JCDecaux SE (DEC) Earnings Call Transcript & Summary

Good afternoon, everyone. Good morning to those of you in the U.S., and welcome to our 2021 half year results conference call, which is also being webcast. The speakers on this call today will be Jean-Charles Decaux, Co-CEO; David Bourg, Chief Financial, IT and Administrative Officer; and myself. We are delighted to welcome Remi Grisard, our new Head of Investor Relations, for his first result call with us today. On Slide 3, after a difficult year in 2020, our H1 2021 has remained under the pressure of mobility restrictions linked to COVID-19, with a revenue performance clearly differentiated between Q1 and Q2. While mobility restrictions have led to lower levels of activity compared to a typical H1, we have also noticed positive trends towards the end of the period, and we have worked hard to improve our business model, including for the future revenue recovery. As you can see on the summary of our H1 financial results, our revenues have remained overall stable year-on-year with a 0.6% increase in total revenue and 2.9% on an organic basis, driven by our Street Furniture and Billboard business activities. Our tight control over costs combined with a favorable business mix geared towards higher-margin activities have enabled us to come back to a positive operating margin in the first half of 2021. Other P&L indicators are negative, but improved significantly except free cash flow. Our total debt remains overall stable. David will come -- will give you more details later in his presentation. On the next slide, as a reminder, in Q1, mobility restrictions were close to their peak with approximately half of the world population under lockdowns and strong international travel restrictions. We have logically been heavily affected by such a situation with lower levels of outdoor audiences. Looking at Slide 5. In the second quarter, mobility restrictions measures have started to be progressively lifted from May, so far only half of the second quarter. Activity levels remain today very differentiated, with leisure activities and long-distance transport suffering the most, while shopping and road traffic are closed or above their pre-pandemic levels. For example, in the U.K., where you can see that our Street Furniture activities on the right part of the chart are close to pre-pandemic levels for urban centers, supermarkets and shopping centers are far better orientated than our transport activities where audiences remain low. It is to be noted that the U.K. has suffered more than most of other geographies for Transport audiences. In China, for instance, our subway audience stood at minus 4% in the second quarter of this year versus last year in Shanghai and minus 28% in Beijing. Moving on to Slide 6. With a low air traffic, including a virtually nonexistent international traffic during most of the period, our airport activity continued to suffer in H1 2021. You can see that the trend is gradually improving throughout 2021, better than 2020, but some restrictions should last, leaving the total air traffic significantly below the pre-COVID levels at approximately minus 50%, with approximately minus 30% for H2 according to these figures that forecasts are almost impossible to make at the present time. On the next slide, we call it a 2-speed recovery because we can clearly see that domestic flights are faster rebounding, sometimes above 2019 levels like in China, what you can see on the left-hand side of the chart, with a mixed bag of air travel recovery in the U.S. For example, Boston is still down 46%; LAX and Los Angeles, down 40%, but Dallas is almost back to pre-COVID level. We don't expect international restrictions to be fully lifted any time soon. China, for example, has announced recently that it should remain difficult to enter the country until at least mid-2022, while the U.K. is starting to lift travel restrictions from -- especially, from people -- travelers coming from the U.S. Based on the forecast of the flight industry on the right-hand side of the slide, we could expect a faster recovery of domestic while the total air traffic might recover only in '23, '24 or even '25. Looking at our adjusted revenue by segment on Slide 8, what we call roadside activities, i.e., Street Furniture and Billboard. Those activities have clearly outperformed Transport in the quarter. Street Furniture at plus 17% year-on-year has been the main driver of our revenue growth this semester, in line with the strong pickup in urban audiences. Some geographies, especially in Europe, have even been trading close or above 2019 levels at the end of Q2. Transport, as we have seen, has suffered from limited air traffic but also from depressed mass-transit audiences. Billboard, although smaller for our company, as you know, is well oriented as car traffic has sometimes been preferred to public transport during this pandemic. Moving on to the next, Slide #9. You can see that our activities have performed way better in Q2 than in Q1. The double-digit difference in our trading and the real satisfaction about the current sales strength. Some activities are now close to 2019 levels in some geographies, which was far from being the case in Q1. Moving on to the next, Slide #10. Our growth by region reflects mainly the business mix. Regions exposed more to Street Furniture business such as Europe have recorded better performances than geographies with more transport such as U.K. and North America, which are heavily impacted -- which is impacted by the end of the New York airport contract. For example, Street Furniture is up 118.4% in Q2 of this year. France with a 10% (sic) [ 16% ] organic growth is clearly the best performer, driven by Street Furniture, and to a lesser extent, Billboard along with audience recovery. Asia Pacific, at 6.8% with China double-digit growth despite its transport exposure, as it saw a double-digit rebound, thanks to domestic air traffic, almost back to pre-COVID level and to a domestic business environment almost back to normal. Australia and New Zealand have also recorded a double-digit revenue growth in H1 2021, while the rest of Asia is still heavily affected. Finally, the rest of the world is at plus 14.2%, with positive growth in all regions. On Slide 11, as a consequence of its rebound, Street Furniture makes up now more than 50% of our revenues, while Transport from a typical 40% level pre-COVID has been reduced to 31%. Before COVID-19, approximately 50% of revenues from Europe, now 56.7% due to the rebound of Street Furniture. Asia Pacific remains