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

Ladies and gentlemen, welcome to the H1 Q2 Figures 2024 Conference Call. I am Shari, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Christian Schmalzl from Stroer. Please go ahead, sir.

Ladies and gentlemen, dear analysts, thank you for participating in today's call for the publication of our Q2 H1 figures. I'll begin the presentation with a brief overview of the key figures, afterwards, I'd like to look at the strong momentum of our core out-of-home business and especially digital out-of-home, a key value driver of our company. Henning will then comment on the developments and effects of our Q2 figures in more detail. This will be followed by remarks on what we expect for the third quarter and the remainder of the year. As always, we are looking forward to your questions after our presentation. With that, let us start the call with a short overview of H1 2024 and the Q2 market dynamics. We've already shown you this chart in a similar form in the previous quarters. In principle, they all had in common that the German advertising market is gaining more momentum again in the last quarters and that Stroer has clearly outperformed the market, the competing advertising categories and its peers. Nothing fundamentally changed in this respect in the second quarter and the first half 2024. Out-of-home advertising is by far the fastest growing category in the German advertising market. Out-of-home grew by around 18% in the second quarter of 2024 financial year, outperforming TV and print significantly by 8 and 17 percentage points, respectively. Our digital out-of-home business grew net by 29%, and was once again the product with the strongest momentum in the market, and it's important to mention that Nielsen's market figures are inflated by around 6 to 7 percentage points, as Nielsen reports on a gross basis. The out-of-home segment performance was 21%, which reflects growth of our classic out-of-home business of 21% in the same period. So how does the strong relative performance translate into our H1 P&L? As expected, the already strong development of the first continued in the second quarter and even accelerated slightly. Overall, we were, therefore, able to achieve sales growth of around 12% to a new record figure of EUR 965 million in H1. At 10.3% organic growth was also in the double-digit range. Henning will go into more detail in the financial section, particularly on developments in the second quarter. As we've already explained in previous quarterly calls, we expected EBITDA, EBIT and net income adjusted to develop at a disproportionately high rate compared to sales. When it comes to adjusted EBITDA development, easing cost pressure, as well as declining inflation and in our particular -- in particular, the sustained positive development of our core out-of-home segment are key. An adjusted EBITDA growth of 16% from EUR 227 million to EUR 263 million is a perfect proof point for our expectations. This is even more evident in EBIT adjusted, we were able to improve this from EUR 84 million to EUR 130 million or 34% in the first half of the year, also due to the comparably stable IFRS 16 effects. Net income adjusted increased even stronger from EUR 40 million to EUR 55 million or 37%. The development of cash flow in particular reflects the strong performance in the first half of the year after a negative free cash flow of minus EUR 16 million in H1 2023, we were able to improve this significantly to plus EUR 22 million. At EUR 41 million. CapEx in the first 6 months was 35% below the previous year's figure of around EUR 63 million, and reflects the continued back to normal and the objective to further optimize and improve the fill rate of our digital portfolio. It's important to put the current development into a slightly broader context, especially the dynamics of digital out-of-home, which is the key value driver for our group. The pandemic with the various lockdowns pushed the last 12 months' revenue of our subsegments, down by roughly 35%, also the digital out-of-home business had fully recovered with the end of the lockdown 2021. The following 6 quarters were strong, but still impacted by the war in the Ukraine massive cost inflation, as well as the ad market crisis and the tobacco ad ban for out-of-home advertising. But in a more normalizing macro environment, since roughly 1 year, we see an acceleration of digital out-of-home and the last 12 months, digital out-of-home revenue has doubled over the last 10 quarters. Consequently, the share of digital, which is our most profitable product category within our out-of-home segment, has nearly doubled from the beginning of the pandemic until today and will reach roughly 40% by the end of 2024. Assuming the current growth rates also for the coming quarters, our out-of-home business will be predominantly digital sometime towards the end of 2026. It's fair to say that the perception of our business will change completely over the coming 2 to 3 years. There's a big difference between gluing paper on wood, and having a growing number of screens on top versus running a predominantly digital out-of-home business, which benefits from constant conversion of the next best location to digital in a relatively smaller classic business for local and regional customers on top. So looking through the bumpy last 4 years with various crises, our anticyclical long-term investment into digitizing our infrastructure clearly pays off. EUR 70 million CapEx before the pandemic were equivalent to over 8% of our out-of-home revenue at the time, where coverage of our public video network was only around 52% of the total population. At the peak of the pandemic, the further ramp-up of especially roadside screens has taken the net reach of our digital out-of-home business to 63%, but the investment level for the segment was around EUR 80 million and more than 10% of the pandemic affected revenues. Today, we expect investments of around EUR 50 million for out-of-home for the full year and thus slightly above 5% of the out-of-home revenue, while we are operating a network that reaches 7 out of 10 Germans per month standalone. And CapEx as a share of revenue will continuously decrease year-over-year going forward. We invest less in relative terms, but focus more on real highlights for advertisers that drive the digital out-of-home category further. Just 4 examples that illustrate our line of attack. Next year, we will