JCDecaux SA (DEC.PA), the outdoor advertising giant, has demonstrated a strong first half of 2024, with organic revenue growth of 13.4%, propelled by a 27.8% surge in digital and a 61.8% jump in programmatic advertising. The company's profitability has seen substantial improvement, with operating margin expanding by 28.7%.
Strategic contract wins, such as those for Shenzhen airport and public transport in Rome, alongside a focus on sustainability, have positioned JCDecaux positively in a challenging environment. Despite a flat performance in France, the UK market showed robust growth. Looking ahead, the company anticipates further growth in digital out-of-home media and is well-prepared to tap into the substantial addressable revenue pool.
Key Takeaways
- JCDecaux's organic revenue increased by 13.4%, with digital advertising up by 27.8%.
- Programmatic advertising grew by 61.8%, highlighting a shift towards more targeted and automated ad placements.
- Operating margin rose by 28.7%, with operating cash flows up by 21.5%.
- Net debt decreased significantly to €956 million, with a leverage ratio of 1.3 times the adjusted operating margin.
- The company's sustainability efforts were recognized as it received multiple awards and approval from the SBTi.
- JCDecaux is optimistic about the impact of the Paris Olympic Games on Q3 2024 revenue, expecting a boost of around 100 basis points.
Company Outlook
- JCDecaux anticipates a 10% organic revenue growth in Q3 2024, mainly driven by digital revenue and the Paris Olympic Games.
- The company's ecosystem is poised to capture a share of the $300 billion addressable revenue pool in programmatic advertising.
- JCDecaux is actively pursuing M&A opportunities and expects programmatic penetration to reach approximately 20% in the near future.
Bearish Highlights
- France's market performance remained flat, attributed to inventory rationalization.
- China's recovery is described as soft, with the company still meeting minimum guarantees on transport contracts.
- The free cash flow was negative at €20 million, although it marked a €160 million improvement from the previous year.
Bullish Highlights
- The UK market experienced strong growth.
- Significant contract wins, such as Shenzhen airport, bolster the company's portfolio.
- Net income group share increased by €55.6 million to €94.4 million.
- JCDecaux expects a full recovery in domestic mobility and a continued recovery in international air traffic.
Misses
- No specific revenue contribution figures were provided for China, despite its 11% contribution to total revenue.
- The company did not disclose revenue projections for individual contracts, including the notable Shenzhen win.
Q&A Highlights
- JCDecaux's luxury client segment remains dynamic despite a challenging environment.
- The CapEx to sales ratio for the year is expected to be around 8%.
- Billboard margins have improved, especially in France, due to optimization of the existing footprint and rent positions.
- Digitization of billboards in Europe is selective, with a focus on renegotiating rent levels in some regions over digitization.
JCDecaux's half-year results for 2024 reflect a company that is successfully navigating a complex market landscape, leveraging digital innovation and programmatic advertising to drive growth. With strategic investments and a clear focus on sustainability, JCDecaux is solidifying its position in the global outdoor advertising industry.
The company's financial health appears robust, with significant debt reduction and a strong outlook for the upcoming quarters, underscored by the anticipated benefits from the Paris Olympic Games.
Full transcript - JCDecaux (DECp) Q2 2024:
Operator: Ladies and gentlemen, welcome to the JCDecaux 2024 Half-Year result presentation. I will now hand over to Jean-Charles-Ducourt, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.
Jean-Charles Decaux: Good morning everyone and welcome to our 2024 Half-Year Results Conference Call. The speaker today on this call will be Jean-François Decaux, co-Chief Executive Officer, David Bourg, chief financial IT and administrative officer and I. Rémi 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 win 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 SBTi. 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 sales 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 5 of our presentation you will see that after a 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 hides disparities between markets. Highly digitized markets like the United Kingdom experienced 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 U.K. grew strongly by 29.8% organically. Rest of Europe, Asia-Pacific and 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 Billboard 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 remained 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 street activities, as we will see on the next slide. The share of digital revenue grew in our three main segments. Street furniture's 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 U.K., which is pictured here in Manchester, proved once again the success of our digitization and identification strategy for this activity. Now, and if we look on the next slide, you see that 60% of our digital revenue is coming from five countries only, namely the U.K., the U.S., Australia, Germany and China. While the U.K. and the U.S. 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 enabled 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 VIOOH supply-side platform is the most connected supply-side platform of the market, now connected to 46 demand-side platforms. VIOOH can now manage booking on 51,000 screens around the world. Among these screens, obviously, 24,000 come from the inventory of JCDecaux 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 Macau 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 as of the Jubilee in 2025. More recently in Australia, we have renewed a contract for Sydney airports and Sydney buses. Moving now onto our climate reduction trajectory, you will see that our climate strategy aiming for net zero carbon by 2050, EA Scopes 1, 2 and 3, 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 CDP A list. Since the beginning of this year, our teams have received multiple awards and these awards obviously are a token of the great commitment and pioneering spirits 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 at the campaign about Marina Prieto, which is by using the Instagram profile of an unknown person, demonstrated the effectiveness of OOH in metro environments. Also in China, a campaign in the Shanghai metro raised awareness about the Alzheimer's disease. Lastly, obviously, another 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.
