JCDecaux SE (DEC.PA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the JCDecaux 2025 Half Year Results Presentation. I will now hand over to Jean-François Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.

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. Remi Grisard, Head of Investor Relations, is also attending today's conference call. Moving to Slide 4 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 EUR 125.6 million and even more by 114.7% when excluding nonrecurring 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 5, 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 that 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 JCDecaux and the broader out-of-home media market continuing to gain market share during this period. On Slide 6, 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 U.K. On the next slide, you can see that all geographic areas experienced growth in this first half, except the U.K., 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. 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 U.K. 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 observed 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, 2 categories showed 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 continued to show strong growth. Meanwhile, automotive has made a comeback into the top 10 after a long absence, taking the place of government. 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 3 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 3 activities. The next slide demonstrates that digital penetration increased across all 3 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 5 countries, namely the U.S., the U.K., 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 5 digital markets in absolute terms. Let's move on to the next slide with programmatic advertising, the fast-growing area, contributing to our digital revenue growth with higher yields. Programmatic revenues soared by 25.2% in H1 2025, reaching EUR 74.7 million or 10.1% of our digital revenue, up from 9% in 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 a Nespresso 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 demonstrates the real-time content adaptation between 2 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 won the freestanding panels of the city of Rennes in France, the city of Odense in Denmark, and bus shelters in Firenze, Pisa and in Italy, as well as Fukuoka in Japan. Regarding Transport, we have won the Northern Rail contract in the U.K., and we announced 2 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 placement on the CDP A list for the second year in a row and the Gold Medal status from EcoVadis. We have received as well, again, the best score, AAA, from MSCI. And Sustainalytics 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 factored 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 EUR 44 million compared to June 2024, bringing it down to EUR 912.9 million, 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 EUR 261 million to EUR 307 million, an increase of EUR 46 million compared to 2024, representing 76% of the revenue growth. Once again, this underscores our strong operational leverage, thanks to the impact of the 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 concession adjusted to the level of activity, especially in China. Other operating expenses was 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 bps, benefiting from the contract adjustments in China that I have just commented. Regarding our EBIT on the next slide, it stands at approximately EUR 126 million, 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 EUR 45 million in 2024 and reversal of provisions and asset disposal, our EBIT excluding nonrecurring items grows by [ 114.7% ], plus EUR 47.4 million. 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 EUR 76.4 million before impairment, as you can see at the bottom of the table on this image, reflecting a decrease of 15% or EUR 13.5 million compared to last year. However, after adjusting for nonrecurring items such as the capital gain on APG|SGA in H1 2024, we actually observed a growth of 86.1%, broadly consistent with the evolution of the EBIT before nonrecurring 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 EUR 18.7 million increase, stemming from the increase in operational results and a less significant [ acquisition ] of deferred tax assets on loss carryforwards than in H1 2024. Looking at the financial results year-on-year, things are overall stable. We saw a EUR 2.7 million drop in IFRS 16 discount cost, thanks to a reduction in lease liability. On the flip side, there had been a EUR 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 remained good at around 3.4% in H1 2025. Finally, there is a EUR 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 EUR 153.7 million, a robust double-digit increase of 10.7%, but less pronounced than the increase in operating margin for 2 main reasons. First, there is an increase in net financial interest paid of EUR 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 EUR 600 million bond, which was paid in last October. Then there is an unfavorable variation on the line other items amounting to EUR 5.9 million, 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 EUR 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 EUR 36.8 million, whereas it was slightly negative in the first half of 2024. While the negative free cash flow is usual at this time of the year due to the seasonality of our activity, timing differences in working capital requirement as of the end of June 2025 negatively impacted our free cash flow to reach minus EUR 64.9 million in H1 2025 versus minus EUR 20 million in H1 2024. These timing effects mainly include a lower use of factoring for about EUR 25 million, 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 introduction, minus EUR 44 million 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 EUR 1 billion in available cash and an undrawn confirmed credit line of EUR 825 million recently renewed for 5 years with 2 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 rising 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 auctions, as most other traditional media are losing audiences, this gives us a unique advantage. Programmatic now represents for us a huge market opportunity with a USD 300 billion market for online display programmatic globally, more than 5x the total OOH 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 2 leading platforms: Displayce, a DSP and DMP active in 88 countries; and VIOOH, the most connected SSP of the OH media industry with 52 DSP connected. We are the only OOH with such programmatic assets open to third-party media owners. Considering recent transactions like the acquisition of Hivestack and Vistar by tech and telecom companies at 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 our 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, OOH 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 the 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 U.S. Almost all tenders now incorporate a significant share of digital. Jean-François highlighted earlier ESG as a key differentiator for us, 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, JCDecaux, a pilot to introduce plants on our street furniture in the center 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 socioeconomic 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 APTI 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 emission, Scope 1, 2 and 3, market-based, by nearly 30% compared in 2024 compared to 2019. To meet our Scope 3 target, public procurement must evolve to prioritize ESG 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 #1 global OOH media company, but the #1 in a 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 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 macro uncertainties and comparison base 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; maintaining -- 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 a 410 basis point negative comparison impact due to the 2024 Paris 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-François, David and I are now ready to take your questions.