our first region at 29.4%. France is the first country as revenue contribution for the second year in a row. Moving on to Slide #12 and compared to 2016 where digital really started, you see that the digital Street Furniture activity is now very material. The share of digital is slightly down due to a temporary effect, i.e., analog networks had longer-term campaigns, especially in airports, such as jet bridges and suffered less from the steep decrease in activity in 2020 and H1 2021. Moving on to the next slide regarding digital Street Furniture. And despite COVID-19, the share of digital has continued to increase along with our digital inventory rollout, especially in Europe. By the way, the relevance of digital screens for city officials has been, in our view, strengthened during the COVID-19 pandemic as it required fast reaction times to inform citizens efficiently and frequently. And this comes on top of the services that we have been able to add to our Street Furniture assets such as the free hand sanitizer dispensers. Moving on to digital transport. And the share decreased due to short-term digital campaigns being easier to counsel versus analog with more long-term contracts. Moving on to digital Billboards now. The share has increased reflecting the digitization of very premium locations such as the one in Australia, which you can see on the slide. Moving on to Slide 16. As you can see, 69% of our digital revenue in H1 2021 was coming from only 5 countries, which are U.K., U.S., Australia, Germany and China. U.K. and U.S. are highly penetrated with 61% and 49% (sic) [ 65% and 50% ], respectively. Interesting to note that Germany, a market where digital out-of-home is accelerating and programmatic trading is gaining traction, our penetration rate has increased from 22% in H1 2020 to 28% in H1 2021. The strong disparity in digital penetration that you see on this slide shows that we have, especially in France and Europe, a lot of room for growth. Moving on to the next slide. We continue to focus on the 2020 priorities being the safety of our employees, the sales team being focused on catching the recovery, a further decrease of operational expenses and a very selective allocation of capital expenditure to projects that will increase our revenue growth in line with our long-term vision, temporary employment measures and careful management of our human capital and a very strong focus on rent abatements. Finally, we have further strengthened our liquidity with the extension of our credit facilities, but David will come back to that. Moving on to Slide 18. The activity in terms of tenders remains lower than usual due to the COVID-19 situation. We have, nevertheless, recorded 2 important Street Furniture contract wins in Belgium, which is a well-developed and resilient outdoor advertising market in many ways similar to France. We will be strongly positioned in this market, covering now most of the main cities. Above these standards, we would like to stress out that we remain strongly committed to ESG goals, and that the ESG criteria are not yet considered enough in the tenders from cities and from other partners. You see here that only France and Belgium incorporated ESG award criteria, which is not enough, in our view, for a significant contribution from our industry to climate change. We have also won some contracts in Grand Paris Express for large format and -- as well as the large format network connecting Saudi Arabia and Bahrain, the bridge; and the Shenzhen bus advertising franchise in China, an activity with a strong momentum currently in line with urban audience recovery. Moving on to Slide 19. You will remember that last year, in the midst -- at the peak of the COVID crisis, we took a minority stake in Clear Media Limited, which operates, as you know, more than 57 advertising panels on bus shelters covering 25 cities. We are part of the consortium of high-profile long-term investors, including the manager of the company, Mr. Han, Chief Executive Officer of Clear Media with a 40% stake; Antfin Holding with a 30% stake; and the Chinese Wealth Growth Fund with a 7% stake. As of today, the consortium owns 82.2% (sic) [ 88.2% ] of Clear Media. A voluntary conditional offer has been announced on July 5 of this year and will be effective in August 2021. Aimia, who owns 11% of the issued share capital of Clear Media, has already given its irrevocable undertaking to tender its chair in favor of the offer. This will allow us to take the company private and implement our strategic plan regarding the rollout of digital on bus shelters. Moving on to Slide 20. In France, we finalized in May on target the integration of Abri Services. It's now part of the JCDecaux commercial offer, and the important cost and revenue synergies have started to materialize. We see this asset as a way to strengthen our presence in middle-sized cities and to grow our footprint in the economically dynamic region of Grand-Ouest in France. Moving on to the next slide. We've been very -- Slide 21. We've been very active on ESG topics with many initiatives from our teams. France is leading the way with its commitment to reach full carbon neutrality as soon as 2021. Other countries might -- will follow. Our 360 footprint calculator is an innovative and transparent tool to measure the total ecological impact of the campaign of -- for advertisers with 4 key indicators: first, the carbon footprint, meaning CO2 emissions; second, the water footprint in cubic meters; third, the social footprint; and fourth, the economic footprint. Our R&D department recently developed our innovative Filtreo bus shelter, which is currently tested in Strasbourg. It provides fresh and clean air partly by using plants on the roof of the bus shelter. Finally, in Chicago, in partnership with Microsoft, we recently rolled out more than 100 air quality sensors, which provide accurate data accessible to all passengers buying through a QR code to monitor the pollution risk, in particular in the less favored area that often suffer the most from a low air quality. Moving on to Slide 22. I would like to thank our talented teams that are a key factor for success. I know that they have been sometimes -- going through difficult times since the beginning of 2020, but they've always remained committed and passionate about our media. We have selected here only a few recent awards, both for 2020 and the first half of 2021. I will not go through all of them, but you can see that they come from all over the world. I will now hand over to David for the financial highlights.

