Lagardere SA (MMB) Earnings Call Transcript & Summary

Good afternoon. This is the conference operator. Welcome, and thank you for joining the Louis Hachette Group and Lagardere First Half 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Rapin, Head of Investor Relations. Please go ahead, sir.

Yes. Thank you. Good evening, everyone. This conference call will be hosted today by Jean-Christophe Thiery, Chairman and CEO of Louis Hachette Group; and Gregoire Castaing, Deputy CEO of Louis Hachette Group and Deputy CEO in charge of Finance for Lagardere. Joining us for this presentation also Frédéric Chevalier, the CEO of Lagardere Travel Retail, who will each share their insights and key highlights for this first semester. This presentation will be followed by a Q&A session. I now leave the floor to Jean-Christophe Thiery.

Thank you, Emmanuel, and good evening, everyone, and thank you for joining us today. I am delighted to introduce you to Louis Hachette Group's first half 2026 results. Despite a challenging economic and geopolitical environment, particularly in the Middle East, our group once again demonstrated its resilience and the strength of its diversified model. In the first half of 2026, we generated revenue of EUR 4.5 billion and EBITA of more than EUR 200 million, reflecting disciplined execution across the group. We also maintained a strong financial profile, supported by good cash generation and continued debt reduction. Gregoire will take you through the figures in a moment. Let me first turn to the main developments across our businesses. At Lagardere Publishing, performance remained solid, supported by the diversity and quality of the portfolio. In trade, we benefited from successful releases by Guillaume Musso and Pierre Lemaitre, to name a few, in France, while the Housemade series continued to perform strongly in both the U.K. and the U.S. We also had strong momentum in Spain and Latin America, while our board games and partwork activities remained important contributors to growth. Turning to Lagardere Travel Retail. The business maintained its positive dynamics driven by strong performances in Europe and the Americas. Our teams continued to demonstrate great agility in managing both the direct and indirect impacts of the situation in the Middle East. We also strengthened our portfolio through several new openings and the renewal of our concession at Geneva Airport. Our other activities also delivered encouraging progress. Both Lagardere Live and Prisma Media reported positive EBITDA in the first half, reflecting disciplined cost management and a more focused strategic approach. At Prisma Media, the restructuring program designed to adapt the business to changing market conditions and accelerate digital transformation is progressing. Overall, 18 months after our listing, we continue to deliver solid momentum across the group. This once again demonstrates the relevance of our strategy and the resilience of our group built around leading positions in publishing, Travel Retail and media. Looking ahead, we remain confident in our ability to create sustainable long-term value and seize the opportunities that lie before us. Thank you for your attention. And I will now hand over to Gregoire, who will take you through our financial performance in more detail.