[Operator Instructions] We will take our first question, and the question comes from the line of Adrien de Saint Hilaire.

So first of all, on organic sales growth, Jean-Charles, you just said up high=single digit versus 2023. I think that's quite a big slowdown versus what you had in quarter 2. So can you explain a bit what's changed? Do you feel that advertisers maybe have turned more cautious recently? Or is it just a matter of timing and we should expect a pickup in Q4? Secondly, on the margin point and the operating leverage, indeed, super strong in the first half. It's a bit unusual, especially given the relatively softer top line, I suppose. So can you detail a bit what's happening there and the sustainability of that into the second half? Because obviously, it looks like you could exceed your 20% operating margin target already maybe in '25. And then lastly, on working capital, David, how much of that should reverse into the second half? It seems like there are some elements of phasing in there. So just curious in terms of how much you expect to recover into the second half.

Adrien, I'll take the first question, and David will take the second and the third question. So the slowdown that you mentioned regarding Q2 is mainly driven by the U.K., which, as we mentioned, is our second largest market, which had a high-single-digit decline, impacting the overall growth of the quarter. And also, we had some one-off effects from the sporting events, as we mentioned on the call, UEFA and also the Paris Olympic Games, which will be even stronger in Q3 in terms of very tough comparables. And these are the main reasons. We don't see any slowdown in most markets across the world. David?

Yes. Thank you, Adrien, for the question. I will take the -- I will start with the third one, the working capital. To answer to your question, the majority of these timing differences should neutralize by year-end, and we expect our working capital requirement to normalize with only a slight negative impact, depending on our activity level. For giving you more granularity over -- on this item, over 50% of the impact seen at the end of June was due to account receivable, which represents about EUR 50 million, of which EUR 25 million, as I said, was from a reduced factoring amount expected to be neutral by year-end and the rest from delayed customer collections that were settled at the beginning of July. We will, therefore, be giving a strong focus in H2 on cash collection to prevent such a swing on client collection to happen at year-end. Regarding the strong operating leverage, this is, as I said during the presentation, is mainly coming from a slight -- lower increase in rents and fees compared to the revenue growth, driven by the contract adjustments, especially in China, which represent about 1/3 of this improvement, and this should obviously impact positively the second half of the year. And regarding the other operating expenses, we have been working hard on optimizing our cost base, which has been flat, as you have seen in the first half of the year. It will continue to be like this in the second part of the year. And on top of that, we will continue to review all our business processes in order to gain [ inefficiency ]. So depending on the top line in the second part of the year, we should benefit from this flat or slightly growing cost base, as it has been seen at the end of June 2025.

Your next question comes from the line of Annick Maas.

