Believe S.A. (BLV) Earnings Call Transcript & Summary

Good Day, and thank you for standing by. Welcome to the Believe Full Year 2021 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded, Thursday, the 17th of March 2022. [Operator Instructions] I would now like to hand the conference over to your speaker today, Denis Ladegaillerie, Founder and CEO. Please go ahead.

Thank you very much. Good day, everyone. I'm Denis Ladegaillerie. I'm very excited to present to you Believe's performance for 2021 and I'd say even more excited about where we are today as a business and our favorable competitive positioning and our future growth prospects. So to start, what did we achieve in 2021? If you can go to the next slide, please. The -- we focused on essentially over delivering on the profitable growth strategy presented at the IPO in terms of growth, but also in terms of operating leverage. Once again, in 2021, we proved our ability to drive profitable organic growth faster than the market. Three elements contributed to faster growth, strong attractivity for artists and labels, we've never signed so many artists and labels than -- in our entire history than we did in 2021. The dynamics have been very strong all year on across all market segments from entry level all the way to top artists and this in all geographies. Second main contributor to growth is improvability through digital innovation, technology, team training to deliver higher digital audience development and monetization for our artists. And finally, the positioning -- Believe's unique positioning in the faster growing markets and the largest future digital markets that are now accelerating in Asia and in Europe has contributed to accelerate growth for us. So very strong organic growth resulting from very strong sales organization and performance and attractivity of the services to build on faster growth. Second element at the core of the strategy we presented to investors at the time of IPO, high-quality M&A. We delivered 4 high-quality deals in 2021 in our 2 core geographies, Jo&Co and Play Two in France and Viva and [ Sync ] music in Asia that have contributing and will be contributing to growth in 2022 and beyond. Second characteristics besides growth is, we have once again demonstrated the operating leverage in our model while continuing to invest in future growth. So I want to insist on the fact that these 2 elements have run in parallel, we have continued investing in future growth. We have invested in sales and marketing teams across all geographies and market segments to build future growth 2023, 2024 and beyond. And we've continued to deliver digital and technological innovations for investment in our central platforms to create, and I would say, even accentuate competitive advantage in a number of areas. And while continuing those investments, we've nonetheless increased operating leverage at EBITDA level by 230 basis points in the course of 2021. Finally, the last core pillar of our 2021 strategy, as presented was formalizing and deploying shaping music for good, which is our CSR plan articulated as you remember, around developing talent, cultivating talent and we're building with respect, fairness and transparency and building for the long term. Next slide, please. On growth, as you can see, strong has been very -- very strong -- growth has been very strong throughout the year. including an acceleration in the last quarter of the year in Q4 with 32% -- over 32% organic growth in the last quarter of the year, driven by strong performance geographically as well as by digital music services across the board, a very strong release schedule that has driven these results. If you look at digital performance, digital revenue growth, which accounts for almost 91% of Believe's revenues, the growth was even stronger almost at 36% in the last quarter. And we've seen these growth trends in Q4 hold on in the past similar growth trends holding on in January and February of this year. Next slide, please. That growth has been driven by record label, a record number of new signings across all market segments. As you can see there, Believe has added web TuneCore over 150,000 new artists to its roster of music creators leveraging the service during the year. And we have signed and renewed top artists in almost all territories, some of the examples that you see there in the slide, are some very top artists across the territories from Micro TDH in Brazil to Placebo in Germany. Most of these are on this picture are artists that we're previously signed to one of the traditional labels, which confirms our ability to -- and the acceleration, I would say, of our ability to take share not only at entry level, but also at [ new ] level and more and more at the top level, all of them contributing to growth. If you move on the next slide, case study for France that is very illustrative of why there's no limit to the level of leadership that Believe can attain in any country. At the very top in 2021, Believe over-performed 2 of the 3 traditional players in the top 200 album in the market with 41 -- market share of 41 of the top 200 albums, including 3 of the 4 most-streamed singles in France, the biggest video on YouTube, the biggest -- and the biggest artists. That is the result of our growth strategy. Some of the artists -- several of the artists in the top 41 were artists that were signed on TuneCore 2 or 3 years ago. Many artists were artists that were signed in the middle segment and that we've now grown to become top 200 artists and some of these artists are artists that were signed away from competitors. So very strong organic contribution that is also further driven by M&A -- our M&A strategy in France as you remember, we acquired [indiscernible] to make an investment in [indiscernible] a few years ago with Jo&Co with Play Two with 2 more acquisitions are now driving additional market share and that is allowing us to come into leadership position in this market. We took France as an example, as France is a top 5 global market. We could have taken many more markets where the very same dynamics are playing. Building on to the next slide on to the contribution to the M&A strategy, just mentioned for France, Jo&Co, Play Two for Asia. What is our strategy? Our M&A strategy, essentially today allows us to expand into new market segments as our market is expanding. To take the case of France, why did we invest in Jo&Co and Play Two? Play Two, largest independent music label in France, previously under partnership with one traditional label. Jo&Co, one of the largest independent French labels, pop music. French pop music for both of them is the core focus previously distributed by a traditional label. Both of these labels essentially came to us because for 2 reasons: one, their market segments are now becoming digital. They used to be very physical and now they're digital and they're seeking a partner that can then help them accelerate their growth in these market segments. Very similar opportunity in Asia, where Sync Music is a Bollywood soundtrack label, which is a segment that was much more traditional, that is becoming much more digital in labels seeking exactly the same thing, a partner that will help them accelerate growth into their markets. There was a couple of opportunities. As we've always said, there's plenty of these opportunities across the markets around the world. Our focused has remained around core geographies for us, Europe, Asia to help us accelerate to leadership positions in these markets. If we want to move to the next slide, please. We have invested in growth organically and through M&A while demonstrated operating leverage. So as you can see there, we have EBITDA level segment is at 14.4% with an investment in that case of almost 2% of revenues invested into new resources, sales and marketing hires in the territories that we made in '20 and '21, and that will start generating in 2022 and -- sorry, in 2023 and beyond. So first high level of -- segment level of EBITDA, even though these at segment level, we keep investing very heavily to keep funding future growth for the business. We've continued investing in the central platform to build digital innovative technological solutions. But as you see an exactly as we had communicated at the time of IPO, investment in the Central Platform is being made at a rate that is much lower than revenue growth, and that translates -- and that will continue to translate year after year into central platform cost, representing a lower and lower percentage of revenues over time, 2 points of gain in 2021. How -- where did we make these investments in terms of next slide, Slide 11, in terms of technology and innovation in a fewer [Foreign language] [Technical Difficulty] Sorry, can you hear us?