launch the then largest screen in our network, the Hamburg main station with over 340 square meter. We are convinced that this location will get iconic status, and boost the total digital out-of-home category top of mind of advertisers for quite a while. Since 2023, we have our green digital products in our network where large format screens roadside are either integrated into vertical gardens or run like the example you see by solar panels directly attached to the screen. We are rolling out large-format motion cubes since this year across various top locations to add real cut-through elements to our network, which allow advertisers to stage their brands. And even if it's meanwhile, almost a standard at New York Times Square or in Asian mega cities, we are working on both ramping up more hardware and software to enable more 3D installations through our public video screens also for the German market. And all of that is happening on top of an outstanding 70% nationwide audience coverage, which we also increased in parallel. As briefly addressed before, we optimize our footprint also for more specific target groups and locations, but follow a more demand-oriented approach. Similar to 2024, our CapEx plan going forward includes 400 to 500 additional premium screens, indoor and outdoor per year and an ongoing diversification of retail and ambient touchpoint presence. So we don't stop investing, but the vast majority of taking our product to a new level happened between 2019 and 2023. It takes a while until the ad market adapts to new products and in our case, the macro-environment made it even tougher, but the overall ad market has recovered significantly for out-of-home and the share of national advertisers has bounced back to the pre-COVID level. Our regional and local business was absolutely crucial to take us through the tougher times for national ad spend, but cost of sales for a local client is more than 3x higher than for a national key account. At the moment, the strategic and ongoing shift to out-of-home and especially digital out-of-home from national top brand helps improving our cost of sales ratio. And still 65% of our digital out-of-home inventory is filled with content with news, with weather, with sports clip and similar pieces of content. So excluding the additional inventory coming from EUR 50 million out-of-home CapEx and the historic 5% price increase for digital out-of-home, we could almost triple the net extraction from the current network setup. We have strong and sustainable momentum across all client industries, but let's look at 4 cases that worked nicely in the last couple of months. Priorin from Bayer is a good example for growing business with pharmaceutical clients, many of them like Priorin focus on TV advertising, and our TV Plus model merges TV audience data with the research specialist, all eyes on the screen, with public video data to add regionally targeted digital out-of-home to TV campaigns to ensure a balanced coverage of the campaign across all areas down to ZIP code level. Geo-fencing and local campaigning is another direction of developing business with clients and Vodafone is a good case here for the telco industry. Locally targeted digital out-of-home was supporting locally targeted mobile and social campaigning and ultimately increase the click-through rates of social post of Vodafone. So public video is strengthening brands and other media across the entire advertising funnel. Ben and Jerry's from Unilever is a nice showcase for targeting features for FMCG brands, different to the targeting limitations of TV broadcasting with integrated data sets of vegan audiences in our public video playout systems to promote new vegan ice cream flavors and the cross check with non-audience targeting, show an audience uplift of almost 3x because of the -- by far more focused use of advertising money only on screens and time slots with overproportionate presence of the vegan target group. Amplifying mobile campaigns for retailers via public video is something we regularly do for different retailers like Douglas. This exemplary case you see get recognized at various advertising awards. And the public video campaign of Deutsche Telekom during the UEFA Euro 2024 in Germany, maybe the most integrated example as it combines mass audiences with smart data and targeting to deliver the right piece of content at the right moment, fully automated via machine to machine. Magenta, the pay board platform of Deutsche Telekom had the streaming rights for the -- for all the Euro matches and as soon as one of the teams called a goal, the highlight clip was streamed in near real time on our public video network to keep people up-to-date on their way back home at train stations or while they were shopping with the family in the mall, always reflecting the individual context of the location in the content. It demonstrates digital out-of-home is showing more or less any possible piece of content at any time to any specific target groups and fully automated or simply broadcasting it to the whole nation. Let's do a quick recap. Our group performance and the strong operational gearing from revenue to EBIT and operating cash flow is predominantly driven by out-of-home with the following future-proof operational levers. Number one, the most profitable product, digital out-of-home is growing the fastest and will be above 50% of our total out-of-home business by the end of 2026. Second, the most profitable sales channels, national advertisers is backed on free covered share with sustainable sales KPIs and overproportionate growth of programmatic trading, which ultimately leads to more efficient sales processes. Three, the upfront investment in our digital infrastructure is completed since 2023. CapEx as share of revenue will constantly decrease while we still improve quality and performance of our network. Four, our fill rate for digital out-of-home is still on a comparably low level, so massive potential for even more aggressive growth scenarios. And 5, we've adjusted our classic out-of-home business in the last 18 months to the inflationary challenges of 2022 and 2023 and the tobacco advertising ban. We had nice growth in H1 and don't see that the business won't grow over the coming years with more focus of our regional and local sales forces on the more traditional products, also something we've been working on in the last 18 months. So far on my remarks, and with that, over to Henning.