Thank you, Jean-François. Hello, everyone. To start this presentation, I would like to come back first on the summary of our financial results on Page 25. As indicated by Jean-François, all our operational and financial indicators have increased significantly, except the free cash flow, which benefited last year from the positive working capital valuation, as you will see that clearly in the cash flow statement. However, our KPIs remain negative, except the operating margin turning positive at EUR 31.4 million despite the revenue growth limited to EUR 6.9 million, a very strong operating leverage, but first, let's go back a minute to revenue growth. As you can see on this slide, Page 25, after 5 quarters in a row of unprecedented decline, we had finally a strong recovery of our activities in Q2 at plus 80.2% on an organic basis with favorable comps, certainly, but above our guidance of plus 60% communicated in mid-May due to a more significant rebound than expected of our roadside activities in June, as already explained by Jean-François. Therefore, H2 organic growth was slightly up at plus 2.9%, almost in line with 2020 on a reported basis, at plus 0.6%, excluding negative impacts from FX for EUR 15.5 million and from change in scope for EUR 9 million. Our H1 revenue has remained finally very low compared to a typical H1 revenue level. If you want more details on the FX and scope impacts, you can have a look to the note on the right-hand side of the slide. Despite the revenue growth limited to EUR 6.9 million, our operating margin has increased significantly by EUR 93.2 million, turning to positive at EUR 31.4 million against minus EUR 61.8 million in H1 2020. As you can see on this slide, our operating margin has benefited from an increase in our gross margin, thanks to a favorable revenue mix toward more roadside revenue and reduced rental cost base as well as flat operating expenses compared to 2020. Rents and fees decreased by 14.5% versus 2020, which was already well adjusted. Given the situation in H1 2021, we have obviously continued discussing with our landlords and obtained rent relief across all segments. Operating expenses were virtually flat at minus 0.4% year-on-year on a cost base already significantly reduced in H1 2020, temporary savings being compensated by more structural measures implemented since the beginning of the pandemic. Compared to 2019, operating expenses are down by 20.5%. Looking at EBIT now on Page 27, EBIT before impairment charge has improved by EUR 91.6 million due to the increase of the operating margin, the other lines below operating margin having not changed significantly year-on-year. However, the level of operating margin at EUR 31.4 million is not yet enough to cover the amortizations and provision. EBIT before impairment charge is, therefore, negative at EUR 166.9 million in H1 2021. Regarding the lines between operating margin and EBIT, please note the increase in maintenance spare parts of EUR 3.1 million, mainly coming from European countries with the increase of the activity of our field operation teams compared to a period last year under stricter lockdowns. The decrease of EUR 5.1 million in depreciation of tangible and intangible assets is mainly due to the end of some contracts like the nonrenewal of the New York airport franchise. And finally, the increase of EUR 5.1 million in the PPA amortization is due to the end of the reversal of the provision for onerous contracts related to the acquisition of Cemusa. The positive impact of the impairment charge in H1 2020 (sic) [ H1 2021 ] for EUR 3.5 million result from mechanical reversal of the provision from -- for onerous contract recognized on our impairment test from previous year -- sorry, it was an impact in H1 2020 and not in -- 2021 and not 2020. This impact versus a negative impact of EUR 60.6 million in H1 2020 this time, mainly related to our Billboard activities in the rest of the world. The EBIT after impairment charge is minus EUR 163.5 million an increase finally of EUR 155.7 million versus last year. Let's have a look now at the variation of our operating margin ratios before impairment by business segment. The overall group margin, which represent 2.6% (sic) [ 2.9% ] of the revenue, an enhancement of 860 bps, has benefited from the favorable mix revenue on a reduced cost base, as already mentioned. The variation by business segment reflect the revenue evolution for each segment, the overall EBIT margin variation as well as by business segment is globally in line with the variation of the operating margin ratios. Let's turn now to our net income in Page 29. To do this, a bit technical, but we need to eliminate the contributions of companies under joint control and restate the IFRS 16 lease payments of our core business. The elimination of the contributions from our JVs has a negative impact of EUR 6.3 million on the IFRS EBIT versus a positive impact of EUR 1 million in 2020 since the operating results of these JVs turned positive in 2021. The corresponding share of net profit are now recorded in the line equity affiliates below IFRS EBIT. The decrease in the IFRS 16 lease payment restatement by EUR 57.9 million, mainly comes from the progressive decrease of contracts under the scope of IFRS 16 and the accounting treatment of 2020 rent reliefs going beyond June 2020, which were booked one shot in the 2020 P&L under IFRS. After restatement, the EBIT under IFRS is a loss of EUR 121.8 million, a positive variation of 19 -- EUR 90.5 million compared to 2020. After financial expenses at EUR 63 million and tax, which is an income of EUR 33.6 million as well as the share of profit from affiliates and minority interests, the net income group share represents a loss of EUR 161.3 million in H1 2021. The year-on-year variation of the net result group share by EUR 93.6 million is finally consistent with the improvement in the IFRS EBIT. The lines below IFRS EBIT compensate for each other. Let me now comment quickly on the evolution of the main lines below EBIT IFRS. First, the positive impact from the net financial results by EUR 19.4 million, mainly comes from the decrease in discounting charges for EUR 26.2 million due to the mechanical reduction in IFRS 16 lease liability on existing contracts. The financial expenses of EUR 21 million have increased by EUR 5.8 million (sic) [ EUR 6.8 million ], mainly due to the interest expenses on the additional financing secured in 2020. The negative variation of EUR 10.2 million in the tax income is due to a lower loss before tax year-on-year in line with the improvement of our operating income in the first half of 2021. The effective tax remain at around 18%, a lower level than typical year, mainly due to non-recognized deferred tax asset on pretax losses on some geographies. Net loss from equity affiliates remained negative at EUR 6.7 million, but an improvement of EUR 7.9 million compared to 2020. The performance from companies under joint control and significant influence has improved as well. Lastly, the negative impact from the adjustment of minority interest to get to the net result group share reflects the improved performance from our subsidiaries with minority partners. Let's have a look now at our cash flow statements in Page 30. First, the funds from operations remain negative at EUR 74.4 million, but improved by EUR 77.3 million compared to H1 2020 due to the increase in the operating margin for EUR 93 million and the decrease in tax over the period for EUR 11 million, partly mitigated by the interest paid due to the increase in gross debt and other nonrecurring charges. Thanks to a good management of our cash collection, payments and inventory, our working capital requirements had a positive impact of EUR 71 million in our H1 cash generation compensating finally the negative impact from funds from operation, I have just commented. Therefore, after CapEx at EUR 54.8 million (sic) [ EUR 59.8 million ], the free cash flow is negative at EUR 63.2 million. The positive cash flow in H1 2021 (sic) [ H1 2020 ] at EUR 69.9 million was mainly due to a positive impact from the working capital requirements of more than EUR 305 million coming from the collections received from a record Q4 2019 revenue in Q1 2020. This explains mainly the EUR 132.7 million variation year-on-year that you can see on this line at the right bottom of the slide. Regarding CapEx, they have been reduced by 29% versus 2020, which was already reduced by 38% compared to 2019, a selective reduction, nonetheless, as we have pursued our growth CapEx, which represents now more than 50% of our total CapEx. Turning to the next slide. Net debt remained overall stable at EUR 1.2 billion, a slight increase versus December 2020, but below June last year as the negative free cash flow in H1 2021 is largely compensated by the decrease in financial investments limited to EUR 13 million over the period against EUR 107 million in H1 2020 related to our minority investment in Clear Media. That net financial debt at the end of June 2021 is composed of EUR 2.5 billion of gross debt and EUR 1.3 billion of cash and equivalent. Regarding our liquidity, next slide, we have continued to reinforce it during the period by extending at the end of June for one more year until mid-2026, our undrawn committed RCF of EUR 825 million, which has no financial covenant before 2023. As you can see on this slide, the profile of our gross financial debt is well balanced with an average maturity of over 3.5 years and no significant maturity before mid-2023. As a reminder, please note that Moody's downgraded our credit rating by 1 notch at the end of March, but we remain investment grade with a stable outlook. So to conclude our H1 financial results, demonstrate once again our financial flexibility and solidity. Thanks to our actions on all our operational and financial level. Since the beginning of the pandemic, we have been able to turn our operating margin positive in H1 2021, while the level of activity remained quite depressed at about the same level as 2020, and to keep a net financial debt relatively stable while continuing investing for future growth and accelerating our digital transformation. Therefore, we believe that we are well positioned to benefit from the recovery. Meanwhile, given the low visibility and persistent uncertainty, we remain more than ever fully committed on cost control all over the world and on a selective CapEx policy. Thank you very much, and over to Jean-Charles now for the outlook and strategy.

