Ströer SE & Co. KGaA (SAX) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the Ströer call on the full year 2019 and the strength of Out-of-Home plus. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Christian Schmalzl, Co-CEO of Ströer SE, who will lead you through this conference. Please go ahead, sir.

Thank you. Dear, ladies and gentlemen, thank you for joining our call today. Originally, we only wanted to report our full year numbers for 2019, but at this moment my Board, colleagues and I think it's more important to update you about how we respond to the corona crisis and how our business model, Out-of-Home plus is able cope with the current and coming challenges. Apart from the really positive development in the last years, we are also convinced that our Out-of-Home plus strategy will be a match winner in the corona challenge. First of all, we start from an extremely robust and resilient business context, with an operating cash flow of 448 -- EUR 484 million, over EUR 210 million net adjusted income and more than 7% organic growth, we finished 2019 with another record result. More important, with a bank leverage ratio of 1.44 at the end of 2019, our debt is at an historic low and our credit facilities are secured long term. The start into 2019 (sic) [ 2020 ] was also very positive, and we expect to finish Q1 2020 despite the beginning of the corona crisis with a growth rate at the top end of our original guidance corridor of 3% to 7%. Furthermore, and by the end of March, we have available credit facilities and cash at hand of over EUR 500 million, and are, therefore, very well equipped to weather all currently foreseeable crisis scenarios. Especially in a situation like now, our focus on the German market is extremely helpful as we operate in one of the most resilient economical ecosystems globally. Germany supports its economy already with more than EUR 650 billion short term as a first step and allows the deferral of various tax payments for companies to relieve cash flows. The German government has a historically low debt ratio of less than 60% of its GDP, and therefore, massive potential to overcome the crisis better than most other countries. The German health system is the strongest in Europe regarding hospital infrastructure and intensive care bed capacities, which will be on top double soon. Ströer with more than 12,000 employees is meanwhile a relevant employer in many cities and regions, and we are experiencing massive and fast cooperative support of all authorities. And we are used to move fast and focus on excellent execution. Within less than 2 days and with a strong IT backbone, we've been able to bring more than 90% of our staff to home office already 2 weeks ago, and the company is fully operational also in a remote mode and reacting to all challenges immediately. In the last 8 years, we've been diversifying our out-of-home business towards online and content media as well as direct marketing. Despite the better access to our customers, we've also diversified our risk profile. And almost all non-out-of-home businesses, the plus businesses, as we call them, show very low or an even positive impact of the current corona crisis. In 2019, those businesses were generating well over EUR 100 million cash. And based on a strong Q1 and the first implications from the last 3 weeks into the crisis, we don't see that 2020 would be much different. Our own content platforms and especially the news portal T-Online have massively increasing traffic, plus 30% visits in March and dramatically better stickiness and we see the same for the news website watson for millennials. The integrated e-mail service of T-Online is driving reach in parallel as people have the growing need to communicate with family and friends. The monetization of our portals as well as our online ad sales business for third-party inventory is experiencing stable to growing demand in the last 3 weeks due to a more online screen time of consumers. Even if some brand advertisers reduce spend, e-commerce businesses are massively increasing online investments and our strong tech stack setup benefits over proportionally from the strong current programmatic growth. Statista sees increasing demand on short-term analysis, especially around corona data and potential implications. We currently see page visits at Statista to be up from 500,000 to more than 2 million site visits. Subscriptions are above planned to date due to aggressive marketing worldwide, and the teams respond quickly to the very different demands per region, for instance, Europe versus Asia and China. Asam's focus on e-commerce almost gets an extra push through the fact that people buy more online, customer acquisition costs are decreasing rapidly as we see stockpiling for many target group clusters. And many of our clients, especially telco companies, invest even more in dialogue marketing and direct consumer interaction. Our call center operations rather face an over demand and can monetize their high service quality level accordingly. So in a nutshell, news, e-mail, data and statistics, e-commerce as well as direct consumer communication are the special winner topics in the current crisis environment. And they are a fundamental element of our plus businesses. Of course, our out-of-home business is impacted in the initial and peak phase of the crisis through the temporary restrictions of public life. But there are, especially on the cost side, some important Ströer-specific aspects, which will safeguard our out-of-home cash flows in the current environment. Almost 40% of our out-of-home cost base are rents and leases, and more than 90% of advertising unit rents have revenue-based mechanics. Furthermore, and without a doubt, there will be reduced lease payments to the public sector in return for reduced public audiences as well as Ströer maintaining local jobs. More than 1/4 of our cost base is for staff-related costs. The high share of revenue-based sales commissions as well as the opportunities of short-term work in Germany allow us to adjust staff costs in line with revenue. Since the IPO, we've outsourced all the blue color workers who are responsible for the maintenance of our infrastructure, and we only pay for the actual demand of servicing. We have been simulating various scenarios to see how our cost base reacts to any foreseeable scenario of the crisis. Even in a theoretical worst case model, with minus 85% revenues and a utilization rate of slightly below 10% of our inventory, which would be equivalent to roughly EUR 100 million, we can actively manage and adjust our cost base for the out-of-home business to that level and ensure cash-neutral operation even in case it gets really stormy. That means that due to our strong cash inflow from the plus businesses, we could digest a filling ratio from only 10% in the out-of-home business without burning any cash on group level. This shows impressively the uniqueness of our Out-of-Home plus strategy compared to any other out-of-home company in the world. But just to be clear, we are far away from such a scenario. And every crisis comes to an end. Our Out-of-Home plus model is the ideal starting point in a recovery scenario. Our broad range of services keeps us in touch with our clients constantly. The out-of-home market is consolidated, and the market leader will benefit over proportionally when advertisers increase spend again. Our tech stack and the integration of digital out-of-home and public video in all programmatic booking systems allows real-time recovery. Our strong share of customer wallet with content and direct media as well as the broad penetration of regional and local customers helps us stimulating demand. And the long-term perspective of digitizing our infrastructure and winning market share is only postponed. It's not canceled. It's very reasonable to look at the company USPs and value also after the crisis and not only in the crisis. As soon as the restrictions of public life are lightened, and that might happen already in 2 to 3 weeks, the first thing people will do after period sitting at home, focusing on themselves and the family, will be going out and enjoying life in the warmer and sunny months of spring. And especially large clients and advertisers will capture that opportunity to reposition and activate their brand USPs. With our strong market share, our broad marketing and advertising services as well as the highly flexible digital out-of-home solutions, we are ready and best positioned for that phase of recovery. With that, let me close our presentation with reference to the publication of our first quarterly statement 2020 on May 12. We will be able to present strong Q1 results in combination with a clearer picture of how we are doing during the crisis and what the outlook will be for the rest of 2020 and especially 2021. Thank you, everyone, and we are now very happy to take your questions.