Thank you, Christian, and a very good morning, everybody. After an already strong start into the new fiscal year for the group, also the performance in the second quarter was strong across more or less all relevant KPIs. Reported sales growth in the second quarter came in at 12%. We have our organic growth accelerated from 8.9% in Q1 to now 11.5%, more than compensating for some continued headwinds at Asam, the main contributor to that strong trajectory was again our out-of-home core business, outperforming also our own initial expectations. The group achieved strong profitable growth with EBITDA adjusted improving by almost EUR 25 million or 19% to EUR 155 million. Exceptional items in the quarter were roughly EUR 3.5 million. The increase compared to the prior year mainly resulted from a reorganization costs in Statista of EUR 1.5 million. For the full year, we are currently expecting broadly stable exceptionals compared to the prior year. Reported EBITDA came in at EUR 151 million, up 18% compared to the prior year quarter. Depreciation and amortization for the quarter was slightly up, influenced by a successful extension of our contract for the subway system in Warsaw. With that, the reported EBIT for the quarter improved significantly by 38% to EUR 72 million. The financial result came in at around minus EUR 18 million compared to minus EUR 15 million in Q2 '23. The development mainly reflects higher interest rates. The Euribor at the beginning of last year was still below 2% and kept rising to more than 3.8% until September 2023. Based on that, we shall still see rising interest costs in the coming months, but with reduced dynamics and eventually an improvement going forward depending on ECB rate action. Sequentially, compared to the first quarter, the financial result was broadly stable. With that, earnings before tax came in at EUR 54 million compared to EUR 37 million in the previous year's quarter. The tax rate for the quarter was around 30% and that's in line with the first quarter. Adjustments to be considered in the quarter were approximately EUR 5 million and related mainly to the exceptionals mentioned before, and PPA-related amortizations of around EUR 3 million. To remind us, the corresponding assets were recognized by way of purchase price allocation in the context of the major acquisitions of the past, the corresponding annual amortization level is declining since more and more assets are fully written down in the meantime. After EUR 23 million in '22 and EUR 19 million in '23, in the current fiscal year, we expect around EUR 12 million. Considering the effects described above, net income adjusted came in at around EUR 42 million, so approximately EUR 11 million higher than in the prior year. Let us now switch over to the cash flow. In the second quarter and also the first half, the improvement in EBITDA and lower cash out for working capital was contrasted by higher cash out for interest, as well as a decline in other. The quarterly working capital development reflects seasonal patterns. For the full year, we expect still a moderate buildup in working capital. The increase in the position in other mainly reflects a higher utilization of provisions compared to the last year and the higher ad equity income included in the EBITDA that has not yet become cash effective, and as such, is corrected via the position of others. All in all, and based on a strong Q2 development that leads to an operating cash flow of now EUR 163 million for the first half. Cash outflow investments was down by $10 million for the quarter and now $22 million for the first half. For the full year, we now expect CapEx below the prior year. Lease liability repayments were down in the quarter but can always shift a little bit among the individual quarters. For the full year, we continue to expect only a slight increase. With a strong Q2, the free cash flow adjusted, so the true underlying cash flow of the business, if you will, after lease liability repayments amounted to EUR 22 million for the first half. This represents a considerable improvement of EUR 37 million against last year's first 6 months, where free cash flow still was a negative. As already discussed during the year, we reiterate our expectation of significantly improved free cash flow generation for '24. Let me come to the net debt development and a sequential view from the end of the first to the end of the second quarter, net debt was up by EUR 61 million, including the adjusted free cash flow for the second quarter of plus EUR 46 million, and our dividend payment of minus EUR 107 million to our shareholders and minorities. With that, our leverage ratio remained broadly stable compared to both Q2 last year and Q1 this year. And this even though the dividend this year was already distributed in Q2, while last year it was only paid in the third quarter. So adjusted for the timing of dividends, the underlying leverage ratio has improved to around 2x. In June, we successfully placed our note loan of EUR 268 million in tranches of 3 and 5 years with fixed and variable rates. The corresponding funds should be used to refinance a loan of around EUR 110 million maturing in Q4, as well as to reduce the current utilization of our revolving credit facilities. With that, and with our strong improving leverage ratio, our financial flexibility remains strong. Let me now discuss the performance of the individual operating segments, starting with our core segment out-of-home media. The teams in our core business out-of-home media delivered a remarkable performance, even ahead of our own expectations and some were supported by good trading around the UEFA Euro here in Germany. During the championships, we have more than 2.5 million visitors attending the 51 matches plus some 6 million fans joined in the different fan zones in the large cities, plus many more other visitors. Organic growth for the quarter came in at 22%. In early May, we expected it to be between 15% and 17% plus some upside risk from trading around the UEFA Euro Cup. So I would say that alone might give you a sufficient idea what the underlying trend was against the moderate base of prior year's Q2. The effect from the Euro materialized quite strongly in the trading performance of our classical out-of-home products that turned in at 10% - 21% growth. Needless to say that this growth rate should not be seen as an indicator for the remainder of the year. In digital out-of-home sales were up by almost 29%, and that's quite aligned with the already strong development of the first quarter. Again, within digital, our programmatic public video was a major contributor to that growth. Our regional local business, as well as our business with large national accounts delivered an accelerating performance. Among the top performers by industry, we had FMCG, telcos and home garden, while somewhat lagging were tourism, transfer and bedding. EBITDA adjusted for the quarter increased from EUR 91 million to EUR 117 million, supported by moderating cost inflation and a better utilization as well as our classic infrastructure, The EBITDA margin improved by 300 basis points. Based on these strong results, we are now also expecting improving margin for the full fiscal year. In digital and dialogue, revenue in the second quarter increased by 12%. Within digital, sales growth was again driven by programmatic demand, while our content business remained broadly stable in a normalizing market context. Growth in our dialogue activities were 13% and still benefited from the acquisition of some call center locations last year. Organic sales growth sequentially accelerated and was around 6% in Q2 after an increase of 3% in Q1. Altogether, the segment delivered an EBITDA adjusted of EUR 37 million after EUR 31 million last year. This improvement mainly comes from the Dialog business. Please bear in mind that earnings in digital are still affected by a [indiscernible] effect from the loss of the Bauer contract that I mentioned on the last call. The effect on EBITDA adjusted from this for the second half will be around minus EUR 5 million. There is and will be no effect on sales, EBIT and net cash flow, due to the compensation of business volume through newly acquired business mandates. Taking all this into account, we still expect a broadly stable EBITDA adjusted and improving cash flow for the segment in the full fiscal year. Moving over to our data as a service and e-commerce segment with Statista and Asam. In total, revenue growth was 3% in the second quarter, while Statista delivered the expected acceleration in sales growth from 4% in Q1 to now 7%, Asam's business development was still impaired by reduced trading and wholesale distribution. Wholesale distribution last year delivered a very strong performance throughout the year, essentially from wholesalers catering for Chinese and consumer demand and here, in particular, for products outside the classical beauty and care assortment of Asam. Our visibility on that channel remains low also for the second half of this year. On the other hand, sales in Asam's core retail and online activities continue to deliver good growth. For Statista, our expectations are unchanged as we are anticipating a further clear improvement in the growth trend in the second half of this year based on the measures of the new leadership team. As a consequence of the impaired performance at Asam regarding China and increased marketing intensity, EBITDA adjusted for the segment was down from EUR 15 million to EUR 9 million. With that, let me hand back over to Christian for the outlook and closing remarks.