Thank you, David. As you know, we have seen in this H1, some positive signs, some of which we did not expect this early. The vaccination rate also unequal today around the world, and after some -- after the beginning of the process, is now progressing quickly in our main territories. You see here in the Slide 36 that Europe is now at 56% of our revenues and is now close to a 50% vaccination rate, and this rate will continue to rise this summer. This is a substantial improvement that we did not expected a year ago, or even at this scale, 6 months ago. On the flip side, we see that COVID cases because of variants have started to rise again in some territories. Lockdowns have been imposed recently in some parts of the world, as for example, in Sydney, Australia, which has affected our activity. Zero COVID policies with lower vaccination rates and more stringent mobility restrictions applied mainly in parts of Asia, especially in Southeast Asia or in the Pacific region remain a challenge for our activity with a heightened volatility and low visibility. Fortunately, life in Mainland China is almost back to normal, although some clusters appeared at the end of Q2. In this context, we need to remain very agile and financially flexible, as described by David a few moments ago. In Slide 37, you can see that digital and OOH are the 2 only structurally growing media in the future. Our media is today highly attractive and powerful, and we are well positioned to capture higher advertising revenues, partly due to this growing scarcity of quality audiences on spaces for advertising. Compared to online media, we keep the reach of the mass media, catering to all type of audiences. We are convinced that we can grow further than these figures of 2.6% in CAGR over the 2019-2025 period. Our strategic visions remain that the combination of digital screens for growth, data for targeting and audience measurement and programmatic for efficient training in line with the best practices of online advertising should enable us to grow faster than this. In the next slide, the new power of OOH is a combination of branding and targeting. OOH can now, thanks to technology, combine the best of both advertising worlds. Branding, as we have been developing since the creation of this firm, and more and more targeting driving customers to stores and web with the direct and measurable impact on purchases. Through data and technology, OOH can now work efficiently on all stages of the marketing funnel. As we have many advertisers using our media both for branding and for purchase activation such as Sky in the U.K., as you can see in this picture, we are now able to target precisely an audience and deliver a campaign instantly through data and technology where before, we needed a few days for logistics of a campaign on paper, on analog posters. We can react to any kind of trigger events. We can use real-time positioning for the messages of our advertisers. You see on this slide that the metrics from different studies that I'm not going to comment in details show that both branding and calls for action can be significantly lifted through OOH campaign. A few words on this. New studies in France and Germany give evidence of the effectiveness of our media. Trust in brands is at all-time low today. The study, The Moment for Trust, carried out in the U.K. has shown that outdoor restores brand trust to a higher level than other media, plus 9%, with a direct effect on consideration plus 5% versus other media. Second, our effectiveness at the top of the marketing funnel is undeniable. Outdoor is a powerful media that brings visibility to the brands and increases brand awareness by 51% in consideration by 16%. At the time where brands and retailers need to bring consumers back to the point of sales, our media combined with mobile is creating in-store traffic. More than 100 campaigns operated with our partner, S4M in France have demonstrated the capability of the media to multiply on average by 2.5% the in-store traffic for campaigns combining OOH and mobile compared with campaign using 1 of the 2 media. Last but not least, our media activates drive to web. A study carried out in Germany assessed the proportion of requests on Google that could be attributed to a JCDecaux campaign, and this share amounts to 25%. On the next slide, in a world where the tech and digital media companies are thriving, these leading data-driven companies understand the efficiency of our media as shown here in the U.S. These companies clearly overweight the OOH in their media mix at 9% versus 3.8% in the U.S. on average and close to 7% in the world. The transformation from movies in theaters to SVOD has not impacted the media companies' investments. Why? Because to drive digital growth without the sales channels or physical distribution, you did more than ever a strong brand awareness, and we are a strong media for this to capture new customers, behind the world gardens, the ad blockers and the vanishing TV eyeballs. On the next slide, the massive opportunity is clearly programmatic. As we discussed on Slide 37 in our OOH universe is still relatively small at USD 40 billion out of circa of USD 650 billion in 2009 in advertising globally, i.e., 6.1%. Our strategy is to really expand far beyond this market by mixing OOH inventory flawlessly with online inventory for campaigns. With our programmatic platform, we can now address this additional EUR 1.27 billion to EUR 270 billion market with the same targeting, buying tools, visuals and soon audience metrics as we continue to improve them through data. On a broader level, we currently feel positive tailwinds of -- in -- for our data strategy. The traditional ultra-personalized individual targeting of online players is today questioned by regulators, but also by users. Many people have opted out of tracking. On Apple products, only 25% of users today accept the tracking of their behavior, leading to lower levels of data. In our approach, we leverage data, but in what we consider a fair way. We do not track individuals. We provide target audience groups through the analysis of aggregated data. In other words, we are native GDPR-compliant. As online advertising campaigns move away from ultra-personalization, they can and will more easily be combined with OOH in multichannel