[Operator Instructions] The first question is from Marcus Diebel, JPMorgan.

Christian, it's Marcus. 3 questions from my side. Could you talk a little bit about the cost base and what you can have in terms of self-help measures? And how much of your cost base is arrival? Where -- what are the areas that you can cut? What are you doing internally to cut costs? Maybe in this regard, also the second question, are you willing to seek government help as many other companies are seeking these days in terms of potential loss in revenues and therefore, in terms of head count, and if so, what does that mean for the dividend? Because I think that starts to get related to state funding only in terms of dividend cuts. Does that impact you? And then lastly, again, on the cost side, so apologies for this, where are we in terms of paying the rents? I mean, we had prominent examples of companies not willing to pay rent, it seems that this starts to become a theme as well. Where are you positioned in this regard?

Marcus, this is Udo, and thanks a lot. First with the rent. We are clearly in a different position here because we pay rent for the circumstance that audience on the street. So this is actually the base of the business. So in the moment, the audience is reduced on the street, it's clearly more or less automatic reduction of the rent on one hand. On the other side, 90% of the rent is anyway, almost for the majority, connected with the turnover we achieve. We talk more or less minimum guarantee. But the minimum guarantee is connected through also minimum of people on the street. So you cannot compare with Adidas, who are saying we don't pay rent for our shops anymore because this is a very indirect constellation. Here, we already talked to a couple of cities, and we don't see any problems that we can adjust the rents accordingly.

And on the cost base, I mean, if you look at the biggest blocks, of course, it's staff cost. And I think in the last 2 weeks, we did more or less everything from hire freeze, salary freeze, 40% of our total staff cost is either bonus or sales provision driven. So there is a high flexible part in there. And of course, we're also looking into short time work because I think it's a special instrument in Germany that helps us below any normal measures in such a very specific crisis. I think Udo just touched on the rents and leases, which is the second big part, where we actively work on, but it's also driven just by the contract and reduced revenues and/or traffic or footfall. And then we have, meanwhile, most of the maintenance costs that are outsourced already. So our suppliers get less money, if there's less work to do. And all other costs from electricity, travel, marketing and so on are, of course, managed aggressively already since 2 or 3 weeks. So I think whatever money we spend it's all under control. And already before fully understanding what the picture might be, we were just working on it and making sure that we have more than enough buffers to react immediately.

I think the key message really what Christian said was, even if our out-of-home turnover, the fall to EUR 100 million a year, I mean, this is never going to happen because this is already half of the permanent advertising what we have that means the corona crisis takes another 3 years and everybody is dead, then we don't burn any cash on group level. I think this is a key message what you want to distribute today. So because this is something what we also -- we needed also a couple of days now to figure that out, and which gives us a super comfortable position. So the Out-of-Home plus is not only giving us better access to customers, Out-of-Home plus is clearly a perfect strategy for this type of crisis because in the plus segment, our products, like mails and news, T-Online is booming. And it's also on the turnover side, double-digit above previous year. Call centers are booming because nobody is going on a shop anymore. And Statista has quite rapid traffic that's really amazing from 500,000 to 2 million people per day on Statista. So that means, let's say, the value from our online portfolio is not negatively impacted. So by the way, if you look on a 3 years' perspective on the stock price, when you get the out-of-home business for free today in fact. And this is something, I think, what we need to communicate much better because if you would only run a pure order-only business today, if you go down to whatever, 20% thing ratio, 30% of your debt. So even if you go down to 10% filling ratio, not even burn cash on group level because the cash from the digital businesses are compensating the remaining cash loss and maintaining the infrastructure. So that means we can survive the crisis actually at infinitum as long as things are developing at the same stage, like we see it now, that means people are focused on news, online businesses, online retailers, increasing the budget. I think this is a key message, actually, what you want to distribute today.

Okay. So maybe one follow-up. How should I think about the non-outdoor business then? If I look at current estimates, say, some parts are very resilient, some are benefiting. So is it fair to say this is, let's say, in April, marginally down or -- I still struggle to see the magnitude of the non-outdoor business from your comments. So if anything you can help to guide us a bit more, that would be very helpful.