Before ending the presentation, let me just have some comments on the outlook for Q3 and the rest of the year as well as our financial calendar. For the third quarter 2024, we expect organic revenue for out-of-home, up by around 10%, whereas classic and services should grow low single digits, and digital out-of-home revenues are expected to be up by more than 20% again. For digital and dialogue, we expect growth to be in the mid-single-digit percentage range. Statista's revenue growth back to double-digit growth and further accelerated quarter-over-quarter. Asam's DACH business is expected to show continued single-digit growth, however, due to the China development Asam in total down high single digit in Q3. For the full year 2024, out-of-home should exceed the initial expectations as published in our full year guidance by roughly EUR 40 million on a group level, this will be offset by lower Asam sales in non-core medical wholesale product in China. We therefore see our annual guidance unchanged. Organic revenue growth, noticeably higher than 2023, which was plus 7.5% and substantial operational leverage based on an EBITDA margin around prior year level and IFRS effects roughly stable. Therefore, EBIT adjusted with double digit -- sorry, double the growth rate of EBITDA adjusted and free cash flow adjusted significantly above the growth rate of EBIT, I think, put a structure of the P&L that you've already seen in the H1 results. Let me now close the presentation with a short look into our financial calendar for 2024, 2025. Our next agenda topic will be the publication of our Q3 report on November 13. On the same date, right after the quarterly call, we will host our virtual Capital Markets Day. In this Capital Markets Day, we will give you another deep dive into the topic of digital out-of-home and above all the mechanics and dynamics of results, corresponding invitation will be circulated. We will then publish our annual report for the 2024 financial year in the course of March. This report will include the mandatory publications on CSR sustainability reporting for the first time. As always, updates, reports and roadshow presentations can be found on our IR website. Thank you, everyone, and we are now happy to take your questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Christopher Johnen, HSBC.