Apologies. Please continue.

Okay. Thank you. So areas of investment technology has been -- core focus has been how do we help artists and labels at very large scale increase their audiences and increase their monetization through on the video side, which is a very important revenue drivers -- through tools such as video monetization optimizers, which helps at very large scale all of our artists and labels around the world generate more views, more revenues on YouTube in an automated way. Spotify discovery, which helped artists and labels gain market share through more exposure of their music to new audiences or TikTok virality tool. And obviously, continuing to build up teams that are supporting our artists in terms of marketing and promotion opportunities with all of the key digital music stores is a key element. Next slide, please, Slide 12. The continued investment in TuneCore to drive growth in 2 dimensions -- geographic dimensions. Service was expanded into 5 new languages to cover new areas and contribute to accelerated market share gain and into innovative services to increase the market share of music creators with social platform, which is service targeting at the tens of millions of new creators that want to make their music available on TikTok, on YouTube, on Facebook, Instagram for discovery and then move on to full distribution once they have generated success. Many examples of this, most recent example being for Charlotte Sands (sic) [Lauren Spencer-Smith], TuneCore artists signed on the social platforms that jumps straight into #5 of the billboard charts in the U.K. a few weeks ago after distributing through social platform. So continued investment there. Finally, last element in the next slide about our key drivers of 2021 since the IPO has been the deployment and execution around our CSR strategy that is centered around developing diverse and local talent, training that -- those talents, building trust relationships with respectfulness and transparency and powering our community to have a long-term impact. We've put a few of the elements that we're very focused on, parity, gender equality, where we've made great progress towards our objective ambassador rate, training rate with the objective of having local people that are the best trend in the industry to deliver services to our artists and labels in the most respectful, transparent and fair way. So I would say as a summary, I would say, this was 2021. I am more excited, I think, than I have ever been at Believe about the opportunity that is ahead of us for 2022 because I do think that where we are as a business and the core trends that have played in 2021 are exactly the ones that are going to continue to play in 2022. In 2022, our focus is going to remain profitable growth. We have a very large opportunity ahead of us with very strong tailwinds in the digital music market with YouTube, Spotify, all digital music services continuing to drive very strong growth. We are more and more convinced that we have exactly the right model to take advantage of the transformation of the artists' market with capturing more at the top, capturing more artists in the middle, capturing more artists at entry level with a service model that's adapted. And that is making us more and more attractive to artists and labels at all stages every day because every day, the music market is more digital. And finally, because we've continued to invest in sales and marketing, because we're continuing to invest in innovation in 2021, we have created competitive differentiation, which has allowed us to acquire market share, and that differentiation is going to become even more evident in 2022, and I think it's going to play exactly on the same dynamics. And finally, we have the right values, the right driving forces with respect, with fairness, with transparency, that are the basis of Believe building trust relations with artists in the long term. So really excited about where we are as a business and I'll pass on the stage to Xavier to tell us the story with the numbers.