Thank you very much, Jean-Christophe, and good evening, everyone. I'm also very pleased to share with you the good and solid results delivered by the group for this first half. We will start by taking a look at the different performance of our different businesses, starting on the Slide 5 with the Lagardere Publishing, which once again delivered a solid performance this semester despite relatively soft market condition overall, the business showed strong resilience, benefiting again from its diversified activities and international footprint. Revenue increased by 1.3% on a like-for-like basis to more than EUR 1.3 billion. In France, as you can see, the revenue was down 1.6% in a difficult market that declined by around 5%. Literature remained well oriented in France for Lagardere Hachette, supported by several successful new releases, as Jean-Christophe mentioned it, including the Crime du Paradis by Guillaume Musso with already 2,050 copies sold and Les Belles Promesses by Pierre Lemaitre published in January of this year. We also benefited from a strong momentum in the L de Posch with Kcalcarot by Miso again and the Barmanuritz by Philip Cola. Digital audio revenue continued to grow with a more than 20% increase in France year-on-year. On digital business, by the way, France is still lagging behind compared with what we are able to achieve in the U.K., for example. However, the growth we are seeing is encouraging. Our efforts to accelerate digital development in France are bearing fruit. This is one of our priority for Achet France in the years ahead. Coming back to H1 results for France. Our performance was also affected by weaker market conditions in a number of segments, notably illustrated books, comics, tourism and education. More broadly, we continue to see the impact of cautious customer spending and a softer environment for discretionary purchases. This makes the performance delivered by the French team all the more noteworthy. Regarding the U.S., revenue increased by 1.3% in a market that contracted by 1.5%. This growth reflects a strong slate of new releases such as the Deluxe edition of Sererensen Tire Boon and Ferryboon or JEesPatterson and Viola Davis Judgstone. The continued growth in audiobooks also contributed to this result in the U.S. In the U.K., revenue was down 1% in a market up 1%, following our very strong growth in the first half of '25, driven by RebeccaosXone, which was a huge success, as you know. Backlist sales remained strong, supported by continued sales of Frida McFadden, the ASmade series and Maggie Oarellnet, both boosted by their film adaptations in early '26. New releases by Alice Osman and Flosnap also contributed to the top line growth this semester. In our Spanish-speaking countries, revenue rose sharply by, as you see, 13%, benefiting from the early start of the back-to-school season in Spain, combined with the continued growth of the paper bag division. Mexico also reported growth for both education and trade. Revenue from Partworks was up 6%. We continue to outperform in this market with particularly strong position and growth across the world, including Japan, Italy, Poland, for example. Finally, board games continue to support our growth -- our revenue segment with a strong 9% growth, supported by the continued success of the Flip7 game. Now let's have a look to the EBITDA and operating margin on the Slide 6. In H1 '26, EBITDA reached EUR 105 million compared to EUR 103 million last year. On a like-for-like basis, mainly excluding adverse exchange rate, EBITDA grew by EUR 5 million compared to H1 '25. As a result, the operating margin remained strong at close to 8%, confirming the Publishing division sustained profitability despite the unfavorable seasonality that typically affect, as you know, the first semester. To sum up, a solid first half for Publishing supported notably by its international footprint and its diversification efforts, which clearly represent 2 key strengths in the current environment. Let's now move on to Travel Retail on the Slide 8. Lagardere Travel Retail maintained its growth momentum and delivered a revenue of almost EUR 3 billion during the first half. Revenue increased by 3.3% on a like-for-like basis, supported by the continued expansion of our network. This includes the opening of Oakland in July '25, which generates EUR 55 million contribution as well as Lima and several new openings across the United States, which contribute an additional EUR 30 million. In France, revenue declined by 4%. As a reminder, this line includes the wholesale activity carrier with the joint venture operating our travel essential and duty-free businesses at Paris Airport. Performance was below last year level, reflecting both the impact of the situation in the Middle East on traffic flows through European hubs and also the temporary disruption caused by renovation works at several terminals at Paris Charles de Gaulle Airport. On more positive note, duty-free, as you can see, excluding