First on Statista. The second quarter was not below the 8% to 10% guidance that you gave last quarter. Is there any sort of color on what happened during the quarter? Anything that's interesting. And then on guidance that you've given, the high teens, just looking at how the development and the acceleration of growth has been, is that also something that you'd be comfortable with beyond Q3, i.e., also going into Q4? And then a second question on Asam. I understand that this horse cream wholesale sort of one-off is difficult to forecast. I just to ensure I would assume that in the ongoing sales process, whoever does the diligence would probably discount that anyway. So I'm just curious, do you see that as a bit of an obstacle to the ongoing sales process that the revenue has decelerated a little bit at Asam or what's your view here?

Christopher, thanks for your question. Well, on Statista, I think we are happy with the trend and the dynamics because it's going in the right direction. Just as a recap, I think 2023 was the first year where you could see that, that historic outstanding growth had seen for the first time a little bit of limitations, but that was mainly for 2 reasons. I think the first one was that the company had grown to a level where a couple of structural changes were necessary. I think we were -- we got over 1,000 people and then sooner or later, you need to change a couple of things. And secondly, the founders had after 17 years where you could see that at the end of the period, I think they were also ready and prepared to leave. I think we had the management change, we found the right person. So in that phase, we've changed a lot of things to prepare the company for the next 3 to 5 years. And in general, we are very happy with the decisions we've made and our new CEO, Marc Berg, and also in partly a new leadership team and many things they've changed. And we see that from Q1 to Q3. And based on what we see now also Q4, we see constantly increasing revenue numbers. We see underlying profitability structures improving and think that from 2025 onwards, the company will be back on historic growth track. The transition process is in line and I think any kind of volatility on a quarterly basis is just part of the process. Also, to be honest, it takes a little bit longer than we thought, but I think that's not driven by the actual performance, especially of the team, I think it's more a little bit our impatience and expecting that things also on a larger scale of a company happen quicker than they realistically can happen. But in general, I think we're very happy with the development there and I think plus or minus a couple of percentage points on a quarterly level is nothing that is really crucial for the mid and long term perspective of Statista. I think Asam case is a little bit different, but Henning?

Well, I guess, to be very clear, we believe that the -- there is probably 90% of the variation of Asam is to be found in its core business. And I think the good thing is that we are continuing to grow nicely out of the retail channel and also the retail channel. China was a great success last year, I think it was always clear that the visibility on that channel is kind of lower and I think we never really expected to get a proper valuation of the same multiple on that part of the business. So I think the bottom line is that should not have any repercussion on the disposal of Asam. However, it's kind of hard facing this prior year comes from China and as you implied in the call, that will also be sort of tough in the second half.

And just when you think of -- when you're in some kind of that -- such a process, I think if you see the development in China last year, you feel like, okay, it pushes the P&L nicely, but you almost know that whatever the numbers show, you won't get a reasonable price because everyone knows how China business works and the volatility is high and whatever you do, it's almost like the higher you perform, the bigger the discount because no one knows what the underlying performance is. So I think at least on overproportionate expectations, I think that risk is gone. And I think, as Henning said, the true value and the highest value for any buyer is in the underlying DACH business, yes, which has, just as a recap, we bought the business 6, 7 years ago. with 30-something revenues. That business has like more than quintupled. It was predominantly TV sales, we've diversified it into e-commerce on the online web shop to retail. In that time, we've established that strong key product magic finish. So we are happy overall and I think that China business today is probably normal. What happened last year was the abnormal development. So I think in the context of our group, it's nothing that is, I would say, of fundamental importance.