Thanks, Denis, and hello, everybody. So I think financial year '21 showcase perfectly what Believe stands for, as illustrated by Denis. A key point for us is that we drive profitable organic growth faster than the market, which is a tribute to our capacity to increase monetization for artists and labels -- we are a digital-focused company. And as you can see in Slide 15, our 91% of our revenue are digital. Our digital growth is at 33.6%. So very significant. And at the same time, this is underpinned by a very strong organic growth at almost 30%. We invest in a very profitable and controlled way. We have increased our EBITDA margin while reinvesting significantly to drive future growth through a mix of technology and services that emphasize the attractivity of our model for artists and label as well for our strategic partners that we invested in. At the same time, we improved our free cash flow by EUR 7 million while managing our working capital needs to be able to fuel our growth. So if we go Page 16, we are legislating our 2 business segments. So just as a reminder, our 2 business segments are the Automated Solutions segment. We are addressing the creators in that segment. It's a fully automated and mainly a subscription business. And the other segments is the Premium Solutions segment, where we address the needs of artists and labels from emerging to top, and the monetization is through a percentage of revenue. We are following on that page, the 2 KPIs, one is the digital music sales that are the receipts we got from the stores and we are following the revenue. The digital music sales are different from the revenue for the Automated Solutions part as the revenue are the subscription. And for the Premium Solutions part, the digital music sales are equivalent to the digital revenue but then we complete our revenue on the Premium Solutions part by ancillary services being physical distribution, being synchronization, merchandising, [indiscernible] branding, et cetera. So what you can see here is that the bulk of our revenue and 60% of our digital music sales come from the Premium segment. With EUR 541 million of revenue, plus 31% versus last year, out of which 35.6% digital growth that is explained by the favorable market trends in the geographies we are in. The market share gains that we have in almost all geographies and countries and the expansion of our services across new channels of music and across also new type of artists specifically the third-party segment. The Automated part of the business, it's 7% of our revenue. The DMS, digital music sales have decreased because of high comp in 2020 due to COVID, where we had a very high distribution rate and also because of the negative exchange rate -- the -- we have a very efficient monetization model. As you see on the revenue side as the revenue have increased by 13.7%. As explained and demonstrated by Denis, we had a very encouraging Q4 new launch of offers on Automated and we are reinforcing that part of the business. If we go to Page 17, it illustrates that we are positioned in the strongest and most dynamic markets in terms of growth. Our positioning is first in Asia, which is the fastest-growing zone where we are investing both in organic and through M&A in the Philippines and India this year. In India -- Asia, sorry, we'll be in the next few years, the first zone in the recording -- global recording market and our main countries there is India, China, Indonesia and Thailand. Second, in terms of growth, roughly at the same level as Americas, mainly South America with Mexico and Brazil, growing almost 36%. Then our second biggest investment zone in Europe is Europe, basically Europe, excluding France and Germany, growing 35% Eastern Europe, Turkey and Russia is in the zone, and we will get back to Russia in a few minutes. So last 2 countries, France, a significant market share gain with a 20% growth in digital sales and showcased by Denis just before on the case studies on our position against incumbent players in that -- in that market. And Germany, plus 5% growth. You will see the figures that we had a better Q4 than we expected, but still we have the portfolio reorganization that will have impacts until well into 2022 in that country. If we go to Page 18, Page 18 demonstrate the operating leverage of the group, where our EBITDA margin has almost doubled to reaching 4% as we are still investing. That operating leverage can be divided into the first block is the EBITDA precentral platform. That includes the investments we make in sales and marketing teams in