Lagardere SA (MMB) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for joining us today to the Lagardère Q3 '23 Revenue. I'm Emmanuel Rapin, Head of Financial Communication, and I will be guiding you through this presentation. The conference is led today by Arnaud Lagardère, Chairman and Chief Executive Officer of Lagardère SA; Sophie Stabile, the Group CFO; Dag Rasmussen, the Chairman and CEO of Lagardère Travel Retail; and Nathalie Houël, the Group CFO of Hachette Livre. [Operator Instructions] I will be reading questions from financial analysts only. Now I will leave the floor to Arnaud Lagardère.

Thank you, Emmanuel, and good afternoon to all of you. Before leaving the floor to Sophie, let me just say very briefly that, as you could see on the press release, we still have a very good positive momentum, especially for Travel Retail, but also Publishing showed strong resilience in a little bit more difficult environment. But as you know, Q4 is where we make most of the year result-wise, I mean, so we'll see what happens. But we're still very confident about this year. You're not aware, obviously, of the budgets, but we will beat our internal budget this year, which is a great satisfaction for us. Sophie, I'll leave the floor to you, and we'll get back for the Q&A.

Good evening, everyone. Thank you, Arnaud. Thank you for joining us. I will take you through the highlights of the company's performance. Lagardère Group fueled a remarkable growth trajectory in 2023. The third quarter revenue grew by 9.6% like-for-like. And over the first 9 months, revenue is up 15.3%. This growth was driven by our two main businesses. First, Lagardère Publishing maintained a robust level of activity despite less dynamic markets. Second, Lagardère Travel Retail achieved a historic quarterly revenue on the back of an exceptional summer tourist season. Let's see how this performance splits. Group revenue grew to EUR 2.2 billion in Q3 '23, which represents a plus EUR 193 million increment on a like-for-like basis. As you can see on the slide, it was driven by Lagardère Travel Retail's record-breaking revenue over the quarter. The difference between the like-for-like and reported growth for the group is due to a negative EUR 44 million currency effect and a positive EUR 83 million scope effect, which includes the acquisition of Marché International by Lagardère Travel Retail in Germany. Now let's focus on our divisions' performances. Lagardère Publishing maintained a strong level of activity, slightly down by 1.6% on a like-for-like basis following a very strong Q3 2022. If we look at the activity by segment, the business was driven by continuing demand in Illustrated Books, especially Young Adult publication, with the ongoing success of the Captive series by Sarah Rivens and the success of À contre sens by Mercedes Ron, which benefited from the Amazon Prime movie adaptation. General Literature was lifted by bestsellers, such as Le temps des combats by Nicolas Sarkozy and L’'Enragé by Sorj Chalandon in France, and also fueled by the popularity of titles on social networks such as Fourth Wing by Rebecca Yarros in the U.K. The good momentum in Travel Guides continued, supported by the upturn in tourist recovery. The Partworks activity is slower, owing to a less dynamic campaign at the beginning of the year than in '22. Looking into geographies. In France, the activity was down by 5% like-for-like, mainly due to the [ advance ] of Guillaume Musso hardback and paperback publication compared to previous year. Apart from this effect and despite a tougher market condition, Illustrated Books and General Literature performed well. In the U.K., the activity was strong at 5.6% like-for-like in a slightly growing market, driven by the Young Adult segment and a strong backlist. In a slower market, the U.S. was down by 5.2% like-for-like due to a softer release calendar and the lack of top-selling reference like Verity by Colleen Hoover last year. Finally, Spain benefited from the peak of the cycle of the school reform for primary education while Mexico is lifted by its trade activity. Moving on to Lagardère Travel Retail. Q3 was a historic quarter for Lagardère Travel Retail at almost EUR 1.4 billion of revenue. This represents a 17.7% increase on a like-for-like basis versus 2022. I would like to highlight the hard work of the team. The commercial initiatives and operational efforts to meet our customer expectations were outstanding over the quarter. In this context, all our geographies performed very well. This is due to a dynamic intra-European market on the back of an exceptional summer performance. The activity in France up 10.8% was boosted by the performance in regional airports such as Marseille and Nice, thanks to a touristic season that has stretched into September. The EMEA region benefited from the European and international traffic, especially from American tourists, with a strong performance in Italy, up 30.6%, and Poland, 18.4%. In North America, the activity profits from the return of Asian passenger, especially in Canada, with up 27.5%. Finally, in Asia-Pacific, the activity is back, up 45.7%, following the reopening of China and with a favorable comparison basis versus 2022. Let's dig into the division's different activities. Globally speaking, this quarter confirms the strong dynamic of the year. The activity is driven by a strong performance in Duty Free and Foodservice within the EMEA region. Overall, the Foodservice segment now represents 27% of the Q3 '23 activity versus 23% last year, thanks to our M&A integration in Germany and Dubai. The Foodservice and Travel Essentials also gained from the leisure traffic in the U.S. Let's move on to Other Activities. The total revenue for the quarter is EUR 56 million, down 6.6% like-for-like. A few points to be highlighted. News is down by 7% due to a softer advertising market and the impact from the non-publication of the JDD for 6 weeks. Lagardère Live Entertainment is down 9% versus Q3 2022 following an exceptional programming in the summer 2022. Overall, Lagardère Group is on a strong revenue growth trajectory. We continue to focus our efforts to secure our leadership position in our various businesses, including our M&A integration capability. In an uncertain environment, we remain confident in our ability to maintain a high level of results. Despite pressure on cost, Lagardère Publishing should maintain relatively similar performances to last year. Lagardère Travel Retail, in a normalized environment as global traffic continues to recover, has potential for revenue and profitability growth, meeting LEAP initiatives. Many thanks for your attention. We are now available to answer your questions.

The first question comes from Julien Roch. And the questions come about what is the trend for Q4 for both Travel Retail and Publishing? Dag will start with the trends.

So the trends are, as you have seen, fairly good. We are, for the month of July, we were at plus 16% versus '19, plus 10% in August and plus 14% in September, which gives the average of 13.2% for the quarter. We would imagine this trend continues throughout the year, give or take. We don't have any indication that this would change. I'm challenging the teams every day to see whether there is any change in trend. We don't see it. So, so far, so good.

I will take then the question from Adrien de Saint Hilaire of Bank of America. I think it comes a little bit the same way as usual, Julien Roch, and just to complete the picture is there is a slowdown between Q3 and Q2. And what about the Q4 maybe? So if you can continue, Dag, on that before we -- yes, the Q4 trend, why there is a slowing down, in fact?

So actually, there's no slowdown. And you have to have in mind that these figures are compared to '22. Q1 '22, you had Omicron, which was really strong. You had China completely closed down. So the real, to understand the dynamics of Travel Retail, it's better to compare to 2019, which is what I did with Julien's question. So we don't see any slowdown of the trend for the time being.

Thank you. So maybe it's Nathalie then that is going to address the question about the trends for book publishing.