The next question comes from the line of Annick Maas from Bernstein.

So I have also 3 questions. My first one is, so you are in the process still of selling Asam. What does that actually mean being in the process? Does that mean we sell it next month? We sell it in 6 months or we started in 12 months? And the second one is on out-of-home. So your growth expectations are slightly lower than what we've seen so far. Can you tell us how much maybe in Q2 was due to the football and therefore, in Q3 is not the football -- the football is not helping anymore or is there consumer pressure going on? Or what is explaining the slightly slower growth in out-of-home? And then the last one, you've shown that you become more digital and therefore also your customers are becoming more national. Can you just give us a bit of an indication of what that means for you guys is forecasting?

Nick, thanks for your questions. I think on Asam, as we said, willing and what does process mean or being in the process of selling something? I think in our case, it means we are willing to sell, and we are prepared to sell. And we've done the basic work that is necessary internally to prepare for that so that any further [vended] work could be completed within a few weeks, yes. But what we currently do is monitor the market, listen to people that are generally interested in the asset, but it's being in the process doesn't mean that we are actually really in a final phase. I think before we go into that, we need to be sure that the market environment is right to receive reasonable well-priced offers and that the asset is performing well. So I think the core business is performing well. The China part is the volatility that we've anyway seen at the M&A market and also, I think the focus of potential strategic investors is not where it should be at the moment. So we monitor that. We are ready to go. But at the moment, the market is still a bit tricky. And even if it's noncore, I think we've invested so much time and a lot of work and I think we've clearly upgraded the value of that business. We just don't want to do anything in anything that affects environment and timing. So I think that means in the process but it doesn't mean that we are in the final stage of sending out material, being at a bidding process or anything like that.

On your question, Annick, what the underlying performance of out-of-home in the second quarter ex-work was -- I tried to make a reference to that in my comments in the speech. You know that on the occasion of our Q1 results, we forecasted 15% to 70% organic growth for out-of-home plus some upside risk now returned in more than 20%. I think that kind of difference might give you an idea what the UEFA Cup impact might have been for the quarter. And then in comparison to the expected 10% organic growth in the third quarter, I think you also need to look at the 2-year comparison. If you look like the organic growth rates of a 2-year time frame, you would actually not see much of a slowdown looking at the 10% organic growth. So this is, I think, a proper way to look at it.

And your third question being, again, a little bit more focused on national advertisers and having a growing digital out-of-home business, what's the impact on forecasting and in part also visibility? I think in general, national advertisers plan, I would say, in 3 to 6 month cycles, but optimize a lot of things on a monthly basis, while regional and local advertisers have very concrete annual plans. So the higher the share of national advertisers, yes, the shorter, the general planning cycles of your customers, and it's the same with digital and versus analog. I think the average lead time for booking versus start of the campaign for digital is like 4 to 6 weeks for classic, it's rather 2 to 3 months. And that means, of course, that we have a little bit less visibility at the moment. At the same time, what we see is the other way around, we can still make more and more money towards the end of the quarter. Why? Because you can do digital out of home with national advertisers also in the last week of a quarter. Even on the last day, you are able to generate significant revenues. And I think that's where we are, in general, on the way to optimize a little bit our predictions and our forecasting tools that we need to reflect that in a way because, yes, of course, you have less visibility, but there is some kind of pattern in which clients book. And today, in the mid of Q3 we have probably 5 to 10 percentage points less in our order book in relative terms versus what we expect to be at the end of the quarter versus 2019, why? Because digital out of home has almost doubled in that period of time. If I even compare it with 3 -- 2 years or 3 years ago, when the share of regional business was 10 points higher, it just means we had more of the ultimate revenues already in our books. That's why today, we have, in relative terms, more to go or more to come but the stuff that is to come is more digital and more national, and that's where we have the most traction. And that's why I would say I prefer a business growing in the teens with a little bit less visibility versus a business growing 6% to 8% and a little bit better predictability. And that's why maybe our quarterly forecast used to be, I don't know, plus/minus 1 percentage point on precise 2 or 3 years ago. Today, there might be a little bit more variation and maybe at the moment, we are a little bit more on the conservative side, yes, both us as a management team as well as the guys that run the sales because they still say, oh, there's so much to come, but they underestimate the general momentum of digital and the shift that we see in national ad market. So I would say, yes, a little bit more volatility, but it's -- I would say, it's a luxury problem and rather has upside potential and a real challenge for our business.