our markets where we have ROI -- target ROI between 18 and 24 months. The EBITDA level in the segment is pretty stable at 14.4%, closer to actual historical levels. It's a high-growth EBITDA as a sense that we are, as Denis explained, constantly reinvesting in new teams to be able to drive growth. The second bucket of profitability is the central platform investments we make. The central platform is where we have the tech and product and support teams that the ones that have -- that are very busy developing new team processes, et cetera, which is a key differentiator for us. As illustrated in -- by Denis in his presentation. We keep investing in the central platform to develop our digital expertise and differentiation. But this investment is made at a lower pace than the revenue growth, leading to a decreased percentage of central platform over sales we went from 12% in financial year '20 to 10% in financial year '21. That lead into Page 19, the free cash flow improvement of almost EUR 7 million between 2021 and 2020. That free cash flow improvement comes from 3 main drivers. The first one is the higher EBITDA. The second driver is the fact that we are controlling an investment -- our investment in the platform, translating into lower CapEx. The third part is the working capital variance, which is on par with our IPO guidance. The working capital is driven by the advanced payments that we make to selected labels and artists to fuel our future growth. Our financial policy is still the same, year in, year out, the advent depends on the value, the duration of the contract and the type of service. So you may remember that H1 was higher as a percentage of sales because of some renewals with the large labels that made a choice to renew with us with a higher contract duration. H2 was more standard versus H1 in that aspect. Hence, the fact that our working cap is right on target with what we had guided at IPO with 11% as a percentage of data sales during the year. Page 20, just a recap of the fact that as we executed largely over the expected objective that we had, we revised our target several times during the year up to the actual performance of 2021. Page 22 -- financial year '22 guidance. So financial year '22 guidance, the guiding principles are still the same. We continue -- we plan to continue driving our strong organic growth with tailwind on the market with market share gains. And thanks to the attractivity of the model as described by Denis. We have an organic performance that is going to be increased by 2%, thanks to the service agreements we concluded with our strategic partners in H2 2021. And of course, the activity in Russia and Ukraine is expected to be penalized by a much lower level of business. So what is Russia and Ukraine for us? So that's illustrated in that slide on the right-hand side. So Russia and Ukraine represent 9% of our group revenues. In this 9% of the group revenues, so 60% of the revenues are local. And in that local revenue, 65% are made by international digital service providers that stated in the last few days that they suspended monetization. And so the rest of the monetization is 40%. They are -- it's made outside of Russia and Ukraine. That monetization is made at a 13% EBITDA margin, and on the ForEx side, we have indirect exposure to rubles as we don't have a direct ruble sales, but the DSPs are selling the services in rubles. So we will be impacted there. The second driver for us is that we are going to continue investing in future growth with very strict control regarding our operating leverage and cash flow. We are going to manage activity on investment cycle. As we demonstrated, we have been doing for the year. Given the situation in Asia and in Russia and Ukraine, sorry the activity, it's too soon for us to know exactly what's going to happen in Russia and Ukraine. As you know, the situation is very fluid and changing quite a lot. So what we are going to do is that we are going to give more precise objectives beginning of May with our Q1 2022 release when we will have a better visibility of the situation in Russia and Ukraine. Having said that, Page 23, we are confirming our midterm objectives. 2021 has demonstrated that our model is very resilient. Our model is very efficient and the attractivity is very high. So we are on track to deliver our midterm objective. We are on track to deliver the 22% to 25% organic growth on average for the period 2021 to 2025. We are on track to get to the 5% to 7% EBITDA margin by 2025, and we are on track to a long-term EBITDA margin at 15%.