My first question is, I see you've suggested that VIOOH is doing EUR 75 million in revenues. Can you give us the impact on the operating profit of VIOOH? And my second question is on China. So you've suggested that there's no improvement expected. Is that maybe because -- and this is a question, I don't know -- whether if luxury is more exposed -- or luxury clients are more exposed to China or why is China remaining so weak? And then the last one is a bit more a longer-term one, I guess. You've suggested that now 40% of your revenues are coming from digital. Can you tell us how much of your inventory is digitized now? And how you think about the inventory -- the share of inventory digitization 5 years down the line?

Okay. Thank you, Annick. David will take the first question, Jean-Charles, the second, and I will take the third question.

Thank you, Annick, for your question on VIOOH. As I said during our last call in March for the full year financial result, VIOOH should be, on a stand-alone basis, breakeven, slightly positive in 2025. This is on a stand-alone basis. When you look at it on a contributive basis at JCDecaux level, given the fact that it is -- the revenue generating on a programmatic basis, is mainly incremental. The contribution of VIOOH is already positive on a consolidated basis.

Regarding China and your questions, Annick, the luxury is certainly not helping. But overall, the situation is still basically very soft in China. That's basically something that, obviously, we are not absolutely surprised by the fact that the improvement in the marketplace is certainly on a soft mode at the moment. That's the reason why we actively worked on our portfolio about 2 years ago already. And this is starting to pay off, as you can see in, as we said this morning, in our numbers. But the top line at the moment is -- as we highlighted in our press release, as usual, transparency is certainly difficult, continues to be difficult. And I would say that the luxury is still investing in our portfolio. If we want to see something positive out of the situation today is that our business in China will generate profit, one. Two, our business in China is on a low base on a historical basis. And the day it rebounds, and it will, that will be, obviously, given the structure of our contracts, certainly helping to grow again with a good profitability. And third, if we look at the digitization in China, which is increasing, as you can see on our presentation this morning, coming from a low base, 27%, versus big countries around the world now at 32% in H1, the digital is growing double digit. So the transformation of our portfolio, especially in the metro, is certainly going into the right direction, but on a soft environment, because consumption in China, as you know, continues to be under pressure. The overall Chinese economy, as you can see through the official figures, is not doing so bad, but it's mainly led by export, where the consumption is not basically at the moment recovering. So it's still a slow mode. Record high historically in terms of selling rates from the consumers at roughly 20%. So you see that people are saving and not consuming at the moment. So that's the reason why the environment is soft. But we are prepared and geared to continue to grow with profitability despite the low -- the soft advertising environment in China.

On your third question regarding digital Annick, the 40% share of our digital revenue is coming from less than 10% of our inventory. Regarding the long-term prospect of digital versus paper, if I take, as an example, our most digitized market, the U.K., going all through the segments, Billboard now in the U.K., we used to have 10,000 paper billboards. We now have in total less than 1,000 billboards, 1/3 of which are digital. And 1/3 of our digital billboard inventory in the U.K. generates 90% of revenues. So it's quite clear that paper billboards in the U.K. will disappear over the next 5 years. If I take the rail, some of our London railway stations are already 100% digital. So rail will also become 100% digital. In the airports, it's pretty much the same. So the only exception is Street Furniture, where Street Furniture has -- is showing some very good resilience for paper revenues, which continue to be very popular with advertisers. If you look at the yield on paper over the last 10 years, in most of our European Street Furniture markets like Germany, the U.K. and Netherlands, the yield is flat despite the fact that we converted the best locations to digital. So that's, I think, a good example of what will happen long term. So transport environment is becoming more and more digital. Right now, our Transport business is 45% digital. So that will continue to increase. And the fact that we are converting in China, as mentioned by Jean-Charles on your second question, a lot of sites to digital, is going to accelerate the -- our digital penetration in transport. Billboard -- in the markets where it is feasible, Billboard will become more and more digital. Of course, there will be exceptions like the big canvas, the big wrap on buildings during building constructions, which are very popular and which are selling very well despite them being nondigital. And on Street Furniture, it's important to -- again, to repeat that the paper Street Furniture business is quite resilient, which is good news, given that we have a very strong exposure to Street Furniture, especially in Europe.