marketing opportunities. We can adapt and work with all types of data. As such, we are well positioned to weather any change in the future and to continue to deliver an efficient data strategy as we will see on the next slide. Our data strategy is summarized here in Slide 42, where we have developed a new unified ecosystem to leverage data globally with a centralized team reporting directly to the Executive Board. This is now a reality with tangible outcomes in the form of products used by our teams globally. We collect 4 main types of data: audience qualification; environment, including position; obviously, movement; and of course, inventory. Data can be accessed easily, thanks to our joint approach, for the end users, including interconnected APIs. As of today, we have more than 30 data products and solutions deployed in certified markets covering our 3 media pillars: optimize, planning, engage, activation, evaluate, measurement. Three products recently released, available in more than 12 markets around the world, can illustrate how data impacts the way our company operates and develop our revenues. OOH planner to better plan campaigns through our campaign planner tool, creative heat map used in 35 countries to optimize ad creations, including, well, to position visual elements. And audience API allows to transform smoothly audience data from market to data inputs for our VIOOH platform that we'll study in more details in the next slide. The VIOOH platform is today the most connected supply-side platform in OOH with more than 26 demand side type of connected plus 11 new DSP year-on-year, which is a major growth. We have also signed more than 300 deals on the activities growing very quickly, with the month of June that has been way above the levels we saw a few months ago. This clearly implies investments, as you can see in terms of FTEs, that we are convinced that this is the right strategy to develop our media in the digital world. We've improved significantly the platform for -- from a training and product standpoint over the last few months, and this starts to be recognized by the market as you could see in the next slide. On Slide 44, here, you will find 2 examples of successful campaigns in programmatic using our VIOOH platforms, bringing us 2 worlds already. Nespresso has, for example, been able to advertise based on real-time teller messages in a shopping center and to increase significantly the traffic to its store. Based on specific weather and air criteria, Renault has been able to advertise for its Zoe electrical car. To continue to feed this success, we have launched VIOOH in 3 additional geographies in the first half of this year, i.e., Australia, France and in China, Hong Kong, for Street Furniture. The feedback from clients and from teams have been very positive. Programmatic already allows us to size the opportunity, I explained to you earlier, to reach out to budget and advertisers outside of the traditional OOH space. And with VIOOH activity in Australia, 86% of the campaign being programmatic-only, yet not coupled to traditional OOH; and in France, it is 80% of new OOH advertisers. These first trends are quite obviously encouraging. Moving on Slide 46, to another key growth driver for us, the main tenders, which are expected, most of them, by the way, having a digital component now. Lower level of activities over the period in terms of tenders due to the situation mentioned by Jean-François earlier. Interesting also to note that Cannes, Paris and Bordeaux includes ECG -- ESG, sorry, award criteria. But as Jean-François explained earlier, we would appreciate to find a more often true rating criteria in tenders from an ESG perspective. We produce most of our street furniture locally, and we pay a great attention to their recyclability level, which is not enough considered as we think in the tender processes in our view today. Please note, as well, that for the Los Angeles bus shelters contract and the Johannesburg Billboard contracts are under renewal currently. On Slide 47, I would say -- on the famous Slide 47, you can see now our competitive landscape. The Slide 47 shows that we remain the clear leader by revenue in the fragmented market since the top 50 outdoor advertising players only represent 45% of the total market of the outdoor advertising and none of them accept us is global. They are mainly one country focused or regional players. The current situation will certainly create some bolt-on acquisition opportunities, but the liquidity available currently, we can see some competitors with very tight financial situation, but in time, had good financial conditions. This is a clear difference with the previous crisis, and especially, the 2008 financial crisis, but at some point, consolidation will be inevitable. As we have always said, we want to be very pragmatic in terms of acquisition, and we will continue to monitor the competitive situation, sizing opportunities when they come. But bearing in mind that there is no much due deal for us and that we still have a lot of organic growth opportunities ahead, as discussed earlier. To conclude on these second, third sections, you know that since the beginning of 2020, we have weathered an unprecedented storm for our activity, an activity that has historically been structurally growing and that will come back to strong growth as long as no stringent mobility restrictions are imposed. Through our careful business management, we have offset a large part of the financial impact of the mobility restriction with an operating margin turning positive in this first half. We have also continued to invest carefully for growth. Our entrepreneurial spirit, our global scale and our digital strategy make us the best positioned OOH company to continue to benefit from the recovery in audiences and the strong value proposition for our media in the future. We will continue to be the clear leader moving forward in ESG initiatives for our industry. As for the Slide 49 now, our outlook and regarding the Q3, the volatility remains high, the visibility low. But based on current trading, we now expect an adjusted organic revenue growth above 20% in Q3, provided that mobility restrictions do not rise significantly in the coming weeks. Thank you, and we are now ready to take your questions.