Superb. Thank you very much, Xavier and we'll open up to questions now.

[Operator Instructions] Your first question comes from the of Nicolas Langlet from BNP Paribas.

So I've got 3 questions, please. The first one on Automated Solutions. So we have seen a sequential improvement of the organic growth in Q4, but clearly, it remains at a fairly low level. So you mentioned the comparable basis, which was still quite challenging. But are there any other reason impacting that business? And looking at the coming quarters, do you think the recent initiatives you implemented will permit to return to 15% to 20%-plus growth momentum? Or it's still too soon to look at that? Second question on the short video platform. So you have announced different partnership with Play Two and TikTok recently, have you seen any real improvement of the business with those platforms? And how big could those platform be in full year '22? The last question on platform costs. You said you expect further increase in the coming years and have been in 2022. So in '21, the increase year-on-year was EUR 7 million in absolute. Is it kind of the trend we should be looking at for full year '22?

Right. Thank you very much, Nicola (sic) [Nicolas] and the -- I'll address I propose to start addressing 1 and 2 and then Xavier will address via the third one. But just before I just realized that I made a mistake in the name of Charlotte Spencer-Smith is in reality Lauren Spencer-Smith. I don't know why I mixed them up. That went to that -- that is a TuneCore artist that went to the U.K. billboard charts. On this TuneCore, Automated Solutions growth, the -- obviously, yes, we want to accelerate growth on automated solutions. The market for music creators, it's very large. It is enlarging. There is 2 ways that we're addressing that market. One, we have new solutions like social platform, and we've seen very strong trends in the initial pickup of the new offering, and we expect them to continue to accelerate. Two, we will be announcing more initiatives at TuneCore to accelerate growth there in 2022, and that is part of the investments that we've made in 2021 that we're continuing to make this year. And I would say 3 to your point, we do have partnerships like the partnerships that we just announced with TikTok, we had announced one partnership with SoundHound, where we are powering distribution for all TikTok, I would say, born artist on 2 of our platforms in partnership with TikTok, the partnerships that we've done earlier with Instagram that we expect all of them to contribute to an acceleration of growth in that business in terms of number of creators. Question two, with regards to the platform. I think do we expect -- do we expect revenues coming from platforms such as TikTok to increase in 2022 and beyond? Yes, I think we have already had the opportunity to touch on this. Unlike traditional labels, we have not negotiated any of these deals with minimum guarantees, which means that in the case of Believe, when we renegotiate deals they don't go down, they go up. And we are renegotiating. We're currently engaging renegotiations with a few deals TikTok being one of them. We expect to see significant increases in revenues in 2022 and beyond coming from some of these deals. Do we expect those platforms to generate or increase significantly in the revenues or be a very large portion of the revenues coming forward? I would say the answer is very different. I would say, deuce platforms like ByteDance or a TikTok that are also building streaming services like TikTok, ByteDance are with [indiscernible] in Asia we are expecting them to become significant revenue drivers, deuce platforms that are not engaging purely into music. Yes, their monetization will increase, but not to be to the same extent. Platform costs, passing on to Xavier.

Thanks, Denis. On the platform cost, the way we reason is more about more percentage of sales because the -- our goal is to be able to invest to increase differentiation and at the same time, increase the operating leverage of the company. So as you know, the percentage of the central platform overall revenue is going to decrease because central platform is a fixed investment. And so what you should expect is that central platform investment as a percentage of revenue decreasing to get to our financial target midterm and long term.

Your next question comes from the line of Lisa Yang from Goldman Sachs.

I have a few. The first one is obviously on the geopolitical situation. I understand it's very early days. But just wondering what are you seeing currently you said January, February is still very strong, but just wondering in March. Have you started to see any sort of impact? I think you talked about 3.5% of your revenue basically being, I guess, given the business has stopped there -- the operations there. But apart from that, are there any other sort of impact you're seeing for instance, in Eastern Europe or anything like that? That's the first question. The second one, wondering if you can give us a bit of your -- an outlook for the industry as a whole. I mean you talked about earlier about the growth from those new platforms. But actually more specifically about the streaming services, the more traditional subscription base or app streaming services. How do you think they're going to perform in 2022? Do you see an opportunity to raise prices? Do you see an opportunity to increase advertising monetization or paid subscription penetration to accelerate in your markets? That's the second one. And the third one is on M&A. Obviously, valuations are coming down the public market. I'm wondering if you're also seeing that coming through in the private markets? Does that open up more opportunities for you? Do you think there's more interesting M&A to be done this year given that mismatch between private and public valuation? That's the third one.