Can I ask one follow-up? So what happens with [indiscernible]. You had -- so basically, if you had 10,000 paper billboards before in the U.K. and now less than 1,000, you had the locations before secured. So what happens to those locations? Are they freed up and there's no billboard? Or are competitors taking...

No, there are no billboards because the demand is not there. So no one, with maybe a few exceptions, rebuilt billboards on those locations, which we decided to kill.

Your next question comes from the line of James Tate.

It's James Tate from Goldman Sachs. I just had a couple of questions, please. I guess, firstly, you helped outline the impact of revenues from sporting events last year in Q3. But could you help comment on the drop-through to EBITDA from these revenues? Was there any meaningful boost to EBITDA margins in H2 last year that we should be aware of? And secondly, looking at gross CapEx, I think that decreased to around 7% of revenues in H1, below your full year guidance of around 8%. And I know H2 tends to be seasonally higher, but could you maintain CapEx at these levels? And a bit as a follow-up to the last question and thinking bigger picture, could you just talk about how you think about striking the right balance to ensure you're investing sufficiently behind the growth in digital?

Sorry, but the line is not very clear. I'm not sure if -- are you speaking -- talking from an iPhone on the train or -- because we can't understand your question.

No worries. Let me try again. Is that better?

Yes, that's slightly better, yes.

Okay. So just the first question was on the impact. You've outlined the impact to revenues from the sporting events last year, but could you comment on the drop-through to EBITDA from these revenues? Was there any meaningful boost to EBITDA margins in H2 last year that we should be aware of? And secondly, I think gross CapEx decreased to around 7% of revenues in H1, which is below your full year guidance of around 8%. And I know H2 tends to be seasonally higher, but could you maintain CapEx at these levels? And bigger picture, a bit of a follow-up to last question as well. Could you just talk about how you think about striking the right balance to ensure you're investing sufficiently behind the growth in digital?

I'll take the first question. David will take the CapEx question. Jean-Charles will take the last one regarding striking the right balance between paper and digital. So the impact of the -- both the Euro 2024 in Germany, as well as the Paris Olympics on EBITDA, if I understand your question correctly, if I look at the French numbers, France did a very good -- did well in the first half and EBITDA-wise as well. So the cost control that was mentioned by David took place across the group. And the revenue -- lower growth in France, for instance, despite the fact that France was growing, was offset by good cost control, meaning that we had a good EBITDA number in France. And that's my answer to the first question. David, on CapEx?

Yes. On CapEx, as [ Jean-Charles ] has indicated in our call in March, we are still aiming for 2025 CapEx level around 8% of the revenue. Right now, it is true that we are at 6.4% of the revenue. So it is clearly possible that we will end up below that target, but we will have a clearer picture at the start of Q4, depending on the project on which we are working on.

On the right balance digital, we are – obviously, every project and every transformation in our existing footprint, we are maximizing as much as we can the digitization process. This is, I think, shown in our numbers, as it was replied before by Jean-François on the previous question. So you can be sure that everything that can be rationally digitalized under our, I will say, way of doing it, [ EA ] premium, high-quality products and best digital screens on our portfolio. And that's, I think, one of the reasons why with basically roughly 5% of our portfolio, we already generate 40% in digital is because it's highly qualitative. And this is true across our different geographies around the world or different segments. You will remember that a few years ago, Street Furniture was lagging. And some of our -- some investors were saying why Street Furniture is lagging? It's because the technology, the digital -- the technology was not yet there at the moment -- at that moment. And now, Street Furniture has been the fastest-growing basically digital segment within our portfolio, not only the biggest but also the fastest-growing segment. And it's because now, the technology is there. And we have a new revolution in Street Furniture that is coming on is that the LED is now becoming very competitive in terms of quality, resolution, pricing and duration, which certainly will give a boost to our portfolio evolution on digital. So the balance is, I would say, favoring digital without any doubt and across many geographies at the moment and across the 3 segments now that are absolutely boosted by digital.

Your next question comes from the line of Julien Roch.