Well, I mean, the first quarter they were doing as we expected. And we've seen that the last 2 or 3 weeks, in total, if you put all the businesses into 1 box, they were doing slightly better than expected. That's why I would say mid- to long term, even during the crisis, I think the potential positive and negative impact within the non-out-of-home business should pretty much level out, so that we don't see that much difference versus a noncrisis mode.

The next question is from Annick Maas, Exane BNP Paribas.

My first question is on the outdoor business. When do you get the cash of an outdoor campaign? How much in advance is that? My second one is, just looking back at the last financial crisis actually, can you maybe give us an indication of how much national advertising versus local advertising, outdoor advertising actually declined? I guess I'm just thinking in the medium term and thinking about if some of these SMEs might not survive what does that imply for Ströer. And then the last one is just, you have these fees, which once you book your outdoor campaign, it's quite difficult to retract it. Have you cut those fees going into Q2? Just thinking, potentially, there might be some advertisers that want to advertise, but then want to lock themselves in. I don't know if you understand my question, but let me know.

Okay. So normally, we get the cash on average before the campaign starts. So it's like 30 days in advance, if you want or we've delivered what we've done. I think secondly, the cancellation period across all the products, on average, it's like 60 to 90 days. And the share of local or regional customers, well, in the past, and also at the moment is 60%. I think an interesting aspect here is that the government is already giving direct and immediate support to all SMEs to cover their running costs and advertising and marketing is part of that. So even if SMEs have problems to pay, for instance, the first bill, now they can get the money directly or even in advance from the government at the moment. And on the discount side, I mean, at the moment, we are working in extraordinary times. So I think within that, in the last 2 weeks, of course, we had discussions with customers, and the ones that maybe are also willing to leave the money where it is or maybe even increase it. Of course, we've been flexible here. But in general, we've rather given clients the opportunity to postpone the delivery of the inventory but leave the money and the bookings where they are at the morning -- at the moment, according to the normal terms that we have in our out-of-home business.

Okay. Can I just follow-up, sorry. So no, it was just -- so I guess, in the last -- so 2008, '09, I guess, do you have by any chance how much your local advertising business declined versus your national advertising business, just to see the difference in between the 2? And then I also forgot to ask on CapEx. So can you maybe tell us, I guess, let's assume the situation lasts till the end of June and then we go back to normal, what would that mean for your CapEx? And same, let's assume it started -- ending in September, what would it mean to your CapEx for this year?

In 2008, '09, the total decline was only 5% or 6%. So there was locally nothing and national maybe be 10% or something, so it was marginal. But maybe also interesting data point that last week in local sales unit, we were actually slightly above previous year. So local sales is quite active still. And especially in Germany, I have to say that the traffic is much more than you would imagine. So the traffic on the road is -- was, let's say, a couple of days heavily impacted and it's still impacted, but it's quite lively on the roads. It's not like in Spain or Italy, where you have completely shut down. People are moving a lot, especially if you look on cars, there's a lot of cars on the road. There's -- you can compare the situation with many other countries. That might be also reason why local sales was also for me surprisingly above previous year in the last week.

And on CapEx, I mean, it's difficult question. I mean, when you get into such a crisis, of course, you stop CapEx spend immediately. And let's assume in the scenario that you've described that June would be the end of such a weak curve of a crisis, we would have had 3 months with more or less the CapEx freeze or CapEx stop, that's probably equivalent to EUR 30 million, EUR 40 million. But looking at our long-term strategies, I think we would try to catch up as much as possible with the CapEx because it's a long-term investment in the business development over time, especially when it comes down to digitization, as long as we can afford it. But I think at the moment, we are somewhere in between. On the one hand, the key question is how quickly can you drive your costs and your spend down? And on the other hand, yes, I think people are also interested in what are you doing when the crisis is over. I think it's quite tricky to keep the balance here, but my feeling would be as long as it's unclear how long the crisis might last and what the real impact is, we are able, as Udo said, to minimize our costs, and we've started that quite aggressively to be prepared. But as soon as there is relief, I think we are able also to catch up on some investments that we have then broadly delayed than not done for the long-term strategy.

The next question is from Stephan Klepp, Commerzbank.

Just a few questions here and probably we take them one by one. It's rather about the structure of your contracts. So can you remind me or us the out-of-home contracts, so how much visibility do you have on them? And how are the change clauses in them? So that means like, okay, well, until March, everything was, let's say, or beginning of March, everything was okay. How quick do we see a change in the revenue? And then you basically were so kind and say that the plus business, the pros and cons are outweighing each other, so it should be rather stable. So how hard should we basically picture the hidden out-of-home that you're taking at the moment? Probably we start with those 2 first.

Well, on the visibility side, I mean, we calculate the rents and leases and pay them depending on the contract on a monthly or quarterly or sometimes also half yearly basis. So we can monitor that more or less on a weekly basis, what the revenue development is, if there are any special incidents of traffic losses like shutdowns of call centers or reduced traffic and train stations because of reduced services. So we can calculate that on a monthly basis and have full visibility here on most of the topics, but...

Yes. So my question is rather how much visibility do you have at the moment? Are you -- can you basically project for 2 weeks, 3 weeks, 4 weeks, 1 week?

Sorry, we don't get the question really. Project what, the revenue?

Your revenues, your revenues, your revenues.