[Operator Instructions] So we have the first question from Sarah Simon from Berenberg.

I have two questions, please. First one is on China. I think in previous calls, you've talked about our financial being under pressure to sell their outdoor holdings. And obviously, there's subsequently been more pressure on Alibaba from a regulatory perspective. Is that still the case? That's the first question. And secondly, would you be open to increasing your stake in Clear Media given that, obviously, they've got quite a long to think about. And the second one was on competition side, as you've outlined, obviously, the industry has been through a massive shock. Has this resulted in lower competition when you've gone to tenders or renewals?

Thank you, Sarah. Jean-Charles will take the questions on China, and I will take the question on low competition.

Sarah, the line was not great for the -- for your 2 questions, but I think we've got a good feel about it. On the Clear Media side, we -- and as long as the outdoor -- as far as outdoor is concerned, we don't feel now the regulatory pressure we are referring in -- to your questions on to our industry at the moment. I think it's certainly probably due to the fact that outdoor is very local in China. We also have a business model, which is a bit unique because we've been partnering, as you know, with airport authorities and transport authorities through joint venture in many cases. And so we are partners with local entities. And this is certainly one of the reasons why maybe the regulatory pressure is not as big as in other industry, which are mainly tech-related industry or education-related industry recently. But we don't have the same basically pressure at the moment.

I think that you'd said -- sorry, I think that in the past, you'd said that Alibaba had -- was under pressure to sell its holdings in outdoor businesses? Or am I wrong in thinking that?

I would never say that you are wrong, but we -- I don't think we've ever said this because this is obviously not in our hands. But I'm not sure that Alibaba is having disposition on the outdoor. I think Alibaba is, as you know, a minority shareholder of different outdoor players in China, including Clear Media, at the moment, and some others. They are good partners. We have been partnering for the Clear Media acquisition. And this is on track at the moment. As you know, the privatization is on track. Privatization will certainly resume in the next coming months, as previously stated. And so I don't see Alibaba, at the moment, on financial, having a different view on this. I think they believe in the outdoor sector. That's why they are committed to it. And I think it's a good partner for the future in China, even though at the moment there are some regulatory pressures, not only on Ali or on financial but also on all the players, as you know, on the tech front in the Chinese context, which is slightly different than the outdoor. I think this is also important to contextualize what we are seeing here is that we don't aggregate personal data, as it was said in our presentation this afternoon. So I think we are less in the focus of the regulator in some markets, including the Chinese market because we -- when we use data, we use, basically, data we are not -- which are not personalized, which are fully GDPR-compliant and which are contextualized, as it was said. And so I think the pressure is less, obviously, strong than it could be on the personal data. So coming back to your questions, we see Ant as a robust partners for the present and for the next coming years. And we also see Clear Media has a good opportunity to transform, basically, this Street Furniture leader into a much more digital company in the future, and we fully trust in Mr. Han's team to do so in the coming months. But this is a quite exciting time because the business, obviously, in China is getting a good momentum despite the fact that it's sometimes bumpy with the situation of the lockdowns. Two months ago, Guangzhou was locked down for a few days, few weeks. Now it seems that the situation is getting better. So it's little -- a bit bumpy, but clearly, the pacing are looking encouraging in China, especially in the domestic domain, as it was said this morning. He has a bus business. He has a metro business. He has a domestic air travel business and -- including, obviously, the Clear Media Street Furniture.

On your third question, Sarah, if I look at the contract wins and/or losses, over the last 1.5 years since the start of COVID, basically, I don't see any softness in the way how out-of-home companies are bidding for these contracts. Whether it's Clear Channel or some other folks in the industry, the level of competition remains pretty high. As you know, we lost a New York contract by trying not to pay any minimum guarantee for 4 years, and Clear Channel wanted it. We lost a few contracts in the first 6 months in the Baltics, in Riga, a small contract. We lost Almere in the Dutch market. And in both cases, the competition was prepared to pay more for the franchise agreements than we were. And -- so the reason is very simple. If you look at GroupM forecast, GroupM is forecasting digital out-of-home to be the second fastest growth media after the Internet -- mobile Internet. So the view is that although the industry discounting theaters and cinema advertising is the most effective traditional media, it is considered to be the only part of the traditional "media" part of the total media industry, which will not lose market share and which is likely to gain market share. So therefore, our competitors being international or local are quite bullish about the space. And COVID-19 doesn't really pave the way for getting long-term contracts in a cheaper way.

We have now a question from Conor O'Shea from Kepler Cheuvreux.

Yes. I've got three questions, if I could. First question, on China, in a couple of parts, thank you for the numbers on passenger numbers and domestic passenger numbers. Can we have a sense of where revenues are overall in Mainland China versus 2019 for the second quarter? Could we also have maybe just a sense of the payment on Clear Channel with -- taking the 23% stake when that cycles end, I guess, in Q3? And also, if we could have a sense of the timing of the renewal on the Chinese metro concessions and maybe a little bit more color as to how much -- how big those are in relation to your overall position in that market? Then secondly, on the U.S., I wonder if you could just isolate the impact of the lost airport contracts in New York, just to get a sense of what the underlying decline was in Q2 or the first half? And then last question on the rental costs for the first half, I might have missed this in your remarks, David, but can you give us a sense of what the year-on-year change was in first half? And what we could expect for the full year?

Thank you, Conor. Jean-Charles will take the question on China, and David will take the question on U.S. second quarter, excluding the New York airports, and the third question.