Great, thank you very much.

The next question comes from the line of Julien Roch, Barclays. Please go head.

Yes, good morning everybody. The first question is on the full year guidance. So out of home EUR 40 million higher than initial full year guidance, but Asam lower. I believe Christian, you said that As am would actually be about EUR 40 million lower. So am I correct in saying that there's actually no change versus initial guidance and consensus is fine? That's my first question. The second on CapEx, you said bulk of digitalization behind us. So can you give us a full year '24 CapEx guidance in euros, EUR 120 million, 125 million and then from '25 onwards as a percentage of revenue? And then lastly, how much of your digital out-of-home revenue was programmatic in the first half? Thank you.

Thanks, Julien. The first one is a very lovely question. It's simple to answer. Yes, you're right. I think we were referring back to what we originally said and what the underlying plan was, yes, and it's like a EUR 40 million shift between out-of-home and Asam. So yes, consensus at the moment in general is pretty much reasonable, I would say.

On CapEx, yes, from today's perspective, in our forecast, we expect that the CapEx in the second half will be slightly above the prior year. I mean you heard also Christian talking about the thing in the last screen that we are about to install in Hamburg and other things. So I guess the decline for the year will not fully coming at the minus EUR 20 million that you see right now, probably for the year, I would calculate is something like minus EUR 10 million, so which implies an up to EUR 10 million higher CapEx in the second half.

And programmatic, first 6 months is somewhere around 55% programmatic. So I think what we see at the moment is that is probably also driven by the UEFA Euro. We had strong classic bookings, but they were also, in some cases, combined with traditional lube-based digital out of home. But in general, the underlying momentum on programmatic is more or less unchanged. And I think it's fair to say that kind of what we had in the first 6 months, 29%, I would say 2/3 of that growth were clearly coming from national programmatic demand.

Sorry, did you say 55% or 65%?

55%.

Sorry the line cut again, sorry.

55%, 5-5.

Okay. And then Henning on CapEx. Thank you for the guidance on '24, from '25 onwards as a percentage of revenue now that you have lower capital intensity in out-of-home?

Yes. I think that's what was coming out of what Christian explained to us when talking like the large investments to some extent, are behind us when we're clearly expecting a lower CapEx to sales ratio going forward for out-of-home. What that means for absolute CapEx, it's probably hard to tell at that moment, but I would not expect in the model right now a big increase, I would rather model it sort of on a stable level compared to '24 for '25.

Okay, thank you.

The next question comes from the line of Marcus Diebel, JPM. Please go head.

Yes, hi everyone. Very strong acceleration, no doubt. How does management or the Board actually at this point, think about cash distribution? I mean, when we just look at the model, we heard the CapEx guidance, the question will increasingly come up. So what is the thought process here? And then secondly, maybe for Henning, just on the net debt number. I didn't have time to look at the numbers in detail, but maybe if you could help me to understand the bridge year-on-year in net debt. You mentioned obviously the dividend payment but if we go from EUR 750 million net debt last year to EUR 840 million this year, if you can just give me the 2, 3 main items of this year. Then obviously, one is cash, one is the dividend, but is that basically it?

Okay. Hi Marcus, thanks for your questions. Maybe on the first one, capital allocation. I think the general strategy for the moment doesn't change. I think we are happy that the current strong momentum pushes down our leverage. So probably year-end will be around that's probably below 2.0 leverage, so rather 1.9 or something like that. So I think that's a really robust number. Nevertheless, I mean, interest rates are different than 3 or 4 years ago. But I think, in general, the company here is well settled looking forward. I think for the moment, we see that in relative terms, going forward, we need less cash in absolute terms, the same or maybe a little bit more, but that's minor. So yes, the money that we make will be distributed in dividends and I think our current policy is like, I think, 50% to 75%. When you look at the average, what we've done in the last 3, 4 years, it was always rather at the upper end of that corridor. So I think that would be my starting point for the moment. Do I think that anything crazy happens there? I don't think so. But I think final adjustments and optimization of that policy is probably realistic once we have our full year numbers, publish our annual report and then propose something to the AGM regarding dividends. But we don't see bigger M&A topics, yes. So we focus on organic growth, we rather see opportunistic disposals in the right moment of time, where we also said historically, whatever money we generate beyond anything we need to keep on our balance sheet, we would pay out special dividends. So overall, I think leverage goes down, CapEx goes down by means of share of profits and revenues. So more money that is flexible and ready for growing dividends. But I think details is something we rather would discover at the beginning of next year.