Revenues, sure, sure. I mean, we can see -- I mean, we have clear visibility until the end of the second quarter.

Okay. Then what's the hit that we basically should imagine? I mean -- and that's the second part of the question. So if you have visibility until the end of the second quarter, how much of the hit is taking place at the moment in out-of-home?

Well, the question is, how many on top bookings will we get for the second quarter. And I think we know exactly what we have in our books. We know in a normal operating mode exactly what we would probably can project on the basis of the existing offers out the number of sales guys locally on the ground. But at the moment, the key question is how do clients behave, especially the large national customers who rather book short term. And that's the point that we cannot predict. So most of the existing revenues for Q2 cannot be canceled anymore, but the question is, how much comes on top. And I think that's, at the moment, something that changes and might change week by week. And as I said, maybe in 2 or 3 weeks' time, there -- if the government is lightening all the restrictions and then the whole -- there is a catch-up, it can also be in a tough -- can also get tougher than no one knows right now. And that makes it difficult to predict revenues in a scenario that is not comparable to anything we had in the past. So we don't talk about the financial crisis or recession where things come step by step. And you have a lot of time to manage it. We talk about something that was hitting, well, the whole economy within 2 weeks or so.

So that's what we said last time, we have almost 50% in the books for Q2 out-of-home turnover. And let's say, this is the worst-case scenario, what we see today, but it can also change very quickly because we see increased activity from the customer side in the last, let's say, 48 hours. And so at the moment, because nobody knows now when is the situational changing. Is it April 20? Is it the end of April? And then we have still 2 months in Q2. So it's -- that's from today's perspective, difficult to forecast. We have a clear visibility about what we have in the books, but we have no visibility of what is the government going to do.

Yes, sure. The 50% in the book, that was what I was after. Okay. Cool. So if we then look into display. I mean, last year, display was down -- in 2019, 5%. And now you commented that -- and I'm not really sure what you said here. Did you say that T-Online is up, is it double digit? Or is the total display subsegment up double-digit at the moment in terms of bookings in...

T-Online and that double-digit for growth is really related to the style of the content because portals like we do the sales for Kicker. It's a big sports portal, #1 sports portal in Germany. Obviously, there's no sports, so turnover is down. But it's a third-party mandate, so very low cash flow from that. But the flagship and our portfolio is clearly T-Online, which is owned by us 100%. T-Online is news and the traffic is up 30%. So Kicker traffic might be down, whatever, 70%. So T-Online is -- because people are watching news, and they have -- this is the biggest news portal in Germany, and people are using e-mails more. And that's also the reason why you need to go to T-Online. So that's why the crisis is supporting T-Online's traffic and turnover.

And you're right, desktop display last year was down by 5%. But at the end of the day, the portal represents desktop display, but also mobile advertising and video, depending on the device that customers use. So at the end of the day, the overall audience across all the different tablets, mobile devices and so on, deliver the traffic that you can monetize. That's why I think in general, the portal currently develops quite nicely.

The next question is from Julien Roch, Barclays.

I guess my question is on revenue because I'm a bit confused. So if we just look at German outdoor, and we look at what happened to revenue since Germany went into lockdown, so -- which is only a week. So you said that regional was actually up a bit last week, but regional was 60% of the revenue and national was -- is 40%. So does that mean that total revenue is down 40% for outdoor last week? Because also you said that -- I don't know whether you said 30% or 50% within the book, so that was the worst-case scenario. So if Germany does not go out of lockdown until the end of June, are you saying that German outdoor will only be down 50%? That's my first question is on both last week and Q2, just for pure German outdoor. Could you tell us what happened to total revenue last week? And what would be the worst-case scenario for Q2 for German outdoor? Then if we move to your second-largest source of revenue. So outdoor -- if you put in public video within outdoor is 51% revenue. The second-largest source is online ad at 18% of revenue. Now again, you said a couple of different things. You said T-Online traffic was up, but Kicker was down. And it was a bit of a mix that way. If we look at the overall revenue picture of black stream last week, what was the revenue? Was it up, down? And then on your third source of -- your largest -- your third-largest source of revenue and I'll stop there, which is direct media, which is 14% of total, you say call centers were doing very well. So how much are we talking about? We're taking 10%, 15%, 20%? So those are my 3 questions on revenue.

Yes. Let me pick one point out, if the lockdown would end until June, it will clearly be tougher than it's now because lockdown is not lockdown. We have not really locked down. We have a reduction of contact strategy. But if there would be a lockdown until June, I'm sure even if you can't cancel the orders anymore, we would end up somewhere different because people wouldn't pay even if they booked it. So that's why the thing with the 50% in the books is based on what we see now. We have a contact reduction strategy for the government, which ends up in, we cannot count it, but maybe, 30%, 40%, 50% of the normal traffic right now. In some areas of the city, we have almost normal traffic and then sometimes have less traffic. But that's also the reason why our customers are quite cooperative, different than in Spain or Italy or France. There's nobody is on the street, nobody will pay a penny for auto advertising, clearly. So here, we are benefiting from the situation that we don't have a lockdown, but a contact reduction strategy for the government. This is something, I think, what we have to take into consideration. That's also why we say from today's perspective, this is, let's say, a base case scenario. In case it's going to change in the next 2 or 3 weeks or with the end of April, then there's clearly also a perspective that it could be slightly better. So with the local sales, I was talking about local, not regional. Christian will give more insight about the turnover development. Local sales is only the sales of permanent advertising to small customers like, let's say, grocery, pharmacy and stuff like that. So this is what I always said, if you would ask me if I prefer local or national advertisers, I would always go for local advertisers. And you see in the last week, so I think we've gone to EUR 1.2 million or something. This is -- we sell single units to a pharmacy on a 1-year basis. So -- and this local permanent ad sales where people are knocking on door-to-door, this was 10%, 15% up in comparison of previous year. And this was the second week of the lockdown. We don't have 1 week now of contact reduction. We had second week of contact reduction. Now we are in the third week of contact reduction that we are going now.