[Foreign Language] My first question is, any contracts you lost in the first half? The second for David, rent and fees were up EUR 10 million in the first half. What was the base in an absolute level in million euros? And then, the third question on China. You highlighted that digital was up quite nicely in China, so all of the decline is due to paper. And if I look at Page 12, your digitalization went from 27% to 32%. So how fast can you digitalize China? Are we talking about 5 points a year, which means that it's going to take you 10 years to go to 70%, 80% because China is the most digital market in the world, right? North of 90% of advertising is digital. So kind of the path to digitalization in China. That's it.

Thank you, Julien, for your questions. I will take the usual -- your usual contract loss question. David will take the rant and fees. And Jean-Charles will address your -- the digital penetration of our company in the Chinese market. So regarding contract losses, only one major contract loss in a small market being Ireland, where we lost the NTA contract for bus shelters across Ireland to Clear Channel before they were sold to Bauer Media. So that's the only one which is impacting our Irish business, where we used to be the #1 company in Ireland. And now, we are the #2 company in Ireland in terms of our share of out-of-home media revenues, this contract being the game changer for being #1 and #2. But we have a very healthy business in Ireland. We still have some very good presence in Dublin with our freestanding units, which are mostly digital, subsidizing the bike -- the free bike sharing scheme, which is very popular among Dublin people, tourists and residents.

Julien, regarding your question on rents and fees, in absolute terms and not in terms of evolution, it represents about 49% of the total revenue, rents and fees, including the local property tax and cost of goods sold [ in '25 ] and was representing about 50% at the end of June 2024.

Julien, on the Chinese questions, you're right to say that China is the most digitalized country. In our portfolio of assets, you're right to say also that the rebound on our profitability is coming mainly from the renegotiation of our existing contracts and the digitization that is coming now through that basically period of renewal and renegotiation. So we are basically quite bullish on our digitization in China, but we are also, as you know, working with our partners. And so, it is clear that the airport digitalization penetration is growing very fast, where the metro is taking a bit more time. But as soon as the market will rebound, I think we will see an acceleration in our digitization in China. Now, we are digitalizing, but we are also cautiously doing it with our partners. But things are progressing quite well in this. And the rate of penetration in China will continue to grow in the near future, alongside our digitalization. It's a process to digitalize in every country. And obviously, it is a process to also digitalize in China with our partners. But the situation -- the difficult situation on the overall marketplace is helping us to make them realize that digitalization is a must-do strategy, where in the past, it was not exactly the case. So now, I think, as usual, difficult times help people to realize that things have to change, and that will certainly help us to grow faster in the future. But it's a process that takes a bit of time.

The next question comes from the line of Adam Berlin.

Two questions, please. First question, you have said that Q3 will be up high-single digits versus 2023. Is that a reasonable assumption for Q4 as well? Or anything we should be aware of that could make that different? That's the first question. And the second question is, can you tell us what the net impact is on 2026 from the contracts you've won and lost this year so far?

So, on your first question, up single digit in Q3 versus 2023 and what we expect in Q4, what I can tell you is our pacing figures in Q4, which are not impacted by the one-off effects of the Olympic Games and/or the Euro 2024, are quite good. It's obviously very early to make a final call, and we will guide, when we announce our Q3 numbers later this year, on Q4, which is our biggest quarter. We generate more than 60% of our operating margin in the second half each year. And a major -- a significant part of this operating margin is coming from Q4, which, again, right now, across the globe, is pacing quite nicely. On the net impact, David?

Yes. The lost contract in 2025, as mentioned by Jean-François, had no significant impact, were not very meaningful. It was -- weather a loss-making contract or dilutive contract on our operating margin. In terms of top line, it was representing less than EUR 20 million on a yearly basis. So we do not expect a significant impact in 2026 on the top line and should be quite positive on the bottom line.

And we maintain our targets for 2026 to be above 20% operating margin rate and a free cash flow of EUR 300 million. Those targets are maintained.

Sorry, can I just follow up? You talked about the impact of the loss, but you've also won contracts this year. So is there any -- can you help quantify the size of the wins as well?