I'll maybe address the first 2 ones because I think they are part of the same question. So what are we seeing in the web streaming services, what we expect in 2022? And do we see an impact of what is happening globally from the Russia, Ukraine situation? So first on that topic. All of the conversations that we have had, and I was in the U.S. last week, and I met with top leadership of all of the streaming services. What we are hearing from them is, right now, no impact from the situation in Russia or Ukraine, outside of Russia or Ukraine. So from a paid subscription growth, the trends that are expecting is continued strong growth in most territories, obviously, as you pointed out, we have obviously stronger paid subscription growth in the territories where Believe is positioned in Europe, Asia, other territories because the penetration rate is still lower. So we are in the acceleration phase. So yes, we expect to continue to be benefiting from strong continued paid subscription growth at Spotify, Apple Music, Amazon in 2022. Two, we expect to see price increases from these services in the very near future. And we do think that once some of these services start raising prices all of them we follow. So yes, we do expect that to play in 2022. And on ad supported monetization, we've seen very strong increase of ad supported monetization in 2021 at YouTube, which we expect to continue to see in 2022, the -- at YouTube, but I would say we're not expecting acceleration there. And what we see from services as Spotify is there's a number of changes that they have done in the way they are organized to improve ad supported monetization. So these are like the 3 elements we see globally. So we anticipate in short especially in the markets where we're positioned in strong -- continued strong growth from the services. Xavier, do you want to touch on the M&A?

So on the M&A front, I think we are in a, I would say, a specific situation because as you know, we are doing bolt-on M&A. As you know, we are really into process. We are really targeting and very selective on targets. And well, so far, at least, we haven't seen any price hike or decrease significant in the last few months, last year's because of our specific positioning. So it's hard for me to say whether we are going to see or to benefit from any price adjustment that is going to happen. Given that the price we pay, the multiples that we pay for our target depends very much on their growth profile, EBITDA profile, the level of also synergies that we need to put on. So I will not make any generalization at the moment. What I can just say that the targets that we are -- that we have at the moment, we don't see any big price hike. So no big changes there.

And maybe to complete Lisa what Xavier was saying one more point on this is, we always expecting -- we always expected that valuation will start to come off from where they are in the U.S. first. Because the U.S. is one market where we have not yet invested in large scale. And our view was always, hey, let's wait until 2023, 2024 because the market will be more major from an artist standpoint and from a growth standpoint, and there might be a good point of entry there. And as mentioned, I just spent 2 weeks in the U.S. And I'm exactly starting to see the first sign of this. First one being the digital transformation of the market of the artist market that are taken place in Europe is now with artist wanting -- starting to move away to some extent from copyright deal, starting to move into looking for partnerships, better economics, away from copyright, all of the conversations I have had point in the same direction. We're seeing the early signs of that happening in the U.S. as it has in other territories. And organically, we are investing more in the U.S. than we have before as part of our budget, and we're going to accelerate this in 2023 because we do think that the opportunity is opening up there. And we do think that for same reasons, lower growth, slower growth in the U.S., the market might -- that might create interesting opportunities.

Your next question comes from the line of Nicolas Cote-Colisson from HSBC.

I've got 2 questions. Just considering the worst case scenario in Russia and Ukraine. Let's say, what would be the contingency plan if you were to close forever, right of the operation. I was wondering the sort of cost we should consider? And also how much of the business could be done from another country, obviously, in still abiding to the restrictions and the law? And my second question is about an update on the possible consequences of the music right bid in the U.K., which could be extended to other countries. Why not? I was just wondering if it has any impact on the company like Believe?

So maybe first on Russia. So in Russia, basically, we are operating in Russia as we are in any other countries, which is that we have local teams that are signing and servicing artists and labels using the central platform technology. And so all our contracts in Russia are signed outside of Russia. And the only thing we have locally are the teams that are servicing. So to your point, is it possible to service the country from outside of the country? Well, technically, I would say, yes, from a technology standpoint. However, you still need to have a local presence to talk to the artists and service the artist on a face-to-face basis. Having said that, what is unknown today is that, as Denis explained, the business is still continuing, even if there are less monetization, and of course, there is the fact that there is a lower monetization might mean that we will have to adjust locally. Once again, it was a fast-growing market for us. We have a very strong local team, and we are -- we will be adjusting according to basically the sanctions, the international recommendations and, of course, the local legislation regarding our business.