Paris Airport in France, continued to deliver good growth with revenue up 14%, supported by the modernization of stores at Nice Airport. In the EMEA, revenue was up 4% despite a 28% decline in the Middle East in the H1 and a minus 39% in Q2. If we -- by the way, if we just take a look at the direct impact of the current geopolitical context of the Middle East crisis on our top line, please note that Middle East accounted for 1.2% of the Louiahet revenue compared to 1.8% in H1 '25. Again, as Jean-Christophe mentioned it, besides this weight in our revenue, we remain very vigilant as to the direct and indirect impact on our activities throughout '26, especially as regard to the impact on air passenger traffic and/or the risk of inflation. Coming back to the performance in EMEA, sales were strong in the rest of Europe. For instance, in Romania, in the U.K. and Ferries, in Italian regional airports as well as in Düsseldorf and Frankfurt in Germany or in Albania, Czech Republic and Spain. In Americas, revenue rose sharply by 6%. In the North America, sales were up 5%, supported by numerous openings and strong commercial performance. Q1 was stronger, clearly at 6%, supported by increased dwell time and consumption in airports. And Q2 was softer at 3%, impacted by lower traffic trends in May and June, surge in airfares and Spirit bankruptcy impacts at Fort Lerdale and Detroit Airports. In APAC, revenue grew by 9%, reflecting a strong performance across the region. As already mentioned, the main driver was our duty-free operation in Auckland, which contributed to more than EUR 50 million during the first half. This more than offset the impact of store closure in China, which reduced revenue by around 40% compared with last year. By the way, regarding the restructuring of our activities in China, we remain on track to finalize our exit by the end of '26. Next slide on EBITDA for HTare for Travel Retail. EBITDA came at EUR 111 million. As you can see, on a like-for-like basis, EBITDA increased by EUR 2 million, and the EBITA margin remained stable despite the consequences of the situation in the Middle East and the record level delivered in the H1 '25. This solid performance reflects strong execution in North America, continued operational discipline and lower restructuring costs in North Asia as the rationalization plan nears completion. Now let's turn to other activities, Lagardere -- for the first semester of ' 26, Lagardere Live revenue increased by 3% on a like-for-like basis to EUR 115 million. Radio and news are facing a weaker advertising market. And on the other hand, live entertainment had a strong semester, posting close to 20% growth like-for-like, driven by the timing of artist tours organized by Productions and a record program of events at Lefroie Berger, the Casino Paris and the Archa Arena in Bordeaux. After a sharp improvement in H1 regarding EBITDA, the EBITDA continued to improve and reach EUR 3 million, representing a solid EUR 22 million increase since H1 '24. These results were achieved, thanks to our continuous efforts to reduce the cost in every entity of this branch. Moving on now to Prisma for the H1 '26. Prisma delivered a revenue of EUR 109 million, down 25%, while print circulation continued to be very impacted by the structural downturn in the magazine market. Digital revenues has been affected by the evolving digital consumption patterns and weaker online advertising demand. But please note that EBITDA remained stable and positive during this first semester at EUR 3 million as the revenue decline has been offset by cost savings. H1 '26 was marked by continued restructuring, the disclosure -- the closure, sorry, of certain titles and magazines, the divestitures of the Luxury division and the sales of 13.6% minority stake to Vivendi. Last but not least, as you may know, the group also obtained a favorable ruling in its complaint against Google recently with a related cash inflow of EUR 66 million expected by the end of this year. I would also take this opportunity to underline the work of the teams who have been working on this matter for months and even for years to defend Prisma interest. Note that we covered the performance of each division, let me walk you through the financial at group level, starting with revenue on the Slide 16. Total group revenue reached EUR 4.5 billion in H1 '26 with a like-for-like growth of 2%. Once again, organic growth was the main driver, contributing EUR 82 million across the Lagardere Group's entities. On the negative side, foreign exchange had an adverse impact of EUR 100 million with the U.S. dollar being the main currency affecting our revenue, reflecting our strong presence in the U.S. in both Travel Retail and Publishing. This provides a good transition to the next slide, where we will look to the revenue by geographic area. As you can see, revenue mix remained broadly stable year-on-year with North America continuing to be our largest market at 26%. France represent 22% of