Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew by 13.4% organically, driven by a 27.8% increase in digital revenue.
- Programmatic advertising saw a significant growth of 61.8%, now making up 9% of digital revenue.
- Operating margin increased by 28.7%, demonstrating strong operating leverage.
- Free cash flow generation improved significantly, up by 88.8% year-on-year.
- Strong performance in key markets like the UK, which grew by 29.8% organically.
Negative Points
- Revenue growth was below expectations despite the overall positive performance.
- Asia, particularly China, remains well below pre-COVID levels, impacting overall growth.
- Luxury and beauty sector showed signs of slowing down, which could affect future revenue.
- High disparities between markets, with some like France showing flat growth.
- Continued challenges in the transport segment, particularly in China, affecting profitability.
Q & A Highlights
Q: What is your target in terms of digital penetration either overall or by division?
A: Jean-Charles Decaux, Co-CEO: Digital penetration is growing strongly, with markets like the UK above 70%. Programmatic trading is also increasing as a percentage of digital revenues, and most of this growth is incremental. There is significant potential in smaller markets, and our geographic diversification is a strength.
Q: Can you tell us how much restructuring you did in the first half, if any?
A: David Bourg, CFO: Factoring is part of our working capital management policy. At the end of June 2024, we did an operation of about EUR250 million. The impact of factoring on working capital variation is only EUR7 million.
Q: Can we have some update on Spain regarding the regulatory review of the Clear Channel assets acquisition?
A: Jean-Charles Decaux, Co-CEO: We are in Phase 2 of the antitrust review in Spain. We hope to have more news in the coming weeks. The process is taking longer than expected, but this is usual for such discussions.
Q: Are you concerned about a potential slowdown in luxury sector spending in the second half of the year?
A: Jean-Charles Decaux, Co-CEO: While some clients are facing a more difficult environment, the luxury sector remains dynamic in most markets. We do not see a major change in Q3 or Q4 in our portfolio at the moment.
Q: Did you give any indication about CapEx for the full year as a percentage of revenues or in absolute terms for 2024?
A: David Bourg, CFO: CapEx to sales ratio was 7.8% in the first half of the year. We expect it to remain around 8% for the full year.
Q: Could you give some color on the profitability of the China business versus pre-COVID?
A: David Bourg, CFO: China has been growing at the same pace as the group average. However, we are still quite far behind pre-COVID levels. The margin has been affected by lower levels of rent relief compared to 2023. We expect stronger growth in the coming months to improve margins.
Q: How much is China making up of Group revenues on a H1 or Q2 basis?
A: David Bourg, CFO: China represents a bit less than 11% of Group revenues.
Q: Could you provide more color on the benefit to margin from the rationalization plan in France?
A: Jean-Charles Decaux, Co-CEO: The rationalization in France's billboard segment is ongoing. We are optimizing our rent position and focusing on cost base improvements rather than top-line growth. This is different from the UK, where we have transformed our portfolio through digitalization and development.
Q: What is the expected impact of the Olympics on Q3 revenues?
A: David Bourg, CFO: The Olympics will mainly impact France in July and August, with a positive impact of about 100 basis points on Q3 organic revenue growth.
Q: What has been the most meaningful contract win in terms of absolute revenue contribution recently?
A: Jean-Charles Decaux, Co-CEO: The biggest win in the first half of the year was the Shenzhen Airport contract in China. Most other contracts were renewals and extensions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