And on the online business, I think if you package it the way you've described it, online advertising, then about 1/3 of revenues go on our own assets and 2/3 is third-party inventory. So the own assets last week, if a week gives you an indication, was up 13% and third-party inventory was up 4%. The point is on our own assets, we only make 1/3 of the revenues in that area. But we generate 2/3 of profits. So from a profit point of view, own assets are by far more important for that part of the business. So more top line growth there is actually good for the margin in that segment. But in combination, the business was still above our normal expectations for 2020. And direct media last week was up 11%, which is also slightly above our expectations.

And sorry, that's really useful. But going back on outdoor, so the local was up, but we don't know regional, we don't know national. So I guess, I mean, what was still outdoor last week, I guess?

Could you just repeat the question?

So we still have no idea what's happening to outdoor. I mean, you gave a lot of color. So Udo just said that local was up last week, but that's not regional just a small customer, the grocery, the pharmacy, they're knocking door-to-door. So I guess...

I -- sorry, sorry. Now I know what want to know, sorry. The order intake is almost flat. Almost 0 the order intake in the last 2 weeks. So maybe it's EUR 1 million or EUR 2 million positive because we had some cancellations, where we agreed to postpone things or whatever, and we got some local orders. So that's why we set a base case scenario today, but we actually in comparison to many other markets, very good scenarios that we have 50% in the books from previous year, but we believe what we can defend and whereas there should be -- but net order intake the last 2 weeks is not much, almost 0.

Sorry. When you mean order intake, do you mean on an absolute basis or are you saying that outdoor was flat year-on-year in the week? Or are you saying that outdoor too was...

I mean, flat -- I was maybe misleading here. On the order -- we have 50% in the book. So if you say, okay in a base case scenario, we have 50% at the end of first quarter means we would not get any new orders for second quarter. So in the last 2 weeks, we didn't get any -- on a net basis, if you add local, regional and national order intake and some cancellations, we're flattening out to 0. So no new orders came in, in the last 2 weeks.

Okay. So with the order book being at 50% and no new order coming in, year-on-year growth for outdoor was down 50% in the last 2 weeks?

Exactly.

Exactly.

The next question is from Patrick Schmidt, Warburg Research.

May be just follow up on the 50% for Q4, which you already have in your books. And how do customers behave? So basically, would you grant some discount or waive some of your rights of your fixed bookings as I guess, lot of these, especially smaller customers, they need every penny basically to survive? And they would effectively also fund your potential rebound. So how do you, let's say, observe this situation and how, let's say, flexible would you be to grant some discounts or waive any of your rights? And then additionally, I'm not sure, I might have missed it, but have you commented on your dividend strategy or what you would like to do with your dividend in that situation?

Yes, the dividend, we already said that we postponed the shareholder meeting to the second half of the year, and this is also a time when we're going to think about the dividend because I think it's not enough visibility right now. So that's why there is nothing -- there's no news and obviously, from whatever -- what I already said, we are in a privileged situation in Germany because we have no lockdown, first. Second, it might even become better in a relative short period of time. And it will end up with one wave. So this is one scenario, but maybe we have a second wave in -- after the summer. Maybe we have a third wave in next year, you never know. So actually, we are -- our focus was now, in the last 2 weeks -- last 3 weeks --actually, the last 6 weeks, clearly, to make the company prepared for any scenario. So that's what we -- I think what we already said at the beginning, this is our key message today. We can weather any crisis even it will take 5 years. So this is not going to kill us. We might not even burn cash. So we have EUR 500 million in cash and from today's perspective, we might have also EUR 500 million at the end of the crisis. So -- but clearly, I mean, the shareholders, the founding family is also bigger shareholders and priority is clearly here on the company. So we're going to see what's happening in the next 2 quarters. And after the summer, we're going to make a proposal to the shareholder meeting about the dividend.

And on the local customers, just to give you a feeling, I mean, we have just the sum of local and regional customers at the moment as far above 50,000. And I think we had, in the last 2 weeks, roughly 110, 120 requests for either postpone payments or cancellation of existing contracts. I don't know that's like 0.2% of our local and regional customer base. And as I said or mentioned before, what we did, that's also something we've worked on in the last 2 weeks, preparing in a special team, quite simple support for those customers that they get immediate financial support from the government because that's possible for SMEs. So instead of postponing campaigns or allowing them to cancel budgets, helping them first to get the necessary money to pay their bills. And for the moment, that works very well. And again, it looks like the SME structure, at least the ones that do advertising, seems to be more robust than I think most of the people think.

Okay. And how do larger accounts behave? So -- because I just wanted to get a feeling how you act within that partnership so that national customers are not being afraid of booking out-of-home view again in better times, so -- and let you kind of strictly stick to your contract detail.