Thanks, Xavier. And Nicolas, for your questions with regards to the U.K., we do think it's actually long overdue and a great opportunity that the competition [ offerees ] are looking at the U.K. market. Our view of the U.K. market is that it is a weak market because this is a market where in the U.K., only the U.K. artist -- local U.K. artists represent less than last year -- represented less than 50% of the market, they only captured 47% market share in the market, slightly only 0.5 percentage above U.S. artists. So this is a market where -- the U.K. is a market that's been used by major record label as an export market first and that has been very weak in local artist development. And so as a result, the percentage and very correlated to that, the percentage of the market that's been controlled by independent players is slightly above -- I think it's around 15%, so very low compared to what we see in other markets. This is exactly what we have told and what we're currently telling the U.K. market authorities, which is you need to correct competition in the U.K. market to strengthen your local market because you are one of the weakest local markets in the world, you need to get that address. And that is, I can tell you, this is resonating quite well. So we do think that if there is action on the back of this, this will create opportunities for us.

Your next question comes from the light of -- line of Richard Eary from UBS.

Just a few questions actually. Just first one is regard to M&A. You've made 4 transactions last year. I think Play Two and Viva both equity accounted and then Jo&Co and [ SBI ] are both consolidating the total amount that was going through the cash flow statement was nearly EUR 50 million. Can you outline -- I'm mean I'm just looking through the financial accounts itself and it looks as though they happened in late last year, so I'm not sure how much impact they have in the fourth quarter in terms of consolidated revenues. But if you can outline any impact on the FY '21 numbers from the 4 acquisitions, and what are the actual pro forma numbers so we can think about contributions for FY '22? It looks as though that [ SBI ] is probably the bigger one out of the 4 on a consolidation basis. That's the first question. The second thing is just is on working capital. I think what we saw is through the year, particularly the guidance around the third quarter, we had a big step-up in working capital outflows in terms of the guidance, which never really materialized. Can you just explain a little bit more why that didn't eventuate, what changed? And whether that is something that we now need to factor in for FY '22. So yes, guidance for FY '22, and an explanation of what happened to working capital in the second half? That would be great, those 2 questions first.

Thanks for your question, Richard. So impact of M&A in financial year '21 is very small. Those transactions happen, as you know, very late in the year -- they've been -- the most of the impact would be the distribution contract that did not really kick off before the end of the year, just a bit for Play Two, but for the rest, not much. So there is almost the impact on revenue of the M&A in financial year '21 is very small, very, very small. So most of the increase is organic. On the working capital, the working capital also, we've been -- there is a big -- there is -- as you mentioned, there is a difference between H1 and H2. The main difference is the type of, I would say, deals that we signed in terms of duration, H2 was much more, I would say, standard in terms of working capital as a percentage of sales versus H1. And so this is why we had, at the end of the year, a spike of H1 that was then amortized, I would say, in H2, leading to an average of the year very close to what we expected at IPO.

Yes. No. Okay. Can I just ask 2 follow-ups, then that one is in terms of if we look at the acquisitions that you made late in the year from a pro forma basis, how much revenues will flow into 2022?

Okay. So that's the -- the main impact is going to be the distribution contracts and distribution contracts are going to represent 2% increase in the organic growth for 2022.

Okay. And that's mainly from basically Jo&Co and [ SBI ]?

From Viva, Play Two, Jo&Co and Think Music, [ SBI ].

But Play Two and Viva directly accounted. So they won't go through the revenue number, they will just go through the equity associates.

They will because we signed -- with them, we signed a distribution contract. So basically, we are going to distribute their music. And so that distribution contract that will be mostly digital. That distribution contract will flow into our revenue. So that's going to be the impact. And the sum of those revenue will represent 2% of our increase in revenue organically next year -- sorry in 2022.

And then just going back to the working capital number for 2022, just to get in the way where we think about artists? How do we think about working capital for this year?

I think it's -- I mean, we haven't changed our financial policy. So for me, what I can see today is that as the financial policy isn't changed, we should have roughly as a percentage of revenue, the same impact because as I explained, the variants that you can have would depend on whether under the same financial policy a label or an artist wants to sign at the longer duration as it happened in H1. So I don't see that today, but it may happen because this is because the deals, as you know, are signed pretty quickly in the order of magnitude of a few weeks, so my appreciation would be, as the financial policy of the company hasn't changed the working cap impact are going to be roughly the same as a percentage of revenue.