revenue, while Western and Eastern Europe slightly increased their contribution, thanks to Lagardere Travel Retail. On the next slide, for this first half of the year, group EBITDA, as you can see, increased by EUR 8 million on a like-for-like basis after, again, a good level for H1 '25. All activities from Lagardere Group contributed positively to this performance and FX and scope impacts amounted to EUR 10 million, mainly reflecting again the unfavorable U.S. dollar and British also pound evolutions versus euro. On the next slide, as regards the rest of our P&L, profit before interest and tax was stable at EUR 162 million. Finance costs improved by EUR 11 million, driven by lower gross debt and reduced average cost of debt. Interest expense on liabilities increased by 11% due to new renewed and amended lease contracts, particularly in Poland and in New Zealand. And so in total, IFRS net result increased significantly by 23% to EUR 16 million. Now let's move on to cash flow from operations. On the Slide 20, we continue to focus, as Jean-Christophe mentioned it, on improving the conversion of our operating performance into cash flow generation. As a result, our CFFO increased by 50% year-on-year to EUR 84 million. As usual, Publishing generated negative cash flow in this first half, reflecting the seasonality of the business and the buildup of working cap ahead of the important second half publishing season. However, H1 cash flow improved significantly year-on-year from an outflow of EUR 40 million in '25 to an outflow of EUR 24 million this semester, mainly by a favorable evolution of the working cap. Travel Retail CFO reached EUR 104 million, up EUR 22 million versus last year. also reflecting both strong operational performance and improved working capital generation. Overall, working cap remained under control, and we continue to expect a significant reversal in the second half as is typically the case in both of our businesses. As a result, we remain confident in our ability to deliver solid cash flow generation for the full year. This improvement in cash flow naturally brings us to our balance sheet and more specifically to the evolution of our net debt, which is presented on the next slide. Given the seasonality of our activities, it makes more sense to consider the rolling 12 months evolution of our total cash generation and net debt as shown on this graph. On this basis, we reduced our net debt by more than EUR 200 million, thanks to mainly our operating cash flow. Please note that our net free cash flow, cash flow after tax, financial interest and dividends paid to minorities and subsidiaries level was reached EUR 320 million. It's worth mentioning that CapEx and CFFO, as you know, in H2 '25 include the proceeds from disposal of our real estate in Ras and also the sale of Mun.com domain name for an amount close to EUR 45 million. So a normative cash generation, let's say, on the 12 rolling months will be around EUR 280 million. This very high level reflects the resilience of our operation throughout the challenging period and the substantial progress achieved over the past 24 months to improve our cash generation. The remaining outflows relating to the dividend paid in May to Lagardere Group minorities and to our shareholders. Finally, we received also EUR 40 million at Prisma level from the sale of its luxury division and from Vivendi's contribution to its capital increase. As a result, net debt decreased by -- decreased from EUR 1.9 billion to EUR 1.7 billion at the end of June '26. At this point, I would like to make a brief remark for those monitoring the net debt at Lagardere level. Like Louis Hachette Group, Lagardere's net debt level also sharply improved, ending the first half of this year just below EUR 1. 8 billion, representing a reduction of almost EUR 200 million year-on-year. As a result, Lagardere net debt ratio fell to 2.2 as of June 26 compared to 2.5 a year earlier. So we are clearly on track with our deleveraging trajectory. We are pursuing since 2 years now. But of course, we remain fully focused on continuing this effort. On the balance sheet side, our debt structure remains well diversified, combining bonds, bank loans, private placements and commercial paper. And as you can see, the maturity profile is also very well balanced. So to wrap up this presentation, -- in the first half of '26, Louis Hachette Group delivered solid operational results, demonstrating the resilience of its businesses despite the difficult geopolitical and macroeconomic context. Let revenue reached EUR 4.5 billion and reported a strong EBITDA at EUR 218 million, growing after an already very strong first half of '25. Cash flow generation was also good with cash flow up 50% and reaching again EUR 84 million. Over 12 months, we significantly reduced our net debt by more than EUR 200 million. This brings to EUR 1.7 billion, a historically low level for H1. Thank you for your attention, and we are now available to answer your questions.