Yes, I mean, there's different clients. If you look at the telco business or a couple of FMCGs, then I think there are arguments, I'm in deep ship because of corona is not really convincing. But I think giving them the flexibility maybe to -- also, they've already booked a campaign that they cannot move anymore, allowing them to move it for a 6-week forward is the kind of flexibility that we are offering in that area so that we don't lose money, but they have the flexibility to adjust the timing of their campaign. If we see that there are customers that have massive problems, then we give them also the opportunity to move campaigns maybe in Q3 or Q4 right now. But it's really an individual case and situation. And we've also seen reaction from some clients the other way around, who said, "Okay. My feeling is that there's still 60%, 70% of traffic out there, but I assume some customers are canceling. What special packages do I get if I increase my budget because I've quite a unique position at the moment with not that much at plus?" So it's really -- on the larger account, it's really an individual situation where we try to find the best solution for us, but also for the long-term partnership with customers.

Next question is from Catherine O'Neill, Citi.

I just wanted to ask if you could give us outdoor -- I guess, what your exposure is by category for your biggest -- not your biggest client by brand, in terms of your categories, what the exposure is in the breakdown?

Well, given the fact that maybe local business is 15% to 20%, regional business is around 40% to 45%, and national business is 40%. If you look then at categories, it's like the automotive sector is like slightly below 5%. Retail is maybe around 10%, but it's half-half between e-commerce and nonretail. FMCG is below 3%. So we are really extremely broad across all categories. So there is no real big exposure anywhere. Telco is, I think, around 10%; energy is 2% or 3%. So it's not like TV, where 40% is FMCG, and it's maybe not print, where 50% or more premium brands. It's really across all budget sizes and categories. It's probably a fair average or median of the ad industry from the largest to the smallest customer.

The next question is from Catharina Claes, Hauck & Aufhauser.

I'm interested in how much of your workforce can you actually apply short-term work on? So what percentage would that be? And then on the dividend, I just read in the news that the German government is requesting companies to cancel dividends to help with the corona impact. How will be your stance on that? And then I think you were in talks with banks about further financing in the last couple of weeks. Is there any update you want to give us on that? Or are you still in discussions? That would be very helpful.

Yes. So the banks, we're not actually discussing further financing. We just were discussing to modify the covenants that as -- in a slight [ different ] case so the financing we have is completely sufficient. And after that if we, let's say, calculate the last 2 weeks, we are pretty convinced, as I already said we don't even need the cash that we have. So we were talking to the banks, 48 hours after the contact reduction came here, to take immediate direction, but this was only for covenant set in between for 2, 3 quarters, but from today's perspective, what I already said, we are very bullish that we don't need -- it looks like that we would not even burn that cash after the cost-cutting measures that we took on one side and after the development, what you see now in our plus segments. So regarding the dividend and the state financing, I think it's too early to say something about it. I think this was more focused on if you get, let's say, big support from KfW and emergency credit lines and stuff like that, I mean, short worker stuff is an instrument, which is actually not only used in Germany in the crisis, you can -- whatever, there are many industries. They use it all the time. There are also 1 million short workers before the crisis started. And I don't think that at any point in time, the government was asking not to pay dividends because we had some people in short working. So this was more a general remark by the government, which I understand completely. So if a company, whatever like TUI, which is actually a backdrop to Lufthansa without state support, would start to pay dividend would be a bit strange. But in case whatever they get EUR 20 million or EUR 30 million or EUR 40 million in short working support. And I think this has nothing to do with our dividend.

And on the short time work, I mean, it's a theoretical question because while you can send people to short time if there's less work, I mean, in the scenario that we've described in the presentation, as the worst case, crisis operation, a 10% utilization rate and 85% revenue drop, we were calculating which means 1 out of 10 advertising phases is used, and we would probably talk about 75% to 80% short time work of the out-of-home operations. And in that scenario, we would still be cash neutral. But I mean, that's really extreme cases that we were calculating to get a feeling for the elasticity of our cost structure. And at the moment, while we need to be prepared for any potential scenario, that's what we've done, and we will now adjust on a weekly basis according to revenue inflows. Makes sense?

The next question is from Nizla Naizer, Deutsche Bank.

I just have a couple from my end. The first is on out-of-home media. Your largest out-of-home contract is with Deutsche Bank. Could you remind us what the cost structure is like there? Do you pay the rent as a percentage of revenue or are there minimum guarantees? Just some color there would be great. And what sort of conversation are you having with them to ensure sort of continuity in these challenging times? The second question is, you mentioned that there are contracts that are over -- that last over a year and around 20% of the revenue is guaranteed as a result of these permanent contracts. So just to confirm, are these only for the local customers? Or are there national clients as well who sort of commit to these year-long contracts and would, therefore, not be able to sort of cancel or modify those campaigns? Just a color -- some color on the percentage there would be great. The last is on the booking behavior on digital out-of-home. Knowing how sort of instantaneous the booking is on digital out-of-home or the public video network, has that deeply sort of fallen off a cliff? Or are you still seeing some activity there? And is this the part of the business that will rebound very quickly if there will be ship recovery the way people are hoping would happen? Just some color on digital out-of-home would also be great.