Yes, Conor, we already gave a lot of information, as you know. And on China Q2, I'm afraid, we won't be able to give you a breakdown, but what we can say is that all the domestic-related environment are really close to '19 or some of them even above '19. But what is still, basically, struggling is the international traffic in airports. So buses and metros and local advertising is really dynamic and almost under pre-COVID level, where basically, because we are big in China in the international airport environment here in Shanghai, in Guangzhou, also in Beijing, in Chengdu, even in Hong Kong or in Macau, but it is already impacting our Chinese business, obviously, in there. But overall, domestic is pretty much on track with '19, which is the case even outside of China when -- and you reached -- especially, in Street Furniture, but also in the roadside traffic environment, we reached quite rapidly close almost at the level of 2019. Regarding the Clear Media, Conor, I didn't catch up perfectly your question. Your question is about, basically, the timing of the...

Yes. And the amount of the cash outflow just relating to that, I guess, in...

It's around -- it's -- the outflow of Clear Media, it's around EUR 100 million of outflow. And this is basically what was always -- already the case a year ago, a bit less given the new structure, but this is around EUR 100 million. And the timing for the renewal of the metro, Conor, is -- I mean you have always some activity in the metro business in China. Renewal is basically on some metro at the moment. But this is something that, given the confidentiality in some of the operations, we can't get into too many details, as you can imagine. But basically, this is a dynamic of our business, obviously, in all geographies, including China. So we are always working on some renewals in different markets around the world. But nothing special as we speak at the moment that something will happen basically between 2021 and 2022, certainly at some point. But the COVID has basically changed a bit the pace of this renewal dynamic because some metros are taking the view that they are better off to wait a bit before getting out for renewal.

Conor, David speaking. Your question regarding the rental and fees and the year-on-year change, as I said, it was minus 14.5% year-on-year. And it should -- we are not providing any guidance for the months to come, but there is no reason that we do not continue to do what we have been doing over the last 12 months, meaning flexibilize our rental base, and this is what we will continue to do. So year-on-year compared to 2020, but keeping in mind that in 2020, we had already reduced significantly our rental base, year-on-year, the variation was 14.5%. And coming to your question on New York, if I understood properly, it was, what was the impact of the nonrenewal of the New York franchise? It was about pre-COVID, the revenue on a yearly basis was about USD 80 million. And last year, obviously, due to the situation, it was much less, at about 60% -- 50% to 60% of this amount.

Okay. Okay. So of the -- I think it was 42% organic drop in the U.S., in North America, in the first half, say, maybe 3/4 of this relates to this contract, something like that.

A bit less. A bit less.

A bit less. A bit less. Half or something.

A bit less. A bit less. I think your calculation is a little bit too bullish.

Okay. So I was looking at '21. So on '20, that would be...

Because in -- yes, in 2020, it was about, as I said, between -- it was about USD 50 million revenue. And so you can do the math on.

It stopped from the start of January 2021.

Exactly. From the end of December, exactly.

Okay. We have now a question from Annick Maas from Exane BNP Paribas.

I just have one question. I'm keen to hear what your take is on the Lamar investment in Vistar Media. I think with -- you were always kind of aiming to be the consolidator of the programmatic out-of-home space. Let me put it like that. So -- I mean Lamar is more exposed to regional, let's say, smaller advertising clients that are probably more the type of clients that would go for this new offering. And Vistar Media, as I understand, is also quite developed already in that space. So just quite keen to get your thoughts on that investment.

Thank you, Annick. This investment confirms that we are right with our strategy to have this supply-side trading platform, which, by the way, is currently discussing with third-party media owners for them to join the platform. And we are with some of them close to reaching agreements. So that's quite a positive. But it's up to, obviously, to the platform to communicate on this. And I think they will do so as soon as the agreements are signed. And I think that we have more connections worldwide than Vistar. So we are, obviously, a global platform, which -- that's the aim of the platform, trading currently active in certain countries with 26 DSPs. And as far as the consolidation of the programmatic digital out-of-home buying is concerned, I think it's a bit early. It's -- there is no doubt that at some point in the future, this question will come up. Technically speaking, I think we are ahead of Vistar, but obviously, that's for the advertisers and the agencies to decide. But Lamar investing in Vistar Media is -- I think, is good news for us. Regarding the profile of clients that are more likely to use the platform versus our clients, it's true that the nature of the Billboard business in the U.S. is more local than national, especially for second and third tier markets, which is the strength of Lamar. So they have more than 70% of sales in local sales. But we also have a strong local sales portfolio in France, for instance. So we -- in H1, we saw a very strong increase from a low base of programmatic trading with quite a significant amount of new clients, but also what's interesting was some large clients buying programmatically on top of their traditional buy. So we don't see, for the time being, any cannibalization. We see some higher CPMs, and we have new clients as well, meaning that the famous long tail of clients, which is the strength of the online guys such as Facebook and Google, we believe that there is potential for us to tap into that revenue. And our footprint, I mean if you think of the latest acquisition in France with Abri Services, we are now in more than 750 cities in France, including some smaller cities, where digital will be rolled out sooner or later. And so our positioning in France is -- although we have a very strong national network, we are locally in -- also in second and third tier cities as well. So that's why we will be, I think, an attractive proposition for these smaller regional or local clients, which was part of your question.

We have now a question from Nizla Naizer from Deutsche Bank.

I have three questions from my end as well. The first is on the U.S. market. I mean with the loss of the New York airport contract, could you remind us how you view the U.S. market even going forward? Is it still an important market to go after? What your strategy there would be? That's question one. Question 2 relates to the previous question on VIOOH and how it might be appealing to local and regional clients. And clearly, that's a great opportunity. But would that also mean greater investment in a local sales force? Because it's a different sort of conversation that you might have to have with these local clients to convert them into digital out of home. Some color on maybe how you're viewing the opportunity and the investments required there? My last question is on the lower ends that you've been able to achieve this year. How much of that would be recurring next year? Is this a conversation that would continue even until 2022? Or is this a one-off special sort of negotiation because of the unforeseen circumstances with the pandemic?

