working capital requirements as of the end of June 2025 negatively impacted our free cash flow to reach minus 64.9 million in H1 2025 versus minus 20 million in H1 2024. These timing effects mainly include a lower use of factoring for about 25 million euros lower payables mainly linked to decrease in inventory and capex, and temporary shift in client collection between end of Q2 and beginning of Q3. Finally, this last slide which summarizes our strong financial structure, the net debt continuing to decrease as mentioned in the introduction, minus 44 million euros compared to June 2024, and a temporary increase versus December 2024 due to seasonality of our activity and the dividend payments in May. A well-balanced debt maturity profile with no upcoming maturities before 2028 and a strong liquidity with over 1 billion euros in available cash and an undrawn confirmed credit line of 825 million euros recently renewed for five years with two optional extension years. That's it for the main elements of our H1 financial results and I now hand over the floor to Jean-Charles Decaux for the outlook.

Thank you, David, for this presentation and good morning to everyone. So for the outlook and strategy, firstly, it is essential to remind everyone that the key structural growth drivers for out-of-home media remain strong both now and for the long term. Our media is at the moment prospering with growing audiences thanks to the increasing economic vitality of cities and the rise in mobility globally, whether it is a long-haul transport like air traffic or rail travel, and this includes, obviously, public transportation. Digitization is not disrupting us. Instead, we are capitalizing on its boost attention through visual emotion, data, and flexibility media buying. Our media remains premium, reaching dynamic and young audiences with strong credentials on audience measurement and quality of ad spaces in our portfolio. In a landscape where advertisers face a growing fragmentation of options, as most other traditional medias are losing audiences, This gives us a unique advantage. Programmatic now represents for us a huge market opportunity with a $300 billion market for online display programmatic globally, more than five times the total OH market at the moment. With automated trading, we can target the long tail of advertisers and increase significantly our addressable revenues pool, creating, obviously, new revenue streams. We are optimally positioned to benefit from this market with our growing programmatic revenue and our ownership of two leading platforms, Displace, a DSP and DMP active in 88 countries, and Vue, the most connected SSP of the OH media industry with 52 DSP connected. We are the only OH with such programmatic assets open to third-party media owners. Considering recent transactions like the acquisition of HypeStack and Vistar by tech and telecom companies as substantial valuations, we believe our assets' true strategic and financial value is absolutely not crystallized yet in our share price. In the next slide, we demonstrate how OOH Media, driven by the growth factors outlined in slide 25, is clearly gaining market share in key countries around the globe. Over the past decade, OH market share increased by around 5 percentage points in the total media mix in Germany, Brazil, and Australia, nearing or surpassing 10% of total ad spend investment. Notably, in the first half of this year, it exceeded 10% in Germany for the first time, according to data from Nielsen. Moving now to slide 28, you will notice on this graph the remarkable growth air traffic has experienced over the years. This trend is expected to continue with passenger numbers projected to rise by 5.8% by 2025 and forecasts suggesting a total exceeding by 22 billion passengers by 2050. We are uniquely positioned to capitalize on this growth by operating advertising concessions in 157 airports globally, including 12 of the top 25 airports in the world. In the next slide, regarding the main tenders, among the most significant we can name in street furniture Barcelona, in transport Danish Rail, and in the airports of Denver and Washington in the US. Almost all tenders now incorporate a significant share Jean-François highlighted earlier ESG as a key differentiator force aligning with our partners' commitments. For our cities and transport partners, we are innovative with sustainable urban solutions, such as introducing plants on our street furniture in Paris since 2024 to support and boost biodiversity in cities. Regarding now our cities and transport partners, we are obviously developing innovative and sustainable solutions mainly related to urban biodiversity and low-emission street furniture. We launched in 2024 JT Deco, a pilot, to introduce plants on our street furniture in the centre of Paris. With 42% of our Scope 3 emissions linked to furniture, prioritizing refurbishment and eco-design is absolutely crucial. Refurbished furniture significantly reduce carbon emissions by over 70% compared to new infrastructures. To help advertisers, we have developed 360 footprint innovative program measuring environmental and socio-economic impacts of campaigns and providing insights into Scope 3 emissions through a calculator. After successful trials in France, we are now gradually rolling it out globally. Our climate trajectory, validated by the SBTI last year, aims for net zero carbon by 2050, in addition with interim targets by 2030. In 2024, the group has reduced its greenhouse gas emissions, Scope 1, 2, and 3 market-based, by nearly 30% in 2024 compared to 2019. To meet our Scope 3 target, public procurement must evolve to prioritize EAG in all tenders and select solutions like furniture refurbishment that are less carbon intensive than new infrastructure. Looking now at our competitive landscape on slide 36, We are the number one global OH Media company, but the number one in the fragmented market. Our global reach gives us a real edge when it comes to serving international clients, especially in the luxury, cosmetics, finance, energy, and automotive industries. We believe that our competitive position is getting stronger, especially with some difficulties faced by local competitors and the clear channel pulling out of Europe and Latin America now. We will continue to execute our bolt-on acquisition strategy. Our key takeaways for today are the following. As you can see, robust revenue growth driven by digital despite micro-uncertainties and comparison-based impacts in Q2 and Q3. Programmatic continued to significantly gain share in our digital revenue. Strong operating leverage, 75% of conversion of revenue into operating margin. plus 200 basis points in operating margin rate while maintaining strict control over CAPEX and selective allocation of our capital. Moving now to our guidance for Q3 2025, we now expect low single-digit negative organic growth for Q3, taking into account 410 basis point negative comparison impact due to the 2024 Olympic Games and the UEFA Euro and no improvement in trading in China at the moment. Compared to 2023, organic revenue growth is expected to be high single digit. I thank you for your attention and Jean-Francois, David and I are now ready to take your questions.