Deutsche Bank contract is far beyond 2030 and is revenue based. So there's a fixed component, but it doesn't play a role here. So it's a very flexible contract on the cost side. And we are in constant talks with Deutsche Bank, obviously, because you may remember that we bought their auto advertising company in -- more than 15 years ago. And since then, actually, we are connected with them on every possible level. So there's a constant exchange of information and Deutsche Bank is also very supportive because they are by themselves in a situation where their traffic is reduced. So there's constant communication. So on the 20%, this is our look. This is what I said in the beginning. This is typically the pharmacy around the corner who is buying one billboard. And this is also stable because they are very often -- emotional point behind that the pharmacy guy wants to have the billboard 100 meter away from his shop and he will never cancel it in a 3-month crisis because then everybody maybe think he's going to bankrupt and -- by the way, he can't cancel it. And so it's a 1-year contract minimum, quite some of them are paying in advance, the full year or 3 months in advance. And until now, I have to say, problems are close to 0. And it might change that some people want to postpone payments. But up till now, it's -- what I said at the beginning, we were also surprised that last week, the order intake was about previous year on this permanent side. National is almost 0 permanent. National is a typically campaign business. These are bigger tickets, go in quickly, go out more quick except that we have in Germany is a very tough anti-cancellation situation. Germany is also one of the very few countries where we get the money still in advance. So this is -- in other countries, it's completely different. But in Germany, anti-cancellation is really strict and advance payments the same. So it's clearly a comfortable situation here.

And on digital out-of-home, yes, you're right, of course, the medium, by its nature, is responding quickly to any positive or negative context. And what we've seen in the last 2 or 3 weeks that there's still programmatic revenues coming in, where we more sell on a real-time or near real-time based audience, where trading desks don't care that much if the traffic in a trade station goes down by 30% or 40%. They buy anyway, only the eyeballs that they still get but you clearly see that in general, the situation doesn't really help digital out-of-home at the moment. But the other way around, as soon as something changes and maybe on the day that -- where the government says they will lighten the burden that exists at the moment, I think you can immediately execute campaigns for clients on that day. So it's in both directions, the more flexible medium.

The next question is from Craig Abbott, Kepler Cheuvreux.

My main question, obviously, regarding how flexible you may or may not be vis-à-vis the customers in regards to the 60-day forward bookings, I think, has been answered. I think the reality is, correct me if I'm wrong, but if a client -- if the end customer gets into trouble, clearly, you're going to be willing to work with them. Right now, you're saying mostly on simply pushing out when they actually take up on the advertising space, but if worse comes to worst, I just want to confirm here, I guess you would be willing also to maybe let some customers get out of their commitments, if you could answer that. And secondly on the CapEx, excuse me, you talked about flexibility there earlier. I just want to confirm, in comparison with the last big downturn you faced, I think -- and it sounded like you were saying this, at this time, your CapEx is pretty much all discretionary, i.e., you have no capital rollout commitments of any significance that you have to continue to deliver on in 2020. Is that correct? And the third figure, probably a bit early for this, and it's just a technical question for modeling. But I just wondered if you have any idea at this stage, what kind of magnitude maybe, the extraordinary cost might be in 2020?

Thank you, Craig. We have 0 CapEx commitments because we had no -- I don't remember when we had the last bigger tender, it must be years away. So all the CapEx is completely discretionary because it's mainly focused on digital rollout and stuff. And we definitely don't let anybody out from the commitment because -- the positive thing is, if you want to rollout advertising, you need us, so you could -- maybe there would be like 3 players in the market. And somebody wants to cancel, could say, "Okay. If you don't accept my cancellation, I work in the future with your competitor." But this is not possible in Germany because in the big format, we have more or less a monopoly because, we have, in the stroller market, almost 90% market share. And in the bus shelters, there is no direct competition between Decaux and us. Either Decaux has a city or we have the city. So direct competition with Decaux is 2%, 3%, below 5%. So nobody can replace us. That's why we are quite stubborn here. But I have to say the customers also understand that. So it -- quite -- some of them try to postpone campaigns and our other customers, for example, the agencies also made the customers listen in case you have to pay more than -- you lose more than 50% of your benefits if you cancel the campaign, that is right. So we have very crystal clear commitments with all the big customers that might also help here because customers are not canceling like crazy everything what they can cancel because, I mean, from the big companies, except maybe the travel companies, nobody will die from this crisis. It is not economical crisis now, it's a shock event. So that's why -- so we found actually commitment because in the beginning, 2 weeks ago, there were still like, I don't remember, maybe EUR 30 million on the hook theoretically, but we didn't lose even 5% from that finally. So now we have 1 more week then you can't -- there are 2 more weeks and almost nothing is technically possible to cancel in second quarter. But I have to say that the customers behave much more rational than I expected actually 2 weeks ago. So -- and don't forget, people get used very quickly to things and also what you see on the streets, the traffic is picking up. I have the feeling that people get used to the crisis slowly, slowly and that the panic mode is clearly going down. And everybody is looking to positioning himself in the crisis and after the crisis and stuff like that. That's why I said, our focus was on one hand, immediately to see what we can do, like we're talking with the banks. Now we realize that this is not an issue for us. But even if it's not an issue for us, we made a broader request to have the money in our hands. But I think it's not our first crisis. So we have quite, let's say, almost a standard program how to react. First thing is secure the cost -- the cash, second thing is reduce the cost, talk with the customers and try to understand what's happening without getting in a panic mode in the first 2 weeks because after 2 or 3 weeks, the world always looks different than in the beginning. And so that's our experience from the last crisis. And the same, what we see here. And I mean, I remember last week, Christian got a call from the TV guys. They also wanted to cancel the campaign and they called and said, "Wow, we are really jealous on you guys because our TV customers, they are able to cancel in whatever 2 weeks’ notice. And -- but I -- can't we cancel our campaign." He said no, and they said, "Okay. I understand. I will do the same," and then it was over with the discussion. And so it's -- and don't forget, the agencies, for example, they are on our side also here because the agencies, they have no advantage from cancellation. So the agencies are also trying to convince the customer, you need to stay public. You need to show yourself, it's very bad if you disappear completely in any kind of communication here. So the agencies, I have to say here, are really helpful. And so we -- this is definitely even better than I expected. But again, if very unlike situation, now we get Spanish circumstances or Italian, we close all the factories, nobody can leave the house, then forget the anti-cancellation. I mean, then you have a force majeure event, and nobody is going to pay. That must be also clear. But from everything that we see up to now, it's very unlikely because the number of deaths in Germany are far below 1,000 there, in a normal flu, up to 20,000 people are dying in Germany. So our intensive care beds are half empty in Germany. This will not stay like that, but I think this -- the preparation went very well. The health system is strong. And that -- from today's perspective -- and the number is now even going down for new infections, we don't expect that we would switch over from contact reduction to lockdown. So that -- you see different strategies in Europe, the Swedish guys are even more progressive. They've let it run more or less. This is the one extreme. Sweden, Spain, France, et cetera is the other extreme and Germany is in the middle. And everything that we see up to now, it looks like that we go -- the number of deaths has to jump by 4, 5, 6, 7, 8x and then maybe there would be a point where people start to rethink that. But as long as it developed up to now, and what I already said, if you look on the number of new infections, they go down slightly even. So there is no exponential growth anymore in new infected. So that's why we actually -- our base case scenario is clearly that we -- that we don't go in a lockdown, we stay on contact reduction here. There was one open question.