I will take your first and second question, and David will take the third one. So on the U.S. market, I mean, U.S. was always -- we were always underweight. Pre-pandemic, U.S. was about 8%, 9% of total sales, is now just below 5%. We operate some kind of niche segments, such as airport advertising and Street Furniture. Street Furniture is a business that we introduced into the U.S. market. It didn't -- it hardly existed before we installed our first Street Furniture back in '96 in San Francisco. It's a good business, and we don't intend to give up on the business. As a matter of fact, we are right now bidding in partnership with OUTFRONT for the renewal of the Los Angeles bus shelter franchise. And the products which are on display are not coming from OUTFRONT, but they're coming from JCDecaux. And you can go on social media, you will find out the exhibition, which is taking place around L.A. on different locations at the request of the city in order to show to the people who live there, what are available from JCDecaux. So U.S. market remains a good market for us. We have some of the most exclusive locations like Fifth Avenue in New York, Market Street in Chicago -- no, sorry, North Michigan in Chicago, Boston Street in Boston. But if you are not in the Billboard business in the U.S., you are kind of a marginal player because billboard advertising in the U.S. accounts for nearly 80% of out-of-home media spend, which accounts for 4.5% of ad spend. So the bulk of the industry is the Billboard industry. Obviously, we've been a potential buyer of the ex-CBS business, which, as a result of the spin-off, is now independent and called OUTFRONT, potential buyer of Clear Channel as well. But I think we've always been cautious before making such a large M&A acquisitions. And if you look at over the last 10 years, the price of those assets, they've gone down. So I think we were right not to rush into making such a transformational acquisition. OUTFRONT is now no longer there in Europe. They lost the battle, and they blew up a couple of billion dollars in the European activities. Clear Channel, as you can see, is under pressure in Europe. It's been under pressure because they don't make money. They lose money. So both of our American competitors are retrenching from this out -- non-U.S. operations. We are a global out-of-home media player. We make money pre-pandemic. We make money everywhere in every single market around the world which is quite unique because we have a special know-how, especially in Street Furniture, which no one has really been able to leverage as much as we did in terms of innovation. I'll just remind you that we were the pioneer of the automatic public toilet, which on the face of it has nothing to do with out-of-home. But we were able to renew San Francisco the prime franchise on the West Coast in terms of visibility with the automatic public toilets after 20 years of good work in San Francisco. And we are in New York. So I think we have a role to play in the U.S. out-of-home media industry, but obviously, unless we do a major transaction, which is either buying OUTFRONT and/or -- or Clear Channel, we will always be a marginal player in the U.S. But finally, on the Billboard, we tried to grow organically, which is highly difficult in the U.S. because of different reasons. And -- but we did one organic contract with the City of Chicago, which is doing extremely well. So it's only 56 spaces, but they are the highest yielding billboard in the Chicago market, ahead of Clear Channel, OUTFRONT. But unfortunately, in the other U.S. cities, which we pitched, whether it's Boston, L.A. or some other -- or other cities, unless you have inventory to trade, in other words, you offer to the municipalities to take down some existing billboards in return to -- for the digitization of some prime locations, they are not really keen to add more inventory in what they consider to be already a market which has too many billboards. So it's politically almost impossible to add more billboards in any given city in the U.S. And what's interesting is that Clear Channel, I think, it was last year in San Diego, did exactly what I'm explaining. In other words, they traded, and they did what we call a takedown deal with the City of San Diego, taking down, I think, 14, 1-4, traditional billboards in return for digitizing 1 billboard. And that's exactly what we would love to do. But unfortunately, we haven't got the inventory because we haven't got any traditional billboards in the U.S. So that's the long answer to your question, but I think it's -- given the importance of the U.S. market, it was important for us to go into the details in answering your question. Second question on VIOOH local and regional clients' investment. No, it's only a question of having even more DSPs connected to the trading platform. And as soon as we have even more DSPs and all digital assets are on the platform, we don't need necessary to hire more salespeople in order to generate -- trigger some programmatic buying from those smaller clients. And finally, on the third question, lower rent, David, what is recurrent and nonrecurrent?

Yes. The rent relief that we have obtained are clearly correlated to the COVID situation and all the ongoing discussions that we are having with our partners and landlords all over the world. And I have to say that those discussions have happened in a very partnership spirit, not everywhere, in some geographies, I have to say that it has been much tougher than in other geographies. But it is clearly correlated to the COVID-19. Obviously, we are trying to get some more structural adjustments to our rental base in some concessions or contracts, but it is, I would say, more marginal. So our rental base should progressively increase with the recovery. Now the major point and to see where it will stand compared to 2019, it will depend on the revenue mix, obviously, and our capability also to have a renewed readjust to some concession contract on a more variable basis, what we have been able to do in some situation. But again, it's not the majority of the situation.

I would just add to what David just said that in some cities and/or with some transport authorities, we decided to take the extension of the contract. And -- when contracts were profitable, pre-COVID, and the city was -- when the city was not prepared to lower the minimum guarantee but was prepared to give us an extension, especially in Street Furniture where, as you can see that the revenue rebound is pretty strong, we took the view that it was better to take the short-term hit for the long-term, medium-term benefit. In other words, we have 3, 4 more years of contract on terms and conditions that were making sense pre-COVID, which should make sense again in the near future. But in the meantime, we are at the same -- more or less the same rent level despite not being back to pre-COVID level, which is obviously hurting the operating margin. But as soon as we are out of the pandemic, which -- we will have more years to -- for us to enjoy those contracts.

We have no more questions.

Okay. So thank you. So on behalf of the Executive Board of JCDecaux, thank you for attending our call today regarding the first half results. And I wish you all and your families a very nice holidays, and stay safe and well. We'll see you virtually or physically during the road show in September. Thank you, and bye-bye, everyone.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.