David Bourg: 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 [Indiscernible] minus 7.3 million for the currency effect. Overall, no material impact on margin. And 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. Netting group rule 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 impact 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. 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 a 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 costs 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 [ph] Italy and [Indiscernible], 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 (TSX:MRU) 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 billboards, 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 180bp, which is quite encouraging due to the slow recovery in China, the reduction in rent relief and the dilutive impact of new contracts starting, such as Shenzhen Airport. Finally, the increase of 610bp in the billboard business segment is mainly due to revenue growth from the most digitized countries and the first positive effect 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 410bp, mainly due to termination costs for the Guangzhou Airport and Metro contracts in the first half of 2023. Excluding the capital gain from the EPG 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. It benefited from the positive impact of the EPG 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 for €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 despite the strong revenue growth over the period due to our ongoing 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, a free cash flow up sharply by €160 million compared to 2023. Finally, to conclude an update on our financial structure which is being reinforced, our net debt improved by almost €50 million compared to the end of December 2023 due in particular to EPG transactions 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 (NYSE:MCO), 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 bond to come in October 2026. 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.
Jean-François Decaux: 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, GroupM, the world's largest media buyer, forecasts 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, where 48% of our revenue is aligned compared to around 15% on average for other companies, and even less in the media sector. We also support soft mobility through our public bike system, 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 is 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 H1 2024. 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 2024, 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 continues 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 the rate 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, Displays, a DSP, is connected to 7 SSPs, including VIOOH. On the supply side, VIOOH is connected to 47 DSPs, including Displays. It offers the JCDecaux 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 U.K., both for the bus shutters where we are the incumbents, and for the London Underground where we are operated currently by Global. Stockholm, both for bus shutters 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 a multiple above 13 times EBITDA, and we believe that we can reinvest this proceeds at a better return in M&A, for instance, with a much lower multiple at around 6, 7 times EBITDA 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 plan exits at Clear Channel from all non-U.S. markets. Finally, I would like to conclude this presentation by some short closing remarks. First, our business momentum has been strong in H1 2024, driven by digital despite the challenging macro environment and geopolitical tensions. Second, programmatic continues to significantly gain share in our digital revenue. Third, we have enhanced our profitability with improved metrics across all key items. Fourth, we maintain strict control over CapEx and selectively allocated our capital, as evidenced by the APG|SGA transaction. And finally, for Q3 2024, we now expect an organic revenue growth of 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.
Operator: Thank you. [Operator Instructions] And the questions come from the line of Julien Roche from Barclays (LON:BARC). Please ask a question. Your line is opened.
Julien Roche: 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 Clear Channel assets. So I wonder where you are in terms of regulatory review there.
Jean-Charles Decaux: Okay, Julien. So on digital penetration, Jean-Francois, will take on your questions. David will take on the second one. I will have the pleasure to take the third one.
Jean-François Decaux: 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 U.K. And it will continue to grow in other markets which are less penetrated. 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 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 the 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, U.K. 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 most of the key locations are digitized now. If you take London, for example, Oxford Street is 100% digital. Kings 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 did generate more than 5% growth in the first half. So overall, as you said in your note, only positive news.
David Bourg: Regarding your question on factoring, Julien, factoring is part of our working capital management policy. At the end of June 2024, we did an operation of about €250 million. And just for a reminder, we did 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 the one-off rental payment that we made last year in the context of some contract renegotiation for €100 million. And the rest is coming from a good working capital management on the trade receivable and inventories.
Jean-Charles Decaux: 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 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.
Julien Roche: 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 July 2023. 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?
David Bourg: 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.
Julien Roche: Okay, clear.
David Bourg: It is not under IFS without the joint venture.
Julien Roche: Okay, very clear. Thank you.
Operator: 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 Cheuvreux. Please ask your question.
Conor O'Shea: Yes, thank you, good morning, everybody. Two questions from my side as well. First question just on luxury. I think Jean-Charles said that what grew faster than group average in the first half of the year, but obviously seeing some of the reporting from that sector being mixed to say the least. Concerned about that in the second half of the year, you see any signs of potential slowdown and 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 on 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 in a minimum guarantees with revenues still overall below pre-pandemic. It would be interesting to know what proportion are under minimum guarantee rental payments. Thank you.
Jean-Charles Decaux: 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 for in most of our markets around the world with obviously more difficulties in China, for example, but you have other markets quite dynamic. So 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 dynamic on our portfolio remains quite good. On the CapEx side?