Just on the extraordinary cost. If you have any idea on that for 2020?

How much do you think will cost us?

The extraordinary cost, which I think was around EUR 25 million last year.

Exceptionals?

Exceptional, sorry, yes, yes.

I can also take that question, Craig. It was actually around -- it was EUR 34 million last year. So for this year, as we're not planning on doing any restructuring, major restructuring work, nor are we planning on doing major M&A acquisitions, we actually believe that figure to stay stable, if not even to come down quite significantly in 2020.

And you will see that in also other KPIs now. I mean, now that M&A is almost -- is over for the second year. For example, last year, we had the last payout or earn-out, so it was also a reason why we addressed a couple of times that we want to change our -- that we're going to change -- very likely going to change our payout ratio for the dividends because our focus is clearly what we said for the next years, improving -- or not improving, ramping up the digital infrastructure in the outdoor business. And this is going to use a lot of cash. And there is no M&A to expect because this is also taking all our focus for the next 10 years. I mean, the digitalization rate on roadside panels is almost 0, a couple of hundreds. And this is clearly the focus for the next year. And CapEx for this came down a lot because the units are getting cheaper and cheaper and cheaper. So this is clearly the focus of the company in the next year. The question now from our side is how much this virus is going to cost us. So that is too early to say. But it's maybe EUR 200 million, maybe more. It's too early to say, but this is clearly from our point of view, it's a kind of a onetime cost. So for next year, if you don't see a third wave, what is also from today's perspective quite unlikely because there will be a vaccine before from what we hear in the second half of the year, but we are preparing for every scenario. But in case you don't see a third wave, then we expect quite normal trading in 2021, which is somewhere around our original expectation for 2020, or between 2019, 2020, whatever, it's too early to say. But everything what we hear, also from our customers and what Christian also said, don't forget what happens first. If the crisis is over, people go public. We expect the immediate rebound in bookings, and this is actually, by the way, also what we are discussing now already with our customers. We try to convince them that they prepare themselves to be ready to push a button, the moment the doors are open and everybody -- I mean, people are, by the way, in Germany crazy, still on the road, not only the cars. On the weekend, we had good weather, go out to the park. It was like a normal spring day. But psychologically, you have the feeling that people are more inside. But the moment this is going to stop, then the first thing they're going to do, they don't switch on the TV, they go outside. And that's why we are quite optimistic what -- for national clients, especially the speed of the rebound after this contact reduction stuff is going to finish.

The next question is from Christoph Bast, Bankhaus Lampe.

So there's only one left for me. You were mentioning the high cash generation of the non-out-of-home segments. Can you give us the split between the cash generation in out-of-home compared to non-out-of-home businesses, probably based on the 2019 numbers or whatever you have, that would be fantastic?

It's very rough, Christoph, but I would say, 75-25. If you take public video into the out-of-home box, maybe 70-30.

So 70% is cash generation from out-of-home, including public video?

Yes.

As there are no further questions, I would like to hand back to the speakers for some closing remarks.

Okay. Many thanks for your time. We all know it's quite difficult situation for all of you as well because you're normally calculating all the details on a monthly and quarterly basis. We just feel like looking at Q2 only doesn't really reflect the value and the substance of the company. And I think we've delivered 30 quarters in a row, really strong results. We have everything under control that we can influence ourselves. I think that crisis is a onetime effect, where probably the question is, as Udo said, what are the ultimate costs for that in the year, and maybe it's -- it might cost us the dividend in a bad case. But after the crisis, I think the business is immediately back to where it was just 2 or 3 weeks ago. And I think it's worthwhile looking at the company value on that basis as well, not only on the basis of Q2. So many thanks for your time, and hope to see and speak to all of you soon. Take care. Stay healthy. Bye-bye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.