The first question comes from Jérôme Bodin with ODDO BHF.

Just first question on the trend. So if we could have a quick word as usual Publishing and Travel Retail for summer. So I have understood that the U.S. has been a bit weaker in May and June. So what's the situation for Travel Retail in the U.S. in July and in Middle East? That would be useful. Second question on the free cash flow. I'm not very clear on what is recurring or not. So should we expect H2 -- I mean, the gain on the working cap to continue in H2? And I'm not very totally clear on the impact of the -- on Prisma. So you win a contingency around Prisma. So is it in the cash or not yet? So if you can come back on that point. So the EUR 66 million, if I'm correct? That's my second question, so on working cap and on Prisma. And lastly, a market question. So regarding publishing. So there is a U.S. judge that approved last week or a few weeks ago, a EUR 1.5 billion settlement with -- between Andropic and a group of publishers over books downloading. So first, do you expect Aet to receive some compensation? That's my first question. And second, besides that, are you now talking with Andropic and other AI company to -- about paid license deal for the future?

Maybe Fred, you can start for the trends regarding Travel Retail.

Sure. Good afternoon, everybody. Fred speaking. For the summer, of course, in the context of the current geopolitical context throughout the world, the situation is extremely uncertain, as you can guess. Overall, we had a pretty good first quarter. The second one was a bit softer overall, especially in the U.S. with a slowdown of the traffic and a consequence of the crisis in the Middle East, the bankruptcy of Spirit Airline, a low-cost carrier in the U.S. that affected the traffic in general and affected us indirectly. What we see today in July is overall worldwide a month of July that is in the continuity or a little bit better than second quarter with Europe and in particular, Southern Europe doing better and the U.S. doing a little bit less lower than Q2. Middle East continues to be obviously quite depressed for obvious reasons. Those reasons remain extremely uncertain. The uncertainty of the conflict in the Middle East is super high. So for that reason, it's a bit difficult for us to give any forecast for August and September, which are 2 big months together with July. July is somehow worldwide, a little bit reassuring, a bit better than Q2, as I said earlier.

Sorry, we need to answer about the publishing, and I leave the floor.

The publishing, the second half of the year is always a key period for Ashettler and for the publishing industry more broadly. As a reminder, unlike in 2025, we will not benefit from a new asterics release this year, which represented around EUR 15 million of revenues last year. More generally, publishing remains a hit-driven business, and it is always difficult to predict the success of upcoming titles. That said, we have a number of highly anticipated releases scheduled for H2, including Rebecca Yaros new book, Freshing Day in September in the U.K. and Joe Biden's Memoir in November, for which we hold the world rights. We will also publish Malcolm Gladwell's new title, the American Way of Kiving as well as a new title from Rachel Gillig, the Nave and the Moon in the U.S. and Silver Ster Stallons Memoir, -- the Steps in the U.K. In France, major autumn releases include Lciamorph by Amin Malou at Grass, Lierandenture by Laurent Gunell and Dan Brown at Lou. I add that we could also have very good surprise with new authors. I am, for example, thinking of the first novel of Canadian author, Telonureda. -- published by Grass next month, which could have success like, for instance, Galfi a few years ago. But however, books are ultimately a discretionary purchase. And given the current consumer environment, we remain cautious regarding demand trends in the second half.

Thank you, Jean-Christophe. Jean, regarding your second question for the free cash flow and the recurring free cash flow, let me just precise some topics. If you have a look to our figures on a 12 months evolution, as I mentioned it, we had 2 big exceptional items for a total of EUR 45 million, the sale of Asa and the sale of moon.com. So if you want just to forecast, let's say, a normative cash flow, you may take this into account. If you have a look to our figures just for the first semester, there is no significant exceptional impact. And that may also answer to your -- the second part of your question regarding Google since, again, the related cash inflow of EUR 66 million is expected by the end of this year, but not yet received by the group. So it's not in the cash and it's not in the result at this stage. For your last and third question regarding the Anthropic settlement, you're right, as several publishers disclosed this recently, we had, let's say, a good and significant settlement in the U.S. Some of the publishers disclosed their expectation regarding this settlement. Lagardere Publishing is also part of the beneficiaries of the Anthropic settlement with a total number of books listed by the court similar, for instance, to Bloomsbury in the magnitude of less or more than 15,000 titles. But -- on our side, we think it's too early to disclose any specific amounts for the company since the settlement amount is after attorney fees and other expenses and will also be, of course, shared with the author. So we hope to see some progress during the second semester, but too soon to mention any impact for us. And I think that you also had a question about the monetization regarding this type of, let's say, process and AI impact. Let's say that we don't rule out monetizing our content if we believe that both we and our author would benefit from its -- but to be completely transparent at this stage, our main focus is more on the ongoing litigation in the U.S. evolving against several publishers and platforms and in which Ashadebu Group is a party. Next question I think I answered the question.

So the next question comes from Eric Ravary with CIC CIB.

I have two questions. First one is on Travel Retail. Could we have some details about the impact of the Middle East crisis on EBIT in H1? And also what was the positive impact of the China restructuring on EBIT in H1? And what are you expecting for China from China restructuring in H2 compared with H1? So that's for Travel Retail. And second question is on Prisma. So you have been implementing a major cost restructuring there. Are you also working on the adaptation of the offering of Prisma magazine offering to the new consumption patterns?