Marcus, only...

So basically keeping the payout ratio, which means in more in absolute terms, clearly, but then the rest goes into that for now at least?

Yes, in case that -- cash -- in case that cash generation and net adjusted income is the same number. My feeling is at the moment, it is roughly the same number or could be even a little bit more cash then you're right. I think we had years when cash was below net adjusted income, I think that was one aspect. If you reference your dividend back to adjusted net income. And it, for instance, a company where you only have 51% like Asam generates a lot of cash where you ultimately only get 50% and I think cash versus NIE is a bit misleading. My feeling is at the moment, those numbers are very close. So then you're right that if we don't change anything it would go to the upper end of the corridor, there would be a little bit of cash left to reduce debt, you're right.

Marcus, on your question, net debt year-over-year, and you're right, there's a significant decline. I mean, very simplistically, 2 things that the increase in net debt includes 2 dividend payments. As I said in my speech, last year dividend was paid only in the third quarter, this year in the second. So we have like EUR 200 million or more of our dividend payments in that development of net debt minus the free cash flow generated over the period between those quarters, which is maybe around about EUR 100 million. So very simplistically, EUR 200 million dividends, and a million free cash flow get to the increase of around about EUR 100 million. I hope that explains it.

Yes. No. Okay. I just wanted to see the direction. I didn't have to look at the numbers and details given results, obviously. But that's -- that's the concept that I get it.

Maybe as a whole, I think that's what we tried to transport in the presentation. I think there's a lot of things that we were able to reorganize and fix in the last 2 years. Managed cost out, reorganize plastics business, work on the fill rate, at the same time, when the markets have recovered, and I think especially that inflationary challenge and the tobacco advertising ban, plus lower share of national advertisers was something that I think the combined impact of that was operationally probably EUR 40 million, EUR 50 million. And that cost challenge came within 6 to 7 months and I think we've leveled that out now and feel quite confident going forward.

And this leveling out is also Marcus seen in the leverage ratio, right, despite EUR 100 million more net debt, leverage ratio is more or less the same. That is a clear indication of a strong underlying improvement of cash generation.

No, no I understand, obviously more EBITDA. Okay, now make sense, I understood.

[Operator Instructions] The next question comes from the line of James Tate, Goldman Sachs. Please go head.

It's James Tate from Goldman Sachs. I've also got 2 questions, please. I think, firstly, just to check, you reinstated your full year guidance on the group level, including EBITDA margins to be around the same levels in 2023. But given the change in mix with the stronger out-of-home offsetting weaker sales in Asam, should we not expect to see some margin benefit given the different margin profiles of these businesses? And then just secondly, for Statista, could you give some more color on the impact from your Gen AI product launches here? Are these really the key drivers of new sales and customer retention or is it the management changes that you talked about earlier? Thank you.

James, on the question of the notion that is there a chance that the margin mix improves with declining sales in Asam and improving out-of-home expectations. The answer is no. Because actually, the business in China contained pretty strong margins -- pretty strong gross profit margins, that also explains to some extent the only decline that we had in the third segment and also in the second quarter. So unfortunately, sales go in and out and our expectation at more or less the same margin level. So net-net, there's no change on what we expect for the group margin.

And on Statista, I think the momentum that we see is clearly driven by changing management and operational focus in a couple of areas. I think one of those is clearly what we do around the eye -- and one aspect of the change program that is also paying off slowly as the AI-supported search function within Statista. So you might have an account and you go on a website and type in something in the search, you'll get an AI-supported management abstract and summary first that answers your -- the key question that you have on the basis of all the underlying data and then shows on top the various links to the detailed statistics. So that kind of management summary upfront is something that is AI-driven. That is something we didn't have before, and of course, substantially improve the usability of the tool because only if you're an expert, you know how to handle it, you answer -- you have a question, you get a lot of statistics to work with the statistics. I think that's perfect for specialists and BI professionals. A few more in general management and expect a quick answer, and you want to be sure that there is more underlying substance than if you Google it or actually if you take business decisions on it or talk to a senior person, and that AI-supported search function of Statista is quite some progress that we've seen. But I would say it's one aspect of a couple of things we're working on. Yes, it also has impact, but it's not the ultimate AI answer that is changing things at the moment. Yes. It's just one feature.

There are no more questions at this time.

Perfect. Then -- well, also, we have some many thanks that you had time for us and participated. Thanks for your questions. Enjoy the rest of a hopefully nice summer, and please speak soon. Take care, and bye-bye.

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