David Bourg: Yes, regarding the CapEx, as you have seen, Conor, the ratio of CapEx to sales has been contained to 7.8% in the first part 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 sale ratio for the CapEx around 8% and this is more or less what we could expect for the end of the year.
Conor O'Shea: And on the minimum guarantees?
David Bourg: Yes, so for the minimum guarantees on the transport business. The main region where we are eating the minimum guarantee is China due to the softer recovery, as it has been mentioned and presented by Jean-Francois in his section. But now related to your precise question on the portion of the contract, which is eating the minimum guarantee. This is not a detail that we are providing, but this is the only region today where we are still at the level of activity, which in some contracts, we are eating the minimum guarantee.
Conor O'Shea: Okay, understood. Many thanks.
Operator: 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. Annick Maas, your line is open. Hello, Annick, your line is open. You may be on mute. Please unmute your line. Okay, we are now going to proceed with our next question. The next question comes from the line of James Tate from Goldman Sachs (NYSE:GS). Please ask your question.
James Tate: Thank you. Good morning, everyone. It’s James Tate from Goldman Sachs. Just a couple questions, please. And first in billboards, margin improved very strongly by 6 percentage points year-over-year in H1. And you mentioned that you only have started to see the benefits in the rationalization plant 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 there 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.
Jean-Charles Decaux: 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 people segment is something that as you know has been ongoing for quite some time now. When you are looking at the French people business, you have to take into account that this is certainly one of the few countries around the world. It's 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 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 on the 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 on the cost base of that business than from the top line. So this is, I would say, a quite different exercise than the one we did over the last 10 years in the U.K., which has been I think impressive transformation of our portfolio in the U.K. by one, digitalizing our portfolio and two, basically having much more development on the billboard section in the U.K. going through the cost base, but more importantly also through the top line, where in France is more through the cost base than through the top line. So I think this summarizes that in that sense, we can't really compare in the billboard market to one market to another because the regulations, sometimes the science restrictions, as I said before, in France, which is limited to the eight 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 OOH industry. So to make a long story short, for the billboard business, you will continue to see improvements 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.
David Bourg: 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 half of the year, but with much lower rates, as it has been mentioned by Jean-Francois, the recovery is soft and we are still quite far behind the level of reducing pre-COVID, still at minus 40%. We have done a lot of work very hard and our team locally has done a great job in order to re-negotiate all the contracts and rents and fees during the COVID period. This year was not considered anymore as the COVID period. So the margin has been affected, as I mentioned during the presentation by a lower level of rent release 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 detail because, 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 China to recover at a stronger pace in the coming months in order to really improve the margin which we impacted very positively our group margin because, pre-COVID, it was a significant contributor to our group margin.
James Tate: Thank you.
Operator: 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 open.
Annick Maas: Good morning. I was disconnected a few times 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 the 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 billboard 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 will give us a bit more of an idea what is more to come? Thank you.
Jean-Charles Decaux: David will take the first and the second one. The second one, and Jean-Francois will take the third one. On this note, David?
David Bourg: Yes, Jean-Charles, regarding the operating margin versus 2019. As you mentioned, the first one will be the recovery in China to get back to the 2019 level. And as one point, it will depend also from the mix of revenue, as you know, the margin from the Street Furniture will be better than the Transport and the Billboard. So 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, Annick your second question?
Annick Maas: No, just if you could tell us either on the Q2 on a H1 basis, how much China revenues made up of the group.
David Bourg: Regarding the -- we are at about 11% of the total revenue, a bit less than 11%.
Jean-François Decaux: On your third question, so digital billboards are mainly in U.K., Australia, Latin America, more specifically Mexico and Central America and a small footprint in the U.S. 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 billboard, 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 digitization depending on the evolution of the traditional billboard sector, where less is more. So in countries where there is no whether I should call it culling exercise, whether it's by legislation like in France, driven by the local authorities or central government, and there is -- 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.
Annick Maas: Thank you very much.
Operator: [Operator Instructions] We are now going to proceed with our next question. Questions comes from the line of [Indiscernible] from Deutsche Bank (ETR:DBKGn). Please ask your question.
Unidentified Analyst: 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 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.
Jean-Charles Decaux: David will take the first on the Olympics, and I will take the contracts. David?
David Bourg: Yes, regarding the impact of the Olympic Games, it will be mainly impacting France for the month of July and August. As you remember last year and 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.
Jean-Charles Decaux: On your second question regarding the new contracts I will 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.
Unidentified Analyst: Understood. Thank you.
Jean-Charles Decaux: Thank you.
Operator: Thank you. We are now going to take our next question. We have no further questions at this time. I would like to hand back to Mr. Jean-Charles Decaux for closing remarks. Thank you.
Jean-Charles Decaux: 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 road show. Enjoy the summer. Goodbye.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now all disconnect your lines. Thank you.
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